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United States v. Brandel

United States District Court, D. Nevada

May 13, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
ANTHONY BRANDEL and JAMES WARRAS, Defendants.

          OPINION, ORDER ON RESTITUTION AND FINAL ORDER OF FORFEITURE

          KENT J. DAWSON, UNITED STATES DISTRICT JUDGE.

         Presently before the Court is the Government's Motion for Forfeiture as to James Warras (#296). Defendant Warras filed a response in opposition (#311) to which the Government replied (#322). Also before the Court is the Government's Motion for Forfeiture as to Anthony Brandel (#298). Defendant Brandel filed a response in opposition (#314) to which the Government replied (#323). Also before the Court is the Government's Motion in Support of Restitution (#297). Defendant Warras filed a response in opposition (#312) as did Defendant Brandel (#315) to which the Government replied (#321).[1] Defendant Brandel filed a Supplemental Response (#365) to the Government's motions which the Government replied to (#367).

         The Government also moved to Strike Government's Statement in Closing Argument Based on a Mathematical Miscalculation of Exhibit K (#366).

         Also before the Court is Defendant Brandel's late filed Motion to Adjust Restitution and Forfeiture (#371). The Government filed a response in opposition (#373).

         Also before the Court is the Government's Motion to Add GW's Loss to Restitution and to Replace EG with JE, as the actual victim of the monetary loss (#372). Defendant James Warras filed a response in opposition (#375) to which the Government replied (#376/379). Defendant Brandel filed a late opposition (#381).[2] The Government also filed a Motion for Entry of Opinion, Restitution Order and Final Order of Forfeiture (#374). Defendant Warras filed a response in opposition (#377) to which the Government replied (#378/380).

         I. PROCEDURAL HISTORY and FACTUAL FINDINGS

         A jury found Anthony Brandel guilty of Counts 1, 3, 4, 6, 7, 9-13, 15-18, 21-24 of the Indictment, and Defendant James Warras guilty of Counts 1, 3-5, 11-13, 15-17, 19, and 23-24 of the Indictment. See Minutes of Jury Trial, ECF No. 208; Jury Verdict, ECF No. 215. The Court found that Anthony Brandel shall pay the in personam criminal forfeiture money judgment of $4, 920, 000 pursuant to Fed. R. Crim. P. 32.2(b)(1) and (2); Title 18, United States Code, Section 981(a)(1)(C) with Title 28, United States Code, Section 2461(c); and Title 21, United States Code, Section 853(p). Indictment, ECF No. 1; Minutes of Jury Trial, ECF No. 208; Jury Verdict, ECF No. 215; Amended Preliminary Order of Forfeiture, ECF No. 237. The Court found that James Warras shall pay the in personam criminal forfeiture money judgment of $4, 920, 000 pursuant to Fed. R. Crim. P. 32.2(b)(1) and (2); Title 18, United States Code, Section 981(a)(1)(C) with Title 28, United States Code, Section 2461(c); and Title 21, United States Code, Section 853(p). Indictment, ECF No. 1; Minutes of Jury Trial, ECF No. 208; Jury Verdict, ECF No. 215; Preliminary Order of Forfeiture, ECF No. 276.

         On January 16, 2018, the Court held the evidentiary hearing and oral argument for the sentencing on restitution and forfeiture, with testimony from Federal Bureau of Investigation (FBI) Special Agent Gene Tierney and FBI Forensic Account Gary Daniel Marsh and admitted exhibits that the Court found relevant and reliable (ECF Nos. 368, 369). The Court finds the rules of evidence do not apply and relevant and reliable hearsay can be used in restitution and forfeiture. See U.S. Sentencing Guidelines (U.S.S.G.) § 6A1.3(a); Fed. R. Crim. P. 32.2(b)(1)(B); United States v. Newman, 659 F.3d 1235, 1245 (9th Cir. 2011), cert. denied, 566 U.S. 915 (2012), abrogated on other grounds, Honeycutt v. United States, 137 S.Ct. 1626, 1632 and 1635 (2017); United States v. Huckins, 53 F.3d 276, 279 (9th Cir. 1995); United States v. Petty, 982 F.2d 1365, 1369 (9th Cir.), amended, 992 F.2d 1015 (9th Cir. 1993); United States v. Riley, 143 F.3d 1289, 1292 (9th Cir. 1998); United States v. Grice, 319 F.3d 1174, 1178-79 (9th Cir.); United States v. Brock-Davis, 504 F.3d 991, 999 (9th Cir. 2007); In re Her Majesty the Queen in Right of Canada, 785 F.3d 1273, 1276 (9th Cir. 2015).

         The Court finds the guilt phase of the government's witnesses' testimonies and the trial admitted exhibits are relevant and reliable. The Court finds the sentencing witnesses and exhibits are relevant and reliable evidence: A, A-1, A-1-a, A-1-b, A-1-c, A-1-d, A-1-e, A-1-f, A-1-g, A-1-h, B, C, C-1, D, D-2, E, E-1, E-2, F, F-1, F-2, F-3, F-4, F-4-a, F-4-b, F-4-c, F-4-d, F-4-e, F-4-f, F-5, F-6, F-7, G, G-1, G-2, G-2-a, G-2-b, G-2-c, G-2-d, G-2-e, G-2-f, G-2-g, G-2-h, G-7, G-7-a, G-7-b, H, H-1, H-1-a, H-1-b, H-1-c, H-1-d, H-1-e, H-1-f, H-1-g, H-1-h, 801, 802, 803, 805, I, J, K, M, and N. The Court finds the statements of the SEC attorneys explaining how they obtained the information, made the exhibits, and only Brandel's statements that are against his interest in Ex. M are relevant and reliable evidence.

         II RESTITUTION

         A. The victims' actual losses are $6, 475, 000 under the Mandatory Victim Restitution Act.

         The Court finds the following are victims with actual losses of Brandel's and Warras's wire fraud scheme and conspiracy to commit wire fraud: GL lost $225, 000, N&NA lost $350, 000, JS lost $300, 000, JH lost $150, 000, EK lost $430, 000, MB lost $250, 000, GD lost $200, 000, MK lost $200, 000, TF lost $1, 000, 000, JA lost $540, 000, WB lost $330, 000, LB lost $300, 000, DM lost $400, 000, JE lost $500, 000, W&CG lost $1, 200, 000, and GW lost $100, 000 because of Brandel's and Warras's criminally convicted conduct. The located victims' actual loss is $6, 475, 000.[3] Admitted exhibits at trial and at sentencing and testimony at trial and sentencing.

         B. The Mandatory Victim Restitution Act applies to this case.

         The Mandatory Victim Restitution Act (“MVRA”) requires a restitution order at sentencing where defendants' criminal conduct caused the victims' losses, including offenses committed by fraud or deceit. See 18 U.S.C. §§ 3663A(a)(1) and (c)(1)(A)(ii) and 3664(e) and (f)(1)(A); United States v. Lo, 839 F.3d 777, 788-789 (9th Cir. 2016); United States v. Eyraud, 809 F.3d 462, 467 and 469 (9th Cir. 2015); United States v. Hymas, 780 F.3d 1285, 1293 n.4 (9th Cir. 2015); United States v. Hunter, 618 F.3d 1062, 1064 (9th Cir. 2010); United States v. Gossi, 608 F.3d 574, 578-79 (9th Cir. 2010); United States v. Peterson, 538 F.3d 1064, 1074-75 (9th Cir. 2008); United States v. De La Fuente, 353 F.3d 766, 769 (9th Cir. 2003). The Court finds that since the jury found Brandel and Warras committed a scheme of wire fraud and securities fraud and a conspiracy to commit a scheme of wire fraud and securities fraud, the MVRA requires the Court order restitution to the victims.

         1. The Defendants are jointly and severally liable for restitution of $6, 475, 000.

         The Court must impose the full amount of restitution for the identifiable victims' losses without consideration of the defendant's economic circumstances (18 U.S.C. § 3664(f)(1)(A)), or when more than one defendant contributed to the victims' losses, may apportion the restitution amounts among the defendants to reflect their level of contribution to the victims' losses and the economic circumstances of each defendant (18 U.S.C. § 3664(h)), and has discretion to decide the monthly payment towards the restitution (18 U.S.C. § 3664(f)(3)(B)). See 18 U.S.C. § 3664(f)(1)(A), (f)(3)(B), and (h); United States v. Hankins, 858 F.3d 1273, 1276 (9th Cir. 2017); Grice, 319 F.3d at 1177; United States v. Matsumaru, 244 F.3d 1092, 1108-09 (9th Cir. 2001); United States v. Dubose, 146 F.3d 1141, 1148 (9th Cir. 1998), as amended on denial of reh'g (Aug. 31, 1998); United States v. Hymas, 582 F. App'x, 770, 770-71 (9th Cir. 2014); United States v. Reed, 84 Fed.Appx. 983, 987 (9th Cir. 2004).

         When the Court asked the defendants if they wanted apportionment at sentencing regarding restitution, they wanted joint and several liability rejecting apportionment. Even if the defendants were to request apportionment, and it certainly appears that Warras has requested apportionment, the Court has discretion to apportion the restitution amounts or not to apportion and to order joint and several liability. 18 U.S.C. § 3664(h); United States v. Booth, 309 F.3d 566, 575-76 (9th Cir. 2002); Hymas, 582 Fed.Appx. at 770-71.

         The Court may deny apportionment when the defendants are blameworthy regarding their convicted crimes, play essential roles in the scheme to commit wire fraud and securities fraud and conspiracy to commit such scheme of fraud, have culpability, and are partially responsible for the victims' losses. Id. The Court may also deny apportionment because restitution is to make the victims whole, not punish the defendants. Hymas, 582 Fed.Appx. at 771; Newman, 659 F.3d at 1241, abrogated on other grounds, Honeycutt, 137 S.Ct. at 1632 and 1635; Hunter, 618 F.3d at 1064. The Court finds the defendants are jointly and severally liable for restitution of $6, 475, 000.

         2. Preponderance of the Evidence is the Standard of Proof for Restitution.

         “The standard of proof for restitution proceedings is preponderance of the evidence as opposed to the standard of clear and convincing evidence required of a sentencing enhancement with a disproportionate impact.” Hymas, 780 F.3d at 1293 n.4; 18 U.S.C. §§ 3663A(a)(1) and (c)(1)(A)(ii) and 3664(e) and (f)(1)(A); In re Her Majesty the Queen in Right of Canada, 785 F.3d at 1276; Peterson, 538 F.3d at 1075. The Court finds that the government has met its burden of proof as to the amount of loss sustained by the victims and the Court finds by a preponderance of the evidence that restitution should be ordered, jointly and severally, against defendants.

         3. The victims are defined under the MVRA.

         Under the MVRA, a victim is (1) “a person” directly and proximately harmed as a result of the commission of an offense for which restitution may be ordered; or (2) in the case of an offense that involves as an element a scheme, conspiracy, or pattern of criminal activity, any person directly harmed by the defendants' conduct in the course of the scheme, conspiracy, or pattern. 18 U.S.C. § 3663A(a)(2); see Lo, 839 F.3d at 788; Gossi, 608 F.3d at 579; Peterson, 538 F.3d at 1074; De La Fuente, 353 F.3d at 771-772. Under the MVRA, the definition of a person includes an entity. See Gossi, 608 F.3d at 576-579; De La Fuente, 353 F.3d at 769.

         The Court finds the victims in this case were directly and proximately harmed because Brandel's and Warras's offenses involved a scheme to commit wire fraud and securities fraud and a conspiracy to commit a scheme of wire fraud and securities fraud. This Court finds that whether the money came from a person or his or her corporation in this case, they were still victims under the MVRA.

         4. Defendants' fraudulent statements are the causation of the victims' loss.

         Defendants' fraudulent statements caused the victims' loss. See Peterson, 538 F.3d at 1075. This is true even when the statements were not the sole factor in causing the victims' loss. Id. (citing United States v. Spicer, 57 F.3d 1152, 1159 (D.C. Cir. 1995)); De la Fuente, 353 F.3d at 774-75; United States v. Hackett, 311 F.3d 989, 992-93 (9th Cir. 2002). It is likely in this case that Defendants' fraud was the sole factor, but even if it was not, the victims were unlikely to have invested their money had they known the true financial standing of the “Malom Group”. The Court finds the defendants made numerous fraudulent statements to the victims in this case to further their scheme to commit wire fraud and securities fraud and their conspiracy to commit a scheme of wire fraud and securities fraud. This Court finds Brandel's and Warras's fraudulent statements were the causation of the victims' losses.

         5. Restitution includes victims' losses not included in counts of the indictment where the defendants committed crimes that include a scheme, a conspiracy, or a pattern, which are closely related to them.

         Where defendants are “convicted of crimes that require proof of a scheme, conspiracy, or pattern of criminal activity . . . restitution may be ordered for all persons directly harmed by the entire scheme. Such restitution is not limited to harm caused by the particular counts of conviction. In this context, a restitution order may be based on related but uncharged conduct that is part of a fraud scheme.” In re Her Majesty the Queen in Right of Canada, 785 F.3d at 1276; see Lo, 839 F.3d at 788; Brock-Davis, 504 F.3d at 999; Grice, 319 F.3d at 1177-79.

         The Court finds that since Brandel and Warras are guilty of a scheme to commit wire fraud and securities fraud and a conspiracy to commit a scheme of such, the Court may order restitution for all victims directly harmed by the entire scheme, including those not in counts of conviction. This Court finds the government proved by preponderance of the evidence the victims were directly harmed by the entire scheme and conspiracy in which Brandel and Warras participated extensively and were convicted.

         The harm to the victim must be closely related to the scheme or conspiracy, rather than tangentially linked. See Riley, 143 F.3d at 1292. The Court finds the harm to the victims who were not included in the indictment are closely related to defendants' scheme and conspiracy with the victims who were in the indictment. The Court finds by a preponderance of the evidence: (1) the victims in the guilt phase and the additional victims at sentencing are victims as defined in the MVRA; (2) Anthony Brandel and James Warras caused the direct and proximate harm to the victims; (3) under the scheme and conspiracy, Anthony Brandel and James Warras caused the direct harm to the victims; (4) Anthony Brandel and James Warras were the causation of the victims' losses through their fraudulent statements; and (5) Anthony Brandel's and James Warras's crimes against the victims that were not in the indictment are closely related to the conduct Anthony Brandel and James Warras committed against the victims who were named in the indictment and finds by preponderance of the evidence that: (a) the joint venture agreements with Malom Group AG or NAS were alike, (b) the escrow agreements were alike, (c) the fraudulent bank statements were alike, (d) Anthony Brandel and James Warras criminal conduct were alike, (e) the flow the victims' money from their accounts to escrow accounts and from the escrow accounts to the same criminals, including Anthony Brandel and James Warras, were alike, (f) Anthony Brandel's and James Warras's scheme and artifice to defraud were alike, (g) Brandel's and Warras's conspiracy were alike, (h) Anthony Brandel's and James Warras's criminal pattern were alike, (i) Anthony Brandel's and James Warras's causation were alike, (j) Anthony Brandel's and James Warras's modus operandi were alike, (k) Anthony Brandel's and James Warras's direct harm were alike, (k) Anthony Brandel's and James Warras's direct and proximate harm were alike, (1) the time periods were alike, (m) the removal of the money in escrow by distributing it to the defendants without approved financial transactions were alike, and (n) Anthony Brandel's and James Warras's lulling the victims with the fraudulent statements that the money would be returned were alike. See Admitted exhibits at trial and at sentencing; testimony at trial and sentencing; see Lo, 839 F.3d at 788-789; Eyraud, 809 F.3d at 467 and 469; In re Her Majesty the Queen in Right of Canada, 785 F.3d at 1276; Hymas, 780 F.3d at 1293 n.4; Hunter, 618 F.3d at 1064; Gossi, 608 F.3d at 578-79; Peterson, 538 F.3d at 1074-75; Brock-Davis, 504 F.3d at 999; United States v. Decoud, 456 F.3d 996, 1015 (9th Cir. 2006); De La Fuente, 353 F.3d at 769; Grice, 319 F.3d at 1177-79; Hackett, 311 F.3d at 992-93; United States v. Montgomery, 150 F.3d 983, 999 (9th Cir. 1998); United States v. Kostoff, 585 F.2d 378, 380 (9th Cir. 1978).

         For these reasons, the Court finds the Government proved by preponderance of the evidence the multiple links of the victims' money to the defendants is a causal chain, and no intervening cause existed regarding the fraudulently obtained money from the victims to the defendants. See Id.

         “The government need not show direct contact or explicit agreement between the defendants. It is sufficient to show that each defendant knew or had reason to know of the scope of the conspiracy and that each defendant had reason to believe that his own benefits were dependent on the success of the entire venture.” Montgomery, 150 F.3d at 999 (citation and brackets omitted) (quoting Kostoff, 585 F.2d at 380). When the defendants' criminal activities were “not limited to a single transaction”, and the defendants “played a variety of roles” in the organization, they are liable for the entire conspiracy. See Decoud, 456 F.3d at 1015.

         The Court finds the admitted evidence at trial and sentencing and the testimony at trial and sentencing proved by preponderance of the evidence that Brandel and Warras were part of the conspiracy and the scheme to defraud; knew the scope of the conspiracy and the scheme to defraud; knew they were dependent on the success of the entire scheme and conspiracy to receive their benefits, the proceeds of the fraudulently obtained money; were involved in numerous transactions; and played a variety of roles in the conspiracy.

         The Court finds, pursuant to 18 U.S.C. §§ 3663A and 3664, Brandel should pay restitution of $6, 475, 000 and Warras should pay restitution of $6, 475, 000 to the victims, jointly and severally liable with each other and with any other convicted codefendants.[4]

         III. FORFEITURE

         A. The forfeiture statutes in the indictment authorize criminal forfeiture money judgments.

         18 U.S.C. § 981(a)(1)(C) with 28 U.S.C. § 2461(c) and 21 U.S.C. § 853(p), the forfeiture statutes alleged in the forfeiture allegation of the Indictment (#1), support criminal forfeiture money judgments. See Newman, 659 F.3d at 1242; United States v. Casey, 444 F.3d 1071, 1076 (9th Cir. 2006); Phillips, 704 F.3d at 771; Fed. R. Crim. P. 32.2(b)(1); 28 U.S.C. § 2461(c); Fed. R. Crim. P. 32.2(e); 21 U.S.C. § 853(p); Honeycutt, 137 S.Ct. at 1633-34; Lo, 839 F.3d at 780, 782-783, 790-792. The Court finds Defendants' crimes of which they were convicted have forfeiture statutes that authorize criminal forfeiture money judgments.

         B. The illegal proceeds of defendants' scheme and conspiracy are the gross proceeds.

         The Court finds illegal proceeds are total gross proceeds obtained, acquired, or possessed with dominion and control in a scheme of fraud and a conspiracy to commit a scheme of such fraud. See 18 U.S.C. § 981(a)(1)(C) with 28 U.S.C. § 2461(c); Honeycutt, 137 S.Ct. at 1632; United States v. Christensen, 828 F.3d 763, 822-24 (9th Cir. 2016); Newman, 659 F.3d at 1243; Casey, 444 F.3d at 1073-74, 1076; Lo, 839 F.3d at 792-794. The Court finds the gross proceeds of this scheme to commit wire fraud and securities fraud and conspiracy to commit such scheme are $10, 399, 725. Admitted exhibits and testimony at trial and sentencing, including, but not limited to, Ex. I, N.

         The Government argued that the Court should order a criminal forfeiture money judgment of $4, 920, 000.00 based on an agreement between DOJ attorney Young and Mr. Smith, Anthony Brandel's attorney. Anthony Brandel denied he authorized his counsel to make the deal (ECF No. 371, p. 1-2). Based on Anthony Brandel's statement that he never authorized the deal, [5]the Court finds Brandel obtained, acquired, and possessed with dominion and control $8, 849, 725 of the fraudulently obtained illegal proceeds through Commercial Escrow Services (“CES”) and $100, 000 through MY Consultants as to B&CG. Exhibits N and K; admitted exhibits and testimony at trial and sentencing. Brandel dictated to Toni Hardstone of CES when and to whom the $8, 849, 725 went before the Joint Venture Agreement authorized such and even without signed escrow instructions. Exhibit N; admitted exhibits and testimony at trial and sentencing. ...


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