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U.S. v. GORDON

October 18, 1999

UNITED STATES OF AMERICA,
v.
BRUCE W. GORDON, WHO'S WHO WORLD WIDE REGISTRY, INC., STERLING WHO'S WHO, INC. TARA GARBOSKI, A/K/A "TARA GREEN," ORAL FRANK OSMAN, A/K/A "FRANK MARTIN," LAURA WEITZ, A/K/A "LAURA WINTERS," ANNETTE HALEY, SCOTT MICHAELSON, STEVE RUBIN, A/K/A "STEVE WALDEN, AND MARTIN REFFSIN, DEFENDANTS.



The opinion of the court was delivered by: Spatt, District Judge.

  MEMORANDUM OF DECISION AND ORDER

I. BACKGROUND

This opinion is rendered with respect to a hearing pursuant to United States v. Fatico, 579 F.2d 707, 711 (2d Cir. 1978) ("Fatico") held before the Court on June 4, 1999, June 11, 1999, June 30, 1999 and July 2, 1999.

This prosecution and the eventual convictions emanate from a telemarketing scheme devised by Bruce W. Gordon ("Gordon") whereby individuals were solicited to purchase memberships in directories or registries commonly referred to as "Who's Who" publications.

On April 7, 1998, following a jury trial, 297 guilty verdicts were returned on 69 separate counts involving ten different defendants. The jury returned a verdict convicting Gordon of Conspiracy to Commit Mail Fraud (Count 1), Mail Fraud (Counts 1-52), perjury (Count 53), obstruction of justice (Counts 54-55), conspiracy to impair, impede and defeat the IRS (Count 56), evasion of payment of tax (Count 57), filing a false tax return 1992-1994 (Counts 59-61), filing a false collection information statement on September 16, 1991, July 8, 1993, and December 29, 1993 (Counts 66-68), and money laundering (Count 69); Who's Who Worldwide was convicted of conspiracy (Count 1) and mail fraud (Counts 2-38, 40-44, 47, 49, 51, 52); Sterling Who's Who was convicted of conspiracy (Count 1) and mail fraud (Counts 39, 45-46, 48, & 50); Garboski was convicted of conspiracy (Count 1) and mail fraud (Counts 2-38, 40-44, 47, 49, 51, and 52); Weitz was convicted of conspiracy (Count 1) and mail fraud (Counts 2-38, 40-44, 47, 49, 51, and 52); Osman was convicted of conspiracy (Count 1) and mail fraud (Count 2-4, 49, 51, and 52); Haley was convicted of conspiracy (Count 1) and mail fraud (Counts 21-38, 40-44, 47, 49, 51, and 52); Michaelson was convicted of conspiracy (Count 1) and mail fraud (Counts 8-38, 40-44, 47, 49, 51, and 52); Rubin was convicted of conspiracy (Count 1) and mail fraud (44, 47, 49, & 51); and Reffsin was convicted of conspiracy to impair, impede and defeat the IRS (Count 56), evasion of payment of tax (Count 57), assisting in the filing of a false tax return 1992-1994 (Counts 63-65).

On January 8, 1999, the Court denied the motions by the defendants for a judgment of acquittal, pursuant to Federal Rule of Criminal Procedure ("Fed.R.Crim. P.") 29(c) ("Rule 29(c)"), or in the alternative, for a new trial pursuant to Fed. R.Crim.P. 33 ("Rule 33").

A. The Presentence Report

The Presentence Report ("PR"), prepared by United States Probation Officer Christine B. Roberts on December 21, 1998 states as follows:

  29. Gordon is held responsible for the entire loss
  caused as a result of the fraudulent scheme. The tax
  returns of Worldwide and Sterling, and other financial
  records of the Companies indicate that their total
  sales between 1990 and 1995 were in excess of $20
  million. The total sales figure is considered the loss
  due to the fraud because the product delivered to
  customers was essentially worthless.
  41. Garboski is held responsible for a loss of $16
  million, based upon the tax returns and internal
  corporate books of Worldwide during the course of her
  employment.
  45. Osman is held responsible for a loss of $6.1
  million, based upon the tax returns and internal
  corporate books of Worldwide during the course of his
  employment.
  48. Weitz is held responsible for a loss of $848,000,
  based upon the tax returns and internal corporate
  books of World-wide during the course of her
  employment.
  51. Haley is held responsible for a loss of $862,000,
  based upon the tax returns and internal corporate
  books of Worldwide during the course of her
  employment.
  54. Michaelson is held responsible for a loss of
  $1,129,000, based upon the tax returns and internal
  corporate books of Worldwide during the course of his
  employment.
  57. Rubin is held responsible for a loss of $246,000,
  based upon the tax returns and internal corporate
  books of Worldwide during the course of his
  employment.
  86. Gordon is held responsible for a total tax loss of
  between $1.5 million and $2.5 million. The government
  is preparing a precise figure for the loss, but
  informs that it is at least more than $1.5 million.
  87. Reffsin is also held responsible for a total tax
  loss of between $1.5 million and $2.5 million.

As a result, the sentence report recommends that Gordon receive a 16 level enhancement as a result of the amount of loss, pursuant to Guideline 2F1.1 (b)(1)(Q). With regard to the other defendants, the Probation Department has recommended the following enhancements based upon the amount of loss and pursuant to Guideline 2F1.1 (b)(1): Garboski (15 levels), Osman (14 levels), Weitz (11 levels), Haley (11 levels), Michaelson (11 levels) and Rubin (8 levels). With regard to the tax convictions of Gordon and Reffsin, pursuant to Guideline 2T4.1 (O), the sentence report recommends that they receive a base offense level of 20.

The only two issues presently before the Court are: (1) To what extent, if any, the loss enhancement provisions of Guideline 2F1.1 should apply to the respective defendants. In other words, what is a reasonable estimate of the fraud loss in this case? and (2) What is the reasonable estimate of the tax loss?

II. THE FATICO HEARING

A. The Burden of Proof

The burden of proof at the Fatico hearing is on the Government to establish the facts required to support the amount of the fraud and tax losses, by a preponderance of the evidence. U.S. v. Shonubi, 998 F.2d 84 (2d Cir. 1993); U.S. v. Carmona, 873 F.2d 569 (2d Cir. 1989); U.S. v. Lee, 818 F.2d 1052, 1057 (2d Cir.), cert. denied, 484 U.S. 956, 208 S.Ct. 350, 98 L.Ed.2d 376 (1987).

B. The Fatico Hearing

After a review of all the evidence taken at the Fatico hearing, and considering the relevant trial testimony, the Court ...


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