The opinion of the court was delivered by: Spatt, District Judge.
MEMORANDUM OF DECISION AND ORDER TO
This opinion follows a Fatico evidentiary hearing, held before the Court on October 28, 2011, November 1, 2011, November 3, 2011 and November 10, 2011.
In the sentencing context, where there is a dispute as to any factor important to the sentencing determination, there shall be an "opportunity to present information to the court regarding that factor." United States Sentencing Guidelines § 6A1.3. The resolution of such a disputed factor is provided for in the aforementioned guidelines, as follows: § 6A1.3. Resolution of Disputed Factors (Policy Statement)
(a) When any factor important to the sentencing determination is reasonably in dispute, the parties shall be given an adequate opportunity to present information to the court regarding that factor. In resolving any dispute concerning a factor important to the sentencing determination, the court may consider relevant information without regard to its admissibility under the rules of evidence applicable at trial, provided that the information has sufficient indicia of reliability to support its probable accuracy.
(b) The court shall resolve disputed sentencing factors at a sentencing hearing in accordance with Rule 32(I), Fed. R. Crim. P.
As to the Fatico hearing held to resolve disputed sentencing factors in this case, namely, the amount of the loss and restitution -- the standard of proof on the part of the government to prove the amount of the loss is the preponderance of the evidence. As stated in United States v. Martinez, 525 F.3d 211 (2d Cir. 2007): "This court has determined that, '[j]udicial authority to find facts relevant to sentencing by a preponderance of the evidence survives Booker.'" Id. at 215 (quoting United States v. Garcia, 413 F.3d 201, 220 n.15 (2d Cir. 2005)). Also, it has long been established that a district court may consider heresay evidence in a Fatico hearing, if the evidence is of sufficient reliability. United States v. Martinucci, 561 F.3d 533, 535 (2d Cir. 2009); United States v. Martinez, 413 F.3d 239, 242 (2d Cir. 2005).
Ivan Moreno is presently a tow truck operator. From 1998 to 2004, he was an owner of a towing company, called Aenos Towing and Recovery, Inc. ("Aenos" or "Aenos Towing"). He and his late brother Renato purchased the company in 1998 for approximately $125,000. The business included three trucks. The company did "tow-truck" work for taxi companies and parking garages. In 2000, Aenos applied to provide towing services for the New York City Police Department within the confines of the 114th and 115th Precincts in Astoria, Queens. Aenos obtained that contract with the New York City Police Department in March of 2003. The contract involved the pickup of derelict vehicles and stolen vehicles. Aenos trucks would tow these vehicles to its holding yard in Astoria where they would be kept for about 15 work days. For this service, Aenos was paid about $80 per car. Aenos would be paid more if the owner claimed the vehicle prior to the 15 day period. There was about a 30 percent owner redemption rate and a 70 percent transporting of the vehicles to the City owned facility.
Aenos also did towing work for small motor clubs and was paid $40 to $100 per vehicle for that service. Aenos Towing did about 100 of those service jobs per month.
In March 2004, the Aenos insurance on all of its vehicles "was taken away" and Aenos Towing could not operate and had to pull its trucks off the road. At that point, the Aenos Towing business ended. Explaining further about the City contract, Moreno stated that the term was for 3 years and 45 days. The agreement with the City is in evidence as Government Exhibit 2. In the contract, the City estimated that there would be 8,850 cars towed per year, at an estimated price of $3,517,875 for the 3 year duration of the contract. Also, there was an estimated aborted tows of 950 cars per year at an estimated price of $162,450 for the period of the contract. So that the total three year bid price for the Brooklyn day tow shift was the sum of $3,680,325. In addition, there could be extra bonuses if the number of vehicles exceeded the target numbers.
The agreement between Aenos and the City commenced on March 10, 2003. Aenos had to lease a large yard to accommodate "at least 1,000 cars." Aenos leased property on Kent Avenue in Brooklyn from Ninth Street Equities and Louis Silverman. Aenos had to make improvements to the leased yard, including fencing in a square block and providing a curb cut. This work cost Aenos about $7,000 to $8,000 and approximately $10,000 in material. The rental for this large yard was about $25,000 per month. In addition, to perform the City contract, Aenos had to purchase a trailer for an on-site office on the Kent Avenue property for about $6,000 and "about" five new 2008 tow trucks including one flatbed truck. The cost was about $25,000 to $30,000 for the smaller tow trucks, $45,000 for the medium tow truck and about $60,000 for the flatbed truck. Aenos financed the purchase of the trucks and paid a down payment of between $20,000 to $30,000, with monthly payments on the financing of the vehicles of between $5,000 to $7,000 per month.
Aenos needed insurance coverage for these new vehicles. Moreno was recommended to an insurance broker named Arthur Bielli whose company was named Cross County Insurance Brokerage Inc. ("Cross County") located in Ronkonkoma, New York. On December 2, 2002, Cross County gave Aenos a quote as to insurance fees for 2003. (See Govt. Ex. 15). The quote was for six 2003 vehicles for commercial auto liability insurance for a total premium of $42,000, which was a "fantastic" premium, compared to other quotes he had received from insurance brokers. Aenos decided to use Cross County as its broker. On December 8, 2002, Aenos Towing sent a check to Cross County in the sum of $12,400 for "truck and property insurance." The monthly insurance premiums were "in the range of $4,000 - $5,000." Some of the insurance premium monthly checks went to Cross County, a "couple" went to Florida Funding Associates and one or two checks went directly to the insurance company. Moreno understood that the insurance company involved was called AIU Insurance Company, or so "he believed."
So that prior to the start of the Aenos Towing contract with the City on March 10, 2003, Aenos had its new tow trucks; its new yard in Brooklyn; and its insurance coverage for the trucks and the property. Moreno described in detail the towing services provided for the City by Aenos in 12 hour shifts starting at midnight. Aenos was paid weekly by the City of New York and, for example, made weekly deposits in November and December 2003 of $25,000, $23,000, $18,000 and $33,000. Aenos also earned "a couple of thousand per month" from the City Department of Sanitation for towing vehicles for that Department. Aenos also did work in the Sheriff's Manhattan PM Tour two days a week. He was still working in the Manhattan PM on a provisional basis two days a week in March of 2004 when Aenos Towing had to pull all their trucks off the road.
Moreno described the events of March 2004, when the City found out that Aenos Towing had no insurance and the vehicles had no registrations. Moreno learned that all of his trucks had insurance suspensions and he claims that he almost had a heart attack that day. At first he disputed this occurrence, saying "it can't be happening." However, punching into the computers, the response was "invalid, invalid" and "suspensions." Moreno arranged to have another private contractor do the Aenos Towing work for that day.
Moreno and his brother attempted to contact Bielli or his company. It was 2 or 3 o'clock in the morning and their calls went to voice mail. They left messages with Bielli. As soon as the sun came out they went to Bielli's office. Bielli wasn't there. The next day Bielli called and said "there was a problem with the computers up in Albany. You are fully insured." Bielli assured Moreno that Aenos Towing had insurance on all their vehicles. However, on March 18, 2004, Aenos received a communication from Kim of Cross County, stating:
Company: Aenos Towing Attn: George & Ivan From: Kim Date: Phone: Fax: Re: Check CC: Q Urgent , For Review Q Please Comment Q Please Reply Q Please Recycle Please be advised that coverage has been bound for your trucks and a deposit check needs to be picked up from you today or I cannot hold the coverage.
Then, the next day, on March 19, 2004, Aenos received another communication from Cross County, stating as follows:
Aenos Towing Inc. 11-06 Broadway Long Island City, NY 11106 To Whom It May Concern: Please be advised that Aenos Towing Inc. has insurance on all of their trucks and is in full force. If you have any questions, please call the office at 631 588 2228. Thank you Lisa (Gov't Ex. 58).
Prior to these occurrences, on August 4, 2003, Aenos had sent a suspension order from the State of New York dated July 1, 2003 stating to Global, "Please follow up today." (Gov't Ex. 46). The suspension order stated: "Failure to maintain continuous liability insurance coverage." Another suspension order was also received on September 29, 2003 and Aenos sent a fax to Lisa of Cross County stating:
14084 22720 24687 We need a restoration order from Albany, its very important (Gov't Ex. 50).
In March 2004, Aenos had to pull all their vehicles off the road due to lack of insurance and suspended registrations. All the Aenos trucks were in the Kent Avenue yard by the end of March 2004. Aenos was not able to perform any towing services. As a result, the City then gave the Aenos Towing contract to another company. However, at that point, at the end of March 2004, the City did not terminate the contract with Aenos. Moreno contacted the AIU Insurance Company and was told that he had to pay a premium before he could start his insurance. There was "an old premium that was never submitted by my former insurance company," (Tr. at 101), meaning Bielli's company. AIU wanted $15,000 to $16,000 in back premiums. Bielli's firm failed to pay the insurance premiums to the AIU Insurance Company. Aenos Towing advised the City that they were a "victim of fraud through our insurance broker." (Tr. at 108).
Aenos Towing made substantial efforts to rectify this situation, apparently without success. In April and May 2004, Aenos received no income, except for the pre-March 2004 towing work, but no new income. Aenos could not pay the Kent Avenue yard monthly rent of $25,000.
In early June 2004, Moreno learned that the Aenos suspensions were lifted with regard to his registrations. However, Aenos still could not resume its towing operations "because there was still money owed from back premiums to the insurance company." (Tr. at 124). So that in early June 2004, Aenos still did not have valid insurance on any of its trucks. In addition, it owed the Kent Avenue landlord several $25,000 monthly rental payments. Also at that time, Aenos had fallen behind in its payments on the trucks to the finance company. Further, the landlord of the Kent Avenue property started eviction proceedings. On June 22, 2004 the landlord served a notice of eviction. (Govt. Ex. 76). Also, landlord Silverman went directly to the New York City Finance Department to attempt to seize and collect any money due to Aenos Towing.
On July 1, 2004, the New York City Department of Finance terminated their agreement with Aenos Towing and Recovery Inc. as of July 7, 2004. (Gov't Ex. 69). Aenos removed their tow trucks from the Kent Avenue yard, which was padlocked by the landlord. Ultimately, Aenos surrendered the trucks to the finance company and sold two older trucks. Of importance, Moreno and his brother George prepared a list of the losses Aenos sustained by reason of the termination of the City contract for the 27 month period remaining on the contract. (Gov't Ex. 1). The total projected loss for the estimated 8,850 vehicles that would be towed per year, was the sum of $5,145,276.56.
After Aenos Towing shut down, Moreno got a job as a dispatcher for a cab company, and then as a driver for a tow truck company.
On cross-examination, Moreno conceded that he didn't file personal federal, state and city tax returns for the years 2002, 2003 and 2004. During these periods he was earning between $50,000 and $75,000 per year and paying no income tax. Also, there were judgments against him for failure to pay on his two Discover credit cards. In addition, there were federal tax liens filed against Aenos in 2002 and 2004. In particular, there was a recorded lien against Aenos Towing of $12,490 on February 2, 2004. Also in evidence is a warrant against Aenos Towing from the New York State Taxation and Finance Department for the period ending May 31, 1999, in the amount of $3,114, (Dft's Ex. AK), in addition to a series of other warrants filed against Aenos.
There was also testimony about the problem Aenos had with the landlord of the Kent property with regard to a mechanics lien filed against Aenos. The defendant seems to assert that the Aenos business was terminated because of the Kent Street mechanics lien, rather than the lack of insurance coverage. The Court disagrees. The City suspended and then cancelled its contract with Aenos because of the lack of insurance coverage. This failure of insurance coverage was the precipitating and dominant factor in the loss of the Aenos Towing business.
It was also brought out in cross-examination that Aenos may have been seeking to secure financing in order to obtain a yard in which to perform the City contract. Aenos Towing would need a very large yard, about "one city square block, almost 250,000 square feet." (Tr. at 220), or 112,000 square feet as in the letter from the Aenos attorney.
Also, it was revealed that Aenos financed its trucks through a company called Rule Transfer, Inc. It seems that Rule Transfer purchased the trucks and leased them to Aenos, who paid about $10,000 per month to lease the five trucks. Aenos had five truck drivers for the five trucks at $10.00 per hour and two supervisors, including Moreno. There were also "scouts" who were paid $10 to $15 per vehicle for about 50 vehicles per scout per week.
Aenos Towing was paying insurance premiums of about $42,000 plus $12,400 for financing the premiums for a total of $54,000 per year. Apparently Florida Funding Associates was a finance company that was helping Aenos fund its insurance premiums at 24% interest. Aenos could not afford to pay AIU Insurance Company directly because it wanted three payments per year, and that was beyond their ability to pay. So Aenos financed the premiums through Florida Funding, making nine payments per year. Apparently, in March 2003 Florida Funding wrote to Aenos that their insurance would be cancelled if not paid by March 26, 2003. (Dft's Ex. C). Also, on April 9, 2003, it appears ...