Opinion
Case No. 98-40074-01-SAC
August 1, 2001
RULING ON OBJECTIONS TO PRESENTENCE REPORT
On August 5, 1998, the grand jury returned a one count indictment charging the defendant, Andrew B. Rowzer, with a violation of 18 U.S.C. § 922(g), felon in possession of a firearm. The indictment lists eleven different firearms. On June 15, 1999, a two-count superseding indictment was filed that added a charge of money laundering in violation of 18 U.S.C. § 1957. Pursuant to a plea agreement, the defendant entered a guilty plea to both counts on June 15, 1999. The defendant subsequently moved to withdraw his guilty plea, and the court denied that motion by order filed November 16, 1999. (Dk. 61).
The Presentence Report ("PSR") recommends a total offense level of 29 with a criminal history category of III for a guideline range of 108 to 135 months. Because the statutory maximum penalty is 10 years, the court must adjust the guideline range to 108 to 120 months. Both sides have objections to the PSR and have chosen not to file any sentencing memorandum in support of them. Consequently, the court will address the objections as they appear in the addendum to the PSR and were argued at the sentencing hearing.
GOVERNMENT'S OBJECTION
The government objects that the PSR does not recommend any enhancement pursuant to U.S.S.G. § 3C1.1 for obstruction of justice. The government contends the court should impose this enhancement based on the defendant's efforts to withdraw his guilty plea by testifying in direct contradiction to the admissions he made previously in his change of plea proceeding. The government believes the record would sustain a finding that the defendant committed perjury either in his statements during the change of plea hearing or in his subsequent testimony. The government recognizes that this two-level enhancement would take the defendant to a guideline sentence range of 135-168 months which exceeds the statutory maximum of 120 months. The government asks the court to sentence the defendant to 120 months with or without this enhancement.
Ruling: Section 3C1.1 of the Sentencing Guidelines requires a two-point enhancement of a defendant's offense level if "the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice during the investigation, prosecution, or sentencing of the instant offense." Obstruction of justice includes "committing, suborning, or attempting to suborn perjury." U.S.S.G. § 3C1.1, comment. (n. 4(b); see United States v. Mounkes, 204 F.3d 1024, 1029 (10th Cir.), cert. denied, 120 S.Ct. 2661 (2000). A defendant's false statements made in his plea of guilty, which is later withdrawn, can serve as the factual basis for an obstruction of justice enhancement. See United States v. Medina-Estrada, 81 F.3d 981, 986-87 (10th Cir. 1996). For that matter, a court may base this enhancement on a "defendant's testimony at his withdrawal of plea hearing, which was at odds with his Rule 11 hearing averments." United States v. Martinez, 169 F.3d 1049, 1056 (7th Cir. 1999).
The court's finding of perjury for a § 3C1.1 enhancement must embrace two components: (1) all factual predicates of perjury; and (2) specific identification of the perjured testimony. United States v. Medina-Estrada, 81 F.3d at 987. Under § 3C1.1, "[a] defendant commits perjury . . . if he `gives false testimony concerning a material matter with the willful intent to provide false testimony.'" United States v. Pretty, 98 F.3d 1213, 1221 (10th Cir. 1996) (quoting United States v. Dunnigan, 507 U.S. 87, 94 (1993)), cert. denied, 520 U.S. 1266 (1997). Thus, the factual predicates of perjury are falsity, materiality, and willful intent. United States v. Massey, 48 F.3d 1560, 1573 (10th Cir.), cert. denied, 515 U.S. 1167 (1995). Secondly, the district court need not recite verbatim the perjurious testimony, but it must "indicate or describe the nature of the testimony found to be perjurious" so that the appellate court can review the transcript and evaluate the perjury findings. Id. at 1574.
At the change of plea proceeding, the government submitted that it would prove the defendant was prohibited from possessing firearms and that the defendant was found in possession of eleven firearms at his residence on June 25, 1997, in violation of 18 U.S.C. § 922(g). At that time, the defendant under oath said the evidence as stated by the government was true and that he had violated § 922(g). (Govt. Ex. 6, pp. 17-18). As to the money laundering count involving the defendant's purchase of a motorcycle with proceeds from the unlawful narcotic distribution, the court conducted the following inquiry at the change of plea:
THE COURT: As it relates to the, what is it, can I call it a motorcycle? That might not be the right terminology. And also as to the handguns and other guns?
DEFENDANT ROWSER: Yes, sir.
THE COURT: All right. It's all true, correct?
DEFENDANT ROWSER: Yes, sir.
(Govt. Ex. 6, p. 19).
In stark contrast to these admissions of guilt, the defendant testified denying his guilt to these same charges at the hearing on his motion to withdraw plea. Specifically, the defendant testified that he did not believe himself guilty of the gun charge at the time of the plea but that he entered his plea only to avoid a possibility of a longer sentence. (Govt. Ex. 7, pp. 16-17). During cross-examination, the defendant testified:
I'm not going to say I was lying (at the change of plea). I was promised something and I didn't get what I was promised, but I didn't know that. I knew I'm not guilty of the crime, so that's why I wanted to go back to trial.
(Govt. Ex. 7, p. 47). The defendant also testified that he was only following his lawyer's advice when he entered his plea. Id. at 48.
The court finds by a preponderance of evidence that the defendant committed perjury when he testified in support of his motion to withdraw on the matters identified and discussed above. The defendant's statements about his guilt were clearly material in these proceedings, particularly in deciding the merit of his motion to withdraw. The court finds the defendant's statements to be false. His testimony as to the reasons for first admitting his guilt and then retracting it is not credible. In a prior order, the court found the "account of . . . pre-plea discussions" given by the defendant's former attorney to be "more credible than Rowzer's self-serving and improbable version." (Dk. 61, p. 25). Moreover, "the government's proffer of evidence it would have offered at trial seemingly eviscerates (if not overwhelms) the defendant's claim of factual innocence of the firearms charge." (Dk. 61, pp. 22-23). Among this evidence was the defendant's own recorded statement to his bondsman over the telephone that "I had a collection of rifles and they took my collection." (Dk. 61, p. 23). The court further finds that the defendant testified falsely with the intent to commit perjury, that is, to mislead the court into granting his motion to withdraw. There is no factual basis for believing the defendant's false testimony was the result of confusion, mistake, or faulty memory. In sum, the court sustains the government's objection and finds the defendant committed perjury in testifying as he did in the hearing on his motion to withdraw his guilty plea. For these reasons, the court imposes a two-point enhancement for obstruction of justice pursuant to U.S.S.G. § 3C1.1.
DEFENDANT'S OBJECTIONS
The defendant advances numerous objections to the ("PSR"), many, if not most, of which concern the facts recited there. The well-settled rule in this circuit is that when a defendant objects to facts in the PSR the district court may no longer simply rely on the PSR, and it becomes the government's burden to prove those facts at a sentencing hearing by a preponderance of the evidence. United States v. Shinault, 147 F.3d 1266, 1277-78 (10th Cir.), cert. denied, 525 U.S. 988 (1998). On the other hand, if the defendant does not object to a fact in the PSR, then the fact is deemed to have been admitted for purposes of sentencing. Id. at 1278.
The court, however, is not just limited to what the government may prove at this hearing, for the defendant stipulated or admitted to certain conduct or facts when he entered his plea. The Policy Statement appearing at U.S.S.G. § 6B1.4 instructs that a sentencing court may rely on, but is not bound to accept, the parties' stipulations or admissions made during the change of plea proceedings. Other courts have treated such stipulations as a defendant having conclusively admitted and waived any subsequent challenge or objection to those facts and/or conduct. See, e.g., Young v. United States, 124 F.3d 794, 797 (7th Cir. 1997), cert. denied, 524 U.S. 928 (1998); United States v. Flores-Sandoval, 94 F.3d 346, 349 (7th Cir. 1996) ("[B]y stipulating to the conduct in the plea agreement, Flores has waived any claim that he did not engage in that conduct."); United States v. Allison, 59 F.3d 43, 46 (6th Cir.), cert. denied, 516 U.S. 1002 (1995). The court has found that the defendant's plea was voluntary, and the defendant does not presently contend that the government breached the plea agreement. Consequently, the court will credit the stipulations and admissions made by the defendant during the change of plea proceedings.
Prior to hearing the parties' evidence at sentencing, the court directed the parties' attention to Fed.R.Crim.P. 32(c)(1) and the provision giving the court discretion "to permit the parties to introduce testimony or other evidence on the objections." The court further indicated that it considered the defendant's objections one through seven to address matters which would not affect the sentence to be imposed. Neither side objected to this conclusion that the facts controverted by the defendant's first seven objections do not impact the court's calculation of the guidelines sentence or its determination of the sentence to be imposed in this case.
At the sentencing hearing, the court heard the testimony of four witnesses. The government presented Richard Clarke who testified to purchasing methamphetamine from the defendant on at least eight occasions for a total of five pounds from July of 1996 through May of 1997. Richard Clarke further described seeing other persons present during his transactions who appeared to be engaging in similar transactions with the defendant. Clarke testified that he dealt exclusively with the defendant and that most of the sales occurred at Jeremy Alexander's residence. Clarke also testified that Rowzer accompanied him to California and introduced him to other suppliers of methamphetamine. The government presented the testimony of Jose Rodriguez who testified to selling methamphetamine to the defendant and/or the defendant's business partner Jeremy Alexander on at least eleven different occasions. Rodriguez testified about personally selling a pound to the defendant and Alexander in the summer of 1998 and witnessing the apparent business relationship between Alexander and Rowzer. Rodriguez recalled sending ten additional shipments of methamphetamine to Alexander in 1998 with at least one shipment weighing ten pounds and all the rest weighing three, five or seven pounds, but none weighing less than three pounds. Officer Bruce Voight with the Topeka Police Department testified about Richard Clarke and his reliable work as a confidential informant. Finally, the defendant called Dale Evenson, a business associate of Jose Rodriguez, who testified that he sold the defendant methamphetamine in quantities only for personal use and that Jeremy Alexander was the person involved in the distribution in the large amounts of methamphetamine.
OBJECTION NO. 1: The defendant objects to ¶ 10 which states that a confidential informant ("CI") told Agent Brandau that the defendant was one of several people purchasing stolen property in exchange for cash and methamphetamine. The CI said that a residence in Auburn had been recently burglarized and that the stolen property was being purchased by the defendant and others. The defendant denies that he purchased any stolen property from the CI whom he believes to be David Brooks.
Ruling: No ruling on this objection is necessary. The facts appearing in ¶ 10 have no impact on the calculation of the guidelines sentence or on the sentence to be imposed in this case. It is noteworthy that the defendant does not object to that part of ¶ 15 which states that officers searching his home found property identified as stolen during the burglary of the Auburn residence.
OBJECTION NO. 2: The defendant objects to ¶ 13 which states that during a high speed chase involving a motorcycle operated by the defendant, Deputy Holladay observed the defendant throw a package that officers subsequently recovered and then tested as positive for methamphetamine. The defendant denies that he ever possessed or discarded what was found by the officers to be methamphetamine. The defendant also contends that officers lack a sufficient factual basis for identifying what they found as the item actually discarded from the car they were pursuing.
Ruling: No ruling on this objection is necessary. The facts appearing in ¶ 13 have no impact on the calculation of the guidelines sentence or on the sentence to be imposed in this case. The court notes that the government has proved these facts through the police reports contained in government's exhibit four admitted at the sentencing hearing.
OBJECTION NO. 3: The defendant objects to ¶ 14 which states that the defendant told officers following his arrest on June 25, 1997, that his address was 15318 West Road, Hoyt, KS. The defendant denies giving officers this address and asserts instead that he told officers his address was 3734 Tecumseh Road.
Ruling: No ruling on this objection is necessary. The disputed facts appearing in ¶ 14 have no impact on the calculation of the guidelines sentence or on the sentence to be imposed in this case.
OBJECTION NO. 4: The defendant objects to ¶ 15 which states that the officers executing a search warrant at 15318 West Road, Hoyt, KS were told that the only person having a key to the gun safe was the defendant and that all the firearms in the safe belonged to the defendant. Regardless of what the officers were told, the defendant denies having a key to the gun safe. The defendant asks that the PSR reflect that a key was not found in the defendant's possession either at the time of his arrest or at his residence.
Ruling: No ruling on this objection is necessary. The court understands the defendant is not disputing what the officers were actually told, but he is disputing the truthfulness of what was said. The court notes the PSR has been modified to reflect that officers did not find a key among the defendant's belongings. The court does not consider the presence or location of the key to be a fact impacting the calculation of the guidelines sentence or the sentence to be imposed in this case. The court finds that the defendant, under oath at the change of plea proceedings, voluntarily and knowingly stated it to be true that the 11 firearms found at his residence were within his possession and that he had violated 18 U.S.C. § 922(g).
OBJECTION NO. 5: The defendant objects to ¶ 16 which states that Perry Deisher, one of the individuals at the defendant's residence when the officers executed the search warrant, told officers that the weapons in the gun safe belonged to the defendant. The defendant says the government's file shows that John Cavanaugh purchased the guns from a man named Nonnast and that Cavanaugh also purchased the gun safe and kept it at the residence where the defendant was living.
Ruling: No ruling on this objection is necessary. The court understands the defendant is not disputing what Deisher actually told the officers, but he is disputing the truthfulness of what Deisher said. The court does not consider the identity of the person who purchased the guns or safe to be a fact impacting the calculation of the guidelines sentence or the sentence to be imposed in this case. As the court previously found, the defendant admitted at the change of plea proceedings that he possessed the 11 firearms found at his residence in violation of 18 U.S.C. § 922(g).
OBJECTIONS NOS. 6 and 7: The defendant objects to ¶ 17 which states that officers learned from Rick Davis, the owner of Davis Cycle, that Andrew Rowzer and Arthur Dalrymple, friends of Jeremy Alexander, made a cash purchase of two motorcycles worth approximately $16,000 to $17,000. The defendant objects to any inference that the motorcycles were jointly purchased and, instead, insists that Dalrymple used his own money to purchase one cycle and the defendant used his own money to purchase the other cycle.
The defendant objects to ¶ 18 which states that Arthur Dalrymple told Agent Brandau that both motorcycles purchased from Davis Cycle in February of 1997 actually belonged to the defendant and that Dalrymple put one of the cycles in his name to assist the defendant in getting around the notification requirements. The defendant disputes the truthfulness of Dalrymple's statement.
Ruling on Objections 6 and 7: No ruling on these objections is necessary. The disputed facts appearing in ¶¶ 17 and 18 have no impact on the calculation of the guidelines sentence or on the sentence to be imposed in this case. The government, however, carried its burden in proving these facts at the sentencing hearing. The government's exhibit eight is Agent Brandau's investigation report that summarizes his conversation with Dalrymple. According to this report, Dalrymple told Agent Brandau that he did not use any of his money to purchase the motorcycle, that all of the money came from Rowzer, and that the motorcycle was always handled as Rowzer's property.
OBJECTION NO. 8: The defendant objects to ¶ 21 which states that Richard Clarke told officers that he distributed methamphetamine with the defendant and that the defendant had been distributing large quantities of methamphetamine in Topeka, Kansas, and had been receiving the drugs from California suppliers through Federal Express and UPS. The defendant charges Clarke's statement as being untrue. He denies ever receiving drugs at his residence via either Federal Express or UPS from California.
Ruling: The court finds that the government has proved by a preponderance of evidence that the defendant distributed large quantities of methamphetamine which were received from California and that he distributed some of this methamphetamine to Richard Clarke. The credible and reliable testimony of Clarke and Rodriguez establish both of these propositions. The court does not recall any specific testimony at the sentencing hearing regarding the defendant's use of Federal Express or UPS. The court sustains the defendant's objection insofar as mentioning either of these methods of delivery. The court overrules this exception except for the mention of Federal Express or UPS.
OBJECTIONS NO. 9, 10 and 11: In his ninth objection, the defendant disputes ¶¶ 22, 23, 24, 25 and 29. Paragraphs 22 through 25 relate information that Richard Clarke gave the officers about the defendant's drug trafficking activities. Clarke purchased methamphetamine from the defendant on several occasions, observed sizable shipments of methamphetamine arrive at the defendant's residence via UPS, traveled with the defendant and Jeremy Alexander to California to meet their methamphetamine supplier, and was fronted drugs by the defendant. Paragraph 29 relates information that Clifford Gardner gave officers about the defendant using drug proceeds to purchase additional drugs and real and personal property. Specifically, the defendant gave Alexander money to purchase a residence and traded drugs for quadrunners, a Corvette, and a motorcycle. Mr. Garder told officers that the defendant was distributing "at the very least" 15 pounds of methamphetamine a month during his association with the defendant. The defendant disputes the truthfulness of Clarke's statements and Gardner's statements.
The defendant's tenth objection takes issue with ¶ 27 which states that Gardner told officers he was present at Alexander's residence when two meth suppliers from California delivered approximately 15 pounds of methamphetamine to Alexander and Rowzer. The defendant's eleventh objection attacks ¶ 28 which states that Gardner told officers that he was present on numerous occasions when methamphetamine was delivered to Alexander's residence and that Alexander and Rowzer split the drugs. The defendant objects that Gardner's statements are false.
Ruling: The court finds that through the testimony of Richard Clarke the government has proved by a preponderance of evidence the facts as stated in ¶¶ 22, 24 and 25. For purposes of this sentencing, Clarke gave reliable and credible testimony that was consistent with the facts stated in those paragraphs. The court, however, sustains the defendant's objection to ¶ 23, as Clarke did not testify as to the matters discussed there. The court also sustains the defendant's objections to ¶¶ 27, 28 and 29, because the government neither presented Clifford Gardner as a witness to testify on those matters nor offered any other evidence to prove them.
OBJECTION NO. 12: The defendant objects to a sentence in ¶ 32 which states that during his interview with the probation officer on June 28, 1999, the "defendant acknowledged the weapons were in his possession at the time the search warrant was executed at his residence." The defendant objects that this statement is incorrect and misleading. The defendant maintains he told the officer that the weapons were in the house where he was residing with others but that he did not acknowledge the guns to have been in his possession. The probation officer responds that the defendant referred to the residence as "my house" and denied owning the guns but admitted to having constructive possession of them.
Ruling: No ruling on this objection is necessary. That the probation officer may have inferred from the defendant's statement an acknowledgment that he constructively possessed the guns is not a fact on which this court relies in calculating the guideline sentence or in determining the sentence to be imposed here. The court finds that the defendant, under oath at the change of plea proceedings, voluntarily and knowingly stated it to be true that the 11 firearms found at his residence were within his possession and that he had violated 18 U.S.C. § 922(g).
OBJECTION NO. 13: The defendant objects to ¶¶ 37, 39, and 52 which recommend that the defendant is not entitled to any reduction for acceptance of responsibility. The defendant argues entitlement based on the statements he made at the change of plea proceeding and the court's subsequent acceptance of them. The defendant maintains his rights to equal protection and due process would be denied if this reduction were withheld based on his later efforts to withdraw his guilty plea. The defendant cites several cases where this adjustment was allowed after the defendant admitted all the relevant facts but challenged only the legal force or interpretation given them. Because he was unsuccessful in withdrawing his plea and because no trial was necessary, the defendant believes he is still entitled to this reduction.
Ruling: The PSR at ¶ 38 recites that the defendant tested positive for amphetamine/methamphetamine use while on pretrial supervised release and that the defendant absconded from supervision for three months resulting in his arrest and the revocation of his bond. The PSR at ¶ 40 recommends that the defendant not receive any reduction for acceptance of responsibility based on his denial of guilt on certain elements of the instant offenses and based on his continued illegal activity while on pretrial supervision.
The defendant "bears the burden of establishing entitlement to a reduction under § 3E1.1." United States v. Bindley, 157 F.3d 1235, 1241 (10th Cir. 1998), cert. denied, 525 U.S. 1167 (1999). The defendant must clearly demonstrate "recognition and affirmative acceptance of personal responsibility for his criminal conduct." Id. (quotation marks and citation omitted). The burden rests with the defendant to prove by a preponderance of the evidence that he has accepted responsibility. United States v. McCollom, 12 F.3d 968, 972 (10th Cir. 1993).
While the entry of a guilty plea does not entitle a defendant to this adjustment "as a matter of right," a guilty plea and a truthful admission of conduct comprising the offense of conviction is "significant evidence of acceptance of responsibility." U.S.S.G. § 3E1.1, comment. (n. 3). Such evidence, however, "may be outweighed by conduct of the defendant that is inconsistent with such acceptance of responsibility." U.S.S.G. § 3E1.1, comment. (n. 3). "[A] defendant who falsely denies, or frivolously contests, relevant conduct that the court determines to be true has acted in a manner inconsistent with acceptance of responsibility." U.S.S.G. § 3E1.1, comment. (n. 1(a)).
Of the circuits considering the issue, most have held that a defendant's criminal conduct while on pretrial release is relevant in determining whether a defendant has accepted responsibility. See United States v. Ceccarani, 98 F.3d 126, 129 (3d Cir. 1996) (collecting cases), cert. denied, 519 U.S. 1155 (1997). The Tenth Circuit has affirmed the denial of a downward adjustment for acceptance of responsibility where the defendant violated his appearance bond, see United States v. Hawley, 93 F.3d 682, 689 (10th Cir. 1996), and where the defendant had attempted escape, see United States v. Amos, 984 F.2d 1067, 1073 (10th Cir. 1993). While on pretrial supervised release, the defendant plainly conducted himself in a manner inconsistent with acceptance of responsibility. As reflected in the Magistrate Judge's Order of Detention (Dk. 27), the defendant admitted to the violations set forth in the petition.
After entering his guilty plea and affirmatively admitting he committed the acts as charged and proffered by the government, the defendant engaged in further conduct that is inconsistent with acceptance of responsibility. He filed a motion to withdraw his plea and he testified in support of the motion that the gun safe was John Cavanaugh's, that he did not have a key to the safe, that his sister lied when she said the guns and the gun safe were the defendant's, that he was not guilty of the crimes of conviction, that he told his former attorney he was not guilty of the charges, that he was on a mind-altering drug during the change of plea proceeding, and that he admitted committing the crimes in that proceeding only because his lawyer told him to do so. In his interview with the PSR writer, the defendant denied that the guns belonged to him and denied his involvement in the money laundering for which he was convicted. In his objections to the PSR, the defendant still takes the position that he did not possess the guns. Having consistently denied his criminal wrongdoing after entering his plea, the defendant plainly engaged in significant conduct that is inconsistent with acceptance of responsibility.
The defendant is not able to carry his burden by merely pointing to his plea of guilty and asking the court to ignore his inconsistent conduct. The Tenth Circuit consistently has affirmed a district court's refusal to find acceptance of responsibility after the defendant attempts to withdraw his guilty plea. See, e.g., United States v. Torres, 173 F.3d 864, 1999 WL 176197, at *2 (10th Cir. Mar. 31, 1999) (the defendant's "misguided attempt to withdraw his plea," and "his substantial effort to persuade the court of his lack of any knowledge of the distribution of crack cocaine constituted a false denial of relevant conduct"); United States v. Young, 166 F.3d 350, 1998 WL 883203, at *6 (10th Cir. Dec. 18, 1998) (the defendant's "attempt to withdraw her guilty plea also demonstrated her lack of acceptance of responsibility"), cert. denied, 526 U.S. 1165 (1999). The defendant's efforts here at withdrawing his guilty plea were not limited to any narrow legal attack but involved a complete denial of the very conduct constituting the counts of conviction. Because "the denial of a U.S.S.G. § 3E1.1 downward adjustment is not a penalty or an enhancement of sentence implicating the Fifth Amendment," United States v. Gordon, 4 F.3d 1567, 1573 (10th Cir. 1993), cert. denied, 510 U.S. 1184 (1994), the defendant's constitutional arguments are of no avail. In sum, the defendant has not carried his burden as the evidence establishes that he engaged in conduct utterly inconsistent with affirmative acceptance of personal responsibility for his criminal conduct. The court overrules the objection as the defendant violated the conditions of his pretrial supervised release and then sought to withdraw his guilty plea by falsely denying relevant conduct.
OBJECTION NO. 14: The defendant objects to ¶¶ 43 to 51 and 67 which add ten offense levels to the base offense level of 17 for money laundering. The first five-level addition is pursuant to U.S.S.G. § 2S1.2(b)(1)(A) because the defendant knew the funds were the proceeds of an unlawful activity involving the manufacture, importation, or distribution of narcotics or other controlled substances. The defendant disputes that the motorcycle was purchased with proceeds of an unlawful activity and that he knew the same. The second five-level increase is pursuant to U.S.S.G. §§ 2S1.2(b)(2) and 2S1.1(b)(2)(F) for funds valued in excess of $1,000,000. The defendant disputes that there is any reliable evidence that he engaged in monetary transactions in property derived from unlawful activity where the value of funds exceed even $100,000 let alone $1,000,000. The defendant argues that even assuming the PSR correctly calculates the amounts there is no evidence to show that such amounts were "laundered" by way of additional monetary transactions.
Ruling: To apply a five-level enhancement under U.S.S.G. § 2S1.2(b)(1)(A), the government must prove that the defendant knew or believed that he was dealing with drug proceeds. United States v. Reiss, 186 F.3d 149, 154 (2nd Cir. 1999). At the change of plea proceeding, the government represented it could prove at trial that the money used by the defendant to purchase the motorcycle on June 20, 1997, was proceeds "from the specified unlawful activity of narcotics distribution." (Govt. Ex. 6, p. 17). At that time, the defendant admitted these facts as represented were true. The court binds the defendant to that admission. Dalrymple's statement to Agent Brandau establishes that Rowzer used his own money to purchase the motorcycles. The testimony of Clarke and Rodriguez prove the defendant's financial involvement in substantial sales and purchases of methamphetamine. The record further shows the defendant often carried large sums of cash and was seen handling such sums in his drug transactions. The court infers from the defendant's admission and this additional evidence that the defendant knew the money he used to purchase the motorcycle was drug proceeds. The court overrules the defendant's objection to the U.S.S.G. § 2S1.2(b)(1)(A) enhancement.
With respect to the second five-level enhancement pursuant to U.S.S.G. §§ 2S1.2(b)(2) and 2S1.1(b)(2)(F), the court finds that the government has not carried its burden of proving that the funds used in the offense of conviction and in relevant conduct have a value in excess of $1,000,000. The evidence establishes that the defendant was involved in the distribution of at least 43 pounds of methamphetamine. Besides the five pounds sold to Richard Clarke, the defendant through and with Jeremy Alexander purchased at least 38 pounds from Rodriguez or his agents. The evidence at the hearing was that the defendant and Alexander paid approximately $10,000 per pound for the methamphetamine.
Considering the funds used to purchase the motorcycles ($21,783.59) and the funds used to purchase methamphetamine (43 x $10,000 = $430,000), the court finds that the government has proved by a preponderance of reliable and credible evidence that the defendant engaged in monetary transactions using drug proceeds totaling more than $450,000. Specifically, the evidence shows the defendant to have engaged in the same course of conduct or common scheme or plan as the offense of conviction by using drug proceeds for the purchase and sale of additional amounts of methamphetamine. That during a period of temporal proximity to the offense of conviction, the defendant engaged in transactions involving at least 43 pounds of methamphetamine the value of which was established by the evidence to equal approximately $430,000. The evidence further shows that the defendant and/or his agents purchased methamphetamine from California suppliers and then profitably distributed the same in exchange for property and/or cash. The evidence also shows that the defendant used the drug proceeds to buy other property. Therefore, the court sustains the defendant's objection to the five-level enhancement but determines a three-level enhancement pursuant to U.S.S.G. §§ 2S1.2(b)(2) and 2S1.1(b)(2)(D) is appropriate.
The defendant's objection to the lack of evidence regarding "laundering" is in error. The government need not prove that the defendant actually "laundered" the money as the defendant asserts. Unlike the traditional money laundering statute, 18 U.S.C. § 1956, which "prohibits money laundering as that activity is commonly understood," § 1957 "contains no requirement that the transaction be designed to conceal anything" and applies even to the most open transactions so long as the property involved in the transaction was criminally derived. See United States v. Allen, 129 F.3d 1159, 1164-65 (10th Cir. 1997). This point is also made in the background to application note 1 of U.S.S.G. § 2S1.2, which explains that § 1957 "does not require that the recipient exchange or `launder' the funds."
DEFENDANT'S OBJECTION NO. 15: The defendant objects to ¶ 147 for failing to mention his cooperation with the government as a factor that may warrant departure. The government responds that it will file a § 5K1.1 motion if the defendant provides substantial assistance.
Ruling: The court overrules the objection. The court does not consider the PSR materially incomplete or misleading for not mentioning the defendant's cooperation with the government and the possible filing of § 5K1.1 motion. Because such matters are committed first to the government's reasonable discretion, the court expects the government shall inform the court by filing any such appropriate motion.
IT IS THEREFORE ORDERED that this written decision constitutes the court's findings and rulings on the parties' objections to the presentence report.