Document 605

Case 1:20-cr-00330-PAE Document 605 Filed 02/18/22 Page 1 of 3 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK United States of America, -v- Ghislain Maxwell, Defendant. 20-CR-330 (AJN) ORDER ALISON J. NATHAN, District Judge: The Court is in receipt of the parties' proposed redactions to the Defendant's motion for a new trial, the Government's response in opposition, and the Defendant's reply in support. See Dkt. No. 596. The parties did not propose any redactions to Juror 50's motion nor the parties letters dated January 13, 2022. See id. at 7. The Defendant submitted a letter justifying her proposed redactions, Dkt. No. 602, and the Government submitted an opposition to the proposals, Dkt. No. 603. The Court determines that the following proposed redactions are not consistent with the Court's prior order, Dkt. No. 596, because they redact information that is widely reported in the press and/or redact legal arguments: - Defense Br. at: - ii, lines 17-18; - 21, lines 1-2; - 49, lines 16-21; - 51, lines 10-16; - 57, lines 5-7 - Gov. Resp. at: 1 DOJ-OGR-00008972 --- PAGE BREAK --- UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK UNITED STATES OF AMERICA, -v- PAUL DAUGERDAS, DONNA GUERIN, DENIS FIELD, and DAVID PARSE, Defendants. AMENDED SENTENCING MEMORANDUM OF THE UNITED STATES REGARDING DEFENDANT DAVID PARSE PREET BHARARA United States Attorney for the Southern District of New York STANLEY J. OKULA, JR., NANETTE L. DAVIS, Assistant United States Attorneys - Of Counsel - DOJ-OGR-00009525 --- PAGE BREAK --- UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK UNITED STATES OF AMERICA, -v- PAUL DAUGERDAS, DONNA GUERIN, DENIS FIELD, and DAVID PARSE, Defendants. AMENDED SENTENCING MEMORANDUM OF THE UNITED STATES REGARDING DEFENDANT DAVID PARSE PREET BHARARA United States Attorney for the Southern District of New York STANLEY J. OKULA, JR., NANETTE L. DAVIS, Assistant United States Attorneys - Of Counsel - DOJ-OGR-00010204 --- PAGE BREAK --- Case 1:20-cr-00330-PAE Document 605 Filed 02/18/22 Page 2 of 3 8, lines 16-19; 9, lines 3-6, 9-11; 16, lines 5-14; 22, lines 6-7; 32, line 2; 37, line 16; 37 n.17, line 2 Defense Reply at: 18, lines 3-4, 11-28; 23 n.11, lines 1-12; 23, line 12-14; 24, lines 1-8, 13-15. There are also clear inconsistencies between the Defendant's intended redactions, as stated in her accompanying letter, and her proposed redactions, compare Dkt. No. 602, with Proposed Redactions to Maxwell Br. at 48-49, and between some of the proposed redactions themselves, compare Proposed Redactions to Gov. Br. at 35-36, with Proposed Redactions to Maxwell Reply at 22. The Defendant also proposes redactions related to "Juror 50's exact responses to the questions on his jury questionnaire" because it is "being kept temporarily under seal." Dkt. No. 602. The Court notifies the parties that Juror 50's completed questionnaire will be docketed in accordance with a forthcoming Order. The Defendant must accordingly eliminate proposed redactions premised on the sealing of Juror 50's questionnaire. 2 DOJ-OGR-00008973 --- PAGE BREAK --- A-6075 Case 1:09-cr-00581-WHP Document 605 Filed 03/18/13 Page 2 of 41 TABLE OF CONTENTS Preliminary Statement....................................................1 I. Relevant Facts...........................................................3 A. The Defendant's Educational Background and Work History...................3 B. The Offense Conduct.......................................................3 1. Parse' Participation in the Fraudulent Kasperzak/Calphalon Tax Shelter..........3 2. Parse's Personal Tax Evasion ...............................................5 3. Parse's Participation in the Fraudulent Backdating of Transactions............5 C. The Indictment, Trial, New Trial Rulings, and the PSR.......................8 D. The Objections to the PSR....................................................9 E. Restitution................................................................21 II. Sentencing Guidelines Discussion.............................................22 III. 3553(a) Analysis............................................................24 1. The Nature and Circumstances of the Offense................................24 2. History and Characteristics of the Defendant................................25 3. The Need To Afford Adequate Deterrence.....................................26 4. The Need To Avoid Unwarranted Sentence Disparities...........................33 5. The Appropriate Sentence....................................................36 Conclusion.....................................................................37 DOJ-OGR-00010205 --- PAGE BREAK --- Case 1:20-cr-00330-PAE Document 605 Filed 02/18/22 Page 3 of 3 The parties are hereby ORDERED to re-submit via email revised redactions to the parties' briefing on the Defendant's motion for a new trial by February 22, 2022. The revised proposed redactions shall be consistent with this Order. SO ORDERED. Dated: February 18, 2022 New York, New York ALISON J. NATHAN United States District Judge --- PAGE BREAK --- UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK UNITED STATES OF AMERICA, -v- PAUL DAUGERDAS, DONNA GUERIN, DENIS FIELD, and DAVID PARSE, Defendants. AMENDED SENTENCING MEMORANDUM OF THE UNITED STATES REGARDING DEFENDANT DAVID PARSE The United States respectfully submits this memorandum for the Court's consideration in connection with the sentencing of defendant David Parse ("Parse" or "the defendant"), which is scheduled for March 22, 2013 at 2:30 p.m. Preliminary Statement Following an eleven-week trial that included over 1300 exhibits, 41 witnesses, eight days of jury deliberations, and 46 jury notes, the jury on May 24, 2011 convicted David Parse on one count of corruptly obstructing and impeding the due administration of the Internal Revenue Laws in violation of 26 U.S.C. § 7212(a) (Count Twenty of the Redacted S3 Indictment), and one count of mail fraud in violation of 18 U.S.C. §§ 1341 and 2 (Count Twenty-Five of the Redacted S3 Indictment). The jury acquitted Parse of the conspiracy count and three counts of tax evasion. Those convictions stemmed from David Parse's integral role in one of the largest tax fraud schemes ever charged, the details of which are spelled out in the indictment against him, S3 09 Cr. 581 (WHP), and the trial record. Incorporating the factual allegations in the conspiracy count, Count Twenty DOJ-OGR-00009527 --- PAGE BREAK --- UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK UNITED STATES OF AMERICA, -v- PAUL DAUERDAS, DONNA GUERIN, DENIS FIELD, and DAVID PARSE, Defendants. AMENDED SENTENCING MEMORANDUM OF THE UNITED STATES REGARDING DEFENDANT DAVID PARSE The United States respectfully submits this memorandum for the Court's consideration in connection with the sentencing of defendant David Parse ("Parse" or "the defendant"), which is scheduled for March 22, 2013 at 2:30 p.m. Preliminary Statement Following an eleven-week trial that included over 1300 exhibits, 41 witnesses, eight days of jury deliberations, and 46 jury notes, the jury on May 24, 2011 convicted David Parse on one count of corruptly obstructing and impeding the due administration of the Internal Revenue Laws in violation of 26 U.S.C. § 7212(a) (Count Twenty of the Redacted S3 Indictment), and one count of mail fraud in violation of 18 U.S.C. §§ 1341 and 2 (Count Twenty-Five of the Redacted S3 Indictment). The jury acquitted Parse of the conspiracy count and three counts of tax evasion. Those convictions stemmed from David Parse's integral role in one of the largest tax fraud schemes ever charged, the details of which are spelled out in the indictment against him, S3 09 Cr. 581 (WHP), and the trial record. Incorporating the factual allegations in the conspiracy count, Count Twenty DOJ-OGR-00010206 --- PAGE BREAK --- charged Parse, Donna Guerin, Denis Field and Craig Brubaker with a wide-ranging corrupt endeavor to obstruct and impede the IRS in connection with the design, marketing, implementation, and defense of four tax shelters known as Short Sale, Short Option, SWAPS, and HOMER. Likewise incorporating the factual allegations of the conspiracy count, Count Twenty-Five charged Parse, along with Paul Daugerdas, Guerin, Field, and Brubaker, with mail fraud as to the overarching scheme to defraud the IRS through the design, marketing, implementation, and defense of the Jenkens & Gilchrist tax shelters. The proof at trial demonstrated that Parse — an investment representative at Deutsche Bank Alex Brown and certified public accountant — participated as a key actor in the largest criminal tax fraud in history. That fraud, which featured Parse's five-year involvement in four fraudulent tax shelters, resulted in the creation of over $7 billion of fraudulent tax deductions or benefits, $1.6 billion in Guidelines tax loss, and well in excess of $230 million in actual loss to the United States Treasury. Parse's role in the fraud - as one of the principal Deutsche Bank employees who steered bank clients to the J&G tax shelters, established the evanescent brokerage accounts for those shelters, executed the crucial Treasury short sale and options "investments," executed the pivotal transfers between accounts, and who helped facilitate the fashioning of the options and other financial instruments used in the shelters - was indispensable to the shelters' success. Consequently, Parse earned substantial commission income from his role in the tax shelters — over $3 million. For the reasons spelled out below and in the Probation Department Presentence Investigation Report ("PSR"), we submit that Parse's conduct, and the resulting harm, is deserving of a significant prison sentence. 2 DOJ-OGR-00010207 --- PAGE BREAK --- Case 1:09-cr-00581-WHP Document 605 Filed 03/18/13 Page 5 of 41 I. RELEVANT FACTS A. Defendant's Educational Background and Work History Parse obtained his bachelor's degree in business administration from the University of Michigan in 1984 and his Master's degree in business administration from the same school in 1988. PSR ¶¶ 89-90. Parse also was a licensed stockbroker and investment adviser, and passed various securities and investment adviser exams. From 1988 to 1995, Parse acted as an investment adviser at Goldman Sachs, Kidder Peabody, and Credit Suisse First Boston. From 1995 through April 2006, Parse was employed as an investment representative at Deutsche Bank Alex Brown in its Chicago office. From April 2006 to the present, Parse has been self-employed at his company Union Capital LLC, a financial consulting firm, which is currently dormant. B. The Offense Conduct The facts concerning Parse's offense conduct will not be repeated herein at length, as those facts are comprehensively set forth in the trial record and the PSR. Accordingly, we are confident that, as a result of the foregoing and the submissions made by the parties, the Court is thoroughly familiar with the scope and nature of the defendant's criminal conduct. Several aspects of that offense conduct bear additional discussion. 1. Parse's Participation in the Fraudulent Kasperzak/Calphalon Tax Shelter Parse assisted in advising the shareholders of the Calphalon cookware company (primarily members of the Kasperzak family, owners of the company, and several key employees) on the orderly disposition of their shares of Newell stock acquired in a stock swap as a result of the sale of 1 The facts described in this section are based on the Probation Department's Presentence Report ("PSR"), the trial record, documents that the Government has produced to the defendant in discovery, and Government interviews of various witnesses. 3 DOJ-OGR-00010208 --- PAGE BREAK --- Case 1:09-cr-00581-WHP Document 605 Filed 03/18/13 Page 6 of 41 the Calphalon company to Newell. Parse was introduced to Peter Barnhart, Calphalon's Executive Vice-President, Sara Jane Kasperzak, Dean Kasperzak, and other members of the Kasperzak family in 1998. As a result of the work that Parse was doing in helping the Calphalon stockholders dispose of their Newell shares, Parse became aware of the large taxable gains that the stockholders would receive. In a meeting at Parse's office, Parse introduced Peter Barnhart to Paul Daugerdas (then an Altheimer & Gray partner) for the purpose of having Daugerdas pitch a J&G tax shelter to the Calphalon shareholders. Parse subsequently attended a meeting with Daugerdas, the Calphalon shareholders, and several attorneys from the law firm of Shumaker Loop & Kendrick. In that meeting and in Parse's presence, as Dean Kasperzak testified at trial, Daugerdas opened with the red-flag statement that the information that he was about to provide was completely confidential and that the shareholders could not even share it with the shareholders' own investment advisors or accountants. (Tr. 6243). Daugerdas then described the tax shelter which he said would result in the shareholders' paying virtually no taxes on the gains. Kasperzak further testified, "We were told that the profit potential was very low and that going forward, should we choose to go forward, if we were questioned about the matter, that our intent was in fact to make a profit, but in order for this tax shelter to work, there had to be, in effect, a loss to balance off the gains from the stock sale."2 (Tr. 6244). The urging by Daugerdas for the shareholders to make false statements about their intent is wholly inconsistent with good faith - all of which Parse witnessed. 2 The testimony of Erwin Mayer and other trial witnesses made clear that the expected short-term duration of the Treasury note transactions, combined with the lack of volatility of the specific Treasury notes chosen for the transactions, meant that the short sale was virtually certain to produce only a small loss or gain on this purported "investment." 4 DOJ-OGR-00009530 --- PAGE BREAK --- Case 1:09-cr-00581-WHP Document 605 Filed 03/18/13 Page 6 of 41 the Calphalon company to Newell. Parse was introduced to Peter Barnhart, Calphalon's Executive Vice-President, Sara Jane Kasperzak, Dean Kasperzak, and other members of the Kasperzak family in 1998. As a result of the work that Parse was doing in helping the Calphalon stockholders dispose of their Newell shares, Parse became aware of the large taxable gains that the stockholders would receive. In a meeting at Parse's office, Parse introduced Peter Barnhart to Paul Daugerdas (then an Altheimer & Gray partner) for the purpose of having Daugerdas pitch a J&G tax shelter to the Calphalon shareholders. Parse subsequently attended a meeting with Daugerdas, the Calphalon shareholders, and several attorneys from the law firm of Shumaker Loop & Kendrick. In that meeting and in Parse's presence, as Dean Kasperzak testified at trial, Daugerdas opened with the red-flag statement that the information that he was about to provide was completely confidential and that the shareholders could not even share it with the shareholders' own investment advisors or accountants. (Tr. 6243). Daugerdas then described the tax shelter which he said would result in the shareholders' paying virtually no taxes on the gains. Kasperzak further testified, "We were told that the profit potential was very low and that going forward, should we choose to go forward, if we were questioned about the matter, that our intent was in fact to make a profit, but in order for this tax shelter to work, there had to be, in effect, a loss to balance off the gains from the stock sale."2 (Tr. 6244). The urging by Daugerdas for the shareholders to make false statements about their intent is wholly inconsistent with good faith - all of which Parse witnessed. 2 The testimony of Erwin Mayer and other trial witnesses made clear that the expected short-term duration of the Treasury note transactions, combined with the lack of volatility of the specific Treasury notes chosen for the transactions, meant that the short sale was virtually certain to produce only a small loss or gain on this purported "investment." 4 DOJ-OGR-00010209 --- PAGE BREAK --- Case 1:09-cr-00581-WHP Document 605 Filed 03/18/13 Page 7 of 41 2. Parse's Personal Tax Evasion Parse executed his own fraudulent SOS tax shelter transaction to eliminate the gains he earned in 2000, and received a free fraudulent opinion letter from J&G. The losses Parse created — $3,000,000 — were larger than Parse needed for the 2000 year, suggesting that he intended to eliminate taxes in more than one year. On his 2000 tax return, Parse claimed a $1,278,706 fraudulent loss, evading $517,542 in taxes on over $2.1 million in income. See GX 1001-132 (Parse 2000 Tax Return); GX 1000-52 (IRS Certificate of Assessment and Payments for Parse's 2000 Taxes); GX 54-1 (J&G Opinion Letter for Parse). Parse's receipt of a free opinion letter, which would have otherwise cost him no less than $90,000 (and likely more)3 had he paid the going rate for a J&G opinion letter, violated Deutsche Bank's gift prohibition policy and almost certainly violated the law, in that it constituted his receipt of an unlawful commission or gift by a bank official. See 18 U.S.C. § 215 (unlawful for any bank employee to accept anything of value intended to be rewarded in connection with business of bank). 3. Parse's Participation in the Fraudulent Backdating of Transactions As detailed in paragraphs 44-52 of the PSR, Parse's conduct involved not only assisting in the design, marketing, and implementation of the fraudulent J&G tax shelters, but also the implementation of fraudulently backdated when Donna Guerin and others at J&G realized that the shelters had been implemented incorrectly, or not consistent with the clients' wishes with respect to 3 Parse executed a $3,000,000 short options deal through J&G. Using a conservative 3% fee results in a $90,000 opinion letter value. Parse only deducted just over $1.2 million of the $3,000,000 in losses on his 2000 return, and thus had available just under $1.8 million in losses to use on future tax returns. Although Parse ultimately did not utilize those additional losses (because he reversed his own transaction when the IRS began investigating), the proper view of Parse's own fraudulent transaction should take into account the full amount of fraudulent benefit he produced. 5 DOJ-OGR-00009531 --- PAGE BREAK --- Case 1:09-cr-00581-WHP Document 605 Filed 03/18/13 Page 7 of 41 2. Parse's Personal Tax Evasion Parse executed his own fraudulent SOS tax shelter transaction to eliminate the gains he earned in 2000, and received a free fraudulent opinion letter from J&G. The losses Parse created — $3,000,000 — were larger than Parse needed for the 2000 year, suggesting that he intended to eliminate taxes in more than one year. On his 2000 tax return, Parse claimed a $1,278,706 fraudulent loss, evading $517,542 in taxes on over $2.1 million in income. See GX 1001-132 (Parse 2000 Tax Return); GX 1000-52 (IRS Certificate of Assessment and Payments for Parse's 2000 Taxes); GX 54-1 (J&G Opinion Letter for Parse). Parse's receipt of a free opinion letter, which would have otherwise cost him no less than $90,000 (and likely more)3 had he paid the going rate for a J&G opinion letter, violated Deutsche Bank's gift prohibition policy and almost certainly violated the law, in that it constituted his receipt of an unlawful commission or gift by a bank official. See 18 U.S.C. § 215 (unlawful for any bank employee to accept anything of value intended to be rewarded in connection with business of bank). 3. Parse's Participation in the Fraudulent Backdating of Transactions As detailed in paragraphs 44-52 of the PSR, Parse's conduct involved not only assisting in the design, marketing, and implementation of the fraudulent J&G tax shelters, but also the implementation of fraudulently backdated when Donna Guerin and others at J&G realized that the shelters had been implemented incorrectly, or not consistent with the clients' wishes with respect to 3 Parse executed a $3,000,000 short options deal through J&G. Using a conservative 3% fee results in a $90,000 opinion letter value. Parse only deducted just over $1.2 million of the $3,000,000 in losses on his 2000 return, and thus had available just under $1.8 million in losses to use on future tax returns. Although Parse ultimately did not utilize those additional losses (because he reversed his own transaction when the IRS began investigating), the proper view of Parse's own fraudulent transaction should take into account the full amount of fraudulent benefit he produced. 5 DOJ-OGR-00010210 --- PAGE BREAK --- Case 1:09-cr-00581-WHP Document 605 Filed 03/18/13 Page 8 of 41 the amount or nature of the tax loss. The facts concerning all of the backdating will not be repeated at length herein. It is useful to note, however, the following facts as they relate to Parse: (i) Parse was the key to the success of the backdated transactions — without his agreement and participation, the J&G attorneys were powerless to correct the mistakes; (ii) the corrections needed for the Aronoff transactions are reflected in David Parse’s own handwriting on GX 401-99 (reflecting the original transaction) and GX 401-100 (reflecting the revised transaction), showing that he fully understood the nature of the backdating; (iii) the correction of the transactions required a complex series of steps, including reversals of transfers of assets between accounts, reversals of already-completed stock and foreign currency transactions, and execution of new “as of” foreign currency and stock trades; and (iv) the backdating occurred with not just one client, but several and occurred in two different tax years — tax year 2000 for the Aronoff family members, and tax year 2001 for Michael Toporek, Greg Blair, and Matthew Coleman. In his sentencing memorandum, Parse attempts to excuse the backdating by claiming, “He gave no investment advice, and the trades were executed by his assistant.” (Parse Sent. Mem. at 12). This statement is not only a shameless attempt by Parse to throw his subordinate under the bus, but also a testament as to just how perverted these tax shelters were that the investment broker, who otherwise touts his treatment of his long-time clients, (id. at 4 “As a broker, David had 30 to 40 long-term customers, and his goal was to assist them to invest their money wisely.”), now attempts to make much of the fact that he was not giving investment advice to the backdating clients (or, as the evidence showed, to any of the other tax shelter clients). As to Parse’s suggestion that the backdating transactions were done not by Parse, but by Carrie Yackee, his sales assistant (Parse 6 DOJ-OGR-00009532 --- PAGE BREAK --- Case 1:09-cr-00581-WHP Document 605 Filed 03/18/13 Page 8 of 41 the amount or nature of the tax loss. The facts concerning all of the backdating will not be repeated at length herein. It is useful to note, however, the following facts as they relate to Parse: (i) Parse was the key to the success of the backdated transactions — without his agreement and participation, the J&G attorneys were powerless to correct the mistakes; (ii) the corrections needed for the Aronoff transactions are reflected in David Parse’s own handwriting on GX 401-99 (reflecting the original transaction) and GX 401-100 (reflecting the revised transaction), showing that he fully understood the nature of the backdating; (iii) the correction of the transactions required a complex series of steps, including reversals of transfers of assets between accounts, reversals of already-completed stock and foreign currency transactions, and execution of new “as of” foreign currency and stock trades; and (iv) the backdating occurred with not just one client, but several and occurred in two different tax years — tax year 2000 for the Aronoff family members, and tax year 2001 for Michael Toporek, Greg Blair, and Matthew Coleman. In his sentencing memorandum, Parse attempts to excuse the backdating by claiming, “He gave no investment advice, and the trades were executed by his assistant.” (Parse Sent. Mem. at 12). This statement is not only a shameless attempt by Parse to throw his subordinate under the bus, but also a testament as to just how perverted these tax shelters were that the investment broker, who otherwise touts his treatment of his long-time clients, (id. at 4 “As a broker, David had 30 to 40 long-term customers, and his goal was to assist them to invest their money wisely.”), now attempts to make much of the fact that he was not giving investment advice to the backdating clients (or, as the evidence showed, to any of the other tax shelter clients). As to Parse’s suggestion that the backdating transactions were done not by Parse, but by Carrie Yackee, his sales assistant (Parse 6 DOJ-OGR-00010211 --- PAGE BREAK --- Case 1:09-cr-00581-WHP Document 605 Filed 03/18/13 Page 9 of 41 Sentencing Mem. at 12), the evidence showed and Yackee testified persistently, consistently, and credibly that she acted at all times at the instruction of David Parse. Given the foregoing, Parse's attempt to blame her for his criminal conduct is inconsistent with the facts; it is also, in a larger sense, inexcusable. To the extent that Parse trial and current counsel have suggested and continue to suggest that the backdating transactions were approved by Deutsche Bank, the only approvals were from Parse himself, and on some of the trade tickets, the signature of the branch manager appears.4 Moreover, there is no evidence that the branch manager knew of the purpose and animus for the backdated transactions. To the extent that a branch manager actually knew what was occurring, that fact would only render the branch manager a co-conspirator, and not excuse Parse's criminal conduct. However complex the tax shelters, the fraudulent backdating was nothing more than garden-variety fraud committed to achieve impermissible tax results. Basic principles of tax reporting — such as the annual accounting rule — prohibit the changing of tax results through transactions carried out after the close of the tax year. Carrie Yackee testified that she understood, based on her 4 Yackee made clear that the "Deutsche Bank approvals" on the backdated transaction were actually instructions from David Parse: Q. You also testified about acting in accordance with Deutsche Bank policy, correct? A. Correct. Q. Are you aware what Deutsche Bank's policy is for the use of as of dates on trades? A. I don't know of the specific policy. Q. How do you know you acted in accordance with the policy? A. I was directed what to do by my boss. Q. So when you say you acted in accordance with policy, you mean you followed your boss's orders? A. And I presumed that he would follow policy. So . . . (Tr. 5699). 7 DOJ-OGR-00009533 --- PAGE BREAK --- Case 1:09-cr-00581-WHP Document 605 Filed 03/18/13 Page 9 of 41 Sentencing Mem. at 12), the evidence showed and Yackee testified persistently, consistently, and credibly that she acted at all times at the instruction of David Parse. Given the foregoing, Parse's attempt to blame her for his criminal conduct is inconsistent with the facts; it is also, in a larger sense, inexcusable. To the extent that Parse trial and current counsel have suggested and continue to suggest that the backdating transactions were approved by Deutsche Bank, the only approvals were from Parse himself, and on some of the trade tickets, the signature of the branch manager appears.4 Moreover, there is no evidence that the branch manager knew of the purpose and animus for the backdated transactions. To the extent that a branch manager actually knew what was occurring, that fact would only render the branch manager a co-conspirator, and not excuse Parse's criminal conduct. However complex the tax shelters, the fraudulent backdating was nothing more than garden-variety fraud committed to achieve impermissible tax results. Basic principles of tax reporting — such as the annual accounting rule — prohibit the changing of tax results through transactions carried out after the close of the tax year. Carrie Yackee testified that she understood, based on her 4 Yackee made clear that the "Deutsche Bank approvals" on the backdated transaction were actually instructions from David Parse: Q. You also testified about acting in accordance with Deutsche Bank policy, correct? A. Correct. Q. Are you aware what Deutsche Bank's policy is for the use of as of dates on trades? A. I don't know of the specific policy. Q. How do you know you acted in accordance with the policy? A. I was directed what to do by my boss. Q. So when you say you acted in accordance with policy, you mean you followed your boss's orders? A. And I presumed that he would follow policy. So . . . (Tr. 5699). 7 DOJ-OGR-00010212 --- PAGE BREAK --- Case 1:09-cr-00581-WHP Document 605 Filed 03/18/13 Page 10 of 41 conversations with David Parse, that the steps of the transactions had to be completed by the end of the year to achieve the tax benefits. Given this clear legal imperative, Parse's willingness to participate in such conduct can only be viewed as brazen misconduct. C. The Indictment, Trial, New Trial Rulings, and the PSR On March 4, 2010, the grand jury returned a third superseding Indictment charging Parse, Guerin, Daugerdas, Mayer, and Brubaker in thirty-one counts. Parse in particular was charged with a conspiracy to the defraud the IRS, to commit tax evasion, and to commit mail and wire fraud (Count One), as well as three counts of tax evasion relating to the tax shelter transactions of three separate tax shelter clients (Counts Seventeen, Eighteen, and Nineteen). Parse was also charged in Counts Twenty and Twenty-Five with engaging in a corrupt endeavor to obstruct and impede the IRS and mail fraud, respectively, essentially through the same conduct underlying the Count One conspiracy charge. On February 28, 2011, trial commenced against Parse and his co-defendants. On May 24, 2011, the jury found Parse guilty on Counts Twenty and Twenty-Five, and not guilty on Count One and Counts Seventeen through Nineteen. Subsequently, the Court denied Parse motions for new trial based on juror misconduct and ineffective assistance of counsel. As a result of Parse's convictions, he faces a maximum of 23 years in prison. In connection with Parse's sentencing, the Probation Office has prepared a Presentence Investigation Report (the "PSR"), which calculates the defendant's Sentencing Guidelines offense levels. As calculated by Probation, the final offense level is 40, calling for a Sentencing Guidelines sentence at the statutory maximum, 23 years' imprisonment. PSR ¶ 103. The breakdown of Parse's Guidelines calculation is as follows: 8 DOJ-OGR-00009534 --- PAGE BREAK --- Case 1:09-cr-00581-WHP Document 605 Filed 03/18/13 Page 10 of 41 conversations with David Parse, that the steps of the transactions had to be completed by the end of the year to achieve the tax benefits. Given this clear legal imperative, Parse's willingness to participate in such conduct can only be viewed as brazen misconduct. C. The Indictment, Trial, New Trial Rulings, and the PSR On March 4, 2010, the grand jury returned a third superseding Indictment charging Parse, Guerin, Daugerdas, Mayer, and Brubaker in thirty-one counts. Parse in particular was charged with a conspiracy to defraud the IRS, to commit tax evasion, and to commit mail and wire fraud (Count One), as well as three counts of tax evasion relating to the tax shelter transactions of three separate tax shelter clients (Counts Seventeen, Eighteen, and Nineteen). Parse was also charged in Counts Twenty and Twenty-Five with engaging in a corrupt endeavor to obstruct and impede the IRS and mail fraud, respectively, essentially through the same conduct underlying the Count One conspiracy charge. On February 28, 2011, trial commenced against Parse and his co-defendants. On May 24, 2011, the jury found Parse guilty on Counts Twenty and Twenty-Five, and not guilty on Count One and Counts Seventeen through Nineteen. Subsequently, the Court denied Parse motions for new trial based on juror misconduct and ineffective assistance of counsel. As a result of Parse's convictions, he faces a maximum of 23 years in prison. In connection with Parse's sentencing, the Probation Office has prepared a Presentence Investigation Report (the "PSR"), which calculates the defendant's Sentencing Guidelines offense levels. As calculated by Probation, the final offense level is 40, calling for a Sentencing Guidelines sentence at the statutory maximum, 23 years' imprisonment. PSR ¶ 103. The breakdown of Parse's Guidelines calculation is as follows: 8 DOJ-OGR-00010213 --- PAGE BREAK --- Case 1:09-cr-00581-WHP Document 605 Filed 03/18/13 Page 11 of 41 A base offense level of 36 pursuant to §§ 2T1.9, 2T1.1, and 2T4.1(tax table). PSR ¶ 62. An increase of 2 levels pursuant to U.S.S.G. § 2T1.1(b)(2) because the offense involved sophisticated means. PSR ¶ 63. An increase of 2 levels pursuant to U.S.S.G. § 3B1.3 because the defendant used his skills as a broker and CPA to materially facilitate his design and implementation of the highly-complex financial products that were involved in the different tax shelters. PSR ¶ 64. Parse has no criminal history points. Thus, with a final offense level of 40, Parse's Guidelines analysis, according to the PSR, yields a final advisory Guidelines range of 292-365 months. However, due to the combined statutory maxima of Counts Twenty and Twenty-Five, the Guidelines term of imprisonment is limited to 276 months. PSR ¶ 103. D. The Objections to the PSR Parse has leveled three objections to the calculation of the Guidelines: specifically, to (i) the loss calculations for Guidelines purposes; (ii) the application of the sophisticated means enhancement, and (iii) the application of the use of a special skill. Parse objects to being held responsible, for Guidelines loss calculations purposes, for the full amount of loss generated by the corrupt endeavor and scheme to defraud the Internal Revenue Service. Parse argues that "a fair reading of the jury's verdict is that Parse was convicted only for his role in what the [Presentence] Report describes as three instances of fraudulent 'backdating.'" Defendant Parse's position is contrary to law and has no basis in reliable fact. First, Parse's contention that he is being held responsible for acquitted conduct ignores the fact that he was convicted on the broad corrupt endeavor and scheme to defraud. Indeed, the Second Circuit Court of Appeals has held as follows: Under § 1B1.3(a), the court, in calculating a defendant's offense level, was to take 9 DOJ-OGR-00009535 --- PAGE BREAK --- Case 1:09-cr-00581-WHP Document 605 Filed 03/18/13 Page 11 of 41 A base offense level of 36 pursuant to §§ 2T1.9, 2T1.1, and 2T4.1(tax table). PSR ¶ 62. An increase of 2 levels pursuant to U.S.S.G. § 2T1.1(b)(2) because the offense involved sophisticated means. PSR ¶ 63. An increase of 2 levels pursuant to U.S.S.G. § 3B1.3 because the defendant used his skills as a broker and CPA to materially facilitate his design and implementation of the highly-complex financial products that were involved in the different tax shelters. PSR ¶ 64. Parse has no criminal history points. Thus, with a final offense level of 40, Parse's Guidelines analysis, according to the PSR, yields a final advisory Guidelines range of 292-365 months. However, due to the combined statutory maxima of Counts Twenty and Twenty-Five, the Guidelines term of imprisonment is limited to 276 months. PSR ¶ 103. D. The Objections to the PSR Parse has leveled three objections to the calculation of the Guidelines: specifically, to (i) the loss calculations for Guidelines purposes; (ii) the application of the sophisticated means enhancement, and (iii) the application of the use of a special skill. Parse objects to being held responsible, for Guidelines loss calculations purposes, for the full amount of loss generated by the corrupt endeavor and scheme to defraud the Internal Revenue Service. Parse argues that "a fair reading of the jury's verdict is that Parse was convicted only for his role in what the [Presentence] Report describes as three instances of fraudulent 'backdating.'" Defendant Parse's position is contrary to law and has no basis in reliable fact. First, Parse's contention that he is being held responsible for acquitted conduct ignores the fact that he was convicted on the broad corrupt endeavor and scheme to defraud. Indeed, the Second Circuit Court of Appeals has held as follows: Under § 1B1.3(a), the court, in calculating a defendant's offense level, was to take 9 DOJ-OGR-00010214 --- PAGE BREAK --- Case 1:09-cr-00581-WHP Document 605 Filed 03/18/13 Page 12 of 41 into account, inter alia, the defendant's own acts and omissions, see id. § 1B1.3(a)(1)(A), as well as "all reasonably foreseeable acts and omissions of others in furtherance of the jointly undertaken criminal activity," id. § 1B1.3(a)(1)(B), and "all harm that resulted from the acts and omissions specified in subsection[] (a) (1) . . . above, and all harm that was the object of such acts and omissions," id. § 1B1.3(a)(3) (emphasis added). United States v. Reifler, 446 F.3d 65, 108 (2d Cir. 2006) (alterations in original). See also United States v. Nash, 338 Fed. Appx. 96, 98, 2009 WL 2901565, at *1 (2d Cir. 2009) (summary order) (rejecting defendant's claim that he be held liable only for the fraudulent transactions in which he was directly involved; loss should be based on foreseeable loss from fraudulent scheme); United States v. Singh, 390 F.3d 168, 192 (2d Cir. 2004) (court upheld finding of full loss for sentencing guidelines purposes, despite some acquittals: "It matters not that various phases of the execution of the scheme were rejected by the jury for reason or reasons unknown. Singh's opinions regarding the legality of his billing practices were rejected by the jury, which clearly found the existence of an overall fraudulent scheme."); United States v. Zicchettiello, 208 F.3d 72 (2d Cir. 2000) (upholding loss computations in RICO case: "As to the campaign finance scheme, Hartman is liable as a co-conspirator for 'all reasonably foreseeable acts and omissions' in furtherance of the conspiracy. U.S.S.G. § 1B1.3(a)(1)(B). Because there was evidence that Hartman was well aware of the larger scheme, the district court did not err in finding that Hartman was liable for the entire loss suffered by the NYCCFB."); United States v. Senninger, 429 Fed. Appx. 762, 767, 2011 WL 2688988, at *4 (10th Cir. 2011) (summary order) (court upheld attributing full loss from mail fraud scheme to defraud the IRS and Colorado Department of Revenue; "[T]he court looked at the totality of Senninger's involvement in that scheme, concluding her actions did not involve 'simply filling in blanks on amended returns.' The district court found Senninger 'lent credibility to the entire operation. She lent her credibility as having been an IRS auditor to this operation, and she knew she 10 DOJ-OGR-00009536 --- PAGE BREAK --- Case 1:09-cr-00581-WHP Document 605 Filed 03/18/13 Page 12 of 41 into account, inter alia, the defendant's own acts and omissions, see id. § 1B1.3(a)(1)(A), as well as "all reasonably foreseeable acts and omissions of others in furtherance of the jointly undertaken criminal activity," id. § 1B1.3(a)(1)(B), and "all harm that resulted from the acts and omissions specified in subsection[] (a) (1) . . . above, and all harm that was the object of such acts and omissions," id. § 1B1.3(a)(3) (emphasis added). United States v. Reifler, 446 F.3d 65, 108 (2d Cir. 2006) (alterations in original). See also United States v. Nash, 338 Fed. Appx. 96, 98, 2009 WL 2901565, at *1 (2d Cir. 2009) (summary order) (rejecting defendant's claim that he be held liable only for the fraudulent transactions in which he was directly involved; loss should be based on foreseeable loss from fraudulent scheme); United States v. Singh, 390 F.3d 168, 192 (2d Cir. 2004) (court upheld finding of full loss for sentencing guidelines purposes, despite some acquittals: "It matters not that various phases of the execution of the scheme were rejected by the jury for reason or reasons unknown. Singh's opinions regarding the legality of his billing practices were rejected by the jury, which clearly found the existence of an overall fraudulent scheme."); United States v. Zichetello, 208 F.3d 72 (2d Cir. 2000) (upholding loss computations in RICO case: "As to the campaign finance scheme, Hartman is liable as a co-conspirator for 'all reasonably foreseeable acts and omissions' in furtherance of the conspiracy. U.S.S.G. § 1B1.3(a)(1)(B). Because there was evidence that Hartman was well aware of the larger scheme, the district court did not err in finding that Hartman was liable for the entire loss suffered by the NYCCFB."); United States v. Senninger, 429 Fed. Appx. 762, 767, 2011 WL 2688988, at *4 (10th Cir. 2011) (summary order) (court upheld attributing full loss from mail fraud scheme to defraud the IRS and Colorado Department of Revenue; "[T]he court looked at the totality of Senninger's involvement in that scheme, concluding her actions did not involve 'simply filling in blanks on amended returns.' The district court found Senninger 'lent credibility to the entire operation. She lent her credibility as having been an IRS auditor to this operation, and she knew she 10 DOJ-OGR-00010215