UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION
June 6, 1995
UNITED STATES OF AMERICA, Plaintiff,
RICHARD BAILEY, Defendant.
The opinion of the court was delivered by: MILTON I. SHADUR
MEMORANDUM OPINION AND ORDER
There is a good deal of anecdotal evidence to suggest that the large majority of federal district judges, regardless of their respective ideological bents, view the Sentencing Guidelines ("Guidelines") regime as having done substantial damage to the "justice" component of our criminal justice system. This Court is unaware of any like reports as to the views of the federal judiciary at the appellate level. But if it were to turn out that either the just-stated perspective or the comparative numbers in those appellate courts were in fact materially different from those of judges at the trial court level, any such difference might well be attributable (at least in part) to the fact that a judge's not having to impose sentences in person may make it easier to accept or even to approve a mechanistic grid-dominated system--a system in which any differentials in sentencing tend to be based only on differences in crimes and not on any differences among the criminals who commit those crimes.
But no individual case such as this can provide an appropriate occasion for venturing into an extended examination of the philosophical support or lack of support for the Guidelines method. It is enough for present purposes to say that both the proponents and the opponents of the system agree that it has dramatically changed the landscape that defines the appropriate sentences for criminal defendants. And this case is truly unique in that respect, for in order to establish the appropriate Guidelines range here:
1. This case requires a federal court and not a state court to determine whether a defendant is guilty or not guilty of having solicited murder (in this instance, the murder of Helen Vorhees Brach).
2. This case also requires that determination to be made by a judge and not by a jury.
3. And this case requires that determination to be made by a preponderance of the evidence and not beyond a reasonable doubt.
Following an evidentiary hearing and an allocution proceeding that together have occupied the best part of fully 10 court days, this Court has indeed made that determination. But before this opinion turns to the subject of the claimed Brach murder, it will address both (1) the Guidelines calculation on the charges in the indictment that defendant Richard Bailey ("Bailey") and his counsel have not disputed and (2) the non-murder-related aspects of the Guidelines calculation that Bailey and his counsel have disputed--in other words, all of the aspects that could enter into the Guidelines calculation whichever way this Court were to rule on the murder-solicitation issue. This opinion's references to the evidence adduced during the hearing are intended to be exemplary only and not by any means all-inclusive: In every instance this Court has considered and evaluated all of the evidence, and not just the portions that are mentioned here.
Base Offense Level
For the reasons that have been set out in the thorough presentence investigation report ("PSI") prepared by Probation Officer Elisa Ehrlich, the base offense level for Bailey's RICO offenses (other than his alleged involvement in the Brach murder) is dictated by Guideline § 2E1.1(a). Taking into account the financial extent of the RICO-linked offenses to which Bailey has pleaded guilty, the PSI calculated that base offense level to be 19. That determination was not challenged by Bailey (see page 2 of his counsel's May 17, 1995 letter ("May 17 Letter")).
However, in then responding on June 1 to the Government's Sentencing Memorandum, the reply memorandum ("R. Mem.") filed by Bailey's counsel correctly pointed out at pages 8-9 an error in the PSI's calculations by its having failed to group the several counts charging money laundering together with all of the other counts. It is plain that although the numerous counts to which Bailey has pleaded guilty do bear different labels and are covered by different sections of the Criminal Code, all of them stem from the same course of conduct within the operative rules established by Guideline § 3D.1. This Court has therefore disagreed with and accordingly rejects the PSI's proposed 2-level addition arising out of the Probation Officer's suggested division of the charges into two different groups.
In turn, the government's most recent submission has pointed out--also correctly--that RICO Guideline § 2E1.1(a) sets the base offense level at the greater of level 19 and "the offense level applicable to the underlying racketeering activity," which in this instance would be the base offense level of 21 for the substantive money laundering counts (Guideline § 2S1.1). That has sent all of us back to the books, in consequence of which everyone has agreed that the teaching of Application Note 1 to Guideline § 2E1.1 is that if any one or more of the applicable increases in offense level would apply to the charged conduct other than money laundering but not to the money laundering as such, the 2-level difference between the former charges (a 19 level) and the latter charges (a 21 level) would become nonmaterial, for the former (as adjusted upward) would control. And as the ensuing discussion reflects, that is clearly the case.
Accordingly this exercise has returned us to the point of beginning, and the relevant base offense level is indeed 19 (albeit for reasons different from those stated in the PSI). It is from that point that this Court must apply any adjustments upward or downward, the subject to which this opinion now turns.
Guideline § 3A1.1: Vulnerable Victim
Guideline § 3A1.1 provides:
If the defendant knew or should have known that a victim of the offense was unusually vulnerable due to age, physical or mental condition, or that a victim was otherwise particularly susceptible to the criminal conduct, increase by 2 levels.
May 17 Letter 1 seeks to avoid such an increase by quoting this excerpt from United States v. Sutherland, 955 F.2d 25, 26 (7th Cir. 1992) (citations omitted):
In a fraud case where the defendant issues an appeal to a broad group the court should focus on whom the defendant targets, not on whom his solicitation happens to defraud....§ 3A1.1 is designed to punish criminals who choose vulnerable victims, not criminals who target a broad group which may include some vulnerable victims.
That notion continues to be relied upon by Bailey's counsel in their discussion of that and other cases at R. Mem. 1-3.
But any such attempted reliance is surprising, for the just-quoted analysis in Sutherland inculpates rather than exculpates Bailey. Defense counsel's invocation of Sutherland wholly ignores Bailey's deliberate focus on sometimes older, but always vulnerable, wealthy women as his "marks" or "pigeons"--preferably women who were recently widowed or divorced and were therefore presumptively more susceptible to his efforts at wooing them.
In addition to the tragic Linda Holmwood ("Holmwood"), whom Bailey left near-destitute after having romanced her and having taken advantage of her tendency toward alcoholism to defraud her, and the distressing saga of the Bailey-engineered extensive frauds perpetrated on Carole Karstenson ("Karstenson") when she was exceptionally vulnerable (she was actually under a doctor-confirmed death sentence, a diagnosis from which she was later almost miraculously reprieved), the record discloses a whole series of Bailey's other frauds (including his extensive use of lonely hearts ads), all of them calculated to locate and take financial advantage of other women who fit the profile of vulnerability that Bailey considered as making for especially easy marks.
Bailey's cynical comments about finding it possible to sleep with elderly women by thinking only about the money to be made from them
were all of a piece with that deliberate targeting of especially vulnerable victims.
More than once during the hearing witnesses made mention of the well-known con man of another era, Yellow Kid Weil,
to whom Bailey was said to have referred as his role model. When Bailey came to the stand, he denied that--a denial that this Court finds to have been another instance of Bailey's mindset hereafter referred to in n.9. This was plainly no more than a marginally collateral matter, yet Bailey felt compelled to deny the assertion--a denial that this Court finds lacking in credibility. In any event, Weil (whose name was once a byword representing the classic con man) often described himself as never having conned anyone who didn't have a bit of larceny in his own heart. Although that observation may help to explain the success of (rather than to justify) many confidence schemes (or even many Ponzi schemes), Bailey's selection of his especially vulnerable victims did not share that characteristic. Bailey's conduct was even more cynical and more worthy of the censure represented by the Guideline § 3A1.1 enhancement (see United States v. Lallemand, 989 F.2d 936, 940 (7th Cir. 1993) (that "guideline's other purpose, the moralistic, is to express society's outrage at criminals who unsportingly prey on the weak, the defenseless")).
In sum, Bailey is an especially appropriate candidate for the Guideline § 3A1.1 increase (see, in addition to Lallemand, the quoted Sutherland reference to "criminals who choose vulnerable victims"--an apt description of Bailey). This Court approves that increase.
Guideline § 3B1.3: Abuse of Private Trust
Guideline § 3B1.3 provides:
If the defendant abused a position of public or private trust, or used a special skill, in a manner that significantly facilitated the commission or concealment of the offense, increase by 2 levels. This adjustment may not be employed if an abuse of trust or skill is included in the base offense level or specific offense characteristic. If this adjustment is based upon an abuse of a position of trust, if may be employed in addition to an adjustment under § 3B1.1 (Aggravating Role); if this adjustment is based solely on the use of a special skill, it may not be employed in addition to an adjustment under § 3B1.1 (Aggravating Role).
Interestingly, both the government and Bailey cite United States v. Brown, 47 F.3d 198 (7th Cir. 1995) in support of their competing arguments that Bailey did or did not engage in conduct triggering that 2-level increase.
It is clear that Bailey obtained and then betrayed a fiduciary relationship with a number of his victims. For example, one of his varied types of fraudulent schemes involved what purported to be a purchase of a horse that Bailey was supposedly already committed to "purchase" from someone who was actually a confederate (with the victim having been told that she and Bailey would later divide the proceeds of the prospective resale of the horse, which was falsely represented to be much more valuable than even the original fictitiously-rigged and inflated "sale" price). After the so-called purchase was completed, Bailey's check (purportedly his share of the "purchase" price) would be torn up and Bailey and his confederate would divide up the victim's money. That and other schemes involving a partnership-type fiduciary relationship (with Bailey being the "partner" who was supposedly acting for both himself and the victims in dealing with the purported sellers) were closely linked with the vast disparity in the knowledge and understanding as between the perpetrator (Bailey) and the victim of the fraud (Bailey's "pigeon"), thus causing the victim to rely on Bailey's superior knowledge--a type of disparity that was held to support the abuse-of-trust enhancement in United States v. Alex Janows & Co., 2 F.3d 716, 722 (7th Cir. 1993).
In another several-times-played variation on the fraud theme, Bailey would falsely represent to a victim that he had contracted to purchase horses and would lose his down payment if he did not complete the deal on the set closing date. That was the predicate for his extracting a short-term "loan" from the victim that Bailey would collateralize with the horses. Bailey would then "default," and the victim would unwittingly become the owner of worthless horses, consequently subjecting the victim to further cash outlays for boarding bills. Then Bailey and his confederates--for there had never really been a contract for Bailey's purchase of horses--would split the victim's money. Again Alex Janows would call for an abuse-of-trust enhancement under those circumstances.
May 17 Letter 1-2 attempts to place this case instead into the category described in Brown, where the relationship between the defrauder and the defrauded party merely provided the culprit with an opportunity that could easily have been afforded to persons other than the victim. But Brown, 47 F.3d at 205-06 characterized the latter kind of relationship as arms-length, while here Bailey expressly agreed with victims such as Karstenson, Kit Moss and Vivian Hurwith (and sought to do so with Barbara Morris) that he would act for them in the classic agent or alter-ego relationship that Brown, id. at 206 (quoting United States v. Ashman, 979 F.2d 469, 478 (7th Cir. 1992)) said would qualify under Guideline § 3B1.1.
Nor does the application of that Guideline in the circumstances of this case involve double counting, as explained in United States v. Haines, 32 F.3d 290, 293 (7th Cir. 1994):
The facts in this record are sufficient to support each adjustment. Furthermore, the district court did not "draw from the same well" when imposing the upward adjustments. One adjustment focuses on the victim, who was demonstrated to be vulnerable. The other adjustment looks to the conduct of the offender, who abused a position of trust.
Accordingly this Court also approves the Guideline § 3B1.1 2-level increase. In that respect it rejects the PSI's recommendation to the contrary.
Guideline § 3B1.1: Leader or Organizer
Guideline § 3B1.1 provides in part:
Based on the defendant's role in the offense, increase the offense level as follows:
(a) If the defendant was an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive, increase by 4 levels.
Government's Sentencing Memorandum ("G. Mem.") 8-9 both (1) explains that Bailey need not have been the highest-ranking person in the criminal enterprise to qualify for that enhancement (see, e.g., United States v. Hogan, No. 94-1673, 1995 U.S. App. LEXIS 9654, at *9-*10 (7th Cir. Apr. 27)) and (2) lists the numerous participants in the fraudulent scheme whom Bailey either employed or controlled or supervised (or a combination of those things). Nothing in the May 17 Letter disputes either of those assertions.
Nor does Bailey's R. Mem. raise any question in either respect--indeed, its conclusion (R. Mem. 9) presupposes the 4-level increase for leadership. Accordingly this Court approves the PSI's recommendation for that 4-level increase.
Guideline §§ 2F1.1 and 5K2.3
G. Mem. 9-14 is the longest single subsection of the United States' Presentation, focusing on the interaction of Application Note 10(c) to Guideline § 2F1.1 with Guideline § 5K2.3:
2F1.1 Application Note 10.
In cases in which the loss determined under subsection (b)(1) does not fully capture the harmfulness and seriousness of the conduct, an upward departure may be warranted. Examples may include the following:
* * *
(c) the offense caused reasonably foreseeable, physical or psychological harm or severe emotional trauma.
* * *
If a victim or victims suffered psychological injury much more serious than that normally resulting from commission of the offense, the court may increase the sentence above the authorized guideline range. The extent of the increase ordinarily should depend on the severity of the psychological injury and the extent to which the injury was intended or knowingly risked.
Normally, psychological injury would be sufficiently severe to warrant application of this adjustment only when there is a substantial impairment of the intellectual, psychological, emotional, or behavioral functioning of a victim, when the impairment is likely to be of an extended or continuous duration, and when the impairment manifests itself by physical or psychological symptoms or by changes in behavior patterns. The court should consider the extent to which such harm was likely, given the nature of the defendant's conduct.
It can scarcely be gainsaid that the situation portrayed by the evidentiary hearing fits the first of those provisions,
so the discussion here will focus on the second.
Two issues remain for consideration in that respect. First, given the egregious nature of Bailey's conduct in defrauding various of his victims such as Holmwood and Karstenson (to choose the most outrageous instances presented to this Court), was the actually-sustained psychological injury "much more serious than that normally resulting from commission of the offense"? Second, would a departure on that ground, when linked with the already-discussed upward adjustments under Guideline §§ 3A1.1 and 3B1.3, amount to double counting?
As for the first of those questions, G. Mem. 9 properly acknowledges that "it is difficult to define the injury normally resulting from mail fraud." That Memorandum then quotes United States v. Pelkey, 29 F.3d 11, 16 (1st Cir. 1994):
Some degree of consequential trust and reliance by the victim is to be expected in the majority of fraud cases involving false pretenses, and the presence of such reliance will not generally justify departure.
But the government's ensuing recapitulation of Bailey's depredations and their impact on Holmwood and Karstenson are graphic illustrations of the fact that (to paraphrase Animal Farm) some frauds and their consequent psychological injuries are more equal than others. Nothing that Bailey's R. Mem. 4 says as to those Guideline provisions (or as to Pelkey) diminishes the force of that conclusion.
What is more troublesome is the second question of possible double counting. G. Mem. 12-13 cites to and quotes from three Courts of Appeals decisions elsewhere ( United States v. Astorri, 923 F.2d 1052, 1055, 1058-59 (3d Cir. 1991); United States v. Mandel, 991 F.2d 55, 56, 58-59 (2d Cir. 1993) and United States v. Haggard, 41 F.3d 1320, 1327 (9th Cir. 1994)) to negate the duplicative impact of a Guideline § 3A1.1 vulnerable-victim adjustment if coupled with the type of upward departure now under discussion. As Haggard, id. (citing Astorri) puts it:
The two provisions in question account for different aspects of the defendant's criminal conduct. One section focuses on the psychological harm the defendant caused the victim. See U.S.S.G. § 5K2.3. The other section accounts for the defendant's choice of victims; it meets [sic] out extra punishment for defendants who prey on unusually vulnerable victims. See U.S.S.G. § 3A1.1. There was no double counting.
Neither Haggard nor Astorri (nor Mandel, which held open the prospect on remand of an upward departure for psychological harm) also involved the further Guideline § 3B1.3 abuse-of-trust increase that this Court has approved here. As reprehensible as Bailey's conduct was, this Court retains the concerns that led the panel in United States v. Kopshever, 6 F.3d 1218, 1224 (7th Cir. 1993), to say after describing Guideline §§ 3A1.1 and 5K2.3 (with this Court sitting by designation and acting as the spokesman for the panel):
But the unquestioned flaw in the sentence imposed below was that the district court really drew from the same well in setting out the considerations for application of the "unusually vulnerable victim" factor and in justifying the departure upward for unusually serious psychological injury--and he did so without the type of factual hearing that is required to make determinations on contested issues. Even apart from the thinness of factual support for the grounds purportedly justifying the departure, the procedure followed below runs afoul of our recent explanation of the concept of "double counting" in Lallemand, 989 F.2d at 939-40. Indeed, the same conclusion was reached recently by the Second Circuit in a strikingly similar situation in United States v. Mandel, 991 F.2d 55, 58-59 (2d Cir. 1993). Accordingly, on remand the district court will not be free to depart upward based on the factor of an unusually serious psychological injury--at least in the absence of a very different type of factual record from that before us.
But on balance this Court has determined that the added ingredient of unusually serious psychological injury was in fact present in more than ample supply as to more than one of Bailey's victims in this case. And as was true in Haines, 32 F.3d at 290, that factor makes this case very different from the situation that was dealt with in Kopshever. That element of serious psychological injury alone supports an upward departure that is of some magnitude, for that factor is not adequately addressed by the already-ruled-upon Guideline adjustments.
Guideline § 5K2.8
Here is still another ground for upward departure that is urged by the government (Guideline § 5K2.8):
If the defendant's conduct was unusually heinous, cruel, brutal, or degrading to the victim, the court may increase the sentence above the guideline range to reflect the nature of the conduct. Examples of extreme conduct include torture of a victim, gratuitous infliction of injury, or prolonging of pain or humiliation.
Because only a single departure upward will be ordered in this case in any event, the problem of potential double counting is not posed as to that contention in the same way that has already been discussed with respect to the adjustments in the offense level. Instead this potential added element plays a different role in this case: For sentencing purposes it is worth examining in how many different ways a defendant's conduct fits the Guidelines that identify the possible grounds for upward departure--an examination that can provide guidance in deciding upon the magnitude of that departure.
In this instance Bailey's conduct certainly rose (or more accurately fell) to the "unusually cruel" and "unusually degrading" levels referred to in Guideline § 5K2.8. Although an already-married man, Bailey concealed that fact from the targets of his fraud, routinely leading them to believe that he cared for them deeply and proposing marriage to at least three of his victims.
It is scarcely surprising that Bailey's callousness in then thrusting the victims aside after he had gained his goal--mulcting them of their money--had a devastating impact on them. And it does not represent double counting to point again to the Holmwood and Karstenson episodes as illustrative of the "unusually cruel" conduct by Bailey that was "unusually degrading" to each of them.
Guideline § 2F1.1: Knowing Endangerment of Solvency
Application Note 10(f) to Guideline § 2F1.1 reads:
In cases in which the loss determined under subsection (b)(1) does not fully capture the harmfulness and seriousness of the conduct, an upward departure may be warranted. Examples may include the following:
* * *
(f) the offense involved the knowing endangerment of the solvency of one or more victims.
Again the Holmwood and Karstenson episodes unquestionably support the application of that ground. Here is the wholly accurate G. Mem. 17-18 in that respect:
Once again, defendant's crime against Linda Holmwood justifies a departure on this ground. Bailey took everything that Linda Holmwood had. When they met, Holmwood lived in a large, furnished house in Naperville. After Bailey defrauded her, Holmwood was without money, without a house, without furniture, without any assets, in a destitute condition, and on public aid. When he had taken all of her money, he abandoned her, taking even the horses that she believed she had purchased. To say that Bailey knowingly endangered Linda Holmwood's solvency is an understatement.
In addition, Carole Karstenson's solvency was threatened by Bailey's crime. Karstenson's husband had left her a substantial sum of money. Bailey and Brown defrauded her out of the bulk of that money. Furthermore, Bailey attempted to have Karstenson sign a power of attorney when Karstenson was no longer physically able to attend to her own affairs. There can be little question that this would have resulted in transferring the remainder of Karstenson's wealth to Bailey.
As before, this Court discredits Bailey's testimony to the contrary, and it likewise rejects the R. Mem. 5 argument on that score.
Upward Departure Summary
Hogan, 1995 U.S. App. LEXIS 9654, at *15-*16 has again made it plain that in announcing any departure from the Guidelines "a district court must 'link the extent of departure to the structure of the guidelines'" (quoting United States v. Ferra, 900 F.2d 1057, 1062 (7th Cir. 1990)). That linkage involves a comparison of the seriousness of the aggravating factors present in the case with those that have been considered by the Sentencing Commission (id.). To be sure, there is no precise mathematical formula for quantifying the amount of departure, but what has already been said in this Upward Departure section points the way.
This opinion has found that three separate bases exist for an upward departure with respect to Bailey's protracted series of criminal frauds. Though all three bases of course stem from the identical factual matrix, the very circumstance that those facts implicate several categories that the Guidelines view as serious grounds for departure helps to inform the appropriate level of enhancement.
This Court views each of the three factors as essentially comparable to the earlier-discussed adjustments for vulnerable victim and abuse of trust--that is, as justifying a 2-level adjustment if any of those aggravating factors were the only one present. However, any straight-out additive aggregation of three separate 2-level increases would materially overstate matters--not in terms of literal double counting as such, but because the several factors have the degree of interrelationship that has been spoken of earlier in this opinion. Accordingly this Court will apply half of that maximum potential, or a 3-level upward departure.
Acceptance of Responsibility
United States v. Jones, No. 94-1391, 1995 U.S. App. LEXIS 8818 (7th Cir. Apr. 17) sets out a recent articulation of the principles that enter into a determination of whether a defendant has "clearly demonstrated acceptance of responsibility for his offense" (Guideline § 3E1.1(a)). It is not enough for a defendant simply to admit his or her guilt to the scheme charged in the indictment (Jones at *11; United States v. Panadero, 7 F.3d 691, 694 (7th Cir. 1993)). And this opinion has already identified a congeries of ways in which Bailey has sought to minimize his culpability through false sworn testimony. That is more egregious than the situation in the numerous cases cited in Jones at *11-*12, each of which affirmed denials of the credit for acceptance of responsibility. Bailey too has forfeited any entitlement to such a credit.
Calculation of the Non-Brach-Related Guideline
Starting with the earlier-discussed base offense level of 19, the Guidelines call for two increases of 2 levels each (Guideline §§ 3A1.1 and 3B1.3), an undisputed 4-level increase under Guideline § 3B1.1 and a 3-level upward departure under the combination of Application Notes 10(c) and 10(f) to Guideline § 2F1.1 with Guideline §§ 5K2.3 and 5K2.8. When coupled with the denial of any acceptance-of-responsibility credit, that calculation produces an aggregate offense level of 30.
Finally, this Court examines the government's additional argument that Bailey's criminal history should be adjusted upward from level I pursuant to the policy statement in Guideline § 4A1.3. Bailey's counsel respond (R. Mem. 7-8) that:
1. Because the indictment sounds in RICO, the operative rules permit the inclusion for Guideline purposes of criminal conduct going back many years--including years that would be outlawed by limitations if made the subject of substantive charges.
2. Relatedly, if those aspects of Bailey's conduct set out as racketeering acts in implementation of the RICO conspiracy had been charged as substantive offenses before they were barred by limitations, they might well have been too old to count in Bailey's criminal history points (see Guideline § 4A1.2(e)).
But that approach misses entirely (or at least seriously deflects from) the principle that underpins Guideline § 4A1.3. First of all, the base offense level of 19 under RICO would have been applicable even if Bailey's depredations had been far less extensive and prolonged. More importantly, if the scenario just stated in paragraph 2 had taken place, the very Guideline to which Bailey's counsel point still would have called for consideration of an upward departure (Application Note 8 to Guideline § 4A1.2). But most significantly, even considering the broad sweep of conduct and the extended time span of Bailey's offenses encompassed within the current indictment, Bailey is plainly what this Court's colleague Honorable William Hart colloquially refers to as a "first caughter" rather than a first offender. As with most con men (a type of crime that carries an extraordinarily high degree of recidivism), Bailey's fraudulent activities neither began nor ended with his involvement in the horse industry that forms the basis of his present conviction:
1. Testimony during the hearing and evidence in the Santiago proffer demonstrated that before Bailey was forced out of his earlier operation of his A-1 Driving School in 1970 by the Illinois Attorney General's office, his modus operandi had involved the same kind of multiple-victim fraud to which he has pleaded guilty here. Though no criminal indictment or conviction resulted from those frauds, Guideline § 4A1.3(e) specifies that activity as a potential basis for upward departure on criminal history grounds.
2. As the government's final witness during its case in chief testified, in the latter part of 1993--after the events charged in the indictment--Bailey took advantage of a woman friend of his family by obtaining a $ 25,000 loan that he said would be repaid within a month. Then nearly eight months later (no repayment having been made) he extracted another $ 10,000 from the victim by giving her the false impression that it would enable him to make good on the original amount. By way of aggravation, Bailey had been told by the victim that she had to take funds from her retirement savings to make the two loans. This Court finds that Bailey did not intend to make repayment as he promised when he obtained the funds,
so that the transactions were fraudulent in their inception.
In sum, this Court finds that the level I criminal history category "significantly underrepresents the seriousness of [Bailey's] criminal history" (Guideline § 4A1.3) and that his real-world criminal history (though not evidenced by prior convictions) is "significantly more serious than that of most defendants in the same criminal history category" (id.). Any single prior sentence that would have been imposed for the types of other offenses committed by Bailey would surely have included a custodial term that would trigger a 3-point increase for purposes of setting his criminal history category (see Guideline § 4A1.1(a))--and it is appropriate to make an adjustment of that magnitude here (see United States v. Chong Tai, 41 F.3d 1170, 1176-78 (7th Cir. 1994)), moving Bailey from Category I to Category II. This Court so rules.
Accordingly, all of the factors that have been discussed in this opinion to this point establish an offense level of 30 and a criminal history category of II. That sets a guideline range of 108 to 135 months, irrespective of the decision reached by this Court on the Brach matter. This opinion now turns to that subject.
Not by way of a separate count that directly charges any murder-related offense, but rather as one of the overt racketeering acts assertedly committed in furtherance of the RICO conspiracy charged in Count Two, paragraph 37 of that count alleges:
In 1977, RICHARD BAILEY and co-schemer A [who has now been identified in the course of the sentencing proceedings as Frank Jayne, Jr. ("Jayne")], conspired to murder and solicited the murder of Helen Brach, in violation of Illinois Revised Statutes, Chapter 38, Sections 8-1 and 8-2.
Bailey stoutly denies any such involvement, which if proved by the United States would drive the applicable Guideline through the roof: In this instance Guideline § 2X1.1(a) (dealing with attempts, solicitation or conspiracy) looks to the base offense level for the substantive offense of murder, which under Guideline § 2A1.1 is a level 43. And level 43, even without reference to the possibility that any of the factors discussed earlier in this opinion would lead to an even higher offense level, is at the top of the sentencing table, calling for a sentence of life imprisonment without possibility of parole.
Understandably much of the focus of the evidentiary hearing has been on the government's efforts to prove that charge by a preponderance of the evidence (see United States v. Ewers, No. 94-3438, 1995 U.S. App. LEXIS 10283, at *5-*7 (7th Cir. May 9) and cases cited there) and on Bailey's efforts to demonstrate that the government has not met even that standard, although it is substantially less demanding than the normal criminal standard of proof beyond a reasonable doubt. And the difficulty of resolving the question has obviously been compounded by the facts that:
1. More than 18 years have gone by since Brach's mysterious disappearance, without any murder charge having been leveled against anyone by the authorities who have been and are most directly involved in the investigation and possible prosecution (indeed, without any hint as to the location of Brach's body--assuming that there has been a murder, as seems almost a certainty).
2. With no direct evidence being available as to the means by which Brach's apparent murder was carried out, the circumstantial evidence proffered by the two sides points in different directions.
3. Much of the circumstantial evidence (again from both sides) stems from sources that clearly raise the need to engage in judgments as to the believability of witnesses whose credibility is suspect for one reason or another.
Before this opinion turns to the crucial task of resolving the ultimate issue, it should be said that Bailey did himself no good by demonstrating his utter lack of credibility in relation to matters dealing with Brach (just as he did in the other areas that have already been discussed in this opinion). Not to put too fine a point on matters, this Court finds for example that:
1. Bailey plainly lied by trying to place himself in Florida rather than in the Chicago area during the time frame that he knew the government was claiming that arrangements were made for the Brach murder: the period immediately preceding February 15, 1977. His bogus story about being in Florida before he checked into the Colony Hotel in Palm Beach on February 16, a story that was already suspect (a) because he had never said that in the early days of the investigation and (b) because he had turned over no receipts of any such stay at the time that he gave the Colony receipt to the Glenview police in March 1977, was flatly belied by the telephone records from his 505 North Lake Shore Drive, Chicago apartment during the critical period. There is no question that Bailey was in Chicago throughout that period earlier in February (before February 16).
2. Bailey also lied to, or equally suspiciously withheld facts from, the Glenview police during the investigative period shortly following the Brach disappearance (when the facts were obviously fresh in his mind). Thus he falsely told the police on March 16, 1977 that he had had no business dealings with Brach, although he misleadingly said only that his brother Paul Bailey had purchased two horses for her (even that number was false--as reflected earlier, Bailey and his brother had sold Brach three horses, though at the time of Bailey's statement only two remained in Brach's ownership, the third having earlier been claimed in a $ 5,000 claiming race). Indeed, Bailey elaborated in his March 16 statement to the police that "the only business he has done with Mrs. Brach" was that he then had two horses in his stables that belonged to her--another outright lie. Moreover, even though he then made it a point to tell the police about possibly suspicious circumstances involving some other parties, and even though in a March 25 further interview he answered a number of police questions about Brach chauffeur Jack Matlick ("Matlick"), back in 1977 Bailey said not a word about the conversations that he now claims to have had with Matlick--conversations that, if they had really occurred as he now says and if Bailey was then trying to be candid and helpful as he purported to be, would certainly have been material because of their suspicious nature. This Court rejects Bailey's current testimonial version of those alleged conversations as totally false.
3. Bailey resolutely refused to acknowledge his having defrauded Brach (as he had defrauded so many other women) at the time that he and his brother Paul sold her the three horses that Bailey admitted having provided to her. Despite the enormous disparity between the cost of those horses to the two Baileys (a total that was under $ 20,000) and the $ 98,000 purchase price that was paid by Brach, throughout his cross-examination Bailey steadfastly refused to acknowledge his fiduciary obligation to Brach or to admit the obvious misrepresentations involved, insisting instead that Brach was a savvy purchaser and that she would have recognized the propriety of his collecting a "commission" (!!)--his euphemistic label for the 400% profit--that he conveniently concealed from her. And of course even that level of deception understates the facts, for what Bailey also hid from Brach was that he (and not just his brother) was engaged in the scam--that in fact Bailey was actually the most active participant.
Although the list of Bailey's unquestionable lies could be extended, this Court recognizes that they do not of themselves necessarily call for assigning the far more serious murder-related offense to Bailey. It is perhaps arguable that they might instead be the product of Bailey's seeking desperately, back in the days of the 1977 investigation, to conceal facts that might make him the target of greater suspicion (that is, in an effort to distance himself from the murder investigation simply to avoid exposure of his other unsavory activities), and of an equally desperate (and particularly stupid) effort now to escape unfavorable inferences that could prove damning. All the same, when the process is the present one of placing evidence in the scales to see which side tips downward--the preponderance-of-the-evidence test--Bailey's total lack of credibility in key relevant areas begins that weighing process on the wrong side of the balance scales for Bailey.
Now to the task at hand. Two witnesses, Joe Plemmons and Cathy Jayne Olsen, respectively testified to a direct solicitation of Brach's murder by Bailey himself and to having overheard more than one conversation in which Bailey, Frank Jayne and others spoke in the same vein. Both of those witnesses (like Bailey himself, who of course denied any such conversations) pose serious credibility questions.
Accordingly this Court looks first to the kind of evidence that must always weigh most heavily in resolving such conflicts: evidence from more reliable sources (particularly if long-after-the-fact recollective testimony from such sources is buttressed by objective documentary evidence) that tends to corroborate or to refute the more dubious sources.
In this instance there is no question, as has already been said, that Bailey cheated Brach. But Bailey seeks to blunt that as a motive for murder in large part by contending (1) that he was involved in the sale of only three horses to Brach, (2) that any concern on her part about having been defrauded in those transactions had to have arisen before January 1, 1977 and (3) that she had not only declined before that date to consider suing Paul Bailey (who it will be remembered was purportedly the only seller of those horses) but had spent New Year's Eve at the Waldorf-Astoria in New York in Bailey's company (and in his arms, at least while they were dancing to the music of Guy Lombardo and his Royal Canadians), having paid for Bailey's entire stay there. If those were indeed the only relevant facts, the words ascribed to Bailey by the two witnesses would seem highly improbable. If as Bailey testified he was looking to make further inroads into the Brach fortune (her "long bankroll," as he termed it), and if that possibility were not in jeopardy because Brach had become disillusioned about Bailey, that would surely render it less likely that he would--as he once said to another witness on the subject--"kill the goose that laid the golden eggs."
But Bailey's version plainly cannot be trusted, just as it is plain that he lied to the Glenview Police only a month after the Brach disappearance in telling them that the last time he had seen her was on that New Year's Eve. In that regard perhaps the most important witness (though, as will be seen, far from the only one) is someone who has no animus toward Bailey and no motive at all to fabricate--and, significantly, whose testimony is backed up by a document that confirms that the witness' current story is the same one that he had given more than 15 years ago.
Arthur Katz, who with his father had done extensive work for Brach over a period of more than a decade in designing and fabricating elaborate memorials for her and her entire family (and even her dogs.!) at the family plot in Ohio, testified that his now-deceased father had become a close personal friend of Brach: Over the years they vacationed together in Florida (with no romantic involvement), he visited her in Ohio as well as in her Glenview home, she sought his advice on personal matters and more. Katz swore that shortly before her disappearance Brach had come in to see his father (where Katz and his father shared a very small business office) and said that she was highly disturbed by having been cheated in the purchase of horses, a purchase that had been induced by a much younger man whom she had been dating and who had made arrangements for her upcoming examination at Mayo Clinic (unquestionably an accurate description of Bailey). When Brach asked the advice of Katz' father about what she could do about it, he responded that he knew several lawyers in the State's Attorney's office and would arrange to take her there on her return from the Mayo Clinic--and she agreed to do just that. That was the last the Katzes ever heard from Brach, for she vanished just after her return from the Clinic.
Katz' testimony was squarely buttressed by the letter that he had sent back in 1979 to the lawyer-guardian who had been appointed after Brach's disappearance--a letter written in response to the guardian's reward offer for information leading to the discovery of Brach's whereabouts (dead or alive) or to the discovery of her body (Government Ex. Katz 3). Here is what Katz wrote at that time:
For the past 10 years prior to her disappearance, as you are aware of, we had been erecting the Brach-Vorhees memorial. During this time, Mrs. Brach and my late father had been very close friends and had many long discussions regarding their personal lives and problems. These discussions were held here, Steubenville, Ohio and at her home in Glenview, and also at her condominium in Florida.
Before my father passed away in February 1978, we had many discussions as to the whereabouts of Mrs. Brach. I am, therefore, offering my information that may lead to the solution of Helen Brach's disappearance and reward that has been offered by the estate.
Before Mrs. Brach disappeared, she had mentioned to my late father that she had been dating a much younger man who had induced her into purchasing several race horses from him, only to find that she had been taken. She was going to try to get back what she had lost. Mrs. Brach was a very intelligent and shrewd woman and did not like to be taken.
The same person she bought the horses from, she confided to my father, had made arrangements to get her into the Mayo Clinic in Rochester, Minnesota.
I would strongly suggest that this individual should be given a lie detector test and further investigation should be made with reference to the above.
Though Bailey's lawyer sought to shake Katz' story on cross-examination, nothing really cast any doubt on its accuracy--and it has strong internal indicia of reliability as well. This Court credits it entirely.
Moreover, there is other strongly corroborative evidence to confirm that things had changed dramatically during the seven weeks that elapsed between New Year's Eve and the time that Brach vanished from the face of the earth. In terms of the horses that had originally been foisted on Brach by Bailey and his brother, it was after the beginning of the 1977 year that Brach obtained an appraisal that told her that she should invest nothing in training Potenciado, the horse on which Jerry Farmer--Bailey's coconspirator whom he had recommended to Brach--wanted her to spend $ 50,000 for that purpose (the testimony of John Keefe). And in addition to the initial fraud that had been involved in the Baileys' sale of the three horses to Brach in 1975, there is credible evidence that Bailey and his fellow conspirators (including Frank Jayne) had made their sought-after major score by way of persuading her to make a large investment in brood mares. Thus John Schaumberg told one of the investigating agents of a call that he received from Frank Jayne shortly after the Brach disappearance, asking whether Schaumberg would take off of Jayne's hands "a bunch of brood mares" belonging to Brach.
Importantly, that is borne out by statements from Bailey himself:
1. Bailey told his then-protege in fraud, Lance Williamson, that he had not only defrauded Brach (whom he had earlier introduced to Williamson) in connection with the original racehorses that were sold to her through Bailey's brother P.J. but that he also intended to make a "big score" by selling her brood mares.
2. In 1979 or 1980 Bailey told John Staren, who was at Bailey Stables two or three times a week and was socially friendly with Bailey, that he had sold Brach brood mares, having made a "couple hundred thousand dollars" in transactions with her. On another occasion Bailey told Staren that Brach had been one of his best--or biggest--pigeons.
It is true that no documentation now exists that evidences such further transactions, but as already stated the existing documentation does not cover even the purchase of all of the first three horses that admittedly took place. Nor do the post-disappearance records of boarding expenses and tax returns put together by accountant Everett Moore negate the statements made by the witnesses and by Bailey and his coconspirators.
For one thing, the Karstenson fraud illustrates that in the breeding scam inflicted on her (which bore a resemblance to the "big score" involving Brach) the victim was not called upon to bear boarding expenses. And as for the purchase price of the horses, it will be remembered that Moore was never given the information about Brach's earlier purchases until after the fact--and in this instance Brach disappeared before that could be done. Thus the current absence of records, long after the fact, is overridden by the numerous independent confirmations of this further and more egregious fraud perpetrated on Brach.
There are still other ways in which the evidence of Brach's knowledge of and indignation at the fraud, and of her intention to pursue the matter with the authorities, goes beyond the persuasive Katz testimony and his 1979 letter. Mary Herbold, who had leased a saddle shop in Northwestern Stables from Frank Jayne but had no involvement in the sale of horses there, testified that she had met Brach riding on the nearby trails and became friendly with her, seeing her once or twice more on the trails, perhaps a dozen times at Bailey Stables and at least once at Brach's home in Glenview. Close to the time that Brach had said that she was going to the Mayo Clinic (within two weeks or so before that trip), and after Brach had earlier told Herbold that she was going to a stable in Elgin to look at breeding stock that she had just bought, Herbold heard Brach at Bailey Stables raising her voice, stating that she was very upset at having been cheated and that she was going to the district attorney's office. And here is a related stipulation between the parties:
If Detective Tomanek of the Glenview Police Department was called to testify, he would testify that following an interview of Mary Herbold in 1988 he included the following in his report of interview.
"Mary Herbold related that she remembers an incident in which Helen V. Brach had told her that she was going to go to 'R Day Stables in Elgin to look at her new 'breeding stock' she had just bought. Mary interpreted this to mean that Helen V. Brach had just bought a 'group' of expensive thoroughbreds. Mary Herbold related that upon Helen V. Brach's return she was extremely upset and was screaming at everyone in the stables about her being cheated into buying garbage horses, and further reference was made by Helen V. Brach about going to the district attorney about this. It is unclear if Mary Herbold witnessed this display herself or heard it from her daughter, who may have witnessed this at Bailey's Harms Woods Stables."
He would also state that he cannot recall how questions to Herbold were phrased. He cannot state whether the italicized line was a note to himself that a follow-up interview should be conducted because of ambiguities in his questions, or whether it reflects an impression that he formed from the witness.
Having heard Herbold's testimony, this Court has none of the doubts suggested by the last paragraph of that stipulation. Herbold was very precise not only in her recollection of the event but also as to just where she was and where Brach was in relation to the stables at the time of the occurrence. And Herbold testified that there were plenty of people around the stables when the event took place. In summary, the totality of the relevant evidence confirms that Brach was ready and willing (and in fact eager) to "blow the whistle" on Bailey upon her return from Mayo Clinic.
Nor can Bailey claim (as his counsel urged in closing argument) that he was ignorant of Brach's displeasure--even apart from Brach's open display of rage at Bailey Stables (which would surely have been communicated to Bailey), another witness (William Corwin, who was then the manager of Bailey Stables) said that shortly after the beginning of 1977 Bailey had told him that Brach might be moving her horses and that she was hiring an appraiser (as she then did) because she felt that she had been conned. And still another of the people engaged in the unsavory aspects of the horse industry, Jerry Holly (who had been associated with Frank Jayne in the 1970s) stated to a state investigator as far back as 1980 that he had been in a conversation with Jayne and Bailey in which they had told him of a $ 600,000 investment that Brach had made, and that she wanted her money back or she was going to the authorities. Holly and Jayne have since had a falling out that actually resulted in a shootout between them, but Holly had no reason to implicate Bailey falsely. Another nail, then, has been driven into Bailey's figurative coffin.
This discussion could be prolonged by adding other pieces to fill in the evidentiary puzzle. But the bottom line is that although it might be contended that the evidence would not suffice to withstand beyond-a-reasonable-doubt scrutiny, the evidence unquestionably demonstrates a powerful motive for Bailey to dispatch Brach before she could carry out her announced intention to go to the prosecuting authorities. And not incidentally, that motive fits hand-in-glove with the kinds of lies that Bailey gave to the police investigators about a month after Brach's disappearance. Indeed Bailey's "you don't kill the goose that lays the golden eggs" argument really backfires: Here the golden eggs were really the major ill-gotten profits that were regularly being obtained by Bailey and his fellow conspirators from their multifaceted frauds, and for that purpose the goose that was laying those eggs was the multifaceted scheme itself. It was Brach--a woman of prominence and means--who was the potential killer of that goose. There was a strong incentive on Bailey's part to prevent her from doing that, and a number of Bailey's associates--Frank Jayne, Kenneth Hansen and others--were known for violence.
All that has been said to this point lends credence to what would otherwise be highly suspect testimony from Plemmons and Olsen. Unfortunately this Court, which is forced to examine the matter so long after the fact, and in so doing must peel away the layers of credibility as well as time, cannot have the assurance that is possessed by the actual observer of events (or by the all-seeing eye of the third-party narrator in a novel). But what might otherwise be a questionable account, offered by a person who had the incentive that Plemmons possessed to benefit himself (and his girlfriend) by assisting the government, has gained a great deal of probative force from the inferences that are properly drawn from the other clearly credible evidence. Indeed, even on its own the Plemmons version cannot be explained away as a manufactured account--it contains ingredients that Plemmons would have no logical way of knowing unless the event had actually transpired much as he recounted it. As for Olsen, she has certainly given a substantial number of shifting accounts over the years (and even during her brief time on the stand here), and she must be considered as a dubious witness in the particulars of her account. But no more need be said in that last regard: Even if no value at all is ascribed to her testimony, the totality of the other evidence is more than sufficient for present purposes.
But what of chauffeur Matlick, on whom most of the investigative attention has reportedly focused?
Although this Court has not been made privy to the reasons that have prevented the authorities from proceeding with charges against Matlick, the bits of evidence that have been provided to this Court by stipulation certainly portray Matlick in a highly suspicious light. Those matters could well be viewed as consistent with an awareness on Matlick's part that Brach would not return. But is Matlick a more likely suspect than Bailey? That is really impossible to tell when all of the evidence as to Bailey has been placed before this Court for evaluation, while as to Matlick (1) nothing has been provided in terms of background, (2) only limited information has been furnished from which to infer a motive for murder and (3) most significantly, nothing has been tendered covering other factors that might enter into the equation.
There is of course another hypothesis that could eliminate the either-or question posed in the preceding paragraph--the possibility that both Bailey and Matlick were involved in Brach's disappearance. In that respect this Court does not credit the facet of Olsen's testimony in which, for the first time in all of her accounts over a period of several years, she has now identified Matlick as present during one of the conversations to which she referred. But we have only Bailey's word for the fact that he did not like Matlick--a statement that is self-serving, just as are Bailey's current accounts of his purported conversations with Matlick during the days that followed February 17 (conversations that Bailey never described, and that with one exception he never even mentioned, to the Glenview Police in his interviews in March 1977). But this Court will not indulge in speculation, let alone reach any conclusion--even tentatively--on such thin information. All that can be said is that tossing the limited Matlick evidence into the scales does not shift the evidentiary balance.
When all is said and done, Bailey surely had a strong motive for taking the action that Plemmons ascribes to him. And the record does offer more than enough to overbalance the possibilities that Bailey and his counsel have advanced. Bailey's purported alibi turns out to be no alibi at all, but a falsified account of his whereabouts--and that falsification supports the inference that the rest of his conduct in Florida during his week there in February 1977 was also no more than an effort to contrive a cover story.
In summary in terms of the appropriate preponderance-of-the-evidence test, on the record before this Court it is more probable than not that Bailey did commit the offenses of conspiring to murder and soliciting the murder of Helen Brach, as charged in Racketeering Act 4 in Count Two of the indictment. And with no reduction from the Guideline level of 43 being attributable to that offense (to say nothing of the aggravating factors discussed in the earlier section of this opinion that would elevate that level), that calls for a sentence of life imprisonment for Bailey.
Milton I. Shadur
Senior United States District Judge
Date: June 6, 1995