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UNITED STATES v. BAILEY

June 6, 1995

UNITED STATES OF AMERICA, Plaintiff,
v.
RICHARD BAILEY, Defendant.



The opinion of the court was delivered by: MILTON I. SHADUR

 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. *fn1"

 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. *fn2" 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. *fn3" Bailey's cynical comments about finding it possible to sleep with elderly women by thinking only about the money to be made from them *fn4" were all of a piece with that deliberate targeting of especially vulnerable victims. *fn5"

 More than once during the hearing witnesses made mention of the well-known con man of another era, Yellow Kid Weil, *fn6" 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. *fn7" 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.

 Upward Departure

 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 ...


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