to exclude these checks from the calculation of loss.
This adjustment will not, however, alter the probation officer's
determination that an increase in 8 levels is appropriate; the amount of
loss resulting from Hendershot's conduct exceeds $200,000 but is less
than $350,000. Pursuant to § 2F1.1(b)(1)(I), this amount of loss
results in an 8-level increased offense level.
Defendant Battista also objects to the amount of cash kickbacks
attributable to him. The evidence at trial concerning Battista's
involvement related to four private investigation firms: PPS, Megco,
Three Star, and Park. In its sentencing memorandum, the government
argued that Battista recovered bribes in the amount of $680 per job for
jobs performed by PPS and Megco, and $700 per job for work performed by
Three Star and Park. The government's initial sentencing memorandum
holds Battista accountable for kickbacks in connection with 96 private
investigation jobs performed by PPS, 88 jobs by Megco, 9 jobs by Three
Star, and 49 jobs by Park.
Battista argues the evidence does not support these job numbers with
respect to PPS, Megco, and Park.
Apparently relying on Government Exhibit Schedule C, Battista argues
the government offered evidence of only 38 jobs performed by PPS for
Alexsis. (Battista's Objections to the Preliminary Pre-Sentence
Investigation Report, at 12-13.) As the court reads Schedule C, however,
it reflects deposits of Alexsis checks to PPS, and contemporaneous cash
withdrawals. Schedule C does not purport to document every job performed
by PPS for Alexsis. It does, however, corroborate the testimony of
Michael Levine, PPS's principal, that he fell into a pattern of paying
kickbacks in a flat amount of $680 per job. As the government notes,
several of the cash withdrawals recorded in Schedule C are in the amount
of $680 or a multiple of that amount.
Michael Levine, who operated PPS, testified that he met with Hendershot
and Battista at a bar in Forest Park, Illinois, and agreed to an
arrangement in which Levine would kick back 40% (20% for Hendershot and
another 20% for Battista) of the amounts paid to PPS by Alexsis. Levine
testified that he ordinarily obtained information concerning surveillance
assignments from Battista, delivered the completed surveillance reports
to Battista, and made kickback payments on each job. Alexsis' own
records of its payments to PPS, offered in evidence as Government
Exhibits Alexsis 3A, 3B, 3C, 3D, and 3E, demonstrate that Alexsis paid
PPS for 10 surveillance jobs in the July through December 1991 time
frame, after the Forest Park meeting. Alexsis records show payments to
PPS for another 44 surveillance jobs in 1992, 15 in 1993, and 22 in
1994, a total of 91 jobs. The court concludes that the amount of loss to
Alexsis resulting from the PPS payments is $61,880 (91 jobs x $680 per
In the middle of 1992, Levine involved a second PI firm, Megco, Inc.,
in kickback payments to Battista. Megco was controlled by Ernest
Marinelli, who, like Levine, was employed as a member of the Cook County
Sheriff's police department. Levine told Marinelli that payments on
Alexsis jobs were to be divided, after payment of expenses, as follows:
50% to Battista, who would share this amount with Hendershot; and 50% to
be shared by Levine and Marinelli.
Marinelli provided Battista's $680 payment through Levine: He wrote a
check to Levine that included both Levine's share of the profit and
$680 payment, payable either to Levine or to Myco, a company
controlled by Levine. Levine wrote checks on the Myco account to straw
payees. Bank records set forth on the government's Schedule D again
reflect several of Levine's cash withdrawals or checks in the amount of
$680 or a multiple of that figure. Those records also corroborate
Levine's testimony that, beginning in early 1993, Levine accomplished
making kickback payments to Battista by writing checks to third parties
who served as straw payees. John Presto, who cashed these checks at a
currency exchange, returned the cash to Levine.
Government Exhibits Alexsis 4A, 4B, and 4C show that Alexsis paid Megco
for 14 surveillance jobs in 1992, for 74 jobs in 1993, and for one job in
1994. For each such job, the government introduced a copy of a cost
breakdown sheet handwritten by Levine. Marinelli or his wife, who served
as bookkeeper for Megco, used these sheets to issue checks for each
individual involved in each job. Each of these cover sheets includes the
notation "JB — $680," a reference to the $680 paid to James
Battista for each job. The court concludes that the amount of loss to
Alexsis resulting from the Megco payments is $60,520 (89 jobs x $680 per
(iii) Three Star/Park Investigations
Yet another group of Alexsis jobs and cash kickbacks involved Richard
Lantini and Defendant Clifford Lanas, who operated Three Star Detective &
Security Agency, Inc. ("Three Star") and Park Investigations, Inc.
("Park"). Lantini testified that Battista told him at a meeting early in
1993 that he could arrange to have Hendershot direct Alexsis surveillance
assignments to Lantini and Lanas in exchange for cash kickbacks in
amounts of $700 to $900 per job. Lantini brought the proposal to Lanas,
who agreed to participate after preparing two typewritten worksheets to
determine the profitability of such an arrangement (introduced at trial
as Government Exhibits Lantini 1H and 1I). In April, May, June, and
August 1993, Alexsis paid Three Star for nine surveillance jobs.
(Government Exhibit Schedule F.) Nine invoices for these jobs were
offered in evidence (Government Exhibit Lantini 3-11), and Lantini
testified that he paid a kickback of $700 to Battista for each of these
jobs. The court concludes that the amount of loss to Alexsis resulting
from the Three Star payments is $6300 (9 jobs x $700 per job).
In March 1993, Lanas and Lantini incorporated Park Investigations.
Park began operating later that year and Alexsis paid Park for 30
surveillance jobs in 1993 and 18 jobs in 1994. (Government Exhibit
Alexsis 6.) Of 29 checks written to Lantini or to cash from the Park
Investigation account between July 1993 and August 1994, 27 are in the
amount of $700 or an exact multiple of that amount. (Government Exhibit
Schedule G.) The memo lines for several of these checks refer to one or
more of the surveillance jobs, strong circumstantial evidence of the
kickback scheme. Until May 1994, the $700 checks were written to
Lantini, who testified that he cashed the checks at Cragin Federal Bank
and delivered the cash to Battista. On May 3, 1994, Lantini was taken
into custody on federal marijuana charges; after that date, Lanas wrote
checks from the Park Investigation account to cash for purposes of the
kickback payments. (Schedule G.) The court concludes that the amount of
loss to Alexsis resulting from the Park payments is $33,600 (48 jobs x
$700 per job).
The total loss to Alexsis for the PPS, Megco, Three Star, and Park
schemes is $162,300. The court will direct the probation officer to
correct the report to reflect this calculation. Because that amount
exceeds $120,000 but is less than $200,000,
the probation officer
correctly concluded that the base offense level for Battista should be
increased 7 levels. See U.S.S. G. § 2F1.1(b)(1)(I).
Defendant Lanas has not specifically challenged the probation officer's
calculation of his offense level. The court notes, however, that the
Pre-Sentence Investigation Report asserts that Lanas paid kickbacks for
19 surveillance jobs in 1994. As noted above, the court believes (and the
government's response acknowledges) that Alexsis paid Park for only 18
jobs in 1994. This alteration reduces the amount of loss in which Lanas
was involved to $39,900 ($9300 for Three Star and $33,600 for Park).
Pursuant to § 2F1.1(b)(1)(E), where the loss is greater than
$20,000, but less than $40,000, the base offense level should be
increased by four levels, not by five as determined by the probation
III. Role in the Offense
Each Defendant has objected to the probation officer's conclusion
regarding his role in the offense. Again, the court addresses those
objections in turn.
The probation officer recommends that Hendershot's offense level be
increased by four pursuant to U.S.S. G. § 3B1.1(a) because he was an
organizer or leader of criminal activity that involved five or more
participants, and by two more levels pursuant to § 3B1.3 because he
abused a position of private trust. Hendershot objects to each of these
adjustments, but the court concludes both are appropriate.
(i) Leader or Organizer § 3B1.1(a)
Section 3B1.1(a) of the Guidelines permits the district court to
increase a defendant's offense level by four levels based on a finding
that the defendant was a leader or organizer of a criminal activity that
involved five or more participants or was otherwise extensive. U.S.S.G.
§ 3B1.1(a). When applying this provision, the court takes the
following factors into consideration: (1) the exercise of
decision-making authority; (2) the nature of participation in the
commission of the offense; (3) the recruitment of accomplices; (4) the
claimed right to a larger share of the fruits of the crime; (5) the
degree of participation in planning or organizing the offense; (6) the
nature and scope of the illegal activity; and (7) the degree of control
and authority exercised over others. U.S.S.G. § 3B1.1, comment. (n.
4). The court weighs these factors "in light of the Guidelines' intent to
punish with greater severity leaders and organizers of criminal activity,"
United States v. Sierra, 188 F.3d 798, 804 (7th Cir. 1999), and may apply
the upward adjustment even though not all seven factors are present,
United States v. Richards, 198 F.3d 1029, 1033 (7th Cir. 2000); United
States v. Akinrinade, 61 F.3d 1279, 1289 (7th Cir. 1995).
Hendershot's role in the offense conduct here supports application of
the enhancement. It was Hendershot whose employment with Alexsis made the
kickback scheme possible. He initiated the scheme and carried it out by
assigning Alexsis work to private investigation firms willing to pay his
price. He set the amount of the kickbacks, and he had authority to
approve the PI firms' invoices. Henderson recruited accomplices: He
negotiated directly with Levine and Herley. When Battista became
involved, Henderson permitted Battista to set up deals with Lantini and
Lanas, and, once they were recruited into the scheme, directed Alexsis
surveillance jobs to Three Star and Park. Henderson claimed the right to
the fruits of the crime: he required PI firms to pay him personally in
return for the privilege of obtaining assignments from Alexsis. Battista
also later claimed a cut in an amount equal to Henderson's, but the other
participants benefitted less directly, recovering the profits on
surveillance jobs their firms performed (or, in some cases, merely
purported to perform). Hendershot was the central participant in the
kickback scheme, which spanned several years, several PI firms, and
hundreds of individual surveillance jobs. Levine, Herley, Battista,
Lantini, and Lanas all participated in the criminal activity, controlled
and directed by Hendershot.
This is at least as strong a case for application of § 3B1.1(a) as
was United States v. Emerson, 128 F.3d 557 (7th Cir. 1997). In that
case, the Seventh Circuit affirmed application of the four-level
enhancement where the defendant, a postal service employee, engaged in a
scheme of arranging postal office construction contracts in exchange for
kickbacks. Id. at 559. Emerson, like Hendershot, recruited contractors
purportedly to perform work for his employer in return for kickbacks of
cash and property to himself. Id. at 560. Like Emerson, Hendershot
directed contractors concerning the amounts of the kickbacks and the
method of payment; for example, Herley testified that on several
occasions he did no work at all on surveillance jobs for which he billed
Alexsis. Hendershot knew this, and required an enhanced kickback amount
for himself in return for passing those bills along to his employer.
Like Emerson, Hendershot has earned the four-level increase.
(ii) Abuse of Trust § 3B1.3
Nor is the court moved by Hendershot's objection to the probation
officer's recommendation of a two-level increase for abuse of a position
of trust. See U.S.S.G. § 3B1.3. In addressing this ehancement, the
court considers: "1) whether the defendant occupied a position of trust;
and 2) whether his abuse of the position of trust significantly
facilitated the crime." United States v. Brown, 47 F.3d 198, 205 (7th
Cir. 1995). Hendershot did occupy a position of trust: he exercised
discretion over which PI firms Alexsis would use and how much they would
be paid. Similarly, in Emerson, the court concluded that Emerson
"occupied a position of trust because he had authority over `valuable
things,'" 128 F.3d at 562, quoting United States v. Boyle, 10 F.3d 485,
489 (7th Cir. 1993) — lucrative surveillance assignments. Hendershot's
position within Alexsis, like that of the postal service worker in
Emerson, "obviously facilitated the scheme because a crucial element of
the scheme involved [his] awarding of contracts . . . to those
contractors that would provide him with kickbacks." 128 F.3d at 563.
Nor is there any merit to Hendershot's suggestion (Position of the
Defendant Richard Hendershot, at 17-18) that application of the "abuse of
trust" enhancement in a case of commercial bribery constitutes double
counting. United States v. Josleyn, 99 F.3d 1182, 1199 (1st Cir. 1996);
see also United States v. Dion, 32 F.3d 1147, 1149-50 (7th Cir. 1994).
Hendershot analogizes his situation to that of the embezzling bank
teller, but the effort is unsuccessful. There is simply no evidence that
Hendershot's work was under "constant supervision," (Position of
Defendant Richard Hendershot, at 17) or that his offense could readily
have been detected. To the contrary, Hendershot's scheme was largely
undetectable, as he could plausibly represent that the prices charged by
the PI firms with whom he did business were no larger than necessary to
generate a profit for the vendors. Not surprisingly, Alexsis' records
contained no indication of amounts being held back or set aside for
Hendershot himself, and no ready basis for exposure of his wrongdoing.
The probation officer correctly added two points for Hendershot's abuse
(iii) Criminal History
Hendershot's final objection to the probation officer's calculations
may be addressed with dispatch. The probation officer's report adds a
point to Hendershot's criminal history for a 1993 DUI conviction, and then
two more points because this offense was committed in part during the
time that Hendershot was on court supervision as a result of that
conviction. Hendershot correctly notes that expunged convictions are not
counted under the Guidelines, § 4A1.2(I), and that his DUI conviction
is expungable under Illinois law. 20 ILCS 2630/5. What Hendershot slides
past is the fact that he never took steps to have his DUI conviction
expunged. United States v. Johnson, 941 F.2d 1102, 1110-1111 (10th Cir.
1991), which he cites, is distinguishable because the Oklahoma criminal
statute involved there provides that a conviction will automatically be
expunged under certain conditions, which the defendant in that case had
met. Hendershot's objection to this enhancement to the sentence
calculation is overruled.
The probation officer has adjusted Battista's offense level by three
points pursuant to U.S.S.G. § 3B1.1(b) on the basis that Battista was
a manager or supervisor of the criminal activity, and that the activity
involved five participants. Battista objects to this adjustment, but the
court concludes the evidence warrants it.
The Seventh Circuit has explained that § 3B1.1 is concerned with
"the imposition of punishment commensurate with the defendant's `relative
responsibility within the criminal organization.' United States v.
Akinrinade, 61 F.3d 1279, 1289 (7th Cir. 1995) (citing United States v.
Johnson-Dix, 54 F.3d 1295, 1309 (7th Cir. 1995), quoting United States
v. Fones, 51 F.3d 663, 665 (7th Cir. 1995)). Factors identified as
relevant to the issue are the same ones discussed above with respect to
the issue of Hendershot's role as organizer or leader — that is, the
nature of defendant's participation, recruitment of accomplices, claimed
right to larger share of proceeds, planning, control, authority over
other participants, and the like. U.S.S.G. § 3B1.1, comment. (n.
This court agrees with the government (Government's Consolidated
Response, at 16-18) that the "manager or supervisor" characterization
fits here for several reasons: Battista was involved in the scheme from
1991 through 1994. He furnished PI firms with information concerning the
surveillance jobs, personally collected hundreds of cash kickbacks,
maintained records, and delivered funds to Hendershot. Unwilling for his
profits to be reflected in a tax record, Battista provided names of
persons who would serve as "straw payees" on checks destined to benefit
Battista and Hendershot. Battista involved Lantini in the kickback
scheme and solicited the participation of lawyers who declined the
invitation but gave testimony in this case. Battista retained the same
share of the kickbacks as did Hendershot. Although not as centrally
involved as Hendershot, who worked for Alexsis and could therefore direct
Alexsis' business to willing contractors, Battista unquestionably
"orchestrated" or "coordinated" the activities of others. See United
States v. Dillard, 43 F.3d 299, 307 (7th Cir. 1994).
The court concludes the probation officer correctly determined that
Battista was a "manager or leader." That conclusion requires, as well,
that the court overrule Battista's objection to the probation officer's
failure to reduce his offense level
based on his alleged mitigating role
in the offense.