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United States District Court, Northern District of Illinois

August 19, 2003


The opinion of the court was delivered by: Blanche Manning, District Judge


This matter comes before this Court on remand for sentencing pursuant to the Seventh Circuit's decision in United States v. Serpico, 320 F.3d 691, 698 (7th Cir. 2003). On July 16, 2001, a jury found Defendants John Serpico and Gilbert Cataldo guilty of mail fraud. Applying section 2F1.1 of the 1990 Sentencing Guidelines, this Court found that Serpico had a total offense level of 19 and Cataldo 16. On appeal, the Seventh Circuit affirmed Defendants' convictions but found that the Hotel Kickback Scheme and the Loans for Deposit Scheme were closer akin to bribery than mail fraud, and therefore, this Court should have sentenced Defendants under section 2E5.1 (which pertains to bribery), instead of section 2F1.1 (which applies to mail fraud).

The United States Probation Office ("Probation") subsequently completed a revised Presentence Investigation Report ("PSR") for each Defendant. Probation calculated the total offense levels for the Defendants using the 1990 United the Guidelines as follows:

Serpico Cataldo Base Offense Level 10 10 (2E5.1(a)(1))
Adjustment Based on 2 0 [ Page 2]

Status as Benefit Plan Fiduciary (2E5.1(b)(1))
Adjustment for Value 9 ($363,850-$403,850) 8 ($333,850) of Loss(2F1.1(b)(1))
Total Offense Level 21 18

Defendants raise two objections to Probation's calculations. First, both Defendants assert that the value of the loss for the Hotel Kickback Scheme should only be $25,000, which is the amount that Cataldo directly "kicked back" to Serpico. This argument, however, was specifically rejected by this Court at sentencing (March 15, 2002 Memorandum and Opinion, at 15-16) and on appeal by the Seventh Circuit — "we reject Serpico's argument that he . . . should only be accountable for the $25,000 that Cataldo kicked back to him." Serpico, 320 F.3d at 697. Accordingly, Defendants' objection as to the amount of loss is overruled.

Second, Cataldo contends that the $25,000 that he kicked back to Serpico was a gratuity, not a bribe. This is an important distinction because section 2E5.1 provides for a base offense level of a 6 for a gratuity but a base offense level of a 10 for a bribe.

To determine whether the $25,000 was a bribe or a gratuity, this Court first examines the Application Notes to section 2E5.1. Note One states that a bribe is "the offer or acceptance of an unlawful payment with the specific understanding that it will corruptly affect an official action of the recipient." A gratuity, in contrast, is "the offer or acceptance of an unlawful payment other than a bribe." Section 2E5.1, App. Note 2.

Here, as discussed in detail in this Court's November 7, 2001, Memorandum and Order, the Government "put forth a litany of circumstantial evidence" showing that the payment of the "kickback" was arranged well before the hotel loan was made. Thus, at the time Serpico [ Page 3]

influenced the MPP to make the loan, he and Cataldo had an understanding that part of Cataldo's $333,850 consulting fee, which would be paid with proceeds from the loan, would be "kicked back" to Serpico. Indeed, quoting Application Note One's definition of a bribe, the Seventh Circuit noted that Serpico's arranging the loan in return for the kickback "is closer to bribery than mail fraud." Serpico, 320 F.3d at 698. Accordingly, this Court finds that the "kickback" constituted a bribe not a gratuity and overrules Cataldo's objection on this point. [ Page 4]


For the foregoing reasons, this Court OVERRULES the Objections [245-1 and 244-1] by Defendants Serpico and Cataldo. Consequently, under the 1990 Guidelines, this Court finds that Serpico has a total offense level of 21 and Cataldo 18. It is so ordered. [ Page 1]


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