1 united states district court northern district of … · 2016-02-18 · united states district...
TRANSCRIPT
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UNITED STATES DISTRICT COURTNORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
vs.
DOUG ALLEN,
Defendant.
)))))))))
No. 12 CR 567-2
Chicago, IllinoisFebruary 8, 201610:30 a.m.
TRANSCRIPT OF PROCEEDINGS - SENTENCING
BEFORE THE HONORABLE RONALD A. GUZMAN
APPEARANCES:
For the Plaintiff: HON. ZACHARY T. FARDONUnited States AttorneyBY: MR. DEREK OWENS
MR. STEVEN J. DOLLEAR219 South Dearborn Street, Suite 500Chicago, Illinois 60604(312) [email protected]@usdoj.gov
For the Defendant: SCHIFF HARDIN LLPBY: MS. VALARIE HAYS
MS. SHAWNA S. BOOTHE233 South Wacker Drive, Suite 6600Chicago, Illinois 60606(312) [email protected]@schiffhardin.com
ALSO PRESENT: MR. ZAKARY FREEZE, Probation Officer
Official Court Reporter: NANCY L. BISTANY, CSR, RPR, FCRR219 South Dearborn Street, Room 1706Chicago, Illinois 60604(312) [email protected]
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(Proceedings heard in open court:)
THE CLERK: 12 CR 567, Defendant 2, United States of
America versus Allen.
MR. OWENS: Good morning, Your Honor.
Derek Owens and Steven Dollear on behalf of the
United States.
MS. HAYS: Good morning, Your Honor.
Valarie Hays and Shawna Boothe on behalf of the
defendant, Doug Allen, who is present in court.
THE COURT: Good morning. Are we prepared to proceed
to the sentencing?
MS. HAYS: Yes, Your Honor.
MR. OWENS: Yes, Your Honor.
THE COURT: Okay. Mr. Allen, have you had an
opportunity to review the Presentence Investigation Report with
your attorney?
THE DEFENDANT: Yes, I have, Your Honor.
THE COURT: Very well. There are some significant
differences with respect to the guideline calculations.
Who wants to go first?
MR. OWENS: Your Honor, the government will go first.
The government believes that the correct
calculations, based on the 2015 amendments to the United States
Sentencing Guidelines as well as our reassessment of the loss
amount, would be a total offense level of 29.
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And the changes that were made from the government's
version are twofold. One was the number of victims -- the
victim enhancement, I should say, that under the amendments is
decreased from four to a two.
THE COURT: Okay.
MR. OWENS: And then our -- or I should say, our loss
amount, the level for that is decreased from a 16 in the
government's version to a 14 in the government's sentencing
memorandum.
THE COURT: Give me the last one again.
MR. OWENS: The total -- the loss calculation --
THE COURT: Yes.
MR. OWENS: -- the loss amount went from a level 16,
which was in the government's version, and now we're
recommending a 14 for the loss amount, which would be a loss
between $550,000 and 1.5 million.
I believe the parties agree on that particular --
THE COURT: And that change is because of the change
in the guidelines?
MR. OWENS: No. The guidelines did adjust -- the
numbers adjusted, but that change is due, well, partially to
the adjustment in the -- with the amendments, but also our
reevaluation of some of the loss figures.
THE COURT: Okay. So the actual calculation.
And that's intended loss?
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MR. OWENS: That's correct, Your Honor.
THE COURT: Okay. Defense.
MS. HAYS: We do not -- we agree with the government
on those two points.
THE COURT: So I want to see if I understand this
correctly then.
We're in agreement that the base offense level is 7.
The enhancement for intended loss is 14. Enhancement for the
number of victims is 2. Role in the offense, organizer/leader
4, and obstruction of justice 2, for a total offense level of
29?
MR. OWENS: That's correct, Your Honor.
THE COURT: That's the government's calculations?
MR. OWENS: That's the government's calculation.
THE COURT: Defense, you're in agreement with that?
MS. HAYS: No, Your Honor. We are in agreement with
the loss and the number of victims.
It's our position that role of offense should be
increased by 3 for manager/supervisor. And we do not believe
the obstruction of justice enhancement applies and that
acceptance -- we should receive the 3 points for acceptance.
THE COURT: Okay. I will hear you on the enhancement
for the role and for the obstruction of justice calculations.
Those are the only two disagreements; is that correct?
MS. HAYS: Correct, Your Honor.
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THE COURT: Okay.
MS. HAYS: So we believe, Your Honor, and we agreed
in the plea agreement that Mr. Allen should receive 3 points
for organizer -- or excuse me -- for manager/supervisor. We
believe that Mastro, who received the leadership enhancement,
it was an appropriate enhancement for Mastro and not Mr. Allen.
Mastro was the owner and the CEO of Mastro Auctions during the
entire course of the scheme. He received all of the profit,
Judge, from the scheme. Mr. Allen did not receive any profit.
He was just a salaried employee.
This was Mastro's scheme from the beginning. He came
up with the idea. He recruited the people to join, and he was
in charge of executing it throughout the time. And all of this
happened long before Mr. Allen even became involved.
And Mastro wasn't just the behind-the-scenes guy. He
was the most active shill bidder over the years. He placed the
most shill bids, significantly more than any of the other shill
bidders listed in the government's chart.
The government's main argument for why Doug should
get the leadership enhancement is that there are emails in
which he's directing employees what to do. And we would argue,
Judge, that that is the role of the supervisor.
So for those reasons, we believe that the 3-level
enhancement is appropriate, not 4.
With respect --
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THE COURT: Let me just stop you for a second to
inquire.
Most of your argument seems to be about what
Mr. Mastro did. What did your client do?
MS. HAYS: Mr. Allen did exactly what he had set
forth in the plea agreement. He was involved on a daily basis
in interacting with a lot of the customers. He was aware that
the consign -- that the shill bids were happening. He was
aware that --
THE COURT: Did he take any part in the shill
bidding?
MS. HAYS: A few, Judge, but not -- not anywhere
compared to the number as many as Mr. Mastro did.
THE COURT: Did he direct employees in the shill
bidding process?
MS. HAYS: Yes, at times he did.
THE COURT: Okay. What was his position within the
organization?
MS. HAYS: He was the president, but it was -- our
position is, Judge, it was a title only. He had no real
control. Everything had to be approved through Mastro. And,
you know, as case law points out, a title is not controlling in
this assessment.
THE COURT: Okay. Go ahead. I'm sorry.
MS. HAYS: With respect to the obstruction of justice
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enhancement, Mr. Allen admits -- you know, the full scope of
the acts, it's laid out in his plea agreement. We are in no
way challenging the facts of the government's allegations with
respect to the obstruction.
He absolutely deserved to lose his cooperation deal
and get a higher sentence as a result of interfering with the
government's investigation. He acknowledges that, and he feels
terribly about what he did. He's apologized in person to both
the AUSAs and the agents who were involved in the
investigation. But it's not obstruction as defined by the
guidelines.
This is purely a legal argument. The guidelines are
very clear that for it to be obstruction, it has to be related
to the offense of conviction or related conduct. And here it's
just not. We cited in our sentencing submission controlling
Seventh Circuit case law that we feel is right on point.
The government in contrast cites one unpublished
clearly distinguishable case. And I'm not going to go through
all the cases, Judge. They're in the sentencing submission,
but I do want to touch a few main points.
In U.S. versus Romano -- that's the Seventh Circuit
main case -- they held that the obstruction enhancement should
not apply in a very similar situation where the defendant was
cooperating to try to get a reduced sentence in a federal case,
and he was cooperating in an unrelated case -- or actually, in
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that case, he was involved in the subsequent investigation, but
it wasn't the offense of conviction. And he lied during the
course of that cooperation so they wouldn't find out about his
involvement.
And the Seventh Circuit said that's not obstruction
because it wasn't related to the offense of conviction or
relevant conduct.
THE COURT: It's not the same as what's alleged in
this case, though, is it?
MS. HAYS: I think it's very similar. Here we have a
situation where Mr. Allen was not interfering for the purposes
of benefiting himself in his -- in his own case. In fact, it's
quite the opposite. There was no benefit to him for the
interference with the investigation. Quite the opposite.
The benefit to him would have been if he'd continued
to cooperate. But instead, he interfered. He told a friend
who he felt guilty about cooperating against about the
investigation. There was no benefit to him, and that's why
this case is distinguishable from the Harweger case that the
government cites.
If the government's interpretation was correct, the
government's interpretation is that the cooperation itself is
the link that can make the obstruction enhancement apply. That
would be directly against the decision in Romano which said the
cooperation isn't enough to tie it to the offense of
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conviction.
So on that point --
THE COURT: Okay. Government, do you wish to respond
to that?
MR. OWENS: Organizer/leader first, Your Honor.
The defendant was more than the president, and we
noted this in our memo. He was the CEO -- COO of the company,
chief operating officer. He's listed as that title in the
catalogs, and he's listed with that title, president and COO,
of one of the emails that we attach to our government's
version.
THE COURT: Yes. But, you know, you can list anyone
as the president or a CEO or a COO. None of it makes any
difference. What really counts is what he or she actually did.
MR. OWENS: And what did he in this case was, he
directed employees of the company underneath him to shill bid
and then to modify bidding records, to hide other shill bidding
that took place, all in furtherance of this fraud scheme. And
he did that for years.
Defendant notes that Mastro was the most prolific
shill bidder over the years. We don't really know that for
sure, because what we're missing is records for at least five
years during the scheme that were destroyed by Mastro and some
other employees that would have told us exactly who was shill
bidding.
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THE COURT: The missing records doesn't help you,
because if I'm going to make an inference from missing records,
it's not going to be against the defendant, right?
MR. OWENS: That's true. That's true. But all I'm
trying to say is that we don't know for sure who was the most
prolific shill bidder during that time.
What we do know is the defendant was shill bidding
during the times that we do have records for, and he held a
position in the company of leadership role. And under 3B1.1,
the factors in particular to this defendant that the guidelines
instruct us to consider are the exercise of decision-making
authority, which he did.
We attach some settlement agreements for the Elvis
hair that was returned to the buyer in that case. And it
wasn't Doug -- or it wasn't Bill Mastro who was signing those
settlement agreements. It was the defendant who was signing
those agreements.
We attached correspondence with the victim of the
trophy ball. It wasn't Bill Mastro who was corresponding with
that particular victim and agreeing to return money to that
victim. It was the defendant, Doug Allen, who was
corresponding with that person.
And, in fact, one month after that email that we
attached, that same fraudulent trophy ball was then sold to
another victim. And it wasn't Bill Mastro who was leading
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that. It was the defendant, because in the email it says, "We
believe this ball is still authentic. We are the ones who sold
it to you years ago."
The guidelines also note that the Court should
consider the nature of the defendant's participation in the
commission of the offense, the degree of participation in
planning and organizing, and the nature and the scope of the
illegal activity. And the Court should also consider the
degree of control or authority exercised over others.
And one of the grand jury transcripts that was
attached to the government's version, Employee Number 1 talks
about how the defendant was the one who was instructing that
particular witness and other employees to modify bidding
records to cover up the shill bidding.
The defendant -- also one of the largest factors to
show his leadership in this is the code of conduct that he
actually authorized. It wasn't Bill Mastro who authorized
that, who authored it and put it out there. It was the
defendant.
The defendant went out into public, published this
code of conduct to give assurances to customers and bidders
that this was an honest organization and that they were
truthful when, in fact, they definitely were not. The
defendant took the lead on this, not Bill Mastro.
Because of all of this, we believe that the
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organizer/leader enhancement applies for this particular
defendant.
Regarding obstruction, the Romano case is cited by
the defendant. That case is different than what we have here.
This case is closer to Harweger, and here's why. In
Harweger, the defendant was trying to get his girlfriend to
essentially cover up some state convictions so they wouldn't be
used in his federal sentencing.
This case is very similar. The defendant was talking
to Subject A, who was wearing a recording device unbeknownst to
the defendant. And they made an agreement where they wouldn't
tell the prosecutors or the FBI about their conversations with
each other and how the defendant was tipping off Subject A
about the government's investigation and the search that took
place at his house.
I'm going to play a recording in a little while, not
a long recording, but a couple clips from the recording that
was made of the defendant when he was talking to Subject A.
And some of the highlights of that at 1 minute 35, the
defendant said, "The only conversation that I had with him,"
the FBI agent, "about you at this point in the process is if I
want to, to help myself."
To help myself, meaning his cooperation in this case
so he could walk into this courtroom and tell Your Honor that
he gave the government substantial cooperation towards this
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case and the sentence that he's going to receive in this case.
That is a very strong connection between that
obstructive conduct and this case, the sentencing for this
case, which the guidelines reference it can be as part of the
offense conduct -- the obstruction can be as part of the
offense conduct or part of the sentencing for this case.
At a minute 40, the defendant says, "You have to
swear" -- I'm sorry -- Subject A says, "You have to swear on
everything that you're never going to tell them that you told
me anything."
The defendant says, "Subject A, Subject A, it hurts
me more than it hurts you," meaning it'll hurt me with my
cooperation deal more than it would hurt you.
At a minute 43, the defendant says, "Under no
circumstance could I ever tell them," the FBI, "that I -- that
you and I have had these conversations, because I would be F'd.
It -- my whole cooperation's out the window. Obstruction of
justice, yeah."
Later in the recording, Subject A says, "As long as
you don't say shit about -- shit that you -- that you were
tipping me off."
The defendant says, "Never, Subject A, Subject A, not
just for you, not just for you. For me, man, never."
This recording shows that he was making an agreement
with Subject A not to tell the FBI, so neither of them would
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tell the FBI that the defendant was actually trying to sabotage
the FBI's investigation rather than providing substantial
assistance to the government.
And based on that, we believe the obstruction of
justice enhancement applies under the guidelines.
THE COURT: So the government's argument seems to
make sense to me in that case. If your client reached an
agreement with or urged one of his co-schemers to hide
information from the Court, the government and the Court, in
order to affect a change in his sentence, in order to give
himself a credit for cooperation that he would not have had,
wouldn't that be an obstruction of justice with respect to his
sentencing?
MS. HAYS: No, Judge. Really bad conduct, that's an
aggravating factor, but not obstruction as defined in the
guidelines. And it's exactly the same as Romano in the sense
that in Romano it's the exact same situation where the
defendant was cooperating in a federal case to try to get a
benefit in the instant federal case, just like here. It's
exactly the same.
And what the Seventh Circuit said is, bad conduct but
it's not obstruction because it wasn't obstructing the instant
case. It was obstructing an unrelated case, so it's not
related to the offense of conviction. It's exactly the same as
Romano in that sense.
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THE COURT: But is it not affecting his sentence?
MS. HAYS: No, no.
THE COURT: I mean, if his co-conspirator tells the
FBI what's going on, his sentence would be changed, would it
not?
MS. HAYS: If the co-conspirator --
THE COURT: One of his sentencing factors would be
changed, and that is --
MS. HAYS: But not to his benefit. The obstructive
conduct was not to his benefit, which is what distinguishes it
from Harweger. Harweger was --
THE COURT: I see two obstructing conducts here,
frankly. I see him obstructing an investigation of a
co-schemer. That's one, because he was double-crossing the
FBI.
And the other is he's agreeing with the co-schemer
that they're not going to share that information with the FBI
so that his sentence will not be adversely affected.
MS. HAYS: But Mr. Allen was cooperating in a
completely unrelated investigation. So it wasn't a situation
where he's saying, "Hey, co-schemer, hide this information in
my -- that I'm involved in because that's going to affect my --
my, you know, sentence with the Court in the federal case."
It would be a different situation if the case that
Doug was cooperating in was related to bad conduct that he was
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involved in, a scheme he was involved in. And he wasn't.
This was completely unrelated, a new investigation
that he put forth and gave the government information on.
THE COURT: Okay. Anything else?
MR. OWENS: It's amended, Your Honor.
THE COURT: All right. The Court is in agreement
with the base offense level being 7, in agreement with the
14-point enhancement based upon the intended loss. We're in
agreement with the 2-point enhancement for the number of
victims.
We're in agreement with the enhancement for organizer
or leader. I think the defendant's conduct here went way
beyond simply managing a scheme. He took lead roles,
specifically his publication of a code of conduct, which was
nothing more than a screen for the underlying conduct that he
was actually engaging in. It goes beyond that of someone who
is simply managing somebody else's scheme, along with his
day-to-day control over the execution of the scheme through the
employees. So there will be a 4-point enhancement for that.
I'm not convinced about the obstruction of justice,
so I'm not going to apply the 2-point enhancement for
obstruction of justice.
That leaves us with a total offense level of 27,
Criminal History Category of I, guideline range of 70 to 87
months.
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MS. HAYS: Judge, we haven't addressed acceptance.
THE COURT: I'm sorry?
MS. HAYS: We haven't addressed acceptance. I don't
know if you were going to get to that later, but if we got
acceptance, it would actually reduce it further.
And my understanding that the government's position
on acceptance was only because of the application of the
obstruction enhancement. And if that's not going to apply, I
think we would agree on acceptance.
MR. OWENS: Right, Your Honor. We are obviously
asking for the obstruction enhancement. And because of the
obstruction enhancement, when it does apply, a defendant is not
entitled to acceptance.
So if the Court does not find that the obstruction
enhancement applies, then, in turn, under the cases, acceptance
would be appropriate in this case.
THE COURT: That's a 3-point reduction for acceptance
then. Total offense level of 24, Criminal History Category of
I, gives us a guideline sentencing range of 51 to 63 months.
Any other objections to the Presentence Investigation
Report by either side?
MR. OWENS: No, Your Honor.
MS. HAYS: No, Your Honor.
THE COURT: Okay. I'll hear the government with
respect to sentencing.
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MR. OWENS: Thank you, Your Honor.
The government has -- and as part of this, I'm
actually going to play part of the recording. And I'm going to
use the laptop, which is right over to my left here.
MS. HAYS: Should we sit down, Your Honor, for the
recording?
THE COURT: I'm sorry?
MS. HAYS: Should we sit down while the recording is
played?
THE COURT: If you wish.
MR. OWENS: Your Honor, the recording is going to be
marked as Government Exhibit Recording.
(Government Exhibit Recording marked for identification.)
MR. OWENS: And I'm only going to play a few brief
snippets of the recording in a few minutes. But as part of our
sentencing recommendation in this case, the government weighed
all the 3553 factors as well as the U.S. Sentencing Guidelines.
And some of the 3553 factors that we thought required
the most attention were, of course, the nature and
circumstances of the offense, the history and characteristics
of the defendant, and then also the need in this case to
promote respect for the law and also the need to provide
adequate deterrence, both general and specific deterrence, in
this particular case.
And after weighing all these factors with the
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evidence in this case, we believe that a 57-month term of
custody is appropriate. That's squarely within the guidelines
that the Court has found apply to this case, and we believe
that it is an appropriate sentence.
In this case, the defendant, Doug Allen, lied and
defrauded customers and bidders of his company for years. And
then he lied to and essentially defrauded the FBI when he
agreed to cooperate with them to investigate other cases.
And now he comes before Your Honor, and he asks you
to give him credit for his, what he calls, substantial
assistance.
Nothing is further from the truth, Your Honor.
Rather than assisting the government's investigation, he
impeded that investigation. And some of the factors that we
looked at in this, the nature of the underlying offense, the
fraud scheme, it was lengthy, and it was extensive. It
involved numerous individuals from his company, and it
defrauded many, many different customers and bidders of the
company.
The fraud scheme was serious because it not only had
an impact on those individual victims who were victimized by
the defendant and his co-schemers, but it also created a lack
of trust by other individuals in the community who would be
customers or bidders in online auctions or even online sales of
whatever it is. It created a distrust amongst people.
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How can people now feel the same way about bidding
online for particular items, whether it's eBay, another sports
memorabilia auction house, or even purchasing something online,
when the president and the COO -- somebody who has been put out
there as the president and COO of the company comes out with
this code of conduct trying to reassure customers and bidders,
"No, we're on the up and up; here's what we're doing to make
sure we have honest and truthful auctions here. Here's what
we're doing. We're taking these steps," when in reality behind
the scenes he was doing the opposite?
Just like when he was double-crossing the FBI, he was
double-crossing his customers. He was telling them they were
trustworthy when, in fact, behind the scenes they were scheming
to shill bid, cover up prices, modify bidding records, and sell
fraudulent merchandise.
The government has looked at the history and
characteristics of the defendant as well, particularly the
facts laid out in the Presentence Report. And we acknowledge
and note that the defendant has a strong family, strong family
support, and he has been involved in some degree of community
service over the years. I believe he has several, numerous
supporters in the courtroom today.
However, these -- this network of family support was
there when he was committing the fraud for years, 2002 to 2009.
They were there. It didn't stop him from committing fraud.
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He was involved in some level of community service
during that time. That didn't stop him from committing the
fraud.
And one thing we noted in our sentencing memo that --
regarding the characteristics of the defendant, the Detroit
Public Library. This is a man who still has not paid the
Detroit Public Library. Whether it was fraud or not, he still
has an outstanding obligation to that library.
If there's anybody in the United States not to scam,
it's Detroit. And if there's anybody in Detroit not to scam,
it's the public library. But the defendant still hasn't paid
them for their baseball cards. It's ridiculous, Your Honor.
Some of the aggravating factors that the government
looked at in coming to the 57-month recommendation were that in
2007 when various news outlets published that the FBI was on to
Mastro Auctions, he was informed -- he knew about the FBI
investigation, but it still didn't stop him from committing
fraud.
Also in 2007, he published the code of conduct that I
talked about, but that didn't stop him from committing fraud.
And then the -- I think the elephant in the room as far as
aggravating factors in this case is his deception with the FBI.
That was in 2013 and '14. He obstructed their investigation.
And I don't want to understate this particular point, that when
informing a target of an investigation and somebody whose house
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and business is going to be searched, informing them that the
FBI is going to come knocking with a search warrant, puts the
FBI agents at risk. It puts the FBI Agent Brian Brusokas, who
is sitting here at the table with me, put him at risk when he
went into that house in 2014 when the defendant, Subject A --
or, I should say, the target, Subject A, knew the FBI was
coming.
The FBI and other law enforcement offices -- agencies
put considerable amount of time and planning into the execution
of search warrants, and they do that for a reason. It's
because bad things can happen when the bad guy knows the FBI is
coming in.
And the defendant was extremely reckless and
obstructive in telling Subject A that the FBI was coming.
And when he asked this Court for some kind of benefit
for his assistance, think about what lengths the FBI had to go
through to find out that their cooperator was actually
double-crossing them. The FBI actually had to wire up a
different individual, a different cooperator, to make
recordings on our own cooperator to prove that he was
double-crossing us, to prove that he was essentially sabotaging
our investigation into Subject A. It allowed Subject A to
create false exculpatory evidence that was then conveyed to the
FBI.
This is a very serious conduct, and I believe that
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it's aggravating when it comes to determining the sentence in
this case. And these facts show that there is a need for this
particular defendant, a need to show him that respect for the
law is required and also to provide a deterrence, again both
specific and general, specific to this defendant, because he is
still a figure in this industry. The sports memorabilia
industry, online auctioning sales, he is still a significant
figure in this industry. He's actually a heavy-weight in this
industry, as was Bill Mastro. Bill Mastro essentially dropped
out of the industry after this case. The defendant did not.
This Court should send a message to this defendant
that his type of fraud, his types of reckless, obstructive
actions will be met with a significant period of -- significant
period of time in jail.
As far as the general deterrence, the sports
memorabilia industry is a very broad and active and, for lack
of a better word, intense industry. There are some very
passionate individuals in this industry. And the news of this
particular case spread like wild fire. It spread across the
countless blogs, websites, and thousands and thousands of web
postings regarding sports memorabilia in this particular case
and the defendants in this case, including Doug Allen.
It's being watched closely by the industry because,
again, the defendant is a -- is a leading figure in the
industry. And the Court should send a message through this
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sentence today to the industry that if you choose to try to
take advantage of the trust of customers and bidders and choose
to defraud on the massive scale that the defendant and the
auction house did, then you will go to jail for a substantial
period of time.
And for these reasons, Your Honor, we believe that a
sentence of 57 months, which is right in the heart of the
guideline range, is appropriate in this case. Thank you.
THE COURT: Defense?
MR. OWENS: Your Honor, I'm sorry. I wanted to play
a few snippets from the recording. And these go to the conduct
that I just mentioned with regard to Subject A, and this is
from Government Exhibit Recording.
(Said audio recording played in open court.)
MR. OWENS: The government doesn't need the screen,
if it matters.
And, Your Honor, the snippets that we're playing are
actually contained in the government's sentencing memo.
(Said audio recording played in open court.)
MR. OWENS: I have a transcript of the parts that
we're playing. I can pass them up to you.
(Said audio recording played in open court.)
MR. OWENS: Now we're coming up at the 1:35:53 point.
(Said audio recording played in open court.)
MR. OWENS: And the next clip that I'm going to play
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is at 1:40:50, the 1 hour 40 minute and 50 second mark.
(Said audio recording played in open court.)
MR. OWENS: And I'm going to play the 1:43:30 mark.
(Said audio recording played in open court. )
MR. OWENS: All right, Your Honor. That is the
presentation of the government's portion of the recording that
shows that the defendant was effectively agreeing with the
Subject A at that point to not alert the FBI about the
obstructive conduct undertaken by the defendant.
And with that, in summary, the government believes
that the defendant's conduct in the case and then after being
charged in this case merits a sentence of 57 months of
imprisonment.
Thank you, Your Honor.
THE COURT: Thank you.
Defense?
MS. HAYS: Your Honor, we don't dispute that Doug's
participation in the shill bidding scheme caused great harm,
both in terms of financial loss to victims and discrediting the
online auction industry.
Nothing I say today is meant to minimize the
seriousness of the offense and the intended loss not as
substantial.
That being said, I'd like to point out the probation
officer, Mr. Freeze's description of the crime, because I think
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he accurately captures the gray areas. And, again, this is
going to the nature and circumstances of the offense, Judge.
Mr. Freeze writes: While it is a conservative
estimate of intended loss, the actual harm of the instant
scheme is perhaps further mitigated by the fact that the actual
loss was much lower and that unlike most fraud schemes, the
victims actually gained something of value.
He goes on and notes that: It is possible that a
number of the victim bidders might have spent the same amount
of money absent the fraud.
And this is consistent, Your Honor, with the findings
of Bryan Dec, the defense's expert, who concluded that the
items he evaluated sold at or below market value even when
shill bidders were participating in the auctions.
And the government itself has conceded that there are
challenges in trying to calculate the loss in this case. And I
do think those factors weigh in favor of the lower sentence.
With respect to Doug's history and characteristics,
there's so much more to Doug than the mistakes that have been
the focus of this case. He couldn't have as much love and
support as he has in this courtroom unless he'd done some
things right. You've gotten over 50 letters of others who
supported him, and they've pointed to a lot of good that he's
brought to their lives and a lot of good things he's done.
He's been a devoted husband, married for over 32
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years to his wife Amy, who loves him dearly and is in court
here today. His three children adore him. He's been a good
friend to many, many people. And he has done a lot of
community service, as detailed in our written submissions to
Your Honor.
I briefly want to talk about the accusation, since it
came up today, with respect to the Detroit Public Library,
because that's one that, you know, from our perspective, really
gets us, because it's -- you know, Doug's admitted to the
things he's done wrong. And this -- this could be, I guess, a
mini trial within itself. It's not something the government
included as relevant conduct in the plea agreement. It's just
coming up now.
This is something the government has known about back
from the time when Mr. Allen was cooperating with them. And,
in fact, the agent actually helped him try to negotiate and
work this out with the Detroit Public Library. Even Mr. Owens
said today, you know, whether it was fraud or not, the check
hasn't been paid. The government is even alleging or going so
far as to say this was fraud, because it wasn't. And, in fact,
as the agent knows who was trying to help Mr. Allen, Mr. Allen
has handed a check over to the Detroit Public Library, the
individual, Mark Bowden, tried to pay them back several times,
and he rejects the check.
So there's nothing more Mr. Allen can do. And the
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government's been aware of it and, again, did not include it as
relevant conduct, didn't revoke his cooperation deal as a
result of that. So I'm not sure why that's a focus, but we
really don't think it should be something that's considered
here.
In terms of the recording, you know, this is
certainly nothing that we think rights the serious wrong
Mr. Allen did, but we do think it's worth noting that the
government had someone wire up on Doug to try to also get him
to obstruct in his own case. And when it would actually
benefit Doug, when he could have tried to obstruct in his own
case, he refused.
And, in fact, in this recording that we have, Doug
tells the undercover informant, who, of course, he doesn't know
is wired up on him, over 25 times in a 45-minute recording to
just tell the truth and not to lie to the government.
And we have an excerpt of that recording. If we can
hear it better than the last one, I'll play it. If we can't, I
think we've made the point anyway. And it's very short, Judge.
Doug is the softer voice.
(Said audio recording played in open court.)
MS. HAYS: So that's the end of the recording, Your
Honor.
I want to move on and talk about the need for the
sentence to reflect the seriousness of the offense and create
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general deterrence.
This is a perfect example of a case in which
deterrence is accomplished by the conviction itself. This is a
small industry, and a lot of people in the industry are aware
of and following this case.
They aren't going to say, "Oh, you know, Mr. Allen
only got a felony conviction and 18 months in prison so I'm
going to keep shill bidding." This has had a serious impact on
this industry, and it serves the purpose of this deterrence,
just the fact of the conviction.
I'd also like to point out again what Mr. Freeze, the
probation officer, says about deterrence in this case.
Mr. Freeze actually interviewed the case agent for this matter,
who told him that this case "has already served as somewhat of
a cautionary tale for this industry."
Everyone now is trying to follow the bidding rules,
Judge, as a result of this case. The deterrence goal has
already been accomplished.
With respect to the need to avoid unwarranted
sentencing disparities, you know, again, Judge, Mr. Mastro got
20 months. He was the leader. He was the beneficiary of the
profits, all of the profits, and the mastermind behind the
scheme.
The government is seeking 57 months for Doug. That's
over a three-year difference. And that discrepancy can't just
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be justified by Mastro's cooperation when you consider the
nature and the scope of Mastro's cooperation. He wouldn't
cooperate for months after the indictment. The government even
confirmed that in a filing they submitted to Your Honor that
only after you rejected his first plea did he agree to
cooperate, and by then there wasn't much left to do.
And it was Mastro who destroyed the bidding records
to hide what he was doing, records that would have been
valuable, as the government said, in their investigation. So
even with that factored in, he still only got 20 months.
Mr. Allen, therefore, respectfully requests 18
months, Judge. And we also agree with probation's
recommendation of a fine for 20,000.
Before we conclude, Judge, there's just two family
members of Mr. Allen's who want to give very brief statements,
and Mr. Allen would like to as well.
THE COURT: Sure.
MS. HAYS: Let's see. If we could have first, Fred
Colvin, who is Doug's brother-in-law.
MR. COLVIN: Thank you, Your Honor.
Yes, I am --
THE COURT: Good morning. Could you just start out
by giving us your name --
MR. COLVIN: Sure.
THE COURT: -- spelling your last name, and stating
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for the record your relationship to the defendant, please.
MR. COLVIN: I am Fred Colvin. That's C-o-l-v-i-n.
And I am brother-in-law to Doug.
THE COURT: Proceed.
MR. COLVIN: So I have known him ever since he came
into the family. And I'm not sure, but I think it's 20-some
years now.
As you can see all of the people behind, I've been
asked to speak on behalf of the family. And the family cannot
all be here, but those that have come and friends and some
church members and others that have all high respect for Doug,
not just love and respect, but an appreciation for his
integrity and his honor.
We do acknowledge that good people sometimes do bad
things, and Doug has admitted and has expressed to us his
remorseness over what he has done. Yesterday alone over 40
people passed through his house giving support.
I have in the course of my activities -- and I've
done a little bit of transportation for Doug. From Long Island
to the Jersey Coast to downtown New York, I have had
experiences where people in the business have said to me face
to face that, you know, they highly respect him and wish him
well in this situation.
I know that he has had large collections come into
his company after the accusations were made public because of
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the people that still had a lot of respect for him.
As to the individual himself, yeah, I have served on
voluntary boards with him, both for high schools, subcommittees
afterwards, and for a seminary. I've served -- he served in
the diaconate of our church, and he is still a member of our
church with good standing. And we still do believe in his
integrity in that regard.
He has done a number of things over the years from
flipping burgers for organizations in our church in
fund-raisers to more significant things in his life and
elsewhere.
He has two daughters from China. They decided to
adopt and decided not to, you know, go a quick, easy American
route but to go and, in effect, rescue a couple of young
ladies.
There was another situation in our family where we
had a member, a niece that is -- was in a -- the daughter of a
nephew who was in a very bad family situation. And Doug and
Amy were the ones that came to her rescue and arranged for an
adoption, and she is now a thriving young lady. That's the
kind of person that he really is.
And so things get caught up and things get -- occur
in one's life that one might not be proud of. But over the
course of this time in the eight years that this has been going
on, I've seen the pain and difficulties that he has gone
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through and the pain in his family.
What you don't see behind me is his parents. His
father is in a wheelchair and not able to be here. His mother
is not able to be here either, but he is also one of their
primary caregivers. My parents, a little bit better off
physically, but still not able to be here.
And our family views him not as an in-law but as a
son and a brother and as an uncle. It's a large family.
Bottom line is, Doug has a lot of respect and from a
lot of people in all walks of life. And we have all come
together, and even those that are not here are praying for a
fair and honest, honest justice to be served. We do not want
justice to go unserved, but we do want to ask that you include
everything that you've seen and everything that you've heard
from both sides in the grand -- in the full scope of it, to be
lenient on him because we need him back.
Thank you.
THE COURT: Thank you.
MS. HAYS: And the second person you're going to hear
from, Your Honor, is Dale Huizenga, H-u-i-z-e-n-g-a. And
that's Doug's best friend.
MR. HUIZENGA: Good morning, Your Honor.
THE COURT: Good morning. I'm going to ask you also
just to state your name for the record, please, and tell us
your relationship to the defendant.
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MR. HUIZENGA: My name is Dale Huizenga,
H-u-i-z-e-n-g-a, and I'm Doug's friend.
Thank you for the opportunity to address the Court
this morning on behalf of Doug.
I've known Doug for over 35 years, going back to our
days at Illiana Christian High School. It wasn't until the
last 30 years of our lives that I really got to know him on a
more personal basis. Our lives became connected through our
wives and our families, our church, our schools.
I've known each of Doug and Amy's children, Spencer
from the day he was born, Jada and Jannae when they brought
them back from China.
Doug and Amy have known my children as well. My
children call them aunt and uncle. In many ways, I am as close
to the Allens as my own family. Our families grew up together.
I feel as though I could just as well be addressing this Court
today as a family member rather than a friend.
Over the years I've attended the same church,
worshiped alongside Doug and his family, served on many
volunteer opportunities at school, at church. I've been on
fishing trips with Doug, family vacations, countless family
vacations, the kind of things that you spend time with somebody
and you get to know who they really are.
I know Doug Allen. I know that he has been the same
person over all the years that we've been friends, a person who
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sees the needs of others and places those ahead of his own, the
same man no matter what level of success or challenges faced in
life. Doug is the type of friend who puts others before
himself.
In January of 2010, my wife passed away suddenly.
Without warning, my life and the life of my children was thrown
into a place I never thought could happen.
Doug was there immediately to support me for that day
and many days after that. It was Doug who would call me or
text me to check on me. It was Doug and Amy who would invite
me to dinner to make sure I wasn't alone, to spend his time
with me many nights to talk and to let me get out what I was
feeling and to give me good advice. Doug placed my needs
before other things and situations going on during his life at
that time, situations such as the one that brings us all here
today.
In hindsight, I can look back at those days and
realize Doug's friendship helped me in so many ways, ways that
likely kept me from a greater depression and sadness. He
encouraged me, and his friendship helped strengthen me and
benefited my family as well.
I've seen firsthand the remorse that Doug feels for
what he has done. He has expressed so many times to me the
stress and sadness that he's caused for his family that they've
known over this process, his deep regret of letting them down
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and others. I've also seen the strengthening of his family and
his faith.
Doug has been and always will be my friend. In fact,
he is my best friend.
I respectfully ask for the mercy of the Court and
lenience in the sentencing today. While I personally do not
understand how society benefits from a longer or shorter
sentence in this case, I know that Doug's friends and families
and those who love him, they will not benefit.
Thank you.
THE COURT: Thank you.
MS. HAYS: Your Honor, Mr. Allen would like to speak
now.
THE COURT: Very well. Sir, you understand you're
not required to make a statement.
THE DEFENDANT: I do understand that, Your Honor.
THE COURT: All right. Proceed.
THE DEFENDANT: Okay. Good morning, Your Honor. I
appreciate the opportunity to say a few words.
I'm going to ask you to excuse me for reading my
words, but I just wanted to make sure that they expressed what
I really do feel today.
The first thing that I want to say is that I'm sorry.
I'm sorry that I caused considerable loss to my former
customers at Mastro Auctions. I realize that -- that we as a
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company were an industry leader and had responsibility to the
public and to our customers, and we let them down. There's not
a day that goes by that I don't regret those actions and those
decisions that were made in those years.
I've personally have had the opportunity and been
gratified at the ability to apologize to many of those former
customers, and I'm grateful to those who have given me a second
chance to prove it and even have stood up to support me.
I'm deeply sorry to my family and friends for the
pain and suffering I caused them. My brother-in-law mentioned
they were parading through my house yesterday. It really gave
me an opportunity to open up to them about that, although I
have for the past years but in a more focused way. I feel so,
so fortunate that they're here today to support me.
After seven years of this investigation, the case
weighing on them, it comes as a surprise to many of them that I
tell them that I'm actually happy that today finally arrived.
It will help myself and my family begin the healing process,
whatever the outcome.
With the support of my -- my wife Amy of 32 years and
my three amazing kids, who I'm just so proud of, I'm ready to
face the consequences of my actions.
Second, I am sorry for the actions as it related to
informing this other individual of the government's
investigation into his activities. I'm sorry for the damage
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that I caused to their investigation, and I truly regret
interfering with the work of what are honest government
employees, who were just basically doing their job. They gave
me the opportunity to try to right some of my wrongs, and I
failed miserably.
Your Honor, I hope that I've explained how badly I
feel about these past actions. If you give me a chance to
return to my family as soon as possible, I will not disappoint
you, and I will not disappoint anyone. I'll work every day to
make you, my family, and my friends proud of me again.
Thank you, Your Honor, for the opportunity to speak.
THE COURT: Thank you.
Is there anything else from the government?
MR. OWENS: No, Your Honor.
THE COURT: Defense?
MS. HAYS: No, Your Honor.
THE COURT: Very well.
The Court has reviewed the Presentence Investigation
Report, the supplemental reports, the submissions of the
attorneys, the letters we've received from victims expressing
their outrage. I take into account the testimony that was
given here today by the defendant's friends and family and the
defendant's statement as well.
As usual in this type of case, there is a significant
schism between a defendant's private life --
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(Brief interruption.)
THE COURT: Hopefully that doesn't mean we're going
to have a breakdown here.
(Continuing) -- and his business life. It appears
that the defendant has reserved all of his good traits, his
honesty, his decency, his caring for his personal life, and has
in his business dealings acted almost entirely the opposite of
that. He has schemed. He has deceived. He has lied. And he
has done it not once or twice but repetitively over a long
period of time. He has caused in that way as much hurt as he
has done good in his personal life. There's no denying that.
I take away a couple of points that are most
important to me in this case. One, as mentioned briefly by the
defendant, is his duplicitous conduct in, in essence,
double-crossing the FBI and the U.S. Attorney's Office by
agreeing to cooperate with their investigation while actually
attempting to damage that investigation. I find that a really
disturbing piece of conduct, showing a total lack, at that
point at least, of understanding of the degree of guilt and the
wrongfulness of his conduct.
It is unusual. I have been sitting on this bench for
many, many years, and I have yet to hear of someone who
actually goes out of his way while attempting -- while
pretending to be cooperating with the law enforcement to
sabotage the very investigation he's supposed to be helping
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them with. I have great difficulty wrapping my mind around
that type of conduct, frankly. It shows, I think, a total lack
of respect for the legal process and the law.
In doing that, he not only affected the
investigation, but he wasted government resources to a
tremendous extent. And as pointed out by the government, you
know, these agents, they have a tough job. It is dangerous.
You never know what's going to happen. And to set them up in
that way, with either particularly evil or -- again, shows a
really lack of understanding of the wrongfulness of his
conduct.
And it's part of a somewhat disturbing pattern, as I
see it here. You know, it's one thing to engage in a fraud
over the internet. It's another thing to, while you're doing
that, publish a code of good conduct that you're professing to
all of your victims that you intend to follow. That also is
duplicitous in the same manner as his actions with respect to
the FBI investigation.
There's a disturbing similarity there which must be
taken into account.
And finally, the need for deterrence in the general
sense in this case is, I think, frankly greater than in most.
The internet is the bold new sort of wild west of commerce. It
is quickly becoming a huge marketplace, which carries with it
certain risks, the disconnect between the customers and the
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vendors. The lack of any personal interchange, the lack of
proximity, the lack of being able to identify really sometimes
who you're dealing with or know anything about them or know
anything about their reputations makes the customers on the
internet, I think, much more vulnerable and much more in need
of protection than someone who is dealing with a corner grocer,
the pharmacy across the street, or a retail outlet with which
you've had many personal experiences over many years.
And for that reason, I think that the -- there is a
need for deterrence in the general sense in this case more so
than in most.
Having said all of that, I'm still faced with the
need to balance the defendant's obviously -- obvious creditable
personal life with his, frankly, atrocious conduct in any moral
sense in this crime.
I believe that a sentence within the guideline range
is the appropriate sentence in this case. It is a sentence
that I have come to after considering all of the propositions
of all of the parties and, frankly, is largely detached from
the guideline range determination itself.
In other words, I feel this is the appropriate
balance regardless of what the precise guideline range
determination turns out to be in this case. Therefore, the
Court intends to enter the following sentence:
Pursuant to the Sentencing Reform Act of 1984, it is
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the judgment of the Court that the defendant is hereby
committed to the custody of the Bureau of Prisons to be
imprisoned for a total term of 57 months on Count I. The
defendant is ordered to pay a fine of $20,000. The Court
imposes, as it must by statute, the $100 special assessment
fee. Both of those monetary sanctions are due and payable
immediately.
The probation report does not recommend a period of
supervised release, and I agree with that. I don't see any
need for rehabilitation in the sense of social life, drug
abuse, mental issues, employment, family life, any of those
things. And Lord knows, the probation department has enough to
do with people who actually are in dire need of those services.
Therefore, the Court will not impose a period of supervised
release.
We'll waive costs of incarceration, and the Court
will waive interest on the payment of the fine.
Are there -- first of all, are there any questions
about the Court's intended sentence?
MS. HAYS: No, Your Honor.
MR. OWENS: No, Your Honor.
THE COURT: Are there other counts?
MR. OWENS: Yes, Your Honor. The remaining counts
regarding this defendant, the government would move to dismiss
those counts.
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THE COURT: Okay. All the other counts are
dismissed.
Date for commencement of the sentencing.
THE CLERK: May 9th before 2:00 p.m.
THE COURT: Okay. Sir, it is your duty to report to
whatever institution the Bureau of Prisons designates for you
to serve your term at on May 9th before 2:00 o'clock in the
p.m. You can find out what institution that is from your
attorney, from the government's attorney, or from the probation
officer. It is your responsibility to do so and to be there at
that time. Should you fail to appear, a warrant will be issued
for your arrest. You will be deemed a fugitive and likely will
face further charges.
Do you understand that?
THE DEFENDANT: I do, Your Honor.
MS. HAYS: Your Honor, we do have a request. If you
could make a recommendation to the BOP for the Terre Haute,
Indiana, facility, it's close to Doug's family.
THE COURT: I won't do that. I don't do it. The
Bureau of Prisons has enough difficulty placing people in the
correct institution. I only do it in cases where there is some
dire family need, somebody who is dying, somebody who is very
ill, something of that nature.
MS. HAYS: His parents --
THE COURT: I won't make that recommendation.
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MS. HAYS: His parents are very elderly, and that's
the closest to where they live.
THE COURT: I'm afraid I just won't make that
recommendation. I'm sorry.
Sir, it's my duty to advise you that you have the
right to appeal your guilty plea if you feel there is something
wrong or impermissible with your guilty plea. You'll also have
the right to appeal the sentence itself if you feel that that
sentence is contrary to the law.
You have the right to appeal in forma pauperis, which
means without having to pay the usual fee. And the Clerk of
the Court will prepare and file a notice of appeal for you if
you request it.
With few exceptions, any notice of appeal that you
file must be filed within 14 days of the date that I actually
enter the judgment I have announced I intend to enter in this
case.
Do you have any questions about your right to appeal?
MS. HAYS: No, Your Honor.
THE COURT: Okay. Anything else?
MR. OWENS: No, Your Honor.
THE COURT: Okay.
MR. FREEZE: Judge, for the record, Zakary Freeze,
probation office.
Are there going to be any modifications to bond,
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Judge?
THE COURT: I'm sorry?
MR. FREEZE: Will there be any modifications to the
defendant's bond, or will the bond conditions remain?
THE COURT: The bond will stand until he -- as is,
the same conditions until he turns himself in.
MR. FREEZE: Thank you, Judge.
THE COURT: You're welcome.
That's the Court's order.
MS. HAYS: Thank you, Your Honor.
MR. OWENS: Thank you, Your Honor.
THE CLERK: The court stands recessed.
(Proceedings concluded.)
C E R T I F I C A T E
I, Nancy L. Bistany, do hereby certify that the
foregoing is a complete, true, and accurate transcript of the
proceedings had in the above-entitled case before the HONORABLE
RONALD A. GUZMAN, one of the Judges of said Court, at Chicago,
Illinois, on February 8, 2016.
/s/ Nancy L. Bistany, CSR, RPR, FCRR February 15, 2016
Official Court Reporter DateUnited States District CourtNorthern District of Illinois
Eastern Division
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