foley usa response to 9th bail motion

Nos. 14-10055, 14-10056

IN THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v. DAVID FOLEY,

Defendant-Appellant.

UNITED STATES’ OPPOSITION TO DEFENDANT’S MOTION FOR

RELEASE PENDING APPEAL

Defendant-appellant David Foley’s motion for release should be denied

because he knowingly and voluntarily waived his right to appeal his convictions

and sentence and because he fails to raise any substantial issues likely to result in

reversal or a substantially reduced sentence. First, defendant knowingly and

voluntarily entered into a broad waiver of his appellate rights to challenge his

convictions and sentence, and he cannot show that he falls within the limited

circumstances in which this Court has declined to enforce such waivers. Second,

defendant cannot demonstrate that he is entitled to the relief he seeks. For the most

part, defendant raises issues in his motion before this Court that he never raised—

at any stage—before the district court, even in the context of his motion for bail

Case: 14-10055 04/21/2014 ID: 9065928 DktEntry: 13-1 Page: 1 of 22

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pending appeal. But even with respect to the single claim raised before the district

court, he has not raised any substantial issues, let alone issues likely to result in

reversal, a sentence that does not include a term of imprisonment, or a reduced

sentence to a term of imprisonment less than the total of the time already served

(none) plus the expected duration of the appeal process. Indeed, defendant does

not even contest his concurrent 24-month sentence of imprisonment for conspiracy

to commit bank fraud in D. Ct. No. 11-CR-00554-EJD, to which he pleaded guilty

as part of the package plea deal, the terms of which he now asks this Court to

rewrite or to disregard entirely. This Court should deny defendant’s motion and

grant the government’s concurrently filed motion to dismiss the appeal in light of

defendant’s knowing and voluntary waiver of his appellate rights.

JURISDICTION AND CUSTODY STATUS

The district court had jurisdiction under 18 U.S.C. § 3231. This Court has

jurisdiction over defendant’s appeal pursuant to 18 U.S.C. § 3145(c) and 28 U.S.C.

§ 1291. On January 21, 2014, the district court sentenced defendant to a term of 24

months’ imprisonment, to be followed by a three-year period of supervised release.

The district court denied defendant’s motion for bail pending appeal, but stayed its

order pending this Court’s resolution of defendant’s appeal.


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FACTUAL BACKGROUND

I. Offense Conduct

As defendant acknowledged in his plea agreement, from approximately June

2006 to February 2008, defendant and Michael Daddona conspired to obtain

money by making false or fraudulent representations by mail and wire to sell

thumb drives (“game packs”) containing videogaming software that could be

loaded onto full arcade video game machines for the home or arcade markets.

Exhibit A (Plea Agreement) at 3. Specifically, they represented to buyers that a

company called Ultracade, which defendant had sold to Global VR, along with all

his intellectual property interests, manufactured the game packs. Id.; Clerk’s

Record (“CR”) 1 at 2. Defendant, who was no longer associated with Ultracade,

made and sold the game packs to Daddona, agreeing that Daddona could then sell

the packs to the public using packaging and advertisements that falsely represented

the goods to be Ultracade. Id. These game packs were sold at significantly lower

prices than the retail prices charged by Global VR. CR 1 at 4.

From September to October 2006, defendant also conspired to defraud

Countrywide Home Loans by falsely claiming in his application for a nearly

$3,000,000 loan and line of credit that he was currently employed by Global VR.

Exhibit A at 4. In fact, defendant had been terminated by the company after an

internal investigation revealed that defendant was selling Ultracade game packs for


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his own benefit after agreeing to and being compensated for the transfer of his

intellectual property rights to Global VR. Id..

II. The Indictments

On July 1, 2009, defendant and Michael Daddona were indicted on 35

counts of conspiracy to commit mail and wire fraud, trafficking in counterfeit

goods, theft of trade secrets, mail and wire fraud, conspiracy to commit money

laundering, money laundering, and bank fraud. CR 1. The indictment alleged that

defendant “secretly manufactured and sold game packs containing video arcade

games with counterfeit markings belonging to Global VR for his own financial

benefit”; that he “retained and stole the intellectual property and trade secrets

belonging to Global VR”; and that he “used materials purchased by Global VR and

other equipment belonging to Global VR to manufacture and produce video arcade

game packs.” CR 1 at 5. The indictment also alleged that the counterfeit game

packs were advertised and sold at a significantly lower price than that charged by

Global VR. CR 1 at 6.

On August 18, 2011, a federal grand jury returned a superseding indictment

against defendant and Daddona, charging them with 53 counts.1 See CR 103. In

count one, to which defendant ultimately pleaded guilty, the indictment alleged

that “[i]t was part of the scheme and artifice to defraud that Foley, after reaping the 1 On that same day, defendant was indicted in CR 11-00554-EJD on charges related to the mortgage and line of credit he fraudulently obtained.


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benefits from the sale of Ultracade to Global VR, retained and stole the intellectual

property and trade secrets belonging to Global VR, and secretly manufactured and

sold counterfeit game packs containing video arcade games with counterfeit

markings belonging to Global VR . . . for his own financial benefit.” CR 103 at 3-

4. The superseding indictment further alleged that defendant used Global VR’s

intellectual property and materials to produce the counterfeit game packs; that he

bought additional materials to make the game packs and charged their cost to

Global VR; that “[t]he proceeds paid to Foley for the counterfeit game packs were

not recorded in Global VR’s accounting records”; and that the counterfeit game

packs were sold at significantly lower prices than the retail prices charged by

Global VR. CR 103 at 4-5. It also alleged that as part of the scheme to defraud,

“Foley instructed, encouraged, and otherwise caused Daddona to lie to

representatives of Global VR when Daddona was asked why he had not purchased

the regular supply of game packs from Global VR.” CR 103 at 5.

III. Defendant’s Plea Agreement

On January 6, 2012, defendant entered into a plea agreement with the

government, pursuant to which he agreed to plead guilty to one count of

conspiracy to commit mail and wire fraud as set forth in the superseding

indictment’s first count in case number CR 09-00670-EJD, and one count of

conspiracy to commit bank fraud in case number CR 11-00554-EJD. Exhibit A at


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1. In return, the government agreed to dismiss the remaining charges against

defendant. Id. at 8.

With respect to sentencing, the parties agreed to an adjusted offense level of

up to 20 on the conspiracy to commit mail and wire fraud count, with the proviso

that the government could “argue [that] the amount of loss is no more than 3,211

units multiplied by $479 a unit, or $1,589,069,” while defendant could argue that

the loss amount was as low as $0. Id. at 6. The parties agreed to an adjusted

offense level on the conspiracy to commit bank fraud of up to 22, and that the

court would decide the combined offense level after determining the appropriate

amounts of loss for both counts. Id. at 6-7. The parties reached no agreement as to

defendant’s criminal history category. Id. at 5. As part of the sentencing

stipulations, defendant expressly stated that he understood “that the court is not

bound by the Guidelines calculations . . . , the court may conclude that a higher

Guideline range applies to me, and, if it does, I will not be entitled, nor will I ask to

withdraw my guilty plea.” Id. Defendant also agreed “that regardless of the

sentence that the court imposes on me, I will not be entitled, nor will I ask, to

withdraw my guilty plea.” Id.

As part of the agreement, defendant agreed to a broad waiver of his rights to

appeal and collateral review. Id. at 5. Paragraph 4 of defendant’s Plea Agreement

stated: “I agree to give up my right to appeal my convictions, the judgment, and


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orders of the Court. I also agree to waive any right I may have to appeal any

aspect of my sentence, including any order relating to forfeiture and/or restitution.”

Id. Paragraph 5 of the Plea Agreement stated: “I agree not to file any collateral

attack on my conviction or sentence, including a petition under 28 U.S.C. § 2255

or 28 U.S.C. § 2241, or motion under 18 U.S.C. § 3582, at any time in the future

after I am sentenced, except that I reserve my right to claim that my counsel was

ineffective in connection with the negotiation of this Agreement or the entry of my

guilty plea.” Id.

IV. Defendant’s Plea Colloquy

During the plea colloquy, defendant confirmed that he had read and

reviewed the plea agreement with his lawyer. Exhibit B (Plea Colloquy) at 3-4.

Defendant further stated under oath that he was satisfied with the services of his

lawyer, that he was not threatened into pleading guilty, and that he was pleading

guilty freely and voluntarily. Id. at 6, 7. Defendant then admitted, again under

oath, that he was in fact guilty of the crimes to which he was pleading guilty. See

id. at 7. The court also confirmed that defendant had had the opportunity to

discuss the plea agreement and in particular its sentencing provisions and that

defendant understood their significance. Id. at 7-8.

After advising defendant of the elements of the offenses and the maximum

penalties he faced, id. at 10-13, as well as the rights he was waiving by pleading


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guilty, id. at 14-17, the district court expressly advised defendant that he was

waiving his right to appeal. Id. at 17-18. In response, defendant acknowledged

that he understood that he was waiving those rights. Id.

The government then made an offer of proof, noting that defendant’s false

representations that the game packs were made by Ultracade were material to the

customers who bought them, and that defendant made and sold the game packs

even though he was no longer associated with Ultracade or Global VR. Id. at 19-

20. The government also stated that defendant had conspired with another

individual to falsely represent that defendant was still employed by Global VR in

order to obtain a nearly $3,000,000 mortgage and line of credit. Id. at 21.

Defendant agreed that the facts as stated by the government were true and correct.

Id. at 22. The district court then found that defendant had made a knowing,

intelligent, and voluntary waiver of his rights as to each of his pleas, and that there

was an independent factual basis for each of the offenses. Id. at 25.

V. Evidentiary Hearings on Loss and Sentencing

The parties filed a joint pre-evidentiary hearing statement on the amount of

loss in which they agreed that the district court should apply a preponderance of

the evidence standard in determining the amount of loss. CR 169 at 2. The

government argued that the loss amount was $1,589,069, the retail value of the

game packs multiplied by the number of game packs sold after June 2, 2006, when


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all of Ultracade’s and Foley’s assets and intellectual property had been fully

transferred to Global VR. Id. at 4-5. In response, defendant argued for a loss

amount of zero because his misrepresentations “harmed no one,” and because there

was purportedly nothing to suggest that Daddona would have bought more from

Global VR but for the misrepresentation. Id. at 6, 8. Defendant did not contend

that loss should be measured only by the impact, if any, on the individuals who

bought the counterfeit packs. Id. at 8.

At a final hearing on January 29, 2013, defendant argued that the victims, if

any, were the individuals who bought the game packs. CR 197 at 8-10. While

defendant (not the court, as defendant mistakenly asserts in his supplemental

memorandum) did assert that the Global VR theory was “not pled . . . in the plea

agreement,” he did not argue that the government was precluded from making such

an argument, but instead that the government bore the burden of proof at the

evidentiary hearing. CR 197 at 9.

After considering the parties’ arguments, the court concluded that the total

loss with respect to the mail and wire fraud conspiracy count was $450,000. Id. at

51. The district court sentenced defendant to 24 months’ imprisonment on each of

the counts to which defendant pleaded guilty, to be served concurrently. CR 251.


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VI. Defendant’s Motion for Bail Pending Appeal

At sentencing, the court scheduled March 24, 2014, as the date for

defendant’s surrender to the Bureau of Prisons. On January 31, 2014, defendant

filed a motion asking that he be permitted to remain out of custody pending

resolution of his appeal. CR 258. Defendant argued that he was not a flight risk

nor a danger to the community, and that his claims of ineffective assistance of

counsel (including claims that counsel failed to inform defendant of the plea

agreement’s terms or the rights he would be giving up) raised substantial questions

of law or fact. Id. Defendant did not raise the issues on which he now bases his

claim for release – namely, that the theory of fraud in the plea agreement differed

from the fraud theory at sentencing and that the district court erred in sentencing

defendant. Id. On February 5, 2014, the court denied defendant’s motion. CR

264.

Six weeks later, on March 21, 2014, defendant appealed the court’s denial of

his motion for bail pending appeal, contending that the district court erred by not

stating its reasons for denying his motion. On March 25, 2014, this Court

remanded to the district court for the limited purpose of enabling the district court

to state, orally or in writing, the reasons for its order denying defendant’s motion.


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VII. The District Court’s Reasons for Denying Defendant’s Motion

On March 26, 2014, the district court stated its reasons for denying

defendant’s motion. Exhibit C (Transcript of Statement of Reasons) at 3. The

court concluded that defendant was not likely to flee or pose a danger to the safety

of the community, but it “could not find by clear and convincing evidence that the

appeal raised a substantial question of law or fact likely to result in a reversal, a

sentence that does not include a term of imprisonment, or a reduced sentence to a

term of imprisonment less than the total of the time already served plus the

expected duration of the appeal process.” Id. at 3-4. In so ruling, the court

considered the declaration in support of defendant’s motion, the plea agreement,

and the plea colloquy. Id. at 4. The court noted that during the colloquy,

defendant had stated that he had discussed the plea agreement and its sentencing

stipulations with counsel, that he was satisfied with counsel’s performance, and

that he was pleading guilty freely and voluntarily. Id. at 4-5. The court also noted

that counsel’s performance at the evidentiary hearing was effective enough to

reduce the amount of loss ultimately found to roughly a million dollars less than

what the government had requested. Id. at 6. Accordingly, the court concluded,

defendant had failed to raise a substantial question of law or fact warranting bail

pending appeal. Id.


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After the district court stated its reasons on the record, defendant renewed

his motion before this Court. In that “supplemental memorandum,” defendant

raised for the first time that he was entitled to relief because (1) there was an

impermissible variation between the theory of fraud in the plea agreement and the

theory of fraud at sentencing, and (2) the district court erred in sentencing

defendant.

ARGUMENT

I. STANDARD OF REVIEW

This Court reviews factual findings underlying the district court’s denial of

release pending appeal for clear error. United States v. Garcia, 340 F.3d 1013,

1015 (9th Cir. 2003). The Court reviews the district court’s legal determinations

de novo. Id.

II. APPLICABLE LEGAL STANDARDS

Once a defendant has been convicted and sentenced, the Bail Reform Act of

1984 (“the Act”) presumes that the defendant should be detained pending appeal.

Accordingly, courts “shall order that a person who has been found guilty of an

offense and sentenced to a term of imprisonment, and who has filed an appeal or a

petition for a writ of certiorari, be detained,” unless defendant can demonstrate by

clear and convincing evidence that he is entitled to relief. 18 U.S.C. § 3143(b)(1).


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First, defendant must prove by clear and convincing evidence that, if

released, he is “not likely to flee or pose a danger to the safety of any other person

or the community.” 18 U.S.C. §3143(b)(1)(A). Second, even if defendant meets

this first requirement, he must also demonstrate by clear and convincing evidence

that “the appeal is not for the purpose of delay and raises a substantial question of

law or fact likely to result in: (i) reversal, (ii) an order for a new trial, (iii) a

sentence that does not include a term of imprisonment, or (iv) a reduced sentence

to a term of imprisonment less than the total of the time already served plus the

expected duration of the appeal process.” 18 U.S.C. § 3143(b)(1)(B). With

respect to this last requirement, the Court must resolve two distinct questions:

(1) whether the appellate issues raised by the defendant are “substantial” and (2)

whether those issues are “likely to result in reversal.” United States v. Handy, 761

F.2d 1279, 1280-81 (9th Cir. 1985). “[T]he word ‘substantial’ defines the level of

merit required in the question raised on appeal, while the phrase ‘likely to result in

reversal’ defines the type of question that must be presented.” Id. A “substantial

question” is one that is “fairly debatable,” and“[l]ikely to result” in reversal means

that “if the substantial question is determined favorably to the defendant on appeal,

that decision is likely to result in reversal or an order for a new trial.” Id. The

burden is on the defendant to overcome the presumption that he should be detained


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while his appeal is pending. See United States v. Montoya, 908 F.2d 450, 451 (9th

Cir. 1990).

Defendant does not even attempt to meet the requirement that he show by

clear and convincing evidence a substantial question “likely to result in: (i)

reversal, (ii) an order for a new trial, (iii) a sentence that does not include a term of

imprisonment, or (iv) a reduced sentence to a term of imprisonment less than the

total of the time already served plus the expected duration of the appeal process.”

Indeed, defendant does not even contest his concurrent 24-month sentence of

imprisonment for conspiracy to commit bank fraud. Instead, defendant challenges

only the sentence on the wire and mail fraud count, but that is not enough. See,

e.g., Morison v. United States, 486 U.S. 1306 (1988) (denying request for release

pending filing of certiorari petition where defendant did not show a substantial

question as to all counts of conviction). For that reason alone, this Court should

deny defendant’s motion.

III. DEFENDANT HAS WAIVED HIS RIGHT TO APPEAL

As discussed more fully in the concurrently filed motion to dismiss,

defendant knowingly and voluntarily waived his right to appeal his convictions and

sentence. Defendant contends in his bail appeal that the waiver was not knowing

and voluntary because he could not have anticipated that the government would

seek to have him sentenced on a different theory of fraud. But as demonstrated


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below, the theory of fraud to which defendant pleaded guilty was the same theory

under which he was sentenced. Accordingly, because defendant waived his right

to challenge his sentence, this Court should dismiss his appeal.

As defendant acknowledges, the only circumstances under which this Court

has declined to enforce a valid appeal waiver are when (1) a defendant’s guilty

plea failed to comply with Federal Rule of Criminal Procedure 11; (2) the

sentencing judge informed the defendant that he retained the right to appeal; (3) the

sentence does not comport with the terms of the plea agreement; or (4) the

sentence violates the law. See United States v. Bibler, 495 F.3d 621, 624 (9th Cir.

2007). None of those circumstances apply here. Defendant contends that the

waiver does not apply here because the sentence did not comport with the terms of

the plea agreement. But that agreement expressly warned defendant that the court

was not bound by the agreement at sentencing and that he could not withdraw his

plea based on his sentence, and the sentence ultimately imposed based on a loss

amount within the range to which defendant agreed. Defendant also contends that

the waiver is ineffective because his sentence violated the law. This is meritless.

Defendant’s sentence was within the statutory maximum and thus plainly not

illegal. See United States v. Johnson, 998 F.2d 941, 943 (9th Cir. 1993) (illegal

sentence “one . . . not authorized by the judgment of conviction, . . . in excess of

the permissible statutory penalty for the crime, or . . . in violation of the


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Constitution”). Defendant has alleged a garden-variety Guidelines calculation

error, not an illegal sentence. Accordingly, defendant is not entitled to bail

pending appeal and his appeal should be dismissed. Bibler, 495 F.3d at 624.

IV. DEFENDANT HAS NOT SHOWN BY CLEAR AND CONVINCING EVIDENCE A SUBSTANTIAL QUESTION LIKELY TO RESULT IN REVERSAL OR A SENTENCE SHORT ENOUGH TO WARRANT RELIEF

A. The Theory To Which Defendant Pleaded Guilty Was The Same

Theory Employed At Sentencing

Defendant argues for the first time on appeal that he pleaded guilty based on

one theory of fraud (that he defrauded customers) but was sentenced based on

another (that he defrauded Global VR). That assertion, however, has no support in

the record. As the superseding indictment, plea agreement, plea colloquy, and

evidentiary hearing on loss make clear, the only theory on which the government

proceeded was that defendant sold game packs to which Global VR, not he, had

intellectual property rights, and that he did so based on false misrepresentations to

customers that the materials were in fact made by Ultracade, when they were not.

Count one of the superseding indictment, to which defendant ultimately

pleaded guilty, alleged that “Foley, after reaping the benefits from the sale of

Ultracade to Global VR, retained and stole the intellectual property and trade

secrets belonging to Global VR, and secretly manufactured and sold counterfeit

game packs containing video arcade games with counterfeit markings belonging to


17

Global VR . . . for his own financial benefit,” that defendant used Global VR’s

intellectual property and materials to produce the counterfeit game packs, that he

bought additional materials to make the game packs and charged their cost to

Global VR, that “[t]he proceeds paid to Foley for the counterfeit game packs were

not recorded in Global VR’s accounting records,” and that the counterfeit game

packs were sold at significantly lower prices than Global VR charged. CR 103 at

3-5. The superseding indictment also alleged that “Foley instructed, encouraged,

and otherwise caused Daddona to lie to representatives of Global VR when

Daddona was asked why he had not purchased the regular supply of game packs

from Global VR.” CR 103 at 5.

Defendant admitted the same fraud in his plea agreement, acknowledging

that from approximately June 2006 to February 2008, he and Daddona conspired to

obtain money by making false or fraudulent representations by mail and wire to

sell game packs by representing to buyers that Ultracade, which defendant had sold

to Global VR, along with all his intellectual property interests, manufactured those

game packs. Exhibit A (Plea Agreement) at 3; CR 1 at 2. Implicit in that

admission is the fact that defendant manufactured game packs to which he had no

intellectual property rights.

Finally, at the plea colloquy, the government’s offer of proof noted that

defendant’s false representations that the game packs were made by Ultracade


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were material to the customers who bought them, and that defendant made and

sold the game packs even though he was no longer associated with Ultracade or

Global VR. Exhibit B at 19-20.

Simply put, there was a single theory of fraud and the district court’s

determination of amount of loss based on the harm to Global VR was in no way

inconsistent with that theory.

B. There Was No Convergence

Defendant ascribes error to the district court by relying on the concept of

convergence – that is, that for defendant to be guilty of mail fraud, he must intend

to obtain money or property from the one who is deceived. United States v. Lew,

875 F.2d 219, 221 (9th Cir. 1989). Here, defendant admitted that his false

representations about the game pack’s manufacturer were material to the customers

who bought them, believing that they were made by Ultracade. Exhibit B at 19-20.

That is sufficient to sustain defendant’s conviction.

But defendant attempts on appeal to use this principle to limit the amount of

loss calculation at sentencing because, he asserts, only the customers who bought

the packs were victims. Defendant does not (indeed cannot) cite a single case

supporting such a result. In fact, Global VR was also a victim of defendant’s

actions, and nothing in the Guidelines or defendant’s plea agreement prohibit

calculating the Guidelines based on its losses. The Application Notes to United


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States Sentencing Guidelines Section 2B1.1 provide that loss is the greater of

actual loss or intended loss, they do not limit loss to a particular subset of victims.

And nothing in defendant’s plea agreement precluded the government from

arguing that Global VR was also a victim. On this record, defendant cannot show

that there is a substantial question that the district court plainly erred in concluding

that it was appropriate to include the loss incurred by Global VR.

C. The District Court Applied The Correct Evidentiary Standard – To Which Defendant Agreed Before The District Court

Finally, defendant contends that the district court erred by applying a

preponderance of the evidence standard rather than a clear and convincing standard

to the amount of loss determination. But defendant has waived this challenge

because he agreed before the district court that a preponderance of the evidence

standard should apply. See CR 169 at 2 (Joint Pre-Evidentiary Hearing Statement).

Moreover, even if defendant had not waived his challenge, he could not establish

plain error where the standard the district court applied was in fact the legally

correct one. See United States v. Armstead, 552 F.3d 769, 776 (9th Cir. 2008).


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CONCLUSION

For the foregoing reasons, this Court should deny defendant’s motion for

bail pending appeal.

DATED: April 21, 2014 Respectfully submitted,

MELINDA HAAG United States Attorney BARBARA J. VALLIERE Assistant United States Attorney Chief, Appellate Division /s/ Anne Voigts ANNE M. VOIGTS Assistant United States Attorney 450 Golden Gate Ave., 11th Floor San Francisco, CA 94102 Phone: (408) 535-5588 Attorneys for Plaintiff-Appellee UNITED STATES OF AMERICA


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CERTIFICATE OF COMPLIANCE

I certify that, pursuant to Fed. R. App. P. 27(d)(2), the foregoing is

proportionately spaced, using the Microsoft Word 2010 program, with 14-font size

Times New Roman style, and contains no more than 20 pages.

Dated: April 21, 2014 /s/ Anne Voigts ANNE M. VOIGTS Assistant United States Attorney


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CERTIFICATE OF SERVICE

I, Hui Chen, certify that I am an employee of the Office of the United States

Attorney, Northern District of California, a person over 18 years of age and not a

party to the within action. I certify that on April 21, 2014, I electronically filed the

• United States’ Opposition to Defendant’s Motion for Release Pending Appeal

• Exhibits A-C to the United States’ Opposition

in the case of United States v. David Foley, CA 14-10055, 14-10056, with the

Clerk of the Court for the United States Court of Appeals for the Ninth Circuit by

using the appellate CM/ECF system.

I certify that all participants in the case are registered CM/ECF users and

that service will be accomplished by the appellate CM/ECF system.

Dated: April 21, 2014 /s/ Hui Chen Hui Chen Legal Assistant


foley usa response to 9th bail motion

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