jl sentencing transcript

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 1 UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS UNITED STATES OF AMERICA vs. JON LATORELLA, Defendant. ) ) ) ) ) ) ) ) ) No. 1:10-cr-10388-DPW-1 BEFORE: THE HONORABLE DOUGLAS P. WOODLOCK SENTENCING HEARING John Joseph Moakley United States Courthouse Courtroom No. 1 One Courthouse Way Boston, MA 02210 Thursday, June 14, 2012 2:00 p.m. Brenda K. Hancock, RMR, CRR Official Court Reporter John Joseph Moakley United States Courthouse One Courthouse Way Boston, MA 02210 (617)439-3214 Case 1:10-cr-10388-DPW Document 261 Filed 07/20/12 Page 1 of 58

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UNITED STATES DISTRICT COURTDISTRICT OF MASSACHUSETTS

UNITED STATES OF AMERICA

vs.

JON LATORELLA,

Defendant.

)))))))))

No. 1:10-cr-10388-DPW-1

BEFORE: THE HONORABLE DOUGLAS P. WOODLOCK

SENTENCING HEARING

John Joseph Moakley United States CourthouseCourtroom No. 1

One Courthouse WayBoston, MA 02210

Thursday, June 14, 20122:00 p.m.

Brenda K. Hancock, RMR, CRROfficial Court Reporter

John Joseph Moakley United States CourthouseOne Courthouse WayBoston, MA 02210(617)439-3214

Case 1:10-cr-10388-DPW Document 261 Filed 07/20/12 Page 1 of 58

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APPEARANCES:

UNITED STATES ATTORNEY'S OFFICEBy: Andrew E. Lelling, AUSA

Paul G. Levenson, AUSA1 Courthouse Way, Suite 9200Boston, MA 02210On behalf of the United States of America.

GREENBERG TRAURIG LLPBy: Martin G. Weinberg, Esq.

Robert M. Goldstein, Esq.20 Park Plaza, Suite 1000Boston, MA 02116On behalf of the Defendant Latorella.

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(The following proceedings were held in open court

before the Honorable Douglas P. Woodlock, United States

District Judge, United States District Court, District of

Massachusetts, at the John J. Moakley United States Courthouse,

One Courthouse Way, Courtroom 1, Boston, Massachusetts, on

Thursday, June 14, 2012):

THE CLERK: All rise.

(The Honorable Court entered the courtroom at 2:00 p.m.)

THE CLERK: This is Criminal Action 10-10388, United

States versus Jon Latorella.

THE COURT: Well, there is a preliminary matter I

think I should take up in this case that came to mind in review

of the defendant's Sentencing Memorandum. There are two

letters here from persons who are acquaintances in Ipswich,

where I now live, the grandparents of two of the defendant's

children; acquaintances of mine in the sense that you run into

people in a small town, more acquaintances, I suspect, of my

wife.

I have thought about it. My own view is it will not

influence my judgment in the case, but I need to make it known

to the parties here for whatever view you have with respect to

it. I will treat those letters the way I would treat the

letters of any grandparents of the children of a defendant for

the information they provide, but I am satisfied for myself

that I will not be influenced here.

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But that is a question that it seems to me the

parties, probably the Government more specifically, will want

to think about. So, what I would propose to do is just take

five minutes. If there is an issue you want to pursue, then we

can take more time. But you will want to think about it at

this point. So, we will take a five-minute recess.

THE CLERK: All rise.

(The Honorable Court exited the courtroom at 2:05 p.m.)

THE CLERK: All rise.

(The Honorable Court entered the courtroom at 2:10 p.m.)

THE CLERK: This Honorable Court is back in session.

You may be seated.

THE COURT: So, are there any objections to my

continuing here?

MR. LELLING: Not from the Government, your Honor.

MR. WEINBERG: Not from the defense, your Honor.

THE COURT: So, let us turn to the Presentence Report,

and I guess I have to put it in a broader context.

Ordinarily, my view is I have to calculate the

Guidelines. There are occasions on which I do not. Those

occasions are marginal when the potential for dispute is really

not material to understanding the nature of the culpability.

Here, I think it is.

I am being invited to avoid making a determination

with respect to broadly conceived loss and also with respect to

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restitution. I do not think that I can properly calculate the

culpability for purposes of making whatever determination I

have to make on the defendant's sentence.

Now, I recognize that this is a particular kind of

plea, not a (C) plea but something very close to it, in which

the parties agree to a sentence that is at the top of what is

available under the remaining charges and that, presumptively,

caps my capacity to do anything beyond that. I will return to

that in a moment.

But even there, I want to make some informed decision

about the degree of loss, which is the driving culpability in

this case. There is a second issue that is raised by the

Supplemental Sentencing Memorandum of the defendant, which

quite properly indicates -- or distances itself from various of

the letters that I received, because a number of the letters

that I received must be read as not arguing for the agreed-upon

disposition by the parties.

That raises a third question, which is one that has

not been explored but I have been thinking a bit about it in

other contexts recently, of whether if I find that the

agreed-upon disposition or any disposition within the range of

sentences available under the one count does not adequately

reflect or accurately reflect culpability, whether I should

reject the plea altogether. I have accepted the plea and moved

on to sentencing.

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There is some case law out there that suggests that,

once a judge has done that, the judge cannot then turn around

and withdraw the acceptance. I am not sure that that case law

is fully considered. But assume the following, the

circumstance in which I find that the loss is extraordinary

and, without doing so at this point, adopt the view of the

Probation Office that the proper guideline here involves a

Total Offense Level of 38, which would generate a sentence

quite beyond what the parties have agreed to and capped it by

the plea that involves dismissal of charges.

So we are clear with respect to that, the Guideline

range, I guess, under the Probation Office calculation is in

the range of 200 months, and the Government makes an

alternative argument -- I say the "range." It is well above 60

months. And the Government makes an argument that the proper

guideline range is 151 to 188 months.

The question I think that is raised by that is does a

judge faced with that disproportion -- I am not adopting it, I

am just noting it -- have to accept a plea or continue to

accept a plea or withdraw it, withdraw acceptance? So, I raise

that at the outset.

I guess the first question is, I know the argument

that has been made more generally by the defendant about

calculating the Guidelines, that it is not necessary because

under any conceivable reading of the Guidelines, the Guideline

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sentence would be above 60 months.

Maybe you will disagree with that as well,

Mr. Weinberg, but I think that is the state of the record.

MR. WEINBERG: Yes.

THE COURT: So, what is the Government's view on it?

I have got your calculation. Is that simply to say it is this

much and by a wide margin? Is that what your calculation is

supposed to do, or is it supposed to influence me in some other

fashion? I will put to one side the Plea Agreement, but what

do I do when I am presented with a low-end guideline of 155

months and I have a set of charges that could support that

guideline but for the Government's decision or statement that

it will dismiss them?

MR. LELLING: I think there are a few points that I

can make here that may or may not help the Court.

Mr. Weinberg and I talked at length yesterday, and I

actually came around to agreeing with him on the point that in

this instance the Court need not calculate the Guidelines

because under any iteration, including Mr. Weinberg's as well,

in excess of five years. I understand that in the Court's mind

that begs the question of why that is.

I think there are a few policy reasons for that. This

case and the investigation before it have gone on for quite

some time. We have given a substantial amount of thought to

what we believed was the low end of fair for a sentence in this

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case. A few things come to mind.

As to the first one, Mr. Levenson, who is the Chief of

the Economic Crimes Unit, might be able to address this one

further. But, as a matter of policy, we believe that at this

particular point, 2B1.1, as it relates to securities offenses,

is a little bit out of whack. I actually respectfully disagree

with the Court that the loss drives sentencing in securities

cases under 2B1.1. If you take on their face the enhancements,

which Probation does, you can get to a substantially higher

sentence without breaking a sweat in a case that involves

almost no loss.

Consider a CEO, for a moment. You have a base of six

or seven. You get four levels for being the officer of a

publicly traded company involved in a securities fraud.

THE COURT: I think I understand that. I am not

trying to cut you off, but when I say it drives it, it is the

base Offense Level, and it adds 18 points when you have got

this much -- I will use "loss" broadly, because loss requires a

fairly nuanced evaluation in this context.

MR. LELLING: I agree.

THE COURT: But, yes, there are these enhancements as

well.

MR. LELLING: You can get to 12 additional levels that

are almost definitional in any securities case, sophisticated

means, more than 10 or more than 50 or more than 250 victims,

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role in the offense, the new plus four for being an officer of

a publicly traded company. We're at 12 levels without even

doing anything.

THE COURT: And that is, I think, probably true in

most securities cases involving the officers or directors, and

I think I share the view that there is a kind of Guidelines

accelerant that is being poured over this kind of white-collar

case; because it works the same way, frankly, in the Base

Offense Level, that it is not geometric but it is pretty close

to that in terms of what it does to the Guidelines.

That all having been said, and whether or not I am

prepared to depart from the Guidelines, the whole purpose of

the evaluation that has been required by the First Circuit, in

particular, is to first figure out where the Guidelines put you

and then interact with the Guidelines in whatever form you wish

to, including saying this is just arithmetic gone mad. But I

cannot say that until I know what the arithmetic adds up to, I

do not think, unless I just say, "Never Mind."

MR. LELLING: Well, the Court knows what ballpark the

arithmetic is in, which is why we are having this --

THE COURT: I keep interrupting you, but so you have

got the full range of things to address, I have got restitution

to consider. The Government wants me to consider restitution,

and restitution is just another way of saying loss, maybe. The

defendant does not think that restitution is appropriate, or it

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takes too long or whatever the reasons why you take a pass at

restitution. I am not so sure I feel that way in a case like

this.

MR. LELLING: On the issue of restitution, I am glad

the Court raised that. Again, in light of my conversation with

Mr. Weinberg, he raised a good point, which I fully agree with,

which is the Government's position is there is no reason to

calculate a restitution figure today with Mr. Fields' case

pending resolution. In our view, the better course -- we can

address it today, if the Court wants to do that. We did not

assume that the Court would adopt this view.

But our view is the better course is to have one

restitution hearing after Mr. Fields' case is resolved; that we

don't need to have two hearings. We have had victim

information trickling in over time, some as most recent as this

week. We may get additional victim information. If Mr. Fields

goes to trial, which I think is likely, that may result in more

finely honed information from victims who testify in that

proceeding, and it would be more efficient and probably lead to

a better result if we simply had the restitution hearing once

after Mr. Fields' case is resolved.

So, what we were going to suggest -- and I have dug

into the case law in this area -- and after a key Supreme Court

decision in 2010 called Dolan, essentially what the Court would

need to do, if Mr. Weinberg and I are reading the case law

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correctly, which I think we are, the cases are pretty

consistent, is decide today whether, in fact, restitution would

be appropriate in this case. If the Court decides that it is,

defer calculation of the amount until after Mr. Fields' case is

resolved. That would be legal and proper under every case I

have seen.

THE COURT: I think that is fair. That is a direction

that I would be leaning toward on this, simple because it is

clear to me that there is going to be substantial contest over

this, not to mention, if Mr. Fields is ultimately adjudged

guilty, whether he will add something to the mix in this.

MR. LELLING: Correct.

THE COURT: So, I will put the restitution to one

side.

Now I am back to the core, which is that I should not

evaluate the question of loss, and I am putting it in the

direct sense that I tried to raise before, which is to say, if

I find that the loss, having gone through it, is rather

substantial and it would drive my decision in this case, why

should I not simply say I decline to continue to accept the

plea, however we style it?

Now, I understand, because this is an issue that has

arisen in related cases that have given me some thought

recently and I have under advisement, that the Government's

position is once you accept it, or at least for other cases

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once you accept it you are ratcheted in; the judge does not get

to withdraw it, and both sides say, "We do not want you to

withdraw it," which I suspect will be the view here. I am not

sure I agree with that.

MR. LELLING: And I certainly will not venture an

answer to that particular legal question. I have not given it

any thought. I think what I can do or, really, all I can do is

say a little bit about why we thought this was a fair

resolution.

THE COURT: Yes, go ahead.

MR. LELLING: We are fully aware that it is a generous

resolution, and we considered our case against these two

defendants fairly strong. There were certain factors that to

us militated in favor of making it five years, and what they

really are is variations on a 3553 theme.

First, we are of the view that the Guidelines for

securities cases are out of whack and need to be revised.

THE COURT: You understand that the court reporter is

taking this down.

MR. LELLING: Am I speaking very fast?

THE COURT: No. However fast you are speaking, what

you are saying is being taken down.

MR. LELLING: I know. I crossed that bridge long ago,

your Honor.

THE COURT: Me too.

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MR. LELLING: Second, there are certain factors

specific to the investigation which softened our position

slightly.

For example, this investigation took a very long time,

longer than we would want in the normal course. The FBI began

its investigation in this case in late 2006. For various

reasons, the case was not charged until late 2010. Now, that

does not create a substantive right for the defendant, meaning

there was no bad faith on our part. The investigation took

longer than we thought, and it took a very long time. We are

cognizant of the fact that the defendant is existing under a

cloud for that extended period of time.

Third, it is a case involving public trading of a

penny stock in which the defendants essentially attempted in

one of the scams that makes up the conspiracy a pump and

dump -- this would be the Omni Data aspect of the conspiracy --

that didn't work, meaning, they announced a $7.2 million deal

to the public in late 2004. The stock price responded not at

all. There was an uptick in volume at the time, but it is

difficult to allege a true market-wide fraud in that regard.

Now, there are other aspects of it that would be

important to a loss calculation. For example, because of the

defendant's actions, the stock was probably publicly trading

long after it should have been in the first place, and so that

would be an issue. But it is unlike other sort of classic

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pump-and-dump cases where you see a real spike, a lot of people

buy into the market because of the upward trend, and then the

bottom falls out when there is a restatement. It is not that

kind of case. At the end of the day, it is a penny stock

company, employing about 50 people on the North Shore.

So, these are some of the things we thought about in

coming up with a sentence; but, again, they are all really

variations on 18 U.S.C. 3553.

Assuming the defendant took responsibility, which

however belatedly Mr. Latorella did, we viewed five years as

the low end of sufficient punishment. He has no record, he has

never been in jail before. Five years will be a substantial

amount time out of his life. There has been some discussion in

Mr. Weinberg's papers about his dependence and that sort of

thing.

In our discussions, which were lengthy on this point,

I think Mr. Levensons' view and mine was this is the low end of

sufficient if he, however late, accepted responsibility for

what he did. If he did not accept responsibility and went to

trial, we would be asking for something higher, but unlikely

that we would be asking for the low end of the advisory range

even after trial, because it would strike us, one, as a matter

of the equities, excessively high, and, two, it, frankly, would

strike us as extremely unlikely that the Court would adopt it.

We would have come in at something lower than that, I think,

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even after trying the case.

THE COURT: Embedded in that are a series of

assumptions, including that the Government's recommendation is

based on handicapping what the judge is going to do with the

sentence.

And maybe, Mr. Levenson, you want to speak to this as

well. I do not mean that Mr. Lelling has not, but there is a

larger policy issue.

I will put it in a more specific sense. I have under

advisement now a case in which the Government obtained

assistance from an individual -- you may or may not be familiar

with the case -- in the healthcare setting, obtained assistance

from an individual cooperator. The individual pled to a

felony. The Government asked me to put off the sentencing for

an extended period of time until the trial of the case.

The case started on trial. There was some suggestion

that the Government's case was weaker, perhaps embarrassingly

weaker than they had anticipated or maybe not, but, in any

event, it came out. The Government in the midst of trial pled

the company to a misdemeanor with a substantial

multi-million-dollar fine and then came back for sentencing of

the cooperator who started.

I raised the question whether or not, having taken a

misdemeanor plea from the corporation for the conduct the

corporation was responsible for in part by the individual, that

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perhaps greater parity would be to plead the individual to a

misdemeanor, too. The Government's position is, no, it is not.

And there are other factors that are involved. I will add one

further dimension. I said, All right. I am going to withdraw

the acceptance of the plea, and you can go do what you want to

do. Both parties came back and said, No, we would like to stay

with the plea, and the Government made the argument that the

Court is not in a position to reject a plea after it has

accepted the plea.

It raises significant issues, that case -- different

from this, I think -- raises significant issues about what the

role of the Court is when confronting contractual negotiations

between the parties: is it an independent role, or has the

Court given up its independence, basically, when accepting the

plea?

Here, there is a different dimension. There is not

the disparity that is evident in the other case. There is a

disparity that is evident to me in the cooperator's sentence by

Judge Wolf as opposed to here.

MR. LELLING: Right.

THE COURT: But it does not raise those kinds of

issues, and, to some degree, Courts are supposed to be, I

think, deferential to negotiations between the parties,

certainly negotiations over charge decisions, which have the

effect of capping what the Court does.

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But I have expressed this in the past. I am not

someone who necessarily takes (C) pleas without question. In

fact, I suspect -- I should have kept over the years count -- I

suspect in about half of the (C) pleas I reject them, because

they suggest to me that the parties do not trust me or that

there is something in the case that they would prefer I just

did not focus on.

So, I raise all of those issues, and perhaps you want

to add to that, Mr. Levenson, maybe you do not, but in support

of the proposition that basically what I would be doing here --

I think both of the parties are asking me to do this -- is to

say the Guidelines, whatever they are, however they would

ultimately be determined, are higher than 60 months, the low

end of the Guidelines is higher than 60 months here, and rather

than devote time to the calculation of the Guidelines with some

specificity, most specifically with respect to loss, I simply

move on.

Mr. Levenson, anything you want to add to that?

MR. LEVENSON: I want to be careful that I do not want

in any way to address the matter. I understand that it sets a

background for your thinking, but I simply -- it is not a

matter under my supervision, not a matter --

THE COURT: I do not view this as the Government

committing itself to a long-term view in securities cases

involving officers and directors of companies, but a candid

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discussion about what is involved in the choice that was made

by the respective parties about plea.

MR. LEVENSON: I think it is fair to say a couple of

things about the broader view of the Guidelines and what do the

Guidelines mean for cases like this. And I think it is fair to

say that, as the Sentencing Commission is now grappling with

what these Guidelines should look like and what do they capture

about culpability -- if the Guidelines are intended to be a

congener for culpability in some ways, I think the Court has it

exactly right that we use a starting point of the Guidelines as

the starting point for a discussion.

In other words, we calculate the Guidelines because it

is an available template, but then the next inquiry, in my view

at least, ought to be how well do these Guideline factors

capture, on the one hand, the features of the offense and the

defendant that we are talking about, and, on the other hand,

how well do they embody the core senses of culpability that are

at issue here?

And those two exercises take us in a couple of

different directions here. In one direction -- and I guess I

will add one third premise, if you will bear with me, to this,

which is, while it is very difficult to argue against your

formulation that handicapping the judge's outcome is not what

should -- it is very hard to come before a judge and try and

persuade you by saying, Well, shucks, we really thought you

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were going to come in here, so we are arguing for that.

To phrase it very differently and, I think,

appropriately, one of the things that I am conscious of as a

lawyer practicing before the Court is whether or not the

arguments I make or the assistants I work with make are helpful

to the Court. It often appears unhelpful and my view is it's

unhelpful when prosecutors simply come in and say, Well, we did

the math, this is the number, and if you do not give the number

there is not a lot to talk about.

So, while I do think it can be a useful exercise, I

think there's something to be said for saying whether or not

you deem Mr. Latorella a four-level leader or a organizer

because we can find five people who are arguably culpable in

one way or another, some of them with only a hazy sense of any

bigger picture of fraud, but they sign something they shouldn't

have signed, and, therefore, we found five culpable people that

makes him a four-level leader or organizer rather than a

two-level leader or organizer. The question one has to ask is,

is that helping us refine and sharpen our sense of this man's

culpability?

The core features of this crime, as reflected in the

Guidelines, are, for the most part, important and worth

considering. The fact that somebody is a director or an

officer of a public company matters, we would suggest. The

fact that it was not individual conduct but collective conduct

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matters, although those tend to go together; not always, but

they tend to go together. Crimes committed by directors of

companies tend to involve numbers of people, they tend to more

often involve complex matters, they tend to more often involve

large dollars, the measurement of dollars as a congener for

culpability.

I'm sure it wasn't the beginning of the debate, but I

first really tuned into a decision by Judge Charles Breyer some

years ago at a time when the Guidelines were still mandatory

that very persuasively suggested that in situations where there

are multiple -- particularly when you are talking about

price-earning ratios, you get multipliers, and a falsification

of revenues is multiplied in the market in a way that, on the

one hand, it would be unreasonable to say, well, the fraud is

simply the amount by which you overstated revenues, if the

fraud was motivated by a desire to move the market.

On the other hand, I have stood before this Court for

sentencing, for example, in connection with the Inso (ph)

matter and the $200 million loss as a starting point was not

necessarily a helpful gauge of what is the culpability of the

individuals whose liberty is in the hands of the Court, which

is a long way of saying any way you calculate these Guidelines,

they are way above five years.

All of the parties discussing the matter knew that.

We have entered into a five-year agreement because, as Mr.

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Lelling said, it was the low end of what, when

Mr. Weinberg said, "Come on, what's the very least you could

live with?" that is the number we got to.

We are prepared to persuade the Court that that

number, or to try to persuade the Court that that number does

meet the core purposes of sentencing as set forth under 3553.

If it's helpful for the Court to go through item by

item of the Guidelines, certainly that is doable, and I believe

Mr. Lelling has laid out cogent positions on every one of them,

but I think any way you slice it, we are all some -- not quite

order of magnitude -- but some very significant margin above

the five-year number. So, I suppose that leaves us with the

question of, if the Court finds unpersuasive our reasoning

about why five years is, in our view, the lowest sufficient

sentence, then that opens the second set of questions about

whether the Court should accept the plea.

THE COURT: Well, I think it proceeds this way: The

first order of business is, ordinarily, calculation of the

Guidelines. I will, obviously, hear from Mr. Weinberg, but the

parties are in agreement that the Guidelines are in excess of

the single count here, and they have an agreement that they are

both going to recommend the highest amount under the charge.

That could mean going immediately to Section 3553 factors

without going through with great care the specifics of the

Guidelines.

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I am inclined to think that that is, having listened

to you, probably the best way to do it, particularly with

restitution being put over for a period of time until we have

got the resolution of all outstanding charges in the case. The

question of withdrawing the plea, which is on my mind simply

because there are other cases, including Mr. Fields' case, that

raise questions of when is a plea withdrawn, can it be

withdrawn once it has been tendered to the Court or some

agreement, whether a fuller agreement or not is presented to

the Court, is shaping my thought about this but not a lot.

This seems to me to be an area in which the Court

ought to be deferential to charge bargaining as well as

sentence bargaining, because the parties have made some kind of

rough evaluation, but also includes questions of cost and

likelihood of conviction on the part of the Government, I

suspect, without having to go into that. But there is always

uncertainty in any case. So, I suppose I should be deferential

in that fashion and not be a slave to the Guidelines in this

context.

So, with each iteration I try to refine what I have to

say.

But, Mr. Weinberg, do you have something?

MR. WEINBERG: Not a great deal, your Honor. I do

think that there are occasions when I was an advocate and

deeply disappointed in the Government's charge choices, for

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instance, minimum mandatory sentencing, which have the result

of extinguishing judicial discretion.

In this case, the Executive Branch, the U.S. Attorney,

headed by two mature prosecutors, not inexperienced people,

certainly not people I had the capacity to take advantage of in

plea negotiation, came, I think, to a responsible decision in

their discretion to dismiss charges, which I think adds an

extra element to the kind of legal difficulty of the standards

that your Honor would have to address were you to think that a

five-year sentence is inappropriate or not equitable.

I think five years is an enormity to a man like

Mr. Latorella. I think it's a fair sentence. It's one I am

prepared to recommend, as I negotiated away from recommending

anything but five years. The Government negotiated too. They

took into consideration a wide variety of variables, came to

the conclusion that five was consistent with 3553, and I do

believe this is an appropriate case for your Honor to endorse

the joint recommendation of both parties.

I should also say, and I do not want to bring child

pornography into this, but this is not the only area where the

Guidelines in all of its overlapping enhancements have come

under judicial scrutiny. All across the country courts have

criticized the kind of Draconian application of child

pornography Guidelines. I had a case in Puerto Rico recently

where Judge Fuste set a five-year sentence with a 17-year

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Guideline.

Again, I think it is a credit to wise and mature

prosecutors not to seek a sentence on Mr. Latorella that

exceeds the least-necessary sentence that's consistent with all

of the purposes of sentencing.

THE COURT: Well, I guess I am persuaded that I should

proceed on sentencing here without doing a precise calculation

of the Guidelines. I will simply note, because the Judgment

and Committal order will require, that I am not revising the

Guideline determination; I chose not to inquire further than

what was provided. I am not going to do it on the basis of

saying, well, the guideline alternatively calculated by the

Government is "X." I will include it and indicate I am

adopting them in the sense that I have not chosen to modify

them and go to the 3553 dimension of the case, which we have

touched on already, of course.

And I am going to put off the question of restitution

until the entire case is resolved. That may or may not yield

very substantial amounts of money, which act as a stalking

horse for loss here, but I think that is the practical way of

dealing with it.

And, ultimately, the Guidelines have created this

illusory mathematical certainty about what goes on in the

sentencing process, and at its best -- and, frankly, this

discussion indicates to me something of its best -- it is an

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iterative process of discussion, a conversation between the

Court and the parties about what it is that sentencing is

supposed to be about and capture in which the various parties

have their own prerogatives, one of which is obviously the

Government's prerogative to charge and decline to pursue

charges in a way that shapes the sentence itself.

If push comes to shove, which it rarely does, that may

call for some discussion about whether or not a judge says, "I

am not going to permit leave to drop the charges," but I do not

think this is that case, and defense counsel is in a position

of making some hard judgments about what the proper and

available and practical resolution should be.

I tend to favor transparency in discussion of

respective roles, and I have received that here. I do not find

in this a sense that, while the Guidelines may lead to a much

larger number, that the numbers that are available here would

be unreasonable. They are in the reasonable range, I think.

So, I am prepared to go forward on that basis.

So, do you wish to be heard some more, Mr. Lelling, on

the 3553 factors?

MR. LELLING: Yes, your Honor. Thank you.

As the Court has heard, the joint recommendation of

the parties is five years' incarceration for Mr. Latorella. We

would add three years of supervised release, restitution in an

amount to be calculated at later date, after Mr. Fields' trial

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is resolved.

In our view, this is truly the least that is

sufficient to reflect the severity of the crimes

Mr. Latorella committed, and it only meets that standard

because he did accept responsibility, if only at the last

minute. The crimes involved are fairly common -- I know the

Court has seen them before -- inflating revenue, lying to the

accountants, lying to the SEC, and so, thus, lying to investors

about the health and nature of the company that they were

investing in. I know the Court has seen these cases.

What sets this case apart for us, it's a theme we

stumbled upon very early on in the investigation, was, in

short, the enthusiasm and callousness with which the defendants

pursued the crimes in this case. The conspiracy here involves

three primary, three major scams, the first being Andover

Secure Resources, which is essentially fabricating an asset on

the company's books, in part to hide the fact that the company

failed to meet its target in its IPO. The second is Omni Data,

sort of a classic revenue-recognition scam in which they

announce a deal with an outside company that does not exist,

they fabricated it. In fact, at the time the deal was

announced in late November -- I think it's late October of

2004, the company with which Locateplus allegedly has a

contract has no existence at all, even on paper. It took six

more months for James Fields to incorporate the company and

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open the P.O. Box and open some bank accounts for it.

Third, you have the Paradigm Tactical Products scam,

which is the defendants fabricating wholesale an array of

accredited investors for a company called Paradigm Tactical

Products in order to deceive the NASD, or what used to be

called the NASD, and the SEC into approving it for a public

quotation on the Pink Sheets while not having to register with

the SEC and so do quarterly and yearly SEC filings. On top of

that in the period of the conspiracy, there's various petty

embezzlements that Mr. Latorella and Mr. Fields commit, and

they abuse their position in other ways: extensive misuse of

corporate credit cards, etc.

To pull all of this off, they essentially betray

everyone around them, betray and manipulate everyone around

them: professional colleagues, lovers, friends. It didn't

matter who it was. That was really a defining element for us

in this prosecution.

So, for example, Ms. Kristie Chapman, a Junior Sales

Associate at Locateplus around 2000, has a romantic

relationship with Mr. Latorella when he is the CEO. Several

years later he schmoozes her into being the quote, unquote

president of Omni Data. She is emotionally fragile, she is

having financial difficulties, and he sets her up in this job

working for a company that she doesn't know doesn't exist, and

then Mr. Latorella and Mr. Fields watch for a few months as she

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does her darnedest to do work for this fake company.

Or Ms. Caroline Hashem, mother of two of

Mr. Latorella's children, who he induces to help him with the

Paradigm Tactical Products scam by signing false paperwork to

open a brokerage account basically containing information

showing that she is an accredited investor, when, in fact, she

is nothing of the sort, opening a bank account, again under

false pretenses, signing checks in blank and then giving them

to Mr. Latorella so that he can do what he wants with the

checkbook, being the trustee, the fake trustee of a fake trust.

That is one of the Paradigm Tactical Products

investors. This is what he does to the mother of two of his

children.

In total, Mr. Latorella uses the identities of six

women, six with whom he had romantic relationships over the

preceding years: Kristie Chapman, Caroline Hashem, Keeley

Valliere, Julie Hastings, Patricia Leonard, and Ksenia

Sirotinskaia. Name, date of birth, Social Security number,

address and phone number for every single one of them he takes

and uses as the identities of fake Paradigm Tactical Products

investors.

He victimizes the dead. Timothy Rodden unwillingly

resurrected on paper. Mr. Rodden died in 1985, yet Mr. Rodden

has a P.O. Box, an e-mail address, a brokerage account, a bank

account, and he, too, invested in Paradigm Tactical Products.

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Finally, the accountants. They are, obviously, a

factor in every case of this nature when you are dealing with a

publicly traded company, since the accountants have to sign off

on the financials. But there is real harm here. The

manipulation of the accountants, first CCR, and then later

Livingston & Haynes in Wellesley, goes on for years.

And what occasionally happens in these kinds of cases,

as the Court knows, I think, better than I do, is, not only the

accountants get to be publicly humiliated when the indictment

comes out, because it becomes clear they didn't catch the

fraud, if the SEC decides they did not work to whatever the

applicable professional standards were, then they get

sanctioned by the SEC to boot. That's what happened here.

These accountants were not participants in the fraud;

they just had the misfortune of coming into the orbit of

Mr. Latorella and Mr. Fields. So, they are deceived along with

the various other people I have mentioned for years as to the

nature of what the defendants are doing, and then for their

troubles they also get sanctioned by the SEC, which has real

professional reputational costs to these people and probably

also a financial cost

On that note, Mr. Bill Wood, one of the accountants

who worked on the Locateplus accountant, is here today and

would like to give a victim impact statement.

THE COURT: In that connection, perhaps I should have

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said it at the outset, but I was going to say it after the

Government had completed, to inquire whether any persons who

might be considered to be victims here wish to speak orally.

MR. LELLING: Yes. He is the only one, Mr. Wood, and

he is here in the back.

Finally, there are victims to every scam of this

nature. The Government did not pursue sort of a broad

fraud-on-the-market approach to loss here. The Government,

instead, looked for specific victims, and victims there are.

The accountants are victims, but there are also

investor victims. Randy Jurecka, the classic individual

investor. He lives outside Charlotte. After 9/11 he thought

that security-related companies might be a good investment. He

follows the press releases for Locateplus. Eventually, he

invests. He considers himself cautious, because when a press

release comes out he doesn't jump to invest, he watches to see

what happens.

So, in late 2004, the company announces Omni Data.

His interest is piqued but he doesn't jump in. He waits to see

what happens. Well, then the press releases start coming out

touting substantial increases in revenue in 2005 and that is,

of course, attributable to the fake Omni Data contract. He

begins investing. He is a victim in this case.

And there are institutional investors, like Special

Situations Fund, who also invested, who are victims, and they

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have submitted victim impact statements to the Court in

writing.

So, in short, put aside the concerns about the

Guidelines for the moment. The five years, in the Government's

view, is the low end of enough in this kind of circumstance.

It is a substantial hit for the defendant, who will lose

liberty for five years, someone who has no prior record, but it

is the least that is enough in light of, A, the extent of the

fraud they attempted, and, B, as I said before, the enthusiasm

and callousness behind it. You can commit a securities fraud

without the wholesale manipulation of everyone you know, but

that is not what happened here, and that factor, to us, is

something of an aggravating factor.

So, in closing, I would say five years is the least

that is sufficient, and that is what the defendant should

receive.

THE COURT: All right. Thank you.

So, I will hear from Mr. Wood, then, if he is present.

Mr. Wood, if you would use the podium right there.

MR. WOOD: Thank you, your Honor.

My name is William W. Wood. I am a CPA with

Livingston & Haynes, and I was the reviewer on the Locateplus

audit.

In addressing the Government's statement of the extent

of the fraud, we have dealt in private companies with frauds,

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but they were usually limited to the one or two people

absconding with assets, etc., classic. We have never dealt

before with one where it was this widespread and thoroughly

corrupt. We had hoped that, with the passage and the attention

given to the Sarbanes-Oxley Act, that it would at least affect

the CEO and CFO when they provided us with management

assurances and signed off on them, that they would take that

into consideration, particularly when we asked about specific

items related in this case to Paradigm. That did not slow them

down.

Steps were taken that are odd to see in a

revenue-recognition fraud in that real money came in. Now,

that came in apparently from other fraudulent activities

separate and some from misstatements relating to paying down

some of the debt of the company that was legitimate debt.

As to the damages, our firm is 80 years old. I know

1932 probably was not a great time to open a new professional

firm, but it has been successful since that time. We have

never had an action against us, never had any question

professionally. As it stands now, we have been censured by the

SEC for not having followed this more in depth.

THE COURT: Can you explain to me what the censure

consists of, what specifically the Commission has done.

MR. WOOD: Okay. They took an action against us for

violation primarily of Reg. 10b, which is that, in the event we

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find criminal activity, that we report it to the Board, and if

they don't take action, then the next day we report it to the

SEC. We had suspicions that did not -- you know, I realize

that in this environment we are used to charging people with

crimes, but in a civil environment this is something you don't

do without considerable backing.

We brought our suspicious to the Board. They asked

for their outside counsel to follow up on some issues. He

assured us they had been resolved. The main thing was that

there was a whistleblower involved, and we were told by the

outside counsel that it had been examined, it had been a

personal matter between he and Mr. Latorella, and that there

was some debt involved, it had been repaid and the person was

fine. The person did not contact us after that, and we were

not able to contact them.

THE COURT: In terms of the sanction that the SEC

imposed -- you called it a "censure" -- what does it consist

of, a public admonition or something like that?

MR. WOOD: It's a public admonition to the firm,

coupled with a fine of $130,000. We certainly would have

fought it further, but, obviously, we have limited resources in

terms of finances for legal fees, and these matters are not

covered by insurance. Personally, like I say, just, for

example, several years back PCAOB, the Public Company

Accountant Oversight Board, held a conference in Boston and had

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a discussion panel of their members, SEC members and one member

of the local audit community from a small firm, and that was

myself. I am currently banned from practice before the SEC for

three years.

THE COURT: Does that mean you cannot do any public

companies?

MR. WOOD: Personally, I can do none; I cannot

contribute to the work on them. Should I leave public

accounting, I cannot be the financial officer or CEO of a

publicly held company for that same period. At that point I

can ask to be reinstated.

I had planned to retire sometime prior to this, but I

intend now to remain in public practice until I am able to be

reinstated. We have lost at least one major client directly

related to this because, again, there is an association with

the people who certify your financial statements.

Like I said, we have been censured. We are in a

competitive field, and it's obviously easy enough for another

firm to say, "You don't want to be with them," which

contributes further to the damage to our reputation.

And, again, personally the ban -- there have been,

perhaps, six cases in the SEC literature where only a 10b

violation has been asserted or the somewhat related 10a, and

this is one of them. So, I will probably become the textbook

example, literally.

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Again, our agreement with the SEC is that we neither

accept nor deny their findings. I am not offering this in

denial of their findings; obviously, additional skepticism

possibly would have cut through, but, again, I also do not

accept it as definitive.

Personally, if we were to look at financial issues,

and I know it is a small amount, but I have taken a 50-percent

reduction in pay. I was not highly compensated to begin with,

but we are a small firm. So, that relates to $50,000 a year,

because I felt, first of all, we had money that the firm had to

pay out and it's not fair that my other partners should be hit

with any part of that.

Essentially, the money is not the issue, though. It

is a matter of reputation, it is a matter of personal honor. I

am a retired Army officer. I been a CPA for 30 years. Honor

is what you have in those businesses. I realize that does not

come under the Sentencing Guidelines and is certainly not

subject to restitution, unfortunately.

THE COURT: Thank you very much.

So, Mr. Weinberg.

Unless there is some other person who comes within the

Crime Victims Act who wants to speak.

MR. LELLING: Not that I know of that is present, your

Honor.

THE COURT: Mr. Weinberg.

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MR. WEINBERG: Thank you, your Honor.

Mr. Latorella stands, or will shortly stand before you

as a 47-year-old man who had no business being an officer of a

public company. He had a skill in technology, he had a skill

in being able to create searchable databases that were of

utility to agencies from the FBI to local police to private

investigators. Had he only had the good fortune to limit his

company to a private company, he probably would not have fallen

within the radar of the SEC or the U.S. Attorney's Office, but

he chose to go public, and he is responsible and has pled

guilty because he is responsible for a lot of misbehavior, some

of which he knew about, much of which he was deliberately or

willfully ignorant of. But, as the CEO, he signed the forms.

He is responsible to Mr. Woods. Even though he never met Mr.

Woods, the Government's investigative reports show that he was

thought of as a ghost to the auditors. They didn't even have

his e-mail till March '07, when he left the company. But that

was all delegated and done by others, not Mr. Latorella. But

he is the CEO. He signed his name, he is responsible. If he

didn't know the details of the forms that were being submitted

to the SEC, he certainly knew that they reported Omni revenues.

Mr. Woods said it's unusual to have these incoming

revenues that are attributable to a source other than a real

customer. This Omni company, which I think is at the core or

the epicenter of the Government investigation, was begun in

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good faith. They were to be a successful small company to fill

another customer that Locateplus lost when a company called

Intelius, which was making lots of money, decided they didn't

want to pay for the data. They set up Omni, they set it up in

the wrong way with the wrong post office with the wrong people,

and when Omni didn't match their wild expectations,

Mr. Latorella, instead of simply being transparent and closing

that, tried his best to match dollar for dollar the kinds of

revenues that Locateplus had advertised and was expecting from

Omni.

And it's a mitigating factor. As the Government has

identified certain aggravating factors, the man went bankrupt.

He took money from his own pocket and put it into Locateplus.

He literally borrowed over a million, maybe close to two, maybe

over $2 million, much at high interest rates, some from banks,

some from lenders that are currently being alleged in the

Bankruptcy Court to be people of ill repute. But he did that

because Locateplus was more than some detached company. It was

his baby. It is what he lived with for 16 or 18 hours a day.

And I am not here to in any way mitigate or justify

the many things that an even half-competent CEO would have made

sure didn't happen. It did happen. It happened on his watch.

They constitute regulatory crimes, they constitute criminal

crimes. But he is bankrupt. He is not Jeff Skilling. He

didn't go to Harvard Business School, he didn't get trained at

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MacKenzie, he didn't get trained at Goldman Sachs. He got no

training to be a public officer, and he failed and failed

miserably.

He is going to jail and he is leaving a loving family

and leaving his mother and leaving his family knowing when he

made his decision to enter that plea agreement that he was

going to jail for a substantial number of years for a man who

never expected to go to jail. He is not a professional

criminal. He is a person who broke the law in this case in

this circumstance who was drowning in responsibility, when all

he wanted to do was fix hard drives and create better search

engines. He was required to do more. He failed to do more.

He used drugs, he used alcohol to try to fill the

void, was just in a spiral down. He owed money to people he

borrowed money from to give back to Locateplus, ended up being

a participator in the Paradigm event.

The Government evidence is very clear that some

portion of the Paradigm stock sales went directly to

Mr. Latorella, to Omni and into Locateplus, again attributed to

a company that wasn't generating revenues. But a large part,

from his perspective, of why the Paradigm event occurred was to

repay these creditors and to put more money into Locateplus to

try to match some of the revenues that they told stockholders

was going to be realized from an arm's-length customer that, in

fact, didn't become a viable company. That's Omni.

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So, when the Government and I negotiated this plea, I

felt five years was a substantial sentence. I didn't

appreciate the wrongdoing or the case or the many examples

where he should have acted, in the words of Mr. Woods, more

honorably. Five years is an enormity to Mr. Latorella. I

think it's a fair sentence.

THE COURT: All right. Thank you.

So, Mr. Latorella, I will hear from you, if there is

something you would like to say at this point.

THE DEFENDANT: Yes, your Honor. Thank you for giving

me the opportunity to talk to you and to tell you a little bit

about myself. I wrote some things down, because, frankly, I've

never talked to a federal judge, and I'm scared about the whole

thing, obviously.

When I was a boy, my dad told me that the road to hell

is paved with good intentions, and certainly my road has been

paved with my good intentions. I'm standing before you today

because of my own neglects, and things that I did wrong, and

failures and things that I should have done and didn't do, and

I couldn't be more sorry for it.

I want you to know a little bit about me, because you

have heard a lot of the things, and I just want to frame it in

the context of what really is what happened, and me. I'm not a

big-time CEO and any of that, as my attorney said. In fact,

all I ever wanted to be was a police officer. I got accepted

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to Mass. State Police Academy, and that was my dream, and it

quickly faded as I got a knee injury and got a medical

discharge from there. It was devastating to me, but I figured

that I would recover and I just pursued it. I kept taking

exams and trying to get on again.

In the interim, I started a company called "Worldwide

Information," and I started it with my partner, Sonia

Berjoni (ph), and we wanted to make this great CD-ROM product

that would help police solve crime, and that they would be able

to search motor vehicle records in a way that they never could

before, with partial plates. So, we invested every penny that

we had in this company. I worked 18 hours a day every day,

sleeping, and not even bathing, on bubble wrap on a table,

cashing in all my bonds my grandmother gave me, just to run

this company.

But it was worth it. We made this product at

Worldwide Information that was amazing. It solved countless

violent crimes: rapes and even homicides and a bank robbery in

Saugus and over and over again. And that gave us so much pride

that we made this product that would help people, because

that's what we were about. We started the company to help

people. We never wanted to make all this money and scam. We

just wanted to build a product to help people, and that's all

it was about.

I never had any intention of growing any further than

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this Massachusetts Motor Vehicle disc on CD-ROM until someone I

knew said to me, "Oh, if you had more money could you make

something, could you do more states?" And I said, "Well,

yeah," I said, "but I have invested every penny I had in this."

In fact, I wasn't even making a salary. I worked details on a

road detail that the full-time police didn't want because they

were going to get killed on it. So, I worked there to earn a

living so we could make the CD-ROM product. So, he said,

"Yeah, I know I can get you money in this thing called a

'private placement.'" I'm like, "Okay. Well, I don't know

what that is, but..." He said, "Yeah, I can get you hundreds

of thousands of dollars and you can make it." I said, "All

right. Well, that sounds good." And I knew that there were,

like, government forms and whatever, but I got it from him and

the lawyers did whatever they did, and we bought more data and

we made more states, and we made Wisconsin and we did the same

great thing that we did for Massachusetts and these other

states, and everyone was really happy.

So, as that grew, they said, "Well, if I can get you

more money, could you do it with other data?" And I said,

"Yeah, there's all this other data that we could link in the

same way and do it." So, yet again, I took another private

placement and started Locateplus.

And, your Honor, Locateplus was an amazing company.

It always was. But it was more than a company to me. It was

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my baby. I dreamed of helping police everywhere and solving

crimes.

So, we built this company, worked day and night, and

we did build it. We built it into this great big company that

was solving crimes. I got awards. I was in the newspaper for

the crimes we solved. The Violent Fugitive Task Force of

Massachusetts gave me an award for violent fugitives that they

apprehended. It was a great company. It wasn't just great for

me, it was great for my employees. We all worked hard and we

loved it.

When 9/11 happened in 2001, the Government contacted

us and said, Hey, we need people run on the planes, the

passengers, who they know and who they are connected with, and

we did it instantly. We never asked them for money. We

weren't about money. It was never about money. And the

employees who worked there didn't ask for money. They worked

over and over all night long that night, like, getting boxes of

paper to the government to help them. And that's what we were

about. That's what all of us were about, not just me, but the

whole company. We were not about being rich or taking money.

We were about helping people, and that's what we did.

Locateplus cost an enormous amount of money to run,

and I did everything to save money. I sat on the floor

screwing together hard drives for 15,000 that cost a quarter

million by LexisNexis so that we could compete with them. I

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mean, LexisNexis was enormous. But that is what we did.

So, I kept trying do this and grow the company, but it

was so expensive and we were getting new private placements,

and my stress just got worse and worse and worse. I started

taking anxiety pills to just deal with it.

And then LexisNexis came to me, and they offered me

$25 million, $25 million to sell the company. I had just taken

one of these private placements, that now I had done a few of

them, and the last round, because they would change the prices

on them, the investors came in, and they would have lost money

at $25 million. I would have netted $15 million in my pocket.

I would have been gone long before any of this stuff, and I

would have put $15 million in my pocket. And I said, No, we

can't do that, we have to do something.

So, the accounting people said, Well, you can give up

your stock and do this rights offering and all of this stuff.

So, I diluted myself from owning the majority of this company,

60 percent. I just gave my stock away so that the price would

come down. And I never took the deal, because I believed in

the company. I was the biggest shareholder. I wasn't selling

my stock. I was out there trying to build this company.

I never had any thoughts of going public at all. I

interviewed a gentleman for the accounting job, and he said,

"Oh, you know, I want to take you public and make all this

money." And I was, like, really skeptical, like, "Okay." I

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just want to build a database and make a great product, and

that's what I wanted to do.

But I listened to him, and I hired him as my CFO, and

he put together this IPO, and he hired this brokerage firm,

which turned out to be unscrupulous, with a lot of bad people

in it, people who new about stocks and cared about, you know,

like pump and dump, or whatever, all of these things.

It wasn't his fault, that CFO, that first CFO. He

should have known better, but he really wanted to make the

company grow also. And I should have cared that everything was

being done correctly, and I wasn't. I wasn't caring. I just

cared about getting the money. You know, we were in debt. We

had to pay employees, we had to do all of this stuff. And I

couldn't have been more wrong. I did everything wrong. It's

my fault. This is my fault, because I did everything wrong

that I could do wrong.

But the mistakes were compounded by the fact that

these IPO brokers brought bankers in when there wasn't enough

money that I thought were legitimate. There were big banks,

and, unknown to me, there were organized crime gangsters

ultimately making threats and whatever. But they set up these

high-interest loans that I personally guarantied. I put my

house up on it, because I wasn't trying to, like, protect

myself. I put my house up on it, and I got deeper and deeper

in the loans and put myself in a worse spot.

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So, you know, we kept trying to think of something to

do. Omni Data was a business project. I mean, the God's

truth, it was a business project that we thought we could get

sales on, and when it didn't work I should have just stopped

it. I should have said something and I didn't, because I was

trying to protect my baby. So, I figured that, okay, whatever

money I get I'll throw into it and it will protect it. It

wasn't to pump stock, it wasn't to do any of those things. It

was to get money into Locateplus, and I did it at all cost.

Instead of caring about what the law was -- I didn't even know

what the law was; I didn't even pay attention. I said, just,

let the money in, as long as it comes in to Locateplus. And

that's what I did. I allowed press releases to go out, and I

never looked at them. And I said, it doesn't matter. As long

as the money's coming into Locateplus, and I couldn't be more

wrong for what I did, but my intention was good.

Your Honor, please understand that I am not even

telling you these things because I am mitigating anything I

did. My remorse and regret couldn't be higher. But I just

want you to know that it was with the good intentions that we

tried to do it; it wasn't to take any money.

I'm not a corporate person. I look back and find it

hard -- I went from making this little product that police use

to standing before a federal judge that's possibly going to put

me in jail. I've never been in jail, I've never been arrested.

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In fact, I've only had a few traffic violations, minor traffic

violations, in my whole life.

I love my family, I love my kids, and I taught them to

work hard -- they're here today -- never steal and to love

everybody. I work hard today doing a marketing product to

protect kids, because I love kids.

I take care of my mom, who is 92 years old, who lives

alone, and I do my best to provide for my fiance, Megan, who is

in law school, and I love her very much. Excuse me.

(Pause)

THE DEFENDANT: We have two beautiful children, our

son, Henry, and our daughter, Madeline, and I work hard to be a

good dad to them and to give them a good life and to teach them

to do the right things, be honest and careful, careful that I

wasn't and I am so sorry for.

We are expecting our third child. Megan's pregnant

with our child, Emmet, who is going to be Emmet, who is due in

August.

This is who I am, your Honor. I'm here today to say

to all the people that have come here who believe in me, who

know me, that I am sorry. I'm sorry for everyone I let down.

I'm sorry for everything I did and to promise to you, to

everyone here, to God, if you grant mercy to my family, who

needs me, so I can care for them, you will never see me here

again, ever. I'll care for them with all my heart and spend

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the rest of my life making up for my mistakes. I promise I'll

never be led astray with good intentions again. I want to do

the right things and help people with good acts instead of good

intentions.

Thank you, your Honor.

THE COURT: Thank you, Mr. Latorella.

Well, the bottom line here is that I will accept the

recommendation of the parties with respect to the sentence of

incarceration of five years. The reasons for doing that, to

some degree, have been developed here, but let me outline them

in the protocol of Section 3553, which is the overarching set

of considerations that Courts are supposed to have in mind when

they sentence individuals.

The first broad topic that I have to address is the

nature and seriousness of the offense and the character of the

offender. The nature and seriousness of the offense cannot be

understated. The integrity of our commercial system depends

upon the integrity of the persons who are involved in it, and

the process, particularly in public companies, of eroding that

cannot be more dangerous to us as a commercial society, one

that depends upon the capacity of its courts and commercial

activities to make judgments that will serve the broader good

of the public.

It is not, I think, accurate to refer to that as a

matter of regulatory violation. It is fundamental, whether or

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not you can trust other people that you do business with. We

are at large because we are dealing in markets that are not

directly face-to-face.

So, the nature and seriousness of the offense is

substantial, and here it is affected by the manipulation of

persons who were working in that company, affiliated with the

defendant in ways that simply are unacceptable.

That brings me to the character of the defendant. I

do not, for a moment, wish to suggest that there are not very

good aspects of the defendant's life and that he has not been

supportive of those persons he has been closest to and those

for whom he bears responsibility, like children. But there is

another dimension here. It is the manipulation of persons who

have developed relationships with him to serve broader ends.

Mr. Weinberg is correct, I think, that the defendant

was not someone who should have been a Chief Executive Officer

of a company for any of a number of reasons, but not the least

of them being that his focus on success of his entity led him

to pursue a path that abused others in ways that he did not

abuse others in his own life.

Listening to the discussion that Mr. Latorella had

gives me the sense of someone who is, to use the psychobabble

of the moment, in denial about what was really going on here,

and what was really going on here and what brings him here is a

fundamental character flaw and a willingness to manipulate

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others. There is collateral damage, to be sure, and that

collateral damage is loved ones who will not for a period of

time receive his support, which has been real and genuine but

is corroded as well by these activities.

I look at the question of what we call "specific

deterrence;" what do we need to make Mr. Latorella not do

something like this again? Well, circumstances may take him

out of the game as a result of this. I am not sure that he yet

recognizes that there were fundamental choices that he made

that were not just to make his "baby" flourish but, rather, to

do so in a fashion that is fundamentally reprehensible. So,

circumstantially, maybe Mr. Latorella will not be able to do

this again, but that is not because, as I perceive this, he is

fully cognizant of how wrong what he did was.

I turn to the question of general deterrence, that is,

the idea that someone in Mr. Latorella's position who is

familiar with what the costs are of this conduct would think

twice. Here, the cost-benefit analysis is, to a large degree,

speculative: no risk, no return. The bigger the risk, the

bigger the return.

So, you look at this and say is five years going to

keep these people from doing that in a system in which the

likelihood of detection is relatively low, in which the

opportunities for manipulation are relatively high and the rush

of self-esteem is so high that, even looking at the costs, they

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are not going to be deterred? Hard to say, but five years is a

long time, and someone looking at this with a cold eye,

considering whether it makes sense to manipulate the market or

face the prospect of five years, may be deterred.

I look at the question of what is the role of prison

here. The role of prison, insofar as I can see, is that

Mr. Latorella will be confined. It is not a matter of

developing for himself new skills or education, although that

may follow. Not that I would send people to prison to benefit

themselves independent of personal culpability, but there is a

benefit to what appears to be a substantial drug-abuse problem

that defense counsel have properly said should be addressed by

the extended treatment program that is available in the Bureau

of Prisons, but, for the most part, the benefit to

Mr. Latorella personally in terms of advancing skills and so on

is going to be minimal.

There is another, however, dimension to it. It seems

contrived for me to say it, but having last week spent a day at

two federal facilities in New Jersey, it came clearer to me

that there are people who are in prison like Mr. Latorella,

with Mr. Latorella's skills or background or personal

characteristics, who can be of some benefit to others who are

not as gifted, who can provide some larger advice within the

prison system to people who are less skilled and, perhaps,

unaware of what possibilities could be for their lives and also

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the dangers of continuing on a particular route. That is a

kind of informal counseling. It seems contrived, but I do not

think so, having, as I said, spent some recent time evaluating

prison systems.

There is a question of what is called "unwarranted

disparity" among sentences. That is the driver, frankly, for

the Sentencing Guidelines, in creating the Sentencing

Guidelines for providing some mechanism for keeping them more

or less aligned, and, in fact, was a major driver for the

Sentencing Guidelines generally. That is to say, the political

bargain that was struck, if we have to personify it, was

between Senator Kennedy, Senator McDermott and Senator Thurmond

wanting heavier sentences for what I will call "blue-collar

crimes" and Senator Kennedy wanting heavier sentences for

white-collar crimes. So, strange bedfellows sometimes lead to

unnatural acts, and this was the outcome, a set of Guidelines

that created tough, tough sentences on their face for

white-collar criminals.

But having been in the system for a while, I have some

sense of the range of sentences that are imposed in cases like

this, and while I think this is at the low end of similar

cases, I think it is in the competitive range of what is being

meted out for people who are involved in white-collar crimes.

There are, of course, the outlier cases, the cases that do not

demonstrate anything other than the particulars of it, and

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today, just as I came down, I saw that a very substantial

sentence was imposed on Mr. Stanford for a Ponzi scheme. But

in the stock-manipulation area, this sentence is perhaps a

little on the low side, but, as I say, in the competitive

range.

So, for those reasons I am prepared to accept and do

accept the effectively agreed-upon recommendation, because it

is the top of whatever I could do in this case by the parties.

Now, the sentence, as I have indicated, is 60 months'

incarceration. I am not going to impose a fine, because I am

not making a determination at this stage but deferring the

question of the restitution, whatever conceivable restitution

there would be, and it is important for us to identify right

now what the calculation of the Probation Office has made will

be of $6,257,323.98. Whatever it is going to be, it is going

to be substantial and should not be diluted by a fine, and to

the degree there is other money available under these

circumstances, of course it ought to be devoted to people for

whom Mr. Latorella is responsible and has taken responsibility.

I have to emphasize that again.

There will be a period of supervised release of three

years. The defendant is obligated to report to the Probation

Office within 72 hours of his release from custody.

I anticipate that he will have restitutionary

obligations, and in order to enforce those restitutionary

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obligations I am going to impose certain financial dimensions

to the period of supervised release. The first is that the

defendant will be obligated to pay his restitutionary

obligations during the period of supervised release. To the

degree that he has not paid them, he is obligated not to incur

any new credit obligations without the specific authorization

of the Probation Office. He is obligated to provide the

Probation Office with any requested financial information, and

he is obligated to -- or I should phrase it somewhat

differently -- he must understand that that information will be

provided to the Financial Litigation Division of the United

States Attorney's Office for such actions they may consider

necessary here. He may not change his address without

notifying the United States Attorney for this District within

30 days of any change in mailing or residence that he has.

I will make the recommendation that he be considered

for the Residential Drug Treatment Program in the Bureau of

Prisons, but I will extend that to the conditions of supervised

release. That is to say, the defendant is going to be

obligated to submit to drug testing in the amount of no greater

than 104 drug tests per year to permit an evaluation of whether

or not he has reverted to drug misuse of the type that I think

he, himself, recognizes is problematic.

He has an obligation to provide a DNA sample, as

directed by the Probation Office.

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He may not commit another federal, state or local

crime, nor illegally possess a controlled substance.

He is prohibited from possessing a firearm or other

dangerous weapon.

The larger issues of what I will call mental-health

treatment here are not salient, but I am leaving to the

Probation Office the authority to fashion a program in

connection with drug treatment that addresses problems of

broadly conceived mental health that may have been drivers to

his abuse of drugs in this case.

There is a Special Assessment that the defendant is

obligated to pay. It is $100. It will be paid immediately.

If not, it will be paid pursuant to a financial responsibility

program that will be administered by the Probation Office.

I will take up the question of voluntary surrender and

request for recommendation with respect to the Bureau of

Prisons in a moment, but I just want to see if there are any

other conditions that the parties would have me consider?

MR. LELLING: None come to mind for the Government,

your Honor.

MR. WEINBERG: None come from the defense.

THE COURT: So, let us turn to the question of

voluntary surrender and recommendation, at least, for the

Bureau of Prisons.

MR. WEINBERG: Thank you, Judge.

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Mr. Latorella is expecting his third child with his

current wife in August, and he would ask the Court to consider

two reasons: one being his desire to be there for her birth or

his birth; and, two, being a desire to not be locked up but be

able to attend the restitution hearing that logically would

occur -- if there was an acquittal it would occur in November,

since the trial of Mr. Fields occurs in October. If there was

a conviction, it would presumably occur around the January

month or 60 to 90 days after the trial.

It is an important event to Mr. Latorella, who wants

to be able to provide for his family, and these restitution

issues are very complicated. We have the chief, the two

largest alleged victims at different times stating that their

losses were due to failure to register stock and have it

publicly traded when it was, apparently, restricted. So, he

has asked me to ask the Court whether or not he could attend

those hearings and attend them prior to rather than after the

start of his incarceration.

I know the Government is content with his surrender

date being on or about September 30. I would ask the Court to

extend that surrender date mostly so he could be there for the

first few months of his next child's life, and also so that he

could attend the restitution hearing without the burdens of

being locked up in a local prison and then transported to

wherever the Bureau of Prisons designates him.

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I know it's his plan and Megan's plan after she

finishes law school to move to Florida, and I would ask the

Court to recommend the Federal Prison Camp at Pensacola.

THE COURT: Do you want to be heard on that?

Let me tell you my initial response, which is

September 30 is the proper date here. I do not think that

extending beyond that for purposes of the restitution hearing

is appropriate, although I will take whatever steps are

necessary to bring him in so that he can consult with his

attorneys on that. That may not be an ideal situation because

it delays designation here, but I just do not see extending the

period of release beyond September 30.

MR. WEINBERG: I would ask, then, that he be

designated at the restitution hearing, that not delay his

designation, because I do think that being locked up at Wyatt

or Plymouth is a difficult time.

THE COURT: Well, I am going to, then, simply say that

he will report to the institution to which he is designated by

the Bureau of Prisons no later than September 30, and the

question of bringing him back, if it is necessary, will be from

the designated facility rather than from Wyatt or someplace

like that.

I will, as well, make a recommendation that he be

designated to a facility in Florida that meets his security

needs without going into Pensacola Camp.

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Is there anything else that we need to take up?

MR. LELLING: Not from the Government, your Honor.

THE COURT: You should understand, Mr. Latorella, you

have a right of appeal, and you will want to discuss with

Mr. Weinberg whether that makes any sense under these

circumstances.

I have tried to be as candid in dealing with these

issues as I can and explaining why I have done what I have

done. You have heard a lot more, probably, than you want to

know about how sentencing is conducted in the federal courts,

but ultimately it is an evaluation of culpability, individual

culpability, and once it is imposed the next step is

rehabilitation. If you face candidly what you have done, you

are on the first step to rehabilitation. If you, and I will

have to say, continue to deny your involvement, rehabilitation

is going to take a very long time and may not be successful.

But now, like before, it is up to you.

Do you understand?

THE DEFENDANT: Yes, sir.

THE COURT: If there is nothing further, then we will

be in recess.

MR. LELLING: Thank you, your Honor.

THE CLERK: All rise.

(The Honorable Court exited the courtroom at 3:50 p.m.)

(WHEREUPON, the proceedings adjourned at 3:50 p.m.)

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C E R T I F I C A T E

I, Brenda K. Hancock, RMR, CRR and Official Reporter

of the United States District Court, do hereby certify that the

foregoing transcript constitutes, to the best of my skill and

ability, a true and accurate transcription of my stenotype

notes taken in the matter of United States of America v. Jon

Latorella, No. 1:10-cr-10388-DPW-1.

Date: July 20, 2012 /s/ Brenda K. Hancock

Brenda K. Hancock, RMR, CRR

Official Court Reporter

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