United States v. Executive Recycling, Inc. (953 F. Supp. 2d 1138, 2013)

United States District Court for the District of Colorado 2013-06-17

Crimes and Criminal Procedure The Public Health and Welfare

Citations

Full opinion text

ORDER ON DEFENDANTS’ OBJECTIONS TO THEIR RESPECTIVE PRESENTENCE INVESTIGATION REPORTS AND GOVERNMENT’S MOTION FOR PRELIMINARY ORDER OF FORFEITURE

WILLIAM J. MARTÍNEZ, District Judge.

On September 15, 2011, the Government filed a sixteen count Indictment against Defendants Executive Recycling, Inc., Brandon Richter, and Tor Olson. (ECF No. 1.) After a lengthy and hard fought jury trial, on December 21, 2012, Executive Recycling and Brandon Richter were convicted on nine counts, while Tor Olson was convicted on eight counts. (ECF Nos. 271-15, 271-16 & 271-17.) All Defendants were convicted of six counts of wire fraud, one count of mail fraud, and one count of smuggling. (Id.) Executive Recycling was convicted on one count of unlawful exportation of CRT monitors. (ECF No. 271-15.) Brandon Richter was convicted of one count of obstruction of justice. (ECF No. 271-16.)

The proceedings related to sentencing have been as hotly contested as the trial. After the jury returned its verdict, the parties all filed Sentencing Statements which outlined their preliminary positions on the potential enhancements relevant to the charges of conviction. (ECF Nos. 286, 297 & 298.) After receiving these filings, the Court ordered additional briefing on certain particular issues raised therein, specifically the amount of loss and number of victims of the fraudulent scheme. (ECF No. 301.) The parties filed the requested briefs and Defendants obtained the services of an expert to assist the Court with its loss calculations. (ECF Nos. 304, 310-11, 315, 336 & 337.) After reviewing the briefs, the Court determined that an evidentiary hearing was necessary and such hearing was held on April 3, 2013. (ECF No. 341.)

Additionally, at the Court’s direction, the Probation Office prepared Presentence Investigation Reports (“PSIRs”) for each Defendant. (ECF Nos. 307, 308 & 312.) Defendants and the Government filed objections to the PSIRs. (ECF Nos. 317-19 & 345.) The Government filed a Response to the Defendants’ Objections. (ECF No. 351.) The Probation Office has prepared an Addendum to each PSIR with the Probation Officers’ position on the parties’ Objections. (ECF Nos. 360-62.)

Defendants Richter and Olson have also filed Motions for Variant or Non-Guidelines Sentences. (ECF Nos. 321 & 353.) The Government has responded to those Motions. (ECF Nos. 357-58.)

Finally, the Government has filed a Motion for Preliminary Orders of Forfeiture for Personal Money Judgments. (ECF No. 350.) Defendants have opposed this Motion. (ECF Nos. 355-56.)

The purpose of this Order is to resolve most of the legal issues raised in the sentencing-related motions and briefing. As set forth below, due to the lack of development of certain aspects of the record (which is admittedly difficult to believe given the volume of paperwork filed by the parties in this case), the Court is forced to reserve ruling on a limited number of issues. Additionally, this Order does not address Defendants’ Motions for Variant or Non-Guidelines Sentences as these motions will be addressed at the Defendants’ individualized sentencing hearings, which will be set by subsequent Court order.

I. LEGAL STANDARD

Federal Rule of Criminal Procedure 32(i)(3)(B) provides that a sentencing court “must — for any disputed portion of the presentence report or other controverted matter — rule on the dispute or determine that a ruling is unnecessary either because the matter will not affect sentencing, or because the court will not consider the matter in sentencing.” “The purpose of Rule 32 is ‘to ensure that sentencing is based on reliable facts found by the court itself after deliberation.’ ” United States v. Begay, 117 Fed.Appx. 682, 683 (10th Cir.2004) (quoting United States v. Nelson, 356 F.3d 719, 722 (6th Cir.2004)). Therefore, a sentencing court does not satisfy its Rule 32 obligation by “simply adopting the presentence report as its finding.” United States v. Guzman, 318 F.3d 1191, 1198 n. 9 (10th Cir.2003). Nonetheless, “[a] ruling on a disputed issue need not be exhaustively detailed, but it must be definite and clear.” United States v. Williams, 374 F.3d 941, 947 (10th Cir.2004).

To the extent other legal standards apply to various aspects of this Order, the Court will discuss those standards in the relevant context below.

II. ANALYSIS

The Court will first determine the amount of loss for purposes of § 2Bl.l(b)(l), which was the subject of extensive briefing and the majority of the post-trial evidentiary hearing. Following this analysis, the Court will address restitution and forfeiture. Finally, the Court will discuss each of the parties’ discrete objections to enhancements applied or rejected in the PSIRs, as well as factual statements made in the PSIRs and relied on by the Probation Officers in making their sentencing recommendation.

A. Amount of Loss Pursuant to U.S.S.G. § 2B1.1 (b)(1)

Section 2B1.1 of the United States Sentencing Guidelines guides a court when sentencing a defendant for “Larceny, Embezzlement, and other Forms of Theft; Offenses Involving Stolen Property; Property Damage or Destruction; Fraud and Deceit; Forgery; Offenses Involving Altered or Counterfeit Instruments Other than Counterfeit Bearer Obligations of the United States.” Part of a court’s duty when sentencing under § 2B1.1 is to determine whether a defendant’s base offense level should be increased because of the amount of loss the offense caused. See U.S. Sentencing Guidelines Manual (hereafter “U.S.S.G.”) § 2Bl.l(b)(l) (“If the loss exceeded $5,000, increase the offense level as follows — ”).

The application notes to § 2B1.1 define loss as “the greater of actual or intended loss.” U.S.S.G. § 2B1.1, cmt. n. 3(A). “ ‘Actual loss’ means the reasonably foreseeable pecuniary harm that resulted from the offense.” Id. at cmt. n. 3(A)(i). “ ‘Intended loss’ ... means the pecuniary harm that was intended to result from the offense.” Id. at cmt. n. 3(A)(ii). “Pecuniary harm” means “harm that is monetary or that otherwise is readily measurable in money.” Id. at emt. n. 3(A)(iii).

In this case, the parties strenuously dispute the amount of loss for purposes of § 2Bl.l(b)(l). The PSIRs have a loss amount of $403,790.22, which results in a fourteen level enhancement. (ECF Nos. 307-08 & 312.) The Government contends that the loss should be valued as all monies paid by the customers named in the Indictment, as well as Summit County, for a total of $475,293.32. (ECF No. 286 at 10.) Defendants provide a variety of ways to value the loss, with the result ranging from no actual loss to a maximum of $195,000, the total amount paid by the customers named in the counts of the Indictment on which they were convicted. (ECF Nos. 297-98; 310-11.)

1. Relevant Conduct

An important aspect of the loss calculation that is disputed by the parties is which customers’ payments to Defendants should be included in the loss calculation. The PSIRs include losses incurred by the following customers: City of Broomfield, El Paso County, City of Boulder, Jefferson County, Denver Newspaper Agency, ADT, and Summit County. (ECF Nos. 307-08 & 312.) Defendants object to the inclusion of ADT and Summit County because they were not convicted on any offense specifically involving these customers. (ECF Nos. 318-19.) The Government objects to the PSIRs’ failure to include Centura Health, Children’s Hospital, and Cherry Creek Schools because, although Defendants were acquitted on the counts of the Indictment naming these entities, the Government believes Defendants’ actions as to them still fall within the relevant conduct to be considered. (ECF Nos. 345.)

“In calculating loss under the Guidelines, the district court does not limit itself to conduct underlying the offense of conviction, but rather may consider all of the defendant’s relevant conduct.” United States v. Griffith, 584 F.3d 1004, 1011 (10th Cir.2009) (internal quotation marks omitted). Section IB 1.3 sets the standard for “Relevant Conduct” as follows:

(a) Chapters Two (Offense Conduct) and Three (Adjustments). Unless otherwise specified, (i) the base offense level where the guideline specifies more than one base offense level, (ii) specific offense characteristics and (iii) cross references in Chapter Two, and (iv) adjustments in Chapter Three, shall be determined on the basis of the following:

(1) (A) all acts and omissions committed, aided, abetted, counseled, commanded, induced, procured, or willfully caused by the defendant; and

(B) in the case of a jointly undertaken criminal activity (a criminal plan, scheme, endeavor, or enterprise undertaken by the defendant in concert with others, whether or not charged as a conspiracy), all reasonably foreseeable acts and omissions of others in furtherance of the jointly undertaken criminal activity,

that occurred during the commission of the offense of conviction, in preparation for that offense, or in the course of attempting to avoid detection or responsibility for that offense;

(2) solely with respect to offenses of a character for which § 3D1.2(d) would require grouping of multiple counts, all acts and omissions described in subdivisions (1)(A) and (1)(B) above that were part of the same course of conduct or common scheme or plan as the offense of conviction;

(3) all harm that resulted from the acts and omissions specified in subsections (a)(1) and (a)(2) above, and all harm that was the object of such acts and omissions; and

(4) any other information specified in the applicable guideline.

The Guidelines Commentary further explains:

For two or more offenses to constitute part of a common scheme or plan, they must be substantially connected to each other by at least one common factor, such as common victims, common accomplices, common purpose, or similar modus operandi....

____Offenses that do not qualify as part of a common scheme or plan may nonetheless qualify as part of the same course of conduct if they are sufficiently connected or related to each other as to warrant the conclusion that they are part of a single episode, spree, or ongoing series of offenses.

Id. § 1B1.3, cmt. n. 9. The Tenth Circuit has interpreted this language to mean that “if the conduct is sufficiently similar and within the same temporal proximity, it may be considered relevant for purposes of determining the guideline range.” United States v. Williams, 292 F.3d 681, 685 (10th Cir.2002). Relevant conduct under the Guidelines thus “comprises more, often much more, than the offense of conviction itself, and may include uncharged and even acquitted conduct.” United States v. Altamirano-Quintero, 511 F.3d 1087, 1095 (10th Cir.2007). Nonetheless, relevant conduct “still must relate to the offense of conviction.” Id. In addition to being related to the convicted conduct, the relevant conduct must separately constitute a criminal offense under either a federal or state statute. Griffith, 584 F.3d at 1013.

a. Government’s Objection

The Government objects to the PSIRs’ failure to include the losses suffered by Centura Health, Cherry Creek Schools, and Children’s Hospital. (ECF No. 345 at 1.) The Court previously ruled that these entities would not be included in the loss calculation because Defendants were acquitted on the counts of the Indictment that specifically named these entities. (ECF No. 301 at 2-3.) The Court incorporates its prior reasoning here. The Court acknowledges that it has the discretion to consider these entities as victims for purposes of the amount of loss. United States v. Watts, 519 U.S. 148, 154, 117 S.Ct. 633, 136 L.Ed.2d 554 (1997). However, the Court finds that, even under the less demanding preponderance of the evidence standard, the Government failed to present sufficient evidence at trial to permit the Court to conclude that Defendants’ actions towards Centura Health, Cherry Creek Schools, and Children’s Hospital constituted a criminal offense under a federal or state statute. See United States v. Kieffer, 681 F.3d 1143, 1168 (10th Cir.2012).

Accordingly, the Government’s objection to the failure to include in the loss calculation the amounts paid to Defendants by Centura Health, Cherry Creek Schools, and Children’s Hospital is OVERRULED.

b. Defendants’ Objections

Defendants object to the inclusion of ADT and Summit County in the loss calculation because they were not named in any of the Counts of the Indictment on which Defendants were convicted. (ECF Nos. 317, 318 & 319.) The Government contends that the monies paid by ADT and Summit County are properly included in the loss calculation as relevant conduct. (ECF No. 304 at 15-20.)

Based on the evidence presented at trial and at the post-trial hearing, there is no dispute that Defendants’ actions towards ADT and Summit County are closely related to the fraud offenses on which Defendants were convicted. Defendants’ website and their representations made therein were the same when the website was accessed by ADT and Summit County as when it was utilized by the City of Boulder or the City and County of Broom-field. Additionally, the types of solicitations Defendants made towards ADT and Summit County were not materially different from those they made to Jefferson County or El Paso County. Thus, the key finding for relevant conduct purposes is whether Defendants’ actions towards ADT and Summit County violated any federal or state statute. Griffith, 584 F.3d at 1013.

i. ADT

Ron Goodchild testified at trial that ADT’s requirements for doing business with an electronics recycler were that the recycler was “EPA certified and a slew of other things”. Mr. Goodchild believed Executive Recycling met “those requirements” and, therefore, he agreed to do business with Defendants. Mr. Goodchild testified that ADT would not have done business with Executive Recycling if Mr. Goodchild had known that Defendants were not handling ADT’s electronic waste “in the manner represented.” At the post-trial evidentiary hearing on the amount of loss, the Government offered into evidence an e-mail sent to ADT by an employee of Executive Recycling that generally described Executive Recycling’s business practices. (Gov’t Ex. 21.)

The Court finds that there is insufficient evidence on the issue of whether any misrepresentation to ADT was material to that entity’s decision to contract with Defendants. Mr. Goodchild’s testimony about what characteristics were important to ADT in choosing to do business with Executive Recycling was vague. ADT’s requirement that any electronics recycler be “EPA certified” was an impossible prerequisite, as the evidence at trial showed that the EPA does not, in fact, “certify” electronics recyclers. The only other testimony on this subject was that ADT required a “slew of other things” before it would agree to do business with an electronics recycler. Without any specifics as to what was important to ADT, the Court cannot determine whether Defendants made any misrepresentation to ADT that was material to its decision to do business with Executive Recycling.

The Government contends that it does not have to link a specific misrepresentation to each victim and that the Court can rely on the fact that Defendants were convicted of a “scheme to defraud”. (ECF No. 304 at 16.) In the context of the jury’s verdict in this case, the Court disagrees. Had the jury believed that Defendants’ overall business model was criminal, Defendants would have been found guilty on all of the fraud counts. The fact that the jury only convicted Defendants on half of the fraud counts shows that it carefully considered the evidence related to each Count and the customer named in that Count and, in the process, clearly determined that the Government’s evidence was adequate with respect to some customers, and lacking with regard to others.

The evidence of misrepresentations made to each customer was relatively consistent; the customers were all generally promised that Executive Recycling complied with all laws and regulations, did not export materials, destroyed data as requested, etc. However, the customers’ testimony differed significantly when it came to the bases on which the customers made the decision to do business with Executive Recycling. For example, the City of Boulder’s representative testified that the most important feature to Boulder in choosing an electronics recycler was that no equipment could be exported anywhere, even to Canada. (ECF No. 323 at 26-27.) On the other hand, the representative for Children’s Hospital testified that the most important aspect to Children’s decision to do business with Defendants was their industrial hard drive shredder, because its main concern was data security and patient privacy. (ECF No. 328 at 8-9.) Given the evidence showing that hard drives were routinely shredded at Defendants’ local facility while CRT monitors were routinely exported overseas, it came as no surprise to the Court that Defendants were convicted on the Count of the Indictment which named the City of Boulder as a victim (Count 10) and acquitted on the Count naming Children’s Hospital (Count 6). (ECF Nos. 271-15, 271-16, & 271-17.)

The mixed nature of the jury’s verdict shows that, in deciding whether to convict Defendants on a particular count of the Indictment, the jurors focused on how the misrepresentations made by Defendants affected each customers’ decision to do business with Executive Recycling. With this understanding of the verdict as the backdrop, the Court finds the Government has not met its burden of showing that Defendants’ dealings with at ADT included false or fraudulent pretenses, representations, or promises that were material. Because the Government has not met its burden of showing that Defendants’ conduct towards ADT violated any state or federal statute, the Court will not consider the amounts paid to Defendants by ADT as relevant conduct in its loss calculation. See Griffith, 584 F.3d at 1013. Accordingly, Defendants’ objections to the inclusion of the monies paid by ADT are SUSTAINED.

ii. Summit County

At the Court’s post-trial hearing on the amount of loss, the Government called Kevin Berg to testify on behalf of Summit County. Mr. Berg, testified that, in choosing a company to contract with for electronic recycling services, one of the most important considerations for Summit County was whether the company would handle the materials-domestically. An email between Mr. Berg and Defendant Richter admitted into evidence showed that the importance of domestic recycling was conveyed to Defendants at the time they started doing business with Summit County. In the e-mail, Mr. Berg directly asked Defendant Richter whether any of Summit County’s materials would be shipped overseas and informed Defendant Richter that Summit County “may not be interested” in doing business with Executive Recycling if the answer were yes. In his testimony at the hearing, Mr. Berg clarified that Summit County would not have been interested in doing business with Executive Recycling if it had known that Executive Recycling was shipping anything overseas, regardless of whether the electronic materials being exported came from Summit County. Mr. Berg testified that, in response to this e-mail, Defendant Richter called and assured him that no materials were going overseas, and that all of Summit County’s electronic materials would be handled domestically.

Based on this record, the Court finds by preponderance of the evidence that Defendants’ action towards Summit County constituted criminal conduct. The misrepresentations about all electronic materials being handled domestically were material to Summit County’s decision to do business with Executive Recycling. The Court finds that these representations were false given the evidence showing that Executive Recycling routinely exported electronic materials received from customers. Moreover, the Court finds that the misrepresentations were specifically intended to procure Summit County’s business and that Defendants used interstate wire communications facilities to carry out the fraudulent scheme. Finally, the Court finds that the fraudulent scheme used to solicit Summit County’s business was similar to that used against the victims in the offenses of conviction, such as the City of Boulder.

Therefore, the Court finds that the Government has met its burden of showing that Defendants’ fraudulent conduct towards Summit County qualifies as relevant conduct for purposes of the loss calculation in § 2Bl.l(b)(l). Defendants’ objections to the inclusion of the monies paid to Executive Recycling by Summit County are OVERRULED.

iii. Other Customers From Post-Trial Hearing

At the Court’s post-trial evidentiary hearing on the amount of loss, the Government introduced into evidence e-mails exchanged by Defendants and a number of other customers. (Gov’t Exs. 522-531.) Specifically, the Government introduced emails about business dealings between Defendants and Denver Water, Janus, Learning Services, Lowry Glory Days, Millenium Recycling, and the Rose Community Foundation. (Id.)

The purpose of these e-mails has not been explained in any subsequent filing. However, the Court presumes that these e-mails were admitted to attempt to show that these other entities were also victims of the fraud and, therefore, the amounts paid by these victims should be included in the amount of loss, which would also result in these entities being considered victims for purposes of restitution and § 2Bl.l(b)(2)’s enhancement based on the number of victims.

In the Court’s view, the same reasoning set forth above with respect to ADT applies to these entities. That is, the Court finds that there is not sufficient evidence in the record to permit it to find that Defendants’ misrepresentations about Executive Recycling’s business practices were material to any of these entities. The emails admitted into evidence show that Defendants made misrepresentations about how certain materials would be handled and where materials would end up, but there is no evidence that these misrepresentations influenced the customers’ decisions to do business with Defendants. As the Court has previously noted, it cannot find that Defendants’ actions towards these customers constituted relevant conduct if these actions on the part of Defendants were not criminal. In the absence of evidence showing that Defendants’ misrepresentations were material, Defendants did not engage in criminal activity. Accordingly, the Court finds that Defendants’ business dealings with Denver Water, Janus, Learning Services, Lowry Glory Days, Millenium Recycling, and Rose Community Foundation are not relevant conduct.

c. Conclusion

For the remainder of the issues to be addressed at sentencing, the Court will consider as relevant conduct only Defendants’ actions towards Summit County.

2. Amount of Loss

“The purpose of the loss calculation under the Sentencing Guidelines is to measure the magnitude of the crime at the time it was committed.” United States v. Schild, 269 F.3d 1198, 1201 (10th Cir.2001). When the loss amount is disputed, as it is in this case, the Government bears the burden of establishing “the amount of loss (or a reasonable estimate thereof) associated with that conduct by a preponderance of the evidence.” Kieffer, 681 F.3d at 1168 (citing United States v. Peterson, 312 F.3d 1300, 1302 (10th Cir.2002)). The Court is not required to calculate the loss with specificity; rather, “[t]he court need only make a reasonable estimate of the loss, given the information available.” United States v. Masek, 588 F.3d 1283, 1287 (10th Cir.2009). The Sentencing Guidelines neither proscribe, nor prohibit, a methodology for a court to use when calculating the “reasonable estimate” of the loss a defendant’s conduct caused. See United States v. Erpenbeck, 532 F.3d 423, 433 (6th Cir.2008).

The PSIRs include as the amount of loss the entire amounts paid to Executive Recycling by Jefferson County, El Paso County, Denver Newspaper Agency, City and County of Broomfield, City of Boulder, and Summit County (collectively “Victims”). (ECF Nos. 317, 318 & 319.) These amounts are as follows:

Victim_Amount Paid

Jefferson County_126,023.99

El Paso County_23,761.89

Denver Newspaper Agency_40,625.17

City and County of Broomfield_1,835.00

City of Boulder_3,590.66

Summit County_17,937.60

Defendants object on a variety of grounds to these amounts as the proper measure of the loss in this case. Each of the Defendants’ arguments will be addressed in turn below.

a. No pecuniary harm

Defendants first contend that there was no pecuniary harm to the Victims in this case because the electronic materials they handled had no value or a negative value to the Victims. (ECF No. 298 at 17.) Defendants contend that state and federal laws required the Victims to contract with an electronics recycler to dispose of their used electronic materials and Executive Recycling was typically the cheapest option for e-waste recycling. (Id. at 17-18.) Therefore, had the Victims not contracted with Defendants, they would have actually had to spend more money to contract with someone else. (Id.; ECF No. 310 at 10-12.)

The Government argues that the amount of loss should be all of the monies paid by the victims to Defendants because “[a]ll of the victims testified that they would not have paid defendants to take their business if they had known what the defendants were actually doing with the e-waste.” (ECF No. 304 at 6.) The Government contends that the Victims “relied on defendants’ misrepresentations in deciding to use them, and therefore money paid stems directly from defendants’ fraud.” (Id.)

The Court agrees with the Government on this point. The fact that the Victims likely would have hired a different company to dispose of their electronic materials does not negate the harm they suffered by choosing to hire Defendants. Per Application Note 3 to § 2B1.1, the Court must calculate the reasonably foreseeable pecuniary harm that resulted from the fraudulent conduct. The evidence at trial showed that the Victims would not have done business with Defendants if they had known the CRTs they sent for recycling were being shipped overseas. Had Defendants not falsely stated that they were processing the CRTs domestically, the Victims would not have contracted with Executive Recycling and would not have paid any money to Executive Recycling. Therefore, the Court finds that the money paid to Defendants by the Victims was the reasonably foreseeable pecuniary harm resulting directly from the fraud, and therefore constitutes the “loss” for purposes of § 2Bl.l(b)(l).

b. No intended loss

Defendants also argue that there was no intended loss because they testified at trial that they were trying to save their customers money by offering their services for the lowest possible price. (ECF No. 310 at 13.) However, Defendants’ intent with respect to causing a loss is immaterial because there was actual loss in this case. See U.S.S.G. § 2B1.1, cmt. n. 3(A) (“loss” for purposes of § 2B1.1(b)(1) is “the greater of actual or intended loss.”). As the Court previously stated, the evidence showed that the Victims would not have done business with Executive Recycling if they had known that their CRTs were being shipped overseas. Because the money the Victims paid to Executive Recycling to dispose of those CRTs was an actual loss caused by the fraudulent conduct, the fact that Defendants may not have intended any loss is immaterial.

c. Offset for value of legitimate services provided .

Defendants also object to the PSIRs’ failure to apply Application Note 3(E)(i) to § 2B1.1, which requires an offset to the amount of loss in the value of the legitimate services provided. (ECF No. 311 at 13-14.)

Application Note 3(E)(i) states:

(E) Credits Against Loss. — Loss shall be reduced by the following:

(i) The money returned, and the fair market value of the property returned and the services rendered, by the defendant or other persons acting jointly with the defendant, to the victim before the offense was detected. The time of detection of the offense is the earlier of (I) the time the offense was discovered by a victim or government agency; or (II) the time the defendant knew or reasonably should have known that the offense was detected or about to be- detected by a victim or government agency.

The Government disputes the applicability of this provision. It first contends that Application Note 3(E)(i) does not apply because Application Note 3(F)(v) provides that there shall be no credit for the value of services provided by a scheme in which: “(I) services were fraudulently rendered to the victim by persons falsely posing as licensed professionals; (II) goods were falsely represented as approved by a governmental regulatory agency; or (III) goods for which regulatory approval by a government agency was required but not obtained.”

The Government argues that this case falls under subsection I in that Defendants represented to customers that they were “EPA certified” and witnesses testified that there is no such certification issued by the EPA. (ECF No. 304 at 9.) Defendants contend that subsection I is not satisfied because it is intended to be narrowly applied only to individuals that posed as attorneys and medical personnel, and is not intended to cover electronics recycling companies. (ECF No. 311 at 14; ECF No. 310 at 15-16.)

When adopting this provision, the Sentencing Commission stated:

The definition of “loss” also provides special rules for certain schemes. One rule includes in loss (and excludes from crediting) the benefits received by victims of persons fraudulently providing professional services. This rule reverses case law that has allowed crediting (or exclusion from loss) in cases in which services were provided by persons posing as attorneys and medical personnel. See United States v. Maurello, 76 F.3d 1304 (3d Cir.1996) (calculating loss by subtracting the value of satisfactory legal services from amount of fees paid to a person posing as a lawyer); and United States v. Reddeck, 22 F.3d 1504 (10th Cir.1994) (reducing loss by the value of education received from a sham university). The Commission determined that the seriousness of these offenses and the culpability of these offenders is best reflected by a loss determination that does not credit the value of the unlicensed benefits provided. In addition, this provision eliminates the additional burden that would be imposed on courts if required to determine the value of these benefits.

66 F.R. 30512-01, 30544 (June 6, 2001).

The Court finds that the Sentencing Commission’s comments indicate that subsection I should only apply to industries in which there are licensing schemes, such as lawyers, doctors, accountants, and universities. At trial, there was evidence that the EPA did not “certify” electronics recyclers and, therefore, Defendants were not operating in an industry where licensing was expected (or even possible). In United States v. Allen, 529 F.3d 390, 397 (7th Cir.2008), the Seventh Circuit affirmed the district court’s refusal to apply Application Note 3(F)(v) to a microbiologist that held himself out as a certified mold inspector. The Court noted that the defendant “was holding himself out as a highly qualified expert, but the profession in which he was scheming was not a licensed one” so “there was no license that he could have pretended to possess.” Id. The same is true here.

Moreover, there was also evidence at trial that Executive Recycling was registered with the State of Colorado as a large quantity handler of universal waste and had an EPA identification number. Therefore, it appears Defendants had all of the “certifications” that were available in their industry. Rather than being “unlicensed”, Defendants were actually just improperly doing the job that they were “licensed” (to the extent possible in the electronics recycling industry) to do.

The Government fails to cite any case law applying subsection I of this Comment in a case such as this. Considering the text and legislative history of Application Note 3(F)(v)(I) and the case law interpreting and applying it, the Court finds that Application Note 3(F)(v)(I) does not apply here.

The Government also attempts to shoehorn this case into subsection III because Defendants were required to get authorization from the regulating authorities before exporting the CRT monitors, and no authorization was ever obtained. However, as Defendants point out, this provision applies only to the sale of “goods” and it is undisputed that the fraud in this case related to the manner in which electronics were recycled, which is a “service”. Therefore, the Court agrees with Defendants and finds that Application Note 3(F)(v)(III) also does not apply here.

The Government next contends that there should be no offset under Application Note 3(E)(i) because Defendants did not provide any legitimate services that had value to the Victims. (ECF No. 304 at 8-9.) With respect to handling of the CRT monitors, the Court agrees with the Government. The Victims universally testified that, had they known their CRTs would end up overseas, they would not have paid any money to Defendants for this service. Thus, the Court finds that the manner in which the Defendants disposed of the CRT monitors was so contrary to the way the Victims wanted the CRT monitors handled that those services had no value to the Victims. An such, the Court will not offset the amount of loss by the money the Victims paid to Defendants for anything to do with removal and handling of the CRT monitors.

However, the Court finds that the other services provided by Defendants — data destruction, hard drive shredding, and equipment decommissioning and resale — had a legitimate market value in general and to the Victims. Though there was evidence that one laptop computer was resold without the hard drive having been wiped, this appears to have been an oversight or an isolated error. The overwhelming evidence at trial showed that, other than the CRT handling and disposal, Defendants provided the services which the Victims contracted for in the manner contemplated by the parties’ agreements.

The Court therefore finds that, pursuant to Application Note 3(E)(i), Defendants are entitled to an offset for the fair market value of the legitimate services they provided, which includes all services except for the CRT removal, handling, and disposal. See United States v. Anders, 333 Fed.Appx. 950, 955 (6th Cir.2009) (district court must apply offset to amount of loss when defendant provided legitimate services related to the fraud). Accordingly, Defendants’ objections to the PSIRs’ failure to offset the amount of loss by the value of the legitimate services rendered are OVERRULED to the extent they seek an offset for the value of CRT removal, handling, and disposal, and SUSTAINED to the extent they seek an offset for the value of all other services provided.

d. Calculation of the Amount of Loss

Although the Government has the burden of proving the amount of loss, Defendants have the burden of proving that they are entitled to a credit against the loss amount. See United States v. Hammer, 3 F.3d 266, 272 (8th Cir.1993) (“The burden of proof [at sentencing] is on the government with respect to the base offense level and any enhancing factors. The burden of proof is on the defendant with respect to mitigating factors.”); United States v. Howard, 894 F.2d 1085, 1090 (9th Cir.1990) (“[T]he government should bear the burden of proof when it seeks to raise the offense level and ... the defendant should bear the burden of proof when the defendant seeks to lower the offense level.”); see also United States v. Felix, 561 F.3d 1036, 1043-44 (9th Cir.2009) (quoting Howard).

To meet this burden, Defendants retained the services of Seigneur Gustafson LLP, which prepared a “Report of Economic Loss Analysis” (“Expert Report”). (ECF No. 311-1.) At the Court’s post-trial hearing on the amount of loss, Defendants presented testimony from Ronald Seigneur, one of the certified public accountants who prepared the Expert Report, and the Expert Report was admitted into evidence. The purpose of the Expert Report was to “identify] the services rendered by [Executive Recycling] to each of the customers and to isolate the services that specifically relate to the obsolete CRT monitors, as opposed to the handling and destruction of hard drives and other computer equipment ■ and peripheral equipment.” (ECF No. 311-1 at 7.) The Expert Report notes that its calculations, for the most part,. are estimates because Defendants’ “dock logs” and invoices were oftentimes not detailed or specific enough to allow for precise calculations. Many of the invoices did not separate the charges for handling .and processing CRT monitors from the charges associated with the other services. For many customers, Defendants did not invoice the inbound equipment by type and number of component elements. Rather, many customers simply paid a price per pound for processing, regardless of whether the service provided was data destruction, hard drive shredding, or CRT monitor disposal. (Id. at 10.)

The Government also presented evidence, both at trial and at the Court’s post-trial hearing, that is relevant to' the calculation of the amount of'loss. First, the Government provided evidence showing the total amount paid by each Victim to the Defendants, which are set forth in the chart above and adopted by the PSIRs. The Government also provided a chart showing the number of CRT monitors sent to Defendants for processing by each Victim. Finally, the Government introduced a summary chart showing the Victims’ payments to Defendants, whether the Victims were billed by Defendants on a per item or per pound basis, and the number of invoices for each Victim found on Defendants’ computer systems.

In fashioning the amount of loss for each Victim, the Court has relied on the Government’s evidence, the Expert Report (which incorporates and relies on much of the Government’s evidence), and the testimony at the hearing on the amount of loss. The Court acknowledges that the losses calculated below are not precise. However, the case law is clear that the Court may, based on the evidence available to it, make a reasonable estimate of the value of legitimate services provided by the defendant for purposes of an offset to the amount of loss. United States v. Snow, 663 F.3d 1156, 1161 (10th Cir.2011); United States v. James, 592 F.3d 1109, 1116 (10th Cir.2010). The Court’s analysis of the actual loss suffered by each Victim is discussed below.

i. Jefferson County

Mr. Seigneur testified that Jefferson County is the only Victim for which there are specific and detailed invoices that included the particular number and types of items handled by Defendants. These invoices broke down the amount paid by Jefferson County for the various services and show that Jefferson County paid $57,748 for CRT monitor disposal. (ECF No. 311-1, ex, C.) The total amount paid by Jefferson County was $126,024. (Id.) Therefore, the value of the legitimate services provided by Defendants to Jefferson County is $68,276 ($126,024 - $57,748 = $68,276). Offsetting the amount paid to Executive Recycling by Jefferson County by the fair market value of the legitimate services provided results in an actual loss to Jefferson County of $57,748.

ii. City of Boulder

Defendants handled 413 CRT monitors for the City of Boulder and paid $5 per CRT monitor for handling and disposal. (ECF No. 311-1 at 20.) Therefore, the Court finds that the City of Boulder’s costs associated with CRT monitor disposal was $2,065 (413 monitors x $5 per monitor). The City of Boulder paid Executive Recycling a total of $3,591. (Id.) Thus, the value of the legitimate services provided to the City of Boulder was $1,526 ($3,591 - $2,065 = $1,526) and the actual loss to the City of Boulder for purposes of § 2B1.1 (b)(1) is $2,065.

iii. El Paso County

El Paso County paid Defendants a total of $23,762 for all services and paid for these services on a per pound basis. El Paso County’s invoices did not detail the types of items handled by Defendants but the Expert Report shows that Defendants handled a total of 4,674 items on behalf of El Paso County. 1,573 of these (approximately 34%) were CRT monitors.

Because El Paso County paid on a per pound basis, there is no reason to believe that the cost per pound for handling and processing a CRT monitor was any different than the cost per pound for shredding a hard drive or decommissioning a desktop computer. Therefore, a reasonable estimate of the amount paid by El Paso County for the handling and processing of CRT monitors is the total amount paid for all services multiplied by the percentage of the total items that were CRTs. Multiplying $23,762 by 34% shows that El Paso County paid approximately $8,079 for CRT handling and processing. Therefore, the value of the legitimate services received by El Paso County was $15,683 ($23,762 - $8,079 = $15,683) and the actual loss to El Paso County from the fraudulent conduct was $8,079.

iv. Summit County

Like El Paso County, Summit County was billed on a per pound basis. Therefore, the Court will employ the same methodology used with El Paso County in calculating Summit County’s actual loss.

Defendants handled 1,865 items for Summit County, 589 (or 32%) of which were CRT monitors. (ECF No. 311-1 at 20.) Multiplying the total amount paid by Summit County ($17,938) by 32% shows that Summit County paid approximately $5,740 for the handling and processing of CRT monitors. Thus, the value of the legitimate services provided by Defendants to Summit County was $12,198 ($17,938 - $5,740 = $12,198). The actual loss to Summit County from the fraudulent conduct was $5,740.

v. City and County of Broomfield

The City of and County of Broomfield paid Defendants $1,835 for all services. The Government’s summary chart shows that the City and County of Broomfield was billed on a per item basis, but there was no evidence introduced at trial or at the post-trial hearing as to the rate it paid for each CRT monitor. Therefore, the Court cannot use the methodology applied to the City of Boulder and will instead use the same formula used for El Paso County and Summit County to estimate the City and County of Broomfield’s actual loss.

Defendants handled 483 items for the City and County of Broomfield, 170 (approximately 35%) of which were CRT monitors. (ECF No. 311-1 at 20.) Multiplying $1,835 (the total amount paid by the City and County of Broomfield) by 35% shows that the City and County of Broom-field paid Defendants $642 for the handling and processing of its CRT monitors. Thus, the value of the legitimate services provided to the City and County of Broom-field was $1,211 ($1,835 - $642 = $1,211) and its actual loss was $642.

vi. Denver Newspaper Agency

Denver Newspaper Agency paid Executive Recycling on a per pound basis. Therefore, the Court will apply the same methodology used with El Paso County and Summit County. However, for Denver Newspaper Agency, the Court will not simply rely, as it has done for the other Victims, on the percentage of CRT monitors to total items as calculated in the Expert Report. The Expert Report states that only 16% of the items handled by Defendants for Denver Newspaper Agency were CRT monitors. (ECF No. 311-1 at 20.) The Court finds that this number is unreliable.

The basis for the Court’s finding is that Mr. Seigneur’s testimony at the post-trial hearing was that the invoices for Denver Newspaper Agency were the least detailed of any of the Victims. While the other Victims had detailed invoices (which at least listed the number of items received, even if not the type) about 70% of the time, Denver Newspaper Agency only had detailed invoices about 10% of the time. (ECF No. 311-1 at 20.) The Expert Report extrapolated the total number of items handled by the company, at least in part, from however many detailed invoices existed for each customer. Because there were so few detailed invoices for Denver Newspaper Agency, the Court finds that the calculation regarding the percentage of CRT monitors to total items was based on an insignificant sample size, a fact which affects the reliability of the extrapolation. Additionally, the Court notes that between 31% and 35% of the items handled by Defendants for all of the other Victims were CRT monitors. Denver Newspaper Agency’s ratio of only 16% of the total items being CRT monitors is an obvious outlier.

Given the small number of detailed invoices for Denver Newspaper Agency and the fact that the Export Reports extrapolation from this sample size results in a statistical outlier, the Court finds that it is more reliable to average the percentages of CRT monitors from the other Victims and use this average to calculate the monies paid by Denver Newspaper Agency for CRT monitor disposal. Multiplying 33% (the average of the other Victims’ percentages) by the total amount paid by Denver Newspaper Agency ($40,625) shows that Denver Newspaper Agency paid Defendants $13,406 for CRT handling and disposal. Thus, the value of the legitimate services rendered to Denver Newspaper Agency by Defendants was $27,219 and the actual loss to Denver Newspaper Agency was $13,406.

3. Conclusion

The PSIRs have a total loss amount of $403,790.22, which results in a 14 level enhancement pursuant to § 2Bl.l(b)(l). For the reasons set forth above, the Court has concluded that the amounts paid by ADT are not relevant conduct and should not be included in the total loss amount. The Court has also concluded that Defendants are entitled to an offset for the value of the legitimate services they provided to the Victims. Given these rulings, the Court finds that the amount of loss for each Victim is as follows:

Jefferson County $57,748

City of Boulder $ 2,065

El Paso County $ 8,079

Summit County $ 5,740

City and County of Broomfield $ 642

Denver Newspaper Agency_ $13,406

$87,680 TOTAL

The Court therefore arrives at a total actual loss amount of $87,680 to the six identified entities set forth above. Pursuant to § 2B1.1(b)(1), this loss amount results in an 8 level enhancement to the offense level.

B. Restitution

The PSIRs recommend that the Court order restitution to ADT, City of Boulder, City and County of Broomfield, Denver Newspaper Agency, El Paso County, Jefferson County, and Summit County in a total amount of $403,790.22. Defendants object to this recommendation.

In ordering restitution, the Court must consider “the amount of loss sustained by a victim as a result of the offense.” 18 U.S.C. § 3663(a). “Thus, unlike the sentencing guidelines, which allow a court to consider actual or intended loss for the purposes of sentencing, ... section 3663 implicitly requires that an award of restitution be based on the amount of loss actually caused by the defendant’s offense.” United States v. Messner, 107 F.3d 1448, 1455 (10th Cir.1997); United States v. Liss, 265 F.3d 1220, 1231 (11th Cir.2001) (“An award of restitution must be based on the amount of loss actually caused by the defendant’s conduct.”).

The Court’s finding as to the amount of actual loss to each Victim is set forth above. In accordance with that ruling, the Court finds that the Victims are entitled to restitution in the following amounts:

Jefferson County $57,748

City of Boulder $ 2,065

El Paso County $ 8,079

Summit County $ 5,740

City and County of Broomfield $ 642

Denver Newspaper Agency $13,406

Additionally, the Court “may make each defendant liable for payment of the full amount” of restitution, or alternatively may “apportion liability among the defendants to reflect the level of contribution to the victim’s loss and economic circumstances of each defendant.” 18 U.S.C. § 3664(h). The evidence in this case showed that Defendant Richter was the president and sole shareholder of Executive Recycling while Defendant Olson was a salaried employee who did not profit from the fraudulent conduct in any significant way. Because the Defendants did not benefit equally from the fraud, the Court finds that apportionment is appropriate in this case.

Pursuant to the Mandatory Victims Restitution Act, the Court will ensure that each customer listed above receives a restitution award for the full amount of loss it suffered, but each Defendants’ share of that restitution judgment may not be equal. At the time of each Defendants’ individualized sentencing hearing, the Court will apportion restitution between the Defendants based on his or its relative contribution to the loss, the relative amounts by which each Defendant profited on account of his or its criminal activity, and each Defendant’s individual economic circumstances.

C. Forfeiture

The Government has filed a “Motion for Preliminary Orders of Forfeiture for Personal Money Judgments Against Defendants Executive Recycling, Inc., Brandon Richter, and Tor Olson.” (ECF No. 350.) Criminal forfeiture is governed by Federal Rule of Criminal Procedure 32.2, which sets forth four requirements before a final order of forfeiture can be entered. The first step in the forfeiture process is notice. Fed.R. Crim.P. 32.2(a) (“A court must not enter a judgment of forfeiture in a criminal proceeding unless the indictment or information contains notice to the defendant that the government will seek forfeiture of property as part of any sentence.”). The Indictment in this case contained the following Forfeiture Allegation:

47. The allegations contained in Counts One through Fifteen of this Indictment are hereby re-alleged and incorporated by reference for the purpose of alleging forfeiture pursuant to the provisions of Title 18, United States Code, Section 981(a)(1)(C), Title 18, United States Code, Section 1956(c)(7), and Title 28, United States Code, Section 2461(c).

48. Upon conviction of the violations alleged in Counts One through Fifteen of this Indictment involving -violations of Title 18, United States Code, Sections 1341 and 1343, Title 42, United States Code, Sections 6928(d)(4), ahd Title 18, United States Code, Section 554, the defendants ER, BRANDON RICHTER, and TOR OLSON shall forfeit to the United States, pursuant to Title 18, United States Code, Section 981(a)(1)(C), and Title 28, United States Code, Section 2461(c) any and all of the defendants’ right, title and interest in all property constituting and derived from any proceeds the defendants obtained directly and indirectly as a result of such offense, including, but not limited to a money judgment in the amount of proceeds obtained by the scheme and by the defendants as a result of the offenses, for which the defendants are joint and severally liable.

49. If any of the property described in the paragraphs above, as a result of any act or omission of the defendants:

a) cannot be located upon the exercise of due diligence;

b) has been transferred or sold to, or deposited with, a third party;

c) has been placed beyond the jurisdiction of the Court;

d) has been substantially diminished in value; or

e) has been commingled with other property which cannot be subdivided without difficulty;

it is the intent of the United States, pursuant to Title 21, United States Code, Section 853(p), incorporated by Title 28, United States Code, Section 2461(c), to seek forfeiture of any other property of said defendants up to the value of the forfeitable property.

(ECF No. 1 at 14-16.) Thus, the Court finds that the Government has provided notice and satisfied Rule 32.2(a).

The instant Motion is directed towards the second step in the forfeiture process in that it asks the Court to enter a preliminary order of forfeiture against all Defendants jointly and severally in the amount of $2,533,762.51. (ECF No. 350.) Where, as here, a money judgment is sought, the preliminary order of forfeiture must set forth the amount of the money judgment. Fed.R. Crim.P. 32.2(b)(2)(A). The preliminary order of forfeiture should be entered “sufficiently in advance of sentencing to allow the parties to suggest revisions or modifications before the order becomes final.” Fed.R. Crim.P. 32.2(b)(2)(B).

The Court notes that Defendant Olson has requested a hearing on forfeiture and, pursuant to Federal Rule of Criminal Procedure 32.2(b)(1)(B), the Court must conduct a hearing if one is so requested. However, there is no requirement that the hearing be. held before a preliminary order of forfeiture is entered. Having reviewed the issues set forth in the Motion and the Defendants’ oppositions thereto, the Court finds it will better serve the scarce interest of judicial resources to resolve a number of the legal issues raised therein and enter the preliminary order of forfeiture based on these rulings. If, after reviewing the preliminary order of forfeiture, Defendant Olson persists in his request for a hearing on forfeiture, the Court will set one in advance of Defendant Olson’s individualized sentencing hearing. In the Court’s view, given the surfeit of briefing and argument it has already reviewed from the parties on this issue, there is little to nothing to be gained from holding such a hearing — but will schedule one should Defendant Olson continue to insist that such a hearing be held.

Defendants do not object to the fact that some amount of forfeiture is required based on the jury’s verdict. However, they argue vehemently that the amount of forfeiture requested by the Government is excessive. Section 981(a)(1)(C) of Title 18 provides that all “proceeds” traceable to the unlawful activity in this case are subject to forfeiture. The parties dispute the appropriate definition of “proceeds” in this section. The Government contends that proceeds are generally “property that a person would not have but for the criminal offense” and, therefore, all of Defendants proceeds are subject to forfeiture. (ECF No. 350 at 7 (quoting United States v. Yass, 636 F.Supp.2d 1177, 1184 (D.Kan.2009)).) Defendants argue that the Court should apply the more narrow definition set forth in § 981(a)(2)(B), which provides: “In cases involving lawful goods or lawful services that are sold or provided in an illegal manner, the term ‘proceeds’ means the amount of money acquired through the illegal transactions resulting in the forfeiture, less the direct costs incurred in providing the good or services.” (ECF Nos. 355 at 4-5, 356 at 2-3.)

The Court concludes that the definition of proceeds applicable here is that set forth in § 981(a)(2)(B). The predicate act underlying Defendants’ convictions— electronics recycling — is not inherently unlawful. There are a multitude of legitimate electronics recyclers that operate within the confines of state and federal law. Even the exportation of used electronic materials is not per se unlawful; it simply requires certain documentation. What made Defendants’ actions unlawful was the manner in which Defendants did business, ie., by misrepresenting to customers where and how their electronic materials would be handled and failing to obtain the required export documentation. Because the criminal acts here involved the provision of lawful services in an unlawful manner, the Court concludes that the appropriate definition of “proceeds” is “the amount of money acquired through the illegal transactions resulting in the forfeiture, less the direct costs incurred in providing the goods or services.” 18 U.S.C. § 981(a)(2)(B); United States v. Nacchio, 573 F.3d 1062, 1089 (10th Cir.2009) (applying § 981(a)(2)(B)’s definition of proceeds to an insider trading case).

Having determined the applicable definition of “proceeds”, the Court must consider whether the Government has met its burden of establishing the amount of the criminal forfeiture money judgment by preponderance of the evidence. United States v. Bader, 678 F.3d 858, 893 (10th Cir.2012). Defendants argue that the Government cannot meet this burden with respect to the full amount of forfeiture requested because it cannot show that the proceeds of their illegal activity was $2,533,762.51. Specifically, Defendants argue that they were only convicted of certain fraudulent transactions, not a wide ranging scheme to defraud, and there is no evidence that they acquired anywhere near $2,533,762.51 as a result of these illegal transactions. (ECF Nos. 355 at 2-3, 356 at 5-13.)

The Government’s requested forfeiture amount is the sum of: (1) the monies paid to Executive Recycling by the nine customers named in the Indictment and Summit County, and (2) the monies paid to Executive Recycling by various foreign buyers. For the same reasons the Court did not include the monies paid by Centura Health, Cherry Creek Schools, Children’s Hospital, and ADT in the loss amount set forth in Part A above, it will not include these monies in the forfeiture award. Specifically, the Court finds that the Government has not met its burden of showing by a preponderance of the evidence that the monies paid to Defendants by Centura Health, Cherry Creek Schools, Children’s Hospital, and ADT were “acquired through illegal transactions.” See 18 U.S.C. § 981(a)(2)(B). Therefore, the Court finds that these monies are not “proceeds” subject to forfeiture.

Next, the Court finds that only a portion of the monies paid to Defendants by Jefferson County, City of Boulder, El Paso County, Summit County, City and County of Broomfield, and Denver Newspaper Agency constitutes proceeds of illegal conduct. As set forth above in the loss calculation, a significant portion of the monies paid by these customers was for legitimate services provided by Defendants in the manner promised. The monies paid for these legitimate services were not “acquired through illegal conduct” and therefore are not “proceeds” subject to forfeiture. For the same reasons set forth in the loss analysis above, the Court finds that the victims of the Defendants’ fraud paid $87,680 to Defendants for processing and handling CRT monitors, which was the backbone of the illegal conduct. Thus, the Court finds that $87,680 constitutes “proceeds” of the fraud convictions.

The Government’s proposed forfeiture amount also includes monies paid to Executive Recycling by overseas brokers in the amount of $2,058,469.19. (ECF No. 350 at 11.) The Government contends that this amount should be included in the forfeiture because “[tjhere is no evidence in the record that any customer who was paying for Executive Recycling’s services in the United States was told that their e-waste was being exported or sold in China.” (Id.) While the Court does not disagree with the Government’s statement, the fact that no customers were explicitly told their e-waste was being sold overseas does not mean that all of the transactions involving these customers were illegal. As discussed above in the Court’s analysis of whether Defendants’ actions towards ADT were relevant conduct, in order to find that Defendants’ actions towards a particular customer were criminal, the Court must find that the misrepresentations were material to that customer. (ECF No. 271-7 at 39-42.) On the record before it, the Court cannot find that Defendants’ representations regarding the domestic handling of e-waste were material to any of the customers other than those charged in the Indictment.

Moreover, the jury did not find that the overseas brokers were part of the criminal scheme to defraud Defendants’ customers. Transactions between Defendants and two of the overseas brokers — Hong Tong Trading and Jet Ocean Technology — were the subject of Counts 3 and 4 of the Indictment. (ECF No. 1 at 7-8.) Defendants were acquitted on both of these Counts. (ECF Nos. 271-11, 271-12 & 271-13.) Had the jury found that the criminal scheme to defraud encompassed the monies paid by these overseas brokers, it could have convicted Defendants on these Counts.

Th