The opinion of the court was delivered by: Juan R. Sanchez, J.
Defendant Donald Anthony Young objects to the imposition of a two-level increase of his offense level for obstruction of justice pursuant to United States Sentencing Guidelines § 3C1.1. For the reasons set forth below, Young's objection to this portion of the Presentence Investigation Report (PSR) is overruled.
In January 2009, the SEC's Philadelphia Regional Office conducted an examination of the books and records of Acorn Capital Management LLC (Acorn), a registered investment adviser of which Young was the managing member. Acorn was the General Partner of, and the investment adviser to, Acorn II LP (Acorn II), another entity controlled by Young which invested in publicly traded securities.*fn2
The SEC conducted the examination pursuant to its authority under Section 204 of the Investment Advisers Act of 1940, 15 U.S.C. § 80b-4. The purpose of such examinations is to ensure registered investment advisers are following the federal securities laws, cash flows and transactions are appropriate, and investors are not being harmed.
On January 13, 2009, the SEC advised Young of the examination and requested in writing certain Acorn records. Pursuant to Section 204 of the Investment Advisers Act and Rule 204-2 thereunder, Acorn was required to maintain the requested records and to produce them for examination by the SEC. The SEC then conducted an on-site examination at Acorn's offices from January 21, 2009, to January 30, 2009.
Although Young provided the SEC with some of the information it requested during the course of the on-site examination, as of January 30, 2009, the SEC still had not received 35 of the items it had requested from Acorn. These documents included some of the materials most crucial to the SEC's ability to determine whether there was any type of impropriety at the fund, including:
(1) custodial statements for Acorn II showing the amount of money in the partnership, (2) a list of Acorn II investors and the amounts of their investments, (3) quarterly performance reports sent to Acorn II limited partners, and (4) email communications sent to individual investors.
During February 2009, the SEC contacted Young and his counsel several times regarding the outstanding items. On February 11, 2011, Young's counsel advised SEC staff that Young said he had sent a box of documents earlier in the week. The SEC, however, did not receive the box. On February 20, 2009, Young agreed he would provide the outstanding items by February 24, 2009, but he did not do so. On February 25, 2009, Young emailed the SEC staff advising a package would be delivered that day, but no package was delivered. On February 27, 2009, the SEC received a package containing some of the outstanding documents; however, 22 of the 35 items were still incomplete or missing entirely as of that date. In particular, Young did not provide a list of investors or the quarterly statements provided to Acorn II investors, and provided incomplete custodial statements.
On March 6, 2009, the SEC sent Young a letter notifying him he had failed to comply with the required submission of the outstanding items and stating Acorn's failure to produce records was impeding the examination. At that time, the SEC did not have the records it needed to verify that client assets were safe and that clients were being told the truth about their assets. The same day, SEC staff began contacting third parties to obtain information it had not received from Young.
On March 12, 2009, the SEC received information from Young which related to only seven of the 22 outstanding items and which still did not include a list of investors or the quarterly statements.*fn3 The SEC thus continued to seek information from third parties because such information was not being provided by Young. On the basis of information provided by third parties, including Acorn's accountants and introducing broker, the SEC determined Young had been misappropriating funds from Acorn II. The Government later determined that Young had continued to misappropriate investor funds after January 13, 2009, while the SEC examination was ongoing.
On April 17, 2009, the SEC filed a civil suit against Young, Acorn, and Acorn II alleging violations of the federal securities laws relating to Young's operation of a Ponzi scheme and seeking injunctive relief, disgorgement of ill-gotten gains, and civil penalties. This suit was delayed by Young's refusal to disclose information requested by the SEC during the examination.
On April 23, 2009, Young participated in an interview with representatives of the SEC and the U.S. Attorney's Office in which he confessed to having conducted a Ponzi scheme. During the interview, Young admitted he had been aware of the SEC examination of Acorn but deliberately had not provided all of the documents the SEC had requested, including the quarterly statements sent to investors, because he knew disclosure of this information would expose his fraud.*fn4 ...