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United States v. Staton

United States District Court, Third Circuit

October 31, 2013




Presently before the Court are Defendants’ objections to the Government’s calculation of the amount of fraud-related loss. The parties have briefed the issues, and a hearing was held on May 31, 2013, at which testimony was presented.


A. Factual Background

On July 21, 2011, a federal grand jury returned a First Superseding Indictment (hereinafter, “Indictment”) against Defendants Barrett Byron Staton, Matthew Staton, and William Haken, Jr. (Indictment, ECF No. 38.)[1] Defendant Barrett Byron Staton was charged with: conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349 (Count One); wire fraud, in violation of 18 U.S.C. § 1343 (Counts Two through Five); mail fraud, in violation of 18 U.S.C. § 1341 (Counts Six through Nine); and making a false statement in a loan application, in violation of 18 U.S.C. § 1014 (Count Ten). (Indictment.) Matthew Staton was charged with conspiracy to commit wire fraud (Count One), and two counts of wire fraud (Counts Four and Five). The trial was held on June 19 through July 2, 2012. On July 3, 2012, the jury returned a verdict finding Defendants guilty on all Counts. (Min. Entry, ECF No. 150.)

Defendants were found guilty of intentionally devising “a scheme and artifice to defraud and to obtain money and property by means of false and fraudulent pretenses.” (Indictment ¶ 1.) As part of the scheme, Defendant Barrett Byron Staton owned and operated, sometimes through nominees, various office copier broker businesses (“Businesses”). (Id. at ¶ 2.) These Businesses were: (1) Access Business Solutions, Inc. (“ABS”); (2) First Choice Imaging, LLC (“FCI”); (3) First Choice Financial Leasing Company, Inc. (“FCFLC”); (4) NBS Document Solutions, also known as New Business Systems, LLC (“NBS”); (5) World Trade Systems (“WTS”); (6) United Office Products (“UOP”); and (7) Ultra Business Systems, LLC (“Ultra”). (Id.) Matthew Staton was employed as a salesman for these Businesses. (Id.)

The Businesses served as brokers between small businesses or non-profit organizations wishing to obtain new copy machines (“Customers”) and financing companies that specialized in funding office copier leases. (Id. at ¶ 3.) Defendants would have the Customers complete a copier lease and an application for financing. Defendants would present the completed and signed lease and application to the financing company. (Id.) If the Customer’s credit was acceptable, the financing company would fund the lease by giving the Business a lump sum payment of up to 125 percent of the value of the leased copier. (Id.) The financing company intended that this lump sum payment would be used by the Business to fund the cost of purchasing and installing the new copier at the Customer’s place of business. The excess was retained by the Business as its profit. The financing company would then collect the monthly lease payments from the Customer over the term of the copier lease. (Id.)

Defendants “enticed” Customers to enter into new leases for copiers by offering package deals in which copiers could be leased at lower monthly rates than what their competitors charged, and by offering other valuable discounts, such as unlimited copies, servicing, maintenance, and supplies. (Id. at ¶ 4.) Defendants also offered to “buy out” the Customers’ existing copier leases, return the copier to the prior financing company, and include this cost as part of the new and much lower copier lease payment. (Id. at ¶ 5.) In addition, Defendant would alter some leases and financing applications, which the Customers had already signed, to include additional copiers or features that the Customer did not order and ultimately never received. (Id. at ¶ 6.) This practice increased the apparent value of the lease and, as a result, the lump sum payment that the Businesses would receive from the financing companies. (Id.) Ultimately, the Businesses would not pay off the Customer’s prior leases as promised. They would, instead, retain a greater portion of the lump sum payment from the financing companies for their own use. (Id. at ¶ 7.)

Defendants also induced Customers to complete new lease applications under the guise of “refinancing” their leases on existing copiers, then submit the new applications to a different financing company. (Id. at ¶ 8.) Under this scheme the refinancing would result in a lower monthly payment. (Id.) As a result of this practice, the Businesses would receive a lump sum payment from the second financing company for the present value of the refinanced copier leases. (Id. at ¶ 9.) However, Defendants would not pay off the first lease, and instead kept the funds received. (Id.) Consequently, the Customers became obligated to make two separate lease payments on one copier and the Businesses were able to collect two lump sum payments for each copier. (Id.) Defendants also did not return the existing copiers to the financing company as promised. (Id. at ¶ 10.) Defendants would periodically close one Business and reopen it under a different business name in order to perpetuate the fraud. (Id. at ¶ 13.) In some cases, the new Business would be opened under the name of a nominee owner to conceal the involvement of Defendant Barrett Byron Staton. (Id.)

In executing the fraudulent scheme, Defendants submitted fraudulent applications to financing companies electronically by facsimile or e-mail. (Id. at ¶ 11.) Defendants would receive payments from the financing companies through interstate wire transfers conducted through financial institutions, or checks through the United States Postal Service or commercial carriers. (Id. at ¶ 12.)

B. Procedural History

In anticipation of sentencing, the Government filed a sentencing memorandum on April 12, 2013. (Gov’t’s Sent. Mem., ECF No. 218.) In response, Barrett Byron Staton filed a sentencing memorandum on April 22, 2013. (ECF No. 219.) Matthew Staton filed a sentencing memorandum on May 24, 2013. (ECF No. 228.) On May 31, 2013, a hearing was held to determine the amount of fraud-related loss attributable to Barrett Byron Staton and to Matthew Staton. (May 31, 2013 Hr’g Tr., ECF No. 241.) Prior to the start of the testimony, Matthew Staton was removed from the hearing due to his continuous disruptive outbursts. Defendant was warned that he would be expelled from the hearing if he continued disrupting the proceeding. After this warning and a brief recess to permit him to compose himself, the hearing resumed. Matthew Staton continued to be disruptive. As a result, his bail was revoked, and he was remanded to the custody of the United States Marshals. The hearing continued in his absence. At the conclusion of the hearing, counsel were directed to file supplemental memoranda of law addressing the issues raised at the hearing.

On June 21, 2013, Barrett Byron Staton filed a Supplemental Memorandum Relative to Determination of Loss and Restitution. (Barrett’s Mot., ECF No. 240.) The Government responded on July 2, 2013. (Gov’t’s Resp., ECF No. 243.) On July, 8, 2013, Matthew Staton, filed a pro se sentencing memorandum that addressed his objections to the pre-sentence report and the Government’s sentencing memorandum. (Matthew’s Mot., ECF No. 244.)[2] On October 23, 2013, Matthew Staton’s ...

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