United States v. Gushlak

11-1957-cr
United States v. Gushlak
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held
at the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of
New York, on the 6th day of September, two thousand twelve.
PRESENT: RALPH K. WINTER,
REENA RAGGI,
DEBRA ANN LIVINGSTON,
Circuit Judges.
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UNITED STATES OF AMERICA,
Appellee,
v. No. 11-1957-cr
MYRON L. GUSHLAK,
Defendant-Appellant.
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APPEARING FOR APPELLANT: DAVID DEBOLD, Gibson, Dunn & Crutcher
LLP (Alan Samuel Futerfas, Esq., on the brief),
Washington, D.C.
APPEARING FOR APPELLEE: DANIEL A. SPECTOR (Amy Busa, on the brief),
Assistant United States Attorneys, for Loretta E.
Lynch, United States Attorney for the Eastern
District of New York, Brooklyn, New York.
Appeal from a judgment of the United States District Court for the Eastern District
of New York (Nicholas G. Garaufis, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment entered on May 6, 2011, is AFFIRMED.
Myron L. Gushlak appeals from a judgment of conviction, entered following a guilty
plea, sentencing him to concurrent prison terms of 60 months for conspiracy to commit
securities fraud, see 18 U.S.C. § 371, and 72 months for conspiracy to commit money
laundering, see id. § 1956(a), (h), as well as a $25 million fine. The crimes stemmed from
Gushlak’s participation in a “pump and dump” scheme, in which Gushlak and others
conspired to buy controlling shares of a private company, Global Net, Inc., for little or no
consideration; to take Global Net public by merging it with a public shell corporation; to pay
stock brokers to promote the stock to investors; and, ultimately, to sell their shares to the
public at prices inflated by virtue of the underlying fraud. On appeal, Gushlak contends that
(1) the money laundering conviction is invalid under United States v. Santos, 553 U.S. 507
(2008); (2) the district court committed procedural error in not awarding him three points’
consideration for acceptance of responsibility under U.S.S.G. § 3E1.1 (2000);1 and (3) the
district court committed procedural and substantive error in imposing a fine of $25 million.
1
The district court sentenced Gushlak under the 2000 edition of the United States
Sentencing Guidelines. All subsequent Guidelines references in this order are to the 2000
edition.
2
We assume the parties’ familiarity with the facts and record of the underlying proceedings,
which we reference only as necessary to explain our decision to affirm.
1. Money Laundering Conviction
Gushlak pleaded guilty to laundering money by using the proceeds of his securities
fraud scheme to pay kickbacks to stock brokers who recommended Global Net to investors,
see 18 U.S.C. § 1956(a)(1)(A)(i), and by routing those proceeds through Swiss bank accounts
in order to conceal their origin, see id. § 1956(a)(1)(B)(i). Gushlak contends that his
conviction must be vacated because he did not specifically plead guilty to laundering the
profits, rather than the receipts, of the securities fraud scheme. Because Gushlak failed to
raise this argument in the district court, we review only for plain error, see United States v.
Zangari, 677 F.3d 86, 94–95 (2d Cir. 2012), which we conclude Gushlak has failed to
demonstrate.2
In United States v. Santos, four justices of the Supreme Court held that a money
laundering conviction under § 1956(a)(1)(A)(i) could not be sustained where the underlying
“proceeds” represented the receipts, not the profits, of the specified unlawful activity. See
553 U.S. at 513–14 (plurality op.). In a concurring opinion, Justice Stevens reasoned that
2
The government urges that Gushlak affirmatively waived this challenge to his money
laundering conviction. Because we conclude that Gushlak cannot demonstrate plain error,
we need not decide whether his failure to present this argument to the district court
constituted true waiver rather than mere forfeiture. See United States v. Quinones, 511 F.3d
289, 321 (2d Cir. 2007) (discussing true waiver and plain error review).
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“proceeds” must be limited to profits in cases presenting a “merger problem,” that is, where
the money laundering count essentially duplicates another charged offense, and there is no
legislative history suggesting Congress intended the money laundering statute to apply. Id.
at 526–27 (Stevens, J., concurring in judgment) (internal quotation marks omitted). We have
held that Justice Stevens’s concurrence controls and, thus, “proceeds” under the money
laundering statute refer only to profits where a merger problem arises and there is no
legislative history indicating Congress’s intent that the money laundering statute should still
apply. See United States v. Quinones, 635 F.3d 590, 599 (2d Cir.) (applying Justice
Stevens’s concurrence in concluding that receipts from sale of contraband are sufficient to
prove “proceeds” element for money laundering), cert. denied, 132 S. Ct. 830 (2011).
Here, there is arguably a merger problem to the extent that Gushlak used securities
fraud proceeds to pay kickbacks to stock brokers who were instrumental to the scheme,
insofar as those payments were expenses associated with carrying out the fraud conspiracy.
See United States v. Santos, 553 U.S. at 517 (plurality op.). But these payments were only
part of Gushlak’s money laundering offense. In pleading guilty to money laundering,
Gushlak also admitted using Swiss bank accounts to pay proceeds from the stock sales to
himself and other beneficiaries of the fraud, thus concealing the source of the proceeds. See
18 U.S.C. § 1956(a)(1)(B)(i). These payments do not present a merger problem as they
represent the fruits of the predicate securities fraud, not its associated expenses. Thus, even
if we were to assume, without deciding, that (1) there was error to the extent the stock broker
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payments were a basis for the money laundering conviction, and (2) this error was plain,
Gushlak would still not be entitled to relief because (3) this error did not affect his substantial
rights. See United States v. Hsu, 669 F.3d 112, 118 (2d Cir. 2012). Specifically, Gushlak
cannot demonstrate that there is “‘a reasonable probability that, but for the error, he would
not have entered the plea’” because the Swiss bank payments to himself and his confederates
were independently sufficient to prove him guilty of money laundering. United States v.
Vaval, 404 F.3d 144, 151 (2d Cir. 2005) (quoting United States v. Dominguez Benitez, 542
U.S. 74, 83 (2004)). Accordingly, Gushlak’s challenge to his money laundering conviction
fails.
2. Sentencing
Gushlak presents two challenges to his sentence, which we review under a
“‘deferential abuse-of-discretion standard,’” United States v. Cavera, 550 F.3d 180, 189 (2d
Cir. 2008) (en banc) (quoting Gall v. United States, 552 U.S. 38, 41 (2007)), assessing
questions of law (including interpretation of the Sentencing Guidelines) de novo and findings
of fact only for clear error, see United States v. Bonilla, 618 F.3d 102, 108 (2d Cir. 2010),
cert. denied, 131 S. Ct. 1698 (2011).
a. Acceptance of Responsibility
The district court determined that, notwithstanding Gushlak’s guilty plea and years
of cooperation with the government, Gushlak was not entitled to a three-level reduction in
his Guidelines calculation under U.S.S.G. § 3E1.1 because (1) Gushlak was not forthcoming
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about his finances, insofar as he manipulated financial statements to understate his net assets
and placed a significant portion of his wealth in overseas accounts outside the United States’
jurisdiction; and (2) while sentencing was pending, Gushlak misrepresented to the public that
he had never engaged in any criminal conduct. Gushlak contends that denial of acceptance
of responsibility on these grounds was legally and factually erroneous. We disagree.
A district court’s denial of § 3E1.1 credit is entitled to “great deference” because of
the sentencing judge’s unique position to assess a defendant’s acceptance of responsibility;
thus, we will uphold such a denial “unless it is without foundation.” United States v. Kumar,
617 F.3d 612, 635 (2d Cir. 2010) (internal quotation marks omitted), cert. denied, 131 S. Ct.
2931 (2011); see U.S.S.G. § 3E1.1 cmt. n.5. Gushlak maintains that it was legal error to use
his post-plea financial statements to deny credit for acceptance of responsibility because none
of the disputed financial information involved proceeds of the Global Net fraud and, thus,
he had no obligation to be forthcoming about those assets or to make them available for
purpose of satisfying his criminal judgment. See U.S.S.G. § 3E1.1 cmt. n.1(e) (stating that
district court may consider defendant’s “voluntary assistance to authorities in the recovery
of the fruits and instrumentalities of the offense”); United States v. Austin, 17 F.3d 27, 31–32
(2d Cir. 1994) (holding that acceptance of responsibility cannot be denied when defendant
declines to give information relating to uncharged conduct). We reject this argument because
it rests on a cramped understanding of the Guidelines.
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An appropriate consideration in determining whether to credit a defendant with
acceptance of responsibility is his truthful admission to any “relevant conduct for which the
defendant is accountable under § 1B1.3” of the Sentencing Guidelines. U.S.S.G. § 3E1.1
cmt. n.1(A). Section 1B1.3 defines relevant conduct to include “all acts and omissions
committed” by the defendant occurring “in the course of attempting to avoid . . .
responsibility for that offense.” Id. § 1B1.3(a)(1). As the district court informed Gushlak
at the plea proceeding, in addition to a term of imprisonment, he faced a fine of up to $28
million, representing twice the proffered amount of the money laundered in the Global Net
scheme, see 18 U.S.C. § 1956(a)(1), as well as restitution. Gushlak’s misstatements about
his net assets, and his efforts to render large portions of his wealth judgment-proof, were
evidence of Gushlak’s avoidance of responsibility, insofar as he sought to diminish his ability
to pay a fine and restitution for his participation in the Global Net securities fraud. See 18
U.S.C. § 3572(a)(1) (listing defendant’s “financial resources” as factor to consider in
imposing fine); U.S.S.G. § 5E1.2(d)(2) (same). Thus, Gushlak’s misstatements and
maintenance of overseas financial accounts were relevant conduct, and the district court’s
consideration of these facts was appropriate under § 3E1.1.
Equally meritless are Gushlak’s arguments that the district court’s factual findings
were clearly erroneous. It is undisputed that Gushlak failed to inform the government of his
accumulation of German stocks in 2006 and 2007, denied to a business counterparty that he
was ever the object of a criminal or regulatory investigation, and continued to hold out
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Global Net’s public offering as legitimate on his website. The district court drew reasonable
inferences from this evidence, specifically, that Gushlak had not exhibited remorse insofar
as he was unforthcoming with the government about his finances and falsely represented to
the public that his business background had been entirely legitimate. Therefore, we cannot
disturb those findings on appeal. See Siewe v. Gonzales, 480 F.3d 160, 168 (2d Cir. 2007)
(stating that, on clear error review, “[s]o long as there is a basis in the evidence for a
challenged inference, we do not question whether a different inference was available or more
likely”). Similarly, we reject Gushlak’s contention that the district court improperly weighed
these adverse inferences against Gushlak’s admission of his role in the Global Net scheme
and his cooperation with the government. Because the denial of a three-level reduction for
acceptance of responsibility was not “without foundation,” we must defer to the district
court’s determination. United States v. Kumar, 617 F.3d at 35 (internal quotation marks
omitted).
b. $25 Million Fine
Gushlak contends that his $25 million fine was procedurally and substantively
unreasonable. We reject both claims.
First, there was no procedural error. The district court correctly calculated the
applicable fine under the Guidelines and considered the factors set forth at 18 U.S.C.
§§ 3553(a), 3571, and 3572. See United States v. Elfgeeh, 515 F.3d 100, 136 (2d Cir. 2008).
Gushlak’s complaint that his fine is invalid because it is 33 times greater than the Guidelines
8
maximum is mistaken. Because Gushlak was convicted of an offense carrying a maximum
fine greater than $250,000, the Guidelines permitted the district court to impose a fine up to
the statutory maximum, which here was $28 million. See U.S.S.G. § 5E1.2(c)(4). Gushlak’s
$25 million fine thus fell within both the statutory and Guidelines ranges.
Nor do we identify substantive unreasonableness in Gushlak’s fine. The district court
determined that a $25 million fine was necessary to deter Gushlak from engaging in future
securities frauds, especially in the United States. Further, a large fine was necessary because
the district court concluded, in light of Gushlak’s misrepresentations, that he likely had
understated his finances to the court and, therefore, had a greater ability to pay a fine than
his financial statements suggested. See U.S.S.G. § 5E1.2 cmt. n.6 (“The existence of income
or assets that the defendant failed to disclose may justify a larger fine than that which
otherwise would be warranted . . . .”). These factors support the weight the district court
assigned them, see United States v. Cavera, 550 F.3d at 191, and we are not persuaded by
Gushlak’s arguments to the contrary.
The disparity between Gushlak’s fine and that of his confederate, Howard Appel, is
insufficient to render the sentence substantively unreasonable because the two defendants
were not similarly situated: the government moved for Appel to receive a downward
departure, which it did not do for Gushlak. See United States v. Fernandez, 443 F.3d 19,
31–32 (2d Cir. 2006) (rejecting disparity argument where defendants were not similarly
situated). Next, the district court’s conclusion that a large fine was necessary specifically to
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deter Gushlak was adequately supported by the evidence of Gushlak’s underlying crime of
conviction, his representations to the public that this felonious conduct had been legitimate,
and his avoidance of responsibility by securing his assets overseas. These facts demonstrate
a pattern of deceptive conduct and, thus, permitted the district court to conclude that a larger
fine was necessary to dissuade Gushlak from committing future acts of business deception.
Finally, there is no evidence suggesting that the district court imposed its fine based on mere
accusations that Gushlak had engaged in securities fraud abroad while his sentencing was
pending. Indeed, the district court specifically disclaimed any reliance on the investigation
of Gushlak’s sale of German stocks in 2006 and 2007, and the record does not support
Gushlak’s contention that the district court nevertheless considered those facts in imposing
sentence.
3. Conclusion
Accordingly, we conclude that Gushlak’s challenges to his conviction and sentence
are meritless. The judgment of the district court is AFFIRMED.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, Clerk of Court
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