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United States v. Davis

United States District Court, D. Minnesota

April 21, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
WILLIAM JAMES DAVIS, Defendant.

          Kimberly A. Svendsen, Amber M. Brennan, and James S. Alexander, UNITED STATES ATTORNEY'S OFFICE, for plaintiff.

          Susan E. Gaertner, GRAY PLANT MOOTY, for defendant.

          ORDER

          Patrick J. Schiltz United States District Judge

         For 24 years, defendant William James Davis was the chief executive officer of Community Action of Minneapolis (“CAM”), a nonprofit agency that was funded by federal and state grants and that was supposed to use its funds to help those in poverty to weatherize and heat their homes. PSR ¶¶ 8, 10-11, 33. For about eight years, Davis regularly stole from the organization that he was supposed to lead. To cite just a few of the most egregious examples of Davis's thievery: Davis ordered CAM to pay his son tens of thousands of dollars per year in salary and bonuses-and to provide his son with a car and cell phone-for a “no show” job. PSR ¶¶ 13-20. Davis used CAM funds to buy a new Chrysler 300 for himself. PSR ¶¶ 26-28. Davis falsely claimed that one of his girlfriends was his wife so that she could receive CAM-provided health insurance. PSR ¶¶ 29-30. Davis charged CAM “for flowers for girlfriends and relatives; cellphone services for a then girlfriend; printing fees for campaign related materials for him and other[] [Democratic politicians]; golf course fees; furniture; and other miscellaneous expenses.” PSR ¶ 31. Davis used CAM funds to pay for vacations with various girlfriends to places like Niagara Falls, Las Vegas, the Bahamas, the Caribbean, Arizona, and Hawaii. See Govt.'s Sent. Exs. 23-24, 49-51, 55-63, 90-93. And Davis falsely claimed to be working during these vacations, so that he could later cash out weeks of “unused” vacation time. PSR ¶ 25.

         All in all, Davis stole hundreds of thousands of dollars from the agency that had been entrusted to his care so that he could fund his lavish lifestyle, benefit his family and friends, and wine and dine his girlfriends and cronies. Davis did so despite the fact that he was paid an exorbitant salary (for the director of a small anti-poverty agency) and given an expense account and other perks that would be envied by the CEOs of many large for-profit companies. Davis was able to steal from CAM year after year because none of CAM's employees had the courage to report his criminal acts, because CAM's board of directors was weak and compliant, and because state and local officials failed to provide effective oversight-that is, until diligent auditors employed by the State of Minnesota finally brought Davis's perfidy to light. Davis was forced to step down as CEO, and CAM was later shuttered.

         Last summer, Davis pleaded guilty to sixteen counts of mail fraud, wire fraud, theft concerning programs receiving federal funds, and conspiracy to commit theft concerning programs receiving federal funds. A presentence investigation report (“PSR”) was prepared to assist the Court in deciding on Davis's sentence. Davis made several objections to the PSR. Those objections were the subject of an evidentiary hearing. The Court now rules on Davis's objections as follows.

         I. LOSS AMOUNT

         The PSR calculated the amount of loss resulting from Davis's crimes as $451, 185.85, triggering a 12-level enhancement to Davis's offense level under § 2B1.1(b)(1)(G). PSR ¶¶ 34, 49. Davis objected, arguing that, for various reasons, the actual loss was slightly more than $250, 000. ECF No. 154 at 34-37. Davis objected not because he was concerned about the 12-level enhancement, which would apply whether the PSR's position or Davis's position were adopted. (The 12-level enhancement applies when the amount of loss is more than $250, 000 but not more than $550, 000. See U.S.S.G. § 2B1.1(b)(1).) Rather, Davis was concerned about the amount of restitution that he would be ordered to pay.

         At the conclusion of the evidentiary hearing, the Court informed the parties of how it was likely to rule on their disputes regarding the calculation of the amount of loss-and, with that guidance, the parties were later able to agree on an amount of loss of $387, 063.67. ECF Nos. 167, 184. The Court thanks the parties for their efforts to reach an agreement and finds that the amount of loss-and the amount of Davis's restitution obligation-is $387, 063.67.

         II. SUBSTANTIAL FINANCIAL HARDSHIP

         Davis also objects to ¶ 50 of the PSR. That paragraph applies an enhancement under § 2B1.1(b)(2)(A)(iii), based on the finding that Davis's offenses “resulted in substantial financial hardship to one or more victims.” See PSR ¶ 50. The Court sustains Davis's objection for two reasons:

         First, applying this enhancement would violate the Ex Post Facto Clause of the United States Constitution. Normally, the Court must apply the latest version of the Guidelines when sentencing a defendant. If, however, applying the latest version of the Guidelines results in “a higher sentencing range than the Guidelines in effect at the time of the [defendant's] offense, ” United States v. Iceman, 821 F.3d 979, 984 (8th Cir. 2016), the Court must “use the Guidelines Manual in effect on the date that the offense of conviction was committed, ” U.S.S.G. § 1B1.11(b)(1).

         The indictment charges Davis with defrauding CAM “until in or about October 2014.” ECF No. 1 ¶ 9. To be precise, Davis was forced to step down as CAM's CEO on October 13, 2014, and nothing in the record suggests that he continued to defraud CAM after that date. PSR ¶ 33. The Guidelines in effect in October 2014 did not contain an enhancement for causing substantial financial hardship; that enhancement first appeared in the version of the Guidelines that took effect on November 1, 2015. Compare 2014 U.S.S.G. § 2B1.1(b)(2)(A) (providing for a two-level enhancement if the offense “(i) involved 10 or more victims; or (ii) was committed through mass-marketing”), with 2015 U.S.S.G. § 2B1.1(b)(2)(A) (providing for a two-level enhancement if the offense “(i) involved 10 or more victims; (ii) was committed through mass-marketing; or (iii) resulted in substantial financial hardship to one or more victims”). Therefore, the Court cannot apply this enhancement to Davis.

         There is a second problem with applying this enhancement. The government argues that CAM suffered “substantial financial hardship” when it went into receivership. Cf. U.S.S.G. ยง 2B1.1, app. n.4(F)(i)-(ii) (listing insolvency and bankruptcy as two possible indicators of substantial financial hardship). But even if the government is correct, the government has not proven that ...


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