BILLY J. WILLIAMS, OSB #901366 Acting United States Attorney, …media.oregonlive.com/pacific-northwest-news/other/Harder... · 2016-11-08 · BILLY J. WILLIAMS, OSB #901366 Acting

BILLY J. WILLIAMS, OSB #901366 Acting United States Attorney, District of Oregon ALLAN M. GARTEN, OSB #812360 [email protected] MICHELLE HOLMAN KERIN, OSB #965278 [email protected] Assistant United States Attorneys 1000 S.W. Third Ave., Suite 600 Portland, OR 97204-2902 Telephone: (503) 727-1000

Attorneys for the United States of America

UNITED STATES DISTRICT COURT

DISTRICT OF OREGON

PORTLAND DIVISION

UNITED STATES OF AMERICA, PLAINTIFF,

V.

JON MICHAEL HARDER, DEFENDANT.

CASE NO.: 3:12-CR-00485-SI

GOVERNMENT’S SENTENCING

MEMORANDA (PHASE II)

HEARING: NOV. 16-17, 20159:00 A.M.

Case 3:12-cr-00485-SI Document 201 Filed 11/10/15 Page 1 of 68

GOVERNMENT’S SENTENCING MEMORANDUM (PHASE II) - i

TABLE OF CONTENTS

Table of Authorities ....................................................................................................................... iv

I. Introduction ....................................................................................................................1

II. Guideline Calculations ...................................................................................................2

A. The Resulting Offense Level is 43 Under Both Parties’ Analysis...........................2

B. The Loss Attributed to Defendant is More Than $65 Million Pursuant to U.S.S.G. § 2B1.1(6)(1)(M) ......................................................................................4

1. Principles Governing Loss .................................................................................4

2. Agreed Upon Loss Calculation ..........................................................................6

3. The Government’s Loss Calculation is Extremely Conservative ......................7

a. The Loss for Sentencing Purposes uses MIMO Method .............................7

b. The Loss Does Not Include the True Monetary Losses from

Blackstone Investors ....................................................................................9

c. The Proposed Loss Does Not Include Losses to Investors Incurred Because of Tax or Other Collateral Consequences ....................................10

d. The Proposed Loss Does Not Include the Devastating Financial Impact to Victims Beginning July 2008 and Lasting Through the First Distribution by the Receiver ..........................................................................................11

C. An Enhancement for Number of Victims Under U.S.S.G § 2B1.1(b)(10)(C)

is Warranted ...........................................................................................................14

D. Defendant Employed Sophisticated Means and an Enhancement Under U.S.S.G. § 2B1.1(b)(10)(C) is Appropriate ...........................................................15

E. Defendant Made Material Misrepresentations in His Bankruptcy and a Two-Level Enhancement Under U.S.S.G. § 2B1.1(b)(9)(B) Should be Imposed .................................................................................................15


GOVERNMENT’S SENTENCING MEMORANDUM (PHASE II) - ii

F. Defendant’s Crime Involved a Securities Law Violation and an Enhancement Under U.S.S.G. § 2B1.1(b)(19)(A) Should be Imposed ........................................16

G. Defendant’s Crime Involved Vulnerable Victims and Therefore, and Enhancement Under U.S.S.G. § 3A1.0(b)(1)-(2) is Appropriate ..........................16

H. Defendant Is Not Entitled to Any Reduction for Acceptance of Responsibility Because He Maintained During Sentencing That He Did Not Defraud Most of the Investors .................................................................................................................18

1. The Court Should Not Give the Defendant a Two-Level

Downward Departure .......................................................................................19 a. Defendant Frivolously Contested Relevant Conduct .................................19

b. Defendant Has Not Accepted Responsibility in Either HIse Words or His

Deeds..........................................................................................................21

c. Defendant Has Engaged in Financial Planning to Ensure that He Doesn’t Have to Pay any Further Restitution to Victims and Has Refused to Provide Documents to the USPO ...............................................................23

2. The Court Should Reject Defendant’s Contentions His Cooperation in the SEC and Bankruptcy Proceedings Warrant Acceptance of Responsibility .....25

3. The Government Will Not Move for the Third-Level of Acceptance and the Defendant Has Conceded the Issue ..................................................................26

III. Section 3553(a) Factors ...............................................................................................27 A. Nature and Circumstances of the Offense .............................................................27

1. Defendant’s Crime Was Egregious ..................................................................27

2. Impact to the Victims of Defendant’s Crimes .................................................29

B. History and Characteristics of the Defendant ........................................................34

1. Generally ..........................................................................................................34

2. The Defendant’s Crime was Motivated by Greed ...........................................35

3. The Bankruptcy and SEC Proceedings ............................................................41


GOVERNMENT’S SENTENCING MEMORANDUM (PHASE II) - iii

a. The Professionals who administered the SEC and Bankruptcy Proceedings Did a Fantastic Job of Ensuring Defendant’s Massive Fraud Was Not as Catastrophic to Defendant’s Victims’ as it Could Have Been ...................41

b. Defendant “gave up” his interest in Sunwest that was Procured Through Fraud and Deceit ........................................................................................43

c. The Defendant has Already Received Substantial Consideration for his Cooperation in the SEC Proceeding – a Further Reduction in His Sentence is Not Warranted ........................................................................................46

C. Need to Provide Adequate Deterrence to Criminal Conduct .................................50

D. Need to Provide Just Punishment for the Offense .................................................52

E. Need to Avoid Unwarranted Sentencing Disparities .............................................56


GOVERNMENT’S SENTENCING MEMORANDUM (PHASE II) - iv

TABLE OF AUTHORITIES

Federal Cases

Brandon v. United States, 2011 WL 4801362 (S.D.N.Y. Oct. 11, 2011) .................................... 60

SEC v. Elliott, 953 F.2d 1560 (11th Cir. 1992) .............................................................................. 7

United States. v. Rutledge, 28 F.3d 998 (9th Cir. 1994) .............................................................. 19

United States v. Allison, 86 F.3d 940 (9th Cir. 1996) .................................................................... 5

United States v. Bachynsky, 415 F. App’x 167 (11th Cir. 2011) ................................................. 60

United States v. Bailey, 549 F. App’x 171 (4th Cir. 2013) .......................................................... 59

United States v. Brennan, No. 2014 WL 1394654 (11th Cir. Apr. 11, 2014) ............................. 59

United States v. Bruteyn, 686 F.3d 318 (5th Cir. 2012) ............................................................... 60

United States v. Bush, 626 F.3d 527 (9th Cir. 2010) ................................................................... 61

United States v. Clark, 717 F.3d 790 (10th Cir. 2013) ................................................................ 60

United States v. Cronin, 429 F. App’x 241 (4th Cir. 2011) ......................................................... 60

United States v. Cutler, 520 F.3d 136 (2d Cir. 2008) .................................................................. 52

United States v. Edwards, 622 F.3d 1215 (9th Cir. 2010) ........................................................... 54

United States v. Espinoza-Cano, 456 F.3d 1126 (9th Cir. 2006) ................................................. 26

United States v. Favara, 615 F.3d 824 (7th Cir. 2010) ............................................................... 61

United States v. Goffer, 531 F. App’x 8 (2d Cir. 2013) ............................................................... 59

United States v. Hagen, 468 F. App’x 373 (4th Cir. 2012) ......................................................... 60

United States v. Harper, 32 F.3d 1387 (9th Cir. 1994) ................................................................. 5

United States v. Lochmiller, 521 F. App’x 687 (10th Cir. 2013) ................................................ 60

United States v. Lopez, 222 F.3d 428 (7th Cir. 2000) .................................................................... 6

United States v. Martin, 455 F.3d 1227 (11th Cir. 2006) ............................................................ 51

United States v. McKanry, 628 F.3d 1010 (8th Cir.) ..................................................................... 7

United States v. Medina-Beltran, 542 F.3d 729 (9th Cir. 2008) .................................................. 26

United States v. Niebuhr, 456 F. App’x 36 (2d Cir. 2012) .......................................................... 60

United States v. Poulsen, 655 F.3d 492 (6th Cir. 2011) .............................................................. 60

United States v. Rajaratnam, 719 F.3d 139 (2d Cir. 2013) ......................................................... 60

United States v. Ruff, 535 F.3d 999 (9th Cir. 2008) ..................................................................... 54

United States v. Simmons, 737 F.3d 319 (4th Cir. 2013) ............................................................. 59

United States v. Stitsky, 536 F. App’x 98 (2d Cir. 2013) ............................................................. 59

United States v. Turek, No. 2014 WL 1613314 (6th Cir. Apr. 23, 2014) .................................... 59


GOVERNMENT’S SENTENCING MEMORANDUM (PHASE II) - v

United States v. Turk, 626 F.3d 743 (2d Cir. 2010) ....................................................................... 7

United States v. Ware, 334 F. App’x 49 (8th Cir. 2009) ............................................................... 5

United States v. Washman, 128 F.3d 1305 (9th Cir. 1997) ......................................................... 19

United States v. Zolp, 479 F.3d 715 (9th Cir. 2007) ...................................................................... 5

United States v. Zuniga, 66 F.3d 225 (9th Cir. 1995) .................................................................... 5

Wade v. United States, 504 U.S. 181 (1992) ............................................................................... 26

Federal Statutes

18 U.S.C. § 1031 (2012) ................................................................................................................ 8

18 U.S.C. § 3553(a) (2012) ................................................................................ 2, 7, 11, 17, 27, 51

18 U.S.C. § 3553(a)(1) (2012) ....................................................................................................... 7

Other

Kenneth Mann et al., Sentencing the White-Collar Offender, 17 Am. Crim. L. Rev. 479, 500 (1980) .................................................................................................................................... 54

James J. Fishman, Enforcement of Securities Laws in the United Kingdom, 9 Int’l Tax & Bus. Law. 131, 170-71 (1991) ............................................................................... 52

Michael M. O'Hear, Appellate Review of Sentences: Reconsidering Deference, 51 Wm. & Mary L. Rev. 2123, 1216-18 (2010) .......................................................................... 55

Michael M. O'Hear, Appellate Review of Sentences: Reconsidering Deference, 51 Wm. & Mary L. Rev. 2123, 2141-49 (2010) .......................................................................... 55

U.S.S.G. ch. 5, pt. A ................................................................................................................... 3, 4

U.S.S.G. § 1B1.3 .......................................................................................................................... 17

U.S.S.G. § 2B1.1 .................................................................................................................. 4, 5, 10

U.S.S.G. § 3A1.1 ......................................................................................................................... 17

U.S.S.G. § 3E1.1 ................................................................................................................ 3, 18, 19

U.S.S.G. § 3E1.1(b) ............................................................................................................... 18, 19

U.S.S.G. § 2B1.1(a)(1) ................................................................................................................... 3

U.S.S.G. § 2B1.1 cmt. n.3 ...................................................................................................... 4, 5, 8

U.S.S.G. § 2B1.1(6)(1)(M) ............................................................................................................ 1

U.S.S.G. § 2B1.1(b)(1)(M) ........................................................................................................ 3, 4

U.S.S.G. § 2B1.1(b)(2)(C) ....................................................................................................... 3, 14

U.S.S.G. § 2B1.1(b)(9)(B) ............................................................................................... 1, 2, 3, 15

U.S.S.G. § 2B1.1(b)(10)(C) ................................................................................................. 1, 3, 15


GOVERNMENT’S SENTENCING MEMORANDUM (PHASE II) - vi

U.S.S.G. § 2B1.1(b)(19)(A) ................................................................................................. 1, 3, 16

U.S.S.G. § 2S1.1(2)(A) .................................................................................................................. 3

U.S.S.G. § 3A1.1(b)(1) ................................................................................................................ 16

U.S.S.G. § 3A1.0(b)(1)-(2) ............................................................................................................ 1

U.S.S.G. § 3A1.1(b)(1)-(2) .......................................................................................................... 16

U.S.S.G. § 3A1.1(b)(1), (2) ........................................................................................................... 3

U.S.S.G. § 2B1.1(b)(19)(A) cmt. n.15 ......................................................................................... 16


GOVERNMENT’S SENTENCING MEMORANDUM (PHASE II) - 1

The United States of America, by and through Billy J. Williams, Acting United

States Attorney for the District of Oregon, and Allan M. Garten and Michelle Holman

Kerin, Assistant United States Attorneys, hereby submit this Sentencing Memoranda to

aid the court in sentencing the defendant Jon Michael Harder. The government requests

that the defendant be sentenced to 15 years (180 months) imprisonment and three (3)

years of supervised release. The government and the defendant request the court set over

for 90 days the determination of restitution and forfeiture.

I. INTRODUCTION

Defendant Jon Harder organized, managed, directed, and personally engaged in

what is believed to be the largest investment fraud in the history of the District of Oregon.

He was the President, Chief Executive Officer, and majority owner of Sunwest (and all

of its many related entities) and made every major decision. Although he portrayed

himself as an ethical and honest businessman, Jon Harder deceived Sunwest investors

and employees alike by misrepresenting nearly every aspect of the investment offered.

Throughout 2006 through mid-2008, and earlier, the defendant falsely and fraudulently

represented to investors, among other things, that Sunwest was a financially successful

company. In truth, Sunwest’s myriad of businesses were hemorrhaging cash, unable to

keep up with their payments to vendors and in some cases, in breach of financial

covenants with their lenders. Defendant knew this.

By mid-2008, Jon Harder knew that Sunwest was failing and rapidly collapsing.

Troublingly, defendant continued to represent that Sunwest was a solid company that

was worthy of investment for older people on fixed incomes—this continued until June



2008. Jon Harder deceived the very people that depended on him to care for their

investment, paid for by monies that in many instances took lifetimes to acquire.

Defendant was motivated by greed and his dream of becoming a wealthy man on

the backs of these investors. However, it was Sunwest’s investors and lenders that bore the

risks of the defendant's actions because although they did not know it, their return

promised by defendant was dependent on Sunwest continuing to accumulate new ALFs

and managing their desperate cash situation.

Regardless of the defendant’s internal thought process and motivations, it cannot

be disputed that the defendant decimated the savings of many Sunwest investors, and

destroyed countless lives through his fraud. Despite this, the defendant has not accepted

responsibility for his crimes—he has and continues to shift blame to everyone else and

world events. Moreover, he has refused to provide financial information to the United

States Probation Office and has utilized clever mechanisms to ensure his victims do not

further recoup their significant losses. The government believes that 15 years is the

appropriate sentence to reflect the magnitude of the defendant’s crimes.

II. GUIDELINE CALCULATIONS

A. Resulting Offense Level is 43 Under Both Parties’ Analysis. After submitting briefs to the court and meeting with counsel to consult, the

parties are now in agreement on most of the applicable specific offense characteristics in

determining the defendant’s appropriate resulting guidelines. There are still two areas

where the parties disagree: (1) whether the bankruptcy misrepresentation enhancement

under U.S.S.G. § 2B1.1(b)(9)(B) is applicable; and (2) whether the defendant is entitled



to acceptance of responsibility. As this court is aware, the government believes that the

bankruptcy misrepresentation enhancement is applicable1 and that the defendant is not

entitled to any acceptance of responsibility; defendant disagrees. Here is a chart outlining

the government’s position regarding the appropriate guidelines calculation:

Enhancement Government’s Position

Base— U.S.S.G. § 2B1.1(a)(1)

7 (not contested)

Loss— U.S.S.G. § 2B1.1(b)(1)(M) more than $65 million and less than $150 million

24 (not contested)

Number of Victims— U.S.S.G. § 2B1.1(b)(2)(C) More than 25 who suffered significant financial hardship

6 (not contested)

Sophisticated Means— U.S.S.G. § 2B1.1(b)(10)(C)

2 (not contested)

Bankruptcy misrepresentation— U.S.S.G. § 2B1.1(b)(9)(B)

2 (contested—submitted via pleadings to court)

Securities law violation— U.S.S.G § 2B1.1(b)(19)(A)

4 (not contested)

Money Laundering— U.S.S.G. § 2S1.1(2)(A)

1 (not contested)

Vulnerable victims— U.S.S.G. § 3A1.1(b)(1) & (2)

2 (not contested)

Acceptance of Responsibility— U.S.S.G. § 3E1.1

0 (2 points are contested)

GOVERNMENT’S PROPOSED TOTAL OFFENSE LEVEL

47 (Reduced to 43 pursuant to U.S.S.G. Chapter 5, Part A (Comment n.2))

1 The parties have submitted the issue of its applicability to the court via declarations and argument.



DEFENDANT’S CONCEEDED TOTAL OFFENSE LEVEL2

43

RESULTING GUIDELINE RANGE Life As the court can see, the resulting offense level, regardless if the government prevails on

the sentencing bankruptcy misrepresentations enhancement and the acceptance of

responsibility, is the same since the guidelines require the court to start at 43 if the

offense level is more than 43. U.S.S.G. Chapter 5, Part A (Comment n.2).

B. The Loss Attributed to Defendant is More Than $65 Million Pursuant to U.S.S.G. § 2B1.1(b)(1)(M). 1. Principles Governing Loss.

The Sentencing Guidelines primarily measure the harm caused by a defendant’s

fraud offense by loss. The Sentencing Commission has explained:

[O]rdinarily, the sentences of defendants convicted of federal offenses should reflect the nature and magnitude of the loss caused or intended by their crimes. Accordingly, along with other relevant factors under the guidelines, loss serves as a measure of the seriousness of the offense and the defendant's relative culpability and is a principal factor in determining the offense level under this guideline.

U.S.S.G. § 2B1.1, Background cmt. (2001 ed.).

For the purposes of determining loss under § 2B1.1, the Guidelines provide that

“loss” is “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.”

2 Defendant does intend to argue that some of the enhancements are duplicative and should not be counted. However, each guideline enhancement reflects a separate and independent characteristic of defendant’s offense and should be applied. For example, even absent the fact Clovis and Hobbs were securities, the sophisticated means enhancement applies by the mechanism that defendant used to siphon and transfer money for purposes other than that promised to investors.



Id. at n. 3(A)(i). “Reasonably foreseeable pecuniary harm” means “pecuniary harm that the

defendant knew or, under the circumstances, reasonably should have known, was a

potential result of the offense.” Id. at n. 3(A)(iv). “Intended loss” means “the pecuniary

harm that the defendant sought to inflict” and includes “intended pecuniary harm that would

have been impossible or unlikely to occur. . . .” Id. at n. 3(A)(ii)-(iii). Actual and intended

loss categories are not mutually exclusive, but rather, can be combined to calculate overall

loss. See United States v. Ware, 334 F. App’x 49, 50 (8th Cir. 2009) (“There is nothing in

the word ‘intended’ or in the application notes that suggests that completed intentional

losses should not be included.”).

The government bears the burden of proving loss. United States v. Zuniga, 66 F.3d

225, 228 (9th Cir.1995). Pursuant to Section 2B1.1, the Court must only make a reasonable

estimate of loss based on available information:

The court need only make a reasonable estimate of the loss. The sentencing judge is in a unique position to assess the evidence and estimate the loss based upon that evidence. For this reason, the court’s loss determination is entitled to appropriate deference.

Id. at n. 3(C). The district court is not required to calculate loss “with absolute precision.”

United States v. Zolp, 479 F.3d 715, 719 (9th Cir. 2007). Likewise, the Ninth Circuit “has

refused to mechanically apply U.S.S.G. § 2B1.1 and has held that in calculating loss in

fraud cases, the sentencing court should take a realistic, economic approach to determine

what losses the defendant truly caused or intended to cause, rather than the use of some

approach which does not reflect the monetary loss.” United States v. Allison, 86 F.3d 940,

943 (9th Cir.1996) (citing United States v. Harper, 32 F.3d 1387, 1392 (9th Cir.1994)).



When calculating intended loss, absolute accuracy is not required, so long as the

calculation is not “outside the realm of permissible computations.” United States v. Lopez,

222 F.3d 428, 437 (7th Cir. 2000).

2. Agreed Upon Loss Calculation.

The parties have agreed that the loss calculation for sentencing purposes, based on

an extremely conservative formula which was borne of compromise with the defendant,

is approximately $120 Million. Here is a chart:



It is axiomatic that loss should not be reduced where a defendant claims it was overstated

as a result of market factors. See United States v. McKarry, 628 F.3d 1010, 1017 (8th Cir.), cert.

denied, 131 S.Ct. 1837 (2011); United States v. Turk, 626 F.3d 743, 749-51 (2d Cir. 2010).3

3. The Government’s Loss Calculation is Extremely Conservative.4 a. The loss for sentencing purposes uses MIMO method

As this court is aware, the Receiver used the MIMO method to determine a victim’s loss

in the SEC and Bankruptcy Proceedings and the parties, in turn, used that for sentencing

purposes. The Receiver proposed the MIMO approach, recognizing the most basic equitable

principle-where investors have suffered similar losses, all should recover their principal

before any recovers profits or interest. SEC v. Elliot, 953 F.2d 1560, 1570 (11th Cir. 1992)

rev'd. in part on other grounds, 998 F.2d 922 (11th Cir. 1993).5 As previously explained

MIMO is the acronym for Money-In/Money-Out and is the prototypical method of calculating

Allowed Claims of Investors in securities fraud receivership cases. Cash or any other material

tangible value given or transferred to defendant or any of the Receivership Entities for purposes

of an investment in Sunwest ("Money-in") is reduced by all payments of principal, interest, rent,

fees, or other payments, distributions or transfers of funds, securities, or other property or any

other material tangible value paid, distributed, or transferred out (for any reason) after January

1,2006 arising from or related to the Investor's investment in the Sunwest Enterprise ("Money- 3 This principle should also apply in considering 18 U.S.C. §3553(a)(1) factors. The fact of a recession is entirely foreseeable to anyone involved in investments. While defendant could not predict its size or scope, that is irrelevant. 4 While the parties agreed to a loss for sentencing purposes, the government asks that the court consider these arguments for both the calculation of loss under the sentencing guidelines and for 18 U.S.C. §3553(a) purposes. The amount of harm to victims that is not captured by the loss number goes directly to the “nature and circumstances of the offense.” 18 U.S.C. §3553(a)(1). 5 See, Receiver’s Omnibus Response to Objections to Distribution Plan, SEC Proceeding, Doc. No. 795, p. 11.



out"). Thus, the MIMO claim reduces the principal amount of an investor’s original investment

by any payments, primarily rent payments, made to investors prior to the detection of the fraud

pursuant to U.S.S.G. § 2B1.1, n.3(E)(i).6

As this court knows, whatever the MIMO amount was, it was not the bargain

investors sought and were promised by defendant when they transferred their retirement,

their deceased spouse’s life insurance proceeds, their inheritance, money saved for their

children’s college, the proceeds from their real property they built or managed, etc. The

investors believed and defendant promised that their principal investment would be

returned (plus a small percentage) and that the monthly rent payments represented

interest for the defendant’s use of that money. Thus, the reduction of these amounts for

sentencing purposes does not fully measure the loss to defendant’s victims. Remember

too, that the whole purpose of the TIC investments, in particular, was to ensure that

investors did not have tax consequences on their section 1031 exchange property—and

defendant and Sunwest promised them they would not. Because rent payments were

considered interest on the bargain the defendant made with his victims, as rent payments

came in before they were ceased on July 2008, the victims paid taxes on those rents as

regular income. Then, as a result of MIMO, their principal investment was reduced by

those dollars (without taking into account the amount paid in taxes). Accordingly, by

using MIMO as the basis of the investors’ losses, the loss calculated for sentencing

6 Over 3,100 claims were filed by investors in the SEC Proceedings, claiming losses totaling over $2 billion. The Receiver reviewed the claims filed by investors and determined that about $950 million of the total claims were valid claims. The Receiver reviewed the allowed claims filed by investors and determined that a total of $527 million of these claims were eligible for payment by the Receivership. Then, the Receiver deducted the rents paid. It was from those amounts (allowable claims-rents paid) that distributions were made.



purposes significantly underestimates the true monetary loss to the victims of defendant’s

massive fraud.

b. The Loss does not include losses from Blackstone investors. Another reason that this loss calculation is extremely conservative is that it does

not include the MIMO claims by those investors who were eligible for and rolled-over

their investment/claims into the Blackstone deal. Indeed, the government has chosen not

to incorporate for sentencing purposes the losses incurred by investors who rolled their

Sunwest investment into Blackstone. The amount excluded from the loss calculation for

investors who rolled-over their investment/claims into the Blackstone deal is

approximately $145,951,000. (Receiver’s Recovery Analysis dated December 17, 2010).

While some of those investors have recovered close to 100% of the amount of their

MIMO claim, something defendant is sure to attribute to his conduct and seek credit for,

the reason for that return is not at all because of the defendant. Instead, it is because

Blackstone could and did invest significant capital in the ALFs, something defendant

promised investors would happen but never did because Sunwest did not have any cash to

do so.7 See, http://www.thedeal.com/content/real-estate/hcp-buys-17b-senior-housing-

portfolio.php.

7 There is significant misinformation about the nature of the Blackstone offering and the recovery by these investors. The results are touted by defendant as proof of his valiant efforts to aid investors which he claims is worthy of a lesser sentence in this instant case. However, the fact is, based on evidence adduced at the Phase I Hearing, the defendant refused to sell properties in an up market, his business model couldn’t invest in the properties he purchased as promised, mostly because of Sunwest’s significant cash problems, which included a monthly drain because of non-senior properties.



c. The proposed loss does not include losses to investors incurred because of tax or other collateral consequences. The loss advocated by the government and agreed to by the parties does not

include any of the loss to investors who had to account for the adverse tax consequences

or unexpected collateral increased costs caused by the defendant’s crimes.8 As the

testimony at the Phase I Hearing and many of the defendant’s victims’ statements

described—the first distribution, the largest, came to the victims in mid-December 2010.9

As a result, many sophisticated investors were unable to prepare for any tax

consequences and ultimately, paid significant taxes.10 While the defendant will argue

that the Receiver and others attempted to avoid tax consequences for investors, the fact is

that many, many investors, as evidenced by the testimony adduced at Phase I and the

Victim Impact Statements, suffered tax consequences because of the demise of Sunwest.

The tax consequences are particularly harmful given that the defendant’s victims

specifically entered into the transactions with defendant in large part, to properly plan for

the tax consequences of their financial decisions.

Moreover, other investors describe additional monetary penalties as a result of the

distributions. The letter of B. C. and D. C., is particularly poignant:

8 U.S.S.G. §2B1.1, n. D(i) excludes from loss interest, late fees, penalties, etc. But taxes on income due as a result of the defendant’s conduct is not specifically excluded. 9 To date, there have been three distributions to victims by the Receiver: December 17, 2010, April 13, 2012 and December 20, 2013. Between July 2008 and December 17, 2010, the victims received nothing from Sunwest or defendant. 10 Judith Baxter, the Taiwanese immigrant who came to this country with nothing to become a CPA at a big-eight accounting firm and then a real estate broker, described the tax consequences. As did lawyer Lyndell VanDyke.



Even when the first check from the sale of the properties began arriving * * * the Sunwest nightmares continued. Repayment of the principal loan amount and the TIC investment were taxable according to the IRS. Then the Medicare System raised our Standard Monthly * * * individual payments by an additional $167.80 each, plus $50.20 each for monthly drug coverage.11

C. Letter, p. 3. These figures are not included into the agreed-upon loss calculation, but

should be considered by this court under 18 U.S.C. §3553(a).

d. The proposed loss does not include the devastating financial impact to victims beginning July 2008 and lasting through the first distribution by the Receiver.

Finally, and completely ignored by defendant in his race to congratulate himself on the

recovery from the SEC and Bankruptcy Proceedings, is that the loss for sentencing purposes

does not fully capture in anyway the significant financial hardship the victims endured from July

2008, when defendant stopped their stream of income which many depended on to meet their

basic needs, to December 2010, when the first distribution was disbursed. During this period of

time, the victims received nothing—not a dime.12 This piece of the History of Sunwest cannot

be ignored. As the victim impact statements demonstrate, this sudden and unexpected cessation

of income, mostly for individuals who were living on a fixed income, caused many victims to

have to use social security as their primary source of income, to readjust their retirement plans, to

return to work, to sell assets, including their home and otherwise make significant living

adjustments.

11 Higher income individuals pay a higher Medicare premium for both Part B and prescription drug coverage. https://www.ssa.gov/pubs/EN-05-10536.pdf 12 As explained in more detail below, during the same time that the victims received NOTHING, from June 31, 2008 through the filing of the Bankruptcy Proceeding on December 31, 2008, defendant and his wife received more than $1.8 million. Govt. Ex. 162. During the course of the Bankruptcy and SEC Proceedings, more than $8.2 million was paid to the Harders or on their behalf, via professional fees. Govt. Ex. 163. Again, the victims did not receive a dime until December 2010.



As the testimony throughout the Phase I Hearing demonstrated, the failure of Sunwest

was caused by the defendant, not GE Capital, not Alvarez and Marsal, not the seizure of the

credit markets, the Great Recession of 2008 or any of the other people and events defendant has

attempted to shift blame to. Defendant’s greed and hubris caused him to acquire over 100

money-losing properties in a 36-month period, along with the significant investment in non-

senior housing property that drained money from Sunwest’s core business—senior housing,

made it impossible for Sunwest to pay its financial obligations. What is more, the timing of

defendant’s decision to stop making payments to investors exacerbated the harm to them. Thus,

while, the financial and economic problems of 2008 did not cause the failure of Sunwest; it did

however, make the losses suffered by defendant’s victims dramatically more severe.

The music stopped for defendant in July of 2008. He ran out of cash and exhausted all

of his sources of cash. It was defendant that increased Sunwest’s negative cash flows to $10

million a month by May of 2008. Sunwest collapsed into the deep cash hole that defendant

dug. After July of 2008, most investors were forced to make new plans for supporting

themselves. Many of these investors were already or close to retirement age. This severely

limited both their ability and opportunity to find employment to replace their lost income. At

about the same time as investors stopped receiving their monthly payments the country’s

financial markets and economy collapsed. This made their financial situation much worse by

limiting the ways in which they could try to recover some of their lost income. The stock

market crash in September of 2008 caused some investors to lose a significant portion of

their other financial investments.



The crash of the housing market decreased the value and equity of many of the

investors’ largest remaining asset, their home. Investors could not sell or refinance their

homes to raise cash because the credit markets were frozen. For those able to work many

found that they could not return to the job market because of their age or the growing

unemployment caused by the recession. Defendant’s victims were devastated by the events

of 2008 leaving many of them in a perilous financial situation. The loss of their income and

principal invested in Sunwest destroyed many of their dreams for a comfortable retirement.

Some of them lost their homes, many of them lost their savings and their dreams. Again,

investors B. C. and D. C. described the impact of the sudden loss of their monthly payments

in his letter to the Court:

Thus began the terrible period of uncertainty with almost daily fear that we were going to lose our retirement funds and we must drastically reduce our spending and budget outlays to the level of our monthly Social Security checks for the foreseeable future. This was a bitter “pill" to swallow, but it appeared to be many months or probably years before any monies from Sun west could be counted on again, if ever. While there appeared to be financial resources within Sunwest, legal fees, investor infighting, and persons hired by Sunwest and the Courts seemed to be battling fiercely to get their hands on as much of these monies as they could. * * * The process was a continuous and frightening emotional roller coaster ride.

M. M. and other investors were shocked and disappointed to find out that defendant

was receiving a monthly allowance while they received nothing “I stopped reading news

reports when Jon Harder was asking the bankruptcy judge for his extravagant living expenses

during the course of the bankruptcy case. He and all the attorneys that were involved did

NOT suffer like us investors. I'm afraid I would be too emotional, but I could come and

testify next week if needed.”



Defendant’s victims have painfully testified and described in correspondence with the

Court the physical and emotional trauma they have suffered. In short, the loss advocated by

the government for sentencing purposes underestimates, significantly, the actual loss, the

harm and the destruction that defendant’s devastating crime had on his victims.

C. An Enhancement for Number of Victims Under U.S.S.G. § 2B1.1(b)(2)(C) is Warranted. The parties agree that a six-level enhancement pursuant to U.S.S.G. §

2B1.1(b)(2)(C) for the number of victims is appropriate because the defendant’s offense

“resulted in substantial financial hardship to 25 or more victims.” The notes describe that

in determining whether a victim has endured a “substantial financial hardship,” the court

may consider a variety of factors including the following:

(i) Becoming insolvent;

(ii) filing bankruptcy * * * ;

(iii) suffering a substantial loss of a retirement, education or other savings or investment fund; (iv) making substantial changes to his or her employment, such as postponing his or her retirement plans; (v) making substantial changes to his or her living arrangements, such as relocating to a less expensive home. * * * Note 4(F), Sentencing Guideline Amendments. The factors listed in the note are non-

exhaustive. So the that the court is satisfied that there is sufficient evidence to impose this

enhancement, the parties agree that the victim impact statements presented to the court

demonstrate overwhelmingly that well over 25 victims have lost a substantial part of their

retirement or otherwise suffered significant financial hardship. Specifically, the government



calls the following letters to the court’s attention as a small sample: V. D., R. E., D. C. F., N. F.,

John and Gwenyth Fuez, Dr. J. and J. F., Dr. Lloyd Heibert (who testified at Phase I Sentencing),

W. and S. L., J. M., J. and J. L., M. K., C. H., D. H., V. H., E. H., E. H., G. K., J. M., R. and M.

M., I. and D. P., A. P., N. R., W. S., B. and D. Clark, T. R., and many, many more. These

victims indicated that they lost a significant part of their retirement savings, were forced to return

to work and/or change their retirement plans, or that they had to change where they were living

as a result of the loss incurred because of defendant’s crimes.

D. Defendant Employed Sophisticated Means and an Enhancement Under U.S.S.G. § 2B1.1(b)(10)(C) is Appropriate. The parties now agree that defendant used sophisticated means to commit his

offense even under the definition in the new version of U.S.S.G. § 2B1.1(b)(10)(C).

E. Defendant Made Material Misrepresentations in his Bankruptcy and a Two-Level Enhancement Under U.S.S.G. § 2B1.1(b)(9)(B) Should be Imposed. Pursuant to U.S.S.G. § 2B1.1(b)(9)(B) a two-level enhancement is appropriate

where the offense involved a misrepresentation or other fraudulent action during the

course of a bankruptcy proceeding. As outlined in the various pleadings submitted by the

government, defendant lied to the bankruptcy court to conceal his crime and maintain the

spoils of his illegal conduct.

F. Defendant’s Crime Involved a Securities Law Violation and an Enhancement Under U.S.S.G § 2B1.1(b)(19)(A) Should be Imposed. The parties agree that a four-level enhancement pursuant to U.S.S.G §

2B1.1(b)(19)(A) because the offense involved a securities violation is appropriate. The



notes to this enhancement provide that a “conviction under a securities law or

commodities law is not required in order” for the enhancement to apply. U.S.S.G §

2B1.1(b)(19)(A), n.15. The uncontroverted evidence at the hearing demonstrated that

the TIC investments were securities and that the defendant was the broker licensed and

registered with FINRA. As this court is aware, the SEC Proceeding resulted in a

summary judgment finding that the determined among other things, that the defendant

violated the federal securities laws. The summary judgment order was based on the

defendant’s own testimony under oath as well as other uncontested evidence. Moreover,

the State of Oregon Division of Finance and Corporate Securities entered an order

finding that defendant violated the Oregon securities laws for both TIC and PMI

investments. This enhancement is applicable.

G. Defendant’s Crime Involved Vulnerable Victims and Therefore, an Enhancement Under U.S.S.G. § 3A1.1(b)(1)- (2) is Appropriate.

The parties agree that defendant’s Sentencing Guidelines calculation should be

increased two levels under U.S.S.G. §3A1.1(b)(1) because the defendant knew or should

have known that his offense involved vulnerable victims. Section 3A1.1(b)(1)-(2), and

Application Note 2, states:

§3A1.1. Hate Crime Motivation or Vulnerable Victim

(b)(1) If the defendant knew or should have known that a victim of the offense was a vulnerable victim, increase by 2 levels. 2. For purposes of subsection (b), "vulnerable victim" means a person (A) who is a victim of the offense of conviction and any conduct for which the defendant is accountable under §1B1.3 (Relevant Conduct); and (B) who is unusually vulnerable due to age, physical or mental condition, or who is otherwise particularly susceptible to the criminal conduct.



Subsection (b) applies to offenses involving an unusually vulnerable victim in which the defendant knows or should have known of the victim's unusual vulnerability.

To impose the enhancement, the court must find that there is evidence by a preponderance that

defendant’s victims were, in fact, vulnerable and the defendant knew or should have known that

his crime involved such a person.13 The vast majority of the defendant’s victims were elderly or

otherwise vulnerable. The government will introduce evidence that the current average age of

approximately 1,200 investors is 68 and more than 79 investors have died since July 2008.

Indeed, part of Sunwest’s marketing strategy, as explained by David Thurber at the Phase I

Sentencing Proceeding, was to target individuals who were retiring and sought a less-managed

investment. The Victim Impact Statements described that several victims spoke directly with

defendant and explained to him that because of their age, or their (or their family member’s)

health condition or other vulnerability, they could not afford to lose the money they were

investing in Sunwest. For example, D. H., 68, has polio and walks with the assistance of

crutches. He met with defendant and explained that he was disabled and needed the income to

live on. After his initial investment, Mr. H. met with defendant a second time and handed

defendant a check for $1 million. Because of his losses from Sunwest, his only source of income

now is Social Security and a little he will borrow from family and friends. Another example is

C. H., 66 who invested with Sunwest after she and her husband sold the family farm of 40 acres

in Nebraska that they had inherited from in-laws. The sale proceeds were the primary source of

their retirement assets. They met with defendant and told him that money would be needed for

13 This information is also relevant to the court’s consideration of factors under 18 USC 3553(a).



their adult daughter who has Tourettes and would be unable to support herself after they died.

When they lost their money, Ms. H. was forced to go back to work, even after having just

undergone hip replacement surgery, in order to pay the bills. The hardest part of the loss was

that she was unable to stay home and care for her husband while he was battling cancer. He died

just this last June at the age of 89. Despite this information about the victim’s specific

vulnerability, the defendant encouraged them to invest their money and made material

misrepresentations to induce them to do so. The court should apply a two-level enhancement.

H. Defendant Is Not Entitled To Any Reduction For Acceptance of Responsibility Because He Maintained During Sentencing That he Did Not Defraud Most of the Investors. Guidelines Section 3E1.1 provides for a two-level reduction for a defendant who

“clearly” accepts responsibility for this offense. This same provision also permits an

additional one-level reduction, but only “upon motion of the government,” and where a

defendant has “assisted authorities in the investigation and prosecution of his own

misconduct by timely notifying authorities of his intention to enter a plea of guilty,”

thereby obviating the need to prepare for trial. U.S.S.G. § 3E1.1(b). The defendant has

the burden to demonstrate he is entitled to acceptance of responsibility. United States v.

Washman, 128 F.3d 1305, 1307 (9th Cir. 1997). The government strongly urges this

court not to provide the defendant any downward departure for acceptance of

responsibility because the defendant did not accept responsibility for misleading investors

including those in Clovis and Hobbs. Even if this court determines defendant is entitled

to the two-level downward departure, the government will not move to allow the



defendant the third point of acceptance outlined in section 3E1.1(b)—and defendant does

not contest the government’s refusal to do so.

1. The Court Should Not Give the Defendant a Two-Level Downward departure. a. Defendant frivolously contested relevant conduct

Mere entry of guilty plea does not automatically entitle defendant to a reduction

under the Sentencing Guidelines for acceptance of responsibility. U.S. v. Tellez, 882 F.2d

141 (5th Cir. 1989). See, also, U.S. v. King, 36 F.3d 728, cert. denied 115 S.Ct. 954, 130

L.Ed.2d 896 (8th Cir. 1994); U.S. v. Defeo, 36 F.3d 272, (2nd Cir., 1994); U.S. v. Shipley,

963 F.2d 56, cert. denied 113 S.Ct. 348, 506 U.S. 925, 121 L.Ed.2d 263 (5th Cir. 1992);

U.S. v. Downs, 955 F.2d 397 (6th Cir. 1999); U.S. v. Lassiter, 929 F.2d 267 (6th Cir.

1991); U.S. v. Saenz, 915 F.2d 1046 (6th Cir. 1990); U.S. v. Dugan, 912 F.2d 942 (8th Cir.

1990); U.S. v. Whitehead, 912 F.2d 448 (10th Cir. 1990); U.S. v. Cooper, 912 F.2d 344

(9th Cir. 1990); U.S. v. Streeter, 907 F.2d 781 (8th Cir. 1990). A defendant “who falsely

denies, or frivolously contests, relevant conduct that the court determines to be true has

acted in a manner inconsistent with acceptance of responsibility.” U.S.S.G. § 3E1.1,

Note 1(A). In U.S. v. Rutledge, 28 F.3d 998 (9th Cir. 1994), the Ninth Circuit elaborated,

noting that:

[t]he goals of the acceptance of responsibility provision would not be fulfilled if a defendant were eligible to receive the reduction even though he falsely denied relevant conduct. See § 3E1.1, comment. (n. 1(a)) (“[A] defendant who falsely denies, or frivolously contests, relevant conduct that the court determines to be true has acted in a manner inconsistent with acceptance of responsibility.”) (emphasis added). * * *Accordingly, we hold that a defendant has the right to remain silent regarding relevant, uncharged conduct; but, once he relinquishes that right and falsely denies such conduct, the district court may weigh the false denial in considering a reduction for acceptance of responsibility.



Id. 28 F.3d at 1002-03(emphasis added).14 In Rutledge the Ninth Circuit upheld the District

Court’s denial of the two point downward departure because the defendant, like defendant

Harder “denied relevant conduct which the district court determined to be true, he acted in a

manner inconsistent with acceptance of responsibility.” Id. at 1003. In this case, the defendant

participated in a three week sentencing hearing during which he adamantly refused to admit that

TIC investors from 2006-July-2008 were part of relevant conduct. The defendant put forth a

hyper-technical defense based on the documents provided to investors that was inconsistent with

the representations many investors testified to he personally made to them but also to his own

admission in the SEC and Receivership Proceedings.

In addition, defendant further falsely denied that other PMI investments were part of

relevant conduct even though the PMI offerings and the defendant’s conduct were exactly the

same as that in Clovis and Hobbs.15 Indeed as the final PSR notes, the defendant’s pre-hearing

contention was that while the defendant admitted to misusing funds derived from PMI investors

in the Clovis and Hobbs projects, as charged in the Counts of conviction, he asserted that, “…the

misuse of funds in the strained times of late 2007, and early 2008, was the exception rather than

the rule.” PSR, ¶44. This statement was contradicted by almost every witness. Significantly,

the defendant even took a position in this criminal case that was completely inconsistent with his

position in the SEC Proceeding—and yet without even so much as a blush, he uses his conduct 14 The Ninth Circuit cited Rutledge and this principle with approval very recently in U.S. v. Munerlyn, __Fed.Appx. ___, 2015 WL 5138486 (9th Cir., Sept 2, 2015)(unpublished). 1515 If the court recalls, it was only during the testimony of Dr. Heibert (whose testimony was taken during the presentation of the defense case but on behalf of the government) that the defendant begrudgingly agreed that the PMI investment for Cottonwood, also known as West Salem Living, should be included in relevant conduct. The defendant continued to maintain that other PMI investments, including Paragon and Hawthorne Gardens, should not be included in relevant conduct.



in the SEC Proceeding to seek a reduction in his sentence. For example, with respect to one TIC

entity, Victory Hills , defendant admitted in the SEC Proceeding that he defrauded these TIC

investors and Judge Hogan so found. See, Govt. Ex. 172, Findings of Fact and Conclusions of

Law, SEC Proceeding, ¶¶ 17-23. However, defendant argued in this matter that he didn’t

defraud any TIC investor and used Victory Hills in his briefing as an example of a TIC

investment that was “executed as marketed.” History Brief, pp. 52, 55-56. This does not evince

an acceptance of responsibility.

b. Defendant’s has not accepted responsibility in either his words or his deeds. The defendant has not accepted responsibility for his actions—even for the conduct for

which he has plead guilty. Defendant (on his own and through his lawyers) has blamed

everything and everyone for the collapse and failure of Sunwest without every really

acknowledging his own role in lying to investors in order to get their money. In his letter to the

court he apologizes for the collapse of Sunwest but NOT for his lies and deceit which caused

people to invest in it in the first place. See, Letter from Jon Harder. Defendant’s entire defense

and indeed his seeming position at sentencing is that the ends justify the means. The defendant

has done little, if anything to acknowledge the lies he told to investors.16

Finally, it is rich that defendant argues in his Response to the Government’s Guideline

Analysis states the following:

16 Defendant, who has never offered or litigated an advice of counsel defense, blames his lawyers for the PPMs, OMs and other documents in which misrepresentations were made. However, he does not even acknowledge the lies he personally told investors. Representative samples of those direct lies were brought out in the Phase I Hearing through Randall Hansen and Tamara Sanner. See also Govt, Ex. 13. Defendant admitted that his lawyers never counseled him to lie. Harder Tr., p. 71 (5/27/15).



it is important to remember that Mr. Harder agreed to this two-phase sentencing mechanism so that the parties, the court, and the victims could get to a result in this case. In doing so, he waived his right to a jury, the requirement of proof beyond a reasonable doubt, the protections afforded by the rules of evidence and the Confrontation Clause, and stipulated to entry of summary testimony.

Doc. No. 185, p. 25 (emphasis added). As this court is aware, despite the expectation that

defendant would agree to a lower burden of proof (and his attorney indicated as much on the

record at the change of plea hearing), the protections of the rules of evidence and the

Confrontation Clause would apply in this sentencing proceeding, the defendant argued the exact

opposite at the time of the Phase I Sentencing. Def.’s Law Brief (Doc. No. 120), pp. 24-30

(defendant maintains pre-trial rights regarding presentations of indictments), 47-67 (standard of

proof is beyond reasonable doubt), and Appendix II, pp. 2-6 (hearsay rules and Confrontation

Clause applicable in this sentencing). The defendant required the government to respond at

length to his claims that the government should be required to prove relevant conduct beyond a

reasonable doubt, that the rules of evidence and in particular with respect to hearsay, should

apply, and that the Confrontation Clause was applicable, despite Ninth Circuit case law explicitly

indicating it was not. Government’s Reply (Doc. 126), pp. 2-8. The court ruled against the

defendant’s requests, to be sure; however, the defendant cannot claim this adverse ruling as

evidence of his acceptance of responsibility.

c. Defendant has engaged in financial planning to ensure that he doesn’t have to pay any further restitution to victims and has refused to provide documents to the USPO. Moreover, the PSR demonstrates that defendant has engaged in financial shenanigans

even as he waits for this court to impose sentence in an attempt to ensure that that investors do



not recoup any further recoveries than what they have, going so far as to refuse to provide USPO

financial documents, despite his obligation to do so in the plea agreement. Indeed, the plea

agreement requires the defendant to “fully disclose all assets in which he has any interest or over

which the defendant exercises control, directly or indirectly, including those held by a spouse,

nominee or third party.” To date, that has not occurred. PSR ¶111a.

As outlined in the PSR, defendant initially presented the required financial disclosure

forms to the USPO in approximately late-September 2015 and then on October 6, 2015, through

counsel, indicated that those forms were incomplete.17 Defendant represented to USPO that he

had no access to any money of any kind, indicating that all household money was in the care,

custody and control of defendant’s wife. Defendant reported to both Pre-trial Services and

USPO that he has been employed as a consultant for Oil Pad Solutions LLC, a company that

operates in North Dakota. PSR ¶108. OPS is member managed and owned by a trust that

includes Harder family members, but not defendant. Id. Defendant's compensation for his

consultation activity has varied over the course of this criminal case, but his wages have been

paid directly to Mrs. Harder for her support and the support of their child. Id. Defendant also

indicated that the USPO that Mrs. Harder declined to provide any statements regarding assets or

income under her control. The defendant’s position appears to be that so long as he hands over

his earnings and assets to his wife or someone else, he is exempt from disclosing it or providing

17 This is a pattern—the defendant lied about Sunwest’s financial situation to investors, so he could get more money. He then lied in the Bankruptcy Proceedings to conceal his fraud and keep his assets. Now, here he is facing a potential prison sentence of 15 years and he is being too clever by half in order to ensure he and his family maintain a specific lifestyle. These are not the actions of a man who is contrite or accepts that his lies wrought great financial devastation to many.



any further information to this court or USPO. This is troubling and inconsistent with the

actions of someone who purportedly seeks to accept responsibility for their criminal conduct.

Defendant further asserted to USPO that his most recent business venture, OPS, is

owned by a trust controlled by Harder family members, but not by defendant himself, though he

is a beneficiary. PSR ¶111b. Defendant then declined to provide any trust documents to USPO

stating he had no access to them or control over them. PSR ¶111b. Mr. Harder did provide

USPO a copy of his most “recent” financial statement dated June 6, 2008—one month before

Sunwest stopped making monthly rent payments to investors. He indicated that he does not have

the funds to pay an accountant to produce a current statement. The defendant’s conduct in

providing very basic information and supporting documentation so that the USPO can advise the

court, particularly given the financial disclosure obligations in the plea agreement18, is disturbing

and does not connote true acceptance of responsibility. Defendant continues to display a pattern

of evasiveness and deceit—his refusal to provide USPO information so that it may obtain a true

picture of his financial position is disturbing and represents the same type of behavior that

brought him before this court.

2. The court should reject defendant’s contentions his cooperation in the SEC and Bankruptcy Proceedings warrant acceptance of responsibility. The defendant’s argument is that his cooperation in the SEC and Bankruptcy

Proceedings is a panacea for all his criminal conduct. The defendant argues that his “heroic” 18 Following receipt of the final PSR, counsel for the government asked the defendant to sign releases pursuant to the provisions of the plea agreement. The government intends to obtain the trust documents and Mrs. Harder’s financial information to verify these statements. However, the complete lack of transparency and willingness to provide limited financial information to the court to verify the defendant’s statements about his purported financial condition is again, consistent with his past criminal conduct and inconsistent with someone who seeks acceptance of responsibility.



and “selfless” conduct in the SEC Proceeding should not only be used to grant him acceptance

of responsibility despite his frivolous contestation of relevant conduct, but it should also reduce

his sentence threefold from the government’s recommendation (and eightfold from the USPO’s)

and recast his prior criminal conduct in a glorious new light. The government anticipates that

the defendant’s adulation for his conduct after his fraud will be the prominent theme in his

sentencing presentation. Defendant cites two cases where the court relied on the defendant’s

failure to cooperate in civil litigation to justify denial of acceptance of responsibility—however,

the court did not just look to the defendant’s conduct within the civil proceeding in deciding the

matter, but to many other factors as well. The government addresses some of the more specific

details about the SEC Proceeding below, however, there is no support for the proposition that

the defendant should receive full acceptance of responsibility solely for his conduct in a civil

case, particularly where he frivolously contests relevant conduct and takes a position in the

criminal case that is inconsistent with his position in the civil case.

3. The Government Will Not Move For the Third-Level of Acceptance and the Defendant Has Conceded The Issue. This guideline provision vests the government with “broad discretion to

determine” when and whether the additional one-level adjustment is appropriate. United

States v. Medina-Beltran, 542 F.3d 729, 731 (9th Cir. 2008), citing United States v.

Espinoza-Cano, 456 F.3d 1126, 1137-38 (9th Cir. 2006). The motion for the additional

acceptance point “is a power, not a duty.” Espinoza-Cano, 456 F.3d at 1135 (quoting

United States v. Moreno-Trevino, 432 F.3d 1181, 1186 (10th Cir. 2005), and citing

United States v. Wade, 504 U.S. 181, 185 (1992)). Where the additional one-point is

disputed, rather than examining the underlying question of whether defendant did or did



not timely accept responsibility, the district court’s task is limited to determining whether

the defendant has come forward with sufficient evidence to establish that the prosecutor

refused to file the motion “on the basis of an unconstitutional motive or arbitrarily.”

Espinoza-Cano, 456 F.3d at 1137-38. A prosecutor does not act unconstitutionally or

arbitrarily when she refuses to move for the one-level adjustment because a defendant

disputes applicable sentencing enhancements and rejects the government’s proposed

appeal waiver. Id.

The defendant’s “guilty plea” has already resulted in a three-week Phase I

Sentencing Hearing, a length more than most trials in this district, with two more days of

sentencing to follow and defendant has suggested in his Objections to the Court’s

Findings [Doc. No. 170], he intends to appeal. The government is well

within its discretion not to move this court for the additional third point of acceptance and

the defendant concedes this issue.

III. SECTION 3553(a) FACTORS

A. Nature and Circumstances of the Offense

1. Defendant’s crime was egregious.

Defendant’s crimes are truly stunning in their breadth and scope and completely

devastating to its victims in their execution. Defendant Harder’s crimes are unusual and

remarkable given the sheer breadth of the loss (more than $120 million), the large number of his

victims (more than 1,000) and the audacity and brazenness in which defendant misrepresented

the truth to lenders and investors alike, violating his promises to them in order to maintain his

obscene standard of living and continue his scheme to defraud. As this court has found, in sum,



defendant Jon Harder lied to investors to get money. He siphoned and secreted information from

his employees and principals to get them to lie so he could get money. He manipulated other

people to get them to lie to get money. He lied to and concealed information from banks and

lending institutions to get money. He lied to his own professionals to continue to get money.19

Once he got the money, he spent it. But not as he promised his victims; instead, he spent the

money to maintain his incredibly lavish lifestyle and prop up his scheme to defraud so he could

get even more money. Predictably, defendant’s house of cards toppled and his fraud was

revealed to virtually everyone who examined it. The fall out for his victims as a result is tragic

and heartbreaking.

This court found that the defendant controlled every aspect of the Sunwest enterprise and

perpetrated a massive fraud that led investors and creditors to lose hundreds of millions of

dollars. Investors were told that they were purchasing ownership interests for a specific real

property, held as a single purpose entity (SPE), that would pay them a fixed promised annual

return either from profits or through reserves funded by their investment, and that Sunwest was a

successful, financially sound business that had a history of never missing a payment to investors.

These representations were false and concealed the true nature of the investments and the risk to

investors from Sunwest’s precarious financial position. Instead, defendant ran Sunwest as an

19 Defendant has spent significant time blaming lawyers for misrepresentations in PPMs, OMs and other investment documents. However, if this court recalls, in late 2007, attorney Gib Masters discovered defendant’s lies regarding the inter-company loans and massive commingling. Once he discovered it, Masters refused to continue to prepare the pending disclosures unless defendant agreed to significant financial controls and disclosed the commingling to investors of West Salem Senior Living, LLC (referred to as Cottonwood). Govt. Ex. 67, p. 4. Defendant personally promised Master such controls would be enacted and that the inter-company loans would be repaid and would cease. These promises were incorporated into investor disclosures, for Cottonwood only. Govt. Ex. 23, p. 1. However, defendant ignored them and his promises to Masters. Business as usual was resumed at Sunwest under defendant’s direction.



integrated unitary enterprise, commingling investor and creditor funds and operational revenue

into essentially a single fund, often funneled millions of dollars per month through his own

personal bank account, which funded defendant’s own lavish lifestyle and covered widespread

shortfalls in the payment of operational expenses and investor returns. As early as 2006, funds

were being utilized and paid on an almost pure "availability" and "cash flow needs basis,"

without regard to the source or the intended or required use of the funds, and without the

knowledge or consent of affected investors and creditors.

Furthermore, contrary to representations, Sunwest paid some investors and some

creditors steady returns on their investments and claims, not from successful

management of a particular real property asset, but from cash generated in the

operations of other real property assets and from funds obtained by refinancing, from

loans from defendant and certain defendant

creditors, and from funds raised through offerings to new investors. These facts

were material and were not disclosed to, or known by, investors.

2. Impact to the Victims of Defendant’s Crimes.

As described above, the $120 million plus loss, conservatively estimated, and

caused by the defendant’s criminal conduct does not fully reflect the harm to victims—

that is just an amount of money. The victims lost much more than $120 million dollars.

As the Victim Impact Statements reflect, defendant’s scheme affected some of his

victims very personally and deeply—they lost their trust in others, they lost their ability

to care for their spouses, children or parents, they lost their homes, they lost their

inheritance, they lost their savings that represented years of hard work and sacrifice,



they lost their health, they lost their independence, they lost their ability to care for

themselves, they lost the ability to afford health insurance or care, they lost the ability to

retire and in many instances were forced to go back to work, and they lost their ability to

pay for educational expenses for their children or grandchildren. And the list goes on.

The scheme disproportionately affected retirees and elderly victims—indeed, part

of the marketing plan of Sunwest to target retirees. These victims sought the certainty of

fixed income that the rent TIC and PMI investments payments provided. They relied

upon the representations made by defendant and others that Sunwest had not missed a

payment and that such payments were guaranteed. As this court recalls from the

testimony of victim Judith Baxter and others20, Sunwest encouraged people to invest a

significant portion of their savings in different facilities because they falsely explained

that each ALF was a separate entity so an investor who invested in multiple properties

was diversifying their investments. As a result, in many cases, people invested much of

the money they intended to use for retirement, believing they were “diversifying” their

investments and minimizing a catastrophic loss. Instead, under defendant’s direction

and control, Sunwest was operated as a unitary enterprise and the success of investor’s

investment depended on the success of the entire Sunwest entities. Now, as a result,

they have lost the bulk of their life savings and, in many cases, have to return to work

during their “golden years” just to support themselves. J. G. is such an example:

20 Other investors in the Victim Impact Statements corroborate the idea that they invested most of their savings in Sunwest because they believed they were diversifying by investing in separate ALFs. We now know that was not true and there was no diversification of investment because the defendant ran Sunwest as a unitary enterprise.



Before I invested $400,000 with Sunwest and Jon Harder.21 I had a nice retirement. The kind of retirement one looks forward to after 40 years of hard work and careful planning. I sold an income property and invested the $400,000 profit with Sunwest and Jon Harder. The short time I received income from that investment made my retirement quite comfortable, I was able to travel and enjoy the things that a person who has worked hard all their life should be able to enjoy. * * * I was * * * forced to return to work part time to replace a small amount of my stolen income. * * * In the midst of all of this I was diagnosed with lung cancer. The cancer was successfully removed through surgery that culminated in the loss of one lung. I had to pay my share of the medical bills in installments, thanks to Jon Harder.

Victim Impact Letter, J. G.; see also Victim Impact Letter, K. F. (“Now I am almost 68

and still back working sometimes 7 days week to trying to make enough to retire

on.”(sic)); Victim Impact Letter, N. F. (“I lost my marriage, I had to take our son our of

school, Humboldt, lost our house * * * This represented a thirty three year savings plan

that was to be my retirement.* * * I will now have to work until I die because of this

situation.”); and R. E. (After meeting with Mr. Harder at his offices, we chose to invest

in what Mr. Harder called his safe and proven track record with Sunwest Properties. * *

* He stole my retirement and placed my senior years in jeopardy without a thought as to

how it would impact the lives of those like me, whose money he took. * * * At the age

of 72, I have been forced to continue working in attempt to keep my family afloat

because of Mr. Harder.”).

21 Mr. G. invested $200,000 in Fort Bragg on 9/24/07; $100,000 in French Quarter on 10/17/07 and $100,000 in Puyallup on 12/11/07.



Some have suffered physical and mental impairments or otherwise have had their (or a

loved ones’) medical care impaired as a result of the loss and the stress brought on by the loss

of their investment. Here are just a few examples:

H. B. (84) believed his wife died, in part, due to the stresses associated with the money they lost after 50 years of hard work.

M. B. (87) said they money he lost was to help pay for the added costs associated with his wife’s Alzheimer’s.

S. .B. believes the stress associated with the money her father lost, shortened his life.

G. B. had a stroke which she attributes to her losses with SW.

R. C. (74) is still “very sick and depressed” because of the money she lost.

D. and D. C. are brothers and business partners. One has Parkinson’s and the other’s wife has cancer.

A. C., whose parents are in their late 80’s have been “humiliated and shaken” at the end of their lives because of their losses.

R. and N. D. (71/69) say the “depression is overwhelming.”

D. C. F. (62) will no longer be able to help pay expenses for his four year old grandson who is disabled.

J. F. (84). Money lost was to help pay for medical costs of his quadriplegic wife.

B. F. wrote to say that because of the losses associated with Sunwest, his father could not afford the care he needed to stay at home and spent the last years of his life in a facility away from his family.

B. G. (63). She and her husband have had eight years of sleepless nights, and the stress has caused serious health problems for both of them.

G. and A. G. (86/78) are “depressed and scared beyond belief”.

E. H. (83) is a childless widow and has no one to take care of her. She lives “in fear” daily of pending health issues she won’t be able to afford.



C. H. (66). Had to return to work after losses. Was unable to stay home and care for her husband in the last years of his life (died at the age of 89 this summer).

L. J. (67) said, “I do not enjoy life” as a result of the impact she has felt associated with her losses.

G. K. (62) needed the money he lost to care for his parents.

B. L. (66) is no longer able to support his mentally disabled daughter.

J. M. had to move in with his 88 year old mother who had dementia and was unable to pay for any of her care.

M. M. wrote in on behalf of her mother who is in her 90’s. The mother’s financial life has been ruined and her “peace of mind is gone.”

L. N.’s (died at the age of 84) niece wrote in to say Ms. N. was dependent on the $500,000 she invested for her day to day care.

N. and R. P. (77/77) say that it is “hard to describe the worry, pain, and anxiety” they feel.

J. P. (57). Losses have significantly affected their health, the effects of which are “long lasting and irrevocable.” He still takes medication as a result.

A. P. Due to money lost from a family trust, he and siblings had to pay for mother’s senior care out of their own pockets which created a financial hardship.

J. W. (83). Unable to afford cancer treatments for wife, who died very recently.

K. W. (52). The losses have taken a “terrible physical and mental toll on all of us.”

Some victim stories are simply tragic beyond words. S. S., 49, invested the proceeds of

her husband’s life insurance after he passed away in mid-2007. Ms. S. had always been a stay-

at-home mom for her two sons and at the time of his death, they were ages 4 and 14. She had

hoped the income from her investment would allow her to have to only work part time so she

could spend as much time with her boys as possible. After about three payments, the rent



stopped and she received “The Letter.” The loss of the money she invested in Sunwest has

required her to work full time:

I wanted to believe things would work out, but they didn’t * * *I had to work more hours, and we were stretched thin financially. I did what I imag[ine] everyone else in this position had to do. I refinanced the house a couple of times and spent a lot of sleepless nights praying for a positive outcome. I tried to keep up on the court stuff but was so discouraged when I heard about [Harder’s] “living allowance.”

Victim Impact Letter, S. S. The real, human, daily toll on the defendant’s victims is

immeasurable. In evaluating the nature and circumstances of the defendant’s massive criminal

fraud, the court must take into the account the many lives that have been impacted in small and

big ways. The nature and circumstances of the defendant’s crime, including its impact on his

victims, demand a sentence of 15 years.

B. History and Characteristics of the Defendant

1. Generally

The defendant founded Sunwest in 1992. At its heighth, the defendant controlled

and operated the fourth largest senior housing facility in the country. The company

made him rich and provided an extremely comfortable and luxurious living for his family.

Indeed, the Defendant received over $85 million directly or on his behalf from 2006 to

2008. Govt’s Ex. 155.

People are complex and generally cannot be measured by the worst thing they

do. The many letters submitted by friends and family present a picture of the defendant

that is different from the government’s and the victims’—these letters demonstrate that

this defendant has done good things in his life and has made a difference in others’.



Surely, the anecdotes in these letters are a measure of the character of the defendant—

the government does not dispute this.

However, the measure of defendant’s character also can be seen from the stories

of investors who met with him personally. The defendant did not engage in a single act

of dishonesty borne out of desperation because of unpredictable circumstances, as he

would have this court believe. Instead, the defendant repeatedly and systematically

stole hundreds of millions of dollars from more than 1,700 investors over a significant

and prolonged period of time. And he did this to get rich. This is also the history and

characteristics of this defendant upon which he should be judged.

2. The defendant’s crime was motivated by greed.

The defendant’s greed is a central plot line in the History of Sunwest and one the court

must consider in evaluating the history and characteristics of this defendant. The very structure

of the Sunwest investments were designed, as Tim Dozois explained, as a means to an end for

the defendant to build his wealth. In his drive to replicate the success of Bill Clauson, his

mentor and idol, the defendant didn’t care how he purchased ALFs or even which ALFs he

purchased—he sought desperately to quickly build an empire on the backs of TIC investors and

lenders, in order to get rich. He rationalized his lies to investors about the inter-company loans,

the separateness of each ALF, the true financial position of Sunwest, and so on, by claiming

that he believed the investors would be made whole because of the purported value of the

portfolio. This is a position he continues to cling to, even today. In evaluating the history and

characteristics of this defendant, the court must consider the fact that to Jon Harder and his

quest to build his empire, the ends justify the means.



As this court heard in the Phase I Hearing, a significant reason Sunwest experienced

continual negative cash flow and was in a precarious financial position was because of the

defendant’s non-senior housing portfolio. Few examples demonstrate the defendant’s greed

more effectively than defendant’s purchase and maintenance of the non-senior housing portfolio.

The evidence adduced at the Phase I Hearing demonstrated that the non-senior facilities were

non-income producing properties requiring significant debt service. These properties carried a

monthly debt service of more than $3.4 million.22 Govt. Ex. 140. The funds used to pay these

expenses were also from commingled funds and inter-company loans. A chart depicting

Sunwest’s negative cash flow over the relevant time period, taking into account Sunwest’s non-

senior properties:

22 This is more than the monthly TIC rent payment expense which was approximately $2.5 million.



Govt. Ex. 135. What is significant about the non-senior housing portfolio is that these properties

were primarily owned by the defendant and almost exclusively, with very limited exceptions,

benefitted the defendant. They did not benefit the TIC or the PMI investors at all. Yet, the TIC

and PMI investors’ money and money from these investors’ ALFs were used to service debt for

non-senior housing. Defendant continued to purchase, by debt financing, and service the debt of

these properties even as Sunwest insiders like CFO Curtis Brody warned him to stop because

they were causing a financial strain on Sunwest. To be clear, in his quest to become a wealthy

man, and even as Sunwest’s financial position got worse and worse, the defendant thought

nothing of compromising the investors’ money and their ALF properties in order to pay for real

property investments in which he and he alone stood to gain. This is the history and

characteristic of this defendant the court must consider in imposing an appropriate sentence.

Nothing stopped the defendant from continuing to pursue and take investor money—

regardless of the circumstances. In his desperate attempt to save his empire and wealth, in

2008, defendant and Sunwest took in significant amounts of money as the ship was sinking,

often impressing on victims that they had to act fast or they would miss a valuable investment

opportunity. The court heard testimony from Randall Hansen and Judy Baxter about the

urgency with which Sunwest, under defendant’s control, took investor money from late 2007

through June 2008. The story of J. and G. F. emphasizes this as well:

My wife and I each made a T.I.C. purchase to satisfy our 1031 obligation. Everything went as promised, my wife and I both received our checks every month. In May 2008, we received a letter from Sunwest telling us they were buying back our investment in Tanner Springs, the home in West Linn, and giving us the opportunity to invest in three other properties available on the same terms. They emphasized that this opportunity had to be done quickly, since we had been receiving check as promised every month, we did not hestitate to reinvest in one of the properties they suggested. * * * We never got



another check from Sunwest, instead we got a letter telling us that payments could no longer be made. We found out later that our new investment was an undeveloped piece of land in Atwater, CA. * * * This crime has left my wife and I without the income that we need for my wife who needs full time care.

Victim Impact Statement, J. and G. F. Defendant tearfully described to the court that he was so

devastated by the May 30, 2008 with GE when Rick Arrowsmith slammed his hand down on the

table and warned the defendant to get a criminal lawyer, that afterwards he sat in bed for three

days. However, on cross-examination he admitted that it still didn’t stop him from taking more

than $6 million from investors from that point to the time that Sunwest stopped offering

investments. These actions were not designed to assist investors; to the contrary, these actions

were designed to prop up the defendant’s empire and to save his own interest in the Sunwest

enterprise. This must be considered in evaluating the history and characteristics of defendant.

And throughout it all, the defendant, as he admitted, lived a very big lifestyle. Harder

Tr., p. 54 (5/27/15). Defendant disbursed millions and millions of dollars to himself and his

family (or for his benefit) in order to continue his extravagant lifestyle. Govt, Ex. 155.

Defendant admitted at the Phase I Hearing that he and his wife “[took] what they needed” from

Sunwest and that there were very few restrictions on the amount he could demand. Harder Tr.,

p. 55 (5/27/15). The testimony of Curtis Brody was consistent with that. In addition, Mr. Brody

testified that Mrs. Harder would call Sunwest employees and ask for large amounts of money

and in almost all instances, she would get it. If she asked for $100,000, the employees at

Sunwest would give Mrs. Harder $100,000. At one point, defendant thought he was making $1.5

to $2 million per month and at least more than his personal expenses which ranged from

$200,000 to $600,000 a month.



The company maintained three aircraft, including one that was a high performance

Bombardier jet that cost approximately $20 million. Govt. Ex. 141. Defendant used these

airplanes for personal use and failed to reimburse the company, despite the significant financial

drain of the maintenance and upkeep of these aircraft. Govt. Ex. 142. Defendant organized and

paid for trips for large groups including one fishing trip for about 100 people in Alaska, most of

which were Sunwest employees. They were flown in on private jets. Defendant also made

annual trips to the Cayman Islands. Defendant had many luxury vehicles, Govt. Ex. 161 and six

homes, including at least one in the Prong Horn development, an exclusive golf country club

gated community, between Bend and Prineville, Oregon. Govt. Ex. 166. His home in Salem,

Oregon was a large house on a private lake and aerial photos showed that he was in the process

of building a very large house of several thousand square feet. Govt. Ex. 164.23 Defendant had a

large staff at his home that incurred significant monthly expenses. For example, he paid private

tutors $6,200 per month to home school his daughter. No extravagance was too much—when

defendant’s daughter studied Ireland, he flew the teacher and the whole family flew first class to

Ireland. When defendant’s daughter studied turtles, defendant flew them first class in February

2008 to the Galapagos Islands to observe the turtles.24 When defendant’s daughter studied

currency, defendant flew them D.C. to get a tour of the Department of Treasury.

23 This court may recall the testimony of Rick Arrowsmith in which he met with defendant in Salem, Oregon to discuss Sunwest’s violations of its loan covenants and other concerns. Arrowsmith requested to inspect the defendant’s house and defendant initially said no. When Arrowsmith did go out to defendant’s home he noticed significant construction trucks owned by an affiliated entity, KDA, and that construction was taking place at the defendant’s home, including the installation of an expensive wrought-iron gate. This caused Arrowsmith concern. 24 During the February 2008 trip, defendant ran into Sunwest investors Lynn and Jane Henricksen—investors in Clovis, the count which defendant plead guilty. Mr. Henrickson and his wife actually invested in 13 Sunwest properties total, including Clovis, with a total investment of more than $4.1 (continued…)



In late 2007 through 2008, despite Sunwest’s dire financial situation, defendant and his

wife continued to ask for and received significant disbursements for their own personal use.

Indeed, in 2008 alone, a dire financial year for Sunwest that ultimately resulted in its predictable

collapse, over $6.1 million in payments were made to the Harders or for the benefit of the

Harders from the comingled Wells Fargo and the CCD bank accounts. From June 30, 2008

through December 31, 2008, while investors on fixed monthly incomes who depended on the

rent payments defendant promised received nothing, the defendant and his wife received more

than $1.8 million in payments, either in their personal bank account or made on their behalf.25

Govt. Ex. 162. This lifestyle, that defendant sought to keep up even as Sunwest’s financial

position became more and more fragile, should be considered in evaluating the history and the

characteristics of this defendant.

In evaluating the history and characteristics of the defendant, the government urges this

court to compare the manner in which many of the victims lived their lives and earned the

money they invested in Sunwest to that of the defendant and the careless manner in which he

spent it. Recall the testimony of Judith Baxter, an immigrant from Taiwan who came to this

country with nothing; her husband initially pumped gas as she worked seven days a week and

put herself through college, eventually earning a Masters degree and then becoming a CPA.

(continued…) million. On December 31, 2007, Henricksen invested in Clovis. On that very same day, he invested $200,000 in another property as well—one defendant disputes should be part of relevant of conduct. At the trip, Mr. Henricksen asked Harder how Sunwest was doing—Harder failed to disclose any adverse financial troubles with Sunwest. By February 2008, GE had taken significant steps to assert remedies under its agreements. GE was insisting that its own accountant be placed to stop the commingling and intercompany loans and bring them in compliance with their loan covenants. In addition, Suwest was experiencing significant shortfalls of cash. 25 On the day that the defendant filed the Bankruptcy Proceeding, he received more than $12,000 in deposits from Sunwest. Govt. Ex. 162.



They lived on one income, her husband’s, throughout her career, in order to save the second

income to invest in real property—they did this even as she became a licensed CPA at a big-

eight accounting firm. Slowly, through a quiet life of restraint, frugality and hard work, she and

her husband had sufficient income to invest in Sunwest. Her story is not unique. See, Victim

Impact Statement of F. Y. and M. C.

Compare these stories of hard work and sacrifice to that of Jon Harder. The defendant

recklessly and criminally took investor money through lies and deceit about most aspects of the

investment. Once he received the victim’s money, he did not use it as promised and instead,

indulged and binged on a big-life, involving material goods and the trappings of privilege,

while at the same time tried to satiate his thirst for additional wealth through careless and

thoughtless purchases of additional properties that neither he nor Sunwest could afford.

3. The Bankruptcy and SEC Proceedings.

The government anticipates that the majority of the defendant’s sentencing brief and

presentation to the court will focus on the results of the SEC and Bankruptcy Proceedings;

results the defendant has described as “miraculous” and due in large part to his own efforts. The

court is familiar with the SEC and Bankruptcy Proceedings as they have been the subject of

much briefing and testimony, and will continue to be. As a result, the government will not delve

into the details here. The defendant has touted these results, claimed credit for them and the

government believes this congratulatory affect will continue with added-vigor throughout the

Phase II Hearing. Defendant’s attempt to turn investors’ monetary losses of, at minimum, more

than $120 million dollars into a personal success story for which he should be rewarded, is

preposterous. The defendant’s position completely overlooks that it was his lies and criminal



conduct that caused investors to suffer any losses. He should not receive any further sentencing

concessions for his actions in the SEC and Bankruptcy Proceedings—the government’s

recommendation of 15 years already incorporates it.

a. The professionals who administered the SEC and Bankruptcy Proceedings did a fantastic job of ensuring defendant’s massive fraud was not as catastrophic to defendant’s victims as it could have been.

As a starting point, the government agrees with the proposition that the SEC and

Bankruptcy Proceedings did provide victims a recovery significantly greater than that which

has been recovered in similar circumstances, i.e. where there is investor fraud on a massive

scale, like defendant’s, and urgent judicial action is required to cease the fraud and marshal and

liquidate assets for creditors and victims of the crimes. There can be no serious dispute in this

regard—and the government applauds the results obtained under these circumstances.

To that end, the government agrees that the end result, where victims received

approximately 60% or more of their MIMO claims, an artificial device to equitably distribute

limited assets but not reflective of the bargain the defendant’s victims and creditors made with

defendant or representative of the actual harm caused, is a much better alternative to a whole-

sale liquidation that may have resulted absent the SEC and Bankruptcy Proceedings. The

government agrees that Judge Hogan, the many professionals who were dedicated to an

equitable result, including the defendant’s lawyers and the Receiver made an incredibly volatile

and potentially catastrophic situation less devastating than it could have been to victims. Again,

there can be no serious disagreement, and the government will not offer one.



The government further agrees that the defendant did, in fact, take actions which saved

the Receiver, the TIC Committee, the SEC, the court, creditors and others, resources and time

that expedited and in turn, increased the ultimate end result to victims. Every professional who

worked on the SEC and Bankruptcy Proceedings, has expressed this and the government does

not dispute it.

That being said, it is the heighth of hypocrisy and hubris for the defendant to use the

results obtained in the SEC Proceeding as his own accomplishment and a reason for this court

to depart in imposing a sentence when it was the defendant’s fraudulent actions that required

victims to be placed in this position. It was the defendant’s criminal conduct that led to the

very crisis that required millions and millions of dollars of lawyers, accountants, consultants,

receivers, etc. to be incurred to try to rescue Sunwest and recover as much of the victim’s

money as possible. Again, the arson analogy is most apt in this scenario—the defendant’s

actions are similar to an arsonist who sets fire to a building and once efforts to put the fire out

are made, he joins in and the end result is that only 40% of the building is damaged. It would

be a ridiculous proposition that the arsonist should receive a significant sentencing reduction

because he saved 60% of the building. The government’s sentencing recommendation of 15

years takes into account the fact of defendant’s cooperation and any further sentencing

reduction is simply not warranted.

b. Defendant “gave up” his interest in Sunwest that was procured through fraud and deceit.

One of the most oft-used claims by defendant and his primary explanation for why he

should be given a reduction threefold from the government’s recommendation (and eightfold

from USPO’s recommendation), is that in order to help the victims, defendant selflessly gave up



his interest in the Lone Star Proceeds and the Sunwest entities, and these actions in turn, were a

significant contributing factor in the results obtained. This argument should be rejected as a

basis to further reduce defendant’s sentence for two reasons. First, without any apparent sense of

irony, defendant overlooks entirely that he had little if any legal claim to these so-called

contributions, because the assets were obtained with money he raised from investors that he

defrauded, i.e. they were fraud proceeds. Second, it is just not true that he “gave up” his interest

in anything.

First, at the time of the Bankruptcy Proceeding, the defendant’s interest in both the Lone

Star Proceeds and the Sunwest enterprise was no longer his; instead, they were property of the

bankruptcy estate subject to the claims of his creditors. 26 They included many secured creditors

who had a first priority security interest in Sunwest’s most valuable assets, and as a result,

defendant’s most valuable assets—the ALFs and the non-senior housing. Thus, in a normal

bankruptcy case these secured creditors would be able to file a Motion for Relief of Stay and

foreclose on these properties. It was only because of the extraordinary remedy that Judge Hogan

ordered (a stay on all secured creditors) and requiring mandatory mediation of all claims, that

defendant’s interest in all of the Sunwest assets weren’t quickly liquidated at various foreclosure

auctions.

Moreover, the defendant’s interest in both the Lone Star Proceeds and the Sunwest

enterprise were obtained by fraud—as a result, any interest defendant claimed would have been

26 In Granting the Preliminary Injunction and Appointing a Receiver Docket, Judge Hogan found as follows:

Harder's interest in the proceeds from the Lone Star sale and from the sales of any Receivership Entities, including but not limited to his member interest, partnership interest, and any and all other interests shall be property of Harder's bankruptcy estate.

SEC Proceeding, Doc. No. 64, pp. 9-10, ¶X



voided in either the Bankruptcy or the SEC Proceeding. Thus, the defendant did not “give-up”

his interest in the Lone Star Proceeds or the Sunwest enterprise in the Bankruptcy and SEC

Proceedings; instead, he gave up a losing legal position within the Bankruptcy and SEC

Proceedings. And as explained below, he received plenty of consideration for doing so. While

the defendant did sign over his “interests” and did not seek to litigate his purported claim, the

fact is the defendant had a very poor legal position. Judge Hogan specifically noted that while

Mr. Harder cooperated and saved the Receiver time and resources by not asserting his interest in

the properties sold, any assertion of his interests would not have been meritorious. SEC v,

Sunwest, et al., 6:09-CV-6056-HO, Doc. No. 2370, p. 7. Thus, defendant merely conceded a

legal point that he was in no position to win. Defendant was not entitled to keep his ownership

interests in any Sunwest entity, which he acquired through his scheme to defraud and his

“interest” in all of the Sunwest entities would have been disposed of in the Bankruptcy or SEC

Proceedings.

Second, the defendant did not actually give up anything—he negotiated and expected

repayment, in some form, for his contributions. Moreover, and as described below, he received

significant consideration along the way for doing so. In November 2008, Mr. Hamstreet

assumed the role of the companies’ Chief Restructuring Officer pursuant to an agreement dated

November 20, 2008, as amended on December 30, 2008 (“CRO Agreement”). The CRO

Agreement provided that Sunwest and the affiliates’ principal equity holders – defendant, Darryl

Fisher, and Wally Gutzler – would assign to Hamstreet the entirety of their right to all cash

proceeds and other distributions payable to them on account of their equity interests. This

assignment was for the benefit of Sunwest and the affiliates, and was intended to fund the



Restructuring Plan for the benefit of residents, creditors and investors. In return, as funds were

used for this purpose, defendant and other equity holders would receive promissory notes bearing

interest at 9% from the entities receiving the cash. Thus, defendant was merely loaning his

interest to Sunwest and hoping that following the successful restructure, he would be fully

repaid.

In addition, the final settlement with the Receiver provided that defendant would start

receiving equity (up to 25 %) in the reorganized enterprise once investors and creditors were

paid $500 million, a sum less than the total allowed claims filed in the SEC Proceeding.

Normally in a bankruptcy case, equity interest holders like defendant would receive nothing until

after all other creditors had been paid in full. Defendant therefore, had an incentive to maximize

the amount paid to Sunwest’s investors and creditors. The greater the return to investors and

creditors, the sooner defendant would receive his ownership interest in the successor entity to

Sunwest. As a result, anything defendant did to benefit his victims also benefited him.

As part of this deal, the defendant and his family members also received a “claims bar” as

to “claims arising out of or related to Sunwest activities.” This means that all of his debts and

liabilities relating to Sunwest were forgiven—the $2 billion in claims filed by defendant’s

victims were suddenly extinguished. In exchange for all of these benefits, defendant agreed to

“assign any and all Sunwest affiliated assets” that he owns or co-owns to the receivership estate.

As explained, these assets were already property of defendant’s bankruptcy estate or the SEC

Receivership and he could not have kept them for himself. Thus, defendant did not “give-up” his

right to anything. Despite his massive fraud, he received and expected compensation for his

assignment and loan of the Lone Star Proceeds and his interest in the Sunwest enterprises.



c. The defendant has already received substantial consideration for his cooperation in the SEC Proceeding—a further reduction in his sentence is not warranted.

Defendant has received much for his participation and cooperation in the SEC

and Bankruptcy Proceedings. But as expected, he wants more—in addition, to all the

other spoils he has already obtained he wants this court to give him a significant

sentence reduction that would result, in essence, to a slap on the wrist for the largest

investment fraud case in the history of this district. While the defendant seeks to paint

his cooperation in the SEC and Bankruptcy Proceedings as altruistic, designed in large

part to assist the victims, the story of the SEC and Bankruptcy Proceedings demonstrate,

the defendant received significant consideration and compensation for this cooperation.

So while his actions in not litigating his weak legal claims aided victims, the defendant

took and extracted considerable benefits for himself.

These benefits started almost immediately from July 2008, when defendant cut-

off rent payments to investors and through the filing of the Bankruptcy Proceedings.27

During that time period the defendant and his wife received more than $1.8 Million in

payments to them or on their behalf.28 This was during a time that the investors were

not receiving any money. Moreover, throughout the course of the Bankruptcy and SEC

Proceedings, more than $8.2 million was paid to the defendant and his wife or on their

behalf through professional fees—these are funds that did not go to victims and instead

27 See, Govt. Ex. 148. 28 Govt. Ex. 158 demonstrates defendant and his wife had monthly payments of more than $100,000 for their own property. And as this court recalls, the non-senior property monthly mortgage was more than $3 million. Govt. Ex. 140.



went to the defendant or their professionals and were paid for out of the Receivership

estate. Govt Ex. 163. This included a monthly stipend of $21,000, to be raised to

$54,000 that defendant negotiated in the CRO, in exchange for loaning his interest in the

Lone Star Proceeds. Moreover, throughout the course of the SEC and Bankruptcy

Proceedings, the defendant negotiated advantageous positions for himself to the

detriment of his victims. Below is a chart that describes the numerous and valuable

benefits the defendant received:

///

///

///

///

///

///

///

///

///

///

///

///

///

///





As the court can see, the defendant received significant benefits for releasing his legal claims to

his interest in the Sunwest entities. Specifically, he received:

A viable plan to reorganize Sunwest by the CRO maintaining his ownership and control of Sunwest.

Repayment of amounts loaned to the CRO from his Lone Star proceeds plus interest.

A monthly allowance of $54,000 a month.

Payment of all his professional fees by his bankruptcy estate and the SEC Receivership. Jon Harder’s professional fees were over $6.5 million.

The billions in claims filed against Jon Harder relating to Sunwest were forgiven as part of his settlement with the CRO and SEC Receiver.

Defendant was allowed to keep his personal and real property by the settlement agreement with the SEC.

A monthly allowance of $22,000 per month from the settlement with the CRO and SEC Receiver. Defendant was paid over $1 million in cash after he filed for bankruptcy.

Defendant was given up to 25% of Sunwest’s successor entity effective after creditors were paid $500 million.

All monetary penalties relating to Jon Harder’s securities fraud were waived.

A payment of $75,000 per year for three years.

///



Defendant did not have to pay any fine or the penalty of disgorgement because of his cooperation.

Any suggestion that defendant sacrificed everything he could to benefit his victims is

fantasy. Defendant’s motivation in the SEC and Bankruptcy Proceeding is clearly demonstrated

by the consideration he negotiated for himself in the CRO agreement, the settlement with the

CRO and Receiver and the settlement with the SEC. Defendant did not suffer a crisis of

conscience and become the benevolent person the defense portrays him as. From the very

beginning to the very end of Sunwest, to today, defendant always took care of himself.

The point is this: the balance of the above weighs in favor of defendant and not his

victims. It is true that he did save the Receiver the time and expense of litigating the issue of his

ownership of Sunwest’s facilities. However, credit for the 65% recovery experienced by

Sunwest’s investors cannot be attributed to Jon Harder. The large return to investors is due

primarily to the efforts of Judge Hogan, the CRO, SEC Receiver and others. Regardless, the

defendant is not entitled to yet another spoil for his cooperation in the form of a sentence

reduction that is three times less than the government recommendation and eight times the

USPO’s recommendation. A sentence of 15 years is appropriate taking into account the

defendant’s cooperation in the SEC and Bankruptcy Proceedings.

C. Need to Provide Adequate Deterrence to Criminal Conduct

White collar crime is peculiarly amenable to general deterrence. That is because white

collar criminals, oftentimes, premeditate their crimes and engage in a cost-benefit analysis. See,

e.g., United States v. Martin, 455 F.3d 1227, 1240 (11th Cir. 2006) (“Because economic and

fraud based crimes are more rational, cool, and calculated than sudden crimes of passion or

opportunity, these crimes are prime candidates for general deterrence. Defendants in white collar



crimes often calculate the financial gain and risk of loss, and white collar crime therefore can be

affected and reduced with serious punishment.”); United States v. Bergman,416 F.Supp.496,

500 (S.D.N.Y. 1976) (“[W]e continue to include among our working hypotheses a belief (with

some concrete evidence in its support) that crimes like those in this case [nursing home fraud] –

deliberate, purposeful, continuing, non-impulsive, and committed for profit – are among those

most likely to be generally deterrable by sanctions most shunned by those exposed to

temptation.”). Indeed, the drafters of Section 3553(a) recognized the distinction between white

collar criminals and other criminals when it comes to deterrence:

The second purpose of sentencing is to deter others from committing the offense. This is particularly important in the area of white collar crime. Major white collar criminals often are sentenced to small fines and little or no imprisonment. Unfortunately, this creates the impression that certain offenses are punishable only by a small fine that can be written off as the cost of doing business.

S.Rep. No. 98–225, at 76 (1983), reprinted in 1984 U.S.C.C.A.N. 3182, 3259. On one side of

the calculus, white collar criminals weigh the benefits of creating and maintaining a fraudulent

enterprise and all the perks – financial, professional, societal status – that come with it. Against

these benefits, they weigh the costs. Namely, they weigh the likelihood of getting caught, the

likelihood of being charged, the likelihood of being convicted, and the degree of punishment

they might face.

The perceived certainty of a long prison term often is decisive in the calculus and can

deter future violators. See James J. Fishman, Enforcement of Securities Laws in the United

Kingdom, 9 Int’l Tax & Bus. Law 131, 170 (1991) (“Though it may be small satisfaction to

defrauded investors, incarcerating perpetrators of financial misdeeds serves as important

deterrence to future violators. The certainly of enforcement and prison for white collar



criminals is an effective deterrence.”). Conversely, insignificant sentences can have the

opposite effect. See id. at 171 (“And of course, the less punishment that is meted out, the less

deterrent effect the sentence will have on others contemplating similar crimes.”); United States

v. Cutler, 520 F.3d 136, 163 (2d Cir. 2008) (“To the extent that the district court's views that

this ‘type’ of offense did not warrant a long sentence and that the relative length of the sentence

was relatively unimportant in providing deterrence were meant to apply to [defendant’s]

convictions for tax evasion and tax fraud conspiracy, the court's views were squarely contrary to

the policy judgments articulated by the Sentencing Commission.”).

In high profile cases, like this one, the deterrent effect, or lack thereof, is magnified. Just

as investor-victims will look to the punishment to see if justice has been done, would-be

criminals may look to this sentence to gauge whether they too should attempt a similar fraud in

hopes of achieving the very riches Jon Harder sought. As the Court saw, while not as expensive

as a jury trial, holding the defendant accountable for the full scope of his crimes was both

difficult and expensive. The United States depends on punishments that will help prevent these

crimes from occurring because of the unfortunate truth that it cannot bring every fraudster and

swindler to justice. Simply put, to achieve general deterrence, the Court should sentence the

defendant to 15 years. The Court must send a message that this conduct will not be tolerated and

that the costs of engaging in this behavior are not worth the potential profits.

D. Need to Provide Just Punishment for the Offense

White collar crime is no less serious or harmful to the community than street crime.

Indeed, in this instant case, the defendant’s fraud wrought significantly more harm than a typical

street criminal could ever conceive of. Yet, legislators and appellate judges have observed a



recent trend: white collar criminals in high-loss fraud cases receiving disproportionately lenient,

non-guidelines sentences. Some Ninth Circuit appellate judges have attributed this

phenomenon, in part, to better funded defense teams, better advocacy, and district court judges

who more closely identify with white collar criminals than street criminals. But there is no

justifiable basis for this disparity. Here, to provide just punishment for the defendant’s offense.

Since Booker in 2005 – and its holding that the Sentencing Guidelines are merely

advisory – a number of legislators and appellate judges have seen an increase in the number of

white collar defendants receiving more lenient, non-guidelines sentences relative to street

criminals.

For instance, in a January, 2011 Senate Judiciary Committee hearing on new fraud

legislation, Senator Charles Grassley stated:

Now that the Guidelines have been held to be merely advisory, the disparity and unfairness in judicially imposed sentences that we sought to eliminate on a bipartisan basis are returning, especially in two areas: child pornography and fraud cases of the type we are discussing today. If potential fraudsters view the lenient sentences now being handed down as merely a cost of doing business, efforts to combat criminal fraud could be undermined. . . Supporting this position is a Reuters analysis of 15 insider trading cases. . . Nationwide, 42 percent of all federal [fraud] sentences were below the guidelines.

Protecting American Taxpayers: Significant Accomplishments and Ongoing Challenges in the

Fight Against Fraud, Hearing Before the S. Comm. on the Judiciary, 112th Cong. 4 (2011)

(statement of Sen. Charles Grassley), reprinted at

http://www.gpo.gov/fdsys/pkg/CHRG-112shrg67415/html/CHRG-112shrg67415.htm.

Likewise, in October, 2011 testimony before the House Judiciary Committee, Representative

James Sensenbrenner stated:



The increasing frequency of downward departures is undermining sentencing fairness throughout the Federal system. . . There are wide sentencing disparity depending upon what crime the defendant commits. If the defendant is a convicted child porn possessor, he is in luck. Federal judges now lower sentences for child porn professors at the highest rate—30 percent are below the guidelines. It is better—a better time also to be convicted of fraud, which has the lower than guideline rate of 17 percent.

Uncertain Justice: The Status of Federal Sentencing and the U.S. Sentencing Commission Six

Years After U.S. v. Booker, Hearing Before the Subcomm. on Crime, Terrorism, and Homeland

Security, H. Comm. on the Judiciary, 112th Cong. (2011) (statement of Rep. James

Sensenbrenner), reprinted at http://judiciary.house.gov/_files/hearings/printers/112th/112-

142_70669.PDF. According to some appellate judges in the Ninth Circuit, this trend is

particularly pronounced in this Circuit. In United States v. Edwards, 622 F.3d 1215 (9th Cir.

2010), Circuit Judges Gould, Bybee, Callahan and Bea dissented from the denial of a rehearing

en banc to review the reasonableness of the defendant’s sentence. In the dissent, Judge Gould

explained the phenomenon of white collar criminals in the Ninth Circuit receiving

disproportionately more lenient sentences:

Because of the nature of their crimes, white-collar offenders are uniquely positioned to elicit empathy from a sentencing court. See United States v. Ruff, 535 F.3d 999, 1007 (9th Cir. 2008) (Gould, J., dissenting) (“[D]istrict courts sentencing white collar criminals can more often identify with the criminal. . . But, socioeconomic comfort with a criminal convict is not a sufficient reason to show such extreme leniency. . .”); Kenneth Mann et al., Sentencing the White-Collar Offender, 17 Am.Crim. L.Rev. 479, 500 (1980) (concluding from a survey of federal judges that they evinced particular “understanding” and “sympathy” “for the person whose position in society may be very much like their own,” and that “factors intimately related to the defendant's social status do receive weight in the judges' thinking” about sentencing). And while judges take seriously violent crime and are forced by congressional mandatory minimums to take seriously drug crimes, there is latent risk in the case of white-collar sentencing that an “it’s only money” rationale will result in undue leniency for serious offenses. I have no doubt that



[defendant] made a persuasive presentation to the district court that he was an unhealthy, aging retiree repentant of past frauds. Such cases are precisely when we should most rigorously review a sentence's reasonableness to ensure that the justifications relied on at sentencing are supported by objective evidence in the record. See Michael M. O'Hear, Appellate Review of Sentences: Reconsidering Deference, 51 Wm. & Mary L.Rev. 2123, 2141-49 (2010) (criticizing appellate deference to trial judge assessment of demeanor evidence at sentencing on the basis of the “emerging consensus in the legal and social science literature that people generally do a poor job in evaluating demeanor evidence,” and concluding that a defendant's demeanor “seems about as likely to lead the trial judge astray as to facilitate good decision making”). We know that often criminal defendants who commit other types of crimes will serve some hard time. White-collar offenders like [defendant] should not escape the same punishment simply because they are better-positioned to make a sympathetic presentation to the district judge.

Id. at 1216-17.

Judge Gould cited empirical statistics in support of the dissenters’ argument. The

statistics showed that sentences for white collar criminals in the Ninth Circuit were (i)

disproportionately lower than sentences for other criminals, and (ii) disproportionately lower than

sentences for white collar criminals in other circuits. Id. at 1218 (for 2009, median sentences in

the Ninth circuit: fraud (6 months), immigration (21 months), drug trafficking (40 months),

firearms (48 months); national median sentence for fraud (18 months)). Judge Gould concluded:

“I’m sure there are good explanations for some of these disparities, but we should be concerned

about the substantial divergence between our treatment of white-collar criminals and other types

of criminals, and between white-collar criminal sentences in our circuit and in other circuits.” Id.

Victim R. S. eloquently stated “Lives have been ruined, not by honest business failure

but by deceit and dishonesty. Society has to demonstrate that justice and fairness is the rule and

that those who choose to lie and cheat are * * * punished.” R. S. Victim Impact Statement. To



provide just punishment to the defendant, the Court should sentence the defendant to a term of

imprisonment of 15 years.

E. Need to Avoid Unwarranted Sentencing Disparities

This court is required to ensure that there are no unwarranted disparities between the

defendant and other defendants similarly situated. The government believes this is the largest

investment fraud case in this district’s history; as such, there are very few true comparators in

this district. Below is a chart of various in-district investment fraud cases and information about

the result, some of which are more relevant than others:

Defendant/ Sentencing Date

Case No. Charges Sentence Guideline Range

Loss to Victims

# of Victims

Jon Michael Harder 11/16/15

12-CR-485-SI

Wire and mail fraud, money laundering

180 mos. (Proposed)

Life PSR rec. 360 mos.

$121 M 1,700+

Walter Hoyt 6/27/01

98-CR-529-JO

Wire and mail fraud, money laundering

238 mos. $105M 4,000+

Michael Rich 04/15/08

05-60140-HO; 05-60142-HO

Wire fraud, mail fraud, securities fraud, bank fraud, money laundering, tax fraud

236 mos. Life PSR rec. 360 mos.

$16 M+ 300+

Johnny “Mickey” Brown 12/21/11

06-CR-385-KI

Mail fraud, bank fraud, tax evasion

130 mos. 262 - 327 mos. PSR rec. 300 mos.

$6 M+ 150+

Charles Rhoades 2/17/09

07-CR-289-HA

Mail fraud 120 mos. 151 – 188 mos.

$22.3 M 50+



John Brent Leiske 11/26/12

08-453-KI (plus 12-096 formerly CDCA 08-176)

Wire fraud, money laundering

120 mos. 210 – 262 mos. Joint sent. w/ CDCA fraud case

$8.17 M 1

Louis Borstelmann 7/19/11

10-CR-60123-HO

Mail fraud, money laundering

108 mos. 108-135 mos.

$18.9 M 115

Tamara Sawyer 04/30/13

10-CR-60122-AA

Bank fraud, wire fraud, money laundering, conspiracy

108 mos. 108 -135 mos.

$5.9 M 33

Neil Madison (Yarbrough co-def.) 06/06/12

09-CR-484-JO; 10-CR-28-01-JO

Wire fraud, mail fraud

96 mos.

235-293 mos.

$8.5 M 680

Casey Jene Yarbrough 03/14/12

10-CR-2802-JO

Conspir. to commit wire & mail fraud

36 mos. (joint rec.)

78 – 97 mos.

Over $1 M but less than $2.5

Unclear on exact #; small portion of 680

Lawrence Heim 10/31/12

11-CR-345-HZ

Wire fraud 51 mos. 51 – 63 mos.

$4.1 M 48

Hui “Judy” Wang 06/17/13

11-CR-452-HA

Wire fraud 41 mos. 41 – 51 mos. PSR rec. 41 mos.

$2 M 2

Yusaf Jawed 09/23/13

13-CR-125-HA

Mail and wire fraud

78 mos. 97 – 121 mos.

$6.47M 10

Mark Neuman

11 –CR-0247-BR

Mail and wire fraud

78 mos. PRS rec. 188 mos.

$13.7M 91



Tim Larkin 11 –CR-0247-BR

Mail and wire fraud

54 mos. PSR rec. 108 mos.

$13.7M 91

Lane Lyons 11 –CR-0247-BR

Mail and wire fraud

54 mos. PSR rec. 97 mos.

$13.7M 91

Brian Stevens

11 –CR-0247-BR

Mail and wire fraud

48 mos. later reduced by J. Mosman to time served (approx. 18 mos. due to coopera-tion and other intervene-ing issues)

$13.7M 91

Jonathan Kendig 10/24/11

10-CR-430-KI

Wire fraud 24 mos. (joint rec. per PA)

24-30 mos.

$1.6M+ 3

Kevin Sawyer 4/30/13

10-CR-60122-AA

Bank fraud 27 mos. 21 – 27 mos.

$360 K Banks only

As the court can see, the government’s requested sentence of 180 months, given the breadth,

scope and devastation of the defendant’s crimes does not create an unwarranted disparity with

defendants similarly situated within this district, particularly given that there have been very few

similarly sized investment fraud case within this district.

The requested sentence does not create unwarranted disparities with other defendants in

similar situations outside this district. The following is a non-exhaustive list of sentences in

recent securities/investment fraud cases inside and outside the Ninth Circuit involving significant

loss amounts, such as what is at issue this case:

United States v. Swenson, et al., District of Idaho, USDC Case No. CR-13-0091-S-BLW (Dec. 2014): CEO of DBSI was convicted of 78 counts of securities and wire



fraud following a jury trial; 250 or more victims; loss amount of more than $100 million. CEO sentenced to 240 months in 2014. Currently on appeal.

United States v. Blount, W.D. Louisiana, USDC Case No. 2:15-CR-00143-001 (Oct. 2015): Plead guilty to a single count Information charging wire fraud; 73 victims; loss amount $5.8 million. Sentenced to 235 months.

United States v. Turek, 2014 WL 1613314 (6th Cir. Apr. 23, 2014): Convicted of 13 counts of securities fraud and tax evasion; 250 or more victims; loss amount between $7 million and $20 million. Sentenced to 260 months. Judgment affirmed.

United States v. Brennan, 2014 WL 1394654 (11th Cir. Apr. 11, 2014): Convicted of 1 count of conspiracy to commit securities fraud, and 2 substantive counts of securities fraud; loss amount between $400,000-$1 million. Sentenced to 75 months. Judgment affirmed.

United States v. Bailey, 549 Fed. App’x. 171 (4th Cir. 2013): Convicted of securities fraud, mail fraud, and filing a false tax return. Sentenced to 384 months. Judgment affirmed.

United States v. Simmons, 737 F.3d 319 (4th Cir. 2013): Convicted of 1 count of securities fraud, 1 count of wire fraud, and 2 counts of money laundering; loss amount of $35 million. Sentenced to 600 months. Specifically, the court sentenced the defendant to 240 months on the securities fraud count, a consecutive term of 240 months on the wire fraud count, and 240 month terms on each of the two money-laundering counts (120 months of which would run consecutive to the fraud counts, and 360 months of which would run concurrent). Money laundering convictions reversed due to merger issues. Sentence vacated and remanded for re-sentencing consistent with the opinion.

United States v. Stisky, 536 Fed.App’x. 98 (2d Cir. 2013): Convicted of conspiracy to commit, and substantive counts of, securities fraud, mail fraud, and wire fraud; 352 victims; loss amount in excess of $23 million. Sentenced to 85 years. Judgment affirmed.

United States v. Goffer, 531 Fed.App’x. 8 (2d Cir. 2013): Goffer was convicted of 2 counts of conspiracy to commit securities fraud and 12 counts of securities fraud; Kimelman was convicted of conspiracy to commit securities fraud and two counts of securities fraud; Drimel pled guilty to conspiracy to commit securities fraud and five counts of securities fraud; loss of approximately $11 million. Goffer was sentenced to 120 months. Kimelman was sentenced to 30 months. Drimel was sentenced to 66 months.



United States v. Rajaratnam, 719 F.3d 139 (2d Cir. 2013): Convicted of 9 counts

of securities fraud, and 5 counts of conspiracy to commit securities fraud; Sentenced to 132 months. Judgment affirmed.

United States v. Clark, 717 F.3d 790 (10th Cir. 2013): Convicted of conspiracy to commit securities fraud, wire fraud, money laundering, substantive wire fraud, and securities fraud. Sentenced to 151 months. Judgment affirmed.

United States v. Lockmiller, 521 Fed.App’x. 687 (10th Cir. 2013): Convicted of 1 count of conspiracy to commit mail and securities fraud, 1 count of conspiracy to commit money laundering,10 counts of mail fraud, and 20 counts of money laundering. Sentenced to 405 months. Judgment affirmed.

United States v. Bruteyn, 686 F.3d 318 (5th Cir. 2012): Convicted of 9 counts of securities fraud. Loss of $58.7 million. Sentenced to 25 years. Judgment affirmed.

United States v. Hagen, 468 F. App'x 373 (4th Cir. 2012) cert. denied, 133 S. Ct. 213 (2012): Convicted of conspiracy to commit securities fraud, conspiracy to commit mail fraud and wire fraud, and conspiracy to commit money laundering. Loss of more than $20 million. Sentenced to 540 months. Judgment affirmed.

United States v. Neibuhr, 456 Fed.Appx. 36 (2d. Cir. 2012): Convicted of 1 count of securities fraud and 1 count of conspiracy to commit securities fraud,

commercial bribery, and wire fraud. sentenced to 108 months. Judgment affirmed.

Brandon v. United States, 2011 WL 4801362 (S.D.N.Y. Oct. 11, 2011): Convicted of 1 count of conspiracy to commit securities fraud and wire fraud, 2 counts of securities fraud, and 4 counts of wire fraud. Approximately 80 victims. Loss in excess of $200 million. Sentenced to 97 months.

United States v. Poulsen, 655 F.3d 492, 497 (6th Cir. 2011): Convicted of conspiracy to commit securities fraud, wire fraud, and money laundering. Loss of approximately $3 billion. Sentenced to 360 months. Judgment affirmed.

United States v. Cronin, 429 F. App'x 241, 242 (4th Cir. 2011): Pled guilty to mail fraud and securities fraud. More than 60 victims. Loss of almost $7 million. Sentenced to 151 months. Judgment affirmed.

United States v. Bachynsky, 415 F. App'x 167, 169 (11th Cir. 2011): Convicted of conspiracy to commit securities fraud, 3 counts of wire fraud, and securities fraud. Sentenced to 168 months. Judgment affirmed. / / / / / /



United States v. Bush, 626 F.3d 527, 529 (9th Cir. 2010): Convicted of 1 count of securities fraud, 8 counts of wire fraud, 3 counts of mail fraud, and 15 counts of money laundering. Approximately 400 victims. Loss of approximately $36 million. Sentenced to 360 months imprisonment. Judgment affirmed.

United States v. Favara, 615 F.3d 824 (7th Cir. 2010): Defendant Custable pled guilty to 17 counts of wire and securities fraud, obstruction of justice, and contempt of court. Defendant Favara pled guilty to 1 count of securities fraud. Custable sentenced to 262 months. Favara sentenced to 70 months. Judgments affirmed.

The conservative fraud loss figure from the defendant’s crime is more than $120 million

dollars. As noted, and agreed to by the defendant, many of the people who were defrauded were

older and specifically invested with Sunwest because they believed it was a safe investment for

that would bring modest returns and the Defendant did not accept responsibility for his crimes.

To avoid unwarranted sentencing disparities, this Court should sentence the defendant to a term

of imprisonment of 15 years (180 months), and not a day less.

Respectfully submitted this 10th day of November 2015.

By: BILLY J. WILLIAMS ACTING UNITED STATES ATTORNEY /s/ Michelle Holman Kerin MICHELLE HOLMAN KERIN /s/ Allan M. Garten ALLAN M. GARTEN Assistant United States Attorneys
