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7/29/2019 Prosecution Motion
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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
WESTERN DIVISION
UNITED STATES OF AMERICA )
)v. ) No. 12 CR 50027
) Judge Philip G. Reinhard
RITA A. CRUNDWELL )
UNITED STATES MOTION FOR UPWARD VARIANCE
The UNITED STATES OF AMERICA, by GARY S. SHAPIRO, United States
Attorney for the Northern District of Illinois, respectfully submits the following motion
for upward variance:
I. DISCUSSION
In United States v. Booker, 125 S.Ct. 738, 767 (2005), the Supreme Court held
that the Sentencing Guidelines are advisory. United States v. Alburay, 415 F.3d 782,
785 (7th Cir. 2005). Booker further held that appellate courts must now review
sentences for reasonableness. United States v. Rodriguez-Alvarez, 425 F.3d 1041, 1045
(7th Cir. 2005) (citingBooker, 125 S.Ct. at 765-66).
Pursuant toBooker, the reasonableness of a sentence is guided by the factors
set forth in 18 U.S.C. 3553(a). Alburay, 415 F.3d at 786. These factors include: (1)
the nature and circumstances of the offense; (2) the history and characteristics of the
defendant; (3) the seriousness of the offense; (4) the sentence necessary to promote
respect for the law; (5) the sentence necessary to provide just punishment for the
offense; (6) the sentence that would provide adequate deterrence; (7) the sentence
needed to provide defendant with needed educational training, medical care, etc.; (8)
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the need to avoid unwarranted sentencing disparities among defendants with similar
records whove been found guilty of the same offense(s); and (9) the sentencing
guidelines range. Rodriguez-Alvarez, 425 F.3d at 1045.
Although [t]he concept of departures has been rendered obsolete in post-Booker
sentencing,the district court may apply those departure guidelines by way of analogy
when analyzing the factors in 18 U.S.C. 3553(a). United States v. Lucas, 670 F.3d
784, 791 (7th Cir. 2012) (quotingUnited States v. Miranda, 505 F.3d 785, 792 (7th Cir.
2007)); United States v. Guyton, 636 F.3d 316, 320 n. 2 (7th Cir. 2011); United States
v. Rice, 520 F.3d 811, 821 (7th Cir. 2008)). The Seventh Circuit will uphold an above-
guidelines sentence so long as the district court offered an adequate statement of its
reasons, consistent with 18 U.S.C. 3553(a), for imposing such a sentence. United
States v. McIntyre, 531 F.3d 481, 484 (7th Cir. 2008). But seeUnited States v. Jackson,
547 F.3d 786, 792-93 (7th Cir. 2008)(stating: An above-guidelines sentence is more
likely to be reasonable if it is based on factors sufficiently particularized to the
individual circumstances of the case rather than factors common to offenders with like
crimes. Wachowiak, 496 F.3d at 750). The district courts duty is to properly
calculate the guidelines range and then come up with a reasonable sentence under
3553(a). Id. (citing United States v. Munoz, 610 F.3d 989, 994 (7th Cir. 2010)).
If a district court decides that an outside the Guidelines sentence is warranted,
it must consider the extent of the deviation and ensure that the justification is
sufficiently compelling to support the degree of the variance. Gall v. United States, 552
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U.S. 38, 50 (2007). A sentence above the range is more likely to be reasonable if it is
based on factors sufficiently particularized to the individual circumstances of the case
rather than factors common to offenders with like crimes. United States v. Aljabari,
626 F.3d 940, 952 (7th Cir. 2010).
In the plea agreement, defendant pleaded guilty to wire fraud as charged in the
indictment and stipulated to committing money laundering in violation of 18 U.S.C.
1956(a)(1)(B)(i). R. 45, 6-7. The PSR has calculated defendants offense level for1
the wire fraud conviction as 35. PSR at 33. This calculation includes a base offense
level of 7 provided by Guideline 2B1.1(a) and enhancements as follows: 24 levels
pursuant to Guideline 2B1.1(b)(1)(M) because the loss as a result of the offense was
more than $50,000,000, 2 levels pursuant to Guideline 2B1.1(b)(10)(C) because the
offense involved sophisticated means, and 2 levels pursuant to Guideline 3B1.3
because defendant abused a position of public trust. PSR at 27-31. The PSR has
calculated the offense level for the stipulate offense of money laundering offense as 37.
PSR at 40. This calculation includes a base offense level of 35 pursuant to Guideline
2S1.1(a)(1) and a 2 level increase pursuant to Guideline 2S1.1(b)(2)(B) because the
stipulated offense constitutes a violation of 18 U.S.C. 1956. PSR at 34-35. Pursuant
to Guidelines 3D1.2(c) and 3D1.3(a), the offense of conviction and the stipulated
offense are grouped together resulting in a total offense level of 37. PSR at 26, 41. The
All citations to the record are denoted "R" and followed by the applicable1
document number. All citations to the Pre-Sentence Investigation Report are denoted "PSR" and
followed by the applicable paragraph number.
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government agrees with the Guidelines calculations contained in the PSR. However,
as explained below, the application of the 3553(a) factors to the defendant warrant
an upward variance to defendants total offense level of at least 4 levels.
A. Nature and Circumstances of the Offense and the History and
Characteristics of the Defendant
The nature and circumstances of the offense and defendants history and
characteristics warrant a sentence above the Guidelines range. In 1970, defendant
began working for finance department for the City of Dixon, Illinois while still in high
school. PSR at 75, 79. In 1983, defendant was appointed as the comptroller/treasurer
for the City of Dixon. PSR at 79. Defendant commenced her scheme to defraud the
City of Dixon on December 18, 1990, when she opened a secret account at Fifth Third
Bank in Dixon, Illinois, that was in the name of the City of Dixon. PSR at 16. The
name of the account was RSCDA - Reserve Fund. Id. Defendant did not disclose the
existence of this account to the City of Dixon. Id. Defendant created the RSCDA
account to use to deposit funds that she stole from various City of Dixon accounts. Id.
The initials RSCDA stood for Reserve Sewer Capital Development Account,
although no such account actually existed for the City of Dixon. In January 1991,
shortly after creating the RSCDA account, defendant began transferring money from
City of Dixon accounts and converting it to her own use. G. Ex. 4. As set forth in2
Government Exhibits 1-4, defendant transferred over $181,000 to the RSCDA account
All references to government exhibits are denoted G. Ex. followed by the applicable2
exhibit number.
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that she converted to her own use in 1991. As the scheme continued, the yearly
amounts that defendant stole from the City of Dixon increased from $181,000 in 1991
to a high of over $5.8 million in 2008. Id. During the course of the scheme, defendant
took over $53 million from the City of Dixon. Id. Defendant took an average of over
$2.5 million dollars per year over the 20 year course of the scheme. Id.
While defendant was taking these large sums of money from the City of Dixon,
she participated in budgeting meetings with City Council members and various
department heads for the City of Dixon. During those meetings, defendant repeatedly
stated that the City needed to make spending cuts due to a lack of sufficient funds.
Defendant stated that the lack of funds was due to a downturn in the economy and
because the State of Illinois was behind in its payments. At the time defendant was
making those statements, she was stealing millions of dollars from the City of Dixon.
Defendants fraud scheme resulted in the City of Dixon having to make various cuts
to its budget and these cuts had a significant impact on the operations of the City of
Dixon.
Summaries of the Dixon City Council minutes regarding the budgeting process
for the years 1991-2012 are contained in Government Exhibit 5. Government Exhibit
5 further sets forth some of the personal expenditures that defendant made using City
of Dixon funds during the same time period that she attending those meetings and
advising the City of Dixon representatives that they needed to make budget cuts due
to a lack of funds. Defendant started her horse breeding business, RC Quarter Horses,
LLC in 1990. PSR at 78. Defendant used millions of dollars in City of Dixon funds to
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run and expand the operations of RC Quarter Horses. Id. At the time of her arrest in
April 2012, defendant owned over 400 quarter horses. While the majority of the horses
were kept at her ranch and home in Dixon and at a ranch in Beloit, Wisconsin,
defendant also boarded horses in several other states. Defendant used fraud proceeds
to travel throughout the country during the course of her scheme to defraud to compete
with at national and international quarter horse competitions. Defendant and her
horses won numerous awards at those competitions including defendant being named
the leading owner by the American Quarter Horse Association for eight consecutive
years prior to her arrest. Id.
Defendant also used City of Dixon funds to renovate her home in Dixon and to
purchase a home in Florida. G. Ex. 5. Defendant also used the fraud proceeds to
purchase the property where she operated her horse breeding business and to construct
buildings on the property. Id. Defendant purchased land on Dutch Road in Dixon and
constructed a house on that property. Id. In addition, defendant purchased numerous
vehicles including a $2 million motor home, semi-tractor trailers, trucks, horse trailers,
and other vehicles. Id. Government Exhibit 5 contains a two page list of the vehicles
that defendant purchased with fraud proceeds and that have been seized for forfeiture.
Id. Defendant also purchased hundreds of thousands of dollars in jewelry. Id.
Between January 2007 and January 2012, defendant also hosted an annual
birthday party in Venice Beach, Florida. Id. A news article describing the January
2010 party is contained in Government Exhibit 5. Although the article claims that the
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party was hosted by defendants boyfriend, defendants American Express credit card
records show that she paid $4,143 to the restaurant on the date of the party. Those
credit card records further show that defendant paid similar amounts to the same
restaurant on her birthdays as follows: $2,300 in January 2007, $3,687 in January
2008, $4,496.25 in January 2009, $4,457.47 in January 2011, and $4,603.70 in
January 2012. Defendants conduct in continuing to take millions of dollars from the
City of Dixon to support her living of this lavish lifestyle while she knew that the City
of Dixon was in dire financial straits was especially egregious.
The lengthy of the scheme also weighs in favor of a sentence above the
Guidelines range. While defendant has no prior criminal history, she executed this
scheme for over 20 years. Day after day, for more than 20 years, defendant would work
with employees of the City of Dixon and interact with citizens in her capacity as
comptroller while lying about the reason the City of Dixon lacked funds and concealing
the fact that she was stealing millions of dollars from the City. Thus, while having no
prior convictions, defendant engaged in an on-going and continuous course of criminal
conduct for over 20 years prior to her arrest in this case.
In addition to merely taking the money, defendant went to elaborate steps to
conceal the detection of her fraud so that she could continue to her scheme. Defendant
disguised the source of the funds and created fictitious invoices to hide the theft.
Defendant created fictitious invoices purportedly from the State of Illinois to justify the
withdrawals from the Citys Capital Development Fund. PSR at 16. For example, to
cover up her transfer of $350,000 in City of Dixon funds on September 8, 2009 to the
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RSCDA account so that defendant could purchase the horse, Pizzazy Lady, defendant
created a fictitious invoice to support the payment of $350,000 to the State of Illinois
that falsely indicated that the payment was for a sewer project in the City of Dixon
that the State of Illinois completed. R. 45, 7(d). A copy of that invoice created by
defendant is attached hereto as Exhibit 6. Defendant created 159 such fictitious
invoices between 2001 and 2012 to help to conceal her fraud scheme. All of these
relating to defendants history and characteristics and the nature and circumstances
of the offense weigh in favor of a sentence above the guidelines range.
B. Seriousness of the Offense
Pursuant to Title 18, United States Code, Section 3353(a)(2)(A), when imposing
a sentence, a district court must consider the seriousness of the offense. In the
present case, the loss calculation for purposes of the Sentencing Guidelines does not
adequately reflect the seriousness of defendants fraud and money laundering offenses.
In the PSR, the Probation Officer states that the loss caused by defendants
fraud offenses was $53,740,394. PSR at 19. While the United States agrees that the
Probation Officer has correctly calculated the fraud loss, this loss figure does not
adequately reflect the full extent of the harm caused by defendants fraud.
Application note 19 of Guideline 2B1.1 states: There may be cases in which the
offense level determined under this guideline substantially understates the seriousness
of the offense. In such cases, an upward departure may be warranted. The
application note goes on to provide a non-exhaustive list of factors a district court
should consider in determining whether an upward departure (or variance) is
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appropriate. One of these factors is whether: [t]he offense caused . . . substantial non-
monetary harm. USSG 2B1.1, application note 19(A)(ii).
Pursuant to Guideline 5K2.7, if the defendants conduct resulted in
significant disruption of a government function, the court may increase the sentence
above the authorized guideline range to reflect the nature and extent of the disruption
and the importance of the governmental function affected. This guideline does not
apply to cases involving offenses such as bribery or obstruction of justice where
interference with a government function is inherent in the offense. USSG 5K2.7.
The Seventh Circuit has held that where a defendants actions result in a loss
of public confidence in the honesty and integrity of elected officials, that the loss of
public confidence is both a non-monetary harm as defined in application note 19 of
USSG 2B1.1, and a disruption of government function. United States v. Pabey, 664
F.3d 1084, 1099 (7th Cir. 2011). InPabey, the defendant, the mayor of East Chicago,
embezzled funds and used government workers to renovate a home he purchased for
his daughter. Id. at 1087-1090. The Court found that the district court did not abuse
its discretion when determined that an upward departure from the Guidelines range
of 27-33 months was warranted and imposed a sentence of 60 months. Id. at 1091,
1099. The Court found that the district court properly considered the 3553(a) factors
which included the district courts finding that Pabeys actions caused a loss of public
confidence in the honesty and integrity of elected officials and that this loss of
confidence was both a non-monetary harm and a disruption of government function.
Id. at 1099. See also, United States v. Paulus, 419 F.3d 693, 696-699 (finding that the
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court did not err in departing upward and increasing defendants offense level by six
levels based, in part, on the fact that defendants conduct of accepting bribes as a state
prosecutor in exchange for leniency on criminal cases he prosecuted caused a
significant disruption of government function pursuant to Guideline 5K2.7).
The enhancement for disruption of a government function can be applied to
sentences for theft of government resources and when the disruption was a loss of
public confidence in the government. United States v. Gunby, 112 F.3d 1493, 1500 n.
10, 1502 (11th Cir. 1997). In Gunby, the defendant pleaded guilty to mail and tax
fraud relating to his embezzlement of filing fees from a county magistrate court over
which he presided. Id. at 1494. The district court found that Gunbys conduct caused
a significant disruption of a governmental function and increased Gunbys offense level
from 16 to 20, which raised the sentencing range from 21-27 months to 33-41 months.
Id. at 1502. The district court sentenced Gunby to 41 months, a more than 50 percent
increase over the maximum sentence possible at the lower offense level. Id.
The Court further rejected the defendants argument that there was no evidence
of disruption of a government function because there was no evidence that any of the
cases handled by Gunby were affected by his crimes. Id. The Court found that the
district court did not abuse its discretion when it inferred that the revelations of
embezzlement and tax evasion by a chief magistrate judge shook the confidence of the
county residents in the integrity of the court system. Id. at 1503. In so finding, the
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Court found that the term disruption encompasses this loss of confidence in the
government. Id.
In the present case, defendants fraud offenses have also caused both non-
monetary harm and the disruption of governmental function. The loss of public
confidence caused by defendants conduct in executing the wire fraud scheme
constitutes a significant impairment of government function as contemplated by
Guideline 2K2.7. Defendants conduct in this case warrants a substantial variance
upward from the guidelines range.
Due to defendants theft of funds from the City of Dixon, the police department
was prevented from making an approximate $80,000 upgrade to the radio equipment
for its squad cars and was not able to make new hires due to lack of funds. Due to the
lack of available funds caused by defendants fraud scheme, the City of Dixon reduced
the staff of its Street Department from 9 to 6 by not replacing employees who retired.
In addition, in the 10 years prior to defendants arrest, the City of Dixon was only able
to resurface 60 blocks of the over 100 miles of city streets and has not been able to
upgrade the trucks used by the Street Department. In 2002, the City of Dixon
constructed a new waste water treatment facility. In 2008, the year that defendant
stole over $5.8 million from the City of Dixon, the City had to postpone an $80,000
maintenance project at the waste water treatment facility which involved the
sandblasting and repainting of screw pump to prevent rusting due to the lack of funds.
The City of Dixon completed the maintenance of the waste water treatment facility in
August 2012 after defendants arrest. However, due to the delay of the project, the cost
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increased from $80,000 to over $400,000. In 2011, the City of Dixon was forced to issue
bonds in the amount of $3 million in order to meet its financial obligations. As shown
in Government Exhibit 1, defendant stole over $4.6 million from the City of Dixon in
2011. During the three years prior to defendants arrest, due to the budget problems
the City was facing, none of the City of Dixon employees received pay raises and when
employees retired no one was hired to replace them. Prior to defendants arrest in
April 2012, the City of Dixon department heads were considering layoffs of certain
employees due to the severe budget crisis. While defendant was stealing millions of
dollars from the City of Dixon, she also collected a salary from the City. PSR at 79.
Defendants theft of over $53 million dollars from the City of Dixon during a 20
year period while she was employed as the Citys comptroller has caused a loss of
confidence in the City of Dixons governmental officials resulting in a significant
disruption of governmental function. This Court can take judicial notice of the fact
that defendants conduct has caused a loss of public confidence in the government for
the City of Dixon. See Paulus, 419 F.3d 698 (district court was permitted to take
judicial notice of the fact that public confidence in the state judicial system had been
undermined in making the determination that the defendants conduct in caused a
significant disruption of government function). The government has also attached a
sample of the news articles that have reported the loss of confidence that the citizens
of Dixon has expressed in their governmental officials as a result of defendants
conduct in stealing $53 million from the City of Dixon while employed as the Citys
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comptroller. G. Ex. 7. Citizens of Dixon have questioned the integrity and competence
of other City officials and employees as a result of defendants conduct. Id.
Defendants conduct in stealing $53 million from the City of Dixon over a 20 year
time period while she was employed as the Citys comptroller, severely undermined the
confidence that the citizens of Dixon have in their government. The loss of public
confidence caused by defendants conduct is at least equivalent to the loss of public
confidence caused by the embezzlement of approximately $14,000 by a mayor during
a two year period,Pabey, 664 F.3d at 1091, 1099, the embezzlement of $400,000 by a
magistrate judge during a five year period, Gunby, 112 F.3d at 1502, and the accepting
of $48,000 in bribes by a state prosecutor during a two year period,Paulus, 419 F.3d
at 696-699. InPabey, Gunby andPaulus, the district court judges imposed sentences
that varied upward from the guidelines range by at least 4 levels based in part on a
finding of disruption of governmental function. See Pabey, 664 F.3d at 1091, 1099
(departed upward from Guidelines range of 27-33 months and imposed a sentence of
60 months); Gunby, 112 F.3d at 1502 (4 level increase);Paulus, 419 F.3d at 696-699
(6 level increase). Therefore, the significant impairment of governmental function
caused by defendants conduct, which was of much greater magnitude in terms of the
amount of the loss and duration of the fraud scheme, warrants a variance above the
applicable guidelines range in at least the same proportion imposed by the judges in
Pabey, Gunby andPaulus.
A disruption of government function departure can be applied in conjunction
with an enhancement for abuse of a position of public trust pursuant to Guideline
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3B1.3. PSR at 31; See Gunby, 112 F.3d at 1501 (holding that because an abuse of
public trust and the disruption of a governmental function are analytically distinct,
sentencing court can apply 3B1.3 and 5K2.7). Here, the abuse of public trust
enhancement is based on the fact that defendant used her position as comptroller to
commit and conceal her fraud and money laundering offenses. The disruption of
governmental function departure is based on the loss of public confidence in the City
of Dixon government officials due to defendants theft of $53 million dollars during the
course of the wire fraud scheme defendant committed during a 20 year time period.
C. Other 3553(a) Factors Weigh in Favor of an Upward
Variance
A variance above the Guidelines range is necessary to promote respect for the
law, provide just punishment and to provide general and specific deterence. Defendant
engaged in the scheme to defraud the City of Dixon for over 20 years. Defendant
continued to take millions of dollars as she turned a blind eye to the fact that the City
of Dixon was facing severe financial hardship and forced to reduce the services it
provided to its citizens, jeopardizing their well-being and safety. Because defendant
had to pay for the care of the over 400 horses she had acquired during her fraud
scheme and had no other legitimate source of income to continue to finance her horse
business, there is no evidence that defendant ever intended to cease her scheme to
defraud the City of Dixon. A sentence above the Guidelines range is necessary to
provide a just punishment for her crimes as well as to provide deterence in order to
ensure that she does not commit further crimes. In addition, a sentence above the
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Guidelines range is necessary to deter others who contemplate engaging in similar
conduct.
Considering all of the other 3553(a) factors, a sentence above the Guidelines
range in this case will not create unwarranted sentencing disparities. This court may,
in its discretion, sentence above the guideline range and even create disparity when
other 3553(a) factors warrant it. United States v. Bartlett, 567 F.3d 901, 907-08 (7th
Cir. 2009) Id. at 908-09. For all of the reasons discussed above, a sentence above the
Guidelines range is warranted because of the nature and circumstances of the offense,
defendants history and characteristics, the seriousness of the offense, the non-
monetary harm and substantial disruption of government function caused by
defendant, the need to promote respect for the law, provide just punishment and to
provide general and specific deterence.
II. CONCLUSION
For the reasons set forth above, the United States respectfully moves that this
court vary upward from the Guidelines range by adding at least four levels to
defendants total offense level.
Respectfully submitted,
GARY S. SHAPIRO
United States Attorney
By: s /Joseph C. Pedersen
JOSEPH C. PEDERSEN
Assistant United States Attorney
327 South Church Street Suite 3300
Rockford, IL 61101
(815) 987-4444
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CERTIFICATE OF SERVICE
The undersigned Assistant United States Attorney hereby certifies that on
January 31, 2013, in accordance with FED.R.CRIM.P.49,FED.R.CIV.P. 5, LR5.5, and
the General Order on Electronic Case Filing (ECF), the following document: United
States Motion for Upward Variance was served pursuant to the district courts ECF
system as to ECF filers.
By: s /Joseph C. Pedersen
JOSEPH C. PEDERSEN
Assistant United States Attorney327 South Church Street Suite 3300
Rockford, Illinois 61101
815-987-4444
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