USA v. Spitzauer Doc 31 Filed 06 Jan 14

8/13/2019 USA v. Spitzauer Doc 31 Filed 06 Jan 14

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United States Response to Defendants Motion For Revocation of Detention Order - 1

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MICHAEL C. ORMSBYUnited States AttorneyEastern District of WashingtonMARY K. DIMKEAssistant United States Attorney402 E. Yakima Avenue, Suite 210Yakima, Washington 98901(509) 454-4425

IN THE UNITED STATES DISTRICT COURTEASTERN DISTRICT OF WASHINGTON

UNITED STATES OF AMERICA,

Plaintiff,

vs.

MICHAEL PETER SPITZAUER,

Defendants.

CR-13-6071-FVS

UNITED STATES RESPONSE TODEFENDANTS MOTION FORREVOCATION OF DETENTIONORDER

Plaintiff, United States of America, by and through Michael C. Ormsby, United States

Attorney for the Eastern District of Washington, and Mary K. Dimke, Assistant United

States Attorney for said District, hereby submits this response to Defendants motion to

revoke Magistrate Judge Huttons detention order (ECF 30).

I. Introduction

The Court should deny Defendants request for release pending trial because the

evidence shows that Defendant is a serious risk of flight, a serious risk to obstruct justice,

and a danger to the community. Defendant is charged with wire fraud, money laundering,

aggravated identity theft, and is subject to substantial forfeitures in an Indictment that alleges

he orchestrated a $7 million investment scheme over the course of several years.

Defendant is subject to numerous judgments for millions of dollars. As a result,

Defendant keeps few assets in his name and he has a history of funneling money through

intermediary accounts, using trusts and corporate entities to house and hide assets, and he

Case 2:13-cr-06071-FVS Document 31 Filed 01/06/14


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presented a financial picture to Pretrial Services (PTS) that is entirely inconsistent with his

lifestyle. In recent months, he had access to substantial amounts of cash, the whereabouts of

which are unknown. Such behavior and lack of candor with PTS is indicative of Defendants

inability to be supervised and unlikely willingness to comply with Conditions. Moreover,

access to undisclosed assets and funds provide a mechanism for Defendant to flee, if he so

chose. These facts, combined with Defendants foreign citizenship and ties, his prior

conviction for lying about immigration matters, the 10-12 year penalty and deportation he

faces if convicted, establish that he is a significant flight risk.

Defendant is a serious risk of obstructing justice. Not only is Defendant charged with

falsifying documents he sent to investors, purportedly from a lawyer, he continued his

fraudulent conduct while he was under investigation. He repeatedly contacted victims and

promised them payment. Of most significant concern, Defendant was recruiting new

investors (victims) and promised those new investment funds to the prior investors, contrary

to the terms of the new investor agreement; which is the definition of a Ponzi scheme.

Defendant has a lengthy history of fraud. He was convicted of forgery in 1989 and of

fraud in 1992 in Austria, and he was charged with fraud in Austria in 1997, but refused to

return to face the charges. He has a 1998 false statements conviction in the U.S. for failing

to disclose his criminal history on his immigration forms. This history, combined with the

underlying charges and his fraudulent Ponzi-like behavior on the eve of Indictment, establish

that he is a danger to the community.

After reviewing extensive briefing and hearing argument on this matter, Magistrate



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Judge James Hutton ordered that Defendant be detained pending trial noting that Defendant

was not supervisable, and finding that Defendant was both a flight risk and a danger to the

community. ECF 29 at 1-2.1

These determinations were correct and pre-trial detention is

warranted based on this record.

II. Charged Conduct

Defendant is charged with a massive wire fraud scheme, alleging losses exceeding $7

million. He entered into deposit agreements with victim-investors, in which he agreed to

maintain their investments in an interest bearing account, which deposits would be controlled

by an attorney and only moved by the attorney, after the parties gave written consent. In

fact, the agreements were not authorized by the attorney and the funds were not controlled by

an attorney. The funds were deposited into accounts, which were controlled by Defendant.

He immediately began spending the funds upon their receipt, for personal expenditures, to

repay prior investors, and for Green Power expenses not authorized by the victims-investors

agreements.

Defendant is currently charged with ten counts of Wire Fraud for his scheme to steal

money from investors, two counts of Aggravated Identity Theft for fabricating emails he

falsely signed under the name of a Washington lawyer, and six counts of Money Laundering

1 The government filed a motion for detention, ECF 5, and Defendant filed a response, ECF 16. The

government filed a reply (ECF 17), with under seal exhibits 1-17 (ECF 23). Defendant then filed a

supplemental response. ECF 20. The government is filing a CD of the audio recording of the

detention hearing held on December 20, 2013, as Exhibit 18. It is labeled Exhibit 18, since the

governments initial exhibits were labeled Exhibits 1-17.



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for transactions where he spent the fraudulent proceeds. The Indictment seeks criminal

forfeiture of proceeds, including his current residence in Kennewick, Washington.

III. Legal Standard

In reviewing the Magistrate Judges Detention Order, the District Court is to make its

own de novodetermination of facts, whether different from or adoption of findings of the

Magistrate Judge; ultimate determination of propriety of detention is also to be decided

without deference to the Magistrate Judges conclusion. United States v. Koenig, 912 F.2d

1190, 1192-1193 (9th Cir. 1990).

The government may move for detention in a case that involves either a crime of

violence, 18 U.S.C. 3142(f)(1)(A), a serious risk that such person will flee 18

U.S.C. 3142(f)(2)(A), or a serious risk that [the defendant] will obstruct or attempt to

obstruct justice, or threaten, injure, or intimidate, or attempt to threaten, injure, or

intimidate a prospective witness, 18 U.S.C. 3142(f)(2)(B). Although a defendant may not

be detained based solely on dangerousness unless one of the conditions listed in section

3142(f)(1) is present, see United States v. Twine, 344 F.3d 987 (9th Cir. 2003), in cases

involving serious risk of flight or risk of obstruction of justice, the court must also consider

the nature and seriousness of the danger to the community presented by defendants release,

see18 U.S.C. 3142(g)(4). The Ninth Circuit has held that danger may, at least in some

cases, encompass pecuniary or economic harm. United States v. Reynolds, 956 F.2d 192,

192 (9th Cir. 1992).

In assessing pre-trial detention, the Court must evaluate several enumerated factors to

determine whether there are conditions of release that will reasonably assure the appearance



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of the person as required and the safety of any other person and the community. . . . 18

U.S.C. 3142(g). These factors include:

(1) the nature and circumstances of the offense charged, including whether the offense

is a crime of violence, or an offense listed in section 2332(g)(5)(B) for which amaximum term of imprisonment of 10 years or more is prescribed or involves anarcotic drug;(2) the weight of the evidence against the person;(3) the history and characteristics of the person, including -

(A) the persons character, physical and mental condition, family ties,employment, financial resources, length of residence in the community,community ties, past conduct, history relating to drug or alcohol abuse,criminal history, and record concerning appearance at court proceedings;and

(B) whether, at the time of the current offense or arrest, the person was onprobation, on parole, or on other release pending trial, sentencing, appeal, orcompletion of sentence for an offense under Federal, State, or local law, and;

(4) the nature and seriousness of the danger to any person or the community thatwould be posed by the persons release.

Id. The Court must balance all of these factors in determining whether a defendant

should be detained pending trial.

IV. Argument

A.The Magistrate Judge properly determined that Defendant poses a significantflight risk.

1. Defendant is a foreign citizen and has foreign ties.

Defendant is a citizen of Austria. He is a legal permanent resident (LPR) in the

United States. Defendant asserts that [w]hatever ties [he] had to Austria were severed long

ago. ECF 30 at 9. However, Defendant told PTS that his mother and sister still reside in

Austria, with whom he has regular contact. ECF 13 at 1. Due to the nature of his

businesses, he has contacts across the globe. The most recent primary investor in

Defendants business Green Power, which investor has provided over a million dollars, is a



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resident of China. Recently, Defendant has been wire transferring funds to Senegal. In the

month of October 2013, Defendant wired via Money Tree, $45,500 to Senegal.

Significantly, if Defendant is convicted, he in all likelihood will lose his LPR status since he

is charged with aggravated felonies, and then will be deported after serving his sentence.

There is no reason to believe Defendant will remain in the United States to face charges,

serve a substantial amount of prison time, then ultimately be deported.

Defendant contends that he cannot leave the country because he does not have a

passport. ECF 30 at 8. However, this is not entirely accurate. Defendant is in possession of

an LPR card, which enables him to travel outside the United States. Moreover, Defendant

could walk into an Austrian Embassy or Consulate and apply for a passport and there is no

way to prevent Defendant from doing so. Since Defendant already has a conviction for lying

to immigration authorities to obtain status in this country (see below), the Court cannot rely

on Defendants word not to obtain travel documents.

Moreover, government counsel has consulted with the Department of Justice, Office

of International Affairs (DOJ OIA) regarding extradition from Austria. According to the

DOJ OIA, Austria will not extradite its nationals. Thus, if Defendant flees to Austria, where

he has family and citizenship, the United States will not be able to extradite him to the

United States to face these charges. This is significant because Defendant has already

avoided facing charges by refusing to return to a country where he had been charged with

fraud. Defendant was charged with another fraud scheme in Austria in 1997, but

successfully defeated Austrias request to extradite him, arguing that the extradition treaty

was invalid. As a result, he never faced that charge in court. SeeExhibit 19, Article:



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Austrian Fights Extradition. There is no basis for the Court to believe that Defendant will

remain in the United States to face these current charges.

2. Defendant has a prior conviction for providing false statements with

respect to immigration matters.

Defendant was convicted in 1998 in the Western District of Washington for false

statements, 18 U.S.C. 1001, for failing to report his prior criminal history from Austria,

significantly his prior fraud convictions, to U.S. immigration authorities on his application to

become an LPR in the United States. ECF 13 at 8. Having already lied to immigration

authorities to obtain status in this country, the Court should have no comfort that Defendant

will abide by any condition not to travel or obtain any travel documents, such as a passport.

3. Defendant faces a 10-12 year penalty and deportation if convicted.

Defendant faces a guideline range of 97 to 121 months of imprisonment on the wire

fraud and money laundering offenses. He faces a two-year mandatory sentence on the

Aggravated Identity Theft charges, which would run consecutively to the sentence on the

underlying charges. As a result, Defendants range if convicted is 10 to 12 years of

imprisonment. The government is also seeking forfeiture of his residence and a money

judgment in the amount of nearly $5,000,000. These types of penalties provide a significant

incentive to flee, especially since post-incarceration deportation is a virtual certainty.

4. Defendants use of intermediary accounts, trusts and corporations to hide

assets, and his lifestyle are inconsistent with his financial representationsto PTS, and such actions provide a potential source of funds to flee.

Defendant attempted to portray himself to PTS as having few assets. Defendant

contended that he has less than $661 in two bank accounts. ECF 13 at 2. Due to

Defendants significant outstanding judgments against him (ECF 13 at 2, see also



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http://www.tri-cityherald.com/2013/12/12/2728423/green-power-owner-faces-several.html);

Defendant utilizes corporate entities and trusts to hold assets so they cannot be seized. This

makes his assets incredibly difficult to track. With respect to the issue of Defendant being a

risk of flight, the government has concerns about Defendants access to funds, his use of

intermediary accounts to move funds, use of corporations and trusts to house assets, and his

initial failure to disclose these financial matters to PTS. As Magistrate Judge Hutton noted,

Defendant has utilized a frankly very complicated and misunderstood web of financial

dealings. He has a number of entities that appear to be receptacles for or payment vehicles

for moneys that have come into this business over time. When I am told that he has limited

funds and I am told that he cannot show, or hasnt shown or demonstrated at this point, that

he has legitimate income from the operation of this business, it causes significant concern to

the court. SeeExhibit 18, 16:05-16:45.

Use of intermediary accounts. By way of example, in February 2013, Defendant

directed a new investor from China to route his investments to Green Power through an

intermediary account. On February 5, 2013, the Chinese investor sent J.C., a Green Power

employee, $985,000 to her (J.C.s) personal account. From that money, she then obtained a

$495,724 cashiers check, which was used to pay Green Powers rent at the Port of Pasco.

She also purchased a cashiers check in the amount of $43,000, which was issued to

WADOT, which maintains a mortgage on Defendants home. SeeECF 23, Exhibit 9. From

February to August, 2013, J.C. has withdrawn over $200,000 in cashfrom this account that

she provided to Defendant.



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Access to Cash: In addition to the $200,000 J.C. gave Defendant in the past 10

months, on October 25, 2013, Defendant withdrew $28,000 in cash from Key Bank Account

XXXX6137, which is his personal account. Defendant told the PTS that the balance on this

account is approximately $300, which is accurate now. However, the government has

concerns about where the $28,000 cash withdrawal is currently located. Defendant asserted

in his brief that the funds were wired to Senegal, ECF 27 at 5, however, the records show

that Defendant wired only $6,700 to Senegal on October 25, 2013. The remainder is

unaccounted for. Moreover, the most recent bank statement the government has obtained

for this account shows that from September 19 to October 2013, Defendant received $94,380

in deposits and he withdrew $63,372.40. SeeECF 23, Exhibit 10. In his personal account,

he received $86,000 from Green Power Senegal. Access to money in substantial amounts

such as these provides the ability for Defendant to flee.

Moreover, Defendants lifestyle is entirely inconsistent with him having only $660 in

cash available to him.

Offer to Purchase $2.5 million home: In early 2013, Defendant made an offer to

purchase a home in Kennewick, Washington for $2.5 million. He intended to put the title in

the name of another trust, the Crotana trust. SeeECF 23, Exhibit 11. This is significant for

two reasons. First, this is another example of Defendant attempting to use trusts to hold

assets. Second, Defendant failed to disclose the existence of this trust and any assets of this

trust during his initial interview with PTS. Third, as of January 2013, Defendant believed he

had sufficient assets to make a down payment on a $2.5 million house, and an anticipated



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income stream where he would be able to make payments on the balance of the loan. This

appears to be inconsistent with the financial picture he now paints.

Familys lifestyle: Defendants teenage sons regularly post on social media about

their expensive toys. One of his sons drives a Hummer, and both recently acquired new

gaming systems. SeeECF 23, Exhibit 12 . On December 4, one son posted a photo of

himself with over a hundred pair of athletic shoes, and posted a photo of himself holding

approximately $1,500 in cash. Seeid. In this photo, Defendants minor son is holding more

money in cash than Defendant claimed to possess to the PTS Office. There must be a source

of income that pays for this lifestyle. This is significant because such as income stream has

not been disclosed to PTS and is a source of funds for potential flight.

Defendant also has a history of using corporate entities and trusts to hold assets:

Prarex Intl Limited: Prarex International is a company associated with Defendant.

He has offered to post as part of his bond five cars valued at approximately $100,000 that are

titled in the name of Prarex International (ECF 13 at 2). Defendant now claims that there are

no other assets in the name of Prarex assets.

The government is aware of at least two prior Bank of America accounts in the name

of Prarex International, that appear to have been closed in June 2012. The signature card for

Bank of America account XXXX9602, dated November 10, 2010, in the name of Prarex

International Limited, Defendant listed himself as the President, Secretary, and Treasurer of

Prarex International Limited. See ECF 23, Exhibit 13.

There was at least one other Prarex International Bank Account, of which the

government is aware, Bank of America Account XXXX9617. In February of 2011, an



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uncharged victim, E.V.R., from the Netherlands, wired $600,000 to this account. SeeECF

23, Exhibit 14. Defendant routinely paid Green Power business expenses from this account,

as well as used it for personal expenses. See id. In addition, in September 2011, Green

Power issued a cashiers check to Prarex International in the amount of $64,000. SeeECF

23, Exhibit 15. In 2011, three cashiers checks were purchased, totaling $190,000, from this

account, which were remitted to WA DOT Capital, which holds the mortgage on

Defendants home. See, e.g., ECF 23, Exhibit 16. This is another example of Defendant

utilizing a corporation to house assets that could fund flight. Moreover, since Defendant

appears to be in control of the assets of this corporation and has in fact benefitted from the

assets of the corporation, those assets, if any, should be disclosed to PTS.

Beacon Light: Defendants current home, (which is the subject of Count 13 and a

forfeiture allegation), is in the name of Beacon Light, a trust he claims is owned by his

children. ECF 13 at 2. The house was purchased initially by Beacon Light, a limited

liability company, over which he was President. SeeECF 23, Exhibit 17. This home was

purchased with funds he stole from Exoterm Holdings, that were laundered through one of

J.C.s bank accounts, as set forth in the Indictment. This is yet another example of him using

a corporate entity and/or a trust to hide assets.

Defendant has mastered the skill of using corporate entities and trusts to house assets

and funnel money to purchase personal items, such as cars and houses, to avoid those funds

being seized for prior judgments. The existence of funds in trusts and corporations, for

which Defendant has access to those funds, should have been disclosed to PTS. More

importantly, any such funds are a potential source of means to Defendant in the event he



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intends to flee. Defendants practice of taking Green Power assets and putting them in

corporate names and/or trusts, then informing PTS that he has minimal assets to contribute

toward a bond is indicative of the fact that Defendant is being deceitful, and cannot be

trusted by the Court to comply with conditions of release.

5. Defendants failing business provides no incentive to remain in the UnitedStates.

Defendant contends that he is not a flight risk because that would require him to

abandon Green Power, his business. ECF 30 at 8. In fact, Green Power, has been evicted

from the Port of Pasco. SeeExhibit 20, Article: Green Power Loses Tenancy at Port of

Pasco; Exhibit 21, FBI 302 of Pasco Port Director. The article notes that the plant was never

completed and in fact was closed by the Department of Ecology in 2009 because he lacked

the necessary permits. SeeExhibit 20. To date, Green Power has failed to produce a

functional plant. The current state of his business would provide no reason for Defendant to

remain in the United States.

6. Defendants behavior since March of 2013 does not lessen his current risk

of flight.

Defendant contends that he is not a flight risk since he did not flee after learning he

was under investigation in March of 2013. ECF 30 at 9. First, there is a significant

difference at this point; there is a pending indictment. Defendant requested that the

government postpone indictment and entered into a tolling agreement in April of 2013. At

the request of Defendant, the tolling agreement was extended again in September of 2013.

In December 2013, Defendant sought another extension of the tolling agreement, which the

government denied. This Defendant had been stalling facing charges, but now he is no



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longer able to prolong this prosecution. What was previously a potential, is now a reality.

Second, the government has significant concerns about Defendants behavior while he knew

he was under investigation. Defendant was contacting victims, which contact substantially

increased as indictment grew closer, in which he was making unfounded promises to pay

them. In addition, any payment he promised was intended to be paid from new investor

money. While Defendant was attempting to prolong facing charges, he continued to commit

Ponzi-scheme like behavior. His email communications indicate an intent to pay off existing

investors with the new investors funds, which the Magistrate Judge noted smacks of a

Ponzi-scheme or other type of artifice or device that would be inappropriate. Exhibit 18,

27:30-27:47.

B. The Magistrate Judge properly determined that Defendant poses a risk ofdanger to the community.

While the concept of dangerousness typically focuses on crimes of violence, in fact,

white collar crimes pose serious dangers. The legislative history of the Bail Reform Act of

the 1984 makes clear that Congress intended that the safety of any other person or the

community language in Section 3142 was expected to be given a broad construction. See

Report of the Senate Committee on the Judiciary, S. Rep No. 225, 98th Cong., 1st Sess. 12

(1983) (the reference to safety of any other person is intended to cover the situation in

which the safety of a particular identifiable individual, perhaps a victim or witness, is of

concern, while the language referring to the safety of the community refers to the danger that

a defendant might engage in criminal activity to the detriment of the community. The

Committee intends that the concern about safety be given a broader construction than merely



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danger of harm involving physical violence.). This legislative history was cited with

approval in United States v. King, 849 F.2d 485 (11th Cir. 1998).

Courts have appropriately construed the statute to find that protection of the

community from economic harm is a valid objective of bail conditions. See United States v.

Reynolds, 956 F.2d 192, 193 (9th Cir. 1992) (post-conviction for mail fraud and witness

tampering, the Court held that for purposes of detention, danger may, at least in some cases,

encompass pecuniary or economic harm); see also United States v. Giordano, 370

F.Supp.2d 1256, 1270 (S.D. Fla. 2005) (no question that an economic danger, like that

posed by a serial defrauder, falls under the broad umbrella of dangerousness as that term is

used throughout the Bail Reform Act); United States v. Madoff, 586 F.Supp.2d 240, 253

and n. 11 (S.D.N.Y. 2009) (Court accepted that in certain circumstances an economic or

pecuniary harm may give rise to a consideration of danger for purposes of pretrial detention

and noted that [t]he question appears to become one of propensity to commit further crimes,

even if the resulting harm is solely economic).

Defendant has a lengthy criminal history for fraudulent conduct. Defendant has a

1989 forgery conviction from Austria, and a 1992 fraud conviction in Austria. He was

released from an Austria prison in 1995, obtained a passport and traveled to the United States

within a matter of weeks. When he arrived in the United States, Defendant lied on his visa

application about having a prior criminal history to enter the country. He subsequently lied

on his legal permanent resident application about having a prior criminal history, which led

to a 1998 federal false statements conviction. Defendant was charged with another fraud

scheme in Austria in 1997, but successfully defeated Austrias request to extradite him,



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arguing that the extradition treaty was invalid. As a result, he has not faced that charge in an

Austrian court.2

Defendant engaged in the instant conduct from 2007 to the present. As recently as

last week, Defendant sent victims emails indicating he was on the verge of receiving $37.5

million in the near future, which the government believes is equally fraudulent. More

importantly, he has promised the new investors funds to the prior victims, when the contract

provides the funds are to be used for other purposes. Despite the fact Defendant was facing

fraud charges, Defendant has continued a pattern of deceit, which he has been doing for

nearly 30 years. His repeated fraudulent conduct, which continued to occur just days before

indictment, establish that he is a danger to the community.

C.The Defendant poses a risk of obstructing justice and the Magistrate Judgeproperly determined that Defendant is unsupervisable .

1. Defendant has contacted his victim-investors numerous times since

learning of the federal investigation, as recently the week prior to

indictment, promising to pay them back.

2Defendant contends that it is alleged that [he] was convicted of crimes in Austria in 1989 and

1992. ECF 30 at 13. In fact, his 1998 false statements charge was for failing to disclose on his

LPR application that he had previously been arrested, charged, convicted, and imprisoned for fraud

in the Republic of Austria. SeeExhibit 22, Superseding Indictment, CR 97-279R WDWA.

Defendant was convicted and sentenced to six months of incarceration. SeeExhibit 23, Judgment.

The governments sentencing memorandum in that case references his prior foreign convictions. See

Exhibit 24, Govt Sent. Memo at 1-3, and attachments. Even Defendants sentencing memorandum

refers to his prior Austrian convictions. SeeExhibit 25, Def. Sent. Memo at 2. For Defendant to

refer to the prior foreign convictions as allegations is further indicative of his lack of candor.



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Defendant has been aware of the federal criminal investigation since approximately

March of 2013, when the parties began pre-indictment negotiations, which were

unsuccessful. Defendant became aware of the substance of the investigation and who the

likely charged victims were due to his participation in a government reverse proffer. Since

that meeting, Defendant has regularly contacted the victim-investors, making promises that

he would repay the funds. Those contacts substantially increased as indictment approached.

Defendant was aware that an indictment would be presented the week of December 9, 2013,

because the parties had a tolling agreement as to the statute of limitations, which was set to

expire in mid-December.

Chakra Energy victims (paragraphs 9-14 of Indictment): Chakra representative G.B.

was interviewed on October 24, 2013, during which he reported that Defendant contacted the

Charka victims in September 2013 and promised them payment. G.B. also reported that

Defendant had contacted his father, D.B. the day before the interview, October 23, 2013, and

promised he would pay back the money by the end of the month. SeeECF 23, Exhibit 1 at p.

3. Moreover, on December 5, 2013, five days before the Indictment was returned, Defendant

emailed victim G.B., attached a contract, and told the victim that Defendant would get paid

on the contract in either December or January, and that Defendant would pay the victim out

of any proceeds. He also offered to give G.B. 3% of shares of Green Power. SeeECF 23,

Exhibit 2.

Bailey Wastepaper victim (paragraphs 23-26 of Indictment): Defendant has made

several attempts to contact A.B. via telephone, email and text message from December 4 to

December 6, 2013, which were the days preceding the indictment. SeeECF 23, Exhibit 3.



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Canadian Partners (paragraphs 15-22 of Indictment): B.G., a representative of the

Canadian Partners group, was interviewed on October 9, 2013. He reported that Defendant

had called him in the past few weeks, prior to the interview, to tell B.G. that B.G.s refund

was coming. SeeECF 23, Exhibit 4. On December 5, 2013, Defendant emailed a

representative of the Canadian Partners Group, and informed them he had a new contract, for

which he would receive payment in December or January. SeeECF 23, Exhibit 5.

Defendant promised the victims that they would get paid out of the contract. Significantly,

the attached contract is for the sale of units to convert waste to fuel. Based on the

governments investigation, there is certainly reason to question the legitimacy of this

contract. But more importantly, Defendants promise to use the new investors money to pay

the prior victims is substantially similar to the fraud with which he is charged. The new

contract provides that in December 2013 or January 2014, Green Power is permitted to

withdraw 15% in advance in order to buy material, equipment, and machineries. It says

nothing about paying off prior investors. If this contract is legitimate, Defendant is

potentially committing fraud on the new investor; this appears to be yet another Ponzi-like

scheme against the new investors.

Defendant contends that these emails do not show that Defendant intends to pay the

investors from the 15% advance and thus his behavior is not fraudulent. ECF 30 at 12. His

contention is entirely inconsistent with Defendants statements in the emails. SeeECF 23,

Exhibit 2 at p. 2 (I attached a contract which will pay either in December or latest January I

want to get you paid out of this.); see alsoECF 23, Exhibit 5 at p. 1 (As we spoke on the

phone, here is a copy of the signed contract with payment guarantee from our Buyer. If



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agreeable to you we would like to get you paid out of the first money we receive from this

contract, which will be hopefully in December but the latest in January.). Defendant then

contends that it is just as likely that the email referred to payment after Defendant received

full payment for selling the new investor the machinery. This is an absurd suggestion, given

that Defendant has never in the history of the companydelivered any product to an investor.

In addition, Defendants attempts to recruit money on the eve of Indictment is suspicious.

The government believes it is highly unlikely that Defendant informed this new investor that

(1) these funds were going to a new investor; in fact, the contract states what the funds could

be used for: material, equipment, and machineries; and (2) Defendant was facing imminent

federal charges. Defendant contends that that there is nothing untoward about his attempts to

repay investors. ECF 30 at 16. However, there is something very wrong about paying

existing investors with new investor money unbeknownst to a new investor; it is called a

Ponzi scheme and it is illegal. What is readily apparent is that Defendant does not

understand that he cannot take money from investors under certain pretenses and then intend

to use the money for other purposes. This is precisely the reason he was indicted and he was

engaging in the same conduct while he was under investigation and facing indictment.

The debts to these investors have been outstanding for years, since 2007 to 2009. The

fact that Defendant was contacting them as the federal investigation is ongoing and

approaching an indictment, is not a coincidence. Importantly, Defendants contacts with the

victims are particularly significant in this case, which involves mostly foreign investors. The

timing of these communications leads the government to believe that Defendant is trying to

lull the investors into believing that funds may be forthcoming so that the victims will cease



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cooperating with the government. In a foreign case, the government must rely on the

voluntary cooperation of foreign victims. The government does not have subpoena power

over such victims. As a result, if Defendant is able to convince them that money is

forthcoming and they stop cooperating with the government, it would significantly impact

the ability of the government to prosecute Defendant.

2. Defendant is currently charged with and has a prior history of fabricatingdocuments, which falsely represent they are authored by attorneys.

In this criminal case, Defendant is charged with Aggravated Identity Theft (Counts

11-12) for sending his victim-investors emails, falsely representing that the emails were from

a lawyer. In those emails, Defendant used an email address that indicated it was associated

with S.C., a lawyer licensed in Washington, based in Issaquah, and he also signed the emails

on her behalf. SeeECF 23, Exhibit 6. In fact, the government has determined through IP

addresses that these emails were sent from Defendants home in Kennewick. These emails

imply that Defendant wants to return investors funds to the victims, but in fact, the lawyer is

advising him not to do so. At the time of the emails, Defendant had already spent the

investors funds and the funds were not available to be returned to the investor. The

government has located numerous instances (beyond these two emails), where Defendant

sent communications to victim-investors that were purportedly from attorney S.C. See, e.g.,

ECF 23, Exhibit 7.

This is not the first time Defendant has engaged in such conduct. On November 27,

2007, Defendant sent an email to investor-victim W.F. (referenced in paragraphs 27-29 of

the indictment), in furtherance of his scheme to convince the investor to send Defendant

funds. SeeECF 23, Exhibit 8. In the email, Defendant forwarded an email that he said he



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received from his attorney G.G., which states that we got an understanding with IRS

Special Agent Hugo Sanchez that based on [Defendants] acceptance and agreeing to extend

the voluntary freeze on all your accounts and assets until January 15th

, 2008, that he agreed

to release the freeze no later than Tuesday, January 15, 2008. The government has

confirmed with the IRS that no Special Agent by the name of Hugo Sanchez existed and

confirmed that attorney G.G. did not author that email.

Defendants repeated conduct of fabricating documents, including communications

falsely stating they are from a lawyer, demonstrates that he is a risk to obstruct justice and

would be difficult to supervise in any meaningful fashion. Moreover, as the Magistrate

Judge noted, there is no way to supervise a defendant like this. Since Defendants family

will have access to electronic devices, such as phones, computers, etc., there is no way to

prevent him from reaching out to more potential victims while on pretrial release. See

Exhibit 18, 27:50-28:20.

The evidence establishes that defendant presents a serious risk of flight, a serious risk

of obstruction of justice, and that he is a danger to the community. Defendant is asking the

Court to trust him and his promise to appear at future court hearings and not engage in

additional criminal and obstructive behavior. Yet everything about the nature and

circumstances of this case and Defendants history shows that he cannot be trusted.

Dated this 3rd day of January, 2014.

MICHAEL C. ORMSBYUnited States Attorney

s/ Mary K. DimkeMARY K. DIMKEAssistant United States Attorney



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I hereby certify that on January 3, 2014, I electronically filed the foregoing with the

Clerk of the Court using the CM/ECF System which will send notification of such filing to

the following: Chris Black.

s/ Mary K. DimkeMary K. DimkeAssistant United States AttorneyUnited States Attorneys Office402 E. Yakima Ave., Suite 210Yakima, WA 98901(509) 454-4425


Documents

USA v. Spitzauer Doc 31 Filed 06 Jan 14