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United States v. Jeffs

United States District Court, D. Utah

December 11, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
LYLE STEED JEFFS, Defendant.

          MEMORANDUM DECISION AND ORDER

          Ted Stewart United States District Judge

         District Judge Ted Stewart Defendant Lyle Steed Jeffs is scheduled to be sentenced on December 13, 2017. Both parties have raised objections to the Presentence Report. The Court will address those objections below.

         I. BACKGROUND

         Defendant Lyle Steed Jeffs, along with ten others, was charged in an Indictment with conspiracy to commit Supplemental Nutrition Assistance Program (“SNAP”) benefits fraud and conspiracy to commit money laundering. A Superseding Indictment was returned on June 21, 2017, adding a charge of failure to appear.

         On September 20, 2017, Defendant pleaded guilty to conspiracy to commit SNAP benefits fraud and failure to appear. Pursuant to the plea agreement, the parties agreed, under Federal Rule of Criminal Procedure 11(c)(1)(C), [1] to a sentence of 1 year imprisonment on the failure to appear charge, which is to run consecutively to a period of 2 to 4 years on the conspiracy to commit SNAP benefits fraud charge.

         The Presentence Report prepared in this case reflects a base offense level of 6. The Presentence Report contains a 20-level enhancement based on the amount of loss, a 4-level enhancement for Defendant's role in the offense, a 2-level enhancement for obstruction of justice, and a 3-level reduction for acceptance of responsibility. This results in a total offense level of 29. With a criminal history category I, the advisory guideline range is 87 to 108 months.

         The parties make two primary objections to the Presentence Report's calculations. First, Defendant objects to the determination of the amount of loss. Second, the government objects to the 2-level enhancement for obstruction of justice. Neither party has objected to the base offense level of 6 or the 4-level increase for Defendant's role in the offense. Therefore, the Court will not address them. As set forth below, the Court will sustain Defendant's objection to the loss amount and overrule the government's objection to the obstruction of justice enhancement. The parties also make a number of other minor objections, all of which will be overruled.[2]

         II. DISCUSSION

         Defendant's offense level is first determined by reference to United States Sentencing Guideline (“USSG”) § 2B1.1. As will be discussed further below, Counts 1 and 3 are grouped together, with the failure to appear count treated as an obstruction of justice enhancement under USSG § 3C1.1.[3]

         A. LOSS AMOUNT

         In this case, Defendant has a base offense level of 6.[4] The base offense level is then increased by the amount of the loss. Under the Sentencing Guidelines, “loss is the greater of actual loss or intended loss.”[5] “Actual loss” is “the reasonably foreseeable pecuniary harm that resulted from the offense, ” while “intended loss” is “the pecuniary harm that the defendant purposely sought to inflict.”[6]

         In the case of government benefits, such as food stamps, the “loss shall be considered to be not less than the value of the benefits obtained by unintended recipients or diverted to unintended uses.”[7] “For example, if the defendant was the intended recipient of food stamps having a value of $100 but fraudulently received food stamps having a value of $150, loss is $50.”[8]

         Where evidence of direct loss is not available, the Court “need only make a reasonable estimate of the loss.”[9] “The estimate of the loss shall be based on available information, taking into account, ” a variety of factors.[10] “But a loss estimate is reasonable only when it is calculated under a reasonable method.”[11]

         The government has proposed a loss amount of $11, 237, 261, which would result in a 20-level increase.[12] This amount is based largely on analysis from the United States Department of Agriculture (“USDA”). Under the USDA analysis, fraud is presumed where a transaction is more than 300% of the national average. The national average transaction amount for stores like Meadowayne Dairy Store (“Meadowayne”) and Vermillion Cliffs Produce (“Vermillion”) is $25. Thus, according to the USDA, any transaction involving SNAP benefits over $75 is indicative of fraud. Using a more conservative estimate, the government has identified all SNAP redemptions at these stores over $100 and has used this number to support the loss amount.

         The government's proposed methodology is flawed for several reasons. First, no information has been presented to support the USDA's 300% fraud standard. While the government indicates that the USDA routinely applies this standard, the basis for this standard has not been provided to the Court. Second, the USDA's standard appears to be used to identify potential fraud.[13] However, the government uses this standard as a basis to identify actual fraud. Third, the government's proposal fails to account for several unique factors present in the FLDS community, including the large household size and the limited points of redemption for SNAP benefits. Such factors have been identified by the USDA in the past as possible explanations for fraud indicators in the Short Creek area.[14] Finally, and perhaps most importantly, the government's analysis defies logic. The government would have the Court believe that every cent of purchases over $100 was “obtained by unintended recipients or diverted to unintended uses.”[15] There is no evidence to support this assertion.

         The government attempts to support its methodology by other evidence. The government asserts that pole camera analysis showed that a large number of transactions of $100 or more involved patrons who swiped their SNAP cards, receiving little or no food in return. However, it is unclear how many of these transactions were at or near the $100 threshold, as opposed to a higher amount. The government also points to Title III analysis, stating that the analysis revealed that nearly 84% of transactions at or above the $100 threshold involved fraud. However, this analysis suffers from the same defect as the pole camera analysis.[16] Specifically, it is unclear just how near the $100 threshold these transactions were. Further, an examination of the Title III analysis shows that the average fraudulent transaction was over $400.[17] While the average transaction amount is not a good proxy for determining fraud, it does cast doubt on the government's $100 fraud threshold.

         The government also relies on witness statements to corroborate the $100 fraud threshold. The government points to Alleen Steed, who told investigators that transactions over $100 likely involved diverted funds. This statement, however, is directly contradicted by Sheryl Barlow, who told the FBI that the average transaction for most United Order families was close to $400.[18] The government further relies on “Monthly Family Expense Reports” to support the $100 fraud threshold. However, these reports generally show amounts far greater than $100 were consecrated.[19] In sum, the government's methodology is sufficiently flawed that it does not provide a reasonable method to determine the amount of loss.

         In its Reply brief, the government proposed a methodology based on the Title III investigation.[20] This methodology does not suffer from many of the same flaws. However, the Court will not consider arguments made for the first time in reply.[21]

         Mr. Jeffs has proposed an estimated loss amount of $2, 096, 918.77, which would result in a 16-level enhancement.[22] This estimated loss amount is derived from the analysis of Chesley Erickson. Mr. Erickson reaches this estimate by calculating all SNAP proceeds received by Meadowayne and Vermillion during the relevant years. He then “subtracts the verifiable SNAP food purchases from the aggregate SNAP receipts, leaving a specific amount of SNAP benefits that cannot be conclusively . . . attributed to food purchases.”[23]

         The government disagrees with this analysis, arguing that the fraud occurred at the time of the transaction and should not be offset by later purchases of food. But the timing of when the fraud occurred and the amount of the loss involved are different questions. In cases involving government benefits fraud, the loss is the value of the benefits “obtained by unintended recipients or diverted to unintended uses.”[24] So, while the fraud may occur at the time of purchase, the amount of loss must be determined by considering the value of benefits obtained by unintended recipients or diverted to unintended uses. If a SNAP recipient ultimately receives some amount of food after the donation of benefits, it is appropriate under the Guidelines to offset that amount. In such a circumstance, the benefit was obtained by the intended recipient and, at least eventually, was put to its intended use.

         The government also attacks certain accounting errors in Mr. Erickson's analysis.[25]However, even crediting these errors, the government would have to show that Mr. Erickson failed to account for nearly $1.5 million in fraud in order to alter the guideline range. This, it has not done.

         The government also argues that Defendant cannot establish how much of the purchased food eventually made its way to SNAP beneficiaries. The government is correct. Mr. Erickson's analysis identifies the amount of money that cannot be conclusively tied to food purchases, meaning it was diverted to unintended uses. However, the analysis assumes that the food purchased with the use of SNAP benefits eventually made its way to SNAP beneficiaries. This is a faulty assumption. The evidence shows that food obtained through the use of SNAP benefits was shared with non-eligible individuals. Thus, Mr. Erickson's analysis fails to fully account for the value of benefits obtained by unintended recipients. This failure means that Mr. Erickson's analysis underestimates the total amount of loss, though it is unclear by how much.

         Another flaw in Mr. Erickson's analysis is that it focuses on the businesses involved in supplying food to the Short Creek area, rather than on the SNAP beneficiaries. But, as the government concedes, it would be logistically impossible to review over 247, 000 SNAP transactions to determine which transactions involved fraud.[26] Given the limited number of vendors and suppliers in the community, analyzing the transactions of these businesses provides a good estimate of the amount of SNAP benefits that were ultimately used to purchase food. But, as discussed, this amount fails to fully account for the amount of loss.

         In the end, Mr. Erickson's analysis is more reflective of the Sentencing Guidelines, Tenth Circuit precedent, and the Court's prior rulings, and does not suffer from nearly the same flaws as the government's proposed methodology. Therefore, the Court will adopt Mr. Erickson's loss estimate of $2, 096, 918.77, which results in a 16-level enhancement.

         B. OBSTRUCTION OF JUSTICE

         The Presentence Report also includes a two-level enhancement for ...


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