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RESPONSE to 235 Objections to Presentence Investigation Report by Eric Dean Sheppard — USA v. SHEPPARD (Dkt. 242)

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Court	U.S. District Court for the Southern District of Florida
Filed	2024-05-23

U.S. District Court for the Southern District of Florida · No. 1:22-cr-20290-BB · Doc. 242 · 2024-05-23 · Docket on CourtListener

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Defendant Eric Sheppard's response to the government's objections to the presentence investigation report, filed May 23, 2024 as Document 242 in United States v. Sheppard, Case No. 22-20290-CR-BLOOM/OTAZO-REYES, in the U.S. District Court for the Southern District of Florida. A footnote corrects his sentencing memorandum, stating that $4,001,962.56 was paid toward permissible business expenses under the PPP and EIDL programs between May 2020 and December 2021. It addresses objections to Paragraphs 37, 103, 109 and 105, including a September 22, 2022 property sale and the description of HM Four, LLC as an active company. On Paragraphs 75 and 118 it opposes a two-level enhancement under U.S.S.G. § 2B1.1(b)(12), arguing PPP loans are not benefits under 18 U.S.C. § 1040 because the CARES Act does not invoke the Stafford Act. The 11-page response asks the court to overrule the objection.

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

CASE No. 22-20290-CR-BLOOM/OTAZO-REYES

UNITED STATES OF AMERICA,

vs.

ERIC DEAN SHEPPARD,

Defendant.
_______________________________/

DEFENDANT ERIC SHEPPARD’S RESPONSE TO
[DKT. No. 235] THE GOVERNMENT’S OBJECTIONS TO
THE PRESENTENCE INVESTIGATION REPORT

Defendant Eric Sheppard (“Sheppard”) respectfully submits the following
Response to the government’s Objections to the Presentence Investigation Report
(“PSR”).1

1 Sheppard also hereby corrects an inadvertent error on page 15 of his previously-filed Sentencing
Memorandum, where we (mistakenly) stated: “And Sheppard did just that by paying
$4,001,962.56 to his workers …” Dkt. No. 236-1at 15 (emphasis added). We should instead have
stated: “And Sheppard did just that by paying a total of $4,001,962.56 toward permissible
business expenses under the PPP and COVID-19 EIDL program, including but not limited to,
payments to his workers (who were eligible for PPP and EIDL proceeds), at the peak of the
pandemic, between May 2020 and December 2021—far in excess of the amount he received as
government benefits under the PPP and COVID-19 EIDL program.” Sheppard notified the
government of this error via email on May 21, 2024, which pointed out that elsewhere in the
Sentencing Memorandum we made clear that the “$4,001,962.56 were used for permissible
purposes under the PPP and EIDL Program, namely, paying workers and paying off business
expenses.” Id. at 14; see also id. at 17 (“$830,620.90 (i.e., $676,946.90 in “Payroll” plus
$153,674.00 in “Payroll to Individual Workers Incurred by Project Manager”) was paid as payroll
to workers, alongside $3,171,341.66 in other non-payroll business expenses, for a total of
$4,001,962.56 in permissible uses of loan proceeds.”). We apologize for any confusion our error
may have caused.
Case 1:22-cr-20290-BB Document 242 Entered on FLSD Docket 05/23/2024 Page 1 of 11

Paragraph 37:
Sheppard makes no reply to the government’s correction of the time frame set
forth in the Offense Conduct at Paragraph 37.
Paragraphs 103, 109:

The government asserts that “Sheppard was not truthful in reporting to
Probation that he does not earn any income from HM-UP Development Alafaya
Trails, LLC because the company sold its assets in September 2022. Dkt. No. 235
at 1-2. The government claims that Sheppard sold the real property known as
“Shoppes at Alafaya Trails” to himself. This assertion is incorrect.
Sheppard had originally planned (prior to the government’s initial indictment)
to refinance the loan associated with the Shoppes, as it had a come-due date of
September 22, 2022, but was compelled to sell the Shoppes because, as a result of
the July 2022 indictment, the bank no longer allowed him to be a guarantor on the
loan.
Toward that end, on September 22, 2022, Sheppard, as a beneficial owner and
managing-member of [seller] HM-UP Development Alafaya Trails, LLC (“HM-
UP”), involuntarily caused the sale of the Shoppes to [buyer] 1200 Alafaya LLC,
which is owned by two entities: [managing member] 1200 Alafaya Manager LLC
(52%) and WAPD Holdings LLC (48%). Jennifer Sheppard is a 99% owner of 1200
Alafaya Manager LLC.
Case 1:22-cr-20290-BB Document 242 Entered on FLSD Docket 05/23/2024 Page 2 of 11

Therefore, [buyer] 1200 Alafaya LLC is not an alter ego of HM-UP —the two
companies have different lenders, loans, and guarantors, with Sheppard neither as
the new lender nor the new guarantor of 1200 Alafaya LLC. And at present, the
property is not profitable.
Paragraph 105:
In its Objections to the PSR, the government objects to the description of HM
Four, LLC as “active for the purpose of overseeing a 150,000 square foot shopping
center and its common area requirements” in Paragraph 105 of the PSR. The
government argues that HM Four was “a passive owner of Alafaya Trails” that was
not entitled to a COVID-19 Economic Injury Disaster Loan (“EIDL”). Dkt. No. 235,
at 2. The government’s objection is without merit; the evidence at trial supports
Paragraph 105’s characterization of HM Four as an “active” company.
At trial, Sheppard presented evidence indicating that HM Four had its own
operational responsibilities and business functions, with multiple business functions
beyond being the managing-member for this asset, including maintaining the
common area of the property and other upkeep. See Def. Ex. M-50 (a “Declaration
of Reciprocal Easements, Rights, and Maintenance Covenants for Shoppes at
Alafaya Trail” containing and detailing HM Four’s contractual obligations). For
example, Sheppard testified that he applied for the EIDL loan on behalf of HM Four
Case 1:22-cr-20290-BB Document 242 Entered on FLSD Docket 05/23/2024 Page 3 of 11

to cover HM Four’s business expenses apart from the ownership of HM-UP
Development Alafaya Trails:
Q: Now, separately, on your own, October 22nd, 2020 you apply on
behalf of the owner of HM-UP Development Alafaya Trails for its own
Economic Injury Disaster Loan, correct?
A: Well, implied for HM-Four for the other functions and their other
business not for the ownership of the 99 percent of HM-Up. This was
specifically HM-Four was applying for their other obligations and their
business that they have -- that’s what was applied for, the purpose.

1/9/24 A.M. Tr. 83:25-84:7.

Sheppard further testified that, regarding a lease between HM Four and
another entity (Pacific Management), HM Four was responsible for maintaining the
common area of the property as set forth in the Declaration of Reciprocal Easements,
Rights, and Maintenance Covenants for Shoppes at Alafaya Trail (Def. Ex. M-50;
see also Gov’t Ex. 58), a recorded document with Orange County, Florida, and that
was the subject of the lease:
Q. Mr. Sheppard, you were shown in cross some type of a computer
report or printout reflecting a lease or -- between or a draft lease
between the Pacific management and HM-Up. Do you recall being
shown something along those lines?
A. Yes.
Q. How did that -- how and why did that turn into the HM-Four lease?
A. I’m sorry how did it turn into the HM-Four lease.
Q. Yes?
A. When the negotiation was going on for the new lease for a short-
term 6-m[onth] lease, they would not provide the financial statements
of the new company Pacific management and that was a problem
because we knew SOS furniture but we didn’t know who Pacific
Case 1:22-cr-20290-BB Document 242 Entered on FLSD Docket 05/23/2024 Page 4 of 11

management was so during the negotiations that’s when we shifted it to
HM-Four because we couldn’t get the financial information there and
short reason why that is -- relates to the shifts it to HM-Four. I thought
it was very strange a national company would change their tenant from
SOS furniture to Pacific management that was very strange for a
national company so obviously there was something wrong we wanted
to see the financials. They wouldn’t give us the financials. So we
change -- I say okay fine then we’re going to put HM-Four as the
landlord. And whatever this Pacific management is.
Q: What was the business reason to switch them over that reason or
others -- what was the issue with keeping it with HM-Up?
A: They were -- we just wanted them out, and they wouldn’t leave. So
I just did not want to get into litigation with HM-Up because I have a
20 million-dollar loan in HM-Ups name. HM-Four owns it, and HM-
Four is responsible for all the common area. And since they haven’t
been paying rent for a long time. They owed approximately $70,000,
I’m like: Listen, you’re no[t] going on[sic] sue me during COVID --
not me, but HM-Up. If you’re going to put this false -- I don’t know
false -- this company I have no idea who they are, okay. But HM-Four
is in charge of all the common area which you are delinquent with. So
HM-Four -- the 99 percent owner of HM-Up -- that’s how the decision
came about to avoid any type of litigation that this guy has shown that
he was, you know, capable of.
1/9/24 P.M. Tr. 97:11-98:25 (emphasis added).

Sheppard was not the only witness to testify to HM Four’s business functions
outside of its ownership of HM-UP Development Alafaya Trails. Sheppard’s
partner, Robert Kallman, also testified that HM Four was responsible for the
common area maintenance of the property owned by HM-UP Development Alafaya
Trails:
Q. Do you know what -- what cam is sorry?
A. Common area maintenance.
MR. ETRA: Sorry Your Honor.
Case 1:22-cr-20290-BB Document 242 Entered on FLSD Docket 05/23/2024 Page 5 of 11

Q. Generally speaking do you know what that is?
A. Yes, I do.
Q. Briefly, what is it?
A. Cam is all the expenses everything outside the tenants demised
property for instance the walkways the parking lot, the garbage areas.
The lighting in the parking lot. Anything that encompasses that is not
the tenant’s actual demised property itself.
Q. Do you know what an REA is?
A. Yes, I do.
Q. And generally speaking what is the function of an R?
A. The R is the master document that governs the rules and regulations
of the project. It’s a very important document. It lays out the what the
tenants can and cannot do. It lays out the scope of the common area.
The control, and what happens in the overall project and the overall --
and building of the --
Q: Did HM-Four have any operational responsibilities at the project?
A: HM-Four management basically ran the cam.
Q: Okay. Put up the HM-Four operating agreement. Sir are you familiar
generally with this document?
A: Yes.
Q: And generally, what, if anything, was HM-Four’s responsibility
under this agreement?
A: HM-Four -- hmfourmanager would be responsible basically for the
cam. And at is search point HM Management. Guys back -- it’s slightly
confusing because all of the companies are named HM so I forget
sometimes what the actual pecking order is.
1/9/24 P.M. Tr. 114:3-115:9 (emphasis added).

The abovementioned testimony indicates that HM Four is more than just a
pass-through company: HM Four had its own business functions and expenses that
made it EIDL-eligible, including those stemming from the common area
Case 1:22-cr-20290-BB Document 242 Entered on FLSD Docket 05/23/2024 Page 6 of 11

maintenance of the property owned by HM-UP Development Alafaya Trails. And
it is evident that the jury believed Sheppard’s and Kallman’s testimony on the matter
as the jury acquitted Sheppard of all charges related to the HM Four EIDL loan.
Thus, as evidenced by the abovementioned testimony, Paragraph 105 of the PSR is
correct: HM Four is “active for the purpose of overseeing a 150,000 square foot
shopping center and its common area requirements.” The government’s objection
regarding this paragraph should be overruled.
Paragraphs 75, 118:
Finally, in its Objections to the PSR, the government objects to the total
offense level of 25 because it does not include an additional two-level enhancement
under U.S.S.G. § 2B1.1(b)(12), which applies if the offense involved conduct
described in 18 U.S.C. § 1040. The government’s objection is misplaced. Section
2B1.1(b)(12) of the Guidelines provides that “[i]f the offense involved conduct
described in 18 U.S.C. § 1040, increase by 2 levels.” In turn, 18 U.S.C. § 1040
proscribes, in relevant part,
(1) falsif[ying], conceal[ing], or cover[ing] up by any trick, scheme, or
device any material fact; or
(2) mak[ing] any materially false, fictitious, or fraudulent statement or
representation, or mak[ing] or us[ing] any false writing or document
knowing the same to contain any materially false, fictitious, or
fraudulent statement or representation
in any manner involving any benefit authorized, transported,
transmitted, transferred, disbursed, or paid in connection with a
major disaster declaration under section 401 of the Robert T.
Case 1:22-cr-20290-BB Document 242 Entered on FLSD Docket 05/23/2024 Page 7 of 11

Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C.
5170) or an emergency declaration under section 501 of the Robert
T. Stafford Disaster Relief and Emergency Assistance Act (42
U.S.C. 5191)[.]
18 U.S.C. § 1040(a). “Benefit” is defined by the statute as “any record, voucher,
payment, money or thing of value, good, service, right, or privilege provided by the
United States, a State or local government, or other entity.” Id. § 1040(c). The
Robert T. Stafford Disaster Relief and Emergency Assistance Act (the “Stafford
Act”), 42 U.S.C. §§ 5121-5208, sets forth the process by which the President may
declare a state of major disaster or emergency that would necessitate federal
assistance to state and local governments. The Stafford Act defines a “major
disaster” as
any natural catastrophe (including any hurricane, tornado, storm, high
water, winddriven water, tidal wave, tsunami, earthquake, volcanic
eruption, landslide, mudslide, snowstorm, or drought), or, regardless of
cause, any fire, flood, or explosion, in any part of the United States,
which in the determination of the President causes damage of sufficient
severity and magnitude to warrant major disaster assistance under this
chapter to supplement the efforts and available resources of States, local
governments, and disaster relief organizations in alleviating the
damage, loss, hardship, or suffering caused thereby.
42 U.S.C. § 5122(2). And the Stafford Act defines “emergency” as
any occasion or instance for which, in the determination of the
President, Federal assistance is needed to supplement State and local
efforts and capabilities to save lives and to protect property and public
health and safety, or to lessen or avert the threat of a catastrophe in any
part of the United States.
42 U.S.C. § 5122(1).
Case 1:22-cr-20290-BB Document 242 Entered on FLSD Docket 05/23/2024 Page 8 of 11

The government contends that payments under the Paycheck Protection
Program (“PPP”) and COVID-19 EIDL program are “benefits” within the meaning
of 18 U.S.C. § 1040, and thus, the two-level enhancement under U.S.S.G.
§ 2B1.1(b)(12) applies here. However, the government ignores that the provision of
the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act that created
the PPP and authorized the loans issued thereunder does not mention, or invoke any
of the terms as defined by, the Stafford Act. See CARES Act, § 1102, 134 Stat. 281,
286-94. Nor do any of the PPP’s rules or regulations cite to or mention the Stafford
Act.2 Thus, it strains credulity to find that PPP loans are somehow benefits
“authorized, transported, transmitted, transferred, disbursed, or paid in connection
with” a major disaster or emergency declaration under the Stafford Act. The
government attempts to conjure a connection between the Stafford Act and the PPP
where one simply does not exist. And, as the government admits, there is no case
law to support the application of U.S.S.G. §2B1.1(b)(12) to PPP loans. See Dkt. No.

2 See 85 Fed. Reg. 20811 (Apr. 15, 2020); 85 Fed. Reg. 20817 (Apr. 15, 2020); 85 Fed. Reg. 21747
(Apr. 20, 2020); 85 Fed. Reg. 23450 (Apr. 28, 2020); 85 Fed. Reg. 23917 (Apr. 30, 2020); 85 Fed.
Reg. 26321 (May 4, 2020); 85 Fed. Reg. 26324 (May 4, 2020); 85 Fed. Reg. 27827 (May 8, 2020);
85 Fed. Reg. 29845 (May 19, 2020); 85 Fed Reg. 29842 (May 19, 2020); 85 Fed. Reg. 29847 (May
19, 2020); 85 Fed. Reg. 30835 (May 21, 2020); 85 Fed. Reg. 31357 (May 26, 2020); 85 Fed. Reg.
33004 (Jun. 1, 2020); 85 Fed. Reg. 33010 (Jun. 1, 2020); 85 Fed. Reg. 35550 (Jun. 11, 2020); 85
Fed Reg. 36308 (Jun. 16, 2020); 85 Fed. Reg. 36717 (Jun. 18, 2020); 85 Fed. Reg. 36997 (Jun. 19,
2020); 85 Fed. Reg. 38301 (Jun. 26, 2020); 85 Fed. Reg. 38304 (Jun. 26, 2020); 85 Fed. Reg.
39066 (Jun. 30, 2020); 85 Fed. Reg. 52883 (Aug. 27, 2020); 85 Fed. Reg. 52881 (Aug. 27, 2020);
85 Fed. Reg. 66214 (Oct. 19, 2020); 86 Fed. Reg. 3692 (Jan. 14, 2021); 86 Fed. Reg. 3712 (Jan.
14, 2021); 86 Fed. Reg. 8283 (Feb. 5, 2021); 86 Fed. Reg. 13149 (Mar. 8, 2021); and 86 Fed. Reg.
15083 (Mar. 22, 2021).
Case 1:22-cr-20290-BB Document 242 Entered on FLSD Docket 05/23/2024 Page 9 of 11

235 at 5 n.1 (noting the government “has found no case in which the application of
U.S.S.G. §2B1.1(b)(12) was directly addressed”).3 The government notes that the
Fourth Circuit—in United States v. Griffin, 2024 WL 1505512 (4th Cir. Apr. 8,
2024) and United States v. Redfern, 2023 WL 2823064 (4th Cir. Apr. 7, 2023)—
upheld, under a harmless error standard, the application of an enhancement to
EIDL benefits (not PPP benefits); the sentencing court expressly declined to apply
this enhancement to conduct under the PPP. That the parties could find so few cases
applying this enhancement even in the context of EIDL is telling. Absent evidence
showing that this enhancement is meant to address the conduct at issue in this case,
and particularly considering “the need to avoid unwarranted sentence disparities”
among similar defendants under 18 U.S.C. § 3553(a)(6), the Court should not strain
to apply this enhancement here.
Furthermore, regarding Sheppard’s conduct under the EIDL program:
Sheppard was acquitted by the jury of all charges associated with any EIDL loan,
notwithstanding the government’s use of unfunded/funded and charged/uncharged
EIDL loans at trial to prove its case. Thus, the government urges the Court to apply

3 Cf. United States v. Golding, 2024 WL 2178962, at *4 (E.D.N.Y May 13, 2024) (applying the §
2B1.1(b)(12) enhancement where the defendant pled guilty to using the personal identifying
information of third-party victims to fraudulently receive state unemployment insurance benefits
that were expanded under federal COVID-19 assistance programs); Jones v. United States, 2023
WL 6541023, at *1 (M.D. Fla. Oct. 6, 2023) (applying the § 2B1.1(b)(12) enhancement for
“conduct involving fraud in relation with a presidentially declared major disaster (the COVID-19
pandemic)”).
Case 1:22-cr-20290-BB Document 242 Entered on FLSD Docket 05/23/2024 Page 10 of 11

a two-level enhancement—that, to be clear, the U.S. Probation Officer does not
include in her recommendation—based on (1) conduct related to a program that is
wholly unconnected to the Stafford Act and (2) conduct for which Sheppard has
been unequivocally acquitted. To apply such an enhancement would contravene
fairness and is unnecessary to crafting a sentence that is sufficient but not greater
than necessary under 18 U.S.C. § 3553. Accordingly, Sheppard respectfully requests
the Court overrule the government’s objection and decline to apply the enhancement
under § 2B1.1(b)(12).

Respectfully submitted,

BLACK SREBNICK
201 South Biscayne Boulevard, Suite 1300
Miami, Florida 33131
Tel. (305) 371-6421

By: /s Howard Srebnick
Howard Srebnick
Florida Bar No. 919063
Email: HSrebnick@RoyBlack.com

O’MELVENY & MYERS

Jeffrey L. Fisher (admitted pro hac vice)

Jason Zarrow (admitted pro hac vice)

NELSON MULLINS
Jayne C. Weintraub
Florida Bar No. 320382
Jonathan Etra
Florida Bar No. 686905
Christopher Cavallo
Florida Bar No. 0092305
Case 1:22-cr-20290-BB Document 242 Entered on FLSD Docket 05/23/2024 Page 11 of 11

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RESPONSE to 235 Objections to Presentence Investigation Report by Eric Dean Sheppard — USA v. SHEPPARD (Dkt. 242)

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