Government’s Memorandum in Aid of Sentencing — United States v. Bischoff (Dkt. 21, E.D. Mich.)

Summary

The government's memorandum in aid of sentencing in United States of America v. Michael Bischoff, Criminal No. 20-20556, in the U.S. District Court for the Eastern District of Michigan, before Hon. Paul D. Borman, filed September 3, 2021 as ECF No. 21. The government states that Bischoff applied for at least nine Paycheck Protection Program loans totaling $931,772.00 on behalf of his companies, that five of them, totaling $593,590.00, were disbursed, that eight applications included false IRS Forms W-3, and that six used another person's personal identifying information. It then sets out the government's sentencing arguments. It is signed by attorneys of the U.S. Attorney's Office and the Department of Justice Criminal Division, including Philip B. Trout and Chad Davis.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Record facts

Full text

Case 2:20-cr-20556-PDB-APP ECF No. 21, PageID.140 Filed 09/03/21 Page 1 of 12




                      UNITED STATES DISTRICT COURT
                      EASTERN DISTRICT OF MICHIGAN
                           SOUTHERN DIVISION


UNITED STATES OF AMERICA                       CRIMINAL NO. 20-20556

v.
                                               Hon. Paul D. Borman
MICHAEL BISCHOFF,

                  Defendant.

_________________________________/


        GOVERNMENT’S MEMORANDUM IN AID OF SENTENCING

The “Paycheck Protection Program” (PPP) is a program administered by the Small

Business Administration (SBA) and designed to help employers keep workers on the

payroll during the economic downturn brought about by the COVID-19 pandemic.

In the early days of the crisis, Michael Bischoff (Bischoff) illegally applied for at

least nine PPP loans, totaling $931,772.00, on behalf of his companies from several

banks participating in the program. The funds for five of the nine PPP loans, totaling

$593,590.00, were disbursed to Bischoff. Additionally, in eight of the nine PPP loan

applications, Bischoff submitted false and fraudulent Internal Revenue Service (IRS)

Forms W-3 to secure approval of the loans. Furthermore, in six of the nine PPP loan

applications, Bischoff fraudulently used another person’s personal identifying

                                          1

Case 2:20-cr-20556-PDB-APP ECF No. 21, PageID.141 Filed 09/03/21 Page 2 of 12




information to secure approval of the loans. Bischoff’s criminal conduct was both

brazen and serious. The PPP program has served as a critical source of support for

struggling businesses during an unprecedented global crisis. Fraud of this sort

imposes real costs on lenders and the government and undermines public confidence

in the integrity of the program. The United States recommends the court impose a

sentence of 41 months imprisonment, which is at the bottom of the advisory

guideline range calculated by the probation department for this offender.




                                         2

Case 2:20-cr-20556-PDB-APP ECF No. 21, PageID.142 Filed 09/03/21 Page 3 of 12



               FACTUAL AND PROCEDURAL BACKGROUND

       Enacted on March 27, 2020, as a part of the Coronavirus Aid, Relief, and

Economic Security (CARES) Act, the PPP is designed to provide a direct incentive

for small businesses to keep their workers on the payroll during the pandemic. The

PPP enables businesses to obtain forgivable loans from participating financial

institutions. The SBA will forgive the loans if all employees are kept on the payroll

for a certain period of time and the proceeds of the loans are used for payroll, rent,

mortgage interest, or utilities. PPP funds were designed as a lifeline.

      The program was designed to provide funds quickly and easily to qualifying

individuals. PPP loans were not dispensed through any government bureaucracy;

funds were distributed by banks who often had existing relationships with many of

the people in need. To apply for a PPP loan, individuals submitted an application to

a participating financial institution along with supporting documentation as to the

business’s payroll expenses.     The supporting documentation requirement was

minimal and could be satisfied with one year’s worth of company tax records. If a

PPP loan application was approved, the participating financial institution funded the

PPP loan using its own monies, which were 100% guaranteed by the SBA.

      Bischoff was the self-reported owner and/or registered agent of Little Dino’s

Pizza Express, Inc. (doing business as Little Dino’s Pizza), Passport Pizza, Motor

City Pizza, Group 1 Enterprises Inc., Marvel Media LLC, D-Brands Inc., MJR

Financial Group LTD, MJR Food Group Inc., and Group MJR Inc. (collectively, the

Case 2:20-cr-20556-PDB-APP ECF No. 21, PageID.143 Filed 09/03/21 Page 4 of 12



“Bischoff Entities”), which are asserted to be registered in the State of Michigan and

located in Macomb County within the Eastern District of Michigan

      Between approximately June 4, 2020, and August 2, 2020, Bischoff submitted

at least nine false and fraudulent PPP loan applications, totaling $931,772, on behalf

of the Bischoff Entities (collectively, the “PPP Loans”). The PPP Loans are listed in

the following table by loan date, the funding financial institution or processing

company and loan amount.

No. Loan Date                 Funding Financial Loan Amount
                              Institution or
                              Processor

 1    June 4, 2020            Lender A               $50,000

 2    June 6, 2020            Bank B                 $134,165.00
 3    June 18, 2020           Bank A                 $90,410.00
 4    June 19, 2020           Bank A                 $112,470.00
 5    June 20, 2020           Bank A                 $119,791.00
 6    June 24, 2020           Bank A                 $136,654.00
 7    July 15, 2020           Bank Processor A       $75,436.00
 8    July 24, 2020           Bank Processor A       $89,477.00
 9    August 2, 2020          Bank Processor A       $123,369.00


      Banks A and B are insured by the Federal Deposit Insurance Corporation,

while Lender A is a nonbank small business investment lender.

      In each of the applications for the PPP Loans, Bischoff falsely represented the

amount of payroll and the number of employees working for the Bischoff Entities.

To secure approval of eight of the PPP Loans, Bischoff submitted false and

fraudulent Internal Revenue Service (IRS) Forms W-3. In addition, to secure
                                          4

Case 2:20-cr-20556-PDB-APP ECF No. 21, PageID.144 Filed 09/03/21 Page 5 of 12



approval for six of the PPP Loans, Bischoff fraudulently used another person’s

personal identifying information. Bischoff also wrongly certified that the funds

obtained through the PPP Loans would be used for qualified expenses. Bischoff

submitted these false statements in his applications as part of a scheme to defraud

the lending banks and the PPP, and he did so with the intent to defraud. As a result

of Bischoff’s fraud, the funding financial institutions or processing company for the

PPP Loans paid five of the loans to accounts controlled by Bischoff.

      Bischoff was charged via an information on November 12, 2020, charging

Bischoff with one count of bank fraud in violation of 18 U.S.C. § 1344(2). Bischoff

entered a plea to the offense on November 23, 2020, pursuant to a Rule 11 Plea

Agreement.

                              GUIDELINE CALCULATION

      Per the plea agreement in this case, the parties agree that defendant Bischoff

should receive a three-point reduction for Acceptance of Responsibility pursuant to

Section 3E1.1 of the United States Sentencing Guidelines (USSG). The probation

department calculated a Guideline range of 41 months to 51 months, based on a Total

Offense Level of 20 and a total of six criminal history points, which yields a Criminal

History Category of III. The government agrees with that calculation. With a Base

Offense Level of 20 and a Criminal History Category of III, his properly calculated

guideline range is 41-51 months imprisonment.


                                          5

Case 2:20-cr-20556-PDB-APP ECF No. 21, PageID.145 Filed 09/03/21 Page 6 of 12



      Bischoff does not object to the calculation of his Base Offense Level of 20.

However, he does dispute the calculation of criminal history points. He first argues

that he should not be assessed three points pursuant to USSG § 4A1.1 for his 1997

conviction by jury for conspiracy to commit wire fraud and bank fraud, wire fraud,

and bank fraud, because “the conviction for that offense (08/28/1997) was not more

than 15 years before (June to August 2020 and August 5, 2004).” PSR at A-2.

      However, as the probation department correctly responded, pursuant to USSG

§4A1.2(k)(2)(A), Bischoff was last released from his sentence within the past 15

years. PSR at A-2. For the purpose of determining the applicable time period, in

the case of an adult term of imprisonment totaling more than one year and one

month, the date of last release from incarceration on such sentence is used. Bischoff

was sentenced on August 28, 1997 to 30 months custody and was released from

custody to supervised release on June 18, 1999. Yet on August 5, 2004, Bischoff

was returned to custody for 24 months due to a violation of supervised release.

Because Bischoff was not released from custody until June 27, 2006, which is within

the applicable 15-year time period, the probation department accurately assessed

three points for his 1997 fraud conviction.

      Bischoff next claims that he should not be assessed three levels pursuant to

USSG § 4A1.1(a) for his 2004 conviction of false statement on a bank credit

application “because it involves double convicting.” PSR at A-2. In the alternative,


                                          6

Case 2:20-cr-20556-PDB-APP ECF No. 21, PageID.146 Filed 09/03/21 Page 7 of 12



Bischoff “suggests the process of inclusion for the supervised release violation and

the instant offense results in double counting.” Id.

      Bischoff is incorrect for the reasons the probation department explains in the

PSR. See PSR at A-2-3. On September 27, 2004, Bischoff was sentenced to 18

months custody. This charge was a violation of supervised release under docket

number 95CR80889. However, the revocation alone did not apply to

multiple/similar sentencing dates. Therefore, these sentences are separate in that the

offenses were separated by intervening arrests and the sentences were not imposed

on the same date. Thus, the probation department did not improperly double count

Bischoff’s convictions. Additionally, Bischoff was designated to Morgantown FCI

on October 1, 2004 and transferred to a residential reentry center (RRC) on

December 30, 2005, which is within the applicable 15-year time period.

          SENTENCING FACTORS UNDER 18 U.S.C. § 3553(a)

   Section 3553(a) of the United States Code sets forth a number of factors for the

Court to consider in imposing sentence. These factors include the nature and

circumstances of the offense, the history and characteristics of the offender,

considerations of both specific and general deterrence, and the need to provide just

punishment for the offense and promote respect for the rule of law. The government

respectfully submits the following observations on those factors and their

applicability to the conduct and defendant in the instant case.


                                          7

Case 2:20-cr-20556-PDB-APP ECF No. 21, PageID.147 Filed 09/03/21 Page 8 of 12



      The nature and circumstances of the offenses here are quite serious. The

defendant’s fraud was blatant, egregious, and involved a substantial amount of

money. Moreover, Bischoff’s crimes were calculated ones, and were hardly the

product of a momentary lapse in judgment. Bischoff repeatedly submitted multiple

applications for PPP loans despite knowing that he was not eligible for them. He

proceeded to fill out nine applications for forgivable loans in the total amount of

$931,772.00, falsely representing the number of individuals these businesses

employed and the monthly payroll they incurred, and he submitted false documents

to support his applications. There is no ambiguity concerning these representations

– they were flagrant lies. Such repeated false and fraudulent conduct reflects

Bischoff’s calculated willingness to lie for money, his greed, and his complete lack

of concern about defrauding a program designed to help struggling small businesses

during a national crisis. Bischoff’s crimes were significant ones.

      The history and characteristics of the defendant present a picture of a recidivist

criminal who continually deceives others for his own financial gain. The PSR

reflects the defendant’s fairly stable home life, and how Bischoff has worked for

decades in the pizza franchise industry but has repeatedly used his pizza businesses

to further his criminal schemes.

      The defendant’s criminal history is troubling. He was convicted at trial in 1997

of conspiracy to commit wire fraud and bank fraud, 12 counts of wire fraud, and six

counts of bank fraud in the Eastern District of Michigan. PSR ¶ 32. The defendant
                                          8

Case 2:20-cr-20556-PDB-APP ECF No. 21, PageID.148 Filed 09/03/21 Page 9 of 12



and his then-wife engaged in a kiting scheme, which involved hundreds of fraudulent

wire transfers worth $20 million related to their chain of pizza franchises under the

name Pizza One. Bischoff was sentenced to 30 months imprisonment, five years

supervised release, and ordered to pay $668,104 in restitution. Id. While on

supervised release, Bischoff engaged in another fraud scheme in 2002 that involved

mortgage and automobile loans. Id.

      In 2004, Bischoff was charged with three counts of false statements in a credit

application. PSR ¶ 33. As the PSR describes, the defendant obtained a series of credit

lines based on false information regarding his employment and income. Id. He

defrauded the credit card companies between 1999 and 2003 by making charges

through the merchant accounts at three Pizza N’ More franchises he owned with his

wife. In 2004, the defendant pleaded guilty to one count of false statements in a

credit application.   He was sentenced to 18 months imprisonment, five years

supervised release, and then sentenced to an additional 24 months imprisonment for

violating the terms of his supervised release on his 1997 conviction. Id.

      There is a clear pattern here. Bischoff defrauds others through false

representations in order to obtain funds to which he is not qualified. And he

frequently exploits his various pizza chain businesses to defraud others and enrich

himself.

      Importantly, and to his credit, Bischoff has already paid full restitution in the

instant case. Within seven business days of signing the plea agreement, Bischoff
                                          9

Case 2:20-cr-20556-PDB-APP ECF No. 21, PageID.149 Filed 09/03/21 Page 10 of 12



made a payment of $593,590.00 to the Clerk of the Court. PSR ¶ 60. This stands in

contrast to his prior convictions, in which he failed to pay full restitution, and was

reported to have purposely failed to accurately report his finances in an attempt to

avoid payment of restitution. PSR ¶ 32.

      With respect to deterrence, the government submits that there is significant

need for both specific deterrence and general deterrence with respect to this offense

and this offender. As noted above, the instant case is the fourth different fraudulent

scheme that Bischoff has participated in, and the substantial sentences he received

on his prior convictions failed to deter his misconduct in this case. A sentence

involving a reasonable period of incarceration would hopefully dissuade Bischoff

from engaging in any such fraud in the future.

      Additionally, general deterrence is a relevant consideration in imposing a

sentence in this matter. Fraud in the PPP is a serious problem in both this district

and nationally. The SBA Office of Inspector General recently conducted an analysis

that identified some $4.6 billion in potentially fraudulent PPP loans. Few defendants

have been sentenced in this district for PPP fraud, and a sentence in line with the

government’s recommendation would send the laudable message that this sort of

fraud is taken seriously by the courts and will yield significant penal consequences.

      Finally, the government submits that a sentence of 41 months would provide

just punishment for the offense and promote respect of the rule of law. The PPP has

been a critical lifeline for a number of small businesses during an unprecedented
                                          10

Case 2:20-cr-20556-PDB-APP ECF No. 21, PageID.150 Filed 09/03/21 Page 11 of 12



national crisis. Fraud on this program obviously harms lenders and may affect their

willingness to participate in the program; additionally, it undermines public

confidence in the viability of such programs and the ability of public programs to

assist those in need. A defendant willing to take advantage of a program designed

and intended to help keep our economy afloat during a pandemic is richly deserving

of a serious punishment. A sentence of 41 months of incarceration would provide the

defendant with an appropriately significant penalty and would promote respect for

the law in this jurisdiction and nationally.

           In conclusion, the government respectfully maintains that a sentence of

41 months would appropriately balance the relevant statutory factors at issue in this

sentencing. Such a sentence would also adequately account for the seriousness of

the offense, promote respect for the law, and deter both Bischoff and others from

engaging in similar criminal conduct. The government therefore recommends a

sentence be imposed at this level.




                                           11

Case 2:20-cr-20556-PDB-APP ECF No. 21, PageID.151 Filed 09/03/21 Page 12 of 12




 SAIMA SHAFIQ MOHSIN                    JOSEPH BEEMSTERBOER
 Acting United States Attorney          Acting Chief
 Eastern District of Michigan           Fraud Section, Criminal Division
                                        United States Department of Justice



 /s/John K. Neal                        /s/ Philip B. Trout
 JOHN K. NEAL                           PHILIP B. TROUT
 Chief, White Collar Crime Unit         Trial Attorney
 Assistant United States Attorney
 Eastern District of Michigan

 DEBORAH L. CONNOR
 Chief
 Money Laundering and Asset Recovery
 Section, Criminal Division
 United States Department of Justice


 /s/ Chad Davis
 CHAD DAVIS
 Trial Attorney




                                       12

File and source

File

gov.uscourts.mied.350647.21.0.pdf

Size

187,652 bytes

SHA-256

4a2fc5761c00fa366393293d4a087001402129611387c85439854ff249af85ce

Our copy

gov.uscourts.mied.350647.21.0.pdf

Original

archive.org