Court filing
Government's Memorandum in Support of Continued Detention — United States v. Francesco Distefano
No. 1:24-cr-00424 · Doc. 45 · Docket on CourtListener
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Case: 1:24-cr-00424 Document #: 45 Filed: 12/12/24 Page 1 of 14 PageID #:225
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UNITED STATES OF AMERICA
Case No. 24 CR 424
v.
Honorable Jeffrey Cole
FRANCESCO DISTEFANO
GOVERNMENT’S MEMORANDUM IN SUPPORT
OF CONTINUED DETENTION OF DEFENDANT
This memorandum is submitted in support of the government’s position that
defendant continue in pretrial detention pending resolution of the Second
Superseding Indictment that charges defendant with 11 counts of wire fraud in
violation of 18 U.S.C. § 1343, 5 counts of money laundering in violation of 18 U.S.C.
§ 1957(a), and 1 count of making a false statement to a financial institution in
violation of 18 U.S.C. § 1014. Defendant has been detained since September 11,
2024, when he was arrested at O’Hare Airport on an arrest warrant issued in
connection with the original indictment, which charged defendant with a single
count of making a false statement to a financial institution. The government moved
for a detention hearing under 18 U.S.C. § 3142(f)(2) following that arrest, outlining
at defendant’s initial appearance some of its proffered evidence as to defendant’s
serious risk of flight and the serious risk that he will obstruct or will attempt to
obstruct justice if he is not detained pending trial. A detention hearing was
scheduled for September 17, 2024. Prior to that hearing, defendant, through his
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counsel, withdrew his objection to detention. Defendant now seeks pretrial release,
and a hearing has been set for December 13, 2024, at 1:30 p.m.
For the reasons described below, which will be expanded upon at the
upcoming hearing, the government submits that defendant poses a serious risk of
flight and that no condition or combination of conditions will reasonably assure his
appearance.
I. LEGAL STANDARD
Detention prior to trial is appropriate if the Court finds that there is no
condition or combination of conditions that will both assure the appearance of the
person as required and assure the safety of any other person and the community. 18
U.S.C. § 3142(e)(1). In making its detention determination, the Court may consider
factors including the nature and circumstances of the offense charged, the weight of
the evidence against the defendant, and the history and characteristics of the
defendant. 18 U.S.C. § 3142(g). If, after a detention hearing, the Court finds that
“no condition or combination of conditions will reasonably assure the appearance of
the person as required and the safety of any other person and the community, [the
Court] shall order the detention of the person before trial.” 18 U.S.C. § 3142(e)(1).
With respect to risk of non-appearance, the government bears the burden of proof
by a preponderance of the evidence. United States v. Portes, 786 F.2d 758, 765 (7th
Cir. 1985); United States v. Daniels, 772 F.2d 382, 383 (7th Cir. 1985).
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II. NATURE AND CIRCUMSTANCES OF THE OFFENSE
Defendant is charged with 11 counts of wire fraud, five counts of money
laundering, and one count of making a false statement to a financial institution.
These charges arise from and relate to defendant’s conduct in filing fraudulent
Paycheck Protection Program (“PPP”), Economic Injury Disaster Loan (“EIDL”), and
mortgage loan applications between March 2020 and February 2021. Defendant
engaged in two charged schemes that fraudulently obtained approximately
$3,330,947 in PPP and EIDL funds, and would have obtained an additional
$3,458,696 in fraudulent second draw PPP loans, but for the intervention of law
enforcement in February of 2021.
III. THE STRENGTH OF THE EVIDENCE
The evidence in this case is strong. The defendant submitted fraudulent loan
applications accompanied by fraudulent tax returns and fraudulent ADP records for
his own company (Distefano Enterprises), as well as his co-defendant’s two
companies using his own name, his own name and his own email account, and he
did so from an unmasked IP addresses at his parents’ house (while he lived there)
and later his own home, in Addison, Illinois. Defendant caused a substantial portion
of the funds derived from the charged offenses to be deposited into his own personal
bank account where he used them for, among other things, exotic motor vehicles.
When law enforcement approached and interviewed defendant concerning the
suspected fraud on February 13, 2021, he repeated the lies from Distefano
Enterprises PPP application, telling agents that the entity had 14 employees and
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$79,166 in monthly payroll, when, in reality, it had no employees and was just the
defendant with occasional help from individuals paid under the table as contractors.
IV. NATURE AND CHARACTERISTICS OF THE DEFENDANT
Defendant’s Background
At the time of the charged offenses, defendant was 24 years-old and working
in the payments processing industry through his Distefano Enterprises entity. At
the time the charged scheme began, defendant resided in his parents’ home in
Addison, Illinois. During the course of the charged scheme, defendant moved out of
his parents’ house and into his own home (the “8TH Avenue Property”), also in
Addison, Illinois. In December 2023, defendant was convicted of nonconsensual
dissemination of a sex image, a fourth-degree felony, and he is presently on
probation. See People of the State of Illinois v. Francesco Distefano, No.
22CR0622401 (Cook County Circuit Court).
Defendant was born in Illinois on March 24, 1996. Defendant is now a dual
citizen of the United States and Italy. 1 In June and August of 2021, defendant was
issued passports by the United States and Italy, respectively. The United States
passport indicates that it was issued to replace a lost or stolen passport.
1 The government does not know exactly when defendant obtained Italian citizenship. The
government has been provided an image of a text message sent on or around August 2,
2021, that the recipient attributes to defendant that shows a picture of what appears to be
an Italian citizenship document containing defendant’s name, followed by the statement “no
more usa [sic] buddy”.
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Ties to the Community
In the 15 months preceding defendant’s arrest, he steadily reduced his ties to
the community.
On or about May 22, 2023, defendant caused Distefano Enterprises to
purchase a 2017 Maserati Levante, paying $33,473 for the vehicle by a cashier’s
check in the amount of $35,000. On or around July 16, 2024, according to a public
records database, title to the 2017 Maserati Levante was transferred from Distefano
Enterprises to Relative A.
On or about June 29, 2023, X1 Merchant Services LLC was formed in
Delaware, with an individual who has performed handyman services for defendant
as its sole member. The following day, June 30, 2023, the entity opened a bank
account with its member and defendant as the two designated signers on the
account. According to its website, X1 offers payment processing solutions to
customers, a business very similar to the business of Distefano Enterprises.
On or around August 2, 2023, Relative A entered into a purchase agreement
to acquire a 2017 Lamborghini Huracan coupe, in the exterior color of orange, for a
sale price before taxes and fees of $230,000. The vehicle was paid for several days
later through a $20,000 trade-in allowance for a 2013 Maserati GranTurismo coupe
(that, according to public records, was previously titled to Distefano Enterprises), a
$60,000 cashier’s check, and a $167,400.97 loan from Credit Union A. While the
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loan from Credit Union A is in Relative A’s name alone, defendant’s email address
appears on the application. The Lamborghini is titled to Relative A.
On or around August 23, 2023, defendant executed a quitclaim deed
transferring the 8TH Avenue Property to Relative B. Defendant continued to reside
at the residence after the transfer of title. Defendant had purchased the home in or
around June of 2020, and had held title in his own name before transferring title to
Relative B.
On or about November 21, 2023, a 2023 Mercedes G-Class was purchased in
Relative A’s name. The purchase price for the vehicle, inclusive of taxes and fees,
was $242,527.40, of which $201,527.40 was financed for a 72-month term. While the
loan and title for the vehicle are in Relative A’s name, defendant’s email address
and phone number appear on the retail installment sale contract.
In February 2024, four different lien releases were filed with the DuPage
County Recorder effecting the release of liens that had been filed against the 8TH
Avenue Property. Each of the releases states that it was prepared by Distefano
Enterprises. Each release purports to be signed by the same individual who signed
the original lien claim to which it pertains. Each signature appears above
defendant’s notary stamp and apparent signature. From interviews with
representatives of the four lien claimants, the government understands that none of
the claimants have been paid, and none authorized or caused the release of their
lien to be filed. The fraudulently released liens are:
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Lien Release Claim
Claimant Recorded Recorded Amount Basis for Claim
Contractor A 11/4/2020 2/7/2024 $26,995 Windows and door
Contractor B 1/15/2021 2/7/2024 $14,595 Roof and downspout
Contractor C 1/26/2024 2/8/2024 $3,000 Floor refinishing
Contractor D 2/8/2024 2/15/2024 $3,522.50 Duct sealing
In August 2024, the government received information indicating that
Relative A had been shopping for shipping containers to ship cars and furniture to
Italy. While defendant did not at that time have any vehicles titled in his own he
possessed and enjoyed the use of the Orange Lamborghini, a Porsche Teycan, and
the Mercedes G-Class, as if they were his own and not Relative A’s.
Defendant’s recently diminishing ties to the community, and the brazenness
of the lien release fraud committed in February 2024, suggests that defendant has
plans to relocate.
Financial Resources
The government does not have high confidence that it currently knows of all
defendant’s accounts, and its visibility into defendant’s known accounts is not real
time, however, based on personal and business account balances in the 12 months
preceding defendant’s arrest, the government expects defendant likely has
immediate access to tens of thousands of dollars. Defendant also has future income
streams in the form of residual payments that he receives from the processing
charges from his business’s payments customers.
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Capacity for Flight
The government is now in possession of defendant’s U.S. and Italian
passports. But there is an unaccounted-for U.S. passport that defendant reported
lost or stolen in May 2021, and his Italian citizenship enables him to get a new
passport by visiting an Italian embassy or consulate in the United States, Mexico,
Canada, or beyond. And there is of course no requirement that defendant take flight
to a foreign country in order to not appear; defendant could try to hide in the United
States rather than face what could be a substantial custodial sentence for the
charged conduct.
Past Conduct
Defendant’s past conduct demonstrates that he is willing to engage in
unlawful conduct even when he knows he is under a microscope, which strongly
suggests that he will not comply with any conditions of release. The nature of
defendant’s past obstructive acts also speaks to his capacity to produce or procure
fake documents to assist flight.
Defendant has been aware that he is under investigation for loan fraud since
at least February 13, 2021, when agents visited his house and interviewed him by
telephone. This knowledge did not dissuade him from continuing to engage in fraud.
On April 28, 2021, FBI issued a Notice of Seizure and Initiation of
Administrative Forfeiture Proceedings against the $677,932.25 seized from
defendant’s bank account, and four luxury vehicles that are now the subjects of
forfeiture allegations in the pending indictment and in a separate civil forfeiture
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proceeding. See USA v. 2016 Lamborghini Huracan VIN:ZHWUC2ZF1GLA04413,
et al, No. 22-cv-01684 (N.D. IL). On or around May 3, 2022, defendant submitted a
petition for remission or mitigation of forfeiture to the FBI Chicago field office,
seeking return of the $677,932.25 seized from his bank account. In the petition,
defendant represented that the funds in the account were “for work that he
legitimately performed.” Defendant contended that even if the funds originated
from fraudulent PPP/EIDL loans obtained by West Coast and National, those
entities owed him the funds that were transferred into his account for debts that
were evidenced by invoices attached to the petition. The petition was electronically
signed by defendant under penalty of perjury. The petition attached four undated
purported invoices totaling $1,010,000 issued to purported customers, care of West
Coast or National. Law enforcement has interviewed the purported customers
referenced in the invoices, and they neither contracted for, nor received, the goods
and services described in the invoices. The documents were simply fabrications, and
defendant submitted those to the FBI in an attempt to obstruct the investigation
that he knew was ongoing and recover the scheme proceeds that had been seized.
On or around August 28, 2023, a restaurant industry consultant who had
previously referred a customer to defendant, sent a group text message to defendant
and the (by then, former) customer with a link to a news article about Covid fraud
and a follow-on text asking: “Are they still coming after you Francesco?” Defendant
responded in the negative, sending what appears to be a letter from the U.S.
Attorney for the District of Columbia that purports to clear defendant of all
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wrongdoing, informs that the 2020 Vehicles will be returned “instanter,” and states
that the United States has “accepted wrongdoing” and will be paying defendant
$15,000,000. Defendant followed the picture of a letter with an instruction “read
and weep boys” and then followed that with the below picture of an orange
Lamborghini.
Defendant’s Conduct While on Probation
As noted above, defendant was convicted of a revenge porn offense in
December 2023 and was sentenced to 18 months of probation. The sentencing order
provides that defendant shall not violate the criminal statutes of any jurisdiction,
and specifies that “defendant allowed to travel for work.” The face of the order itself
is ambiguous about whether defendant is permitted to travel generally (i.e., not for
work).
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The government has spoken with the probation officers in both Cook and
DuPage Counties (the defendant’s probation is based in Cook County but he reports
to an officer in DuPage County), and is informed that defendant is not permitted to
travel without first clearing the travel with his probation officer. If defendant wants
to travel for work, he must ask permission from the DuPage County Probation
Officer and supply documentation evidencing the planned travel before the officer
approves the travel. The defendant has sought and been granted such permission
previously, demonstrating that he is aware of the requirement. The government
understands that the defendant must seek court approval if he wishes to travel for
matters other than work.
The defendant spent most of the month of June outside of the United States,
flying from New York to Rome on June 1, 2024, and returning to Chicago from
Munich on June 29, 2024. The government understands that defendant did not
request permission from the Cook County Circuit Court to make this trip, nor did
he request approval from his DuPage County Probation Officer. Defendant met by
video with his DuPage County Probation Officer on June 20, 2024, and apparently
did not inform the officer that he was out of the country during their video meeting.
The DuPage County Officer informs that defendant did not request permission to
travel to Istanbul, Turkey on September 11, 2024, which is where he was headed at
the time of his arrest.
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Defendant’s non-compliance with the conditions of his current probation,
through his involvement in the fraudulent lien releases and unauthorized travel,
suggest that defendant is unlikely to abide any conditions of pretrial release.
Defendant’s Conduct While Detained
Since his detention on September 11, 2024, defendant has engaged in at least
two notable episodes of dishonest behavior. First, in the early days of his detention,
defendant falsely accused one of the case agents working on this investigation of
visiting him on multiple occasions at the Jerome Combs Detention Center to try and
speak with him outside of the presence of his attorneys. The agent did not even visit
the building on the days that defendant claimed these encounters occurred.
Defendant’s accusations were entirely false. And while the false accusations against
the case agent were quickly dropped, the fact that defendant leveled the accusations
in the first place illustrates the extents to which defendant is willing to go in an
attempt to achieve his aims.
More recently, after defendant had spent approximately 40 days in detention,
he claimed to have a serious, pre-existing eye condition that, left untreated, would
result in him losing sight in the affected eye within a week. He claimed to have
submitted medical requests to the Jerome Combs facility that went unheeded and
further alleged that he was threatened with a write-up if he continued to submit
requests for medical attention. Defendant went on to assert that he traveling to
Istanbul on September 11, 2024, so that he could have eye surgery in Turkey on
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September 17, 2024. 2 When the government investigated the claimed lack of
medical attention, serious contradictions in defendant’s claims quickly emerged.
First, the facility had no record of any medical requests from defendant. 3 Next,
when the facility attempted to obtain the purportedly existent medical records so
that treatment for the condition could be arranged, defendant told medical staff
that the undersigned AUSA possessed his medical records (which was not true), and
then provided the name of his purportedly treating doctor, who, as it turns out,
retired 8 years. The only records the facility’s medical staff have been able to obtain
regarding defendant’s eyes are records from his visits to LensCrafters in March
2023 and March 2024.
2 Notably, defendant provided a different reason for the travel to Turkey in his interview
with Pretrial Services, as set forth in the report.
3 Defendant had made three non-medical requests as of October 22, 2024, demonstrating
his awareness of the process for submitting requests.
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V. CONCLUSION
The government respectfully submits that no condition or combination of
conditions will reasonably assure defendant’s appearance. Defendant should be
detained pending trial.
Respectfully submitted,
MORRIS PASQUAL
Acting United States Attorney
By: /s/ Jeffrey S. Snell
Jeffrey S. Snell
Assistant United States Attorney
United States Attorney=s Office
219 South Dearborn Street
Chicago, Illinois 60604
(312) 469-6308
Dated: December 12, 2024
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