Government’s Combined (1) Response to the Presentence Investigation Report and (2) Sentencing Position — United States v. Kanyike (Dkt. 60, C.D. Cal.)

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The government's combined response to the presentence investigation report and sentencing position in United States v. Hassan Kanyike, Case No. CR 21-00081-VAP, in the U.S. District Court for the Central District of California, filed September 7, 2021, ahead of a sentencing date of Sept. 27, 2021. It is filed by the Acting United States Attorney through Assistant United States Attorney Richard E. Robinson and by the Fraud Section of the Department of Justice Criminal Division. The filing closes by asking the Court to impose a three year term of supervised release with the conditions recommended by the Probation Officer, to order restitution totaling $1,302,500 to the SBA and four other victim lenders as detailed in the PSR, and to impose a substantial fine and a $100 special assessment.

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Case 2:21-cr-00081-VAP Document 60 Filed 09/07/21 Page 1 of 10 Page ID #:361



 1   TRACY L. WILKISON
     Acting United States Attorney
 2   SCOTT M. GARRINGER
     Assistant United States Attorney
 3   Chief, Criminal Division
     RICHARD E. ROBINSON (Cal. Bar No. 090840)
 4   Assistant United States Attorney
     Major Frauds Section
 5        1100 United States Courthouse
          312 North Spring Street
 6        Los Angeles, California 90012
          Telephone: (213) 894-0713
 7        Facsimile: (213) 894-6269
          E-mail:    Richard.Robinson@usdoj.gov
 8
     JOSEPH BEEMSTERBOER
 9   Acting Chief, Fraud Section
     WILLIAM E. JOHNSTON (D.C. Bar No. 1030662)
10   Assistant Chief, Fraud Section
     Criminal Division
11   United States Department of Justice
        1400 New York Avenue, NW
12      Washington, DC 20005
        Phone: (202)514-0687
13      Email: William.johnston4@usdoj.gov

14

15   Attorneys for Plaintiff
     UNITED STATES OF AMERICA
16
                             UNITED STATES DISTRICT COURT
17
                      FOR THE CENTRAL DISTRICT OF CALIFORNIA
18

19   UNITED STATES OF AMERICA,               Case No. CR 21-00081-VAP

20              Plaintiff,                   GOVERNMENT’S COMBINED (1) RESPONSE
                                             TO THE PRESENTENCE INVESTIGATION
21                    v.                     REPORT AND (2) SENTENCING POSITION

22   HASSAN KANYIKE,                         Sentencing Date:     Sept. 27, 2021
                                             Time: 9:00 a.m.
23              Defendant.

24

25

26        Plaintiff United States of America, through its counsel of

27   record, the Acting United States Attorney for the Central District

28   of California and Assistant United States Attorney Richard E.

     Case 2:21-cr-00081-VAP Document 60 Filed 09/07/21 Page 2 of 10 Page ID #:362



 1   Robinson, and the Fraud Section of the Criminal Division of the U.S.

 2   Department of Justice, hereby files its Combined (1) Response to the

 3   Presentence Investigation Report and (2) Sentencing Position with

 4   respect to defendant HASSAN KANYIKE (“defendant”).

 5        The government’s response to the Presentence Investigation

 6   Report and its Sentencing Position are based on the attached

 7   memorandum, the Plea Agreement between defendant and the government,

 8   the other files and record in this case, and such further evidence

 9   and argument as the Court may permit.

10   Dated: September 7, 2021           Respectfully submitted,

11
                                        TRACY L. WILKISON
12                                      Acting United States Attorney
13                                      SCOTT M. GARRINGER
                                        Assistant United States Attorney
14                                      Chief, Criminal Division
15
                                          /s/Richard E. Robinson
16                                      RICHARD E. ROBINSON
                                        Assistant United States Attorney
17                                      Major Frauds Section
18                                      WILLIAM E. JOHNSTON
                                        Assistant Chief, Fraud Section
19                                      United States Department of Justice
20

21

22

23

24

25

26

27

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     Case 2:21-cr-00081-VAP Document 60 Filed 09/07/21 Page 3 of 10 Page ID #:363



 1                              SENTENCING MEMORANDUM

 2   I.   INTRODUCTION

 3        Defendant Hassan Kanyike faces sentencing by the Court

 4   following his guilty plea to one count of wire fraud, in violation

 5   of 18 U.S.C. § 1343, as charged in the information.           ECF 42, 51.

 6   Defendant pleaded guilty pursuant to his plea agreement with the

 7   government dated February 22, 2021 (the “Plea Agreement”).            ECF 44.

 8   Defendant’s offense conduct arises from his scheme to defraud the

 9   Small Business Administration (“SBA”), banks, and other lenders

10   participating in the CARES Act Paycheck Protection Program (“PPP”)

11   and the SBA’s Economic Injury Disaster Loan (“EIDL”) program

12   (“lenders”).

13        To carry out his scheme, defendant submitted eight false and

14   fraudulent applications seeking more than $1.775 million in EIDL and

15   PPP loans for his businesses, Falcon Motors and HK Development.1               The

16   loan proceeds were supposed to be used to retain workers, maintain

17   payroll, make lease and utility expenses, and pay other permitted

18   expenses for Falcon Motors and HK Development because defendant’s

19   businesses were purportedly experiencing substantial financial

20   disruption due to the COVID-19 pandemic.         Defendant’s bogus loan

21   applications misrepresented and inflated the total revenue, costs of

22   goods sold, number of employees and payroll for his businesses,

23   which defendant supported by submitting fake payroll tax records,

24   payroll registers, and bank records.        Defendant secured three EINs

25   from the IRS to facilitate obtaining multiple PPP loans for the same

26

27        1 Defendant submitted his bogus loan applications to the SBA and
     six participating PPP lenders, two of which lenders declined the
28   applications.

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     Case 2:21-cr-00081-VAP Document 60 Filed 09/07/21 Page 4 of 10 Page ID #:364



 1   Falcon Motors business.      Defendant fraudulently obtained more than

 2   $1.3 million in EIDL and PPP loan proceeds from the SBA and four

 3   other victim lenders.     Instead of using loan proceeds for their

 4   stated and authorized purposes, defendant used proceeds for his own

 5   personal benefit, including wire transferring $762,000 offshore, to

 6   a bank account in his home country of Uganda for the benefit of an

 7   entity in the name of defendant’s father.

 8         For the reasons discussed below, the government recommends that

 9   the Court sentence defendant to a term of 33 months’ imprisonment,

10   followed by a three-year term of supervised release, and order

11   defendant to pay: $1,302,550 in restitution to the SBA and four

12   other victim lenders identified in the PSR, a substantial fine, and

13   a special assessment of $100.

14   II.   RESPONSE TO PRESENTENCE INVESTIGATION REPORT

15         With respect to the Presentence Report for defendant issued

16   August 23, 2021 (the “PSR”), the government has no objections or

17   corrections to the PSR’s description of defendant’s offense conduct,

18   offender characteristics, determination that defendant is in

19   criminal history category I, and finding that defendant’s conduct

20   resulted in actual losses to the victim lenders in the total sum of

21   $1,302,550.

22         The PSR concluded that defendant’s total offense level is 24

23   and his advisory guideline imprisonment range is 51 to 63 months.

24   PSR ¶¶ 61, 113.    The government, consistent with its obligations

25   under the Plea Agreement and as calculated in Section III below,

26   maintains that defendant’s total offense level is 20 and his

27   imprisonment range is 33 to 41 months.        This four-level difference

28   arises from the PSR’s applying two special offense characteristics

                                            4

     Case 2:21-cr-00081-VAP Document 60 Filed 09/07/21 Page 5 of 10 Page ID #:365



 1   not supported by the government.       PSR ¶ 114.    Specifically, the PSR

 2   applies +2 levels for use of sophisticated means, pursuant to USSG

 3   §2B1.1(b)(10)(C); and +2 levels for deriving more than $1 million in

 4   gross receipts from one or more financial institutions, pursuant to

 5   USSG §2B1.1(b)(17)(A).      PSR ¶¶ 51, 52.    These two specific offense

 6   characteristics were not included in the Plea Agreement and the

 7   government does not support or suggest imposing them here.            PSR ¶

 8   114; Plea Agreement ¶ 16.

 9         Accordingly, the government objects to the PSR to the extent it

10   provides that defendant’s total offense level is greater than 20 and

11   his advisory guideline imprisonment range is greater than 33 to 41

12   months.

13   III. ADVISORY SENTENCING GUIDELINES

14         The government submits that the following Sentencing Guidelines

15   calculations, as stipulated to by the parties in the Plea Agreement,

16   are applicable to the facts of this case:

17     Base Offense Level:                         7      [USSG §2B1.1(a)(1)]

18     Specific Offense
       Characteristics:
19
        Loss greater than $1,500,000
20      Not more than $3,500,000                 +16      [USSG §2B1.1(b)(1)(I)]
21     Acceptance of Responsibility:              -3      [USSG §3E1.1(a),(b)]
22     Total Offense Level:                       20
23

24         Defendant fraudulently applied for EIDL and PPP loans in the

25   total amount of $1,775,675, which sum represents defendant’s

26   intended fraud loss.     PSR ¶¶ 49, 50; Plea Agreement Exhibit B ¶¶ 27,

27   28.   Because defendant’s intended fraud loss is greater than

28   $1,500,000 and not greater than $3,500,000, the base offense level

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     Case 2:21-cr-00081-VAP Document 60 Filed 09/07/21 Page 6 of 10 Page ID #:366



 1   of 7 is increased +16 levels to 23.         USSG §§2B1.1(a),(b)(1)(I).

 2   Defendant’s acceptance of responsibility reduces level 23 by -3

 3   levels to total offense level 20.          USSG §3E1.1(a),(b).

 4         The government concurs with the PSR’s determination that

 5   defendant is in criminal history category I, given defendant’s lack

 6   of prior convictions and criminal history points.            PSR ¶¶ 66, 67.

 7         Given defendant’s total offense level of 20, and criminal

 8   history category I, defendant’s advisory guideline imprisonment

 9   range is 33 to 41 months.      The government’s guidelines calculations

10   for defendant are fully consistent with the parties’ Sentencing

11   Guidelines stipulations.      Plea Agreement ¶ 16.

12   IV.   RESTITUTION

13         Defendant pleaded guilty to wire fraud, in violation of 18

14   U.S.C. § 1343.    Defendant is required by the Mandatory Victim

15   Restitution Act of 1996 to pay full restitution to the victims of

16   his offense conduct.     18 U.S.C. § 3663A; PSR ¶¶ 39, 124.        In

17   addition, under the terms of the Plea Agreement, the Court may order

18   defendant to pay restitution for victims of any relevant conduct in

19   connection with the offense to which defendant pleaded guilty.            Plea

20   Agreement ¶ 8.

21         The PSR correctly determined the amounts of actual loss

22   sustained by the SBA and the other four victim lenders identified in

23   the PSR, which totals $1,302,550.          PSR ¶¶ 40, 124.   Restitution owed

24   to these victims in these amounts is undisputed and is supported by

25   the stipulated facts concerning defendant’s offense conduct set

26   forth in Exhibit B Statement of Facts in Support of the Plea

27   Agreement at ¶¶ 7-14, 18-25, 27.

28

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     Case 2:21-cr-00081-VAP Document 60 Filed 09/07/21 Page 7 of 10 Page ID #:367



 1   V.   FINE AMOUNT

 2        Defendant may be fined up to $250,000, or twice the gross gain

 3   or gross loss resulting from the offense, whichever is greater,

 4   pursuant to 18 U.S.C. § 3571(b)(3),(d).         The applicable advisory

 5   fine guideline range for defendant’s total offense level 20 is

 6   $15,000 to $150,000.     USSG §5E1.2(c)(3).      The Court should impose a

 7   fine in every case, except where the defendant establishes that he

 8   is unable to pay and is not likely to become able to pay any fine.

 9   USSG §5E1.2(a); PSR ¶ 98.

10        Defendant has not been forthcoming regarding his financial

11   condition and ability to pay.       Although defendant provided a

12   Personal Financial Statement (“PFS”) to the Probation Officer, as

13   required by General Order 03-01, defendant failed to: (1) provide

14   any supporting documentation for his PFS; (2) disclose any bank

15   accounts and other information to make clear where defendant keeps

16   his substantial monthly cash flow; and (3) disclose all his

17   outstanding liabilities on his PFS.         PSR ¶¶ 96, 100, 102.

18        As to the $1,302,500 defendant derived from his fraud scheme,

19   he claimed to the Probation Officer that it is “all gone.”            PSR

20   ¶ 104.   As to the $762,000 defendant transferred to Uganda to an

21   account controlled by his father, he claimed it was all lost “on a

22   bad investment,” but defendant provided no documentation or other

23   means to support that contention.          PSR ¶ 105.   Likewise, defendant

24   has not disclosed to the Probation Officer the whereabouts of the

25   remaining $540,550 in fraud proceeds that defendant did not transfer

26   to offshore.    PSR ¶ 106.

27        Nonetheless, defendant’s PFS reported hundreds of thousands of

28   dollars of other assets and a net worth that is sufficient to pay a

                                            7

     Case 2:21-cr-00081-VAP Document 60 Filed 09/07/21 Page 8 of 10 Page ID #:368



 1   substantial fine.     PSR ¶ 97, 109.       The government therefore

 2   recommends that the Court impose a substantial fine in this case.

 3   VI.   SENTENCING RECOMMENDATION

 4         The government recommends that defendant be sentenced to a term

 5   of imprisonment of 33 months and that upon his release be placed on

 6   supervised release for a term of three years.          The government

 7   recommends that defendant’s supervised release be ordered to include

 8   all the Probation Officer’s recommended terms and conditions,

 9   particularly conditions 6, 7, and 8 relating to defendant’s

10   employment to prevent recidivism.          The government further recommends

11   that defendant be ordered to pay: restitution totaling $1,302,500 to

12   the SBA and four other victim lenders, as detailed in the PSR, a

13   substantial fine, and a $100 special assessment to the United

14   States.    The government submits that the recommended sentence is

15   sufficient, but not greater than necessary, to comply with the

16   purposes of 18 U.S.C. § 3553(a)(2).

17         A.    Nature, Circumstances, and Seriousness of the Offense

18         Defendant’s offense conduct exploited and defrauded the CARES

19   Act PPP and SBA EIDL programs intended to provide government-backed

20   forgivable loans to help sustain and preserve small businesses

21   suffering from the COVID-29 pandemic.         Defendant’s fraud scheme

22   sought more than $1.775 million in EIDL and PPP loan proceeds from

23   multiple lenders, from which defendant derived more than $1.3

24   million that he says is “all gone.”         EIDL and PPP loan funds were

25   not used by defendant for their stated and authorized business

26   purposes, but rather consumed for defendant’s own personal benefit

27   and/or sent offshore to his father in Uganda.          Defendant’s fraud

28   scheme was extensive: he submitted eight false and fraudulent loan

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     Case 2:21-cr-00081-VAP Document 60 Filed 09/07/21 Page 9 of 10 Page ID #:369



 1   applications to the SBA and six PPP participating lenders, using

 2   fake supporting documents and multiple EINs that defendant secured

 3   from the IRS for that purpose.

 4        B.     History and Characteristics of Defendant

 5        Defendant, age 29, came to the United States from Uganda on a

 6   student visa in 2012 and was granted in asylum in 2013.           Defendant

 7   has a degree in accounting, obtained in the United States, and has

 8   provided bookkeeping services for others.         He has primarily worked

 9   in car sales and for a linen service.         Although defendant may have

10   had a difficult life growing up in Uganda, he had been working and

11   living in the United States for approximately eight years when he

12   committed in the instant offense.          Other than defendant’s

13   willingness to enter into the Plea Agreement, and his lack of a

14   prior criminal record, nothing in defendant’s history or personal

15   circumstances significantly mitigates his guilt or warrants a prison

16   sentence below the low-end of his guideline imprisonment range,

17   i.e., 33 months.

18        C.     Goals of Sentencing

19        Defendant deserves a very substantial sentence to reflect the

20   seriousness of his offenses, promote respect for the law, provide

21   just punishment for the offense, and afford adequate deterrence to

22   criminal conduct, which encompasses both specific and general

23   deterrence.    United States v. Goff, 501 F.3d 250, 261 (3d Cir.

24   2007).    Because economic and fraud-based crimes are more rational,

25   cool, and calculated than sudden crimes of passion or opportunity,

26   these crimes are prime candidates for general deterrence.            United

27   States v. Livesay, 587 F.3d 1274, 129 (11th Cir. 2009).

28

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     Case 2:21-cr-00081-VAP Document 60 Filed 09/07/21 Page 10 of 10 Page ID #:370



 1         Defendant’s offense conduct was very serious, particularly

 2   because such loan fraud schemes impair the effectiveness and

 3   resources of the EIDL and PPP programs to assist small businesses

 4   experiencing substantial financial disruption due to the COVID-19

 5   pandemic.    Defendant committed his offense out of pure greed and

 6   opportunism in exploiting and defrauding government-backed emergency

 7   loan programs during the COVID-19 pandemic.          Defendant’s guideline

 8   imprisonment range of 33 to 41 months reflects the serious of his

 9   offense conduct, so that a sentence within that range affords

10   appropriate deterrence to such criminal conduct.           The recommended

11   sentence serves the purposes of the Section 3553(a) factors, but is

12   not greater than necessary to do so.

13   VII. CONCLUSION

14         For the foregoing reasons, the Court should (1) determine the

15   applicable advisory guideline imprisonment range to be 33 to 41

16   months, based on a total offense level of 20 and criminal history

17   category I; (2) sentence defendant to a term of imprisonment of 33

18   months; (3) impose a three year term of supervised release that

19   includes all the terms and conditions of supervised release

20   recommended by the Probation Officer; (4) order defendant to pay

21   restitution totaling $1,302,500 to the SBA and four other victim

22   lenders, as detailed in the PSR; (5) order defendant to pay a

23   substantial fine; and (6) order defendant to pay a $100 special

24   assessment to the United States.

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