Memorandum Decision and Order re Defendant's Motion for Continued Release from Custody (Dkt. 68)

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A Memorandum Decision and Order re Defendant's Motion for Continued Release from Custody Pending Appeal, Document 68 in No. 1:22-cr-00153-AKB-1, in the U.S. District Court for the District of Idaho, filed April 1, 2024, in United States v. Eric J. O'Neil. The Court denies the motion. It states that O'Neil was indicted for one count of bank fraud in violation of 18 U.S.C. § 1344 and was sentenced to twenty-seven months of imprisonment followed by three years of supervised release. The Court finds that O'Neil is not a flight risk or a danger to the community, but concludes that the three claimed sentencing errors, including the sophisticated means enhancement, do not raise a substantial question of fact or law likely to be reversed on appeal.

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          Case 1:22-cr-00153-AKB Document 68 Filed 04/01/24 Page 1 of 9




                             UNITED STATES DISTRICT COURT

                                FOR THE DISTRICT OF IDAHO

  UNITED STATES OF AMERICA,
                                                      Case No. 1:22-cr-00153-AKB-1
          Plaintiff,
                                                      MEMORANDUM DECISION
          v.                                          AND ORDER RE DEFENDANT’S
                                                      MOTION FOR CONTINUED
  ERIC J. O'NEIL,                                     RELEASE FROM CUSTODY
                                                      PENDING APPEAL
          Defendant.


       Pending before the Court is Defendant Eric J. O’Neil’s Motion for Continued Release from

Custody Pending Appeal (Dkt. 62). The Court finds oral argument would not aid its decision-

making process and decides the motion on the parties’ briefing. Dist. Idaho Loc. Civ.

R. 7.1(d)(1)(B); see Dist. Idaho Loc. Crim. R. 1.1(f). The Court denies O’Neil’s motion.

                                       I. BACKGROUND

       In July 2022, O’Neil was indicted for one count of bank fraud in violation of 18 U.S.C.

§ 1344. (Dkt. 1). O’Neil gave notice of his intent to plead guilty in April 2023 and entered his

change of plea in May 2023. (Dkts. 25, 30, 32, 34). During his change of plea. O’Neil “admitted

that he knew the two [Paycheck Protection Program] loan applications . . . contained materially

false information about his business and were supported by fraudulent documents.” (Dkt. 62 at

pp. 5-6). O’Neil also admitted that his business “had no employees and thus had not filed any

payroll related forms with the IRS” and “that he invented names and social security numbers to

use as fake employees for purposes of the loan.” (Id. at p. 6).

       The presentence investigation found O’Neil, a resident of Connecticut, worked with co-

conspirators in other states to submit false and fraudulent loan applications and tax documents for

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his business, Accountants R Us. (Dkt. 45 at ¶¶ 11-12, 15). O’Neil submitted one such fraudulent

application to a lender in Boise, Idaho. (Id. at ¶¶ 10, 12). O’Neil submitted this application despite

that his business did not have legitimate operations or employees during the reported tax year. (Id.

at ¶ 13).

        Before sentencing, the Government objected to O’Neil’s Presentence Investigation Report

(PSR) and argued O’Neil should receive a two-level upward adjustment to his offense level

pursuant to the sophisticated means enhancement, U.S.S.G. § 2B1.1(b)(10)(C). (Dkt. 42 at pp. 2-

4; Dkt. 50 at pp. 4-6). The Government argued the enhancement applied because O’Neil falsified

tax forms, a payroll log, and profit and loss statements for his business to defraud lenders; O’Neil

engaged with co-conspirators to do so; and the scheme required a certain level of sophistication to

fraudulently obtain two loans. (Dkt. 42 at p. 3). O’Neil objected to application of the enhancement,

arguing he engaged “in a straightforward fraud that did not rise to the level of intricate scheming

that warrants” the sophisticated means enhancement. (Dkt. 51 at p. 1).

        During sentencing, the Court heard oral argument on whether the sophisticated means

enhancement applied to O’Neil’s conduct. (Dkt. 63 at pp. 4-10). In ruling on the Government’s

objection, the Court found O’Neil falsified tax forms, payroll logs, and profit and loss statements

for his business, despite that the business did not have legitimate operations or employees; worked

with co-conspirators to identify lenders; and submitted fraudulent loan applications. (Id. at p. 11).

The Court further found O’Neil worked with co-conspirators located out-of-state to identify a

lender in Idaho, a jurisdiction in which neither O’Neil nor his co-conspirators resided. (Id.). Based

on the totality of the circumstances, the Court applied the sophisticated means enhancement. (Id.).

The Court then calculated O’Neil’s offense level at eighteen, and his criminal history category as

one, resulting in a guideline range of twenty-seven to thirty-three months. (Id. at p. 13). The Court


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sentenced O’Neil to twenty-seven months of imprisonment, followed by three years of supervised

release, for committing bank fraud. (Dkt. 60). The Court ordered O’Neil self-surrender to the

institution designated by the Bureau of Prisons. (Id. at p. 2). O’Neil filed a notice of appeal and

seeks continued release pending appeal. (Dkts. 57, 62).

                                     II. LEGAL STANDARD

        A person convicted of a federal crime and sentenced to prison must be ordered detained

pending appeal unless the Court finds “by clear and convincing evidence that the person is not

likely to flee or pose a danger to the safety of any other person or the community if released” and

that “the appeal is not for the purpose of delay and raises a substantial question of law or fact”

likely to result in reversal, an order for a new trial, a non-custodial sentence, or “a reduced sentence

to a term of imprisonment less than the total of the time already served plus the expected duration

of the appeal process.” 18 U.S.C. § 3143(b)(B)(iv); see United States v. Handy, 761 F.2d 1279,

1283 (9th Cir. 1985). “[T]he word ‘substantial’ defines the level of merit required in the question

raised on appeal.” Handy, 761 F.2d at 1281. A substantial question exists where the appeal raises

a fairly debatable question. Id. at 1283.

                                            III. ANALYSIS

        O’Neil argues the Court made three procedural errors during sentencing: (1) incorrectly

applied the sophisticated means enhancement, (2) failed to sufficiently explain the sentence, and

(3) relied on clearly erroneous facts. (Dkt. 62 at p. 3). The Government argues each claimed error

fails to raise a substantial question of fact or law. (Dkt. 66 at p. 5). The Government “accepts”

O’Neil is not a flight risk and is not appealing for the purpose of delay. (Id. at p. 4). Given the

nonviolent nature of O’Neil’s crime and his conduct on release to date, the Court finds O’Neil is

not a flight risk or a danger to the community. The Court also finds the appeal is not taken for


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purpose of delay. At issue is whether O’Neil’s appeal raises a substantial question of law or fact

likely to result in reversal.

A.      Substantial Question of Law or Fact

        1.      Sophisticated Means Enhancement

        O’Neil argues the Court erred in applying the sophisticated means enhancement, and the

error will result in his sentence being set aside on appeal. (Dkt. 62 at pp. 10-11). The sentencing

guidelines direct the Court to increase a defendant’s offense level by two points if “the offense

otherwise involved sophisticated means and the defendant intentionally engaged in or caused the

conduct constituting sophisticated means.” U.S.S.G. § 2B1.1(b)(10)(C). Application Note 9(B)

provides “sophisticated means”

        means especially complex or especially intricate offense conduct pertaining to the
        execution or concealment of an offense. For example, in a telemarketing scheme,
        locating the main office of the scheme in one jurisdiction but locating soliciting
        operations in another jurisdiction ordinarily indicates sophisticated means. Conduct
        such as hiding assets or transactions, or both, through the use of fictitious entities,
        corporate shells, or offshore financial accounts also ordinarily indicates
        sophisticated means.

        The Ninth Circuit has recognized “the enhancement properly applies to conduct less

sophisticated than the list articulated in the application note.” United States v. Jennings, 711 F.3d

1144, 1147 (9th Cir. 2013). In Jennings, the defendants “syphoned money” from their business

into another bank account they gave a legitimate appearing name to, and then the defendants used

the money for personal purposes without reporting the money as income. Id. at 1145-47. The Ninth

Circuit held this conduct justified application of the sophisticated means enhancement. Id. at 1147.

        Here, O’Neil emphasized his role in the scheme was limited to making up names and social

security numbers for false documents submitted with the loan applications. (See Dkt. 63 at p. 8).

O’Neil previously conceded, however, that he “signed the false documents, authorized [a co-


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conspirator] to submit the applications, and received the $777,501 proceeds minus his [co-

conspirators’] commission.” (Dkt. 51 at p. 2). The loan applications were made on behalf of

O’Neil’s business, but the loan proceeds were not used for legitimate business purposes. (See

Dkt. 45 at ¶¶ 13-14; Dkt. 51 at pp. 3-4).

       As the Court discussed during sentencing, O’Neil’s own conduct contributed to falsified

tax forms, payroll logs, and profit and loss statements for his business, and he did this despite that

he did not have the legitimate business operations and employees to qualify for the loans. (Dkt. 63

at p. 11). O’Neil also worked with co-conspirators in other jurisdictions to apply for a loan in

Idaho. (Id. at pp. 11-12). After receiving the funds, O’Neil paid his co-conspirators a “commission”

and proceeded to utilize the funds for personal use. (Dkt. 45 at ¶¶ 13-14). Given O’Neil’s conduct,

the Court applied the sophisticated means enhancement. (Dkt. 63 at p. 11).

       O’Neil argues the enhancement was misapplied because the Court relied “on the means of

the overall scheme and without identifying a basis to determine that [O’Neil] engaged in the

conduct.” (Dkt. 62 at p. 11). O’Neil also argues no fact supports he recruited “out-of-state

recruiters or us[ed] fictitious entities.” (Id.). The Court found, however, that O’Neil falsified a

variety of documents for his business, despite that his business did not have the legitimate

operations and employees to qualify for the loans; O’Neil worked with co-conspirators in other

jurisdictions to complete his loan applications; and based on the totality of the circumstances,

O’Neil’s actions demonstrated the use of sophisticated means. (Dkt. 63 at pp. 11-12). The Court

relied on O’Neil’s individual conduct and specifically noted conduct he engaged in within the

overall fraud scheme.

       Moreover, the Court found O’Neil worked with co-conspirators to utilize his own business

to apply for the loans, despite that it did not have legitimate operations or employees for purposes


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of the loans applied for. (Dkt. 45 at ¶ 13). Insofar as O’Neil’s business lacked legitimate operations,

real employees, and was presented to lenders via false tax and business documents, the business

was fictitious. (See Dkt. 58 at p. 1). That the business may have been legitimately formed and, at

some point, may have had legitimate operations does not prevent application of the enhancement.

See United States v. Niko, 584 F. App’x 693, 694 (9th Cir. 2014) (rejecting contention that

enhancement should not apply where concealment of funds was not total because defendant used

real name and social security number to open account for funds); Jennings, 711 F.3d at 1147

(same).

          In short, O’Neil aided in knowingly fictionalizing portions of his business to qualify for

the loans, authorized co-conspirators to submit fraudulent applications, filtered the obtained funds

through his business, and then personally utilized the funds after distributing a portion of the funds

to his co-conspirators. See id. at 1147 (affirming application of enhancement where defendants’

conduct “reflected a sophisticated effort to conceal income” because concealed income was

syphoned into a legitimate appearing account); see also United States v. Augare, 800 F.3d 1173,

1175 (9th Cir. 2015) (holding defendant’s “coordinated and repetitive steps” to fraudulently obtain

money justified application of enhancement). Indeed, O’Neil knew what he was doing. See Niko,

584 F. App’x at 694. Accordingly, application of the sophisticated means enhancement does not

raise a substantial question of fact or law likely to be reversed on appeal. United States v. Mirando,

768 F. App’x 596, 598 (9th Cir. 2019) (affirming application of sophisticated means enhancement

because district court could reasonably conclude sending fraudulently obtained funds to fictitious

entity “adds a layer of fraud and apparent deception” sufficient to apply enhancement); see also

United States v. Bruey, No. 22-12532, 2023 WL 9016349, at *6 (11th Cir. Dec. 29, 2023)




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(affirming application of sophisticated means enhancement); United States v. Redfern, No. 22-

4196, 2023 WL 2823064, at *3 (4th Cir. Apr. 7, 2023) (same).

       2.      Explanation of Sentence

       O’Neil also argues the Court did not sufficiently explain his sentence to permit meaningful

appellate review. (Dkt. 62 at p. 11). Under 18 U.S.C. § 3553(a), the court is required to consider

several factors in crafting a defendant’s sentence, and § 3553(c) requires the court, “at the time of

sentencing, [to] state in open court the reasons for its imposition of the particular sentence.” To

meet these statutory obligations, “the sentencing judge should articulate enough to satisfy the

appellate court that he has considered the parties’ arguments and has a reasoned basis for

exercising his own legal decisionmaking authority.” Rita v. United States, 551 U.S. 338, 339

(2007). Phrased differently, the sentencing judge has “a duty to provide a sufficient explanation of

the sentencing decision to permit meaningful appellate review.” United States v. Trujillo, 713 F.3d

1003, 1009 (9th Cir. 2013).

       O’Neil emphasizes the Statement of Reasons, entered after sentencing, states he

“recruit[ed] out-of-state co-conspirators” and engaged in conduct “involving fictitious entities.”

(Dkt. 58 at p. 1). O’Neil argues these findings contradict the PSR. The Statement of Reasons,

however, represents the changes the Court made to the PSR’s factual statements. (Id.). Moreover,

the transcript of the sentencing proceeding demonstrates the Court considered the factors set forth

by § 3553(a). 1 (Dkt. 63 at pp. 27-30). O’Neil does not raise any particular § 3553(a) factor he


1
        The Court notes the written Statement of Reasons is issued to the United States Sentencing
Commission pursuant to 28 U.S.C. § 994(w)(1). See United States v. Mezquita Vega, No. CR20-
120RSM, 2023 WL 7129770, at *1 (W.D. Wash. Oct. 30, 2023). This requirement is separate and
apart from the Court’s obligation under 18 U.S.C. § 3553(c) to “state in open court its reasons for
the imposition of the particular sentence.” The oral pronouncement of a sentence controls,
however, if a discrepancy exists between the oral pronouncement and a written document

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alleges the Court failed to consider. (Dkt. 62 at pp. 11-13). Rather, O’Neil again takes issue with

the Court’s application of the sophisticated means enhancement. The Court stated in detail why it

applied the enhancement. (Dkt. 63 at pp. 10-13). As discussed above, the Court’s application of

the sophisticated means enhancement does not raise a substantial question of fact or law likely to

be reversed on appeal. Given that the Court considered each § 3553(a) factor in determining

O’Neil’s sentence, his challenge to the Court’s explanation of the sentence does not raise a

substantial question of fact or law likely to be reversed on appeal.

       3.      Factual Findings

       Finally, O’Neil argues no evidence supports the Court’s findings that O’Neil “personally

created the falsified financial documents, recruited out-of-state co-conspirators, or used ‘fictitious

entities.’” (Dkt. 62 at p. 14). O’Neil does not explain how these factual findings impacted his

sentence or how consideration of these facts was in error. Rather, O’Neil appears to again be

challenging the Court’s application of the sophisticated means enhancement.

       As discussed above, ample evidence supports that O’Neil falsified financial documents,

worked with out-of-state coconspirators, and utilized a fictitious entity. During his allocution, for

example, O’Neil acknowledged his “role in creating the false names and social security numbers”

and his knowledge “they would be used for creating false documents to acquire money [he] did

not deserve.” (Dkt. 63 at p. 25). Furthermore, O’Neil has also conceded he “signed the false

documents, authorized [a co-conspirator] to submit the applications, and received the $777,501

proceeds minus [his co-conspirators’] commission.” (Dkt. 51 at p. 2). O’Neil recognized the




memorializing the oral pronouncement. See United States v. Hernandez, 795 F.3d 1159, 1169 (9th
Cir. 2015) (providing oral pronouncement controls over written judgment).


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money “was supposed to be used to help businesses stay afloat, not [him] personally stay afloat.”

(Dkt. 63 at p. 25). In short, O’Neil acknowledged he helped create and ultimately signed the

falsified documents, worked with out-of-state co-conspirators, and used a business that did not

have legitimate operations, real employees, or, for purposes of the loans in question, legitimate tax

and business documents. O’Neil’s challenge to these specific factual findings does not raise a

substantial question of fact or law likely to be reversed on appeal.

B.     Reduced Sentence

       Although the Court concludes O’Neil fails to raise a substantial question of law or fact, the

Court nonetheless addresses whether O’Neil’s appeal is “likely to result in . . . a reduced sentence

to a term of imprisonment less than the total of the time already served plus the expected duration

of the appeal process.” See 18 U.S.C. § 3143(b)(B)(iv). O’Neil contends his “[p]roperly

calculated” sentencing range is twenty-one to twenty-seven months. (Dkt. 62 at p. 15). Even

assuming that the Court erred in applying the sophisticated means enhancement and that O’Neil

was resentenced to a term of imprisonment of twenty-one months, that term would not be less than

the expected duration of the appeal process. Other than presenting conclusory argument, O’Neil

has failed to demonstrate otherwise.

                                           IV. ORDER

       IT IS ORDERED that:

       1.      Defendant’s Motion for Continued Release from Custody Pending Appeal

(Dkt. 62) is DENIED.

                                                                               April 01, 2024




MEMORANDUM DECISION AND ORDER RE DEFENDANT’S MOTION FOR CONTINUED RELEASE
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