Sentencing Brief — No. 5:20-cr-04066 (Dkt. 71-1, N.D. Iowa)

Summary

The government's sentencing brief as to defendant Donald Franklin Trosin, filed July 6, 2021 as Document 71-1 in United States v. Trosin, No. 20-CR-4066-LTS-KEM, in the U.S. District Court for the Northern District of Iowa. The brief argues for a two-level increase for sophisticated laundering under USSG §2S1.1(b)(2)(C), citing the commentary examples of fictitious entities, shell corporations, layering and offshore accounts, and for a two-level increase for obstruction of justice. It also asks the court to impose the recommended mental health condition and addresses joint and several restitution. It describes false CARES Act applications, including a $1.2 million PPP loan and 20 EIDLs, submitted in the defendant's name and another's.

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“Sentencing Brief — No. 5:20-cr-04066 (Dkt. 71-1, N.D. Iowa).” Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/sentencing-brief-no-5-20-cr-04066-dkt-71-1-n-d-iowa-774e9b7829/, SHA-256 ed92b9a5d5743e553a17528d51d93c9445ff9597be5c12a71a2a1fd938176892.

Full text

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
WESTERN DIVISION

UNITED STATES OF AMERICA, )
)
Plaintiff, ) No. 20-CR-4066-LTS-KEM
)
vs. )
) GOVERNMENT’S
DONALD FRANKLIN TROSIN, ) SENTENCING BRIEF
)
Defendant. )

TABLE OF CONTENTS

I. A TWO-LEVEL INCREASE IS APPROPRIATE FOR
SOPHISTICATED LAUNDERING ................................................................ 1

II. A TWO-LEVEL INCREASE IS APPROPRIATE BECAUSE
DEFENDANT OBSTRUCTED JUSTICE ..................................................... 7

III. THE COURT SHOULD IMPOSE THE RECOMMENDED MENTAL
HEALTH CONDITION .................................................................................. 11

IV. JOINT AND SEVERAL RESTITUTION .................................................... 11

I. A TWO-LEVEL INCREASE IS APPROPRIATE FOR SOPHISTICATED
LAUNDERING

As relevant here, USSG §2S1.1(b)(2)(C) provides for a two-level increase if

“the offense involved sophisticated laundering.” The commentary to §2S1.1 defines

“sophisticated laundering” as “complex or intricate offense conduct pertaining to the

execution or concealment of the 18 U.S.C. § 1956 offense.” USSG §2S1.1, cmt.

(n.5(A)). The commentary states:

Sophisticated laundering typically involves the use of—

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(i) fictitious entities
(ii) shell corporations
(iii) two or more levels (i.e., layering) of transactions,
transportation, transfers, or transmissions, involving criminally
derived funds that were intended to appear legitimate; or
(iv) offshore financial accounts

Id. The listed examples “are illustrative but not required; they are typical but non-

exhaustive.” United States v. Fish, 731 F.3d 277, 280 (3rd Cir. 2018).

The undisputed portions of the Offense Conduct section of the Final

Presentence Investigation Report (“PSR”) (Doc. 66) make clear that the instant

offense was “complex or intricate.” Indeed, this offense involved not just one, but all

four, of the non-exhaustive examples of sophisticated laundering listed in the

Guidelines commentary. Therefore, the Court should apply the “sophisticated

laundering” enhancement in this case.

In response the COVID-19 pandemic, Congress passed the Coronavirus Aid,

Relief, and Economic Security (“CARES”) Act, which authorized hundreds of billions

of dollars of emergency financial assistance to the millions of Americans suffering

from the pandemic’s economic effects. PSR ¶ 11. The emergency assistance included

the Paycheck Protection Program (“PPP”) and Economic Injury Disaster Loans

(“EIDLs”). PSR ¶¶ 11-18.

Defendant participated in a scheme to defraud the United States of these

CARES Act funds and then to launder the funds through many layers of individuals,

corporations, and financial accounts. The scheme was extensive in scope,

complicated and intricate in nature, and extended overseas.

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Specifically, it was a part of the scheme to defraud that defendant provided

his means of identification to others via text message, including his signature and

social security number. PSR ¶ 24. A series of false and fraudulent CARES Act loan

applications, including a $1.2 million PPP loan and 20 EIDLs, were submitted in

defendant’s name and in the name of defendant’s ex-girlfriend, A.K., without her

knowledge or permission. PSR ¶¶ 26, 38. To gain approval, fictitious documents

were created and submitted to lenders in the name of defendant and A.K., including

a false and fraudulent 2019 IRS Form 944, Employer’s Annual Federal Tax Return,

and a false and fraudulent 2019 Schedule C, Form 1040 or 1040-SR, Profit or Loss

From Business. PSR ¶¶ 25-26.

With respect to the PPP loan, the fictitious documents purported to show that

defendant was regularly receiving large incoming wire transfers for a business from

major companies in the United States and paid in excess of $960,000 in payroll

expenses during the month of January 2020. PSR ¶ 25. In truth, defendant did not

operate a business and had no payroll expenses during that month. Id. The

paperwork submitted in support of some of the 20 EIDL loans identified a fictitious

business entity in A.K.’s name—as a purported sole proprietorship—and bore her

fake e-signature. PSR ¶ 26. To cover up the scheme, another individual hired a

company to subcontract with another entity to incorporate a phony Minnesota

corporation, “Donald Trosin Construction Equipment, LLC,” at an address in

Albertville, Minnesota. PSR ¶ 28.

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Defendant received the fraudulent proceeds from the CARES Act loans into

two “funnel accounts” that defendant controlled at financial institutions in

Minnesota (Wells Fargo Bank) and Iowa (Northwest Bank). PSR ¶¶ 16-26.

Defendant then further executed the scheme by “conduct[ing], and attempt[ing] to

conduct, a series of smaller financial transactions each in excess of $10,000, to

various entities and individuals in other states and countries, including Canada and

the People’s Republic of China.” PSR ¶ 31; Plea Agreement (Doc. 57), ¶ 16(W).

“For example, after receiving $1.2 million in PPP funds into his account at

Wells Fargo Bank, the defendant initiated a series of interstate wire transfers to

various individuals at different financial institutions.” PSR ¶ 32. Specifically, from

about May 14, 2020, to about May 19, 2020, the defendant initiated wire transfers in

the amounts of $25,000 to the Wells Fargo Bank account of [C.J.] in Arizona, $50,000

to the Republic Bank account of [A.G.] in Pennsylvania, and $200,000 to the Capital

One Bank account of DMV Home Services, LLC, in Virginia.” Id. “Further, on June

11, 2020, the defendant withdrew $300,020 from his account at Wells Fargo Bank to

purchase two cashier’s checks, each in the amount of $150,000, for an out-of-state

limited liability company, NKB Enterprise, LLC, a business owned by Benjamin

Sakyi.” Id.

“Between July 1, 2020, and July 2, 2020, defendant withdrew another

$610,000 from his account at Wells Fargo Bank to purchase three additional

cashier’s checks, in favor of NKB Enterprise, LLC, and Blue Flight Logistics, LLC –

both businesses owned by Benjamin Sakyi – in the amounts of $310,000 and two

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$150,000 checks, respectively.” Id. “On July 7, 2020, the defendant withdrew

$11,000 from his account at Wells Fargo Bank to purchase an $11,000 cashier’s

check, payable to [A.G.].” Id.

“Defendant executed additional interstate wire transfers via his joint account

with A.K. held at Northwest Bank.” PSR ¶ 33. “Specifically, after receiving the

$10,000 EIDL Advance, the defendant initiated a $9,500 wire transfer to the Navy

Federal Credit Union account of [M.L.] in Texas.” Id. “Following the receipt of the

additional EIDL funds, a net disbursement amount of $29,900, the defendant

initiated an additional $29,800 wire transfer to the Bank of America account of

[B.G.] in Georgia.” Id.

Exhibit 1 is an affidavit from Michael Gentry, an IRS agent, in the related

case of United States v. Benjamin Sakyi, No. 21-CR-4013 (N.D. Iowa). Exhibit 2 is

an excerpt of Agent Gentry’s testimony at a detention hearing in that case. These

exhibits provide further detail with respect to the laundering of the funds in

question. The affidavit details, for example, that Sakyi opened accounts in the name

of “NKB Enterprise LLC” and “Blue Flight Logistics LLC” at multiple banks in

Virginia shortly before receiving the fraudulent proceeds from defendant. Ex. 1,

¶¶ 19-22. Sakyi then used these accounts to deposit the funds from defendant and

then also to funnel the funds elsewhere by various means. Id. ¶¶ 40-44, 46. In total,

defendant moved over $900,000 to Sakyi via various means and financial accounts,

some of which ended up, after further financial transactions, in Ghana and at a

company based in Canada. Ex. 2, at 10, 12-13.

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The probation office concedes that the facts set forth in the PSR disclose an

offense that is intricate and complex and involves fictitious entities, shell

corporations, two or more levels of transactions, and offshore financial accounts.

PSR ¶ 43, Resp. to Obj. No. 8. However, the probation office characterizes these

facts as part of “the larger offense conduct” and declines to score the two-level

enhancement for sophisticated laundering because “defendant’s own conduct was not

‘sophisticated.’” Id.

There is no legal basis for distinguishing between “the larger offense conduct”

and “defendant’s offense” in this case. Section 2S1.1 simply asks whether “the

offense involved sophisticated money laundering,” much like §2K2.1 inquires

whether the offense involves a destructive device or a stolen firearm. Of course,

under the doctrine of relevant conduct, defendant is not only responsible for his own

actions but he is also responsible for the reasonably foreseeable acts of others,

whether or not charged as a conspiracy. See USSG ¶1B1.3. In this case, of course,

defendant has himself pled guilty to money laundering conspiracy, so it was

foreseeable to him that the persons to which he was sending fraud proceeds by

various means would do the same. That is particularly true when defendant was

doing much more than making a few financial transactions with fraud proceeds as

one might find in a garden-variety money laundering case—to the contrary,

defendant received over $1 million in fraud proceeds at two bank accounts in two

states and then sent or attempted to send the proceeds of the fraud to multiple

persons and entities in many states and to China. The fact defendant acted at the

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direction of another person and did not himself execute all of the financial

transactions does not change the analysis.

The government would emphasize that the “sophisticated laundering”

enhancement in USSG §2S1.1 is worded differently than the “sophisticated means”

enhancement in USSG §2B1.1. Section 2B1.1(b)(10) not only requires proof that the

offense involves sophisticated means but also proof that “the defendant intentionally

engaged in or caused the conduct constituting sophisticated means.” Section 2S1.1

contains no similar requirement of proof for “sophisticated laundering.” 1

Accordingly, the Court should apply the two-level enhancement for

“sophisticated laundering” in §2S1.1 in this case.

II. A TWO-LEVEL INCREASE IS APPROPRIATE BECAUSE
DEFENDANT OBSTRUCTED JUSTICE

On July 31, 2020, law enforcement attempted to interview defendant about

the scheme at the home of defendant’s son, J.T., in Ringstead, Iowa. PSR ¶ 34;

Exhibit 4. Defendant’s son, J.T., was present during the attempted interview but

falsely stated that defendant was not there. Exhibit 4. On August 27, 2020,

1 The Commission added the additional requirement to §2B1.1’s

“sophisticated means” provision in 2015 but conspicuously did not make a similar
amendment to §2S1.1’s “sophisticated laundering” provision. See USSG
§2B1.1(b)(10)(C), amend. 792, Supplement to App. C. (effective Nov. 1, 2015). Even
so, the sophisticated means enhancement is not limited to the mastermind of the
scheme. See United States v. Muresanu, 951 F.3d 833, 840 (7th Cir. 2020) (the
“enhancement applies when the defendant ‘engaged in’ or ‘caused’ the relevant
conduct … using sophisticated means[,]” and is not limited to the “mastermind”
behind the scheme).
7

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defendant was arrested on a warrant for the instant offense after surrendering to

the USMS at the United States Courthouse in Sioux City. PSR ¶ 2.

The PSR discloses—and it is undisputed—that within weeks of his arrest

defendant executed a quit claim deed in favor of his son on September 18, 2020.

PSR p.27, n.8; Exhibit 3. By that quitclaim deed, defendant transferred defendant’s

property located on Third Avenue in Armstrong, Iowa, to his son. Id. The value of

the property is valued at $19,800. Id. No transfer tax was paid on the quitclaim

deed, because the deed itself states that there was “no consideration” for the

transfer between parent and child. Exhibit 3; Iowa Code § 482A.2(11).

This quitclaimed property was defendant’s largest asset, and he now has a

negative net worth of $18,967.12. PSR ¶ 87. Defendant presently represents

himself to the Court at sentencing as essentially “judgment proof” and unable to pay

a fine. PSR ¶ 88.

Section 3C1.1 of the advisory Sentencing Guidelines provides for a two-level

increase if a defendant obstructs or impedes justice, or attempts to obstruct or

impede justice. The circuit courts of appeals have held that obstruction of justice for

purposes of USSG §3C1.1 may include transferring assets to a relative to avoid

collection. United States v. Craft, 478 F.3d 899, 901 (8th Cir. 2007); United States v.

Jackson-Randolph, 282 F.3d 369, 390 (6th Cir. 2002); United States v. Keeling, 235

F.3d 533, 536 (10th Cir. 2000).

The probation office does not recommend the enhancement on the ground

that there is “no evidence to suggest that the defendant’s noted transfer of property

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via quitclaim deed was ‘fraudulent’”; defendant disclosed the transfer in his

presentence interview; and Jackson-Randolph and Keeling are not precedential and

“the most recent case was heard approximately 19 years ago.” PSR ¶ 46, Response

to Obj. No. 9. These reasons for not applying the enhancement do not withstand

scrutiny.

First, the Court may infer from the circumstances that the quitclaim deed

was a fraudulent transfer amounting to an attempt to obstruct the administration

of justice, that is, the government’s ability to collect restitution. Here, both parties

to the transaction were aware of the investigation into defendant, and the quitclaim

deed was effectuated less than a month after defendant’s arrest. Although

defendant is not himself an attorney, of course, the Court may readily infer from

these circumstances that defendant knew he would be required to pay restitution in

the event of conviction and used the quitclaim deed as a way to frustrate the

government’s efforts to attach a lien to defendant’s primary asset so that proceeds

from any future sale of the property might be applied towards defendant’s

restitution obligation. That is especially true where, as here, there was no

consideration for the transfer. See, e.g., Ritchie Capital Mgmt, LLC v. Stoebner, 779

F.3d 857, 863 (8th Cir. 2015) (considering the “[p]erhaps most salient fact” in a

fraudulent transfer analysis to be the fact that the transferor received “no value in

exchange” for the transaction).

The foregoing analysis is similar to the fraudulent transfer context in

bankruptcy. In the fraudulent transfers context, the Eighth Circuit Court of

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Appeals has recognized that “direct evidence of fraud is rare” and “a court in most

instances can only infer fraud by considering circumstantial evidence.” Ritchie, 779

F.3d at 863 (quoting In re Sholdan, 217 F.3d 1006, 1008 (8th Cir. 2000)). Therefore,

once badges of fraud are shown through circumstantial evidence, a party attacking

a transfer as fraudulent may be entitled to a presumption of fraudulent intent on

the part of the transferor, and the transferor should have to come forward with

“some legitimate supervening purpose for the transfers at issue.” Id. (quoting Kelly

v. Armstrong, 141 F.3d 799, 802 (8th Cir. 1998)). In this case, defendant has offered

no reason or justification for the transfer of his chief asset to his son for no

consideration, and so the Court may infer from the circumstances that he acted

with fraudulent intent.

Second, the fact defendant disclosed the transfer in his presentence interview

should not preclude the Court from finding that defendant obstructed justice by

fraudulently transferring his chief asset to his son without consideration. To be

sure, had defendant made a false statement to the probation office about his assets

and transfers, that additional false statement, in itself, would have been an

independently sufficient ground for applying the obstruction of justice

enhancement. USSG §3C1.1, cmt. n.4(h). Rather, it is because defendant has

admitted he made the transfer that the government has not objected to defendant

receiving a reduction for acceptance of responsibility under USSG §3E1.1.

Third, nothing prevents the Court from relying on persuasive cases from

other circuit courts of appeals. The government does not suggest that Jackson-

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Randolph and Keeling are binding on this Court. The reasoning of those cases

stand on their own merits and, to the extent the Court finds them persuasive, the

Court may rely on them here.

Accordingly, the Court should apply the two-level enhancement for

obstruction under USSG §3C1.1.

III. THE COURT SHOULD IMPOSE THE RECOMMENDED MENTAL
HEALTH CONDITION

The government agrees that the Court should impose the requested mental

health condition for the reasons the probation office identifies in Paragraph 104 of

the PSR. The government would point out that defendant has not objected to

making the underlying statement at issue in Paragraph 37, which led to the

probation office recommending the special condition.

IV. JOINT AND SEVERAL RESTITUTION

Defendant argues his restitution obligation “should be joint and several” with

certain individuals presently under indictment in the United States District Court

for the Southern District of New York in Case No. 21-CR-88. Defendant notes that

the individuals in the Southern District of New York are charged with a series of

frauds emanating from West Africa and at least one of those individuals received

some of the fraudulent proceeds that defendant received and laundered to Sakyi.

The pending case in the Southern District of New York results from a

separate investigation. The publicly filed indictment in that case alleges a scheme

to defraud that began in 2013 and continued to 2020 and involves a wide-ranging

fraud that appears to be broader in scope, both in nature and temporally, than the

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CARES Act fraud and money laundering scheme to which defendant has pled guilty

in this case.

The undersigned cannot find any legal authority discussing the precise issue

at hand, i.e., whether the Court may impose a restitution obligation jointly and

severally with a hypothetical conviction in the future in another separate case that

may turn out to present some overlap in the restitution obligations of various

sentenced individuals. Although the undersigned does not believe the practice of

conditional restitution orders prevails in this district based on past experience, in

United States v. Guillermo, No. CR 13-55-DMG, 2016 WL 5852851, at *1 (C.D. Cal.

Oct. 3, 2016), the judgment order reflects that a California district court entered a

conditional restitution order with respect to a co-defendant. The California district

court employed the following language, “The defendant shall be held jointly and

severally liable with co-defendant Marilyn Agaton, if convicted, for the amount of

restitution ordered in this judgment.”). The serious difficulty in the present case, of

course, is that unlike Guillermo the defendants in the Southern District of New

York are not defendant’s co-defendants. Therefore, at present, it would appear to

the government to be the better course to not make defendant’s requested

conditional restitution order at this time, because (1) it is not certain whether any of

the defendants in the Southern District of New York will be convicted and (2) even

in the event of conviction of one or more of the Southern District of New York

defendants, it is unclear to what extent there would be any overlap in the

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restitution obligation imposed in New York with defendant’s restitution obligation

in this case.

Respectfully submitted,

SEAN R. BERRY
Acting United States Attorney

By, /s/ Timothy L. Vavricek

TIMOTHY L. VAVRICEK
Assistant United States Attorney
111 Seventh Avenue, SE, Box 1
Cedar Rapids, IA 52401
319-363-6333
319-363-1990 (Fax)
Tim.Vavricek@usdoj.gov

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