Sentencing Memorandum — USA v. Murphy et al (Dkt. 57, E.D. Wash.)

Summary

Stephen Lawrence Murphy's sentencing memorandum and motions for variance or departure, electronically filed April 19, 2023 in United States v. Stephen Lawrence Murphy, Case No. 2:22-CR-00084-TOR, in the U.S. District Court for the Eastern District of Washington, by counsel Robert M. Seines. It states the defendant pleaded guilty to Count 8 under 18 U.S.C. §287 and that the three PPP loans obtained with co-defendant Stephanie Murphy totaled $62,499.00 and were later forgiven. The memorandum states the application was made through a website run by Womply, which the defense describes as approving it without tax documentation. It argues for a variance based on criticism of the fraud loss table, post-offense rehabilitation and the cost of imprisonment, against a guideline range of 21 to 27 months, and asks for 1 to 5 years of probation.

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“Sentencing Memorandum — USA v. Murphy et al (Dkt. 57, E.D. Wash.).” Original at ecf.waed.uscourts.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/sentencing-memorandum-usa-v-murphy-et-al-dkt-57-e-d-wash-93b1328df7/, SHA-256 8300ab299e6fadd4e0cccc7f5fbb1876a5b3f50aa52a9db5d6414c349154efe3.

Full text

Robert M. Seines
1 Attorney at Law
1312 N Monroe St
2 Spokane, WA 99201
509-844-6002
3 fax 509-255-6003
4 Attorney for Defendant

5
UNITED STATES DISTRICY COURT
6
FOR THE EASTERN DISTRICT OF WASHINGTON
)
7 )
UNITED STATES OF AMERICA, ) Case No. 2:22-CR-00084-TOR
8 )
Plaintiff,
) DEFENDANT’S SENTENCING
9 ) MEMORANDUM AND MOTIONS
v. ) FOR VARIANCE OR DEPARTURE
10 )
)
11 STEPHEN LAWRENCE MURPHY, ))
12 )
Defendant. ))
13
STEPHEN MURPHY, by and through his attorney, Robert M. Seines,
14

15
respectfully submits the following sentencing memorandum and motions for

16 departure or variance.
17
1. BACKGROUND.
18
On July 19, 2022 a nine-count indictment was filed in this court
19

20 charging Stephen Murphy and his wife Stephanie Murphy with crimes related

21 to three Paycheck Protection Program (PPP) loans they applied for and
22
received under the Coronavirus Aid, Relief and Economic Security Act
23

24 DEFENDANT’S SENTENCING MEMORANDUM
AND MOTIONS FOR VARIANCE OR DEPARTURE
25 Page 1 of 13
(CARES Act). They three loans totaled $62,499.00. The loans were later
1

2 forgiven by the Small Business Administration.1
3
Stephen Murphy entered a guilty plea to Count 8, False, Fictitious, or
4
Fraudulent Claims, 18 U.S.C. §287, on November 22, 2022.
5

6
Probation filed a final Presentence Investigation Report on April 12,

7 2023. ECF 55. The PSIR accurately calculates Mr. Murphy’s USSG
8
sentencing guideline range. PSIR ECF 55 at ¶ 178. Probation also notes that
9
Mr. Murphy is eligible to a sentence of 1 to 5 years of probation under 18
10

11 U.S.C. §3561(c)(1). Id at ¶181.2

12 2. FACTS
13
In the spring of 2021 the Murphy’s learned from an acquaintance that
14
they could go a website sponsored by an entity named Womply and obtain
15

16 PPP loans. On March 23, 2021 Stephen Murphy went to the website of
17 Womply and applied for a PPP loan using SBA Form 2483 (3/21).3
18

21 1
Mr. and Mrs. Murphy agree they should pay $62,400 in restitution.
2
Mr. Murphy is not eligible for probation under the sentencing guidelines because his
22 guidelines range is in Zone D. USSG §5B1.1, comment (2). ECF ¶182
3
The PPP Application is Attachment 1.
23

24 DEFENDANT’S SENTENCING MEMORANDUM
AND MOTIONS FOR VARIANCE OR DEPARTURE
25 Page 2 of 13
Turns out, Womply is a shady financial technology firm that takes PPP
1

2 applications, approves them, then submits the applications to several lenders.
3
SBA, in reliance on the approved applications, funds the loans and pays fees
4
to Womply and the lender. Congress is presently investigating Womply and
5

6
other similar firms for financial fraud. Following is a link to a statement by

7 SBA about the fraud investigation:4
8
https://proxy.www.sba.gov/article/2022/dec/08/us-small-business-
9 administration-statement-house-select-subcommittee-coronavirus-crisis-
report
10

11 SBA requires borrowers to submit documentation to the lenders or their

12 agents proving they are eligible for a PPP loan. However, Mr. Murphy’s SBA
13
Form 2484 was not accompanied by tax returns or any other documentation that
14
verified his eligibility. Even so, Womply falsely represented that Mr. Murphy
15

18
4
19
Here are two other articles describing Womply PPP fraud investigations:

20 https://www.usatoday.com/story/news/investigations/2021/11/23/ppp-companies-
blueacorn-womply-added-congressional-probe/8730237002/
21
https://www.npr.org/2022/12/06/1140823783/a-congressional-report-says-financial-
22 technology-companies-fueled-rampant-ppp-fr

24 DEFENDANT’S SENTENCING MEMORANDUM
AND MOTIONS FOR VARIANCE OR DEPARTURE
25 Page 3 of 13
verified his income with a 2020 Schedule C, Profit or Loss from Business (sole
1

2 proprietorship).5
3
In sum, the Murphys found Womply’s PPP loan application process to
4
be effortless. It was basically money for nothing. Then, after following
5

6
Womply’s abbreviated path to money – three checks totaling $62,400

7 appeared – almost from thin air.
8
Stephen and Stephanie Murphy used the money to pay for living
9
expenses, buy a tiny home and tools and equipment. The money also enabled
10

11 them to rise out of a dead-end lifestyle and become productive citizens in

12 their community. Probation notes:
13
Mr. Murphy expressed before he and his wife were indicted, his
14 wife became clean and sober, and he was working toward his
sobriety. He stated, “we were able to become better society
15
members. We were given the opportunity to be better citizens in
16 our community.” He expressed, having the money made me so I
was not dealing with the people I was prior [i.e., drug addicts
17 and distributors]. I was no longer searching out things to make
18 me happy because I was no longer in poverty.

19 PSIR ECF 55 at ¶29.
20

21
5
Womply’s “Supporting Tax Documents” is Attachment 2. It states that Stephen Murphy
22 provided Womply with his 2020 Schedule C documenting $100,000 in income. Mr. Murphy
never filed a tax return or Schedule C in 2020.
23

24 DEFENDANT’S SENTENCING MEMORANDUM
AND MOTIONS FOR VARIANCE OR DEPARTURE
25 Page 4 of 13
3. MOTIONS AND GROUNDS FOR VARIANCE OR
1
DEPARTURE.
2

3 The United States, in the filed plea agreement, will recommend a sentence

4 at or below the low end of the guidelines. ECF 40 at ¶ 10.

5 Probation also recognizes that a sentence less than the guideline range may

6 be appropriate:

7
Mr. Murphy’s convictions began at the age of 21 and consists of
8 driving offenses, crimes against community members, domestic
violence related offenses, and offenses exhibiting a longstanding
9 polysubstance abuse addiction. Mr. Murphy has spent long periods
10
incarcerated to include 12, 18, and 27.75 months, yet he continues to
commit crimes. Despite Mr. Murphy’s past criminal behavior, he has
11 begun to make changes in his life to include, maintaining stable
employment, having a residence, and refraining from using all illicit
12
substances including marijuana. Additionally, he obtained a driver’s
13 license, opened a bank account, and has exhibited behaviors similar to
productive members of society since being indicted for the instant
14
offense. As such, a sentence less than the guideline range may be
15 sufficient to reflect the seriousness of the offense, promote respect for
the law, and to provide just punishment, while affording adequate
16 deterrence to future conduct. PSIR ECF 55 at 197 (emphasis added).
17

18
As this Court is well aware, the sentencing guidelines are just the “starting

19 point in the initial benchmark” in determining a sentence. Gall v. United States,
20
552 U.S. 38, 128 S.Ct. 586, 596 (2007), (stating that “a district court should begin
21
all sentencing proceedings by correctly calculating the applicable guideline
22

24 DEFENDANT’S SENTENCING MEMORANDUM
AND MOTIONS FOR VARIANCE OR DEPARTURE
25 Page 5 of 13
range.”).
1

2 The sentencing court “may not presume that the guideline range is
3
reasonable.” But must “make an individualized assessment based on the facts
4
presented” to arrive at a sentence that is sufficient, but not greater than necessary
5

6
in each case. Gall, 128 S.Ct. at 597.

7 The Supreme Court has affirmed the authority of the sentencing court to
8
impose a term of imprisonment outside the guideline range if the court deems it
9
fitting and reasonable under the facts of that case and the applicable law. See,
10

11 Gall, 552 U.S. at 602; Kimbrough v. United States, 552 U.S. 85, 128 S.Ct. 558,

12 570 (2007) (holding that sentencing courts may vary from the advisory guideline
13
range based solely on policy considerations, or the sentencing court’s
14
disagreement with the guideline range in a particular case).
15

16 Finally, the sentencing court is not required to see “extraordinary
17 circumstances” to impose a sentence outside the guidelines:
18
We reject, however, an appellate rule that requires “extraordinary”
19 circumstances to justify a sentence outside the Guidelines range. We
20
also reject the use of a rigid mathematical formula that uses the
percentage of a departure as the standard for determining the strength
21 of the justifications required for a specific sentence.
22
Gall, 128 S.Ct. at 594-95.
23

24 DEFENDANT’S SENTENCING MEMORANDUM
AND MOTIONS FOR VARIANCE OR DEPARTURE
25 Page 6 of 13
1
(a) The Fraud Sentencing guidelines and 18 U.S.C. §3553(a).
2
Mr. Murphy’s calculated offense level is presently 10 which, along with his
3

4 12 Criminal History points, puts him in Zone D of the Sentencing Table. PSIR

5 ECF 55 at ¶ 35.
6
The fact that the amount of loss exceeds $45,000 and is less than $90,000 is
7
the offense characteristic that has the most dramatic effect on Mr. Murphy’s
8

9 guideline range by increasing his total offense level by 6 per USSG 2B1.1(b).
10
However, courts and legal scholars have questioned the actual correlation between
11
the amount of loss and the number of points that should be added to the base
12

13
offense level.

14 The usefulness of the Guidelines’ loss table in fraud cases was aggressively
15
challenged by Judge Rakoff in United States v. Adelson, 441 F.Supp.2d 506
16
(S.D.N.Y. 2006):
17

18 What drove the Government's calculation in this case, more than any
other single factor, was the inordinate emphasis that the Sentencing
19 Guidelines place in fraud cases on the amount of actual or intended
20
financial loss. As many have noted, the Sentencing Guidelines,
because of their arithmetic approach and also in an effort to appear
21 “objective,” tend to place great weight on putatively measurable
quantities, such as the weight of drugs in narcotics cases or the
22
amount of financial loss in fraud cases, without, however, explaining
23

24 DEFENDANT’S SENTENCING MEMORANDUM
AND MOTIONS FOR VARIANCE OR DEPARTURE
25 Page 7 of 13
why it is appropriate to accord such huge weight to such factors. See
1

2 generally, Kate Stith & José A. Cabranes, Fear of Judging:
Sentencing Guidelines in the Federal Courts 69 (1998).
3

4 441 F.Supp.2d at 509.
…
5

6
What this exposed, more broadly, was the utter travesty of justice that
sometimes results from the guidelines' fetish with abstract arithmetic,
7 as well as the harm that guideline calculations can visit on human
beings if not cabined by common sense.
8

9 Id at 511.
10
In “Drawn from Nowhere”: A Review of the U.S. Sentencing Commission’s
11
White Collar Sentencing Guidelines and Loss Data,” Federal Sentencing Reporter,
12

13
Vol. 26, No.1, October 2013, the author conducted a survey of cases and statistics

14 from the U.S. Sentencing Commission and noted trends with respect to the
15
application of the loss guideline, 2B1.1(b)(1)(I).
16
The author notes, following the detailed presentation and analysis of the
17

18 sentencing statistics, that:

19 Courts are varying downward more often and at a greater magnitude
20
in fraud cases than in any major offense category. The statistical
evidence reviewed above strongly points to the concept of loss as the
21 primary reason for the judiciary’s increasing dissatisfaction with the
fraud Guidelines. Federal Sentencing Reporter, Vol. 26, No. 1, page
22
25.
23

24 DEFENDANT’S SENTENCING MEMORANDUM
AND MOTIONS FOR VARIANCE OR DEPARTURE
25 Page 8 of 13
1
Given the ongoing debate concerning the Sentencing Guidelines particular
2
to fraud cases and considering the facts of this case; a below-guidelines sentence
3

4 without imprisonment, and an adequate restitution order would be sufficient, and

5 not greater than necessary, and would result in a just sentence for Mr. Murphy.
6
b. Departure for Post-Offense Rehabilitation.
7
In United States v. Tzok-Sierra, 387 F.3d 978 (9th Cir. 2004) the 9th Circuit
8

9 reviewed a downward departure for post-offense rehabilitation. The Court
10
determined that post-offense rehabilitation can be the basis for a downward
11
departure. Id. at 981 (citing United States v. Thompson, 31 F.3d 1071, 1077 (9th
12

13
Cir. 2002) (Berzon, J., concurring) (referencing § 5K2.0)). The court held that the

14 departure "must be based on a determination that defendant had demonstrated an
15
extraordinary level of rehabilitation." Id.
16
This Court knows how difficult it is for meth addicts to get clean and turn
17

18 their lives around. Mr. Murphy’s level of rehabilitation is indeed exceptional and

19 clearly justifies a downward departure.
20
(c) Relative cost of imprisonment.
21
USSG §5H1.4(b) directs the Court consider the relative costs of treatment
22

24 DEFENDANT’S SENTENCING MEMORANDUM
AND MOTIONS FOR VARIANCE OR DEPARTURE
25 Page 9 of 13
vs incarceration. Probation indicates that the annual cost of imprisonment in a
1

2 BOP facility is $44,258. In comparison, supervision by Probation is $4,454 and a
3
Residential Reentry Center is $35,761. PSIR ECF 55 at ¶ 185.
4
4. 18 U.S.C. §3553(a).
5

6
(b) The Court can find reasons justifying a sentence outside the
guideline range by considering the factors enumerated in 18 U.S.C. § 3553(a).
7
After determining the sentence pursuant to the advisory sentencing
8

9 guidelines, a Court must consider the following factors pursuant to 18 U.S.C. §
10
3553(a):
11
(a) Factors To Be Considered in Imposing a Sentence. - The court
12 shall impose a sentence sufficient, but not greater than necessary,
13
to comply with the purposes set forth in paragraph (2) of this
subsection. The court, in determining the particular sentence to be
14 imposed, shall consider –
15
(1) the nature and circumstances of the offense and the history
16 and characteristics of the defendant;
17 (2) the need for the sentence imposed –
18
(A) to reflect the seriousness of the offense, to promote
19 respect for the law, and to provide just punishment for the
20
offense;

21 (B) to afford adequate deterrence to criminal conduct;
22
(C) to protect the public from further crimes of the
23

24 DEFENDANT’S SENTENCING MEMORANDUM
AND MOTIONS FOR VARIANCE OR DEPARTURE
25 Page 10 of 13
defendant; and
1

2 (D) to provide the defendant with needed educational or
vocational training, medical care, or other correctional
3
treatment in the most effective manner;
4
(3) the kinds of sentences available;(4) and (5) the United States
5 Sentencing Guidelines and Policy Statements;
6
…
7
(6) the need to avoid unwarranted sentence disparities among
8
defendants with similar records who have been found guilty of similar
9 conduct; and
10
(7) the need to provide restitution to any victims of the offense.18
11 U.S.C. § 3553(a).

12 “The overarching statutory charge to a sentencing court is to “impose a
13
sentence sufficient, but not greater than necessary” to reflect the seriousness of the
14
offense, promote respect for the law, and provide just punishment; to afford
15

16 adequate deterrence; to protect the public; and to provide the defendant with
17 needed educational or vocational training, medical care, or other correctional
18
treatment.” United States v. Carty, 520 F.3d 984, 991 (9th Cir. 2008),
19

20
Probation has completed a detailed and thoughtful analysis regarding

21 sentencing considerations in Mr. Murphy’s case. In conclusion, Probation tells the
22
Court:
23

24 DEFENDANT’S SENTENCING MEMORANDUM
AND MOTIONS FOR VARIANCE OR DEPARTURE
25 Page 11 of 13
… Despite Mr. Murphy’s past criminal behavior, he has
1
begun to make changes in his life to include, maintaining stable
2 employment, having a residence, and refraining from using all illicit
substances including marijuana. Additionally, he obtained a driver’s
3
license, opened a bank account, and has exhibited behaviors similar to
4 productive members of society since being indicted for the instant
offense. As such, a sentence less than the guideline range may be
5 sufficient to reflect the seriousness of the offense, promote respect for
6
the law, and to provide just punishment, while affording adequate
deterrence to future conduct. PSIR ECF 55 at ¶ 197.
7

8
Stephen Murphy respectfully requests the Court to carefully consider if
9
anything would be gained by incarcerating him for the guideline range of 21 to 27
10

11 months, or even for any length of time. In the years since the offense, he has

12 become clean and sober. He has changed and improved his life, and in so doing, he
13
has earned respect in his community and is a productive community member.
14
Probation has determined that Mr. Murphy is eligible under statute for a
15

16 sentence of probation which clearly a far better alternative to incarceration in this
17 case.
18
5. RECOMMENDATION
19

20
Based on the facts in the record and the above memorandum, Stephen

21 Murphy asks the Court to vary or depart downward in its sentencing guideline
22
calculation. Then, after consideration of 18 U.S.C § 3552(a) and 18
23

24 DEFENDANT’S SENTENCING MEMORANDUM
AND MOTIONS FOR VARIANCE OR DEPARTURE
25 Page 12 of 13
U.S.C.§3561(c)(1) impose a sentence of 1 to 5 years probation, along with
1

2 restitution or community service.
3

4
SIGNED this 19th day of April, 2023 at Spokane, WA.
5

6
s/ Robert M. Seines
ROBERT M. SEINES
7 Attorney for Stephen L. Murphy
8

10
CERTIFICATE OF SERVICE
11
I hereby certify that on April 19, 2023 I electronically filed the foregoing
12

13
with the Clerk of Court using the CM/ECF System, which will send notification of

14 such to: Tyler H.L. Tornabene Assistant U.S. Attorney.
15

16
s/Robert M. Seines
17

24 DEFENDANT’S SENTENCING MEMORANDUM
AND MOTIONS FOR VARIANCE OR DEPARTURE
25 Page 13 of 13

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