Transcript of Sentencing — United States v. Patrick Parker Walsh, No. 1:22cr24 (Dkt. 40, N.D. Fla.)
Summary
At this January 31, 2023 sentencing in the Northern District of Florida (Case No. 1:22cr24), Judge Allen C. Winsor sentenced Patrick Parker Walsh to 66 months' imprisonment on each of two counts, to run concurrently, followed by three years of supervised release. The court ordered restitution of $7,817,167 payable to the Small Business Administration, a forfeiture money judgment in the same amount, a $200 special assessment and no fine. It found a total offense level of 25 and a guidelines range of 57 to 71 months, and said the sentence would be the same regardless of how the guidelines objections came out. The court questioned Walsh about assets and transfers; Walsh said an EIDL loan was used to purchase a property in Cisco, Texas.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
1 UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF FLORIDA
2 GAINESVILLE DIVISION
3 )
UNITED STATES OF AMERICA, )
4 )
Plaintiff, ) Case No: 1:22cr24
5 )
v. ) Gainesville, Florida
6 ) January 31, 2023
PATRICK PARKER WALSH, )
7 ) 11:03 AM
Defendant. )
8 _____________________________ )
9 TRANSCRIPT OF SENTENCING
BEFORE THE HONORABLE ALLEN C. WINSOR
10 UNITED STATES DISTRICT JUDGE
(Pages 1 through 101)
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21 LISA C. SNYDER, RPR, CRR
Official United States Court Reporter
22 111 North Adams Street, Tallahassee, FL 32301
(850)567-1374 * lisasnydercr@gmail.com
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24 Proceedings reported by stenotype reporter.
Transcript produced by Computer-Aided Transcription.
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1 APPEARANCES:
2 For the Plaintiff: United States Attorney's Office
By: JUSTIN KEEN
3 KATHERINE C. KERWIN
Asst. U.S. Attorneys
4 justin.keen@usdoj.gov
katherine.kerwin@usdoj.gov
5 111 N. Adams Street, Fourth Floor
Tallahassee, Florida 32301
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United States Attorney's Office
7 By: DAVID BYRON
Asst. U.S. Attorney
8 david.byron@usdoj.gov
300 E. University Avenue, Suite 310
9 Gainesville, Florida 32601
10 For the Defendant: Fisherbroyles LLP
By: NICOLE HUGHES WAID
11 Attorney at Law
nicole.waid@fisherbroyles.com
12 127 Montrose Rive, Suite 203
Fort Myers, Florida 33919
13
Verrill Dana
14 By: DAVID G. LAZARUS
Attorney at Law
15 dlazarus@verrill-law.com
1 Federal Street, 20th Floor
16 Boston, Massachusetts 02210
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1 P R O C E E D I N G S
2 (Call to Order of the Court at 11:03 AM on Thursday,
3 February 2, 2023.)
4 THE COURT: Good morning. Have a seat, please.
5 All right. We are here in case 1:22cr24. It's United
6 States versus Patrick Walsh.
7 We are here for a sentencing. Mr. Walsh is here.
8 Good morning, sir.
9 THE DEFENDANT: Good morning.
10 THE COURT: He is with his lawyers, Ms. Waid and
11 Mr. Lazarus. Good morning to both of you.
12 And for the government we have Mr. Keen, Mr. Byron,
13 and Ms. Kerwin, all Assistant U.S. Attorneys.
14 And Officer McCommon is here as our probation officer.
15 Everybody ready to begin, Mr. Keen?
16 MR. KEEN: Yes, Your Honor. Thank you.
17 THE COURT: Ms. Waid?
18 MS. WAID: Yes, Your Honor.
19 THE COURT: Okay. I will start by asking you,
20 Mr. Walsh, if you have had a chance to go through the
21 presentence investigation report and the addendum that went with
22 it. Have you seen those?
23 THE DEFENDANT: Yes, Your Honor.
24 THE COURT: Have you gone through those carefully with
25 your lawyers?
4
1 THE DEFENDANT: Yes, Your Honor.
2 THE COURT: And have they been able to answer any
3 questions you had?
4 THE DEFENDANT: Yes, sir.
5 THE COURT: Do you have any more questions for them?
6 THE DEFENDANT: No, sir.
7 THE COURT: All right. Very good.
8 Mr. Walsh, I tell you now that you have what's called
9 the right of allocution, which means you will have the right to
10 tell me anything you'd like in mitigation of your sentence.
11 That will be later in the hearing. Some defendants do, some
12 don't. You don't have to, but I want to make sure you know
13 that's an option.
14 All right. So we have got a lot to talk about. I
15 will start by noting for the record everything I have seen.
16 There have been a lot of recent filings, including two last
17 night.
18 Of course, I have gone through the presentence
19 investigation report. I have seen both sides' objections. I
20 saw the government's reply to the defendant's objection.
21 I saw the government's initial sentencing memorandum.
22 That's at Document 31. The defense's at Document 32, which I
23 did see had a number of letters attached to that. I have
24 reviewed all of those.
25 Then there was a supplemental filing about the loss
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1 amount from the defense at Document 33.
2 The government's memorandum regarding the property in
3 response to my question on Friday, that's Document 34. And then
4 the two filings last night, which I think were 35 and 36, one
5 from each side. That's right.
6 Is there anything else I should have seen, Mr. Keen?
7 MR. KEEN: No, Your Honor.
8 THE COURT: Ms. Waid?
9 MS. WAID: No, Your Honor.
10 THE COURT: Very good.
11 I think, probably a good starting point -- I do have a
12 lot of questions about the financial situation. It seems
13 like -- it's not clear to me what's what in that department.
14 And it matters for purposes of today in terms of weighing the
15 extent there was acceptance of responsibility. And, also, there
16 has been a request from the defendant not to impose a fine, and
17 certainly that's something that would be a consideration there.
18 But I wonder if we can start by addressing the issue
19 of the Texas house, Ms. Waid. The government filed something
20 yesterday saying that the defense had presented to the
21 government that it's one thing, and included some pictures about
22 some outbuildings and things that didn't look too nice. And
23 then the government found some realtor posting that painted an
24 entirely different picture. And I just wanted to see what we
25 are missing there in terms of -- it does look like something
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1 other than what it was presented to be by the defense.
2 MS. WAID: Sure, Your Honor.
3 So, the distinct question from the government was
4 what -- and I apologize because I am losing my voice so I'm
5 sorry. I will try to speak up as much as I can -- was whether
6 it was used for business purposes.
7 This is a business property. I think the biggest
8 question was; was it disclosed? And it was definitively
9 disclosed to probation that Mr. Walsh takes his family. He has
10 11 kids. They are homeschooled. So he takes them to this
11 property, which is in the middle of nowhere in Texas, to work on
12 his oil projects. So we are talking oil fields and projects in
13 the middle of Texas.
14 And is there a residence? Yes. Absolutely. There is
15 a residence on the property so that the family can stay there
16 while Mr. Walsh is working, which, again, was disclosed to
17 probation. He went there for two months. It was in November
18 and December to work on oil projects with his family.
19 The dog photo -- they took their dog. The dog got
20 lost. That's the Facebook photo.
21 They are working, though, and the pictures that were
22 provided by the defense to the government in response to their
23 question was, there is a shop. There are offices. They keep
24 calling them barndominiums. It's a place where actually people
25 can go and do business. People have stayed there for business.
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1 The four people stayed there that we provided an
2 affidavit for. Another person stayed there for a night. But
3 people come to the property because there is nothing else
4 around. I think the closest hotel is about 25 miles away. So
5 it's used a business property. It was disclosed as a business
6 property.
7 It is, technically, owned by a trust which was
8 disclosed to probation.
9 THE COURT: Where was that disclosed to probation? I
10 went back -- and I don't always see the underlying documents but
11 I did in this case, and it seemed like the disclosure that he
12 completed, that mentioned the trust, didn't provide the
13 information that the disclosure sought. Is that not right?
14 MS. WAID: So the question in the probation forms was:
15 Disclose the trust. It doesn't ask for an independent kind of
16 analysis of every single asset the trust owns.
17 Mr. Walsh doesn't, technically, own those. The
18 trustee technically owns those.
19 THE COURT: It asked for your interest in the trust
20 assets and he doesn't provide an answer.
21 MS. WAID: The interest is currently not making any
22 money, so as any beneficiary of the trust, there is no money.
23 And I think we provided the bank statement last night in our
24 filing. There is no actual money coming into the trust so he is
25 not getting any interest in that.
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1 THE COURT: But he put the money in the trust, right?
2 I mean, you don't dispute -- I want to make sure I understand
3 those because your latest filing says there is nothing wrong
4 with having a trust. As a general matter, that's a fair
5 statement.
6 In this case, at the time Mr. Walsh was stealing
7 millions and millions of dollars from the federal government, he
8 was creating this trust and putting assets into it; correct?
9 MS. WAID: I don't believe that -- he was putting
10 assets in the trust. The trustee would put assets into the
11 trust. Yes; that's correct.
12 THE COURT: Well, it was all his doing. You are not
13 disputing that?
14 MS. WAID: No. No, Your Honor.
15 THE COURT: In other words, he could have not put it
16 in the trust.
17 MS. WAID: Right.
18 THE COURT: And he took the money -- because one of
19 the things I want to talk about, too, a lot of your presentation
20 is that he wasn't buying Ferraris. He was helping out his
21 businesses and things like that. That's not entirely clear,
22 from the record, where all the money went. We have all the
23 money laundering transactions that went to a lot of entities
24 that weren't otherwise reflected in any of the materials I
25 have -- these other entities, I guess, some sort of business
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1 investments.
2 MS. WAID: Right.
3 THE COURT: But the bottom line is, he was taking
4 assets and putting them out of the reach of creditors in a trust
5 in Belize that he is the beneficiary of.
6 MS. WAID: He and his wife and his kids.
7 THE COURT: He and his wife are the primary
8 beneficiaries.
9 MS. WAID: Right. Right.
10 THE COURT: Okay. And --
11 MS. WAID: Although, just for the record, for
12 clarification, I don't believe that they actually get the
13 assets. I believe it's his descendents that get the assets from
14 the trust document, just to keep the record clear.
15 I am not disputing with you. I think that's --
16 THE COURT: Say that again.
17 MS. WAID: Is that right?
18 Yeah, I think the trust document actually says it's
19 his descendents that get the assets, not technically the
20 beneficiary, if I am accurate in what the trust document says.
21 I am not disputing --
22 THE COURT: After he dies?
23 MS. WAID: Right.
24 THE COURT: For the entirety of his life, and his
25 wife's life, the entire purpose of the trust is to support him
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1 and to do things that are in his interest; right?
2 MS. WAID: Correct.
3 THE COURT: Including, in your view, buying this
4 million dollar beautiful home in Texas; correct?
5 MS. WAID: For businesses purposes. Correct. I am
6 not disputing --
7 THE COURT: He is living in it.
8 MS. WAID: He -- technically he lives in Florida. He
9 stays there for business.
10 THE COURT: Okay.
11 MS. WAID: Yeah, in Texas. It's an oil company. He
12 does stay there with his family for a month or two at a time
13 when he was working on an oil project, and then he comes back to
14 Florida.
15 I'm not disputing with you, Your Honor, that is in the
16 trust's name and if the government wants to seek that property
17 if he doesn't fulfill his restitution, which he has a plan to
18 fulfill his restitution, I think that's an argument we can have.
19 I think our argument was more so it was disclosed to
20 the government. Probation knew exactly where it was. He wrote
21 to the probation officer and said, We are staying at this
22 business property. This is the address. We are going to be
23 here for two years.
24 I just don't want it to be colored on the record that
25 he was trying to hide something. I don't think he is. Whether
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1 or not the government has access to that money I think is, you
2 know, an argument that can be made if restitution is for some
3 reason not fulfilled, but --
4 THE COURT: Let me ask this: He has access to it to
5 some extent. It's not like a trustee just decided, Hey,
6 Mr. Walsh, I bought this million dollar property in Texas on my
7 own volition, right?
8 MS. WAID: Right.
9 THE COURT: And, in fact, the other Texas property
10 that was sold to pay a small portion of the restitution was
11 owned by the trust. Correct?
12 MS. WAID: It was owned by the company. It was
13 owned -- yes.
14 THE COURT: It was owned by Shiloh.
15 MS. WAID: Yes.
16 THE COURT: And your position is, Shiloh is entirely
17 owned by the trust?
18 MS. WAID: Yes. Technically, yes.
19 THE COURT: What do you mean "technically?"
20 MS. WAID: I mean, yes. In the trust documents it is
21 owned -- the asset is owned by the trust.
22 THE COURT: All right.
23 So he is paying restitution with assets that aren't
24 his?
25 THE DEFENDANT: Your Honor, the property in Cisco,
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1 Texas, an EIDL loan was used to purchase that property. So that
2 property was sold and the funds transferred back.
3 One important point regarding the trust is no actual
4 money was transferred into the trust outside of less than a
5 couple thousand dollars for trust fees.
6 THE COURT: I thought $200,000 in cash was
7 transferred.
8 THE DEFENDANT: No. Initially when the trust document
9 was set up, before any assets were actually transferred, this
10 was the intended -- what we would do, but no assets were
11 actually transferred outside Shiloh -- the company Shiloh was
12 formed under the trust.
13 Another point that is very important is that the Ovalo
14 property was purchased with outside capital. So no funds, from
15 the government funds, were funds that were held in a trust or
16 anything like that were used to purchase that property.
17 MS. WAID: There were investors that actually
18 purchased the property.
19 THE COURT: That purchased the home in Texas?
20 MS. WAID: Yes. It didn't come from -- it did not
21 come from Mr. Walsh's personal finances.
22 The first $10,000 Mr. Walsh put down to hold the
23 property open, but then investors actually invested in the trust
24 and purchased the property, not with Mr. Walsh's funds. And we
25 can provide that information to the --
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1 THE COURT: Well, that would be helpful because that's
2 contrary to my understanding.
3 The Walsh Family International and Irrevocable Trust
4 has outside investors?
5 MS. WAID: It has people who actually put money into
6 the trust to invest in Shiloh because it's actually a growing
7 company. It's not currently making any income, but the belief
8 is it will make some income and so there were outside investors
9 who actually purchased the property. And Mr. Lazarus can pull
10 that up for Your Honor.
11 THE COURT: Forgive my confusion, but I thought your
12 position was that Shiloh, the entity, owned the house. And then
13 that the trust owned Shiloh.
14 MS. WAID: Shiloh --
15 THE DEFENDANT: Sorry. It's really confusing.
16 So an LLC owns the property there in Texas. That's
17 owned by the trust.
18 THE COURT: This is the CR -- the LLC with the --
19 THE DEFENDANT: 1402 --
20 THE COURT: Okay. And you are the managing member of
21 that?
22 THE DEFENDANT: So, I incorrectly signed that on one
23 of the documents for the loan for that, but the trustee is the
24 managing member of that property.
25 All the funds used to acquire that property are funds
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1 from outside parties investing in Shiloh Oil products. So,
2 Shiloh -- the Shiloh Oil Company hasn't turned a profit yet.
3 It's kept in existence by outside investors.
4 THE COURT: Who get what in return? An interest in
5 what?
6 THE DEFENDANT: Different oil well projects. So, we
7 work together and identify an oil well project, people put money
8 together for an oil well project.
9 THE COURT: For a particular project and not for --
10 who has the financial interest in Shiloh?
11 THE DEFENDANT: So the trust owns Shiloh.
12 THE COURT: Exclusively?
13 THE DEFENDANT: Exclusively. Yeah.
14 THE COURT: Okay.
15 And have the entire -- well --
16 THE DEFENDANT: Myself and my family.
17 THE COURT: You and your family have the trust. The
18 trust has Shiloh. Shiloh has this CR something LLC?
19 THE DEFENDANT: For the specific property.
20 THE COURT: And that owns the house?
21 THE DEFENDANT: Yes.
22 MS. WAID: For this specific property. Yes.
23 THE COURT: Right. But you were saying, Ms. Waid,
24 that outside investors had some interest in the house.
25 MS. WAID: Well, the money came not from Mr. Walsh
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1 personally to purchase the house. They had put money in the
2 trust account, which Mr. Lazarus is pulling up for you.
3 THE COURT: So then outsiders do have an interest in
4 the trust, or outsiders do not have an interest in the trust?
5 MS. WAID: I don't believe they get any --
6 THE DEFENDANT: Yeah. So --
7 THE COURT: They don't get benefit but they put money
8 in? Who are these people?
9 THE DEFENDANT: Outside investors work together on oil
10 projects and that's how Shiloh Oil Company has any type of
11 capital from outside parties.
12 Those funds are then used to support oil projects, or
13 other things that benefit Shiloh Oil Company -- this house,
14 equipment, things like that for the oil company.
15 THE COURT: This doesn't make any sense to me.
16 You're saying there are outside investors who give
17 money to this entity that only you and your family benefit from.
18 THE DEFENDANT: No. So, there are oil projects,
19 right? So, let's say, we want to do an oil project called the
20 Davis Oil Lease, and different investors and Shiloh will all
21 come together and say, To get interest in that oil project we
22 are each going to put X amount of dollars to complete that
23 project. Say it's a million dollars to complete that oil
24 project. So, an investor may put in 250,000 and they get
25 25 percent of that project. And then, the revenue that that oil
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1 well produces, 25 percent will go to that oil investor
2 indefinitely.
3 THE COURT: Is it the case that then, for this
4 individual project, there would be yet another entity set up
5 that would have common ownership by say, Shiloh, and this other
6 person that is putting in 25 percent?
7 THE DEFENDANT: No. They get title to it. That's how
8 oil wells work. You get title to it. You don't own interest of
9 it. So, by investing in the project with Shiloh they get an
10 interest in that oil well in perpetuity.
11 THE COURT: They get interest in the well but not in
12 Shiloh?
13 THE DEFENDANT: Right. In the profit from that
14 project.
15 THE COURT: So, Shiloh would have a partial interest
16 in a particular well, and that these other people --
17 THE DEFENDANT: Shiloh would do the work and they --
18 MS. WAID: Use the property as base camp for their
19 work.
20 THE DEFENDANT: And they would supply the capital to
21 fund the project.
22 THE COURT: Okay.
23 But the bottom line is -- there is no dispute that he
24 incurred debt to buy this property, right? He guaranteed the
25 loan personally?
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1 MS. WAID: For the property, yes.
2 THE COURT: At a time that all of this was going on --
3 actually last summer, at a time that he was saying he was going
4 to pay $7 million back he was incurring debt for this home that
5 benefits him, tremendously -- this million dollar home? I mean,
6 do you see what I am saying? I am trying to make sure I have
7 the facts right.
8 MS. WAID: Right.
9 He personally guaranteed it. So, that's the debt to
10 the trust technically. And he has lived there when he is
11 working, yes. And the other people who are working on projects
12 have use to that as well.
13 So, if there is an oil well that they are working on a
14 project, the whole purpose of the property was this is a central
15 location in Texas so that they can get to whatever project they
16 need to go to.
17 THE COURT: Okay.
18 And so the -- he is not the owner or the managing
19 member of this LLC that owns it?
20 MS. WAID: No.
21 THE COURT: Give me just moment here.
22 (Pause in proceedings.)
23 THE COURT: So, the Cisco property, 7005 State Highway
24 183, that's been liquidated, correct?
25 THE DEFENDANT: Yes, Your Honor.
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1 THE COURT: Okay. That wasn't a trust property?
2 MS. WAID: But it was purchased with EIDL loan funds,
3 Your Honor. That's why we liquidated it. Returned the money to
4 the government.
5 THE COURT: Why is it listed as a real estate asset,
6 and the Oslo property is not, if they both -- the reason the
7 Oslo property, if I am pronouncing that right, was not listed is
8 because it's owned by the trust and not Mr. Walsh. The same
9 would be true of the Cisco property, correct?
10 MS. WAID: Yes, but the Cisco property had already
11 been identified by the government. We've been working with them
12 to actually sell it off.
13 THE COURT: How can you sell it off if it's trust
14 property?
15 MS. WAID: With permission from the trust.
16 THE COURT: Okay.
17 And the trust won't give permission to liquidate other
18 assets to pay restitution?
19 MS. WAID: I don't think the trust has been asked if
20 it would because Mr. Walsh already had a plan to pay off
21 restitution with other assets that he personally owns. So, in
22 the works right now, there are airships that he is selling.
23 There are properties that he was selling. He was supposed to
24 sell off his business but that fell through, so he is selling
25 off other assets.
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1 If he can't sell off, you know, his other assets to
2 actually make due on his restitution that would come into play.
3 But it doesn't need to because there are other assets which he
4 hopes to liquidate within the next 120 days, or so, in order to
5 pay off his restitution.
6 THE COURT: Okay.
7 And then the entirety of his business holdings then is
8 this Airsign Airship Group and its related entities?
9 MS. WAID: I'm sorry. I didn't hear your question.
10 THE COURT: I am looking back at the net worth
11 statement. In terms of businesses, it identifies just the
12 Airsign Airship Group.
13 MS. WAID: Yes. And I think it was ten million or so
14 was what it was listed as.
15 THE COURT: Six to nine.
16 Part of the problem here, I think, is that a lot of
17 times when you are talking about entities and things like that,
18 if an organization owns a piece of real estate, and an
19 individual owns that entity or organization, then the assets of
20 that business that that individual has is the company's, and the
21 company's asset is the real estate.
22 Here there is sort of a blending. You know, sometimes
23 on these documents it will say, Well, he owns this Walsh Land
24 Company -- I may have that name wrong -- and it owns property.
25 But then its' property show up as his assets. And then we have
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1 a discrepancy here that I identified about how the Texas
2 properties are treated differently. And it's hard to get --
3 It seems like a very messy situation. And when the
4 representation is made that he is doing everything he can, and,
5 therefore, has actually accepted responsibility, it's just hard
6 to find that to be the case looking at all of -- this messy
7 situation.
8 It would seem like -- it would seem like we would have
9 a different picture here. There are all of these entities. I
10 don't know what's what. I don't know who they are. There is
11 very little information on what this Shiloh is doing, how it
12 came to be. So it's hard for me to evaluate the acceptance of
13 responsibility.
14 Do you see what I am saying?
15 MS. WAID: I do. I completely understand what you are
16 saying, Your Honor.
17 I think that in the very beginning we had worked out
18 kind of a clear path for restitution that has been, you know --
19 we have been working with the government to do so, and have had
20 almost daily communications, or weekly communications, about
21 that path.
22 And so, we originally identified all of these
23 properties. Originally Path A was the sale of the business and
24 that fell through.
25 So, then Path B we actually submitted to the
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1 government the different properties and we have been providing
2 restitution when those properties have sold. It goes into
3 escrow and then it goes to DOJ. I believe there is 1.6 -- well,
4 technically 1.4. Two-hundred thousand has already gone to the
5 SBA.
6 From our purposes, it's been kind of a transparent
7 path of how restitution is going to come forth. And we have
8 other kinds of things in the works to sell off the rest of the
9 properties. And we have been trying and actually speaking with
10 the government in order to get that done in the best way
11 possible.
12 There was a chance for the Department of Defense to
13 buy the blimps; that fell through. We are consistently working
14 daily. Mr. Walsh is working daily to get these properties sold
15 in order to fulfill his restitution.
16 From our perspective, that's what he has been working
17 on, this kind of clear path of getting that done. And he hopes
18 to do so within the next 120 days, be able to pay off all of his
19 restitution.
20 THE COURT: Okay.
21 Let me ask one other thing: The PSR said the
22 beneficiaries of the trust were the wife and children, but, as a
23 factual matter, that's not entirely correct. That he is --
24 MS. WAID: He is a beneficiary.
25 THE COURT: Okay.
22
1 All right.
2 MS. WAID: We obtained the trust documents from the
3 trustee and provided that to the government, I believe,
4 yesterday.
5 THE COURT: Okay.
6 Let me hear from you, Mr. Keen.
7 MR. KEEN: As to which part?
8 THE COURT: As to anything you would like to say in
9 response to anything.
10 MR. KEEN: Okay.
11 As far as the asset portion of the government's
12 presentation, Ms. Kerwin is handling that part. I have other
13 things to say about other issues.
14 THE COURT: Okay.
15 MS. KERWIN: Good morning, Your Honor.
16 THE COURT: Morning.
17 MS. KERWIN: My name is Katherine Kerwin. I am the
18 financial litigation coordinator for the U.S. Attorney's Office
19 here in the Northern District of Florida.
20 As part of what we need to do here is ensure that full
21 restitution is repaid we have, you know, looked at a lot of
22 documents. And I agree with a lot of what you have stated so
23 far.
24 THE COURT: Let me just interrupt you real quickly. I
25 want to make something clear. My job here is not to enforce any
23
1 restitution amount.
2 The restitution has been stipulated to. It's going to
3 be the $7.8 million. That will be part of the criminal judgment
4 along with the forfeiture money judgment.
5 The reason I am so interested in this is because it
6 goes to the overall characteristics of the defendant, which is
7 an appropriate sentencing consideration.
8 So I just want to make that clear. I hope I did
9 earlier.
10 I didn't mean to cut you off but I just wanted to
11 state that.
12 Go ahead.
13 MS. KERWIN: Thank you. Yes, I understand that.
14 One of the reasons we needed to evaluate everything
15 was to see whether Mr. Walsh was being fully cooperative and
16 honest in what we were talking about as we are working through
17 this.
18 So the presentation by the defense regarding the trust
19 and the property was confusing and it's not just because it's
20 hard to understand. It's because it's intentionally confusing.
21 Just based on a review of all the documents, we show
22 that Mr. Walsh has controlled the sale and the purchase of these
23 properties.
24 Now to say that he miss-signed a document, I can't
25 really put any weight on that because we have one document
24
1 signed as the CEO of the trust, and another document signed as
2 the managing member of the 1402 LLC.
3 There were some questions about these investors. And
4 I have never heard people described as "investors" giving money
5 to Mr. Walsh to purchase these properties. But I look at the --
6 I have an Exhibit 4. It's the deed to secure debt and
7 security agreement. I do see some companies listed on here.
8 And what I am thinking is that they gave Shiloh Oil, and Mr.
9 Walsh, a loan to purchase the property.
10 If we look to page two of that --
11 THE COURT: This is Document 34?
12 MS. KERWIN: Thank you. Yes. Document 34. It would
13 be attached in the first batch of exhibits.
14 THE COURT: So 34-1?
15 MS. KERWIN: Yes. We are looking at Exhibit 4, which
16 would be, maybe, ten pages down.
17 THE COURT: I have got Exhibit 4. It's page 8,
18 document 34-1.
19 MS. KERWIN: Thank you. Yes. That's the deed to
20 secure debt and security agreement.
21 So what I was talking about these businesses I see in
22 the first paragraph. And then, on the second page, if we look
23 at little -- paragraph little (a) where they have agreed to
24 repay $575,000 by July 5th, 2024. So that is a benefit, I
25 guess, that the investors would get.
25
1 It's still not clear to me they are investors in
2 Shiloh Oil, anything beyond just businesses who gave a loan.
3 So, I don't have any other information to support --
4 THE COURT: I don't think that's disputed. I didn't
5 understand -- Ms. Waid can correct me if I'm wrong -- I didn't
6 understand them to say that other investors have a financial
7 interest in the entity Shiloh Oil LLC, or that may be the one
8 that's converted to a corporation now.
9 I understood the entirety of that entity was owned by
10 the Walsh Family Trust.
11 MS. KERWIN: I agree that Shiloh Oil is owned by the
12 Walsh Family Trust.
13 I also have to emphasize the Cisco, Texas property
14 that has been sold. For purposes of discussion of the assets
15 that Mr. Walsh and his businesses own, there is no distinction
16 whether it was purchased with fraudulently obtained funds or
17 purchased with some other funds.
18 For the purposes of the discussion, we need to talk
19 about all the assets. This is a big asset, and if Mr. Walsh can
20 control the sale of the Cisco property, he can also control the
21 sale of the Ovalo, Texas property.
22 And we have seen written in the letter of the
23 documents about how he did control the purchase back in July of
24 2022, while, presumably, the plea agreement was being negotiated
25 with the government. And now that property is owned by the
26
1 trust.
2 I am not necessarily disputing that the trust is not a
3 legal trust. I don't know if it is. Let's assume it is. But
4 the fact that this valuable property was moved beyond the reach
5 of the government, during the negotiations, is not a good faith
6 action.
7 May I address more about that property?
8 THE COURT: Certainly.
9 MS. KERWIN: So we have two buildings on that land; we
10 have the main house and then this, what the realtor called a
11 "barndominium." I have never heard that word before. It
12 doesn't really matter. It's an outbuilding that has a shop at
13 the bottom and a place to stay up top. I would venture to guess
14 that employees of Shiloh Oil never stay in that main house.
15 For Mr. Walsh to assert that he can own a valuable
16 property and use it for the benefit of his family, really, I
17 would say to the detriment of the government, that's not
18 something that we would agree with.
19 Pursuant to the plea agreement, his personal residence
20 is already protected. Unless he violates the plea agreement,
21 that property will be kept safe for him and his family -- the
22 one in Williston. Yes. Pardon me. The house in Williston.
23 And then --
24 THE COURT: And the one with the ten acres. Not the
25 surrounding hundred acres or so?
27
1 MS. KERWIN: Correct. Whether those surrounding acres
2 can be sold -- they might be encumbered by the mortgage that is
3 on the property. We will have to see.
4 But the business property appears to me to be a second
5 home for the family to stay in while Mr. Walsh travels on
6 business, which for a person that is not obligated to repay $7.8
7 million in restitution, that might be not a problem. But that's
8 what we are dealing with here.
9 So, that is not something that we would say is
10 indicating full cooperation and an indication to pay back the
11 restitution.
12 Going back to the plea agreement, we can assume that
13 he said: Yes, I want to repay seven-and-a-half million. But the
14 problem is that he has produced limited information to show here
15 are the properties that I have that will add up to
16 seven-and-a-half million.
17 As time has gone on, we have discovered more
18 property -- more and more property. Every time I have
19 discovered something new maybe it appeared that they -- that
20 defense has already provided the information.
21 A case in point would be about the blimps -- the
22 airships. When I wrote the sentencing memo I suggested that
23 there were eight airships that had not been disclosed. And then
24 yesterday, or the day before, the defense did provide me with a
25 list of actually 15 -- 15 airships that I was not aware of.
28
1 I would have included that but now we know it's not
2 just eight airships that he owns. It's actually 15. So I still
3 don't think that the value of those airships, or the businesses,
4 were properly disclosed for the PSR.
5 We need to talk about all the assets. Not just the
6 assets that Mr. Walsh would choose to tell the government about.
7 MS. WAID: Your Honor, can I clarify the record on
8 that one?
9 THE COURT: Sure.
10 MS. WAID: Those 15 airships were actually disclosed
11 to the government in an email in September. If part of the
12 government doesn't read communications, Mr. Walsh really
13 shouldn't be held liable for that.
14 THE COURT: Are they owned -- who owns the airships?
15 MS. WAID: Airsign Group, Your Honor.
16 But it was on September 13th, 2022, that was disclosed
17 to the government.
18 The reason that we were speaking about specific
19 assets, Your Honor, is because that's what the plea agreement
20 was. There was a negotiated Path B with specific assets. And
21 he has been completely transparent in trying to sell those
22 assets. I mean, we are talking about which escrow agent should
23 it go to, and how does it go there, and things of that nature.
24 So, for Ms. Kerwin to say that she just found out
25 about that yesterday, that may be accurate. But it was
29
1 disclosed to the government in September.
2 Going back to my -- he is not trying to hide anything.
3 He has been sharing all of this with the government. It was
4 literally part of a negotiation in a plea agreement that was
5 agreed to by the government. They agreed to the Plan B. And
6 now they might not like it, but we are still trying to actually
7 to fulfill Plan B -- fulfill all of the restitution.
8 THE COURT: So your position is he has been very
9 transparent with his finances through this process?
10 MS. WAID: So for the assets, we have been actually
11 speaking with the government the entire time about which assets
12 we were selling and how we are selling them, including
13 conversations with the Department of Defense and things of that
14 nature.
15 I have never spoken, frankly, in my 15 years this much
16 about restitution as we have in this case, so...
17 THE COURT: This is an unusual case in that regard.
18 I mean, obviously most -- 90 percent of our cases here
19 don't have any restitution. And, certainly, we don't have
20 instances where someone is asserting that they should have a
21 downward variance, or a downward departure, based on extensive
22 cooperation and acceptance of responsibility that is going above
23 and beyond to make sure everyone is made whole when we have all
24 of these different moving pieces. And as I understood you to
25 say a moment ago that the trust, or the trust documents, were
30
1 disclosed yesterday. And this case has been going on for quite
2 some time --
3 MS. WAID: The trust was disclosed, Your Honor. We
4 just didn't -- the documents. We had not -- and, just for the
5 record, that's Document 35-1, Exhibit 1, was what I was
6 referring to with the September 13th email in the government.
7 THE COURT: Right. And so the judge sees it for the
8 first time over the weekend before a Tuesday sentencing, and
9 months into this thing. So, I do -- I do have issues with the
10 idea that this has all been very transparent.
11 And you keep saying he has disclosed it. I am looking
12 at the financial disclosure. I am sure you have the same thing.
13 It says, Walsh Family International and Irrevocable Trust. The
14 form asks: What's the value of the trust? No answer.
15 What's the annual income from the trust?
16 What's your interest in the trust?
17 At that point, when I am looking at this, and the PSR
18 says the beneficiaries are the wife and children, it doesn't say
19 he is the beneficiary, which we know he is.
20 It doesn't say what his interest is here. It says it
21 has no "liquid money" -- I don't know what liquid money is, as
22 opposed to other money.
23 It doesn't say -- it says it does own Shiloh Oil
24 Company, Inc. which has operated at a loss. It doesn't say
25 anything about the assets that Shiloh, Inc. holds, which we now
31
1 know was a million dollar home.
2 It is not recognizing a profit. You can have a
3 company that doesn't recognize a profit that has a substantial
4 value. We all know that just from reading the newspaper.
5 And, so, this does not, in my view, come close to
6 telling the government the details that we need to know about
7 with this trust.
8 How would you know, from looking at this document,
9 that this trust, that he set up at the time he is stealing money
10 from the federal government -- millions and millions of dollars
11 designed for PPP, designed for victims, people who were
12 suffering economic losses from the pandemic -- he sets up the
13 money -- he takes the money fraudulently. Creates this trust in
14 Belize. Funds the trust. And then controls the trust to the
15 extent that he is signing documents affecting this sale of this
16 million dollar property in Texas that he takes his family to
17 live in. And then, on the day of sentencing says, We have been
18 very transparent about the trust. I don't understand that
19 argument at all.
20 MS. WAID: It's one of those issues, Your Honor, where
21 the trust had not come into play for more information because we
22 were working on the assets, via the plea agreement, to fulfill
23 the restitution.
24 THE COURT: But this financial disclosure is not just
25 about restitution. This is an obligation, signed under oath.
32
1 It's something that people do in these cases. I am troubled by
2 that.
3 And then, you know, the government's whole position
4 is, he is trying to hide assets. He has placed assets outside
5 in this trust. To the extent it's valid, and that's not for the
6 sentencing court to determine what happens, whether people can
7 attach those assets.
8 Again, my purpose is just to evaluate the overall
9 characteristics of this defendant and determine what is an
10 appropriate sentence. And, certainly, these type of actions are
11 relevant to that.
12 So, I reject the idea that it was adequately
13 disclosed. Just looking at the form right in front of me, it
14 clearly wasn't.
15 Now, maybe the government should have followed up more
16 on that. I don't know. But at any rate -- I didn't mean -- we
17 got a little off track, Ms. Kerwin, but you can go right ahead.
18 MS. KERWIN: Thank you.
19 You know the last thing I wanted to address was
20 Mr. Walsh's efforts to sell the properties.
21 Again, they were the properties that were disclosed on
22 the plea agreement in the Path B to repayment. And some of them
23 have been sold. We have seen the Cisco property -- the Cisco,
24 Texas property; a commercial property in Dixie County, and there
25 was one of the airships.
33
1 So some of the other properties, I have been informed
2 by the defense, are for sale; that is the 12 Northwest 5th
3 Place; that's the business address. As well as --
4 THE COURT: That's the $4 million industrial park?
5 MS. KERWIN: Yes.
6 And then, there is this Sweetheart Island, in
7 Yankeetown. Two of the properties are not for sale at this
8 point. And I would have liked to see them be up for sale by
9 now.
10 I have been informed by the defense that they are flip
11 houses, and they are being renovated or construction is being
12 done.
13 Now, if we are on what has been described as a "fire
14 sale" effort to sell the properties, flipping a house is not
15 that. We would expect to have more properties liquidated by
16 now.
17 For example, what I am talking about, specifically, is
18 8657 Northeast 150th Avenue. That's in Williston. And,
19 541 Southeast 1st Avenue, also in Williston.
20 So, if we had seen full cooperation on the effort to
21 sell the properties, I think those properties should have been
22 up for sale by now.
23 Unless the Court has any other questions regarding the
24 trust or the Texas property, that is all I have now.
25 THE COURT: Okay. Thank you, Ms. Kerwin.
34
1 Do you dispute, Ms. Waid, that a couple of those
2 properties are not currently listed for sale?
3 MS. WAID: We do, Your Honor.
4 We actually provided in our -- let's see -- our
5 exhibit yesterday, Exhibit Number 2, a letter that is dated
6 October 14th, 2022, that we provided to Mr. Keen, that included
7 all of the property -- Sweetheart Island, Dixie County; 12
8 Northwest 5th Place; 8657 Northeast 150th; 541 Southeast 1st
9 Avenue. And, with that letter, we actually provided the
10 listings of all of those properties and documents to support
11 that they were actually for sale and still remain for sale.
12 And, this morning, we also have provided to the
13 government updates on where some of those properties were for
14 sale.
15 THE COURT: So, the 12 Northwest 5th Place has been
16 for sale since October?
17 MS. WAID: Yes. The letter is dated October 14th,
18 2022, Your Honor, with a broker.
19 And the government has the listing agreement presented
20 in October with that letter.
21 THE COURT: Oh, the 12 Northwest -- that's not the one
22 I meant. That's the industrial property. There was a smaller
23 home I thought, too.
24 The 12 Northwest 5th is the $4 million office park,
25 right?
35
1 MS. WAID: Yes, Your Honor.
2 THE COURT: Which ones were you saying were not
3 listed, Ms. Kerwin?
4 MS. KERWIN: Pardon me, Your Honor. I am trying to
5 find it.
6 I had referenced an email that Ms. Waid had sent not
7 too long ago. It was definitely after the October date she
8 mentioned. I am trying to find it. I believe I attached it as
9 an exhibit. That's where I learned that these were flip houses,
10 and that one of them, it was -- either the 8657 property or the
11 541 property -- was not going to be finished with it's
12 renovations until March of 2022. That was based off an email.
13 THE COURT: I have that. That's Document 34-3.
14 That's an email from Ms. Waid from last week.
15 MS. KERWIN: Thank you.
16 (Indiscernible crosstalk)
17 MS. WAID: They were trying to get more value by
18 renovating while they were still for sale.
19 THE COURT: You say he has been working to get the
20 property ready for sale. But, you're saying it was already
21 ready for sale; is that what you are saying?
22 MS. WAID: Your Honor, they could sell it as-is, or
23 they could get more value out of it by actually renovating. So
24 it was -- as of October 15th, or 14th, Your Honor, with the
25 broker, listed for sale but they were actually working on it to
36
1 get more money out of it.
2 MS. KERWIN: Your Honor, just as a follow-up to that,
3 I guess I would ask, where are the funds coming from to renovate
4 that property? If it's going to increase the value that much, I
5 would ask: Where are the funds coming from?
6 THE COURT: Ms. Waid?
7 MS. WAID: I mean, Mr. Walsh does most of the work
8 himself, Your Honor. And so, just basic business income. He is
9 actually doing the work himself.
10 THE COURT: There is no building materials going into
11 this?
12 MS. WAID: No. There are building materials,
13 Your Honor.
14 THE DEFENDANT: So, we are still operating our
15 businesses. That was an agreement with the government. There
16 was no restriction on that. So, there is limited income coming
17 in. So, to maximize the ability to repay restitution quickly on
18 these properties we are -- we have been improving them and
19 getting them ready continually. And the listing agreements for
20 both of those properties with the broker was supplied on
21 October 14.
22 THE COURT: So the 8657 Northeast 150th is currently
23 listed for sale with a real estate broker?
24 THE DEFENDANT: So, on October 15th we provided the
25 listing agreement for that property. And we have been working
37
1 with the realtor to improve it, to get it ready for the maximum
2 value.
3 THE COURT: Let me ask this again. The 8657 Northeast
4 150th Avenue is listed for sale with a broker, or is not listed
5 for sale with a broker?
6 THE DEFENDANT: Yes, it is. I don't think he has
7 started marketing efforts on it yet. That's supposed to start
8 in February. But that's just, you know, working closely with
9 the realtor. So, on October 15th we supplied to the Court the
10 listing agreement for that property with the broker -- to the
11 government.
12 THE COURT: So there is a listing agreement but no
13 listing?
14 THE DEFENDANT: It's at the realtor's discretion on
15 that. We signed a contract with him to list the property.
16 THE COURT: Well, I am just trying to understand --
17 and I won't ask any more questions. You don't have to answer my
18 questions either, Mr. Walsh. You stood up and wanted to speak,
19 and I let you, and I had a couple of follow-up questions.
20 It seems -- well, Mr. Keen, you were standing up.
21 MR. KEEN: I don't know that I need to add anything
22 that the Court hasn't already said, Your Honor.
23 THE COURT: Okay.
24 I guess I will ask this, Ms. Waid: This email, it sure
25 looks like, based on your email from last week, that the 150th
38
1 Avenue house is not currently for sale. Maybe I am misreading
2 that.
3 It seems kind of consistent with a lot of what I view
4 as misdirection and half answers and things from the papers.
5 For what its worth, and I am not relying on Zillow, but Zillow
6 shows it as not being on the market, as I am looking at that
7 right now.
8 I am not prepared to make a finding about whether it's
9 currently for sale or not. I don't know that that ultimately
10 matters. What matters is whether this defendant is -- the
11 extent to which he has taken acceptance of responsibility, the
12 extent to which he is doing what he set out to do.
13 Yes, ma'am?
14 MS. WAID: I'm sorry, Your Honor.
15 THE COURT: You're fine.
16 MS. WAID: Just to be clear, the October 14th email,
17 where we actually gave the listings to the government, was
18 because Mr. Walsh had entered into agreements with a broker
19 owner for sale of all of these properties. And that person is
20 working with potential buyers to sell those properties. That's
21 the email that we had provided to the government this morning
22 but I have a copy right here.
23 It's with a broker developer. It has been since
24 October 14th. And that person is the person who is actually
25 seeking the buyers for these properties.
39
1 THE COURT: All right.
2 Okay. Anything else on the assets or any of the
3 finance issues?
4 MS. KERWIN: No, Your Honor.
5 THE COURT: Anything from the defense on any of those
6 issues?
7 MS. WAID: Nothing else, Your Honor.
8 THE COURT: Okay. Let me see if I had any other
9 questions. Let me look back at my notes here.
10 (Pause in proceedings.)
11 THE COURT: I do want to ask this -- this is something
12 that's new to the PSR. It's a footnote that relates to this
13 house that we have discussed at length in Texas. But the PSR
14 states in the new addition to the footnote, this is on page 20,
15 and it relates to paragraph 70, it says: Defendant provided a
16 down payment of $500,000.
17 Do you dispute that as a factual matter?
18 It's small print there.
19 MS. WAID: Sorry, Your Honor. Court's indulgence.
20 I'm trying to --
21 THE COURT: Sure. Take your time.
22 It's page 20 of Document 29.
23 MS. WAID: The bold?
24 THE COURT: Yes.
25 MS. WAID: Those were the -- that was the outside
40
1 money we have been discussing about earlier, Your Honor, from
2 the outside investors. And then I believe there was a loan for
3 the balance.
4 THE COURT: Okay.
5 So you do dispute that factual assertion?
6 MS. WAID: It was from him personally. Correct.
7 THE COURT: So, that's an objection to that. Is there
8 any response or evidence on that from the government?
9 MS. KERWIN: Your Honor, no; I don't have any proof
10 that that payment came from investors.
11 THE COURT: Okay.
12 That objection will be sustained and I won't consider
13 that aspect of the fact.
14 Okay.
15 Let's turn then to the objections. We will start with
16 the objection -- government's objection about whether
17 2B1.1(b)(17)(A) applies. This is the provision that applies the
18 two-level enhancement if the defendant derives more than a
19 million dollars in gross receipts from one or more financial
20 institutions.
21 It's not included in the PSR right now. The
22 government has objected and says it ought to be. Both sides
23 submitted legal argument on that.
24 I do want to make sure I have one clarification right;
25 the defendant is not asserting that the banks involved in the
41
1 PPP transactions were not financial institutions, as that term
2 applies here; correct?
3 MR. LAZARUS: Your Honor, if I may?
4 THE COURT: Sure.
5 MR. LAZARUS: We do not dispute that some of the
6 fraudulent loans were obtained from financial institutions.
7 THE COURT: Okay. And a million dollars, you don't
8 dispute that either, correct?
9 MR. LAZARUS: We don't. But we would add, or we would
10 suggest, Your Honor, that there is no evidence right now for the
11 Court to decide which of the various institutions were financial
12 institutions and which were non-banks. We don't dispute that
13 those facts may be there, but they are not before the Court in
14 the format that you currently have.
15 THE COURT: I am glad I asked the question.
16 I understood your objection about the government is
17 the ultimate risk-bearer. The government is the ultimate victim
18 here, which I think everyone agrees to.
19 I understood your objection to be just that the
20 financial institutions that did exist were not the sources of
21 the funds; that it was more akin to a wire transfer or something
22 like that. That's the way I understand the objection.
23 MR. LAZARUS: Thank you, Your Honor. And if I wasn't
24 clear in my objection, I apologize.
25 What you have just stated is the primary argument that
42
1 we are raising. But just along the lines of the lack of
2 foundation before the Court, there were a number of institutions
3 including NewTek, Harvest, Fountainhead -- they all call
4 themselves non-banks.
5 As the Court knows, there is a number of very
6 complicated definitions throughout the United States Code and
7 other regulations, what is and isn't a financial institution.
8 And we may very well agree on some of those. But there is no
9 record before the Court for you to decide that now.
10 THE COURT: I understood what you are saying about
11 NewTek, Small Business Finance Incorporated; what about Chase?
12 Do you dispute that Chase is a financial institution?
13 MR. LAZARUS: Not at all, Your Honor.
14 THE COURT: Okay. Well, then doesn't that make that
15 issue moot because he got over a million dollars from Chase
16 alone?
17 MR. LAZARUS: Your Honor, I believe that those were
18 loans that were applied for with Chase, but not funded, so those
19 would not qualify under the government's theory that disbursing
20 of loans was the harm caused to the lender, to bring that within
21 the purview of the enhancement.
22 THE COURT: Okay. I see what you're saying.
23 So you do dispute that Celtic Bank Corporation is a
24 financial institution for purposes of the guidelines?
25 MR. LAZARUS: I don't know whether I dispute it or
43
1 not. I dispute whether there is evidence before the Court right
2 now. They haven't proved it, Your Honor. It's their
3 enhancement. It's their objection.
4 THE COURT: Well -- okay.
5 Mr. Keen?
6 MR. KEEN: Yes, Your Honor. If I can have one moment
7 please.
8 THE COURT: Sure.
9 (Pause in proceedings.)
10 MR. LAZARUS: Your Honor, can I confer with Mr. Keen
11 for one moment?
12 THE COURT: Sure.
13 MR. LAZARUS: It may save us some time.
14 (Pause in proceedings.)
15 MR. LAZARUS: Thank you, Your Honor.
16 MR. KEEN: Your Honor, what I would proffer to the
17 Court -- and I will certainly present testimony, I am trying to
18 look in the statement of facts to see if we included which
19 financial institutions were federally insured. I thought we put
20 it in there.
21 I am going to start with ECF Number 1, page 5,
22 paragraph 11, which is the Information; Celtic Bank, Web Bank,
23 Renaissance Bank, Trustmark National Bank, First Home Bank and
24 JP Morgan Chase Bank, I believe, are all federally insured by
25 the FDIC.
44
1 If the defense -- well, a quick Google search would
2 find that answer, but if not I have a FDIC agent that can
3 testify.
4 MR. LAZARUS: Your Honor, it's not my job, I believe,
5 to Google things. But I will take counsel's representations
6 that the Indictment is accurate in that respect. He doesn't
7 need to put on a witness to that.
8 My point was simply that the record wasn't developed.
9 I am perfectly content to agree to that.
10 THE COURT: To agree to what?
11 MR. LAZARUS: That the institutions that he just
12 identified are, in fact, financial institutions.
13 THE COURT: All right.
14 Does that mean, to the extent your objection was that
15 Celtic Bank and others were not financial institutions, you are
16 withdrawing that?
17 MR. LAZARUS: Yes, Your Honor.
18 THE COURT: Okay.
19 MR. LAZARUS: I am withdrawing it with respect to the
20 ones that Mr. Keen has just specifically identified.
21 THE COURT: Which were which ones, Mr. Keen?
22 MR. KEEN: Celtic Bank --
23 THE COURT: Well, the Celtic Bank alone gets you over
24 a million?
25 MR. KEEN: Right.
45
1 MR. LAZARUS: That's correct.
2 THE COURT: So, then you are left with the objection
3 that we started off with, which is that it wasn't the source of
4 the funds. It wasn't the victim.
5 MR. LAZARUS: Yes, Your Honor. That's right.
6 THE COURT: All right. So, there is no issue about
7 the million dollars coming from Celtic, and there is no issue
8 about Celtic's status as a financial institution for purposes of
9 this guideline.
10 MR. LAZARUS: Correct. Your Honor.
11 THE COURT: All right.
12 Do you have additional argument on, or do you want to
13 stand on what you have submitted in writing?
14 MR. LAZARUS: Just very briefly, if I may, Your Honor.
15 THE COURT: Sure.
16 MR. LAZARUS: I will stand on what we submitted. I
17 think we covered the issue and we talked about the Muho case.
18 We agree with probation's reading of that.
19 We object to --
20 THE COURT: Well, probation's reading isn't your
21 reading. They are saying it's a little open and they are not --
22 your reading is they are just not the source.
23 MR. LAZARUS: They are not the source. They are not
24 the victim. The Muho case requires both.
25 THE COURT: Right. I am not sure that was probation's
46
1 ultimate conclusion.
2 At any rate, I will determine --
3 MR. LAZARUS: It's our position, and we would ask the
4 Court to find accordingly. I would say, Your Honor, that we
5 object to the use of the transcript that the government
6 introduced -- that they filed, I believe it was last night.
7 First of all, we ask for any Jencks, or other material
8 of a fact witness, if it's being used as statements here before
9 for the Court.
10 Obviously, hearsay is admissible at a sentencing
11 hearing so we are not challenging on those grounds. But we are
12 challenging it on the grounds that it should be of no weight for
13 this Court because it deals with an entirely different case.
14 It doesn't talk about Celtic, for example, or any
15 of -- how their internal operations work. It was a person from
16 the SBA, who was in charge of marketing, by her own words. And
17 so, as the Court may be aware, there has been a number of
18 publications, including one by the Inspector General to the SBA
19 about how poorly all of these programs were managed, and,
20 certainly, PPP and EIDL. And, so, it's just not reliable, we
21 submit, Your Honor, for some marketing person from the SBA to
22 opine as an expert on the flow of funds from the SBA through
23 financial institutions.
24 THE COURT: The funds came from Celtic Bank. You are
25 not disputing that, are you?
47
1 MR. LAZARUS: We are not disputing they came from
2 Celtic Bank, but what we would say is that the government, in
3 order for this to be actual harm to the financial institution,
4 as opposed to simply being affected by it, they need to give
5 you, Your Honor, facts to show they were deprived of use of the
6 money, or they were somehow victim, is what the Muho case says.
7 They were paid fees. Some of the banks were paid $15,000 fees
8 for administering these "no risk loans," from their perspective.
9 THE COURT: That doesn't mean it wasn't their money.
10 MR. LAZARUS: But it -- they get an application from
11 an individual. They then submit that to the SBA. The SBA then
12 says, here is your loan number. So, at that point, before any
13 money has left them, they know it's guaranteed. So, they are
14 just passing it on.
15 The Muho case talks about the different ways that that
16 might function. And this is very different from the Muho case.
17 And so, if the bank knows, when it lets the money go out the
18 door, that it cannot be a victim, Your Honor. So that negates
19 the findings that they are harmed and a victim.
20 The old reading of the guideline, before it was
21 amended, was broad --
22 THE COURT: What it knows is that it can't
23 ultimately -- it knows that the federal government is standing
24 behind it.
25 The government made an analogy of an insurance policy;
48
1 if someone physically robs a bank with a gun and the bank is
2 insured and made whole and they know that as soon as that robber
3 leaves that -- you know, that was a traumatic event, but at
4 least we are not going to have any financial loss because we
5 have an insurance policy. How is that different?
6 MR. LAZARUS: So because that's money that's in the
7 bank's general depository account. I am not an expert on the
8 inner-workings of a bank, Your Honor, but, in general, for
9 purposes of the analogy, right, that's money the bank has. And
10 it's there for them. They are holding it. They have custody
11 over it. They are going to distribute it how they want based on
12 their review of the different accounts.
13 THE COURT: That's exactly the situation with Celtic
14 Bank; is it not?
15 MR. LAZARUS: But this is a situation where someone
16 walks in -- they don't have to do anything other than pass on
17 paperwork. Once they pass the paperwork on the --
18 THE COURT: They have to have the capacity to make the
19 loan. It's their own funds. They can't lend the same dollars
20 to two different people.
21 MR. LAZARUS: That is right. It is their own funds,
22 but at the point they give it out there is zero risk that they
23 will be victimized. Even if a bank has insurance, it's a
24 different scenario. It's different money. They have said to
25 the SBA, This is who we intend to lend this money to. And the
49
1 SBA says, Here is your SBA number. Guaranteed. You have zero
2 risk.
3 And, so, were they used as part of this? Sure.
4 Were they harmed by and victimized, which is what's
5 more of a hurdle? No, because they got paid for the use of
6 their money. And so, you know, the time value of money, who
7 knows. But there is no foundation, is my point, before the
8 Court for that.
9 The witness who testified before Your Honor in that
10 other trial, that we were not party to, on cross-examination,
11 when the defense attorney asked questions of the witness, the
12 witness said -- I am quoting from page 103 of the transcript:
13 Again, I don't process the loans so I don't know
14 exactly how much fraud actually happened. Again my
15 responsibility for the SBA is to market the program. So I was
16 out there talking to borrowers. Letting them know the program
17 existed and they had the ability to apply.
18 So the witness doesn't -- other than establishing that
19 the money physically came from the bank, which we don't dispute,
20 the testimony doesn't offer any value for the Court.
21 We will rely, otherwise, on our papers.
22 Thank you.
23 THE COURT: Mr. Keen?
24 MR. KEEN: I don't have anything more to add, other
25 than what I have already presented.
50
1 THE COURT: Okay.
2 The government's objection is sustained as to this
3 one. The bottom line -- just looking at the plain text of the
4 guideline, it does apply here.
5 We had the million dollars change hands. It was from
6 a financial institution. Those pieces are not disputed. So
7 they were the source of the funds.
8 The fact that the federal government guaranteed the
9 loan doesn't mean that Celtic Bank was not the source of the
10 funds. It also doesn't mean they weren't the victim. I think
11 the analogy that the government had, which we discussed, was
12 that.
13 The fact that the government, ultimately, was made
14 whole doesn't change -- doesn't make them a non-victim. They
15 were still defrauded. They still issued a loan that they
16 wouldn't have without this fraud.
17 This is not like a situation where the money just
18 passes through the bank. Some of the cases that the defense
19 cited dealt with someone stealing from an individual and bank is
20 involved. You know, go to the back and get money out of an
21 individual's account and the bank is involved. But it's not
22 their money. They are just holding it.
23 Here, the bank was lending its own money -- Celtic
24 Bank was. It was reimbursed. And the government ultimately
25 bore the risk and the loss. But when the funds went out that
51
1 day they went out as a consequence of the fraud. The funds were
2 bank funds. They were funds owned by the bank. So, the bank
3 was the source. It was the victim.
4 That objection is sustained and so that leaves the
5 two-level increase.
6 The next objection is as to the loss amount. The
7 parties extensively briefed this too. And I have reviewed the
8 cases that both cited on this issue.
9 Of course it's been lurking out there for awhile and
10 maybe we will get some firmer guidance from the Eleventh
11 Circuit, or from the U.S. Supreme Court some day.
12 I think the only thing that I want to talk about today
13 is the government's specific argument about 1B1.3, modifying the
14 way we would look at the 2B language. And I wanted to ask a
15 couple of questions.
16 Is this going to be you, Mr. Keen?
17 MR. KEEN: Yes, Your Honor.
18 THE COURT: One: is there any Court that accepted
19 that? I looks broadly at where the language in 1B1.3, that you
20 are relying on, is referenced in the cases. I didn't see
21 anything particularly helpful. And I wanted to understand if
22 your argument is that that creates an ambiguity with the word
23 "loss" in the 2B guideline, or if it controls what the term
24 "loss" means, if that question makes any sense.
25 MR. KEEN: Okay, Your Honor.
52
1 First, I think I probably mentioned this in our
2 filings, but our position is that the best interpretation of the
3 guidelines, 2B1.1, includes intended loss and there is no
4 ambiguity. However --
5 THE COURT: That's not an argument that any Court has
6 accepted, right? I mean, I know there is not a whole lot on
7 this but the weight of the authority is on their side at this
8 point.
9 MR. KEEN: What I mean is, if you are looking 2B1.1,
10 in a vacuum, I think that argument isn't as strong. However,
11 you can't look at 2B1.1 in a vacuum, which is why our primary
12 position is if you look at 2B1.1, in concert with 1B1.3, and
13 when you look at them together, there is no longer ambiguity
14 because 1B1.3 says all harm that was the intended -- that was
15 intended by the object of the crime -- or the next sentence --
16 the omission that was done.
17 If we didn't have 1B1.3 then I would agree that we are
18 looking just at the text of 2B1.1.
19 I don't believe that any courts has addressed the
20 argument we are making, and the position we are taking, that you
21 have to read them in concert.
22 If you just look at the text of the two there is no
23 ambiguity.
24 THE COURT: Let me ask this: Wouldn't that -- it's an
25 intriguing argument. I don't think -- it's a fair argument.
53
1 The reason I have some pause is it seems like that
2 would be equally applicable to a number of other guidelines.
3 And it would seem to be saying that 1B1.3 makes attempt
4 applicable to every guideline when they are talking about
5 something that doesn't include attempt.
6 Just to use another example, we have how many guns are
7 involved in a felon in possession case? Well, suppose someone
8 intended to get some others. Does that mean that now we count
9 those?
10 Or in a child pornography case where you are counting
11 the images, do we say, well, he intended to get some others and
12 so the object of his crime included a thousand images instead of
13 the 500 he was caught with?
14 Help me understand how your reading would not do all
15 of that and alter the way the guidelines have been applied for
16 years and years and years.
17 MR. KEEN: For other guidelines, that don't involve
18 economic harm, I don't think it's an issue because those
19 guidelines are a little more specific.
20 But, in 2B1.1 context, when we are looking at loss,
21 our position is the best reading of what loss means in the text
22 of 2B1.1 is pecuniary harm. And pecuniary harm isn't as
23 intuitive as it would be, like, in a gun case. So, that's why
24 when you look at 1B1.3, and you look at what they talk about in
25 terms of, quote, all harms resulted from the offense, which
54
1 would be actual economic harm and intended economic harm.
2 That's why we don't believe there is ambiguity -- a genuine
3 ambiguity in the text of the guidelines.
4 But to answer the Court's initial question, if the
5 Court doesn't agree with that then we would say that, in order
6 to reach 2B1.1 and 1B1.3, then there has to be -- there is an
7 ambiguity now such that you look at 1B1.3 reading, which
8 includes in harm or intended pecuniary harm.
9 I think either way we get to the same result, which is
10 you have to read them in concert. But our facts in this case
11 tend to support that 2B1.1, on its own, implies economic harm
12 that's intended under 1B1.3.
13 THE COURT: Okay.
14 Anything else on the loss amount issue?
15 MR. KEEN: Well, yes. I -- well, not other than what
16 we put in our ECF 27, our objection. But I would note that
17 the -- and I put it in our sentencing memo -- that there exists
18 an upward departure ground.
19 If the Court ultimately rules against us on intended
20 loss I think the Court can consider that intended loss for
21 purposes of an upward departure of the guidelines and that's
22 something we would ask, if the Court is ultimately going to find
23 that you can't consider the intended loss for calculation
24 purposes.
25 THE COURT: I will say this, generally, whether you
55
1 call it departure or anything else, certainly it's a valid
2 sentencing consideration, what someone's intended loss were.
3 If you had two people who had both stolen $5 million
4 and one of them had intended to steal another ten million but
5 hadn't achieved that, and they were equal in all other respects,
6 certainly one would expect the second person would face a
7 harsher sentence. Ultimately, in this case, it may not make a
8 difference in what the ultimate sentence turns out to be.
9 Again, we are talking about a two point difference
10 here. Some of the cases, as you all have seen, involve an
11 intended loss of $10 million and actual loss of very little, and
12 it can make a significance difference there.
13 Any response from the defense on the guidelines issue,
14 and, specifically, if someone will address Mr. Keen's argument
15 about the 1B1.3?
16 MS. WAID: Your Honor, I think you said it best when
17 you were talking about the enhancement, that the plain language
18 of the enhancement is what we should be reading and that's
19 exactly what Dupree and Banks say.
20 And if you start applying 1B1.3 to all different
21 crimes then it's going to open up a rabbit hole of -- we are
22 completely missing the point of the sentencing guidelines, which
23 is the text is what the text is. And there is no ambiguity in
24 the word "loss." And I feel it's the whole thing in Dupree and
25 Banks, and that progeny, and I would argue what we argued in our
56
1 writing, in our memorandum, and that's what the Court said that
2 the plain language is what rules.
3 THE COURT: Well, here is the ruling: I'm going to
4 sustain that objection as well.
5 I think your argument, Mr. Keen, is, like I said, not
6 an unreasonable one. I initially didn't think much of it, to be
7 honest with you, but the more I looked at these things I think
8 it's actually a close question, ultimately. But at the end of
9 the day I am not persuaded.
10 We start with the acceptance of the recent en banc
11 case of Dupree, which says that Kisor overrules Stinson. It
12 asks whether the loss, as used in the guideline, is ambiguous.
13 I don't find that it is, either with or without the 1B1.3
14 overlay.
15 I think intended loss is something different than
16 loss, and guidelines recognize that by defining actual loss and
17 intended loss differently. So, I don't find any ambiguity there
18 and so will only consider the actual loss which is in the
19 neighborhood of 7.8 million.
20 As I said before, that doesn't mean the additional
21 intended loss, or attempted loss, can't be taken into
22 consideration. It absolutely should be, and will be.
23 But the objection is overruled.
24 Like I said, it's a close issue and maybe we will have
25 some clarity on this at some point in the future. But that's
57
1 the ruling there.
2 So, that's a two level decrease which is offset by the
3 two level increase that we just talked about.
4 So, the guidelines then end up in the same place,
5 which is a total offense level of 25 and criminal history
6 category of I and a guidelines range of 57 to 71 months.
7 Any other objections anything in the PSR, Mr. Keen?
8 MR. KEEN: No, Your Honor.
9 THE COURT: Ms. Waid?
10 MS. WAID: No, Your Honor.
11 THE COURT: Okay. So that's where we are.
12 With the guideline range, there will be a money
13 judgment of the $7.8 million and change; the number reflected in
14 the plea agreement.
15 There will also be restitution in that amount.
16 Any objection to that, Ms. Waid?
17 MS. WAID: No, Your Honor.
18 THE COURT: Mr. Keen?
19 MR. KEEN: No, Your Honor.
20 THE COURT: And then the conditions of supervised
21 release that are set out in the PSR seem appropriate. The one
22 change I would note is that any unpaid restitution would be
23 conditioned if he can make a greater payment, which I think
24 would square with what is in the agreement, of $15,000 a
25 quarter.
58
1 Any objection to doing it that way?
2 MS. WAID: I'm sorry, Your Honor. Could you just
3 repeat that?
4 THE COURT: Sure.
5 The supervised release conditions that are set out in
6 the presentence investigation report deal with fairly standard
7 things like reporting his financial conditions, and things like
8 that. One of the proposed conditions is that he pay $250 a
9 month, or something like that, toward unreimbursed restitution,
10 to the extent there is any. And it seemed like that would be
11 too small of an amount. I wanted to give you an opportunity to
12 weigh in on that.
13 MS. WAID: Was the proposal 15,000 a quarter?
14 THE COURT: A quarter.
15 MS. WAID: That's fine, Your Honor. Thank you.
16 MS. KERWIN: Your Honor, in light of all the confusion
17 regarding the trust, and which assets belong to the trust, we
18 wanted to request, as a condition of supervised release, that
19 Mr. Walsh would be restricted from transferring or purchasing in
20 the name of -- any property into that trust or any other trust
21 that might be created.
22 THE COURT: Or dissipating assets, generally, I guess
23 would be more appropriate.
24 MS. KERWIN: Yes. We do have -- we do have a
25 restriction on dissipating assets in the agreement. I believe
59
1 it restricts Mr. Walsh was dissipating assets. Had we possibly
2 known what we know now, we may have asked for a tighter
3 restriction on any businesses dissipating assets. But that is
4 what we are asking for, to protect any existing assets from
5 being further dissipated into the trust and beyond the reach of
6 the government.
7 THE COURT: The condition that's already in there
8 would be, you must not transfer or dispose of any asset, or any
9 interest in any asset, without the prior approval of the
10 supervising probation officer, unless you have satisfied all
11 financial obligations. Obviously, that would include moving it
12 to a trust.
13 MS. KERWIN: Unless a new LLC was created that was
14 owned by the trust, like 1402 LLC purchased the property and is
15 owned by the trust. I think Mr. Walsh could argue that he
16 didn't do it.
17 THE COURT: But what would that LLC be doing it with?
18 In other words, if he creates an LLC under the -- that's owned
19 by some other entity, like a trust, and then he gives money to
20 that LLC, he would be violating this condition. Would he not?
21 MS. KERWIN: He would be, yes. If it was his own
22 money that was transferred in. I think that there are
23 definitely potential problems with transferring other business
24 assets that he controls.
25 It is still our position that he controls Shiloh Oil.
60
1 So, if Shiloh Oil assets were transferred into another newly
2 created LLC, technically, he wouldn't have violated those
3 restrictions.
4 THE COURT: All right.
5 (Pause in proceedings.)
6 THE COURT: Ms. Waid, any objection to this condition:
7 You must not control any business entity or direct any
8 transactions of any business entity without probation officer
9 permission for purposes of this restriction or condition, that
10 includes business entities, it includes trusts or family trusts.
11 Any objection to doing that?
12 MS. WAID: So, I don't have any objection to him
13 notifying probation, or anything of that nature, Your Honor. I
14 just want to be clear that a trust, he doesn't -- he is not --
15 he doesn't control the trust or what the trust does, but we can
16 control what he does.
17 THE COURT: Right. So if he doesn't control the trust
18 then he wouldn't violate that. But, I mean, there is certainly
19 some indication here that he controlled, or affected
20 transactions, including the sale of the Cisco property, the
21 purchase of his house. I mean, this is not some blind trust
22 where someone is taking his assets and investing it for his
23 benefit and things that are unknown to him the way that some
24 presidents do, and things like that, to avoid conflicts of
25 interest. This isn't like that.
61
1 MS. WAID: Your Honor, I just wanted to make it clear.
2 To the extent his control over what his actions are, I don't
3 have an objection.
4 THE COURT: No. If the trust made a transaction and
5 it turned out he did not control it, he would not be in
6 violation of this, or he did not direct it. We certainly have a
7 record here of -- he is in there making transactions in an area
8 that you are telling the Court he doesn't have authority to make
9 them. He signed as the CEO of an entity. He, I guess, was
10 responsible for the conversion of this entity from an LLC to a
11 corporation -- the creation and registration of another
12 corporation. He is doing all of those things. And then at the
13 same time saying, Well, those are beyond my control. I don't
14 have anything to do with them. So, that condition will be
15 added.
16 Does that satisfy what you were after?
17 MS. KERWIN: Yes, thank you.
18 THE COURT: All right.
19 Any objection to anything else in the PSR from either
20 side?
21 MR. KEEN: No, Your Honor.
22 MS. WAID: No, Your Honor.
23 THE COURT: Very good.
24 Then what we will do -- we have been going about an
25 hour and a half here. The usual process is that I would hear
62
1 anything the defense wants to make, presentation wise. I don't
2 have if you have any witnesses to speak. Do you have any of
3 that?
4 MS. WAID: We do have one person who would like to
5 speak and Mr. Walsh would like to say something to the Court.
6 THE COURT: Okay.
7 So, we do all of that, and then the government
8 responds, and then I always give the defense the last word. So,
9 we will do it that way.
10 It might be -- we have been going about an hour and a
11 half. Might be good to give our court reporter a break and some
12 of you may want a break. So why don't we take a ten-minute
13 recess. We will continue after that.
14 I will note, we have a one o'clock hearing. That will
15 be postponed. So if anyone is here for that, that will not
16 start until at least -- give me one moment here -- until at
17 least 1:30.
18 We will take a ten minute recess.
19 (Recess taken 11:35.)
20 (Resumed at 11:35.)
21 THE COURT: Have a seat, please.
22 Everyone is back. Everyone ready to begin?
23 MR. KEEN: Yes, Your Honor.
24 MS. WAID: Yes, Your Honor.
25 THE COURT: Ms. Waid, I will hear from you.
63
1 MS. WAID: I think Mr. Walsh would like the speak.
2 THE COURT: Okay.
3 Will you come to the lectern here?
4 THE DEFENDANT: Absolutely.
5 THE COURT: Thank you.
6 If you will speak nice and slowly for our court
7 reporter, please.
8 THE DEFENDANT: Yes, sir.
9 I brought notes because I'm definitely nervous.
10 THE COURT: Take your time.
11 THE DEFENDANT: So I will start off by -- thank you,
12 Your Honor, for allowing me the opportunity to share just a few
13 words here.
14 I would like to first thank the prosecution. I feel
15 they have been very professional and fair throughout this whole
16 investigation and process.
17 So, -- sorry -- so, I grew up in a loving home with
18 parents who taught me to love and fear God.
19 As a young teenager, one example I vividly remember, a
20 time when my father was put in a position to either compromise
21 his convictions or lose his job, and without a moment's
22 hesitation he chose to lose his job.
23 Through my adult life I have been enormously blessed.
24 I have a very loving and patient wife. We have 11 beautiful
25 children: six boys and five girls. My oldest is 18. My
64
1 youngest is my daughter, , who we -- she is five
2 months and we affectionately call her .
3 Thankfully, they all take after their mother. They
4 are amazing kids. Probably the worst we have it is we wake up
5 in the morning with two or three of them in our bed every night.
6 We have had our share of trials throughout life but
7 consistently, have been blessed with a loving church, loving
8 church family, and friends that have supported us throughout our
9 life.
10 I have always tried to teach my children to love God
11 and put Him first in their lives. I have taught them that it is
12 in the moments when no one is watching or when you think your
13 current situation gives you an excuse or a pass; it's those
14 moments that really determines the measure of a man.
15 Sadly, and without excuse, when I was tested I failed,
16 and failed miserably.
17 I worked for years to build a reputation on integrity
18 and character, yet, when it really mattered, I didn't practice
19 what I spoke.
20 I recognize that there are real victims from my
21 crimes: Number one, the U.S. government and the country that I
22 love. I am very patriotic and passionate about America; the
23 Small Business Administration. I recognize that there are many
24 other small businesses who couldn't get the funding in a timely
25 manner because of my actions as well.
65
1 Finally, my wife, Hannah, and our children. They have
2 tried to be very tough and strong throughout this process. This
3 has been going on for a couple of years. But I realize the
4 depth of the raw pain that I have caused them, especially to my
5 wife, Hannah.
6 I'm sorry.
7 THE COURT: Take your time.
8 THE DEFENDANT: Hannah is one of the most selfless,
9 loving, patient people you will ever meet. And the pain that I
10 have caused her is a debt that I will never be able to repay.
11 And then just you, Your Honor, whatever sentence you
12 give me today will be far less than I deserve for what I have
13 done.
14 Thank you.
15 THE COURT: Thank you, Mr. Walsh.
16 MS. WAID: Mr. Walsh's pastor would like to say a few
17 words, Your Honor.
18 THE COURT: Okay. That will be fine.
19 THE WITNESS: Your Honor, first I want to say thank
20 you for reading the letter I wrote to you. That means a lot to
21 me.
22 THE COURT: Would you say your name for the record.
23 THE WITNESS: Daniel Kendall, K-e-n-d-a-l-l.
24 I am Patrick's pastor. Been his pastor for about four
25 years now. I am not a lawyer. I don't understand half of what
66
1 you all talked about this morning. But I do have a very close
2 relationship with Patrick, as I do with all of my flock.
3 I just want to share a little bit about what I know of
4 him for you to take into consideration as you make your decision
5 today.
6 One of the things you heard Patrick choking up about,
7 his love for his family.
8 When you hear of someone with 11 children sometimes
9 you get a stereotype in your mind of, maybe, their view of
10 women, and those types of things. But I can tell you, as a
11 pastor looking out on the congregation, he's got two kids in his
12 lap, he's taking the fussy ones out so his wife can sit there,
13 he is pushing them on the playground so his wife can have time
14 with her friends, he is taking his boys with him on business
15 trips. He wants them to go with him -- as was disputed this
16 morning about being in Texas -- because he wants to be with his
17 family.
18 In my private conversations with him, the thing that I
19 think has been one of the biggest pains is to watch his wife
20 hurt and to know he is the cause of it. And he has never
21 disputed that in any of my conversations with him. And that's
22 probably the greatest guilt that he carries is the pain that he
23 caused his family. To me, it takes a lot for someone to not
24 make excuses for how much they have hurt his family.
25 He is also a very generous man in terms of with his
67
1 business. I know that all businesses are intended to turn a
2 profit, but throughout the time I have known him he has employed
3 numerous people. More for their benefit, than for his own.
4 I will have give you example: There is a young man in
5 our congregation. Comes from a broken home. Really
6 directionless. Had no real direction for what he was doing in
7 life. Patrick hired him. I don't think Patrick would
8 acknowledge this, but pretty much created a job for him that he
9 could do, and has continued to do so.
10 When the young man wanted to get married, he could not
11 afford to find housing, Patrick helped out with the first and
12 last month's rent.
13 With all the stuff that has been going on in the last
14 couple of days, he gave the young man a raise to help him take
15 care of his family.
16 That's the type of person he is. There is a lot of
17 other young men who have started families that he has personally
18 helped by hiring them, even if that wasn't the best financial
19 interest of his company.
20 As it relates to my interactions with him, again, I
21 haven't been on all the interactions you have. I don't look at
22 financial documents.
23 One of the things, and I indicated this in my letter,
24 is he volunteered all the information to me. I know I am his
25 pastor and people confess their sins to me all the time. But
68
1 that is very unusual for people to come to me before they are
2 really caught. And I think it speaks of what he said this
3 morning. There is the genuineness of it. He is wrong. He
4 knows he was wrong. And he acknowledges he was wrong.
5 So, I thank you for the opportunity to speak and I do
6 not envy your position. And I thank you, as a citizen, for the
7 work that you do trying to balance all of these things.
8 But that's the Patrick I know.
9 Thank you, Your Honor.
10 THE COURT: Thank you, sir.
11 MS. WAID: Thank you, Your Honor.
12 Just briefly, the defense would be requesting for the
13 Court to look at the 3553(a) factors, obviously, and actually
14 grant a variance in this particular case.
15 This was a pre-indictment plea.
16 Mr. Walsh has no priors.
17 He has a 11 children. He has a loving wife.
18 And the majority of -- the majority of his life he has
19 actually dedicated to helping others.
20 I mean, this is somebody who actually was walking the
21 walk. And he says he taught his children to do that and when it
22 was his time, he made grave mistakes and he did. But the
23 majority, the vast majority of his life he did missionary work.
24 He volunteered. He helped people. He creates job. He takes
25 care of 11 kids, which is far more and better than I could do,
69
1 believe me.
2 He is in his community and he cares very, very deeply
3 about that community. And that's him as a person.
4 What occurred was Mr. Walsh got in over his head. He
5 actually started these businesses because he loves aviation.
6 That's what his joy was. That was his passion. He actually
7 volunteered to search and rescue missions with NASA. This is
8 what he always wanted to do with his life and he loved these
9 companies deeply.
10 He got in trouble. His business skills were not the
11 greatest and he started getting these high interest loans and
12 those were bringing down the company. He wasn't able to provide
13 for his family and he wasn't able to provide for his employees
14 and he made some really stupid mistakes by fraudulently getting
15 those PPP and EIDL loans.
16 He was trying to get those businesses back. Once the
17 pandemic hit, there was no worse industry than the blimps
18 industry. There was no going to Super Bowls or entertainment.
19 The whole world stopped, and he panicked. And he was desperate.
20 He made dumb choices.
21 But we would ask that you look at the remainder of his
22 life, and the earlier years when he actually built this company
23 with grit, and he actually took care of others, and he dedicated
24 his life to helping people. We'd ask that you actually consider
25 that when you are fashioning your plea [sic] and we'd request a
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1 variance, Your Honor.
2 Thank you.
3 THE COURT: Thank you.
4 Mr. Keen?
5 MR. KEEN: Your Honor, before I make my argument, in
6 general, there was a part of the sentencing memo that was filed
7 by the defendants regarding the civil matter, and I would ask if
8 AUSA Marie Moyle can address the Court on that portion only
9 before I argue.
10 THE COURT: That will be fine. I am happy to hear it.
11 I can tell you that it does -- it's not a significant
12 factor to me that there is a civil side of things. Obviously,
13 the law allows different types of relief in this type of
14 situation. The argument the defense made, in a sense, was -- I
15 think they used the term "piling on." But that this sentence
16 ought to be reduced, I think, was the ultimate request based on
17 the fact that there is a civil aspect of things. I don't think
18 that's very persuasive argument.
19 Certainly I am happy to hear from Ms. Moyle.
20 You will, of course, get a rebuttal to all of this.
21 MS. MOYLE: Judge, just briefly, I think we just heard
22 some of the words about Mr. Walsh and how he has accepted
23 responsibility. But, in terms of if it goes to your
24 consideration, we have disclosed to Mr. Walsh, since
25 February 2022, the mandatory treble damages with his actions.
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1 During that time, since then, they have not
2 represented, to the best of our belief, the finances accurately.
3 And, again, the False Claims Act provides for mandatory treble
4 damages. That is not optional. And we did not receive the
5 ability to pay forms which is the only way --
6 THE COURT: You did not what? I'm sorry?
7 MS. MOYLE: The ability to pay forms, which is the
8 only way the Department of Justice considers less than treble
9 damages, until December 22nd, 2022.
10 During the nine months, from February to December,
11 there were multiple, you know, offers going through the ability
12 to pay. And, as we heard here today, during that time he was
13 transferring assets.
14 And it wasn't until they requested the forms first in
15 September 2022, and then they delayed an additional three months
16 in providing them, despite multiple representations that they
17 were intended to be provided.
18 Your Honor, if there are no further questions.
19 THE COURT: Thank you, Ms. Moyle.
20 Mr. Keen?
21 MR. KEEN: Thank you.
22 I want to first start off of by -- I do commend the
23 defendant for resolving the case early when we reached out to
24 him through his lawyers by way of an Information. That's
25 admirable. And as the Court knows in other cases, there are
72
1 sometimes that we do that, we resolve cases quickly and we don't
2 waste the Grand Jury's time. So, for that we recognize that is
3 an acceptance of responsibility on the defendant's part.
4 What I was hoping we would come here and do, like I
5 told the defendant and his attorneys when we first met, was that
6 I was going to come in here with restitution having already been
7 paid in full. And I would tell the Court, just like I did in
8 our case a few years ago here, that this defendant has done
9 everything we can expect of a federal criminal defendant. That
10 was my intent. That was my hope. And we had that conversation.
11 And there has been back and forth communication since. And here
12 we are at sentencing.
13 And, as the Court noted, there has been a lot of
14 discussion about this trust, and about assets, and about the
15 property in Texas, and the outstanding restitution that still
16 has not been fully paid.
17 So, we are not in a position to praise the defendant
18 that much for where we are at.
19 I think it's important for the Court, as you noted, to
20 consider a few things: In the sentencing memo, the defense
21 creates the issue that the blimp industry was suffering. He was
22 panicking. He needed money.
23 And then it sounds like what he did was, instead of
24 just trying to keep his businesses afloat, he decided to take
25 the money and go another avenue -- the oil business and the real
73
1 estate business. And that's not really what the PPP funds and
2 the EIDLs were designed to do. It was designed to keep
3 employees paid and businesses afloat.
4 And I would analogize it to somebody who gets student
5 loan money school and decides, Well, school is not really for me
6 so I am going to buy a nice sports car with the money instead.
7 That money was designed for a particular purpose. And
8 as the defendant admits through his plea he stole it. And he
9 got it by fraud.
10 I would analogize the issue with the assets that we
11 have been talking about at length today, and how the defendant
12 has provided information to probation, or to the government.
13 And the argument that's been made consistently by the defense is
14 we told the government about it. And I have a couple of things:
15 First of all, at the time that we were negotiating
16 this case -- the plea agreement and the plea rider, those were
17 dated and filed early August of 2022. At that time, when we
18 were working on that, as the Court knows from the record
19 evidence already here, he was in the purchase of this house for
20 over a million in Texas.
21 That's not something we knew about that was clearly
22 conveyed to us.
23 The other thing is while he was discussing not only
24 the criminal case, but the defense has brought the civil case
25 into the sentencing by saying DOJ is looking to get damages on
74
1 the civil side. Knowing what civil had had against him for a
2 potential false claims case, the defendant was buying assets in
3 Texas and a pretty nice house.
4 All the while, we are operating under the
5 understanding that he was worried about his family home, here in
6 Williston, which is why we made very painstaking detail to carve
7 out that home so that the family is not destitute.
8 But it turns out the family clearly isn't going to be
9 destitute. They have a nice home and a lot of land here and,
10 apparently, there a second home with a lot of land, and a pool,
11 and a swing set over in Texas.
12 That's something that many families, who were affected
13 by the pandemic, from lost income, don't get to have. And
14 that's what the whole purpose of this benefit program is for.
15 So, to say that he told the government about the trust
16 and he told the government about this house, he wasn't hiding it
17 in the traditional sense. These things were hidden plain sight.
18 When you say it's a company provided home, that
19 doesn't mean what we have seen in these pictures in Texas.
20 That's not what comes to mind, at least for me. It's
21 misleading.
22 We ask the Court to consider that as it pertains, as
23 the Court, noted these 3553(a) factors because it goes to his
24 acceptance of responsibility, not just at the beginning when he
25 pled and says, I am going to try to sell all of these assets,
75
1 but what has he done all the way through.
2 What I would say is in this case, and I will keep it
3 simple, theft is theft. What he did was wrong. And I
4 understand, you know -- in his memo and here in Court, someone
5 with religious background and upbringing knows from a young age:
6 Thou shall not steal. And that's what he did. Not just once.
7 Not just twice. But if you look at the statement of facts that
8 goes on and on for that many pages, there was that many false
9 statements that he made to the government to increase the amount
10 of money he was eligible to receive for businesses that were
11 legitimate, but also for businesses that didn't have any
12 legitimate income, or employees, that would have qualified for
13 loans.
14 So, to say he needed money for his businesses; there
15 was a small subset that he got that he may have qualified for,
16 but, what he did was purely greed and he was looking out for his
17 own interests and that of his family. And that is evident in
18 what we were arguing about earlier with this property and trust
19 in Belize.
20 I would ask the Court to consider those things.
21 THE COURT: One thing I will note, and Ms. Waid will
22 get a chance to respond to this, there has been a lot of
23 representation in the papers that even though it wasn't done
24 legally, the ultimate result was to help other people, and save
25 other jobs, and things like that. I don't see that in these --
76
1 in the documents. I don't see evidence of that.
2 It's unclear where all the money went, but obviously a
3 lot of it went to his benefit and not to others.
4 Is there evidence that this went to pay employees and
5 thing like that?
6 MR. KEEN: Yes, Your Honor. I talked to Ms. Waid
7 about this yesterday. I was intended to call one of our agents
8 and get into all the money tracing. Ultimately, I thought it
9 wasn't as important of an issue to waste time on.
10 My understanding, and I talked about this with
11 Ms. Waid, there was some money that went to payroll. Out of the
12 eight million, my guess is between one and two million. But
13 there were a number of employees that were interviewed that were
14 part of the investigation who said they never got paid, or they
15 didn't get paid, and they had to live off credit cards and
16 whatnot during the time that the defendant was receiving money
17 from the SBA.
18 The understanding that I had was that some of the
19 lower-level employees may have gotten pay checks, but not all
20 the employees. Of the eight million that he got, I would say a
21 small portion went to payroll.
22 THE COURT: One to two million?
23 MR. KEEN: One to two million, is my understanding.
24 We laid out three-and-a-half million in the money
25 laundering transactions that were in the statement of facts.
77
1 That's not every transaction. We just picked a representative
2 sample of transactions that would otherwise qualify for 1957
3 statute.
4 THE COURT: What are those? Are those recipients that
5 are laid out in the PSR and the statement of facts, what are
6 they?
7 MR. KEEN: You are talking about the money laundering
8 transactions?
9 THE COURT: Yes.
10 MR. KEEN: Some are mortgages that he had on his
11 personal home and other properties.
12 I believe some of them may have been these high
13 interest loans that he was talking about.
14 I think some were for the acquisition of other
15 properties by some of those law firms. But I believe there is a
16 few title companies and/or lending companies, like Supreme
17 Lending -- if I am not mistaken, some of those were for the
18 property here in town, the family residence. And my
19 understanding is he took some of the federal dollars to pay off
20 his own personal mortgages.
21 But, again, I didn't get into the tracing of all of
22 that because at the end of the day none of that money he should
23 have received in the first place, even if some of it went to
24 employees but not all of it.
25 THE COURT: The Williston ten acre homestead still has
78
1 a note on it?
2 MR. KEEN: I believe so. There are notes on that and
3 I think the surrounding two parcels of land, if I am not
4 mistaken, which is something we will have to sift through going
5 forward on the restitution collection.
6 The other thing I would ask, as a side, like I
7 mentioned earlier, the attempted loss that's not accounted for
8 by the guidelines, I don't think the Court would treat it that
9 way, but simply put he shouldn't be given a pass because it's
10 not in the guidelines. Because that is a significant amount
11 that he tried to get that he was not successful in getting.
12 Does the Court have any other questions for me?
13 THE COURT: I don't think I do, but let me look.
14 (Pause in proceedings.)
15 THE COURT: No, sir. Thank you.
16 MR. KEEN: Thank you.
17 THE COURT: Yes, ma'am.
18 MS. WAID: Thank you, Your Honor.
19 Just quickly, for the record, the request, when we
20 refer to the civil, was for the fine portion of things, because
21 the treble damages would be a lot of money, even on the 7.8 --
22 we're talking over $20 million.
23 When we were talking about what Mr. Walsh, kind of,
24 spent the money on -- and I don't dispute. We did speak about
25 it yesterday at length. We actually met with the government
79
1 yesterday and have been as cooperative as possible. But it's
2 approximately, we believe, 2.7 million was paid in employee
3 payroll.
4 I don't have the benefit of discovery, because it was
5 pre indictment plea so I haven't seen those 302s. I do know
6 that come 2021, after -- while we were still going through the
7 pandemic, they actually did have to lay off employees because
8 the money had run out.
9 The majority of the transactions that occurred, that
10 are actually within the indictment, include kind of rent
11 payments for business locations, business loans were paid off.
12 As I described, Mr. Walsh got in over his head and had a lot of
13 high interest business loans that were secured by -- that was
14 properties.
15 So a lot of those -- a lot of the money went to pay
16 off those high interest loans. It went to pay rent.
17 He did switch gears, because he was unsure if the
18 airship business was going to be able to bounce back, and he did
19 buy other properties, and things like that, under Walsh Land,
20 because there was another business they had.
21 He knows that was wrong and he should not have
22 utilized that money to buy those properties. But it was in a
23 misguided attempt to actually change his business so that he
24 could, in fact, start making money and revenue again. So those
25 are kind of where that went.
80
1 So, in the sense of, we were never trying to state
2 that what he was doing with the money was correct. And, again,
3 completely misguided and completely wrong. But even as we
4 discussed the Laredo, Texas property, he's working.
5 He then went into the oil business to start that. And
6 there are actually affidavits that we sent to the government
7 from employees who were there last week on a business meeting.
8 They are actively working to make something work. To make
9 revenue come back and to rebuild these businesses as he has done
10 several times.
11 THE COURT: I think the last piece I am less sure
12 about. But, generally speaking, what happens with the funds,
13 you make the point he is not buying Ferraris or taking exotic
14 vacation. Certainly he is benefiting himself along the way.
15 But if, as the government acknowledges, you know, north of a
16 million, you say two -- north of two million was used to pay
17 employees, that's certainly a mitigating factor. And that's not
18 one that I gave much consideration to until just now because it
19 didn't seem like there was much back that up.
20 Given the government's representations in that regard,
21 I accept that.
22 MS. WAID: Thank you, Your Honor.
23 THE COURT: Anything else further from either side?
24 MR. KEEN: Want to clarify the numbers because I think
25 we are about 800 or $900,000 apart on our numbers.
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1 I believe -- when I said between one and two million
2 we were basing that on payroll that appears to have been paid to
3 employees.
4 The number Ms. Waid had, I think, includes payroll
5 that went to the defendant and his wife, who, my understanding,
6 was not an employee of the company because they have 11 kids to
7 take care of. So our numbers are different because they are
8 excluding the defendant and his wife's income, according to the
9 paycheck records.
10 THE COURT: Okay. Let me ask this, Mr. Keen --
11 MS. WAID: I will go --
12 THE COURT: Go ahead.
13 MS. WAID: I will go with the government's number,
14 Your Honor.
15 And could we briefly approach, too? Just briefly?
16 THE COURT: Sure.
17 (Following conference held at sidebar at 12:02 PM.)
18 THE COURT: Let me make sure that Ms. Snyder can hear.
19 MS. WAID: We also wanted to let the Court know, and
20 Mr. Keen and I talked about this yesterday, that Mr. Walsh has
21 been cooperating with the government. He has actually come in.
22 It didn't rise to the level of a 5K yet, because he provided
23 documents, and emails, and all of those things last week, so
24 they haven't been able to verify that. It may turn into a 5K,
25 it may not. But I wanted to let the Court know when I said
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1 "cooperation," I wanted to let the Court know that.
2 THE COURT: Thank you.
3 (Following conference held at sidebar at 12:03 PM.)
4 THE COURT: Then, in the memorandum, the defense, your
5 position is 18 months is appropriate.
6 Mr. Keen, you talked about an upward variance. I
7 don't know if you were requesting one, or ultimately it's the
8 government's position that the guidelines are sufficient, or
9 insufficient.
10 Tell me -- you sort of said in these circumstances a
11 variance could be appropriate, which, obviously, that's, you
12 know, a consideration in any case. But what's the government's
13 view on the sufficiency of the guideline sentence?
14 MR. KEEN: Well, our position would be that the
15 objection that the Court sustained, as to the intended loss,
16 would put us at another plus two, which would put us -- bump us
17 up slightly on the guidelines. But I say to give the Court -- I
18 mean, the Court knows it could always vary. But the departure
19 ground is there.
20 I think in this case if you just look at it, at a
21 30,000-foot view, we have a defendant who obtained $8 million
22 and tried to get 15-and-a-half million dollars, roughly, from
23 the government by fraud.
24 I don't know where the Court's head is at, as far as
25 the guidelines, and where the sentence ought to be. I know in
83
1 other cases we have had, we have had healthcare fraud cases
2 where the defendant received quite a significant sentence based
3 on that fraud and the money laundering.
4 We have also had a PPP and EIDL trial where that
5 defendant received an upward variance, but the large reason for
6 that was prior history.
7 THE COURT: A consideration -- every case is different
8 as you all know.
9 MR. KEEN: I was just pointing out the fact that the
10 Court can vary. It can always vary. But it can also depart
11 within the guidelines, based on the numbers. And we are not
12 that far between the guidelines with the plus two for intended
13 loss, in this case, as opposed to in other cases where, as the
14 Court pointed out, intended loss could be ten million and actual
15 loss could be zero.
16 I would submit, given what we have heard, that perhaps
17 the upper end of the guidelines that we are operating under
18 would be a fair balance. But I don't want to argue against
19 myself, of course, in case the Court was considering going above
20 the current guidelines.
21 THE COURT: Do you want to respond to any of that?
22 Like I said, I give the defense the last word but, sometimes,
23 there is a back and forth.
24 Anything further?
25 MS. WAID: No, Your Honor.
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1 THE COURT: Okay.
2 Give me just a moment.
3 (Pause in proceedings.)
4 THE COURT: Your request for a departure was just
5 contingent based on the objection that I resolved in your favor;
6 is that right, or was it not?
7 MS. WAID: Yes. Actually, it would have been resolved
8 by the loss argument, Your Honor.
9 THE COURT: Okay.
10 This is a difficult case. A lot of sentencings are
11 difficult. A sentencing is probably one of the more difficulty
12 things that a judge has to do.
13 This case is difficult because there is a lot of
14 aggravating factors and there is a good many mitigating factors
15 also.
16 What I am going to do is I'm going to tell you what
17 the sentence will be, then I will explain it in some detail, and
18 then I will formally impose it.
19 It is going to be a guideline sentence. It's going to
20 be in the middle of these guidelines. It will be 66 months as
21 to the each of the two counts; those will be concurrent,
22 followed by three years of supervised release.
23 I will tell you more about the supervised release in a
24 minute.
25 I start with the seriousness of the offense. This is
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1 an extraordinary serious offense. There was nearly $8 million
2 stolen from the government. That, in and of itself, of course,
3 is a terrible thing.
4 I do find an aggravating factor, I think, it was worse
5 because of what was the intended purpose of these funds.
6 I mean, from the government's perspective it's not an
7 ordinary bank fraud, if there is such a thing as an ordinary
8 bank fraud. But it was taking advantage of a program that was
9 designed to give immediate and rapid assistance to people who
10 really needed it based on the pandemic. And so, I do find the
11 nature of the program, that was the ultimate victim of this, is
12 an aggravating factor.
13 It was worse, too, in that you used the funds largely
14 for yourself. I did consider the fact that somewhere in the
15 neighborhood of $2 million went to others, that is a factor I
16 considered, but much of this went to advance your own financial
17 interests.
18 There is evidence that you stowed away much of it, or
19 a good bit of it, for future use. I find this whole episode
20 with the trust, while this was going on -- forming this foreign
21 entity that wasn't designed to help employees. It was designed
22 to help you and people close to you, putting it in Belize, away
23 from creditors, I think, is an aggravating factor, too.
24 I do find, based on everything that's been presented
25 to the Court, that there is continued sort of misdirection about
86
1 where these assets are and where they have gone. That's
2 consistent with the incomplete disclosures that we talked about.
3 I am going to direct the probation officer to submit
4 for filing, so it will be part of the record, the financial
5 statement that I addressed today and the attachment -- the real
6 estate attachment. Those will be filed under seal and those
7 will be part of this record. But those are things that I
8 reviewed.
9 So, there were incomplete disclosures. There was sort
10 of misdirection about what's going on with all of these
11 entities.
12 That goes to the extent of the acceptance of
13 responsibility and I will talk about that a little bit more.
14 You do get credit under the guidelines, the three-level
15 reduction, based on the acceptance of responsibility. I am not
16 taking that away. I think there would be a basis to do that,
17 but I am not doing that in this case.
18 I always do look at the extent of the acceptance of
19 responsibility, and what people do leading up to the sentencing
20 factors in to that.
21 So, we have somebody who, again, at the time that the
22 fraud was going on is setting up this foreign trust, putting
23 proceeds of it, or funds, assets, in a foreign trust away from
24 the creditors, and then it's set up in a way that will be for
25 your long-term benefit.
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1 Then we have the more recent activities: Buying this
2 house last summer. There is an argument it's not his house;
3 it's the trust house. It's clear that he was controlling the
4 transactions. I don't think there is any dispute about that.
5 We have the documents where he is signing as CEO of
6 the trust, managing member of the LLC. He says that was a
7 mistake. I don't know how someone mistakenly asserts in a
8 transaction like that that they are the managing member of a LLC
9 that they don't control. So, I do find there is still a lack of
10 acceptance of responsibility in that regard.
11 Then on top of that, there is the fact that these
12 funds ultimately went to you to buy this luxury home. There is
13 discussion, Well, the company needed it. This was a huge
14 benefit to him personally. I don't think there is any disputing
15 that. The company, to the extent it needed housing for
16 employees, could have done something different.
17 And then we have this series of transactions to get
18 there involving his asserting control of these entities that, on
19 the one hand, are there for his benefit, when they can benefit
20 him, but then when it comes to, you know, paying the victims,
21 they are not there. They are beyond the reach. So, I found
22 that to be a consideration but not as significant as some of the
23 other ones.
24 I do always look to the need to deter criminal
25 activity. I look at the need for general deterrence. There is
88
1 too much fraud out there, particularly in this PPP area.
2 The government pointed out in its memorandum, and we
3 have seen these cases before where, particularly, in white
4 collar crimes like this, there is a greater need to deter
5 because those are the types of people that are more rational
6 when it comes to making risk/reward analysis. So, I think with
7 a general deterrence there needs to be a substantial punishment.
8 I think a rational person -- if I impose the sentence
9 the defense has requested of 18 months, I think a rational
10 person might look at that and make a different risk reward
11 analysis than in the interest of society. Someone could say, I
12 am willing to do 18 months in prison if I take $7 million of
13 government money, stow it away in a foreign trust, and go to
14 prison for 18 months. So, I do think something less than what I
15 am about to impose would be insufficient for general deterrence.
16 I also find it's necessary for specific deterrence as
17 to this defendant for many of the same reasons.
18 The biggest aggravating factor here is the size of the
19 loss: Nearly $8 million in actual loss. I did sustain the
20 objection as to including the intended loss, but that's very
21 much a factor. That was another nearly $7 million of intended
22 loss that does exacerbate the crime here.
23 We also have the volume of the transactions. This is
24 not, you know, a single moment of weakness. It's been described
25 as a moment of weakness but it's not a single transaction.
89
1 There were many, many transactions. Different financial
2 institutions involved. Different loan applications. Different
3 types of loan applications. I think that's an aggravating
4 factor as well.
5 Also, the fact that he involved his wife's name, at
6 least in terms of applying for loans in her name -- and every
7 indication is it was without her knowledge, that's an identity
8 theft issue. But it's also just a really concerning factor that
9 someone would involve his wife and potentially implicate her in
10 something like that. So, that's an aggravating factor as well.
11 So, like I said, there are a lot of aggravating
12 factors. I think in many instances facts like these could lead
13 to an upward variance of an above guideline sentence. In this
14 instance I am not going to because of the mitigation.
15 Again, we talked about the acceptance of
16 responsibility. I find there is some here. Not the same amount
17 that maybe there could have been, or there are in other cases.
18 I very much considered the family situation. It's
19 obviously something that was mentioned in the papers, and I
20 certainly understand and appreciate the difficulties that it
21 places on a large family with lots of young children when the
22 head of the family is sent to prison. And that's something I
23 took into consideration. But it also wouldn't be fair to other
24 people who don't have large families to, sort of, get much of a
25 credit for that that absolves them of their criminal liability.
90
1 But I did consider the family situation.
2 It is unfortunate that in many instances families
3 suffer for things that they didn't do. That will be the
4 situation here and that in unfortunate, but, ultimately, it's
5 the consequence of the decision that this defendant made.
6 I did consider the fact that there was an indictment
7 waiver. That is certainly some mitigation. Not a tremendous
8 amount, but it's something that I considered.
9 I considered the facts about what we talked about at
10 the sidebar just now.
11 I also considered the letters and what the pastor said
12 today. I do find that there is a lot of good works that
13 Mr. Walsh has done in the community and other places. And I do
14 find he has been helpful to other people.
15 And, again, as I mentioned, some of this money -- a
16 substantial dollar figure, somewhere in the neighborhood of
17 $2 million went to others. And so, that's consistent with the
18 overall idea that he is helpful to others at, and I do accept
19 that, and I have considered it.
20 But given the seriousness of the offense, given the
21 need to provide specific and general deterrence, I do find --
22 and the need to provide adequate punishment -- I find that a
23 lesser sentence would be inadequate.
24 And I will note for the record that, based on those
25 considerations, I would make the same finding, even had I leaned
91
1 the other way, on the two-level enhancement regarding the
2 financial institutions.
3 This sentence is the exact sentence I would have
4 imposed had I sided with the defense on the financial
5 institution two-level issue because it's my judgment that
6 anything less than this would be insufficient to afford
7 sufficient deterrence, general deterrence, adequate punishment,
8 and to reflect the seriousness of the crime.
9 There will be supervised release for a term of three
10 years to follow. That will be on each of the two counts. Those
11 will be concurrent. It will be the standard conditions, the
12 mandatory conditions, and the specific conditions that are set
13 out in the presentence investigation report.
14 That will also be -- the modified amount of unpaid
15 restitution due will be $15,000 a quarter, instead of what is in
16 the PSR, which, I believe, is $250 a month. So, it will be
17 $15,000 a quarter toward the unpaid restitution.
18 And there will be an additional condition that will
19 say this: You must not control any business entity, or direct
20 any transactions of any business entity, without the approval of
21 the probation officer. For purposes of this condition, that
22 business entity includes any trusts and family trusts.
23 So that will be part of that.
24 On the mitigation, I should also note that I do find
25 the defendant remorseful. I do find he genuinely regrets his
92
1 conduct. And I considered that factor as well.
2 There will be -- no fine will be imposed, but there
3 will be a $100 special monetary assessment as to the each of the
4 two counts so that will be $200.
5 Ms. McCommon, did I cover everything?
6 Oh, actually, I did not. The restitution -- I
7 mentioned this earlier, but I will note it now and I will impose
8 it in a moment.
9 The restitution will be the $7.8 million and change.
10 It's $7,818,167. That will be due immediately. And then there
11 will be a forfeiture money judgment of the same amount entered
12 as part of this sentence as well.
13 The restitution will be directed to the Small Business
14 Administration. Is that correct, Mr. Keen?
15 MR. KEEN: Yes, Your Honor.
16 THE COURT: That will paid to the Small Business
17 Administration.
18 I will impose the sentence now, unless there is
19 anything we need to address before I do that.
20 We will talk about releasing things after the sentence
21 is imposed. Mr. Keen?
22 MR. KEEN: No objection.
23 THE COURT: I am asking is there anything else we need
24 to address before the sentence is imposed?
25 MS. WAID: Well, Your Honor, we would be asking for
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1 Pensacola, if possible.
2 THE COURT: I will include a recommendation that you
3 be housed near Pensacola. Mr. Walsh, that's ultimately up the
4 Bureau of Prisons. They make those decisions. But I will
5 include that recommendation.
6 If you will stand now I will impose the sentence.
7 Sir, you have been adjudicated guilty of the two
8 counts set out in the Information.
9 I do find that the presentence investigation report is
10 accurate and the findings in it are incorporated into this
11 sentence.
12 I will note that there will be -- I noted the
13 objections on the two issues that we discussed and then, also, I
14 did not consider the footnote that your counsel objected to
15 about the $500,000 going to the house. That was not considered.
16 Pursuant to the Sentencing Reform Act of 1984 and all
17 amendments, it is the judgment of the Court that you be
18 committed to the custody of the Bureau of Prisons to be
19 imprisoned for a term of 66 months.
20 That's as to each of the two counts, but those will be
21 concurrent, so it will be 66 months total.
22 This does address the seriousness of the offense and
23 all the characteristics of this defendant.
24 It's my judgment that this is sufficient, but not
25 greater than necessary, to comply with the statutorily defined
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1 purposes of sentencing.
2 I have considered all of the 3553(a) factors in
3 fashioning the sentence. I have talked about some of them. I
4 have considered all of them.
5 There will be no fine but there will be a $100 special
6 assessment pursuant to 18 USC 3013 for each count, for a total
7 of $200.
8 Restitution is ordered in the amount of $7,817,167,
9 payable to the Small Business Administration. That is due
10 immediately.
11 Forfeiture money judgment will issue in the same
12 amount.
13 Upon release, you will be placed on a term of
14 supervised release for three years. That's three years on each
15 count but those will be concurrent.
16 While on supervised release, you will be required to
17 comply with the standard and mandatory conditions, as well as
18 the specific conditions set out in the presentence investigation
19 report, with the two changes -- with the one change and the one
20 addition that I mentioned a moment ago. Those will be the
21 conditions.
22 The total sentence is 66 months' imprisonment. Three
23 years on supervised release, $200 special monitary assessment,
24 and forfeiture and restitution.
25 As I noted a moment ago, the sentence is the same as
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1 it would have been regardless of how the objections came out on
2 the guidelines objections.
3 You all can have a seat.
4 I am going to say a couple of other things and then I
5 will solicit objections. One, I did consider everything that
6 was said today. I considered everything in all the filings on
7 both sides. Some of those were very helpful as I approached
8 this.
9 One thing I didn't talk about, that I did consider, is
10 the need to avoid unwarranted disparities. And I went through
11 and looked, based on the cases that you submitted, Ms. Waid. I
12 am familiar, generally, with a lot of other case in this area.
13 There was one just yesterday. The Department of Justice had a
14 press release dated Friday, actually; 45 months for someone
15 who -- where the restitution was only 1.6 million.
16 Some of yours had different -- what you submitted had
17 different loss amounts. And, of course, every case is
18 different. But I did consider those cases that you submitted.
19 I considered a number of other cases, too. And I did take into
20 account the need to avoid unwarranted disparities.
21 Are there any objections to the sentence of the manner
22 in which it was imposed, Ms. Waid?
23 MS. WAID: No, Your Honor.
24 THE COURT: Mr. Keen?
25 MR. KEEN: No, Your Honor.
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1 THE COURT: Okay.
2 Like I said, there will be a recommendation for
3 Pensacola.
4 Mr. Walsh, you do have the right to appeal this
5 sentence. Any appeal would have to be filed within 14 days of
6 the written judgment. So today I pronounced the sentence
7 orally. It will be confirmed in a written judgment. That
8 begins the 14-day clock.
9 If you can't afford a lawyer for the appeal, one would
10 be appointed for you. If you can't afford to pay the cost of
11 the appeal, you can apply to proceed without cost.
12 You should talk to your lawyers about whether you do
13 or do not wish to appeal.
14 I want to make sure you understand the 14-day
15 deadline. Do you understand that?
16 THE DEFENDANT: Yes, sir.
17 THE COURT: Your lawyers can file a notice of appeal
18 for you or the clerk of court, if requested, will file a notice.
19 There has been a request that he be permitted to
20 self-report. I understand probation does not have an issue with
21 that. Is that correct?
22 PROBATION OFFICER: That is correct, Judge.
23 THE COURT: Mr. Keen, what's the government view on
24 that?
25 MR. KEEN: This isn't one of those cases where it's a
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1 mandatory remand and I don't believe there has been any
2 violation of the conditions, so we leave it in the Court's
3 discretion.
4 THE COURT: How much time is appropriate in your view,
5 Ms. Waid?
6 MS. WAID: Your Honor, we would ask for 90 to 120
7 days. The reason being, one, he has 11 children to figure out
8 what's going on there. And, two, he has done 1.6 million in
9 restitution, but there are additional properties being sold,
10 hopefully within the next 120 days, that it would just be easier
11 if he was there and be able to get the money back to the SBA.
12 THE COURT: So these are deals that are in progress?
13 MS. WAID: They are in progress at the moment,
14 Your Honor. We are also trying to work out with DOD, if we
15 possibly can, a sale of the blimps, which would make it easier
16 and quicker. We just need Mr. Walsh for that.
17 THE COURT: Mr. Keen, what's your view on 90 days?
18 That's far greater than probably is typical, but that's your
19 view?
20 MR. KEEN: I told the defense I would leave it to the
21 Court's discretion.
22 If the issue is needing Mr. Walsh's signature on some
23 documents, I think that could be accomplished in a number of
24 different ways through his lawyer's POA, something like that,
25 but...
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1 THE COURT: You are leaving it to the discretion.
2 MR. KEEN: I really don't want to take a position,
3 like I told them I wouldn't.
4 THE COURT: All right.
5 Then the government takes no position.
6 Here is what I am going to do, I'm going to put it at
7 60 days. We will find a precise date here in a minute.
8 If there are concrete reasons why that needs to be
9 extended, you can file a motion and we will deal with that then.
10 I will say this, and it relates to the sentence I just
11 imposed -- I talked about misdirection and things like that --
12 some of that was exemplified in some of the presentation today.
13 We talked about the house; was it for sale, was it not? Where
14 is the money coming from? Well, he is doing the work. Well,
15 aren't there supplies? Well, yes; there are supplies but the
16 company is paying for those. And he is in Texas but he is here
17 doing work on this rental home.
18 So, I'm not certain what will happen in these next 60
19 days. I have a hard time accepting that there are deals right
20 there ready to be closed. But, having said that, I am going to
21 grant 60 days. And if there is, like I said, a concrete reason
22 why it needs to be extended, you can file a motion. But it
23 would need to be something other than, we have this in the
24 hopper or we are working on this, things like that.
25 So we will do roughly 60 days. I will look at the
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1 calendar here.
2 April 3rd is a Monday. It's a little over -- 62 days.
3 Mondays are good. We will set it for noon on Monday, April 3rd.
4 Here is the way this works, Mr. Walsh: I am obligated
5 to remind you that if you fail to turn yourself in on time,
6 that's not only a violation of the current terms of your
7 release, but it's also a separate federal offense that could
8 lead to a new prosecution completely independent of all this.
9 You will leave here today on the same conditions that
10 you came in on. You will need to comply with those conditions
11 while you are out.
12 And you absolutely must turn yourself in on time.
13 This is not something where someone can afford to say, my car
14 broke down or anything like that. It's a must.
15 So noon on April 3rd.
16 You can turn yourself in here at the United States
17 Courthouse to the marshals when you first come in. If a
18 facility is designated by then, and I expect it will be, you can
19 alternatively turn yourself in there.
20 If you take that option you will be responsible for
21 your own transportation cost. So, again, the Bureau of Prisons
22 decides where you will be. If you are in, say, Texas, you can
23 take yourself there to that facility at your own expense, or you
24 can turn yourself in here and they will transport you.
25 Do you understand that?
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1 THE DEFENDANT: Yes, sir.
2 THE COURT: All right. That's that.
3 I will say this, in closing, these cases are
4 difficult. They are all difficult. This one perhaps
5 particularly so because there is a lot of aggravation, a lot of
6 mitigation, as I talked about.
7 This is -- in the grand scheme of things many
8 sentences are much longer than this that are imposed. At your
9 age, you will be able to come out and get on a different track
10 and perhaps have a great redemption story.
11 I have seen cases go in two different directions; one
12 is people learn from their mistakes and don't return to them and
13 have great success on the back end. Other times people go the
14 opposite direction and wind up back here.
15 Obviously, the supervised release serves a purpose of
16 making sure that you are doing what you are supposed to be
17 doing. But it is my hope that you will take the first path and
18 not be back here again. You certainly have the ability to do
19 it. You have a lot of support in the community. And there is
20 no reason why you shouldn't be able to get this behind you and
21 lead a productive and successful life after this. I hope that's
22 the outcome.
23 Anything else from the government?
24 MR. KEEN: No, Your Honor.
25 THE COURT: Anything else from the defense?
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1 MS. WAID: No, Your Honor.
2 THE COURT: We will be in recess until 1:45, when we
3 will begin what was going to be the one o'clock hearing.
4 (Proceedings concluded at 12:29 PM on Thursday, February
5 02, 2023.)
6 * * * * * * * *
7 I certify that the foregoing is a correct transcript
from the record of proceedings in the above-entitled matter.
8 Any redaction of personal data identifiers pursuant to the
Judicial Conference Policy on Privacy are noted within the
9 transcript.
10 /s/ Lisa C. Snyder 2/7/2023
11 Lisa C. Snyder, RPR, CRR Date
Official U.S Court Reporter
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