You Can't Cheat an Honest Man - James Walsh [45]
This was another way Holuisa and his cronies were like the old master—they claimed to be people of the people, in conflict with the ritzy financial establishment. Still, Holuisa and Simpson worked hard to not seem too hometown. They both drove leased Mercedes to underscore their success. They rented offices in the ritzy Crown Point, Indiana, suburb of Chicago and filled it with high-tech equipment.
But the stock market crash of October 1987 sent many investors to the sidelines, effectively drying up fresh money to perpetuate the scheme.
In the early spring of 1988, Certified’s dividend checks began bouncing. In April 1988, the Indiana State Police stepped in. Responding to complaints from investors, detectives raided Certified’s offices. They seized 25 boxes of records for investigation. The company ceased doing business the same day.
When the scheme finally collapsed, Holuisa had spent $3.5 million on himself and his friends and returned the rest of the money—slightly more than $8 million—to his investors in monthly payments.
In 1990, Holuisa, Simpson and one of their salesmen pleaded guilty to charges of mail fraud, conspiracy to commit mail fraud and failure to report a currency transaction.
Holuisa received a sentence of five years on the mail fraud count and 57 months—the maximum sentence—on the other two counts. In sentencing Holuisa, the court considered that “he never intended to invest the money taken from the victims,” and “that the intent of this defendant was to defraud all the victims of their money.”
Holuisa’s lawyer pointed out that he had partially repaid the investments. The court’s sentencing calculation had been based on a loss amount of $11,625,739. The lawyer argued that, because over $8,000,000 was returned to investors, the actual loss was approximately $3,500,000.
In contrast, the prosecutors argued that the full amount should be considered, even though much of it was returned, because the money was not invested as investors had been promised. The district court agreed with that rationale:
In this case the gravity of the completed crime was more substantial than the ultimate loss suffered by the victims. The defendant never intended to invest the monies taken from the victims; the intent...was to defraud all of the victims of their money.
Nevertheless, Holuisa appealed the sentence as inappropriately harsh. The appellate court hearing Holuisa’s case had considered the various calculations of fraud-related losses in an earlier case that involved another precious metals loan scam. In that case, it had written:
Both the Sentencing Commission’s notes defining “loss” and this court’s cases call for the court to determine the net detriment to the victim rather than the gross amount of money that changes hands. So a fraud that consists in promising 20 ounces of gold but delivering only 10 produces as loss the value of 10 ounces of gold, not 20. Borrowing $20,000 by fraud and pledging $10,000 in stock as security produces a “loss” of $10,000: “the loss is the amount of the loan not repaid at the time the offense is discovered, reduced by the amount the lending institution has recovered, or can expect to recover, from any assets pledged to secure the loan.”
In the Certified case, the full amount invested was not the probable or intended loss because Holuisa did not intend to keep the entire sum. Indeed, return of the money—that is, payment of earlier investors with the funds of later investors—was an integral aspect of Holuisa’s scheme, essential to its continuation. And, in line with his intentions, Holuisa returned over $8 million to investors before the scheme was detected.
The appeals court concluded that Holuisa should not have been sentenced based on amounts that he both intended to and indeed did return to investors. The court vacated his sentence and sent the case back to trial court for resentencing—involving less jail time.
The appellate court’s decision rubbed