United States' Opposition to Motion for New Trial

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Criminal No. 05-282 (MJD/JJG)

UNITED STATES OF AMERICA,
Plaintiff,

v.

(1)CHRISTOPHER WILLIAM SMITH,
Defendant.

UNITED STATES’ OPPOSITION TO DEFENDANT SMITH’S MOTION FOR A NEW TRIAL

The United States of America, by and through its attorneys, Rachel K. Paulose, United States Attorney for the District of Minnesota, and Nicole A. Engisch and Elizabeth C. Peterson, Assistant United States Attorneys, opposes Defendant Smith’s motion for a new trial pursuant to Fed R. Crim. P. 33.

Under Rule 33, the Court may grant a new trial only if the “interest of justice so requires.” The district court's authority to grant a new trial should be exercised "sparingly and with caution." United States v. Ramirez, 362 F.3d 521, 525 (8th Cir. 2004 (citations omitted). The defendant’s motion for a new trial should be denied because there is no merit to any of his four grounds of alleged error.

Defendant’s first two grounds of alleged error are that the Court erred by allowing only an “unqualified ‘expert’” to testify to the prevailing standards of medical practice in the United States and by instructing the jury to consider prevailing standards of medical practice in the United States when there was no
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qualified testimony concerning such practice. Both grounds are without merit because the government introduced qualified testimony both from Dr. Philip Mach and from Carmen Catizone concerning the prevailing standards of medical practice in the United States.

Dr. Mach testified about how he typically practices medicine (e.g., that he typically sees the patient in person, takes a medical history, and evaluates the patient’s need for medication) and about how his Internet prescribing for Defendant Smith was, in contrast, outside the usual course of professional practice and not for a legitimate medical purpose. There was no error in allowing1 this testimony. To the extent Dr. Mach gave his opinion that his own Internet prescribing behavior was inconsistent with prevailing standards of medical practice, that testimony was “(a) rationally based on the perception of the witness” and “(b) helpful to a clear understanding of the witness' testimony or the determination of a fact in issue.” Fed. R. Evid. 701. "Personal knowledge or perceptions based on experience is a sufficient foundation for such testimony." United States v. Oslund, 453 F.3d 1048, 1058-59 (8th Cir. 2006)(quoting In re Air Crash At Little Rock Ark., 291 F.3d
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503, 515 (8th Cir. 2002)). Because Dr. Mach was the issuing physician, his testimony that his Internet proscriptions were outside the usual course of professional practice and not for a legitimate medical purpose was sufficient evidence on this issue. See United States v. Hayes, 595 F.2d 258, 261 (5th Cir. 1979)(in case against pharmacist, court rejected sufficiency argument where “[t]he doctor himself testified that during the period in question he had no legitimate patients and that any prescriptions written by him were not written in the usual course of medical practice or for a legitimate medical purpose.”).

[1 To the government’s recollection, at the time Dr. Mach’s testimony was introduced, there were no objections by the defendant. Therefore, the matter must be reviewed under the plain error standard. See United States v. McBride, 862 F.2d 1316, 1319 (8th Cir. 1988) (holding that defendant's failure to object at trial generally precluded him from asserting the error in a motion for new trial absent plain error).]

But the government also offered qualified expert testimony from Carmen Catizone, M.S., R.Ph., D.Ph., on the issue of 2 prevailing standards of medical practice. The basis for his testimony was that Dr. Catizone, in addition to being the chief executive officer and executive director for the National Association of the Boards of Pharmacy, is a pharmacist, and pharmacists are required by law (21 C.F.R. 1306.04, among others) to determine for themselves if prescriptions are issued in the usual course of professional practice and for a legitimate medical purpose. Dr. Catizone testified that he had reviewed Government3

[2 The defendant did raise an objection to this testimony at trial. The objection was overrruled based on the arguments of the government which were consistent with the arguments made here.

3 It should be noted that there is no requirement that such expert testimony come from a licenced physician. United States v. Jones, 570 F.2d 765, 769 (8th Cir. 1978)(court upheld conviction after rejecting defense argument that there was no qualified expert testimony on the issue of outside the usual course of professional practice where government’s expert witness was not an M.D., but possessed a Ph.D. in pharmacology and taught at the Washington University Medical School).]

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Ex. 169, the information that Dr. Mach relied upon in issuing prescriptions, and based on his experience and expertise, he concluded that there was not enough information for a physician to determine whether or not a person actually needed the prescription order. Transcript of Testimony of Carmen Catizone at 31.

Specifically, he testified that “[b]ased upon state and federal law that defines a valid prescription and the conditions that are necessary to deem they’re valid, this information doesn’t meet that requirement. It also doesn’t meet the requirement of the standards of care for a prescription to be dispensed or a prescription to be prescribed.” Id. At 34.

The defendant’s next ground of alleged error is that the Court erred by refusing to instruct the jury that a good faith reading of 21 C.F.R. § 1306.04 could support an acquittal. There is no merit to this argument. “A district court has broad discretion when formulating jury instructions, and a defendant is entitled to a requested instruction only if ‘it correctly states the law and is supported by the evidence.’" United States v. Poe, 442 F.3d 1101, 1103 (8th Cir. 2006)(quoting United States v. Johnson, 278 F.3d 749, 751-52 (8th Cir. 2002)).

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It would in any event have been error for the Court to have instructed the jury in this drug conspiracy case that a defendant who incorrectly reads the law may be acquitted. There was no factual basis to support such a proposed instruction, as there was no evidence in the case whatsoever that the defendants acted in reliance on a misreading of 21 C.F.R. § 1306.04. None of the defendants testified, and no such evidence was otherwise introduced.

Secondly, the proposed instruction was an incorrect statement of the law applicable in this case. Essentially, the proposed instruction was based on the Supreme Court’s decision in Cheek v. United States, 498 U.S. 192 (1991). In Cheek, the defendant was charged with tax evasion and failure to file tax returns. In that context, the Court held that a good faith misunderstanding of the law or a good faith belief that one is not violating the law could negate willfulness. As the Court noted on the record following the charge conference, the Eighth Circuit has declined to extend the Cheek decision beyond the tax context in which it was decided. See, e.g., United States v. Hildebrandt, 961 F.2d 116, 188 (8th Cir. 1992)(refusing to extend Cheek’s holding to a false statement case because such a charge did not involve a willful failure to act, but the willful doing of a prohibited act); United States v. Dureinksy, 945 F.2d 1006, 1012 (8th Cir. 1991)(noting that district courts have wide discretion to determine appropriate jury
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instructions and holding that Cheek does not apply to a case in which the defendant was charged under a general conspiracy statute in which willfulness was not an express element, as opposed to a criminal tax statute).4

[4 In addition, the jury was properly provided with a good faith instruction, based on a standard instruction from O’Malley, Grenig, and Lee, Federal Jury Practice and Instructions, § 64.16, that informed the jury they could acquit the defendant if they agreed the defendant acted in the good faith belief that the prescriptions issued were valid. The jury was also instructed that a defendant’s good faith reliance on the advice of counsel (here there were at least four attorneys involved in rendering advice) could support an acquittal.]

The defendant’s final ground of alleged error is that the Court erred by refusing to instruct the jury that the seminal question of fact was whether the prescriptions in issue were issued in the usual course of Dr. Mach’s practice rather than in the usual course of the prevailing standards of medical practice in the United States. This argument, too, is without merit. While the defendants were permitted throughout the trial to argue, via cross examination and otherwise, that the “usual course of professional practice” is determined by a subjective standard, that has never been the law. The Courts that have examined the question of whether the “usual course of professional practice” is based on a subjective or objective standard have uniformly held that it is an objective standard. See United States v. Hurwitz, 459 F.3d 463, 478 (4th Cir. 2006) (“We believe that the inquiry must be an objective one, a conclusion that has been reached by every court to
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specifically address the question.”). These uniform holdings are based on the Supreme Court’s 1975 decision in United States v. Moore, 423 U.S. 122 (1975).

For example, in United States v. Vamos, 797 F.2d 1146 (2nd Cir. 1986), cert. denied, 479 U.S. 1036 (1987), the court stated:

The term “professional practice” refers to generally accepted medical practice; a practitioner is not free deliberately to disregard prevailing standards of treatment. United States v. Norris, 780 F.2d 1207, 1209 (5th Cir. 1986). In short, the doctor must act in the good faith belief that his distribution of the controlled substance is for a legitimate medical purpose and in accordance with the usual course of generally accepted medical practice. In United States v. Moore, 423 U.S. 122, 138-39, 96 S.Ct. 335, 343-44, 46 L.Ed.2d 333 (1975), the Court quoted and implicitly approved a jury instruction explaining that a physician could be convicted if the jury found that he knowingly distributed controlled drugs “other than in good faith for detoxification in the usual course of a professional practice and in accordance with a standard of medical practice generally recognized and accepted in the United States.” Id. at 138-39, 96 S. Ct. at 343-44.

797 F.2d at 1151 (emphasis added). The court further explained:

To permit a practitioner to substitute his or her views of what is good medical practice for standards generally recognized and accepted in the United States would be to weaken the enforcement of our drug laws in a critical area. As the Supreme Court noted in Moore, “Congress intended the CSA to strengthen rather than to weaken the prior drug laws.” 423 U.S. at 139, 96 S. Ct. at 343.

Faced with a situation similar to that presented here, the Fifth Circuit approved an objective standard for determining what constitutes accepted medical practice, stating, “[o]ne person’s treatment methods do not alone constitute a medical practice.” United States v. Norris, supra, 780 F.2d at 1209. The Sixth Circuit has likewise followed an objective “reasonableness” standard,
approving an instruction to the effect that a physician’s good faith dispensation of a controlled substance in the usual course of his professional practice “connotes an
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observance of conduct in accordance with what the physician should reasonably believe to be proper medical practice.” United States v. Voorhies, 663 F.2d 30, 33-34 (6th Cir. 1981).

797 F.2d at 1153 (emphasis added); see also United States v. Singh, 390 F.3d 168, 185 (2d Cir. 2004); United States v. Leal, 75 F.3d 219, 226 (6th Cir. 1996).

Additionally, in United States v. Norris, 780 F.2d 1207, 1209 n. 2 (5 Cir. 1986), the court approved the following instruction, which is very close to the language of the instructions in this case:

A controlled substance is prescribed by a physician in the usual course of a professional practice and, therefore, lawfully, if the substance is prescribed by him in good faith, medically treating a patient in accordance with a standard of medical practice generally recognized and accepted in the United States.

The cases in this area from the Eighth Circuit, in which courts assume an objective standard without any challenge to that standard by defense, are in accord. See, e.g., United States v. Katz, 445 F.3d 1023, 1029 (8th Cir. 2006); United States v. Jones, 570 F.2d 765, 769 (8th Cir. 1978); United States v. Plesons, 560 F.2d 890, 896 (8th Cir. 1977); United States. v. Kershman, 555 F.2d 198, 201 (8th Cir. 1977).

Thus, in this case, the jury was properly instructed that the phrase “‘[u]sual course of professional practice’ means that the practitioner acted in accordance with a standard of medical practice generally recognized and accepted in the United States.”
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The jury was also properly instructed that, “[i]n issuing prescriptions, practitioners are not free to disregard prevailing standards of treatment.”

CONCLUSION
For all of these reasons, and upon the record and evidence in this case, the government respectfully requests that the Court deny Defendant Smith’s motion for a new trial pursuant to Fed. R. Crim P. 33.

Dated: December 4, 2006 Respectfully submitted,

RACHEL K. PAULOSE
United States Attorney

s/Nicole A. Engisch
BY: NICOLE A. ENGISCH
Assistant U.S. Attorney
Attorney ID No. 215284

BY: ELIZABETH C. PETERSON
Assistant U.S. Attorney
Attorney ID No. 321564

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Ruling on Motion for New Trial

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
UNITED STATES OF AMERICA,
Plaintiff,

v.

(1) CHRISTOPHER WILLIAM SMITH
a/k/a “Chris Jonson,” a/k/a “Tony Spitalie,”
a/k/a “Bruce Jonson,” a/k/a “Robert Jonson,”
Defendant.

MEMORANDUM OF LAW & ORDER

I. INTRODUCTION
This matter is before the Court on Defendant Christopher William Smith’s Motion for a New Trial. [Docket No. 357]

II. BACKGROUND
Smith was originally indicted on August 23, 2005. The Third Superseding Indictment was filed on September 19, 2006, against four defendants, Christopher Smith, Bruce Lieberman, Daniel Adkins, and Darrell Griepp. Smith was charged with Count One, conspiracy to distribute and dispense controlled substances; Counts Two through Four, unlawful distribution and dispensing of controlled substances; Counts Five through Seven, introduction of misbranded drugs into interstate commerce; Count Eight, conspiracy to commit money laundering; and
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Count Nine, continuing criminal enterprise. Trial commenced on October 10, 2006. On November 22, 2006, the jury found Smith guilty on all counts. Smith now brings a motion for a new trial.

III . DISCUSSION
A. Standard
Under Rule 33 of the Federal Rules of Criminal Procedure, the Court may vacate any judgment and grant a new trial if the interest of justice so requires.

The decision of whether to grant a new trial is within the broad discretion of the district court. United States v. Dodd, 391 F.3d 930, 934 (8th Cir. 2004). The Court must “balance the alleged errors against the record as a whole and evaluate the fairness of the trial.” United States v. McBride, 862 F.2d 1316, 1319 (8th Cir. 1988).

B. Testimony of Dr. Mach
Smith asserts that the Court erred by allowing Dr. Philip Mach to testify to the prevailing standards of medical practice in the United States because he was not qualified as an expert. Because Smith did not raise this objection to Dr. Mach’s testimony at the time it was introduced, the Court reviews the propriety of his testimony under the plain error standard. United States v. McBride, 862 F.2d 1316, 1319 (8th Cir. 1988). “The plain error rule connotes error that has affected a defendant’s substantial rights, resulting in a miscarriage of justice.” Id.

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Dr. Mach testified to how he usually practices medicine and to how the internet prescribing that he did for Smith was not done in the usual course of medical practice and not for a legitimate medical purpose.

Under Federal Rule of Evidence 701, a lay witness can testify regarding his opinions or inference if those opinions or inferences are (a) rationally based on the perception of the witness, (b) helpful to a clear understanding of the witness’ testimony or the determination of a fact in issue, and (c) not based on scientific, technical, or other specialized knowledge within the scope of Rule 702.

As a lay witness, Dr. Mach could not testify to whether another physician’s actions met a particular standard of care; however, Dr. Mach was permitted to testify as to standard of care regarding his own issuance of prescriptions “based on his experience . . . [and to aid the jury’s] understanding of his decision making process in the situation.” Parker v. Cent. Kan. Med. Ctr., No. 02-3099, 57 Fed. Appx. 401, 404 (10th Cir. Feb. 24, 2003) (unpublished) (quoting Weese v. Schukman, 98 F.3d 542, 550 (10th Cir. 1996)). See also United States v. Hayes, 595 F.2d 258, 261 (5th Cir. 1979) (“The doctor himself testified that during the period in question he had no legitimate patients and that any prescriptions written by him were not written in the usual course of medical practice or for a legitimate medical purpose.”). Additionally, Dr. Mach’s limited testimony regarding whether he issued the internet prescriptions not for a legitimate medical purpose and not in the usual course of professional practice was not the
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only testimony regarding the prevailing standards of medical practice. The Government also provided the expert testimony of Carmen Catizone.

C. Expert Testimony Regarding Prevailing Standards of Medical Practice
Carmen Catizone, M.S., R.Ph., D.Ph., testified that he had reviewed the information upon which Dr. Mach relied when issuing prescriptions and that, based on his experience and expertise, there was not enough information for a physician to determine whether a person needed the prescription requested. He opined that the information did not meet the requirement for the standard of care for a prescription to be dispensed or prescribed.

Smith argues Dr. Catizone was unqualified to give testimony concerning the prevailing standards of medical practice in the United States for a prescription to be valid. Smith raised this objection during trial and was overruled.

Dr. Catizone is a pharmacist and the chief executive officer and executive director for the National Association of the Boards of Pharmacy. He is an expert in internet pharmacies and has testified before Congress on that subject. A pharmacist can be qualified to testify regarding the medical standard for prescribing a drug. See United States v. Jones, 570 F.2d 765, 769 (8th Cir. 1978) (holding that Government adequately proved medical standard for prescription of particular drug through testimony of non-M.D. when witness taught at medical school and had Ph.D. in pharmacology).
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Furthermore, pharmacists are required by law to determine if prescriptions are issued in the usual course of professional practice and for a legitimate medical purpose. 21 C.F.R. § 1306.04(a) (providing that “a corresponding responsibility rests with the pharmacist who fills the prescription” and that “the person knowingly filling . . . a purported prescription [issued not in the usual course of professional treatment] . . . shall be subject to the penalties provided for violations of the provision of law relating to controlled substances” ). The Court concludes that Dr. Catizone was qualified to opine regarding the prevailing standard of medical care for prescribing the drugs at issue in this case.

Additionally, it is “well established” that expert testimony is not required to prove that a doctor’s prescription writing is outside the usual course of professional practice. United States v. Word, 806 F.2d 658, 662-63 (6th Cir. 1986) (citing United States v. Rogers, 609 F.2d 834, 839 (5th Cir. 1980); United States v. Smurthwaite, 590 F.2d 889, 892 (10th Cir. 1979); United States v. Larson, 507 F.2d 385, 387 (9th Cir. 1974); United States v. Bartee, 479 F.2d 484, 448 (10th Cir. 1973)). Even without Dr. Catizone’s expert testimony, there was ample evidence for a jury to find that Dr. Mach’s prescription practice fell outside the usual course of professional practice.

D. Defense of Good Faith Reading of 21 C.F.R. § 1306.04
Smith asserts that the Court erred by refusing to instruct the jury that a
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good-faith reading of 21 C.F.R. § 1306.04 could support an acquittal.

“A district court has broad discretion when formulating jury instructions, and a defendant is entitled to a requested instruction only if it correctly states the law and is supported by the evidence.” United States v. Poe, 442 F.3d 1101, 1103 (8th Cir. 2006) (citation omitted). The Court did not err in refusing to give Smith’s proposed instruction because the proposed instruction was a misstatement of the law.

The proposed instruction was based on the Supreme Court decision in Cheek v. United States, 498 U.S. 192 (1991). In Cheek, the Supreme Court held that a good faith misunderstanding of the law could negate the willfulness requirement of the crimes of willful tax evasion, 26 U.S.C. § 7201, and of willful failure to file a tax return, 26 U.S.C. § 7203. Id. At 202-03.

The Eighth Circuit has not extended Cheek beyond the tax context. The Eighth Circuit explained, “Although ignorance of the law traditionally is no defense, Congress has carved out an exception to that rule in certain criminal tax statutes by making ‘specific intent to violate the law’ one of the elements.” United States v. Hildebrandt, 961 F.2d 116, 118 (8th Cir. 1992) (citing Cheek, 498 U.S. at 199-200). It explicitly held that “[t]he Cheek holding was premised on the complexity of the tax laws . . . If Cheek is to be expanded, that expansion must be made by the Supreme Court.” Id. at 119. See also United States v. Derezinski,
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945 F.2d 1006, 1012 (8th Cir. 1991) (noting that the holding in Cheek was premised on the fact that “‘willfulness’ is an express element in a criminal tax statute” and holding that Cheek did not apply to a prosecution for conspiracy to defraud the Internal Revenue Service because the government prosecuted the defendant “under a general conspiracy statute, not a criminal tax statute, and because ‘willfulness’ is not an express element of [the conspiracy statute]”). The crimes for which Smith was convicted do not contain a willfulness requirement; nor are they tax crimes. The Cheek holding is not applicable.

Furthermore, the Court did accurately instruct the jury that they could acquit Smith if they agreed that he acted in the good faith belief that the prescriptions were valid, even if that belief was unreasonable.

E. Definition of Usual Course of Practice
Smith argues that the Court erred by refusing to instruct the jury that the seminal question of fact was whether the prescriptions at issue were issued in the usual course of Dr. Mach’s medical practice rather than in the usual course of the prevailing standards of medical practice in the United States.

Based on extensive case law, the Court concludes that the law requires an objective standard for the phrase “usual course of professional practice.” See United States v. Moore, 423 U.S. 122, 124 (1975) (“[R]egistered physicians can be prosecuted under § 841 when their activities fall outside the usual course of
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professional practice.”); United States v. Katz, 445 F.3d 1023, 1030 (8th Cir. 2006) (noting that “the material issue [was] whether Dr. Katz wrote . . . prescriptions outside the usual course of medical practice and without a legitimate medical purpose”). See also United States v. Hurwitz, 459 F.3d 463, 479 (4th Cir. 2006) (“We believe that the inquiry must be an objective one, a conclusion that has been reached by every court to specifically consider the question.”); United States v. Feingold, 454 F.3d 1001, 1011-12 (9th Cir. 2006) (“[I]t is appropriate in cases such as this for the jury to consider the practitioner’s behavior against the benchmark of acceptable and accepted medical practice. Just how that benchmark is expressed to the jury-here, the district court defined that benchmark in terms of the ‘standard of medical practice generally recognized and accepted in the country’-is a matter within the district court’s discretion.”) (footnote and citation omitted); United States v. Vamos, 797 F.2d 1146, 1151 (2d Cir. 1986) (“The term ‘professional practice’ refers to generally accepted medical practice; a practitioner is not free deliberately to disregard prevailing standards of treatment. In short, the doctor must act in the good faith belief that his distribution of the controlled substance is for a legitimate medical purpose and in accordance with the usual course of generally accepted medical practice.”) (citing United States v. Norris, 780 F.2d 1207, 1209 (5th Cir. 1986)).

According, based upon the files, records, and proceedings herein, IT IS
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HEREBY ORDERED:

Defendant Christopher William Smith’s Motion for a New Trial [Docket No. 357] is DENIED.

Dated: December 14, 2006

/s/ Michael J. Davis
Judge Michael J. Davis
United States District Court

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Amendment to Detention Order

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

UNITED STATES OF AMERICA,
Plaintiff,
v.

(1) CHRISTOPHER WILLIAM SMITH,
Defendant.

ORDER

IT IS HEREBY ORDERED that:

Paragraph six of the Court’s April 11, 2007, Order setting forth the conditions of confinement of Defendant Christopher William Smith [Docket No. 370] is modified to read as follows:

In addition to the mail privileges delineated in paragraph 5 above, Defendant Smith may send outgoing mail to, and receive mail from, only: a) his mother, [redacted at his step-mother's request] Meili, his stepfather, [redacted at his step-father's request] Meili, and his sister, [redacted at his sister's request] Smith, at the address of Burnsville, Minnesota; b) Anita Smith, his son, M. S., and his stepdaughter, A. P., at the address of Prior Lake, Minnesota and c) employees of the CBS News television show, “60 Minutes.” Defendant Smith may receive mail from his father, Scott Smith, at the address of Lakeville, Minnesota, but may not send outgoing mail to Scott Smith. All mail to and from these persons shall be screened by the Government prior to being sent to the persons or given to Defendant Smith.

Dated: July 13, 2007
/s/ Michael J. Davis
Judge Michael J. Davis
United States District Court

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2nd Amendment to Detention Order

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

UNITED STATES OF AMERICA,
Plaintiff,

v.

(1) CHRISTOPHER WILLIAM SMITH,
Defendant.

ORDER

IT IS HEREBY ORDERED that:

1. Paragraph three of the Court’s April 11, 2007, Order setting forth the conditions of confinement of Defendant Christopher William Smith [Docket No. 370] is modified to read as follows:

Defendant Smith is permitted to meet in person with Katherine Menendez, of the Office of the Federal Defender, with regard to Defendant Smith’s appeal in this case.

2. Paragraph five of the Court’s April 11, 2007, Order setting forth the conditions of confinement of Defendant Christopher William Smith [Docket No. 370] is modified to read as follows:

Defendant Smith may send outgoing mail to, and receive mail from, his attorney, Joseph S. Friedberg, at the following address: Joseph S. Friedberg, Chartered, 150 South 5th Street, Suite 320, Minneapolis, Minnesota 55402. Defendant Smith may send outgoing mail to, and receive mail from, Katherine Menendez, at the following address: Katherine Menendez, Office of the Federal Defender, 300 South Fourth Street, Suite 107; Minneapolis, MN 55415. All such mail shall be monitored as per Oak Park Heights’ routine procedures for “legal” mail.

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3. Paragraph seven of the Court’s April 11, 2007, Order setting forth the conditions of confinement of Defendant Christopher William Smith [Docket No. 370] is modified to read as follows:

Defendant Smith shall be permitted to make telephone calls to his attorney, Joseph S. Friedberg, and, for purposes of discussing his appeal of this case, to attorney Katherine Menendez.

Dated: August 17, 2007

s / Michael J. Davis

Judge Michael J. Davis
United States District Court

United States' Statement with Regard to Sentencing

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Criminal No. 05-282 (MJD/JJG)

UNITED STATES OF AMERICA,
Plaintiff,

v.

(1)CHRISTOPHER WILLIAM SMITH,
Defendant. )

POSITION OF THE UNITED STATES WITH RESPECT TO SENTENCING AND MOTION FOR EVIDENTIARY HEARING

The United States of America, by and through its attorneys Rachel K. Paulose, United States Attorney for the District of Minnesota, and Assistant United States Attorney, Nicole A. Engisch, hereby submits this position with respect to sentencing regarding the above-captioned case. The United States also hereby moves pursuant to LR 83.10 (f) for an evidentiary hearing to resolve various contested enhancement and related issues, as described herein.

I. INTRODUCTION
The United States has reviewed the presentence report (PSR) in the above-referenced case and does not object to the factual findings or to the guideline conclusions found by the U.S.
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Probation Officer. Indeed, the Probation Officer found that each of the enhancements described herein should apply to increase the defendant’s sentencing guideline range.1

[1 The Probation Officer also concluded that various alternative enhancements should also apply, with the exception of one: committing a portion of the scheme outside the country, pursuant to U.S.S.G. § 2B1.1(b)(9)(B). The Probation Officer did not address that alternative enhancement one way or the other. That alternative enhancement is discussed below.]

This position pleading will primarily emphasize the guideline analysis applicable to the misbranded drug counts (referred to as “Group 2” in the PSR). Although the defendant was convicted of all nine counts of the Third Superseding Indictment, the guideline analysis is driven by his conviction on the three counts of introduction of misbranded drugs into interstate commerce and aiding and abetting the same (Counts 5-7), in violation of 21 U.S.C. §§ 331 (a), 333 (a)(2), 353 (b)(1), and 18 U.S.C. § 2. Moreover, as discussed further below, the United States concurs in the Probation Officer’s conclusion that the applicable guideline range is 360 months to life imprisonment.2

[2 The defendant’s ultimate sentence is also subject to a statutory mandatory minimum sentence of 20 years based on his conviction of operating a continuing criminal enterprise, in violation of 21 U.S.C. § 848.]

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II. STATEMENT OF FACTS

A. Smith Engaged in Pre-Pharmacy Internet Scams
Long before Christopher Smith established his illegal online pharmacy, he was already an experienced Internet scam artist. Beginning at least in the 1990s, when he was in his teens, and continuing well into his 20s, Smith sold a wide variety of dubious if not outright fraudulent products through large-scale unsolicited email (spam) campaigns. The products Smith spammed included human growth hormones, penis enlargement pills, “phermone” concentrate, and an online gambling casino (in which winners were not paid their winnings). Smith also set up a fake escrow service to receive proceeds from the purported sales of Dell laptops and plasma TVs. Customers who paid Smith never received any product.

On November 20, 2002, one of the victims of his scams, Time Warner, obtained a permanent injunction against Smith, his business at the time, Rizler, Inc., and others from the U.S. District Court for the District of Minnesota (Case No. 0:01cv1077 (DDA/FLN)), enjoining them from selling cable TV descramblers which illegally stole cable signals.

While there were very few laws governing spam email campaigns until the CAN-SPAM act was passed in late 2003, Smith nonetheless engaged in a wide-variety of illegal activity surrounding his spamming endeavors. For example, in addition to defrauding customers out of their money as discussed above, Smith stole email
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accounts and used computer programs to obtain customer account information and passwords. He also set up fake email accounts using stolen credit numbers, and in turn used those fake email accounts to spread his spam.

B. Smith Started India-Based Online Pharmacy
But it was not until early 2004 when Smith hit upon his most lucrative scam of all: selling prescription drugs over the Internet. Smith began his online pharmacy scheme by importing prescription drugs directly from India. He distributed those drugs to customers without requiring a prescription and without the involvement of any physician. Smith marketed the prescription drugs through web sites and through spam emails.

C. Smith Shifted to U.S. Based Online Pharmacy
Smith’s overseas Internet pharmacy was successful but not without its problems, and starting in about July 2004, Smith began shifting his Internet pharmacy to the United States where he could maintain more control over the operation. Smith also initiated a series of steps to make his online pharmacy appear legitimate to customers and regulators. The online pharmacy began operating under the name Xpress Pharmacy Direct, among others.

D. Smith Recruited Single Physician to Issue Sham Prescriptions
In the July 2004 time frame, Smith enlisted a single physician, co-defendant Philip Mach, to issue sham prescriptions after appearing to “review” the customer orders. The customer
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orders, which were primarily for the addictive pain killer, hydrocodone, were obtained primarily through Smith’s various Internet web sites (xpress-rx.com was the main site) or telemarketing call centers, including call centers in Burnsville, Minnesota and the Dominican Republic. Smith also maintained a customer service center based in the Philippines run by his associate (hereinafter, “Philippines associate”).

Using a computer log-on system that was directed by Smith, Mach approved the orders in large batches at a time, rarely rejecting any orders, and most of those he did reject were ultimately approved. Over time, he approved a total of more than 70,000, in quantities of upwards of hundreds of orders per day. At Smith’s direction, Mach had no face-to-face, telephone, or other contact with the customers apart from a limited online questionnaire completed by customers. There was no effort by Smith’s online pharmacy to verify the customer’s medical complaint, obtain an adequate patient medical history, or perform any sort of examination or testing before approving the orders. No medical records were obtained from the customers or their primary care physicians, and none of this customer information was ever verified. Many customers made up the information or simply left portions of the questionnaire blank. No one was required to have a prior prescription.

Throughout the entire duration of his online pharmacy, Smith was only able to retain one physician, Dr. Mach, for the purpose of
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making his online pharmacy appear, at least on the surface, to be legitimate. But Smith, who was in charge of setting up and managing the entire online pharmacy operation, knew there was no legitimacy. On several occasions, Smith even obtained prescription drugs for himself and family members, using a facsimile signature of Mach that was on file and bypassing even the minimal questionnaire process.

E. Smith Employed Telemarketers to Push Drugs to Addicts
Smith’s Burnsville call center business was known as Online Payment Solutions, a business which Smith incorporated in Minnesota. The call center employed telemarketers practically around the clock, and Smith directed them to “sell, sell, sell,” to existing and prospective customers.

Smith recognized from very early on that many of his customers were addicts, but to Smith, that just meant repeat sales, and he exploited their addictions by having his telemarketers place frequent calls, asking, “Are you ready for a refill?” Smith encouraged his telemarketers to sell multiple drugs to customers at one time, and he advised them that there was no problem placing multiple orders for hydrocodone-based drugs all on the same day, so long as the orders were for different brand names (e.g., Norco, Vicodin, etc.). At Smith’s direction, the amount of “medical” information that customers were provided was minimal and of no
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consequence, except insofar as it made the operation appear to have some legitimacy.

F. Smith Recruited a Few Small Pharmacies By Lying About Operations
Smith took other steps to make his business appear legitimate. Because his online pharmacy did not have a license from the U.S. Drug Enforcement Administration (“DEA”) to distribute controlled substances, Smith needed licensed U.S. pharmacies to fill the prescription drug orders. Smith intentionally targeted small, struggling independent pharmacies because he believed they would not be inclined to ask many questions and would quickly become economically dependent on him.

Even the handful of pharmacies that agreed to work with him, however, asked some questions, and to allay their concerns, Smith repeatedly lied about how his operation worked. For example, in the pharmacy contracts, on his web sites, and in other communications, Smith falsely told pharmacies that he had numerous physicians and pharmacies located throughout the United States, that his online pharmacy employed an FDA-approved online questionnaire, and that there was meaningful communication between the prescribing physicians and the customers placing orders.3
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Despite these lies, most prospective pharmacies and physicians that he tried to recruit flat out refused, in many cases advising him or his associates that his operation was illegal.

[3 The misrepresentations to pharmacies dovetailed the misrepresentations that Smith made to the public via his web sites and in communications by telemarketers. The web site misrepresentations included statements that Xpress Pharmacy Direct employed a “third-party physician’s network,” a “network of doctors,” and that the information supplied by customers would be “reviewed by one of our physicians.” Additional misrepresentations included statements that Xpress Pharmacy Direct had its own manufacturing laboratories (“our state of the art laboratories”) to manufacture all major name brand pharmaceuticals, and that it had its own pharmacy (“our pharmacy”) to fill the orders.]

In what became a critical point for Smith’s illegal enterprise, in February and March 2005, the DEA issued a directive to pharmacies throughout the United States, warning that

[a] patient completing a questionnaire that is then reviewed by a physician, hired by or working on behalf of an Internet pharmacy, does not establish a doctor/patient relationship. A consumer can more easily provide false information in a questionnaire than in a face-to-face meeting with the physician. It is illegal to receive a prescription for a controlled substance without the establishment of a legitimate doctor/patient relationship, and it is unlikely for such a relationship to be formed through Internet correspondence alone.

In response to that directive, most of the pharmacies working for Xpress Pharmacy Direct contacted Smith or his associates and indicated they would cease filling drug orders for the company unless they were assured the online business was legal. Smith, who was overheard reacting angrily to these letters and discussing plans to flee from authorities, ultimately arranged to have a false
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letter prepared and sent to the pharmacies. That letter, which was ultimately signed by Dr. Mach, falsely stated that Xpress Pharmacy Direct dispensed controlled substances based on a legitimate doctor-patient relationship formed through a review of medical records and through thorough communications between the patient and doctor and, thus, was not operating an illegal online pharmacy as described in the DEA directive.4 Smith knew none of this was true, but he hoped it would appease the pharmacies enough to keep shipping the drugs to his customers.

[4 Throughout the course of operating his online pharmacy, Smith received many other indicators that his operation was illegal. For example, he received warnings about the illegal nature of his business from various entities such as boards of pharmacies and MasterCard, and he possessed pleadings and research regarding various other online pharmacy operators (including Vincent Chhabra) who had been charged and convicted of crimes similar to those Smith was ultimately convicted of in this case. Rather than cease operations, in each instance, Smith resorted to additional lies and deception. As just one example, when Mastercard complained that sales of controlled substances such as hydrocodone were illegal, Smith created fake web sites that displayed no hydrocodone, and he stopped taking Mastercard sales for a time.]

G. Smith Learned of Government Investigation and Expanded Into Canada
In the same general time frame as the DEA directive, Smith learned of the government’s investigation into his illegal online pharmacy operation. Rather than change his ways or shut down entirely, he began to obstruct justice.

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For example, after Smith learned of the government’s investigation in about January 2005, he arranged to set up another online pharmacy in Montreal, Canada, at least in part to avoid the jurisdiction of the United States. He also began withdrawing large sums of cash, which he moved around to various locations, including safes and other storage facilities, in an effort to obstruct the government’s investigation.

H. Smith Obstructed Justice By Destroying Returned Drugs
There were other instances of efforts to obstruct justice. Namely, when customers declined to accept prescription drug orders for various reasons, those drugs were returned to the Online Payment Solutions' premises, in violation of laws prohibiting the handling of such drugs other than by a licensed pharmacist. Smith ordered the drugs to be repackaged for possible resale. When a disgruntled, terminated employee filed a complaint with the Burnsville Police Department, describing the huge volume of drugs being maintained illegally on site, Smith hastily arranged to have employees remove the prescription drugs from the premises. Ultimately, when Smith learned of the government's investigation, he arranged to have the drugs destroyed.

I. Smith Conspired to Launder Money
Smith also engaged in a large scale money laundering conspiracy. Because Smith was prohibited from obtaining credit card merchant accounts in his own name, he arranged to disguise his
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involvement in the prescription drug business in order to secure credit card accounts. Beginning in January 2005, Smith, working with others, arranged to establish a shell corporate entity, Rxorderfill.com, Inc., and bank accounts in the name of that entity.5 The proceeds from all credit card orders were then deposited into Rxorderfill.com’s bank accounts. In turn, those funds were wired back to other bank accounts that Smith maintained in Minnesota at US Bank and Crown Bank. Funds that had been deposited into the US Bank account and Crown Bank account were used to pay the expenses of carrying on the business of Xpress Pharmacy Direct, including payments for Mach, pharmacies, and other expenses associated with the business locations. In addition, funds from these accounts were used to buy luxury vehicles and to otherwise engage in monetary transactions of greater than $10,000.00.

[5 Smith’s masking of his involvement and creation of a shell entity in another name were consistent with other efforts Smith made to hide the corporate structure and location of his online pharmacy. For example, he advised telemarketers at his Burnsville location to tell anyone who asked that the company was located in Belize.]

J. Smith Obstructed Justice By Hiding Luxury Cars and Assets
From early 2004, through May 2005, Smith and others distributed and dispensed in excess of approximately 4 million units of hydrocodone-based controlled substances. During that same time period, Smith's gross sales totaled approximately $24 million.

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During the time frame of his Internet pharmacy business, Smith acquired a number of expensive luxury vehicles, including one or more of the following: Hummer, Cadillac, BMW, Mercedes, Lamborghini, Ferrari, and Jaguar. Smith also acquired a second home in Prior Lake, worth approximately $1.1 million, for which he paid cash.

Over the course of several weeks in approximately March and April, 2005, Smith withdrew more than $2,000,000 in U.S. currency from a Wells Fargo Bank account (in the name of another entity, Advanced Financial Svcs.) that contained deposits from drug sales made by his online pharmacy. The currency had been delivered, at Smith’s direction, by Brinks armored truck. Smith moved the money into safes and other locations that he controlled.

In late May and early June 2005, Smith arranged for approximately $400,000 to $600,000 in U.S. currency, all derived from proceeds of his online pharmacy business, to be transported to Montreal, Canada, for his use and for purposes of going forward with plans to open up a new Internet pharmacy call center in Canada. The money was placed at Smith's direction in a safe in a Montreal apartment of an associate.

In about that same time frame, Smith began hiding his luxury cars by moving some of them to Canada and moving others to storage facilities secured in others’ names.

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K. Court Enjoined Smith’s Online Pharmacy and Government Executed Search Warrants
On May 9, 2005, upon the government’s motion in Case No. 0:05CV00895 (MJD/FLN), the Court entered a temporary restraining order (“TRO”) which found probable cause to believe that Smith and his online pharmacy were violating the mail and wire fraud statutes. The TRO was filed under seal, but the next day, May 10, 2005, the government executed search warrants at Smith’s business, home, and at a number of locations throughout the Twin Cities and in other states. On the day of the search warrants, the government served the TRO on Smith and others. The TRO shut down Smith’s online pharmacy business, froze the company’s bank accounts and assets, and enjoined Smith and other individuals and entities from continuing to operate another online pharmacy in violation of the mail and wire fraud statutes.

On May 20, 2005, following a hearing in which Smith, his counsel, and other parties appeared, the Court converted the temporary restraining order into a preliminary injunction.

L. Smith Started Up New Online Pharmacy in Dominican Republic
On May 24, 2005, within days of his court hearing, Smith traveled to the Dominican Republic for the purpose of setting up an Internet pharmacy that was a continuation of his Minnesota-based operation. On his trip to the Dominican Republic, Smith carried U.S. currency related directly to Online Payment Solutions and that
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was subject to the Court’s preliminary injunction. In the May and June 2005 time frame, Smith arranged to have others bring additional U.S. currency, related directly to Online Payment Solutions, to him in the Dominican Republic. Smith also arranged to obtain a copy of the customer database for his online pharmacy, despite the Court’s preliminary injunction. The idea was for him to set up his lucrative business overseas where the U.S. authorities were without jurisdiction to shut him down.

On June 6, 2005, in an act that he later admitted was directly in violation of the Court’s preliminary injunction, Smith made two withdrawals from Xpress Pharmacy Direct’s U.S. Bank account (of $1,000 each, plus transaction fees) by way of Xpress Pharmacy Direct cash card previously issued to Smith. Smith made the withdrawals from a casino located in Santo Domingo, Dominican Republic. The U.S. Bank account had been frozen by the Court’s preliminary injunction, but was temporarily unfrozen by the receiver for the purpose of paying employees.

During this same June 2005 time frame, in anticipation of being charged with criminal offenses, Smith began making arrangements to flee from U.S. authorities, adopting a plan to relocate first in the Turks and Caicos and then to Honduras. Smith communicated his plans to his associate Scott Poe, but Poe began cooperating with the United States and did not go forward with
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assisting Smith. Smith’s flight plans were corroborated at trial with private jet records, among other things.

M. Government Moved For Contempt, and Smith Was Placed on Electronic Monitoring
In June 2005, within a short time of learning that Smith had launched a new, Dominican Republic-based online pharmacy web site, the government sought to have Smith and others held in contempt for willfully violating the Court’s preliminary injunction by setting up a nearly identical online pharmacy based in the Dominican Republic. (Case No. 0:05mc00041 (MJD)). The Court held a hearing on the matter on July 6 and July 7, 2005. Although the Court took the contempt matter under advisement at that time, it placed Smith on electronic monitoring and imposed conditions on Smith which prohibited him from using a computer or developing any new web sites.

N. Smith Was Indicted, Released to Halfway House, and Violated His Release Conditions
On August 24, 2005, Smith and others were indicted in this matter. Smith was released to 180 Degrees Halfway House. Within the first month of his stay at the halfway house, Smith was found with a contraband laptop computer and PDA.

On September 29, 2005, as part of a court proceeding to revoke his pretrial release, Smith admitted to violating conditions of his pretrial release. In addition to the computer and PDA that had been brought into the halfway house, Smith had been developing a
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search engine web site in violation of the Court's orders. Smith was thereafter detained and remanded into the custody of the United States Marshals Service at the Sherburne County Jail in Elk River, Minnesota.

O. Smith Provided Family Members With Cash Subject to Court Order
At the time his business was enjoined and all the proceeds frozen by Court order, Smith secretly hid a large amount of cash (consisting of bank withdrawals that had been delivered by Brinks and that were covered by the Court’s injunction). During Smith’s detention at the Sherburne County Jail, Smith arranged through family members to provide large sums of cash to an associate of Smith’s who was also one of his attorneys at the time (hereinafter, “attorney/associate”). Family members were also provided access to the cash, in violation of the Court’s preliminary injunction. In fact, they used some of the cash to reimburse themselves after they paid for Smith’s attorney fees. After the government learned about the cash, family members and the attorney/associate returned what was left to the government. On February 3, 2006, $289,305.00 in U.S. Currency was surrendered to the IRS-CID; on March 24, 2006, $139,720.00 in U.S. Currency was surrendered to the IRS-CID; on March 31, 2006, $50,000.00 in U.S. Currency was surrendered to the IRS-CID; on April 10, 2006, $90,000.00 in U.S. Currency was surrendered to the FBI.

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P. Smith Arranged to Get Around Jail’s Telephone Procedures to Make Unrecorded Calls
At the Sherburne County Jail, the defendant routinely violated the jail’s rules and procedures, and he was the subject of numerous disciplinary actions. In particular, the defendant went to great lengths to bypass the jail’s procedures for monitoring and recording his telephone calls. Specifically, the defendant misused other inmates’ PIN numbers (which are used to keep track of which calls a given inmate makes), and he arranged to have his calls transferred from his attorney/associate to other persons via three way calling. None of these calls were recorded.

Ultimately, Smith got even more sophisticated, arranging to have a local phone number, (763) 219-8837, entered into the jail’s system as a number purportedly associated with his attorney/associate. He then arranged to have calls made to that fake (763) attorney number forwarded, using Voice Over Internet Protocol, to his Philippines associate.

Smith’s Philippines associate had worked for him and his online pharmacy until about the fall of 2005, providing customer support from the Philippines. Smith’s relationship with his Phillippines associate predated their work together on the online pharmacy. Indeed, she was involved with the defendant since at least 2002, helping him with call center services and with his spam email campaigns and related fraudulent businesses.

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Q. Smith Lied to Government About the Use of Fake (763) Attorney Number
In about November/December 2005, officials at Sherburne County Jail discovered that the defendant was using the fake (763) attorney number and put a stop to it. During this same time frame, the defendant and the government had been negotiating a possible settlement of the indicted drug conspiracy case. On January 31, 2006, the government met with the defendant and his counsel. The government asked Smith about his use of the fake (763) attorney number and about the jail’s separate discovery that Smith had his attorney/associate smuggle Xanax anti-anxiety medication into the jail for him. The defendant proceeded to tell the government, among other things, about a woman named “Baby” who lived in the Philippines and who was helping him do some research on Internet pharmacies so he could turn that information over to the government. Smith denied that “Baby” was his Philippines associate. Smith omitted any description of doing anything illegal with his Phillippines associate, such as working with her to set up another online pharmacy.

R. Smith Employed Another Fake Attorney Number to Call Phillippines Associate
On March 3, 2006, a Sherburne County Jail Investigator discovered that the defendant was placing a number of calls using a number of different inmate PIN numbers to a new number, this time one with a (612) prefix, 612-465-8888. Calls to this number were
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not being monitored and recorded, as the number had previously been entered into the jail’s system as an attorney’s number. Jail officials determined, however, that Smith was once again employing a scheme to misuse an attorney number to make non-attorney calls. As a result, the jail made the decision to record the calls Smith was making to 612-465-8888. But by that time, Smith had made about 63 calls to the fake (612) attorney number, starting as early as January 2006.

As a result of its investigation, the government determined that Smith, with the help of his Phillippines associate, had secured the use of the number 612-465-8888 by applying to use that number through a phone company, Integra. The calls were forwarded to the Philippines via Voice Over Internet Protocol (VOIP) through another company, Delta 3. The defendant determined that the number was in the jail’s system as a blocked attorney number because it was formerly associated with a local law firm. That law firm had since relinquished the number.

S. Smith Plans to Kill a Witness
On March 4, 2006, at about 7:35 p.m., the defendant placed a call to 612-465-8888. In this call, the defendant and a female, later identified as his Phillippines associate, first discussed sending a threatening email to a witness in the defendant’s upcoming trial in the drug conspiracy case. Smith stated:
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. . . I think what we’re gonna have to do . . . when we get a little closer to trial, you know? I think we’re gonna have to . . . hire a private detective to get pictures of [the witness’] kids. And ah . . . we can do a little bit of emailing and electronic influence about a week before trial . . . Just let her know that, you know, if, if she wants to talk on the stand, that’s perfectly fine, but we’re also going to give her the option of picking which one of her kids she’s going to sacrifice for doing so.

When his Phillippines associate asked, “Are you sure?,” Smith responded, “What, you think I’m joking?” In response to her comment, “That’s scary,” Smith stated, “So is going to prison for 20 years . . . This is a kill or be killed world . . . .”

Smith and his Phillippines associate then moved on to discussing actually arranging to kill the witness. She said to Smith, “Well, she’s lucky she’s not here,” meaning in the Philippines, to which Smith responded, “Because if she were there it would already be done.” His Phillippines associate agreed: “Yeah.” Smith then asked, “How hard is it for a, one of those kind of people to get a passport with a visa?” As the conversation continued, Smith made it clear exactly what sort of hit man services he needed, stating, “I mean you know what kind of services I’m looking for, right? I’m looking for like a full service.” The defendant followed up with the statement that, “[t]here was a famous comment by Joseph Stalin, the most powerful man of the whole world, you want to know what it was? ... . No man, no problem.’” To further clarify his intent, Smith stated, “I'm, I'm really not
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joking. I got to get out of here... . I got to get out of here. That's the only way I can do it.” And, as the conversation continued, he stated: “I'm more looking for the, uh, missing persons kind of thing, not, uh, not, you know what I mean, not, uh, something laying around to be stared at and . . . talked about.”

In the call, his Phillippines associate offered various suggestions for how the killing could be done. She offered comments about passports, about finding someone in Mexico, China, Russia or already in the United States through her uncle, and finally, she discussed her dad’s friend who provides these sorts of services for her family and who is professional, who gets the job done and then just leaves. The defendant agreed that her dad’s friend would be the “perfect one” to kill the witness.

T. Smith and His Phillippines Associate discussed Tracking Device
In a call Smith placed to his Phillippines associate the next day, March 5, 2006, they discussed at length how to use GPS technology to employ a tracking device on a person’s cell phone without the person’s knowledge.

U. Smith Was Moved to Oak Park Heights
Shortly after the jail learned of Smith’s plans to kill a witness, the jail shut down access to the 612-465-8888 from the jail and took away the defendant’s phone privileges. Thus, Smith was no longer able to proceed with his plans to kill the witness or to discuss the topic further. Within a short time thereafter,
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Smith was transferred to a maximum security facility at Oak Park Heights, and the Court entered an order placing restrictions on Smith’s communication privileges.

V. Government Learned of Smith’s Other Illegal Activities With His Phillippines Associate
The government’s investigation further revealed that Smith had been working with his Phillippines associate and others, through the fake (612) attorney number, to place false orders for prescription drugs at local pharmacies. That is, Smith arranged for false prescriptions with forged doctor information to be transmitted to local pharmacies for the purpose of ordering prescription medication.

Moreover, Smith used the fake (612) attorney number in an elaborate scheme to set up (yet another) online pharmacy, located in the Philippines. His Phillippines associate was helping him to set up that business, namely, to establish a call center in the Philippines as well as a web site, despite court directives prohibiting Smith from doing so. When the government learned of the plans, it shut down the web site.

W. Smith’s Plans to Kill Witness Were Corroborated
Smith was also working on his new Philippines’ based online pharmacy with a family member and with his associate/attorney. That associate/attorney later cooperated with the government and
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acknowledged that Smith specifically raised the idea of having one of his witnesses killed.

The government also heard from inmates at Sherburne County Jail about Smith’s violent tendencies, plans to kill a witness, and offers to hire hit men. Specifically, Smith told one inmate he was interested in arranging to have a witness killed because that witness was planning to rat him out. Smith offered to pay money for these services. Smith told another inmate that one of his co-defendants would end up dead.

X. Smith Was Indicted in Separate Witness Tampering Case
On March 21, 2006, Smith was indicted in a separate case (Case No. 0:06cr00097 (MJD/JJG)), charging him with conspiracy to tamper with a witness and endeavoring to obstruct justice. The same conduct also serves as the basis for an obstruction of justice enhancement that the government is seeking in this case.

Y. Government Learned of Smith’s Separate Plan to Kill His Wife
Smith’s plans to kill the trial witness were not an isolated incident. After Smith’s trial in the drug conspiracy case, a former Sherburne County jail inmate of Smith’s contacted the government. The inmate stated that, in approximately December 2005, Smith asked the inmate if he would be willing to kill Smith’s wife. Smith said he would pay the inmate $60,000 to kill her and an additional $20,000 to kill his wife’s boyfriend. Smith told the inmate that he did not want his child around when the murders took
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place. Smith arranged for the inmate to meet with another of Smith’s family members while the inmate was out of jail on furlough. The inmate met with Smith’s family member and discussed the details of the plan to kill Smith’s wife and her boyfriend. The family member showed the inmate an envelop with a substantial sum of cash. The family member also gave the inmate Xanax and asked him to smuggle it into the jail for Smith. The inmate did not go forward with the plan. The inmate’s girlfriend corroborated that the inmate did meet with Smith’s family member while on furlough. Smith’s family member refused to talk to the government about this topic.

Smith’s plans to kill his wife were not surprising given Smith’s long history of engaging in acts of domestic violence against his wife, including one instance in 2005 where Smith tried to run his wife off the road. Smith reported to at least one inmate of his concerns that his wife could be a damaging witness against him.

III. SUMMARY OF GUIDELINE ISSUES IN DISPUTE

A. The Fraud Guidelines, U.S.S.G. 2B1.1, Apply to the Misbranded Drug Counts
The defendant objects generally to the application of U.S.S.G. § 2B1.1 (the fraud guidelines) because he claims he was not convicted of fraud. His objections are without merit because the
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misbranded drug counts are fraud-based and are subject to the guidelines set forth in U.S.S.G. § 2B1.1. Thus, the base offense for the misbranded drug counts is 6. See U.S.S.G. § 2B1.1(a)(2). The misbranded drug charges required the government to prove and the jury to find that Smith acted with the intent to defraud or mislead. Thus, the fraud guidelines are the applicable guidelines.6 See, e.g., United States v. Kimball, 291 F.3d 726, 733 (11th Cir. 2002) (where defendant is convicted of distributing a prescription drug without a prescription with the intent to defraud or mislead, an essential element is fraud, including fraud against government agencies, and the proper guidelines section is § 2F1.1 (the predecessor to § 2B1.1)); United States v. Andersen, 45 F.3d 217, 219-20 (7th Cir. 1995) (§ 2F1.1, § 2B1.1's predecessor, applies to a wide variety of fraud cases, including Food, Drug and Cosmetics Act cases in which the defendant can be found guilty of defrauding individuals, regulatory agencies or both); see also United States v. Cambra, 933 F.2d 752, 755-56 (9th Cir. 1991)(because steroid offense brought under 21 U.S.C. §§ 331 and 333, et al., involved
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fraud against the government, § 2F1.1 rather than § 2N2.2 was the correct guideline section).

[6 At trial, the government introduced evidence of countless instances of misrepresentations and fraudulent conduct by Smith as part of his distribution of misbranded drugs (e.g., false statements about the online pharmacy’s business in its web sites, contracts, and letters to brick and mortar pharmacies). Smith has not objected to the factual paragraphs in the PSR regarding those misrepresentations. See PSR ¶¶ 33, 38.]

B. The Loss Amount Is More Than $24 Million
Defendant argues that the $24 million loss figure set forth in paragraph 101 of the PSR is over-inclusive because it includes all of Smith’s sales of prescription drugs, not just those that were at issue in the counts of conviction for misbranded drugs. This argument is without merit because it ignores well-settled principles of relevant conduct. Because the loss amount for the misbranded drug count is over $24 million, 22 levels are added to the base offense of 6 (6 + 22 = 28).

Under the guidelines, “specific offense characteristics, such as the calculation of fraud losses, are determined on the basis of ‘relevant conduct,’ not the acts underlying the offense of conviction.” United States v. Killgo, 397 F.3d 628, 631 (8th Cir. 2005) (citing U.S.S.G. § 1B1.3(a)). “Relevant conduct” includes all “acts or omissions ‘that were part of the same course of conduct or common scheme or plan’ as [the defendant’s] offense of conviction.” Id. (citing U.S.S.G. § 1B1.3(a)(2)). “‘Common scheme or plan’ as used in § 1B1.3(a)(2) is construed broadly in determining relevant conduct for sentencing purposes.” Id.

At trial, Dr. Mach testified that he did not issue a valid prescription for any of the prescription drugs that were sold by Smith’s online pharmacy. All of the drugs sold were sold in
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substantially the same way with the help of the same accomplices, including Dr. Mach and others. Id. (two or more offenses will constitute part of a common scheme or plan where they are “substantially connected to each other by at least one common factor,” including “common accomplices, common purpose, or similar modus operandi.”); see United States v. Shields, 1993 WL 13348 (9th Cir. 1993)(court held that even conduct charged in dismissed counts can be counted as relevant conduct for establishing the loss in a steroid distribution scheme). During the testimony of Bernardette Hollis, the government introduced exhibits detailing the gross sales from all such prescription drugs, amounting to approximately $24 million. The $24 million figure was further supported by bank records introduced during testimony of Special Agent Chad Vetter. The correct loss calculation is $24 million.

C. Enhancement for Mass-Marketing Through the Internet Applies
Defendant objects to the 2-level enhancement for committing the offense of introducing misbranded drugs into interstate commerce through mass-marketing pursuant to U.S.S.G. §2B1.1(b)(2)(A)(ii). His basic objection, that this enhancement is already taken into account in other aspects of the guidelines, is without merit. Thus, the offense level is increased to 30 (28 + 2= 28).

For fraud offenses, “mass-marketing” is defined as:
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a plan, program, promotion, or campaign that is conducted through solicitation by telephone, mail, the Internet, or other means to induce a large number of persons to (i) purchase goods or services; (ii) participate in a contest or sweepstakes; or (iii) invest for financial profit.

Application Note 4.(A) to U.S.S.G. § 2B1.1. In this case, because Smith sold his drugs not only through the Internet, but also via telemarketers who placed phone calls to prescription drug customers, this enhancement will apply.

To the extent Smith is arguing that this enhancement has already been taken into account in other aspects of the guidelines and thus would amount to double counting, his argument should be rejected. “Double counting occurs when one part of the Guidelines is applied to increase a defendant’s punishment on account of a kind of harm that has already been fully accounted for by application of another part of the Guidelines.” United States v. Kenney, 283 F.3d 934, 936 (8th Cir. 2002) (citations omitted). Moreover, the commentary to the guidelines, specifically, Application Note 4 to U.S.S.G. § 1B1.1, provides “that the Commission intended to include enhancements for every applicable aspect of criminal conduct, to be added together cumulatively, unless the Guidelines themselves direct otherwise.” Id. at 938.

Because introduction of misbranded drugs can both be (and historically have been) accomplished in ways not involving the
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Internet or other mass-marketing, there is no double counting. The 2-level enhancement should apply.7

[7 With respect to his controlled substances offenses, Smith raises a similar objection to an enhancement for distributing a controlled substance through mass-marketing by means of an interactive computer service pursuant to U.S.S.G. 2D1.1(b)(5). For the same reasons as set forth herein, that enhancement should also apply. See Application Note 22 to U.S.S.G. § 2D1.1(b)(5) (defining the phrase “mass-marketing by means of an interactive computer service” to mean “the solicitation, by means of an interactive computer service, of a large number of persons to induce those persons to purchase a controlled substance.”).]

D. Enhancement for Violation of a Prior Order or Injunction Applies
The Court held in its April 27, 2007, order in Case 05-mc-41 (MJD) that the government proved beyond a reasonable doubt that Smith violated the preliminary injunction by making two $1,000 withdrawals from Xpress Pharmacy Direct’s U.S. Bank account. Accordingly, Smith should receive a 2-level enhancement for violating a prior order pursuant to U.S.S.G. § 2B1.1(b)(8)(C). His offense level is therefore increased to 32 (30 + 2 = 32).

Application Note 7(C) to U.S.S.G. § 2B1.1 states that this 2- level enhancement should apply:

if the defendant commits a fraud in contravention of a prior, official judicial or administrative warning, in the form of an order, injunction, decree, or process, to take or not to take a specified action. A defendant who does not comply with such a prior, official judicial or administrative warning demonstrates aggravated criminal intent and deserves additional punishment. If it is established that an entity the defendant controlled was a party to the prior proceeding that resulted in the official judicial or administrative action, and the
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defendant had knowledge of that prior decree or order, this enhancement applies even if the defendant was not a specifically named party in that prior case. For example, a defendant whose business previously was enjoined from selling a dangerous product, but who nonetheless engaged in fraudulent conduct to sell the product, is subject to this enhancement. This enhancement does not apply if the same conduct resulted in an enhancement pursuant to a provision found elsewhere in the guidelines . . . .

The defendant engaged in several instances of violating prior orders, any one of which is sufficient to support this enhancement. In addition to his violation of the preliminary injunction by withdrawing frozen funds (which the Court found had been proven beyond a reasonable doubt), the government has proven by a preponderance of the evidence that Smith also violated the injunction by fleeing to the Dominican Republic to start up a continuation of his online pharmacy.8

[8 Even though the Court decided the government did not prove criminal contempt beyond a reasonable doubt based solely on evidence introduced at the contempt hearing, the Court can still assess this enhancement because the government can prove the factors supporting the enhancement by a preponderance of the evidence based on evidence later introduced at trial. United States v. Woods, 270 F.3d 728, 730 (8th Cir. 2001)(“[E]ven acquitted conduct can be considered when determining a sentence under the Sentencing Guidelines, so long as that conduct has been proved . . . by a preponderance of the evidence.”).]

Moreover, Smith violated the Court’s pretrial orders by smuggling a computer and PDA into the 180 Degrees halfway house and by setting up another web site business (which resulted in the Court’s decision to revoke his pretrial release). PSR ¶¶ 10-11.
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Finally, Smith violated various Court orders by arranging from Sherburne County Jail to establish yet another online pharmacy in the Philippines. PSR ¶ 12. Any one of these instances is sufficient to warrant the 2-level enhancement for violating a prior order.9

[9 It should be noted that the guidelines specify that this enhancement applies only to conduct “not addressed elsewhere in the guidelines . . . .” U.S.S.G. 2B1.1(b)(8)(C). Therefore, the government is not seeking an obstruction enhancement based on these same facts.]

E. Enhancement for Relocating a Substantial Part of the Scheme to Another Jurisdiction Applies
Defendant Smith objects to the 2-level enhancement for relocating or participating in relocating a substantial part of a fraudulent scheme to another jurisdiction to evade law enforcement or regulatory authorities pursuant to U.S.S.G. § 2B1.1(b)(9)(A). The enhancement under § 2B1.1(b)(9)(A) for relocating the scheme is applicable because Smith relocated a substantial part of his scheme to the Dominican Republic and Canada. His offense level is therefore increased to 34 (32 + 2 = 34).

Based on evidence introduced at trial as well as at the July 2005 contempt hearing, the government can meet its burden of showing by a preponderance that Smith relocated a substantial part of his scheme to the Dominican Republic and Canada. After Smith’s Minnesota-based online pharmacy was shut-down, the defendant moved to the Dominican Republic for the purpose of setting up another
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online pharmacy, using a database of customers he obtained from his Minnesota-based online pharmacy despite the Court’s injunction. With the help of others, Smith set up a web site offering the same sorts of hydrocodone products. The web site was shut down by the government before actual sales could go through.10 According to recorded calls with Bruce Lieberman (introduced at trial), Smith located his online pharmacy in the Dominican Republic so that he could be outside the jurisdiction of U.S. authorities. Scott Poe’s trial testimony also demonstrated that Smith’s purpose in relocating to the Dominican Republic was to evade U.S. law enforcement.

[10 That there were no actual sales is irrelevant. The scheme itself was relocated when Smith moved to the Dominican Republic and set up a new web site.]

Additionally, according to Scott Poe’s trial testimony, in
2005, Smith, Poe and others began relocating the online pharmacy
scheme to Canada in part to evade government authorities. Smith,
Poe and others traveled to Canada, and hundreds of thousands of
dollars were shipped there. The Canadian telemarketing operation
had rented space, hired employees and was about to begin
telemarketing calls when Smith’s business was enjoined in May 2005.

F. Alternative Enhancement for Committing a Substantial
Portion of the Scheme Outside the Country Applies Even if the Court chooses not to apply the 2-level enhancement for relocation of the scheme outside the jurisdiction, the Court
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should still apply a 2-level enhancement under other portions of U.S.S.G. § 2B1.1(b)(9). Namely, the evidence shows that a substantial part of the fraudulent scheme was committed from outside the United States pursuant to U.S.S.G. § 2B1.1(b)(9)(B).11

[11 As indicated above, the Probation Officer did not address this alternative enhancement. Because the United States can prove its application by a preponderance, it respectfully requests that the Court include this alternative enhancement (along with all alternative enhancements) in its final sentencing decision.]

A substantial part of the scheme was committed in the Dominican Republic and Canada, as well as the Philippines and France. In addition to Smith’s relocation to the Dominican Republic in May 2005, Smith some months earlier had begun relocating or expanding into Canada. By May 2005, Smith had rented space, had hired employees and was about to begin telemarketing calls at his Canadian telemarketing center when Smith’s business was enjoined.

Moreover, Smith enlisted the telemarketing services of Harry Creaghan, located in the Dominican Republic, from the outset of Smith’s scheme until at least the time of the injunction. Throughout the scheme, he also enlisted his Phillippines associate to conduct customer service work to appease customers of his illegal online pharmacy and, later, to establish another online pharmacy located in the Phillippines. Additionally, for most of the duration of his online pharmacy, he employed offshore merchant
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account companies to process credit card orders (including Bardo in France). Finally, Smith’s scheme began when he imported drugs directly from India.

G. Alternative Enhancement For Sophisticated Means Applies
In the further alternative, aside from the foreign countries in which Smith operated portions of his scheme, the Court could apply a 2-level enhancement for sophisticated means pursuant to U.S.S.G. § 2B1.1(b)(9)(C).

Application Note 8.(B) to U.S.S.G. § 2B1.1 provides:

[f]or purposes of subsection (b)(9)(C), “sophisticated means” means especially complex or especially intricate offense conduct pertaining to the execution or concealment of an offense. For example, in a telemarketing scheme, locating the main office of the scheme in one jurisdiction but locating soliciting operations in another jurisdiction would ordinarily indicate sophisticated means. Conduct such as hiding assets or transactions, or both, through the use of fictitious entities, corporate shells, or offshore bank accounts also ordinarily would indicate sophisticated means.

This application note describes almost exactly what happened in this case. In addition to relocating the scheme in Dominican Republic and Canada, as described above, Smith also established a shell company, Rxorderfill.com, Inc. and bank accounts in that entity’s name in order to disguise his involvement with the online pharmacy funds that flowed through those accounts. See PSR ¶ 42. Prior to his establishment of Rxorderfill.com, Inc., Smith relied
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on offshore bank accounts and merchant account companies, such as Bardo in France.

H. Enhancement for Risk of Death or Serious Bodily Injury Applies
Defendant Smith objects to a 2-level enhancement under U.S.S.G. § 2B1.1(b)(12)(A) for the conscious or reckless disregard of death or serious bodily injury, along with objections to factual paragraphs regarding deaths associated with his online pharmacy. His objections are without merit. The government is prepared to present evidence at the evidentiary hearing regarding the deaths that are described in paragraphs 65-67 of the PSR. But even if there were no actual deaths, the defendant’s sentence should still be enhanced for his conscious or reckless disregard of death or serious bodily injury. His offense level is therefore increased to 36 (34 + 2 = 36).

In the context of this enhancement, the Eighth Circuit defines “reckless” to mean “the defendant disregarded ‘a risk of harm of which he is aware.’” United States v. McCord, Inc., 143 F.3d 1095, 1098 (8th Cir. 1998) (citations omitted). Thus, to apply the enhancement under U.S.S.G. § 2B1.1(b)(12)(A), the government must prove that the defendant’s criminal conduct “created a risk of serious bodily injury,” and that the “defendant was in fact aware of and consciously or recklessly disregarded that risk.” Id. “Serious bodily injury” is defined by the guidelines to involve
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“extreme physical pain or the impairment of a function of a bodily member, organ, or mental faculty; or requiring medical intervention such as surgery, hospitalization, or physical rehabilitation.” Application Note 1.(L) to U.S.S.G. § 1B1.1. There is no requirement that the persons at risk for serious bodily injury be victims of the offense. United States v. Hoffman, 9 F.3d 49, 50 (8th Cir. 1993).12

12 The government’s primary position is that the victims of Smith’s offenses were the government agencies. However, the Court could conclude that some or all of the drug purchasers were victims (those who may have been defrauded into believing they were buying legitimate prescription drugs with valid prescriptions). In that event, the defendant could potentially face several other enhancements, including enhancements for over 250 victims, see U.S.S.G. § 2B1.1(b)(2), or for a large number of vulnerable victims (namely, those who are addicts), see U.S.S.G. § 3A1.1(b).

As the trial evidence made clear, the defendant was well aware that a large number of his purchasers were drug addicts, and yet he continued his online pharmacy scheme. In instant messages, he chatted about the “f-ing addicts” and joked about how addicts would be willing to pay high prices to get their fix. In addition, Smith received various other indications that his customers were addicts, such as observing promotional postcards with mailing labels that demonstrated customers made multiple purchases using only slight alterations on their names and addresses.

It is a matter of common knowledge that addicts can suffer
severe health problems and can overdose or become suicidal as a
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result of their addiction. Indeed, at trial, one of Smith’s best customers testified that he was hospitalized not once but twice due to overdosing on prescription medication he ordered from Smith’s online pharmacy (which he preferred because of how easy it was to get orders through).

Moreover, in 2005, one of the pharmacies for Xpress Pharmacy Direct, Fallbrook Pharmacy, was sued in a wrongful death action, and information about the lawsuit was passed on to Smith. The person who died (an addict) had placed orders with various online pharmacies and had received an order from Xpress Pharmacy Direct, although apparently after he had already died. Although Smith and his online pharmacy operation was therefore not responsible for that particular death, this lawsuit placed Smith on notice of the potential for a death resulting from orders placed by addicts with online pharmacies. He nonetheless did nothing to change his online pharmacy operation.

In addition, Smith’s own web pages warned of the dangers of addiction, side effects, and overdose from the prescription drugs he distributed. His Internet customers were asked to click that they had read disclaimer forms acknowledging these risks. See United States v. Nomar, 95 Fed. Appx. 28, 29 (4th Cir. 2004), vacated on other grounds, 543 U.S. 1101 (2005) (where defendant posed as a physician and prescribed Schedule III and IV drugs via an Internet pharmacy, court found enhancement for conscious or
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reckless risk of serious bodily injury applied; even though there was no evidence any specific customer had been injured, the court found the defendant “was fully aware of the serious risk associated with prescribing medications in the manner described by the Government, as demonstrated by the disclaimer posted on [defendant’s] website.”).

Finally, the government is aware of at least three instances where individuals who ordered drugs from Smith’s online pharmacy died. The government will be prepared to introduce the following evidence at the evidentiary hearing for the purpose of further demonstrating the very real risk of death or serious bodily injury:

1. K.O.
K.O. committed suicide on March 3, 2005. After his death, his family uncovered several bottles of prescription drugs, mostly hydrocodone products, at his home. When the family looked at K.O.’s computer they discovered that he was ordering these drugs from several different on-line pharmacies.13 After his death, the family continued to receive calls from at least some of these pharmacies, soliciting K.O. for refills. The family also recovered
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a credit card statement that showed that K.O. had ordered from Xpress Pharmacy Direct in the approximate two-week period prior to K.O.’s death. During the DEA investigation of Smith’s online pharmacy operation, it was discovered that K.O. had ordered at least once from Smith’s company, in approximately February 2005. The family believes that K.O. became addicted to these drugs and as a result fell into financial difficulties and eventually lost his job. These circumstances, combined with the effects of the addiction itself on K.O.’s mental state, are what likely led to his suicide.

[13 Smith was well aware that there were other illegal online pharmacies operating and that customers were readily able to order from multiple web sites at the same time. In early 2005, he arranged to hack in and steal a competitor online pharmacy operator’s customer database. After Smith did so and began marketing to the competitor’s customers, Smith’s sales rose dramatically.]

2. C.M.
C.M. died in September 2006. During the DEA investigation of Smith’s pharmacy operation it was discovered that C.M. had ordered at least seven times from Smith’s online pharmacy in a three month period between late March 2005 and mid May 2005. C.M. was ordering mostly hydrocodone products from Smith’s pharmacy and was apparently also ordering from other online pharmacies. During an interview of C.M. by the DEA in July 2006, she indicated that she ordered from Smith’s online pharmacy because it was so easy to do so. In October 2006, the DEA spoke to C.M.’s husband, who indicated that his wife died from medical complications associated with the volume of controlled substances that she was taking over a long period of time, including the time during which she had obtained hydrocodone from Smith’s online pharmacy.

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3. J.P.
J.P. died on Christmas Day of 2006. During the DEA investigation of Smith’s pharmacy operation, the government discovered that J.P. had ordered drugs from Smith’s pharmacy at least twelve times in a five month period between late November 2004 and early April 2005. J.P. was ordering mostly hydrocodone products from Smith’s pharmacy and was apparently ordering from other online pharmacies. In July 2006, during a conversation with J.P.’s father, the DEA learned that J.P. had become addicted to the controlled substances and was placed in a drug rehabilitation program twice. J.P.’s father indicated that his son’s life had been ruined by the drugs and that his son suffered medical problems associated with the use of these types of drugs. The DEA contacted the Stearns County Sheriff’s Department after learning of J.P.’s death. The DEA was informed that J.P.’s death would be ruled as an accidental overdose of prescription medications.14

[14 There could well have been other deaths associated with Smith’s online pharmacy, in light of the thousands and thousands of customers, many of whom were clearly addicted based on their excessive orders. Given Smith’s many efforts to mask the identity and ownership structure of his online pharmacy, family members would not necessarily know Smith was involved, and even if they did know, they might not necessarily reach out to law enforcement to report the connection between Smith’s online pharmacy and their family member’s death.]

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I. Alternative Enhancement for Possession of Firearm In Connection With Offense Applies
Defendant Smith objects to the alternative 2-level enhancement for possessing a firearm in connection with the misbranded drug offenses pursuant to § 2B1.1(b)(12)(B). On the day of the search warrants in May 2005, Smith was stopped in his Cadillac Limousine and observed wearing a holster. A Glock pistol was found on the floor of the Cadillac limousine and another Glock pistol was found in his personal office at the Burnsville facility. Both are locations that were connected to Smith’s prescription drug selling activities. Namely, prescription drugs bearing Mach’s name were found in the Cadillac, the same vehicle as the firearm. Prescription drugs and cash were also located at sometime during the scheme in Smith’s office.

For the misbranded drug counts, the enhancement language is fairly broad. The enhancement will apply if the offense involved “possession of a dangerous weapon (including a firearm) in connection with the offense.” U.S.S.G. § 2B1.1(b)(12)(B). The phrase “in connection with” has been defined to mean “possessed in a manner that permits an inference that it facilitated or potentially facilitated-i.e., had some potential emboldening role in a defendant’s felonious conduct.” United States v. Riley, 335 F.3d 919, 930 (9th Cir. 2003); Cf. United States v. Harper, 466 F.3d 634, (8th Cir. 2006) (Eighth Circuit defines similar “in
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connection with” phrase under U.S.S.G. § 2K2.2(b)(5) to mean “the firearm had a ‘purpose or effect with respect to’ the other felony offense because its presence facilitated or had the potential to facilitate the offense, as opposed to being the result of mere accident or coincidence.”).

Trial evidence demonstrated that Smith kept returned drugs and large amount of cash (delivered by Brinks) in and near his office. Many young telemarketers, including some hired from 180 Degrees halfway house, worked in areas near to his office. Smith told at least one witness that he carried a gun because of how much cash he had around. Therefore, “it is certainly reasonable to infer that [Smith] carried the firearm to prevent a ‘rip-off’” of the drugs or cash. United States v. McClain, 252 F.3d 1279, 1288 (11th Cir. 2001). For these reasons, the firearm enhancement under U.S.S.G. § 2B1.1(b)(12)(B) should apply even without additional facts regarding Smith’s possession and use of tasers (which the government also reserves the right to prove at the evidentiary hearing).15

[15 With respect to his controlled substances offenses, Smith also objects to an enhancement for possessing a firearm pursuant to U.S.S.G. § 2D1.1(b)(1). For the same reasons as set forth herein, that enhancement should also apply. See Application Note 3 to § 2D1.1 (provides that the weapon enhancement “should be applied if the weapon was present, unless it is clearly improbable that the weapon was connected with the offense.”). Moreover, “[a] connection between a firearm and drug-related activities may be shown by proof that the firearm was located in the same place as the drugs or drug-related activity.” United States v. Davis, 471 F.3d 938, 949 (8th Cir. 2006). The enhancement applies “if the firearm is present during ‘relevant conduct,’ as defined by [the guidelines], not merely during the offense of conviction.” United States v. Savage, 414 F.3d 964, 966 (8th Cir. 2005). To meet its burden, the United States “need only prove a temporal and spatial nexus among the weapon, defendant, and drug-trafficking activity. The government need not prove the defendant had actual possession of the weapon; constructive possession will do.” United States v. Delapaz, 168 Fed. Appx. 126, 128 (8th Cir. 2006).]

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J. Enhancement for Obstruction of Justice
Smith objects to the 2-level enhancement for obstruction of justice pursuant to U.S.S.G. § 3C1.1, along with various factual paragraphs relating to this enhancement. These objections are without merit, and the obstruction of justice enhancement is appropriate because, as will be discussed below, Smith engaged in at least seven different categories of significant obstructive behavior. Thus, his offense level is increased to 38 (36 + 2 = 38).

1. Plot to Kill Witness
First, at the evidentiary hearing, the government will prove by a preponderance of the evidence that Smith engaged in “threatening, intimidating, or otherwise unlawfully influencing a co-defendant, witness . . . directly or indirectly, or attempting to do so,” as described in Application Note 4 to U.S.S.G. § 3C1.1.

Namely, the United States will introduce an actual recorded call and transcript from March 4, 2006, in which Smith discusses his plans to kill a witness. It will also introduce surrounding
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calls and transcripts and a call log of all calls made by Smith in March 2006 to the fake attorney number. Based on the surrounding circumstances of the March 4 call, namely, the defendant’s elaborate efforts to hide the call from the authorities, the content of the call and the defendant’s tone, it is clear that he discussed sending a threatening email to a witness and soliciting help in arranging to kill the witness. See PSR ¶ 19 (“I’m more looking for the, uh, missing persons kind of thing, not, uh, not, you know what I mean, not, uh, something laying around to be stared at and . . . talked about.”). There are other surrounding facts that prove the defendant’s intent was to obstruct justice through violent acts involving the witness. See PSR ¶¶ 21-22, 55-56.

In cases that, like this one, involve at least the discussion of threats or plans to harm a witness, courts have readily found that the obstruction enhancement applies.16 For example, in United States v. Adipietro, 983 F.2d 1468, 1479 (8th Cir. 1993), the district court ordered the 2-level enhancement after finding that
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the defendant had attempted to procure the bodily injury of a co-defendant who had pled guilty and who was planning to testify against the defendant at trial. The evidence came largely from recorded jail calls in which the defendant told a third party about his plans to have the co-defendant harmed. Id. The court based its obstruction finding on the content of the jail calls, the defendant’s tone of voice, and the roundabout way he spoke. Id. At 1480. The court rejected an argument (similar to one Smith is making here) that the language on the tapes was innocuous. Id.; see also United States v. Hawkins, 51 Fed. Appx. 192, 193 (8th Cir. 2002) (district court properly found the obstruction enhancement applied despite defendant’s claims that his statements were ambiguous, he was just blowing off steam, or that he never intended for the alleged threats to reach the potential witness); United States v. Capps, 952 F.2d 1026, 1028 (8th Cir. 1991)(obstruction of justice enhancement properly applied in a case where threat was not communicated directly to the witness; the party to whom the threat was communicated was a co-conspirator who could be intimidated into obstructing the government’s investigation).

[16 Although the facts supporting this conduct are also the subject of the separate charges brought against Smith in Criminal No. 06-97, the government does not have to prove the elements of those charges for the enhancement to apply. Moreover, if the Court were to base the obstruction enhancement on the death plot, there is no double jeopardy issue with the second case. See, e.g., United States v. Bellrichard, 62 F.3d 1046, 1052 (8th Cir. 1995) (citing Witte v. United States, 515 U.S. 389(1995), as “reject[ing] the claim that double jeopardy principles bar a later prosecution or punishment for criminal activity where that activity has been considered at sentencing for a separate crime.”).]

2. Fake Attorney Number
Even apart from Smith’s plot to kill a witness, the obstruction enhancement can be based on Smith’s use of two fake attorney phone numbers to make calls to an associate in the Philippines, among others. Smith went to such efforts to avoid
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having his calls recorded so that he could thwart the government’s investigation into his new online pharmacy and other illegal activities.

3. Destruction of Returned Drugs
Evidence at trial showed that Smith arranged with associates to dispose of returned prescription drugs after he learned of the government’s investigation. See PSR ¶41. This conduct falls within Application Note 4(d) to U.S.S.G. § 3C1.1, which prohibits “destroying or concealing or directing or procuring another person to destroy or conceal evidence that is material to an official investigation or judicial proceeding . . . .”

4. New Online Pharmacy in Dominican Republic
Evidence during the July 2005 contempt hearing showed that after Smith’s company was shut down by the Court’s preliminary injunction, he fled to the Dominican Republic in order to evade U.S. authorities and to start up what the evidence proved at least by a preponderance was a continuation of his online pharmacy. As Scott Poe testified at trial (evidence which was not available to the Court at the contempt hearing), Smith had fled the country because he knew U.S. authorities were going to be looking for him, and he planned to continue his online pharmacy in a manner that was not significantly different from the business that was then under investigation by the government. That is, he planned to sell
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controlled substances and prescription drugs to U.S. customers without any sort of meaningful review by a physician.

5. Hiding of Cash and Luxury Vehicles
As may be shown at the evidentiary hearing, both before and after the Court entered its preliminary injunction freezing the proceeds from Smith’s Burnsville-based online pharmacy, Smith hid large sums of cash and other assets derived from online pharmacy proceeds. He then clandestinely provided cash and other assets to associates and family members. PSR ¶ 13. Namely, beginning in or about March 2005, after learning that he and his business operation were under investigation by the federal government, Smith housed cash in various safes in various locations, and some of it was brought to Canada. Some of the luxury vehicles that Smith bought with illegal online pharmacy proceeds were brought to various storage locations in Minnesota (in names other than Smith’s), and some were brought to Canada.

As with the destruction of returned drugs, Smith’s conduct with regard to assets falls within Application Note 4 (d) to U.S.S.G. § 3C1.1, which prohibits “destroying or concealing or directing or procuring another person to destroy or conceal evidence that is material to an official investigation or judicial proceeding . . . .” In addition, comparable violations of court orders involving restrained assets are specifically identified in the
comments to U.S.S.G. § 3C1.1 as examples of obstructive conduct.
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Application Note 4(j) (obstruction of justice includes “failing to comply with a restraining order or injunction issued pursuant to 21 U.S.C. § 853 (e) or with an order to repatriate property issued pursuant to 21 U.S.C. § 853(p). . . ”).

6. Use of Multiple Aliases and Web Addresses
During the time he ran his Burnsville-based online pharmacy and after it was shutdown by the preliminary injunction, Smith employed multiple web site addresses, multiple business names (including Discount Pharmacy Direct, Xpress Healthcare Ltd., and Rxorderfill.com, Inc.). He also employed various aliases, such as “Robert Jonson,” “Robert Johnson,” “Chris Jonson,” “Bruce Jonson,” and “Tony Spitalie,” among others. The purpose for employing these different web site addresses, multiple business names, and aliases was at least in part to conceal and disguise from third parties, including law enforcement and others, his ownership and control of the prescription drug operation. Indeed, as Scott Poe testified at trial, at one point, Smith masked the very products he was selling by having his merchant bank account identify the products sold as bicycle parts.

The obstruction enhancement can based on use of aliases. See United States v. Blackman, 904 F.2d 1250, 1259 (8th Cir. 1990). At trial, Special Agent George Kyrilis testified that his investigation was initially thwarted because he did not realize Robert Johnson and Chris Smith were the same person.

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7. Misrepresentations During Proffer Session17

[17 The proffer letter sent to the defendant’s counsel on December 12, 2005, provided, “if the government should ever conclude that Mr. Smith has knowingly withheld material information from the government or has otherwise not been completely truthful and candid at the proffer session or sessions and/or Grand Jury appearances, the government may use his statements against him for any purpose, after first notifying you of its intention to do so.” The government has provided that notification.]

On January 31, 2006, the government met with the defendant and his counsel for a proffer interview. The defendant was told that he needed to be truthful. The defendant proceeded to tell the government, among other things, that he had been making unauthorized and unrecorded calls from jail to a woman named “Baby” who lived in the Philippines and who was helping him do some research on Internet pharmacies so he could turn that information over to the government. This information was false and was intended to, and did, significantly obstruct the government’s investigation into Smith’s activities, including the unauthorized telephone calls that he was making to his Philippines associate to discuss setting up a new online pharmacy and to discuss to plans to threaten and kill a witness against him. See Application Note 4(g) (providing that obstruction enhancement can be based on “providing materially false statement to a law enforcement officer that
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significantly obstructed or impeded the official investigation or prosecution of the instant offense . . .”). 18

18 In the March 4, 2006, recorded phone call between Smith and his Phillippines associate, Smith acknowledged that he lied during his proffer with the government. As he stated to her, “‘cause the Feds wanted me to give your, give them your information. I said what, said what are you talking about, who you talking to, not me ... I'm not giving you sh-t, I don't know anything. That was part of the reason the deal fell apart is ‘cause there were certain areas they wanted to know about and I wasn't going to talk about it....”).

IV. GUIDELINE ISSUE NOT IN DISPUTE
The defendant does not object to the Probation Officer’s conclusion that he was an organizer or leader of a criminal activity that involved five or more participants. Therefore, his guidelines are subject to a 4-level enhancement pursuant to U.S.S.G. § 3B1.1(a). The resulting offense level is a 42 (38 + 4 = 42).

V. SUMMARY OF GUIDELINE ISSUES
The guideline issues for Group 2, the misbranded drug counts, can be summarized as follows:

Guideline Enhancement / Increase in Level
Base offense 6
Loss amount greater than $20 million but not more than $50 million + 22

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Guideline Enhancement / Increase in Level
Offense committed through mass-marketing (Internet) + 2
Violation of prior orders + 2
Relocation of scheme to another jurisdiction to evade authorities (or alternatively, substantial part of offense was committed outside the U.S., or alternatively, otherwise involved sophisticated means) + 2
Conscious or reckless disregard of risk of death or serious bodily injury (or alternatively, dangerous weapon was possessed in connection
with offense) + 2
Organizer or leader of criminal activity involving five or more participants + 4
Obstruction of justice + 2
Total Adjusted offense level: 42
The sentencing guideline range for an offense level of 42 is 360 months to life imprisonment.

VI. DEFENDANT’S OBJECTION TO CONCLUSION THAT HE HAS NOT DEMONSTRATED AN INABILITY TO PAY A FINE
Defendant objects to paragraph 167 and its conclusion that he has not demonstrated an ability to pay a fine. Because he refused to provide Probation with his financial information (see PSR ¶ 162) and because there is nothing to indicate he does not now and will not in the future have an ability to pay a fine, this paragraph should remain as written.

The defendant bears the burden of proving that he cannot pay a fine. United States v. Berndt, 86 F.3d 803, 808 (8th Cir. 1996).
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“[A] fine is the rule-and it is the defendant’s burden to demonstrate that his case is the exception.” United States v. Yeje-Cabrera, 430 F.3d 1, 19 (1st Cir. 2005). Indeed, “[t]he existence of income or assets that the defendant failed to disclose may justify a larger fine than that which otherwise would be warranted under this section.” Application Note 6 to U.S.S.G. § 5E1.2. Courts should consider not just the defendant’s present financial situation, but how much a defendant can pay toward a fine while incarcerated and after leaving prison. U.S.S.G. § 5E.12(d); Yeje-Cabrera, 430 F.3d at 19. If the defendant can establish that he cannot pay a fine within the guideline range, courts can still order a fine outside that range. U.S.S.G. § 5E1.2(f). Because there has been no showing by the defendant that he cannot pay a fine, his objections to paragraph 167 are without merit.19

[19 The United States has learned from Smith’s counsel that Smith may also be moving the Court to appoint counsel for him for all further proceedings, namely, on appeal, based on his inability to pay. The defendant may also contend that his new attorney’s fees should be paid out of receivership funds. The United States will oppose any such motion. First, the defendant’s lawyers’ fees cannot be paid out of the receivership monies because the government is entitled to forfeiture of those funds as illegal proceeds. The Supreme Court has held that criminal defendants are not entitled to use illegal proceeds for their criminal defense. United States v. Monsanto, 491 U.S. 600 (1989); Caplin & Drysdale, Chartered v. United States, 491 U.S. 617 (1989). Second, this Court should deny Smith’s request for the same reasons as it should deny his request to be exempted from a fine: He cannot meet his burden of showing an ability to pay. In particular, “the court may . . . refuse to appoint counsel if it finds that the defendant’s portrayal of financial ability lacks credibility,” United States v. Barcelon, 833 F.2d 894, 897 (10th Cir. 1987); see United States v. Lefkowitz, 125 F.3d 608, 621 (8th Cir. 1997), the defendant’s request is based only on “conclusory protestations of poverty,” United States v. Martinez-Torres, 556 F. Supp. 1275, 1280 (S.D.N.Y. 1983), the defendant concealed or secreted funds, United States v. Robinson, 543 F.2d 951, 964 (2d Cir. 1976), and the defendant has funds available to him from sources such as family, friends, trusts, etc., Martinez-Torres, 556 F. Supp. at 1279.]

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VII. GROUNDS FOR UPWARD DEPARTURE OR VARIANCE
In response to the PSR, the government reserved the right to move for an upward departure and/or upward variance from the guideline range. The guidelines may not sufficiently reflect the full nature of the defendant’s conduct, such as (1) the defendant’s plans to kill not one but two human beings, a witness against him and his wife; (2) the numerous instances of obstruction of justice, only one instance of which is necessary for the enhancement; (3) the numerous instances of the defendant’s violations of prior court orders, only one instance of which is necessary for the enhancement;(4) the substantial risk to members of the public (even if they are not technically victims) created by defendant’s illegal online pharmacy; and (5) the defendant’s corruption of a large number of other individuals including his co-defendants, telemarketers, and numerous other co-conspirators) whom he lured into criminal behavior. Moreover, the defendant’s criminal history score may “not adequately reflect the seriousness of the
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defendant’s past criminal conduct or the likelihood that the defendant will commit other crimes.” U.S.S.G. § 4A1.3. 20

[20 The defendant has zero criminal history points and is in Criminal History Category I.]

As discussed below, the government is not moving for an upward
departure or variance because of its view that the guideline range,
as set forth in the PSR, is sufficient, and a sentence within that
range would be reasonable in light of 18 U.S.C. § 3553(a).

VIII. MOTION TO DISMISS DRUG DISTRIBUTION CONSPIRACY COUNT
Because conspiracy to distribute controlled substances is a lesser included offense of operating a continuing criminal enterprise (“CCE”), double jeopardy precludes the entry of both convictions. See United States v. Jones, 101 F.3d 1263, 1268 (8th Cir. 1996)(citing, inter alia, Rutledge v. United States, 517 U.S. 292 (1996)). Thus, at sentencing, the government will move the Court to vacate Smith’s conviction for conspiracy to distribute controlled substances (Count 1). In the event that the CCE conviction (Count 9) is for whatever reason reversed on grounds that only affect that offense, the Court may later reinstate the conspiracy conviction. Rutledge, 517 U.S. at 306.

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IX. CONCLUSION AND SENTENCING RECOMMENDATION
The United States contends that a sentence at the bottom of the sentencing guideline range as found by the Probation Officer, 360 months, is more than a reasonable sentence. It takes into consideration the many extreme aspects of defendant’s conduct in this case, including his chilling plans to kill not one but two people, the multiple instances of his other obstructive conduct over a long period of time, his demonstrated willingness to violate any rule or law placed in front of him no matter the consequences, the extremely large volume of illegal drugs that he wantonly distributed, and his callous disregard for the harm he was causing to a substantial number of vulnerable, addicted people.

If anything, the 360 month to life guideline range is conservative. Many of the guideline enhancements that make up this range are readily proven under a number of different alternative factual scenarios. Indeed, the defendant is quite close to being within a guideline range that begins at life imprisonment. Namely, the Court could conceivably apply one or more additional enhancements (such as an enhancements for more than 250 victims or for numerous vulnerable victims). Even one additional enhancement would bring the defendant to an offense level of 43, the highest possible level and a level where the resulting guideline range would be life imprisonment. While the United States is not seeking any additional enhancements and does not contend that the
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appropriate guideline range starts at life, these facts do demonstrate that a 360 month sentence is reasonable.

Even if the defendant had not been convicted of the misbranded drug counts, a 360 month sentence would still be reasonable. For his conviction on the CCE count, Smith is already at an offense level of 40 (based on a base offense level of 38 plus a single two-level enhancement for obstruction of justice). His plans to kill two people could alone justify an upward departure or variance of two offense levels. Alternatively, the defendant’s criminal history, which did not adequately take into account his long history of illegal behavior, could readily support an upward departure or upward variance. With an upward departure or variance of only two criminal history levels or two offense levels, the defendant’s guideline range would be 360 months to life.

In sum, a sentence of 360 months is a fair sentence. It takes into consideration the many extreme aspects of Smith’s behavior described at length herein and during the trial of this matter. Thus, it reflects the seriousness of all of the defendant’s offenses, promotes respect for the law, provides just punishment for the offenses, and affords adequate deterrence to criminal conduct. Although this is a defendant who has never shown a willingness to let incarceration affect his criminal plans, this sentence will protect the public from further crimes of this
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defendant, at least to the extent feasible and at least for the duration of the defendant’s incarceration.

Dated: July 19, 2007

Respectfully submitted,
RACHEL K. PAULOSE
United States Attorney
s/Nicole A. Engisch
BY: NICOLE A. ENGISCH
Assistant U.S. Attorney
Attorney ID No. 215284

Attachment	Date	Size
SmithSentenceMemoUS.pdf	06/28/09 1:05 pm	181.08 KB

Defendant's Statement with Regard to Sentencing

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
0:05-CR-282-001 (MJD)

United States of America,
Plaintiff,
vs.

Christopher William Smith,
Defendant.
* * * * * * * * * * * * * * * * *
DEFENDANT’S POSITION REGARDING SENTENCING

INTRODUCTION
Defendant Christopher William Smith, by and through his undersigned attorney, Joseph S. Friedberg, respectfully submits this position paper to address the following: (1) the most significant of Mr. Smith’s objections to the Presentence Investigation; (2) the Court’s request for information on sentences meted out in similar cases; and (3) a request by Mr. Smith that the Court implement a non-Guidelines variance in its sentence down to the mandatory minimum should the Court conclude that the guidelines range as calculated in the PSI is correct.

In this case, the Guidelines as applied in the PSI indicate a total offense level of 42 and a criminal history category of I, resulting in the guideline range for imprisonment of 360 months to Life. PSI at ¶ 169. Pursuant to the CCE conviction in Count 9, the minimum term of imprisonment is 20 years and the maximum is life. PSI at ¶ 168. The government may move for an upward departure or variance from the guideline range. PSI at ¶ 184. Defendant urges this Court to sentence him to the mandatory minimum of 240 months in prison, contending the guidelines as appropriately calculated allow for such a sentence, or in the alternative that a moderate variance is warranted to arrive at such a sentence.

The government will be moving to dismiss the convictions of conspiracy and distribution of controlled substances in Counts 1 through 4 because they are lesser included offenses of the Continuing Criminal Enterprise offense for which Mr. Smith was also convicted in Count 9. Therefore, while Mr. Smith lodged, and for purposes of sentencing maintains, numerous objections relating to the facts underlying the calculations and the application of the guidelines based on those facts, the adjusted offense level of Group 1 as calculated in paragraphs 93 through 99 of the PSI is, in fact, legally irrelevant to the ultimate sentence of Mr. Smith. The adjusted offense level for Group 3, money laundering, was calculated at 32, see PSI at ¶ 115, which when considered in light of Mr. Smith’s criminal history category, creates a guideline range well below the mandatory minimum sentence in this case. Again, both Mr. Smith’s objections and the calculations and application of the Guidelines for Group 3 are thus
equally immaterial for the sentencing of Mr. Smith. Mr. Smith will direct the Court in this memorandum to his objections that have a potential impact on his actual sentence, and he will therefore address in detail the facts underlying and application of the Guidelines for Group 2, the introduction of misbranded drugs into interstate commerce, and for Group 4, continuing criminal enterprise.

ARGUMENTS
I. BASED ON MR. SMITH’S OBJECTIONS TO PSI, THE TOTAL OFFENSE LEVEL UNDER THE GUIDELINES SHOULD BE NO HIGHER THAN 38, AND THE GUIDELINES RANGE SHOULD BE 235 TO 293 MONTHS.
Since the Guidelines are now merely advisory for the Court, the main controlling factor in Mr. Smith’s ultimate sentence is the statutory mandatory minimum sentence of 20 years, or 240 months, that applies due to Mr. Smith’s conviction for CCE. Certainly, the Guidelines range as determined in the PSI to be 360 months to life, is significantly higher than the mandatory
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minimum. However, that range is based on an offense level of 42. If, based on any of Mr. Smith’s myriad objections, the total offense level was appropriately calculated at 40, Mr. Smith’s Guidelines range goes down to 292 to 362 months. Further, if the total offense level was actually only 38, the Guidelines range would be 235 to 293 months, and Mr. Smith could receive a Guidelines sentence at the mandatory minimum of 240 months.

Group 2 –Misbranded drugs
Under the calculations in the PSI, the adjusted offense level for Group 2 is 42. PSI at ¶109. This is based on seven different upward adjustments from a base level of 6. See id. at ¶¶100-109. Mr. Smith objects to virtually every calculation and application of the Guidelines for Group 2, reaffirms them here, but directs the Court to the following arguments.

Mr. Smith objects to the 22-level enhancement in paragraph 101 of the PSI. The enhancement is based on the gross sales of Mr. Smith’s operation, approximately $24 million. While Mr. Smith’s scheme defrauded government agencies, there was not a monetary loss. Other courts have concluded that it is inappropriate to substitute the defendant’s gain in such a case as a proxy for loss. See, e.g., United States v. Andersen, 45 F.3d 217, 222 (7th Cir. 1995) (reversing increase in offense level under Section 2F1.1(b)(1) on basis of financial loss because harm caused by defendant’s acts was non-monetary); see also United States v. Kimball, 291 F.3d 726 (11th Cir. 2002) (in misbranding case, expressing no opinion on district court’s determination that it was inappropriate to substitute defendant’s gain as proxy for loss because no connection existed between defendant’s gain and agencies’ loss). The Court should conclude that the 22-level enhancement is inapplicable, although the Court might, as the Andersen and Kimball sentencing judges did, determine that an upward adjustment is necessary for the non-monetary
loss caused by the fraudulent scheme.

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Mr. Smith objects to the two-level enhancement in paragraph 103 of the PSI. The relevant guideline provides for a two-level upward adjustment “[i]f the offense involved … a violation of any prior, specific judicial or administrative order, injunction, decree, or process….” U.S.S.G. §2B1.1(b)(8)(C) (emphasis added). Application note 7.(C) indicates the enhancement applies if the defendant commits the fraud offense of conviction “in contravention of a prior, official judicial or administrative warning, in the form of an order, injunction, decree, or process to take or not to take a specified action.” Here, the fraud offenses were three convictions for the introduction of misbranded drugs. These offenses, which were sting operations by the government, simply did not take place after and “in contravention” of any official judicial or administrative warning that Mr. Smith not sell prescription drugs. Nor was there a “prior, official” injunction precluding Mr. Smith from setting up a web site to sell misbranded drugs at the time of the commission of these fraud offenses. The Court should conclude that the two level enhancement under §2B1.1(b)(8)(C) is not applicable in this case.

Mr. Smith objects to the two-level enhancement in paragraph 104 of the PSI. Mr. Smith denies the allegations contained throughout the PSI, including but not limited to those in paragraphs 39, 47-50, 75, and 104, setting forth Mr. Smith’s foreign activities and concluding that those activities were fraudulent and undertaken to evade law enforcement. The underlying theory in the PSI is that all conduct by Mr. Smith in relation to establishing the Internet pharmacy was not just criminal but was clearly or obviously criminal, and further that, after court action was taken on May 9, 2005 to shut down the Online Payment Solutions operations, all activities or planned activities in foreign jurisdictions were similarly criminal and undertaken with the purpose of evading U.S. authorities. The PSI applies a two-level enhancement pursuant to U.S.S.G. §2B1.1(b)(9)(A).

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The evidence at trial revealed that at the relevant times, there were no laws directly prohibiting Internet pharmacies and that those operations were not in all cases illegal. The evidence also showed that Mr. Smith hired and utilized legal counsel for his operations, including Daniel Atkins and John Nelson, as well as an accountant, Bruce Lieberman. Furthermore, there is no evidence that the Internet pharmacy ever actually relocated and operated in any foreign jurisdiction. The Court should determine that the two-level enhancement under §2B1.1(b)(9)(A) is not applicable in this case.

Mr. Smith objects to the two-level enhancement in paragraph 105 of the PSI. The relevant guideline provides for such an enhancement if the offense involved “(A) the conscious or reckless risk of death or serious bodily injury; or (B) possession of a dangerous weapon (including a firearm) in connection with the offense….” U.S.S.G. §2B1.1(b)(12). As to the enhancement factor for risk of death of injury, Mr. Smith denies the allegations included in paragraphs 65-67 and throughout the PSI that there were deaths associated with prescription drug purchases from his company. Mr. Smith objects to application of U.S.S.G. §2B1.1(b)(12) in paragraph 105 because his offenses did not involve conscious or reckless risk or death or serious bodily injury.

As to the enhancement factor for possession of a dangerous weapon, Mr. Smith denies various allegations contained throughout the PSI as misleading or irrelevant. Specifically, while paragraphs 51 and 71 state that Mr. Smith used a taser gun on his employees, including Alton Scott Poe, the PSI omits the fact that the use on Poe was with Poe’s consent and does not identify any other employee that was tasered. Mr. Smith denies the allegation in paragraph 71 that he used a Glock pistol to threaten and intimidate people. Mr. Smith objects to application of U.S.S.G. §2B1.1(b)(12) in paragraph 105 on the ground that Mr. Smith’s possession at various
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times of firearms was not in connection with the offenses committed here.

Mr. Smith objects to the two-level enhancement in paragraph 108 of the PSI. The relevant guideline provides for such an enhancement where there is obstructive conduct. U.S.S.G. §3C1.1. Mr. Smith sharply contests the charges contained in United States v. Smith, case no. 06-CR-97 (MJD), which are referenced throughout the PSI, including but not limited to those in paragraphs 18-20, and objects to an adjustment for obstruction of justice based on those alleged acts. The theory for application of the enhancement is that Mr. Smith “obstructed the administration of justice in this case by threatening, intimidating, or otherwise unlawfully influencing a codefendant, directly or indirectly, or attempting to do so.”PSI at ¶ 78 (citing Application Note 4(a) to U.S.S.G. §3C1.1). The person who was allegedly the subject of the attempted unlawful influence was Bernardette Hollis. Mr. Smith has not been convicted or adjudicated guilty of the charges in case number 06-CR-97. He has pleaded not guilty to the charges and will contest them in a trial. On similar grounds, Mr. Smith objects to the obstruction enhancement being applied here, where a review of the uncontested facts show that he did not endeavor to obstruct justice, or that if he did, his conduct did not rise to the level of an attempt to unlawfully influence as set forth under U.S.S.G. §3C1.1 in this case. An endeavor must have the natural and probable effect of obstructing the due administration of justice, which means the effect is more likely to happen than not to happen. Merely discussing or inquiring into the possibility of obstructing or attempting to obstruct justice is not an endeavor, because an endeavor requires that the defendant actually undertook an act, or attempted to effectuate an arrangement, or tried to do something the natural and probable cause of which is to influence, obstruct or impede the due administration of justice. See United States v. Silverman, 745 F.2d 1386, 1396 n.12 (11th Cir. 1984). Here, in the
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first of five tape-recorded conversations between Mr. Smith and Roanna Cloefe that occurred over the course of two weeks, Mr. Smith made inquiries as to whether Cloefe knew of anyone that could be hired to kill Ms. Hollis. During that first tape recording, Cloefe did not agree to make specific arrangements to have Ms. Hollis killed or take further action to aid Mr. Smith in finding a hit-man. And in statements to investigators, Cloefe stated that she did not take Mr. Smith seriously and did not follow up on the discussion. That the matter was never discussed again in the remaining four conversations corroborates that there was never an agreement between Mr. Smith and Cloefe to harm or otherwise influence Ms. Hollis, nor did Mr. Smith’s actions rise to the level of an attempt to unlawfully influence as set forth under U.S.S.G. §3C1.1.

On the other hand, Mr. Smith cannot contravene some of the other allegedly obstructive conduct raised by the government and incorporated into the final version of the PSI. Although defense counsel was unaware of it at the time, Mr. Smith did lie to the government during his proffers. Mr. Smith contends these allegations are far less serious than the charges in the Hollis case, and was not actually very obstructive because the government knew, at the time, that Mr. Smith was lying.

In the event the Court agrees with two or more of Mr. Smith’s objections to the Group 2 calculations, therefore bringing the adjusted offense level down to 38 or lower, the calculations for Group 4 then become relevant.

Group 4 –Continuing criminal enterprise
Under the calculations in the PSI, the adjusted offense level for Group 4 is 40. PSI at ¶121. This is based on a base offense level of 38, plus one two-level upward adjustment for obstruction of justice. See id. at ¶¶ 116, 120. Mr. Smith has lodged a strong objection to the adjustment for obstruction of justice that was based on unlawfully influencing Bernardette
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Hollis, which objection was addressed in detail supra. That same objection applies to the adjustment set forth in paragraph 120 of the PSI. However, Mr. Smith concedes that there is other, less serious, obstructive conduct that the government could prove.

Additional Objections
Besides the objections addressed in detail supra, there were numerous other objections. The defense letter raising objections to the probation officer includes no less than 38 specifically enumerated and emboldened paragraph numbers of the PSI to which Mr. Smith was lodging some objection. The addendum to the PSI does not list or specifically address a number of these objections. In the addendum, the probation officer discusses eight areas of controversy raised by Mr. Smith and then in a ninth area, described as “offense conduct,”states only that “[t]he presentence report contains sufficient information in the offense conduct section to support the guideline calculations. Several of the proposed amendments are directly related to the defendant’s denial of the factual basis of which he was found guilty.” PSI at p. A.4.This is, quite frankly, an inadequate response to Mr. Smith’s specifically enumerated objections. The probation officer has an obligation in the addendum to present “any unresolved objections, the grounds for those objections, and the probation officer’s comments on them.” Fed.R.Crim.P. 32(g) (emphasis added). For each of the unresolved objections, the Court has an obligation to “rule on the dispute or determine that a ruling is unnecessary either because the matter will not affect sentencing, or because the court will not consider the matter in sentencing.” Fed.R.Crim.P. 32(i)(3)(B). By failing to identify for the Court Mr. Smith’s specific factual objections, Mr. Smith risks a denial of the process to which he is due. Mr. Smith reiterates his additional factual objections here:

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Paragraph 12: Mr. Smith has denied that he violated the preliminary injunction and the Court’s pretrial orders by planning to open and operate a new Internet pharmacy. In light of the Court’s April 27, 2007 conclusion that Mr. Smith was not guilty of the offense of criminal contempt for marketing prescription drugs on the internet in violation of the Court’s order for preliminary injunction, this objection seems to merit at least a mention in the addendum.

Paragraphs 27-31, 69: Mr. Smith has denied that he engaged in spamming for his prescription drug operation. Further, Mr. Smith objects to the omission in these paragraphs that his spamming for prior businesses was, at the time it was conducted, legal activity. Considering that no less than six different paragraphs in the PSI allege spamming, this objection should be addressed.

Paragraph 31: Mr. Smith denies that through an Internet-based pharmacy, he imported prescription drugs from India and distributed those drugs to customers without requiring a prescription and without the involvement of any physician. This is an entirely different and prejudicial allegation that was not the subject of any proof at trial, and should have been addressed by the PSI.

Paragraph 41: Mr. Smith denies that he ordered returned drugs to be repackaged for possible resale.

Paragraphs 53-56, 58-64: Mr. Smith specifically denies the allegations of violence or threatening behavior contained in each of these paragraphs.

Paragraph 69: Mr. Smith denies that the drug orders through the Internet pharmacy were primarily for Hydrocodone.

Paragraph 122: Mr. Smith objects to the determination that the greater of the adjusted offense levels is 42, and that instead the greater is the correct Group 4 calculation of 38. Therefore, the total offense level in paragraph 124 should be 38.

Paragraph 125: Mr. Smith objects to the contents of this paragraph as there are no allegations and no proof of any tax violations; this paragraph should be stricken.

Paragraph 143: Mr. Smith denies that he asked a fellow inmate to kill Anita Smith.

Paragraph 165: Mr. Smith denies that he has the listed assets.

Paragraph 167: Mr. Smith objects to the conclusion that he has not demonstrated an inability to pay a fine.

Paragraph 169: Mr. Smith objects. Based on a total offense level of 38 and a criminal history category of I, the guideline range for imprisonment should be 235 to 293 months.
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Based on Mr. Smith’s objections to the PSI, the total offense level under the Guidelines should be no higher than 40, and the Guidelines range should be 292 to 363 months.

II. A NON-GUIDELINES VARIANCE IS APPROPRIATE IN THIS CASE TO SENTENCE MR. SMITH TO THE MANDATORY MINIMUM OF 240 MONTHS.
The guidelines, as calculated in the PSI, advise a sentence range of 360 months to life based on a total offense level of 42 and a criminal history category of I. PSI at ¶ 169. Mr. Smith has lodged numerous objections and urges that the Court to appropriately calculate the total offense at 40, with a resulting sentencing range of 292 to 362 months. There is a statutory mandatory minimum sentence of 240 months that applies, and Mr. Smith urges that a sentence of 240 months is appropriate in this case. In the event that the Court calculates the advisory guidelines range at 360 to life, based on an offense level of 42, or a guidelines range of 292 to 362, based on an offense level of 40, Mr. Smith seeks a downward variance.

Now, following the issuance of United States v. Booker, this Court must consider statutory factors to impose a sentence “sufficient, but not greater than necessary” to satisfy “the need for the sentence imposed.” The 18 U.S.C. § 3553(a) factors include: (1) the nature and circumstances of the offense and the history and characteristics of the defendant; (2) the need to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense; (3) the need for deterrence; (4) the need to protect the public; (5) the need to provide the defendant with educational or vocational training or medical care; (6) the kinds of sentences available; (7) the advisory guidelines range; (8) the need to avoid unwarranted sentencing disparities; and (9) the need to provide restitution to victims. Pursuant to Booker, a sentencing judge should consult the Guidelines and the factors listed in Section 3553(a), apply the
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Guidelines where those factors are met, and feel free to depart from the Guidelines when they are not.

There are several factors about the nature of this case, and how it was charged and prosecuted, that exaggerate the actual criminality and the guidelines range as calculated by the PSI. These considerations are relevant under the Section 3553(a) factors and are a basis for a downward variance to the mandatory minimum sentence of 240 months.

Nature and Circumstances of the Offense
As the Court is aware, the very long sentence that will be imposed in this case is going to be determined based on the convictions for misbranded drugs and CCE. Yet this case is atypical for either crime.

The introduction of misbranded drugs as occurred here is not the typical fraud case – where a person, business or government agency is essentially cheated out of something worth monetary value. There is really no evidence here that Mr. Smith’s customers did not usually get exactly the prescription drugs they wanted for the price they expected in a manner they preferred (quickly, without having to go to and pay for an in-person visit to a physician to get or renew a prescription).

The fraud theory eventually espoused by the government is that the sale of misbranded drugs defrauds regulatory agencies. If the Court applies it, a 22-level fraud enhancement for loss of more than $20 million is really overstating the criminality here where generally neither the suppliers (the pharmacies) nor the customers involved in the $24 million in sales were cheated out of anything. And enhancing for utilizing mass-marketing in a fraud is duplicative when one is being punished for $24 million in sales –what misbranding case involving $24 million in sales could ever be achieved without mass marketing? The aspect of mass-marketing is subsumed by
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the offense level adjustment which uses gross sales as a measure. Further, consider that federal prosecution for this type of offense was virtually unheard of when Mr. Smith got into the business. The evidence at trial revealed that at the relevant times, there were no laws directly prohibiting Internet pharmacies per se, and that those operations were not in all cases illegal. (The legislation named after Ryan Haight that was later presented in Congress is indicative of the lack of a clear legal proscription on this type of business.) The evidence also showed that Mr. Smith hired and utilized legal counsel for his operations, including Daniel Atkins and John Nelson, a physician, Phillip Mach, as well as an accountant, Bruce Lieberman. This case cannot be compared to the typical fraud case.

Nor is this case the typical CCE. It will be left for Mr. Smith’s appellate attorney to argue that the CCE conviction should be reversed because it does not apply in this arena. But for sentencing purposes, this Court should certainly consider that CCE and its mandatory minimum sentence were directed at traditional street-level drug dealing.

Reflecting seriousness of offense, Providing just punishment
Under the government’s theory, this is a case of misbranded drugs. They argued and proved to the satisfaction of the jury that Mr. Smith operated a fraudulent scheme, defrauding government agencies, by introducing misbranded drugs into interstate commerce by providing prescription drugs without a valid prescription. Mr. Smith was convicted of the three counts of which he was charged. It is this group of convictions, according to the PSI, that results in the highest adjusted offense level under the Guidelines and sets the range at a very high 360 months to life.

By charging misbranding, the government was able to make this a high-dollar-value fraud case and ratchet up the guidelines range dramatically. The upward adjustment for the
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amount of loss alone was itself 22 points, comprised of all of Mr. Smith’s sales of prescription drugs on the basis that those sales were part of a common scheme or plan –i.e., relevant conduct. The misbranding theory of the case allowed for other enhancements as well. For example, Mr. Smith’s post-injunction behavior, where the government contends he participated in relocating his fraudulent scheme outside of the United States, also resulted in enhancements under U.S.S.G. § 2B1.1(b)(9)(A) for relocating a fraudulent scheme and under U.S.S.G. § 3C1.1 for obstruction of justice.

There are significant sentencing limitations from a misbranding case, however. Under the misbranding counts, the maximum term of imprisonment is three years. 21 U.S.C. §§ 331(a), 333(a)(2), and 353(b)(1). Even if the sentences for the three counts were stacked, the maximum sentence achievable is nine years. So while misbranding can result in a high guidelines range, statutory maximum sentencing law limits what can actually be imposed.

So, in addition to charging and proving the government’s theory that this is a misbranding case, the government charged a typical drug conspiracy –more typically utilized for the conventional street sales type of drug dealing, and not involving a fraud component. Only by including this alternate theory could the government then also charge continuing criminal enterprise, which of course has the 20-year mandatory minimum sentence.

Unwarranted sentencing disparities
In a letter dated June 19, 2007, this Court requested the types of sentences that have been imposed on defendants who are similarly situated to Mr. Smith, including both situations where the defendant pled guilty and went to trial. Mr. Smith has located the following cases, presented in no particular order:

-14 through 19-

--TABLE OMITTED--
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If this were prosecuted solely as a drug conspiracy case, Mr. Smith would not face 360 months to life as an advisory guidelines range. If this were prosecuted solely as a misbranded drugs case, Mr. Smith would not face more than nine years in prison because of the statutory maximum. Yet, by combining the theories, the government is able to seek much more. The question for this Court, in considering the variance, is whether a sentence of 240 months in this case adequately reflects the seriousness of the offense, promotes respect for the law, and
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provides just punishment for the offense. Mr. Smith urges that, particularly in light of sentences
imposed in other cases, it does each of those things.

CONCLUSION
Based on the foregoing, Mr. Smith respectfully requests this Court grant a variance from
the Guidelines sentencing range to sentence him to no more than 240 months of incarceration.
Dated: July 19, 2007

/s/ Joseph S. Friedberg
___________________________
Joseph S. Friedberg
Attorney Reg. No. 32086
Lisa Lodin Peralta
Attorney Reg. No. 254484
Suite 320 Fifth Street Towers
150 South Fifth Street
Minneapolis,MN 55402
(612) 339-8626
Attorneys for Defendant Smith

Attachment	Date	Size
SmithSentenceMemoDef.pdf	06/28/09 1:05 pm	140.29 KB

United States' Response to Defendant's Position Regarding Sentencing

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Criminal No. 05-282 (MJD/JJG)

UNITED STATES OF AMERICA,
Plaintiff,

v.

(1)CHRISTOPHER WILLIAM SMITH,
Defendant.

UNITED STATES’ RESPONSE TO DEFENDANT’S POSITION REGARDING SENTENCING

The United States of America, by and through its attorneys Rachel K. Paulose, United States Attorney for the District of Minnesota, and Assistant United States Attorney, Nicole A. Engisch, hereby submits this response to the Defendant’s Position Regarding Sentencing for the limited purpose of addressing three issues: 1) the loss amount enhancement, 2) the violation of a prior order enhancement, and 3) the downward variance sought by the defendant. The United States reserves the right to respond to the defendant’s other arguments at the evidentiary hearing and/or at sentencing.

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I. DISCUSSION

A. The Defendant’s $24 Million In Sales Is the Appropriate Loss Amount

The PSR concludes and the government contends that the proper measure of loss in this case is the $24 million that the defendant gained from his fraudulent sales of prescription drugs without a valid prescription. Smith responds that because his scheme defrauded government agencies, there is no monetary loss. For support of this argument, the defendant relies primarily on United States v. Andersen, 45 F.3d 217, 221-22 (7th Cir. 1995)(where customers who purchased veterinary drugs were “well aware that the drugs they were purchasing were not approved by the FDA,” the court held that the defendant’s gain was not an appropriate measure for determining loss).1 As will be discussed below, the Andersen case, which took a minority view, was decided prior to a 2001 clarification of U.S.S.G. § 2B1.1 that makes it clear the defendant’s sales are the proper loss calculation in cases charging FDA and related violations. Therefore, this Court should reject the defendant’s “no loss” argument.

[1 Smith also cites United States v. Kimball, 291 F.3d 726 (11th Cir. 2002), but the appellate court in that case declined to express an opinion on whether it was inappropriate to equate the loss amount with the defendant’s gain. Id. at 734 n. 4.]

First, the majority of courts to address the question have held that the defendant’s gain should serve as the loss amount in
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cases involving FDA and related violations. See, e.g, United States v. Munoz, 430 F.3d 1357, 1370-73 (11th Cir. 2005)(where the defendants “conspired to mislead buyers by informing them that [the drugs] did not require prescriptions,” the loss was equal to the defendant’s gain); United States v. Milstein, 401 F.3d 53 (2d Cir. 2005)(in case involving misbranded drug and other FDA charges, court held that the loss amount was the defendant’s total sales because illegally sold prescription drugs had no value); United States v. Gonzalez-Alvarez, 277 F.3d 73, 77-80 (1st Cir. 2002)(where customers reasonably believed they were purchasing milk that was compliant with government regulations, they were denied the benefit of their bargain, and loss should be calculated based on the amount paid the defendant); United States v. Bhutani, 266 F.3d 661, 669-70 (7th Cir. 2001)(where “consumers bought drugs under the false belief that they were in full compliance with the law,” “the defendant’s gain is the appropriate measure of the loss”); United States v. Haas, 171 F.3d 259 (5th Cir. 1999)(where the loss to customers is incalculable, the court can rely on the gain the defendant received from defrauding the FDA by importing Mexican drugs without incurring the costs associated with regulatory approval); United States v. Marcus, 82 F.3d 606, 610 (4th Cir. 1996) (where “consumers did not receive what they bargained for--an FDA-approved drug of known safety and efficiency,” the defendant’s gross sales were the appropriate
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measure of the actual loss suffered by consumers . . .”); United States v. Cambra, 933 F.2d 752, 756 (9th Cir. 1991)(“There is no meaningful distinction between the government as victim and individual consumer victims”; district court properly held that the defendant “intended to profit from his activity and that at least federal agencies were defrauded by his acts. Adjusting the guideline range based on the amount involved [the defendant’s gain] is therefore appropriate”); But See United States v. Chatterji, 46 F.3d 1336, 1341-42 (4th Cir. 1995) (finding the defendant’s gain was not an appropriate measure of loss in case where the customers received drugs that, despite fraudulently-obtained FDA approval, did not harm customers and were exactly what the defendant represented the drugs to be).

The analysis of the majority view makes sense here. Smith’s customers were duped by the defendant’s misrepresentations and online pharmacy structure into believing they were legally purchasing prescription drugs with a valid prescription. Because there was no valid prescription and the drugs were sold illegally, the customers were deprived of the benefit of their bargain.

But even if this case were arguably closer to the facts in Andersen and the other minority cases, such arguments would be academic. In one of the more recently decided cases, United States v. Milstein, 401 F.3d 53 (2d Cir. 2005), the court identified a critical 2001 application note that appears to have resolved the
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matter for most FDA and related cases. As the Milstein court observed, in 2001, the fraud guidelines were clarified by the following commentary:

In a case involving a scheme in which (I) services were fraudulently rendered to the victim by persons falsely posing as licensed professionals; (II) goods were falsely represented as approved by a governmental regulatory agency; or (III) goods for which regulatory approval by a government agency was required but not obtained, or was obtained by fraud, loss shall include the amount paid for the property, services or goods transferred, rendered, or misrepresented, with no credit provided for the value of those items or services. Id. (quoting Application Note 3.(F)(v) to U.S.S.G. § 2B1.1). Thus, the loss amount in Milstein was equal to the defendant’s sales. Id.; see also United States v. Aronowitz, 151 Fed. Appx. 193, 194 (3d Cir. 2005) (in health care fraud case involving dentist who allowed dental assistants to do procedures he billed for, court rejected defendant’s argument that there was no loss because patients were not harmed by the work done by the non-dentists; Application Note 3.(F)(v) was controlling and effectively overruled earlier case law relied upon by the defendant).

The conduct in this case falls within the language of this 2001 commentary. First, this case involves a scheme in which “goods were falsely represented as approved by a governmental regulatory agency” because Smith falsely represented on his web site and in contracts that his online questionnaire, and thus, by implication, his online pharmacy, was “FDA approved.”

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Second, this case involves a scheme in which “goods for which regulatory approval by a governmental agency was required . . . [and] was obtained by fraud” because Smith made numerous misrepresentations to brick and mortar pharmacies in an effort to lure them into supplying the prescription drugs which he in turn distributed.2 Smith needed the pharmacies and their DEA licenses in order to secure the prescription drugs and in order to distribute them without drawing undue attention from regulators.3

[2 The misrepresentations included lies about how many doctors were on board and about how they reviewed the customer orders, as well as the entirely false “Dr. Mach letter” prepared in April 2005 in response to the DEA directive.

3 In a related case, Bernardette Hollis pled guilty to the offense of obtaining prescription drugs by fraud based on aiding and abetting this same conduct.]

Finally, while this case does not directly involve “services [that] were fraudulently rendered to the victim by persons falsely posing as licensed professionals,” it involves closely analogous conduct. Namely, in this case, the central misbranding conduct involved Smith’s misrepresentations that the prescription drugs were being sold with a valid prescription secured after proper review and approval by a physician. There was in fact a licensed physician involved, but for all intents and purposes, that individual did not act in a professional manner in reviewing the drug orders and issuing “prescriptions.”

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Thus, because this case falls within Application Note 3.(F)(v) to U.S.S.G. § 2B1.1, and based on the analysis of the majority of cases, the loss amount should be $24 million, the amount customers paid Smith for the drugs.4

[4 This application note is consistent with other commentary to U.S.S.G. § 2B1.1 applicable to controlled substances cases sentenced under the fraud guidelines. See Application Note 3.(F)(vi) to U.S.S.G. § 2B1.1 (“[i]n a case involving controlled substances, loss is the estimated street value of the controlled substances.”). Here, the “estimated street value” of the hydrocodone and other controlled substances sold by Smith is approximately $24 million.]

B. Because the Defendant Violated Orders That Were Prior to His Relevant Conduct, the Enhancement Applies

Defendant contends that he is not subject to an enhancement for violation of a prior order because there were no orders in place prior to the dates he engaged in introducing misbranded drugs into interstate commerce. Defendant’s argument is without merit because it ignores principles of relevant conduct. Namely, “specific offense characteristics . . . are determined on the basis of ‘relevant conduct,’ not the acts underlying the offense of conviction.” United States v. Killgo, 397 F.3d 628, 631 (8th Cir. 2005)(citing U.S.S.G. § 1B1.3(a)). Thus, the term “prior” in the prior order enhancement means prior to the defendant’s entire course of conduct, not just prior to the counts of conviction. Id.

In this case, the defendant continued to engage in online
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pharmacy activities throughout 2005 (when he set up an online pharmacy in the Dominican Republic at www.allpainmeds.com and at www.allusamedical.com), and into 2006, while he was housed at the Sherburne County Jail (when he set up an online pharmacy in the Phillippines at www.valuemeds.ph). He also continued to engage in obstructive conduct related to his online pharmacy activities (such as the plot to kill a witness) well into 2006. Thus, as previously argued, he engaged in a number of violations of orders that were prior to his relevant conduct. Any one of those violations, including Smith’s violation of the Court’s May 2005 injunction when he brazenly stole money from the receivership bank account, will justify this enhancement.

C. Defendant Is Moving For a Substantial Variance Not Justified By Extraordinary Circumstances

If the Court finds all of the enhancements found by the Probation Officer and argued by the government, the guideline range is 360 months to life. In that instance, the defendant seeks a downward variance to 240 months. The defendant, however, has not offered exceptional circumstances to justify such a substantial variance.

As the Eighth Circuit has repeatedly held, the further a district court varies from the sentencing guideline range, the more compelling the justification based on the statutory factors must
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be. “[A]bsent exceptional facts, the imposition of a sentence that is dramatically lower than that recommended by the guidelines is an abuse of the district court’s discretion.” United States v. Maloney, 466 F.3d 663, 668 (8th Cir. 2006); see also United States v. Bryant, 446 F.3d 1317, 1319 (8th Cir. 2006).5

[5 This proportionality principle was left unaddressed by the Supreme Court’s recent decision in Rita v. United States, 127 S.Ct. 2456 (2007), which noted that it would be taken up next term in United States v. Gall. Id. at 2467. At present, the proportionality principle remains binding precedent in the Eighth Circuit.]

Smith does not present exceptional facts but instead argues that a 360 month sentence is too long because it is based on a combination of charges brought by the government and is longer than other sentences imposed in other online pharmacy cases (where the defendants apparently were not subject to such a combination of charges).

In the government’s view, it may be problematic to vary a sentence based either on a comparison of other cases or based on a criticism of the government’s prosecutorial discretion to charge the case in a certain manner.6 The whole purpose of starting the
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sentencing analysis with the guidelines is to avoid unwarranted sentencing disparities by ensuring that all defendants convicted of the same crimes and subject to the same enhancements will receive the same sentences. Where, as here, the parties know little about the facts and circumstances of defendants charged in other cases, including which sentencing enhancements were at issue, it is difficult to compare those defendants to Smith.

[6 The government takes issues with defendant’s suggestion that he is at most facing 9 years for the misbranding counts. He was convicted of nine counts, and the Court is permitted to stack the statutory maximums for all of those counts to reach a final sentence within the applicable guideline range (which groups all of his offenses). See U.S.S.G. § 5G1.2. Even setting aside the CCE statutory maximum of life imprisonment and the conspiracy to distribute controlled substances count (which the government is dismissing), the Court could stack as follows: five years for each of three counts of distribution of controlled substances (15 years total), three years for each misbranding count (9 years total); 20 years for conspiracy to commit money laundering, for a grand total of 44 years.]

Indeed, comparing this defendant to other defendants in other cases is arguably akin to comparing a defendant to defendants charged and sentenced in state court. The Eighth Circuit has held that it is an abuse of the court’s discretion and infringes on prosecutorial discretion to make such comparisons. United States v. McCormick, 474 F.3d 1012, 1014 (8th Cir. 2006)(holding that the district court lacked authority to vary downward from the guideline range after comparing the defendant’s sentence to the sentence received by his accomplice in state court); United States v. Jeremiah, 446 F.3d 805, 807-08 (8th Cir. 2006)(“The District Court was neither required nor permitted under 3553(a)(6) to consider a potential federal/state disparity in imposing [the defendant’s] sentence.”); see United States v. Deitz, 991 F.2d 443, 448 (8th
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Cir. 1993) (“Choice of forum . . . is a decision that lies safely within the realm of prosecutorial discretion, and the Guidelines were not designed to make inroads into this exclusive territory of the executive branch”); see also United States v. Blackford, 469 F.3d 1218, 1220 (holding that district court was not permitted to compare the defendant’s case with other defendants who had received sentencing immunity because “any disparities arising from appropriate prosecutorial practices (or sentences resulting from those practices) are justified”).

Even if the Court were to compare Smith with defendants in other online pharmacy cases, the comparison would nonetheless demonstrate why a 360 month sentence is reasonable. Namely, the defendant that Smith is arguably most like is Clayton Fuchs, who was also convicted of CCE for operating an illegal online pharmacy.7 Fuchs received a sentence of 240 months, but so far as the government is aware, Fuchs did not violate numerous court orders, obstruct justice in multiple ways, or plan to murder two individuals. If Smith is sentenced to 240 months, it will be as if all of his additional, serious conduct is of no consequence.
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Moreover, a sentence 240 months, the minimum sentence for conviction under CCE, is the same sentence Smith would have received if he had pled guilty prior to trial.

[7 Akhil Bansal was also convicted of CCE but has not yet been sentenced. The Fuchs and Bansal cases, as well as Smith’s, demonstrate that CCE is an appropriate charge in certain online pharmacy cases. There is simply no reason why someone who pushes millions of dollars worth of narcotics to known addicts should be treated more leniently than someone who sells cocaine on the street.]

II. CONCLUSION

For all of these reasons and those set forth in the government’s initial position pleading, the United States believes that a sentence of 360 months is reasonable.

Dated: July 25, 2007 Respectfully submitted,

RACHEL K. PAULOSE
United States Attorney

/s/Nicole A. Engisch
BY: NICOLE A. ENGISCH
Assistant U.S. Attorney
Attorney ID No. 215284

Attachment	Date	Size
SmithSentenceMemoUSResponse.pdf	06/28/09 1:05 pm	63.66 KB

Sentence

Total prison terms of 60 months on Count 2, 60 months on Count 3, 60 months on Count 4, 36 months on Count 5, 36 months on Count 6, 36 months on Count 7, 240 months on Count 8 and 360 months on Count 9. All terms to run concurrently.

Supervised release (probation) for terms of 5 years on Counts 2, 3, and 4; 1 year on Counts 5, 6, and 7; 3 years on Count 8; and 5 years on Count 9. All terms to run concurrently.

He has to give up DNA, undergo drugs testing (1 within 15 days of release, 2 more times within the remainder of his probation), drug counseling (which may include testing and inpatient or outpatient treatment, counseling, or a support group, at the probation officer's discretion), and psychological/psychiatric counseling. He also has to tell everyone that he lives with and works with that he might be searched if his probation officer has a reasonable suspicion that he's got something that he's not supposed to have.

Finally, there's an $800 penalty and $24,240,747 in forfeitures.

He did get a bone, though. The judge recommends that he be incarcerated in the penitentiary in Terre Haute, Indiana. That'd be the maximum security prison where death row is located. As rough as that might sound, it's at least close enough for his family to visit him. It's also not the Administrative Maximum Security, Florence unit where he would live life on permanent lock-down (as is apparently the case currently).

============================
United States District Court
District of Minnesota
UNITED STATES OF AMERICA

v.

Christopher William Smith

JUDGMENT IN A CRIMINAL CASE

Case Number: 05cr282(1) MJD/JJG
USM Number: 12310-041

Social Security Number: [REDACTED]

Date of Birth: 1980

Joseph Friedberg
Defendant’s Attorney

THE DEFENDANT:

[x] was found guilty on counts 1,2,3,4,5,6,7,8,9 of the Third Superceding Indictment after a plea of not guilty.

However, Count 1 of the Third Superceding Indictment was dismissed by the Government at the time of
sentencing.

The defendant is adjudicated guilty of these offenses:

. The sentence is imposed pursuant to the Sentencing Reform Act of 1984.

[x] Count 1 of Third superceding Indictment is dismissed on the motion of the United States.

It is ordered that the defendant must notify the United States attorney for this district within 30 days of any change of name, residence, or mailing address until all fines, restitution, costs, and special assessments imposed by this
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judgment are fully paid. If ordered to pay restitution, the defendant must notify the court and United States attorney of any material change in economic circumstances.

August 1, 2007
Date of Imposition of Judgment

s / Michael J. Davis
Signature of Judge

MICHAEL J. DAVIS, United States District Judge
Name & Title of Judge

August 6, 2007
Date

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IMPRISONMENT

The defendant is hereby committed to the custody of the United States Bureau of Prisons to be imprisoned for a total term of 60 months on Count 2, 60 months on Count 3, 60 months on Count 4, 36 months on Count 5, 36 months on Count 6, 36 months on Count 7, 240 months on Count 8 and 360 months on Count 9. All terms to run concurrently.

[x] The court makes the following recommendations to the Bureau of Prisons:
That defendant be housed in the penitentiary at Terre Haute, Indiana

[x] The defendant is remanded to the custody of the United States Marshal.

RETURN
I have executed this judgment as follows:

Defendant delivered on to
a , with a certified copy of this judgment.
United States Marshal
By
Deputy United States Marshal

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SUPERVISED RELEASE

Upon release from imprisonment, the defendant shall be on supervised release for a term of 5 years on Counts 2, 3, and 4; 1 year on Counts 5, 6, and 7; 3 years on Count 8; and 5 years on Count 9, all such terms to run concurrently.

The defendant must report to the probation office in the district to which the defendant is released within 72 hours of release from the custody of the Bureau of Prisons.

The defendant shall not commit another federal, state or local crime.

The defendant shall not unlawfully possess a controlled substance. The defendant shall refrain from any unlawful use of a controlled substance. The defendant shall submit one drug test within 15 days of release from imprisonment and at least two periodic drug tests thereafter, as determined by the court.

[x] The defendant shall not possess a firearm, ammunition, destructive device, or any other dangerous weapon.

[x] The defendant shall cooperate in the collection of DNA as directed by the probation officer.

If this Judgment imposes a fine or restitution, it is a condition of supervised release that the defendant pay in accordance with the Schedule of Payments sheet of this judgment.

The defendant must comply with the standard conditions that have been adopted by this court as well as any additional conditions on the attached page.

STANDARD CONDITIONS OF SUPERVISION

1) the defendant shall not leave the judicial district without permission of the court or probation officer;

2) the defendant shall report to the probation officer and shall submit a truthful and complete written report within the first five days of each month;

3) the defendant shall answer truthfully all inquiries by the probation officer and follow the instructions of the probation officer;

4) the defendant shall support his or her dependants and meet other family responsibilities;

5) the defendant shall work regularly at a lawful occupation, unless excused by the probation officer for schooling, training, or other acceptable reasons;

6) the defendant shall notify the probation officer at least ten days prior to any change in residence or employment;

7) the defendant shall refrain from excessive use of alcohol and shall not purchase, possess, use, distribute, or administer any controlled substance or any paraphernalia related to any controlled substances, except as prescribed by a physician;

8) the defendant shall not frequent places where controlled substances are illegally sold, used, distributed, or administered;

9) the defendant shall not associate with any persons engaged in criminal activity and shall not associate with any person convicted of a felony, unless granted permission to do so by the probation officer;

10) the defendant shall permit a probation officer to visit him or her at any time at home or elsewhere and shall permit confiscation of any contraband observed in plain view of the probation officer;

11) the defendant shall notify the probation officer within seventy-two hours of being arrested or questioned by a law enforcement officer;

12) the defendant shall not enter into any agreement to act as an informer or a special agent of a law enforcement agency without the permission of the court; and

13) as directed by the probation officer, the defendant shall notify third parties of risks that may be occasioned by the defendant's criminal record or personal history or characteristics and shall permit the probation officer to make such notifications and to confirm the defendant's compliance with such notification requirement.

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SPECIAL CONDITIONS OF SUPERVISION

a The defendant shall not commit any crimes, federal, state, or local.

b The defendant shall abide by the standard conditions of supervised release recommended by the Sentencing Commission.

c The defendant shall refrain from possessing a firearm, destructive device, or other dangerous weapon.

d The defendant shall cooperate in the collection of DNA as approved by the probation officer and mandated pursuant to 18 USC §§ 3563(a) and 3583(d).

e The defendant shall be required to undergo mandatory drug testing as set forth by 18 USC §§ 3563(a) and 3583(d).

f The defendant shall participate in a program for drug abuse as approved by the probation officer. That program may include testing and inpatient or outpatient treatment, counseling, or a support group. Further, the defendant shall contribute to the costs of such treatment as determined by the Probation Officer Co-Payment Program not to exceed the total cost of treatment.

g The defendant shall participate in a psychological/psychiatric counseling or treatment program, as approved by the probation officer. Further, the defendant shall contribute to the costs of such treatment as determined by the Probation Office Co-Payment Program not to exceed the total cost of treatment

h The defendant shall submit his person, residence, office, vehicle, or an area under the defendant's control to a search conducted by a Untied States Probation Officer or supervised designee, at a reasonable time and in a reasonable manner, based upon reasonable suspicion of contraband or evidence of a supervision violation. The defendant shall warn any other residents or third parties that the premises and areas under the defendant's control may be subject to searches pursuant to this condition.

i If not employed at a regular lawful occupation, as deemed appropriate by the probation officer the defendant may be required to preform up to 20 hours of community service per week until employed. The defendant may also participate in training, counseling, daily job search, or other employment -related activities, as directed by the probation officer.

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CRIMINAL MONETARY PENALTIES
The defendant must pay the total criminal monetary penalties under the schedule of payments on Sheet 6.

Assessment Fine Restitution
Totals: $800.00

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SCHEDULE OF PAYMENTS

Having assessed the defendant’s ability to pay, payment of the total criminal monetary penalties are due as follows:

A [x] Lump sum payment of $800.00 special assessment to the Crime Victims Fund due immediately,
Unless the court has expressly ordered otherwise, if this judgment imposes imprisonment, payment of criminal monetary penalties is due during the period of imprisonment. All criminal monetary penalties, except those payments made through the Federal Bureau of Prisons’ Inmate Financial Responsibility Program, are to be made to the clerk of court.

The defendant shall receive credit for all payments previously made toward any criminal monetary penalties imposed.

[x] The defendant shall forfeit the defendant’s interest in the following property to the United States:

a. the sum of $24,240,747, representing the gross proceeds of the offenses of conviction. The defendant shall be given a credit against this money judgment for the net forfeited value of the assets forfeited in connection with United States v. One Mercedes Maybach et al., Civil No. 05-1516 (MJD/AJB). The defendant shall be given a further credit against this money judgment amount for the net forfeited value of each specific asset including, without limitation, the assets listed below, finally forfeited pursuant to this order, that is, the value of all currency actually collected and forfeited to the United States, and the value of the net proceeds from the sale of all other property finally forfeited to the United States;

b. $89,335.00 in U.S. Currency surrendered to the Internal Revenue Service, Criminal Investigation Division, on February 3, 2006;

c. $198,120.00 in U.S. Currency surrendered to the Internal Revenue Service, Criminal Investigation Division, on February 3, 2006;

d. $1,850.00 in U.S. Currency surrendered to the Internal Revenue Service, Criminal Investigation Division, on February 3, 2006;

e. $13,757.96 in net proceeds from the sale of a 2005 Mercedes Benz, C55AMG, VIN WDBRF76J95F612084;

f. $139,720.00 in U.S. Currency surrendered to the Internal Revenue Service, Criminal Investigation Division, on March 24, 2006;

g. $50,000.00 in U.S. Currency surrendered to the Internal Revenue Service, Criminal Investigation Division, on March 31, 2006;

h. the real property located at XXXX, Prior Lake, Minnesota, and legally described as XXXX, Scott County, Minnesota, together with its buildings, fixtures, improvements, and appurtenances;

i. a Rolex watch, serial number F159286, style R7917441RB7824, purchased on December 22, 2004 from Osterman Jewelers;

j. any and all remaining funds in U.S. Bank Account No. X-XXX-XXXX-XXXX, or other accounts held by the court appointed Receiver in connection with United States v. Christopher William Smith et al., Civil No. 05-895 (MJD/SRN);

k. funds up to the amount of $16,000 held by Braemer Mailings funded by Online Payment Solutions check number 7200 in the amount of $16,000; AO 245B (Rev. 06/05) Sheet 6 - Schedule of Payments

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l. funds in the amount of $922,166.97 withdrawn from various accounts at CommerceBank between May 11 and May 13, 2005, including Revenue Doctors Account No. XXXX, RxOrderFill.com Savings Account No. XXXX, and Bruce and Robin Lieberman Account No. XXXX; and

m. any and all remaining funds in accounts held by Bardo France, 16, Place Vendome, Paris, France, under Account Identification No. XXXX (Xpress Pharmacy Direct).

Attachment	Date	Size
Sentence.pdf	06/28/09 1:05 pm	73.6 KB

Affidavit of Special Agent Chad Vetter

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
CRIMINAL NO. 05-282 (MJD/JJG)

UNITED STATES OF AMERICA
PLAINTIFF,

v.

CHRISTOPHER WILLIAM SMITH
DEFENDANT.

STATE OF MINNESOTA
COUNTY OF HENNEPIN

AFFIDAVIT OF SPECIAL AGENT CHAD VETTER

I, Chad Vetter, having been duly sworn, do state the following is true and correct to the best of my knowledge and belief:

1. I am a Special Agent with the Internal Revenue Service, Criminal Investigation Division, in Minneapolis, Minnesota. I have been employed in this capacity since August, 2001. Prior to that, I completed the required ten-week Criminal Investigation Training Program and sixteen-week Special Agent Investigator Training at the Federal Law Enforcement Training Center in Glynco, Georgia. As a Special Agent, my duties and responsibilities have included conducting criminal investigations of individuals and businesses for possible violations of Federal laws, particularly those laws found in Title 18, Title 26 and Title 31 of the United States Code.

2. The information contained in this affidavit is based upon conversations with other law enforcement officers and others, my review of various documents and records, and my personal
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observations and knowledge.

3. This affidavit is submitted pursuant to Fed. R. Crim. P. 32.2(b)(1) in support of the motion of the United States for a preliminary order of forfeiture. The information contained in this affidavit is offered to supplement the evidence introduced at trial for the purpose of establishing the requisite nexus between the offenses of which defendant Christopher Smith has been convicted, and specific assets that the United States is seeking to forfeit in this action.

A. Forfeiture Of U.S. Currency As Criminal Proceeds

4. As summarized in Government Exhibit 713 which was introduced at trial, between January 26, 2005 and May 6, 2005, a total of $2,920,375 in cash was withdrawn from the Advanced Financial Svcs. Account at Wells Fargo Bank. This account was funded with proceeds from the illegal sale of controlled substances. The cash was delivered by Brinks delivery trucks to businesses associated with online Payment Solutions.

5. During the early months of 2006, a total of $569,025 was delivered by various persons to Agents of the Internal Revenue Service, Criminal Investigation Division, and the Federal Bureau of Investigation. This cash is alleged and believed to constitute a portion of the $2,920,375 in cash that was withdrawn from the Advanced Financial Svcs. account at Wells Fargo Bank. Additional details concerning these funds is contained below.

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6. Various individuals have informed law enforcement officers about large amounts of cash that were stored by or at the direction of Christopher Smith. Anita Smith participated in a proffer interview with law enforcement officers on February 1, 2006. Ms. Smith advised that she traveled to the U.S. Courthouse on or about May 20, 2005 with Christopher Smith. After a hearing before the Honorable Michael J. Davis, defendant Smith left the courthouse by himself in a cab. He returned home later that evening with duffle bags of cash. Ms. Smith estimated that there was over $1 million in the duffle bags. She assisted defendant Smith with wrapping the cash in "seran" wrap, and placing the wrapped bundles in cereal boxes. Ms. Smith stated that she later helped defendant Smith hide the cereal boxes full of cash in a boathouse at the home of Smith's mother ([redacted at his mother's request]).

7. [Redacted at his step-father's request] Meili, defendant Smith's stepfather and the husband of [redacted at his mother's request], participated in proffer interviews on February 14 and March 24, 2006. Meili stated that he was aware that Christopher Smith had hidden money in his boathouse basement in June 2005. Smith told Meili about the money after Smith returned from the Dominican Republic. Meili stated that the funds were kept in cash bundles that were either shrink wrapped or wrapped in foil and placed in Apple Jacks or Cheerios cereal boxes. Meili estimated that there were about ten to twelve cereal boxes. Later, on or about July 1, 2005, Meili moved the money out of the cereal
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boxes and placed the bundles of cash in two fabric backpacks. Meili placed the backpacks in a crawlspace deeper inside the boathouse.

$89,335.00, $198,120.00 and $1,850.00 in U.S. Currency

8. During a proffer interview with [redacted at his step-father's request] Meili on February 14, 2006, Meili advised that sometime between January 3 and January 6, 2006, he received a call from John Nelson. Meili and Nelson subsequently met at Sweeney's Bar in St. Paul. Nelson gave Meili a white envelope. The envelope contained a note from Chris Smith which stated something like "[redacted at his step-father's request] please give John Nelson $200,000. There's a backpack in the basement boathouse. He has not been paid for legal fees."

9. Approximately one week later, Meili and Nelson met again at Sweeney's. Prior to the meeting, Meili packed a shoe box with twenty bundles of money. Meili gave the box of money to Nelson during the meeting at Sweeney's. On or about January 25, 2006, Meili met with Nelson again. Nelson indicated that there were new violations that he was alleged to be involved with. Nelson gave the shoebox of money back to Meili. Meili stored the cash in his boathouse with the rest of the money received from defendant Smith.

10. On February 1, 2006, [redacted at his step-father's request] Meili and [redacted at his mother's request] Meili met with Attorney Joseph Friedberg. Meili indicated that he had received approximately $200,000 back from John Nelson. Later that day, Meili placed the approximately $200,000 in a styrofoam container and gave the money to an investigator for Attorney
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Friedberg. A day later, Meili delivered a backpack containing nine bundles of cash to Attorney Friedberg.

11. On February 3, 2006, law enforcement officers were directed to meet attorney Joseph Friedberg at the Office of the United States Attorney at the Federal Courthouse in Minneapolis. Friedberg turned over a two-wheeled cart containing a small white cooler and a brown paper bag to law enforcement officers. Friedberg stated that the bag contained cash from Chris Smith, and the cooler contained cash from attorney John Nelson. Friedberg stated that the portion of the money provided by Smith came from the residence of Smith's mother and stepfather.

12. On February 6, 2006, I transported the cash referenced in paragraph 11 to the Office of the Internal Revenue Service, Criminal Investigation Division. The cash was photographed. I noted that a large portion of the hundred dollar bills contained consecutive serial numbers. The consecutive serial numbers would be consistent with the cash having been withdrawn in bulk from a bank such as Wells Fargo Bank. The cash was transported to Wells Fargo Bank, where it was counted. One cashier's check was issued for $89,335, which represented the cash provided by Smith. A second cashier's check was issued for $198,120, which represented the cash provided by Nelson. The funds received from Attorney Friedberg on February 3, 2006, also included an additional $1,850.00 in U.S. currency. I was advised that the bank initially miscounted the funds, and the $1,850 were therefore not included
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with the funds in the amount of $89,335.00 and $198,120.00 referenced above.

$139,720.00 in U.S. currency

13. On March 24, 2006, I went to the United States Attorney's Office on the 6th floor of the U.S. Courthouse in Minneapolis, Minnesota. I, along with several agents, met with [redacted at his step-father's request] Meili, and his attorney, Richard Lind. Richard Lind handed IRS Special Agent Ken Fry and I a box which was taped shut. Mr. Lind reported that the box contained cash that [redacted at his step-father's request] Meili was holding for Chris Smith.

14. The cash was transported to the offices of the Internal Revenue Service, where it was photographed and counted. The cash was subsequently taken to wells Fargo Bank, which counted the money, and then issued a cashier's check in the amount of $139,720.

$50,000.00 in U.S. currency

15. On March 31, 2006, I met with Scott Smith and his attorney, Deborah Ellis, at the United States Attorney's office for a proffer interview. During the proffer session, Scott Smith voluntarily turned over a plastic bag containing a large amount of U.S. currency. Scott Smith, who is the defendant's father, indicated that in late December 2005 or January 2006, attorney John Nelson requested that they meet. During a meeting at a Target store, Nelson handed him $50,000 wrapped in plastic. Nelson told Smith that he would be receiving instructions about what to do with the money. Nelson told Smith to be careful because the bills were
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sequential. Smith stated that he suspected that the money came from [redacted at his step-father's request] and [redacted at his mother's request] Meili.

16. The cash was later inspected and counted. I noted that the serial numbers of the one hundred dollar bills were in consecutive order. The cash was taken to Wells Fargo Bank, which issued a cashier's check in the amount of $50,000.

B. Real Property Located on Elm Court, Prior Lake, Minnesota

17. On or about December 28, 2004, Christopher Smith purchased a residence located at in Prior Lake, Minnesota, legally described as Lot 11, Block 3, Cedarwood Estates, Scott County, Minnesota
("the real property"). The record owners of the real property are Christopher Smith and Anita Smith, husband and wife, by virtue of a Warranty Deed dated December 28, 2004, and filed of
record with the Scott County Recorder on March 23, 2005.

18. The real property was purchased with proceeds of the online / telemarketing pharmacy scheme. The real property was purchased with U.S. Bank cashier's check Number 506836451 dated
December 28, 2004, from Online Payment Solutions, Inc., payable to Christopher Smith in the amount of $1,115,367.46. This check was drawn on the online Payment Solutions account at U.S. Bank. As testified to at trial, this account was funded with proceeds of violations of the Controlled Substances Act, and was directly involved in the money laundering conspiracy under Count 8 of the
Third Superseding Indictment. A copy of the cashier's check and the counter withdrawal slip are attached as Exhibit A.

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C. Account Held by Court Appointed Receiver - United States v. Christopher William Smith et al., Civil No. 05-895 (MJD/FLN)

19. I have reviewed the account statements for U.S. Bank account number X-XXX-XXXX-2520, which is maintained by Andrew Luger, as court appointed receiver in connection with United States v. Christopher William Smith et al., Civil No. 05-895 (MJD/SRN). This account was opened on June 2, 2005. This account had a balance of $890,977.87 as of June 30, 2007. A summary of the deposits to this account between June 2, 2005 and June 30, 2007, is attached as Exhibit B. This summary does not include certain deposits under $1,000. Based on my review, and as discussed in the summary attached as Exhibit B, I have determined that the funds held by the Receivership account were derived from proceeds of the online / telemarketing pharmacy operation conducted by Christopher Smith and others.

D. Rolex watch

20. A Rolex certificate of purchase revealed that a Rolex watch, serial number F159286, style R7917441RB7824, was purchased on or about December 22, 2004 from Osterman Jewelers in the name of Anita Smith. See Exhibit C. Online Payment Solutions account statements reveal that on December 22, 2004, a purchase was made in the amount of $5,553.98 from Osterman Jewelers, Bloomington, Minnesota. The Visa purchase was posted to the Online Payment Solutions Inc. account at U.S. Bank on December 24, 2004. See Exhibit D.

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E. Deposit Held by Braemer mailings

21. On May 5, 2005, check number 7200 in the amount of $16,000, was posted to the Online Payment Solutions account number 1-047-5780-6955 at U.S. Bank. See Exhibit E. This check was a deposit for future mailings to be undertaken by Braemer Mailings on behalf of Online Payment Solutions. Upon information and belief, these funds are still being held by Braemer Mailings.

F. Proceeds from the sale of a 2005 Mercedes C55AMG, VIN WDBRF76J95F612084 in the amount of $13,757.96.

22. This vehicle was purchased by Christopher Smith from Sears Imported Autos, Inc., Minnetonka, Minnesota, on or about October 11, 2004, for $56,635.00 plus sales taxes and other fees. It was paid for with undated checks of $1,000 and $31,000 from Online Payment Solutions, Inc.'s U.S. Bank account number 1-0475780-6955, plus financing in the amount of $29,084.03. A seizure warrant was previously obtained for this vehicle in May 2005. However, the United States was unable to locate the vehicle for seizure at that time. Mercedes Benz credit was successful in obtaining the return of the vehicle to the United States from Canada. Mercedes Benz sold the vehicle to pay off the loan, and remitted the excess amount of $13,757.96 that was realized from the sale to the United States.

G. Funds Held by Bardo, France

23. The property to be forfeited includes funds estimated at approximately $400,000 held in reserve with Bardo France, 16, Place 9
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Vendome, Paris, France, under Account Identification No. XPRESSHE HJ54TVF7 (Xpress Pharmacy Direct). The money held by Bardo France represents the proceeds of the illegal online pharmacy generated during 2004, when Christopher Smith retained Bardo France for merchant account processing services. Bardo France processed credit card transactions placed by customers of Smith's online pharmacy. The funds that are currently being held in reserve with Bardo represent proceeds from the sale of illegal controlled substances that Bardo held onto for purposes of repaying customers and/or credit card companies for charge-backs. Because those charge-backs did not materialize, the funds should have been returned to Smith. However, before Bardo France could return the money, Smith's entities were shut down by court order in May 2005. Efforts by the court-appointed receiver to contact Bardo France for a voluntary return of the money have been unsuccessful.

FURTHER YOUR AFFIANT SAYETH NOT
Chad Vetter, Special Agent
Internal Revenue Service
Subscribed and sworn to before me this 23 day of July, 2007.
NOTARY PUBLIC

Preliminary Order of Forfeiture

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

Criminal No. 05-282 (MJD/SRN)

UNITED STATES OF AMERICA,

PLAINTIFF,

v.

(1) CHRISTOPHER SMITH,
DEFENDANT.

PRELIMINARY ORDER OF FORFEITURE

Based on the United States’ motion for a Preliminary Order of Forfeiture; on the conviction of defendant Christopher Smith at trial on Counts 1-9 of the Third Superseding Indictment; on the Affidavit Of Special Agent Chad Vetter submitted in support of the motion for a preliminary order of forfeiture; on the Court having found that certain property is subject to forfeiture pursuant to 18 U.S.C. § 982(a)(1) and pursuant to 21 U.S.C. § 853(a); and on the Court’s determination that, based on the defendant’s conviction at trial and based on all of the files and records of this proceeding, the government has established the requisite nexus between certain property and the offenses of which the defendant has been found guilty,

IT IS HEREBY ORDERED that:

1. Plaintiff’s motion for a preliminary order of forfeiture [Docket No. 386] is GRANTED;

2. Defendant Christopher Smith shall forfeit to the United States pursuant to 21 U.S.C. § 853(a) all property constituting, or derived from, proceeds defendant Smith obtained, directly or
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indirectly, as a result of Counts 1 through 4 and 9 of the Third Superseding Indictment; all property used, or intended to be used, to commit or to facilitate the commission of the offenses alleged in Counts 1 through 4 and 9 of the Third Superseding Indictment; and, pursuant to 18 U.S.C. § 982(a)(1), all property, real or personal, involved in the money laundering conspiracy alleged in Count 8 of Third Superseding Indictment, and all property traceable to such property. The property to be forfeited includes, but is not limited to, the following:

a. the sum of $24,240,747, representing the gross proceeds of the offenses of conviction. The defendant shall be given a credit against this money judgment for the net forfeited value of the assets forfeited in connection with United States v. One Mercedes Maybach et al., Civil No. 05-1516 (MJD/AJB). The defendant shall be given a further credit against this money judgment amount for the net forfeited value of each specific asset including, without limitation, the assets listed below, finally forfeited pursuant to this order, that is, the value of all currency actually collected and forfeited to the United States, and the value of the net proceeds from the sale of all other property finally forfeited to the United States;

b. $89,335.00 in U.S. Currency surrendered to the Internal Revenue Service, Criminal Investigation Division, on February 3, 2006;

c. $198,120.00 in U.S. Currency surrendered to the Internal Revenue Service, Criminal Investigation Division, on February 3, 2006;

d. $1,850.00 in U.S. Currency surrendered to the Internal Revenue Service, Criminal Investigation Division, on February 3, 2006;

e. $13,757.96 in net proceeds from the sale of a 2005 Mercedes Benz, C55AMG, VIN WDBRF76J95F612084;

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f. $139,720.00 in U.S. Currency surrendered to the Internal Revenue Service, Criminal Investigation Division, on March 24, 2006;

g. $50,000.00 in U.S. Currency surrendered to the Internal Revenue Service, Criminal Investigation Division, on March 31, 2006;

h. the real property located at XXXX, Prior Lake, Minnesota, and legally described as XXXX, Scott County, Minnesota, together with its buildings, fixtures, improvements, and appurtenances;

i. a Rolex watch, serial number F159286, style R7917441RB7824, purchased on December 22, 2004 from Osterman Jewelers;

j. any and all remaining funds in U.S. Bank Account No. XXXX-XXXX-XXXX, or other accounts held by the court appointed Receiver in connection with United States v. Christopher William Smith et al., Civil No. 05-895 (MJD/SRN);

k. funds up to the amount of $16,000 held by Braemer Mailings funded by Online Payment Solutions check number 7200 in the amount of $16,000;

l. funds in the amount of $922,166.97 withdrawn from various accounts at Commerce Bank between May 11 and May 13, 2005, including Revenue Doctors Account No. XXXX, RxOrderFill.com Savings Account No. XXXX, and Bruce and Robin Lieberman Account No. XXXX; and m. any and all remaining funds in accounts held by Bardo France, 16, Place Vendome, Paris, France, under Account Identification No. XXXX (Xpress Pharmacy Direct).

3. the Attorney General and/or the Secretary of the Treasury or their authorized designee may seize the property itemized in paragraph 2 above and maintain custody and control of the property pending the entry of a Final Order of Forfeiture;

4. the United States shall, pursuant to 21 U.S.C. § 853(n),
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publish and give notice of this Order and its intent to dispose of the property itemized in paragraph 2 above in such manner as the Attorney General and/or the Secretary of the Treasury may direct;

5. pursuant to Fed.R.Crim.P. 32.2(b)(3), this Preliminary Order of Forfeiture shall become final as to the defendant at the time of sentencing, and shall be made a part of the sentence and included in the judgment;

6. following the Court’s disposition of all petitions filed pursuant to 21 U.S.C. § 853(n)(2) or, if no petitions are filed, following the expiration of the time period specified within which to file such petitions, the United States shall have clear title to the foregoing property and may warrant good title to any subsequent purchaser or transferee;

7. pursuant to Fed. R. Crim. P. 32.2(b)(3), Fed. R. Crim. P. 32.2(c) and 21 U.S.C. § 853(m), the United States may conduct discovery to identify, locate or dispose of property subject to forfeiture under the terms of this order, or to address any factual issues raised by a third-party petition filed pursuant to Fed. R. Crim. P. 32.2(c);

8. this Court shall retain jurisdiction to enforce this Order, and to amend it as necessary pursuant to Fed.R.Crim.P. 32.2(e) to forfeit any subsequently discovered directly forfeitable or
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substitute property, and to dispose of any third-party claims.

Dated: August 1, 2007

s / Michael J. Davis
MICHAEL J. DAVIS, Judge
United States District Court

Attachment	Date	Size
MotPrelimForfeitOrder.pdf	06/28/09 1:05 pm	16.09 KB

RESPONSE to Motion to be Appointed Counsel

So, now Smith wants the taxpayers to pay for his...what? Appeal? Transcript?

Given what we've seen so far in this case, plus the fact that the government has recordings, I think I'll go for their interpretation that he's just trying to get off cheap by having the taxpayers to shell out the $20,000 for his trial transcripts, then it's off to private attorney-land.

So, how dense do you have to be in order not to remember that the government is listening to every word you say on the telephone? I mean, it's in the Detention Order, fer cryin outloud.
============================
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

UNITED STATES OF AMERICA,
Plaintiff,

v.

(1)CHRISTOPHER WILLIAM SMITH,
Defendant.

UNITED STATES’ RESPONSE TO DEFENDANT’S MOTION TO BE APPOINTED COUNSEL FOR HIS UPCOMING APPEAL

The United States of America, by and through its attorneys Rachel K. Paulose, United States Attorney for the District of Minnesota, and Assistant United States Attorney, Nicole A. Engisch, hereby responds to defendant Christopher William Smith's motion to be appointed counsel for his upcoming appeal, made orally during the recent sentencing hearing.

INTRODUCTION

At the recent sentencing hearing, the defendant’s current counsel, Joseph Friedberg, indicated that he will no longer be representing the defendant and that, due to the defendant’s indigency status, the defendant seeks a court appointed attorney. Thus, the defendant is apparently now moving the Court, pursuant to
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Federal Rule of Criminal Procedure 44 and 18 U.S.C. § 3006A, to obtain appointed counsel to file a notice of appeal and for all subsequent proceedings in this matter.

The United States will not oppose this motion, provided 1) the defendant meets his burden of demonstrating that he is financially unable to pay for counsel, specifically by explaining under oath what happened to the bulk of the $24 million he earned from his online pharmacy operations, 2) the defendant is treated the same as other indigent defendants and appointed competent counsel from the Public Defender’s CJA panel1 rather than being permitted to select his counsel, and 3) the defendant is put on notice that he will be ordered to reimburse the government for all defense costs expended, in the event that he subsequently retains private counsel, as he suggests in recent jail recordings he plans to do.

[1 The Public Defender’s Office likely cannot represent the defendant due to a conflict of interest. That office previously represented material witnesses, Philip Tritabaugh and Ramesh Ramnaraine.]

Pursuant to the Criminal Justice Act, those who are unable to pay for counsel are entitled to appointed counsel "if the court is satisfied after ‘appropriate inquiry' that the defendant is ‘financially unable to obtain counsel.'" United States v. Brockman, 183 F.3d 891, 897 (8th Cir. 1999) (citing 18 U.S.C. §3006A(b) and United States v. Barcelon, 833 F.2d 894, 896 (10th Cir. 1987)). "When requesting the appointment of counsel, the
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burden is on the defendant to show that he is ‘financially unable' to afford representation." Id. (citing United States v. Lefkowitz, 125 F.3d 608, 621 (8th Cir. 1997)). If the defendant's request is based only on "conclusory protestations of poverty," it should be denied. United States v. Martinez-Torres, 556 F. Supp. 1275, 1280 (S.D.N.Y. 1983). Moreover, "the court may . . . refuse to appoint counsel if it finds that the defendant's portrayal of financial ability lacks credibility." Barcelon, 833 F.2d at 897; see Lefkowitz, 125 F.3d at 621 (the defendant “presented nothing more than his personal testimony. The district court found that testimony to be entirely lacking in credibility, as do we.”).

In this case, the defendant should be required to itemize, under oath, exactly what happened to the rest of the $24 million that he obtained from the online pharmacy operation, after deducting the approximately $4.5 million in forfeitable assets, the expenses incurred to run the pharmacy, and the subsequent receivership expenses.2 At the very least, he should be required to explain what happened to the remainder of the $2,920,375 in cash that was delivered by Brinks truck in the weeks before Online Payment Solutions was shut down, after deducting the $569,025 in cash that was turned over by the defendant’s attorneys and family members. See Affidavit of Special Agent Chad Vetter (Document No.

[2 Previously, in connection with his sentencing, the defendant refused to sign an affidavit describing his financial condition, as required by 18 U.S.C. § 3664(d)(3).]

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387), at 2.3 If his testimony is not credible or is conclusory, the Court is permitted to reject his request for appointed counsel. If the defendant provides a sufficient explanation of what happened to the rest of his illegal proceeds, the government does not oppose his request for appointed counsel.4 The government, however, will oppose any request by the defendant to be appointed particular counsel. Meyer v. Sargent, 854 F.2d 1110, 1113-14 (8th Cir. 1988)(it is "well-settled that a ‘criminal defendant does not have the absolute right to counsel of his own choosing.'"). The government has understood for some time that the defendant had retained Paul Engh, for the purpose of preparing his appeal.5

[3 When he was at the Sherburne County Jail, as recently as March 2006, the defendant bragged to other inmates that the government only seized a small portion of his assets and that he had many more millions stashed away.

4 To the extent the defendant is continuing to seek attorney’s fees out of the receivership monies, which are now the subject of the Preliminary Order of Forfeiture, that request should again be denied because the defendant is not entitled to use such funds to pay for his criminal defense. United States v. Monsanto, 491 U.S. 600 (1989) ; Caplin & Drysdale, Chartered v. United States, 491 U.S. 617 (1989).

5 Because Paul Engh represented co-defendant Bruce Lieberman at trial, the government was concerned that Christopher Smith could later raise (such as in a habeas petition) the argument that Mr. Engh’s representation was compromised by his representation of Mr. Lieberman. The government expressed these concerns to Mr. Engh and Mr. Friedberg in a conference call in March 2007 and requested written waivers from both the defendant and Mr. Lieberman. To date, it has not received any waivers. To the extent the Public Defender’s Office has a conflict, it would seem the same sort of conflict applies to Paul Engh. Moreover, the government will be having ongoing forfeiture related proceedings involving Mr. Lieberman and online pharmacy proceeds that he withdrew from bank accounts he maintained. Mr. Lieberman may wish to retain Paul Engh for these proceedings or to have Mr. Engh consult with whomever Mr. Lieberman does retain.]

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For example, on January 18, 2007, the Court entered an order granting the defendant’s motion to modify his custodial conditions which included, among other things, a paragraph allowing the defendant to meet with Paul Engh in person to discuss the defendant’s possible appeal. See Document No. 360. In jail conversations with family members, the defendant mentioned how he was going to petition the court to have Mr. Engh, a member of the Public Defender’s CJA panel, appointed to represent him for free. The defendant also discussed how he would arrange to pay for Mr. Engh in the event Mr. Engh was not appointed by the Court. For example, the defendant discussed with his mother having his mother take out a second mortgage on one of the three homes that she and the defendant’s stepfather own together (in Minnesota, Kentucky, and Florida).6 The defendant also discussed his plans to have his grandparents and sister provide money for his appeal.

[6 At least some courts hold that if the defendant has funds available to him from sources such as family, friends, trusts, etc., he should be denied appointed counsel. Martinez-Torres, 556 F. Supp. at 1279. Other courts go the other way, however. See United States v. Rubinson, 543 F.2d 951, 964 (2d Cir. 1976)(“a defendant should not be denied appointment of counsel solely because other members of his family have assets and income.”). In this case, the defendant’s family previously paid for his counsel, but they thereafter reimbursed themselves approximately $175,000 to $200,000 from online pharmacy proceeds they had agreed to hide for the defendant.]

In sum, the government opposes any request by the defendant to be appointed particular counsel. So that the defendant is treated
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no differently from other indigent defendants and to avoid any appearance of manipulation of the process, he should not be allowed to select his own counsel.

In very recent telephone recordings with family members, the defendant discussed how Paul Engh may no longer be willing to represent him, at least at the CJA panel rate. But the defendant may have another plan to manipulate the court appointment process. Specifically, in recent calls to his sister and his ex-wife, the defendant indicated that, if he obtains a court appointed panel attorney, he will have that attorney arrange to pay the approximately $20,000 that, according to him, he needs for trial transcript fees. Thereafter, once those fees are paid by the government, he stated that he plans to secure retained counsel of his choosing.

Based on the defendant’s own recorded comments, it appears he may be scheming to arrange for a portion of his court costs to be paid for by the government, despite that he has the ability to pay for his own counsel. Courts have faced similar scenarios before. See Lefkowitz, 125 F.3d at 621 (where the court determines that a defendant has funds to pay for representation, it may order the defendant to reimburse the government for the costs of defense pursuant to 18 U.S.C. 3006A(f)). Thus, if the defendant is appointed counsel, he should be put on notice that, if he later terminates that appointed counsel, he may well be ordered to
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reimburse the government for all prior costs paid for by the government on his behalf.

CONCLUSION

The defendant has the burden of demonstrating that he cannot afford privately retained counsel. If he meets that burden, the government does not oppose his motion for appointed counsel. But, even if he succeeds in demonstrating his indigency status to the satisfaction of the Court, he should not be permitted to select his own counsel. The government further respectfully requests that the defendant be put on notice that if he later terminates his appointed counsel and retains his own counsel, he may be required to reimburse the government for all costs of his defense previously incurred by the government.

Dated: August 14, 2007

Respectfully submitted,

RACHEL K. PAULOSE
United States Attorney

s/ Nicole A. Engisch

BY: NICOLE A. ENGISCH
Assistant U.S. Attorney
Attorney ID No. 215284

Attachment	Date	Size
RespMotionApptAttorney.pdf	06/28/09 1:05 pm	50.18 KB

ORDER Appointing Federal Defender for Appeal

It appears that the government got pretty much what they wanted in this hearing. They said that they wouldn't oppose appointing someone for Rizler's appeal, but that they did oppose selecting Paul Engh due to a conflict of interest, and that they wanted to make certain that he wasn't gaming the system by getting the taxpayers to fund the $20,000 for the transcripts and then retaining a private attorney.

So, the Court appointed Assistant Federal Defender Katherine M. Menendez, removed Paul Engh from consideration if a conflict comes up such that they would need to move to the use of the District of Minnesota's Criminal Justice Act Plan's panel of attorneys, and ordered that he reimburse the Federal Public Defender's office if he retains private counsel or it is discovered that he has money to pay.

============================
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

UNITED STATES OF AMERICA,
Plaintiff,
v.

(1) CHRISTOPHER WILLIAM SMITH,
Defendant.

ORDER

This matter came before the Court on August 16, 2007, for a hearing upon the motion of the defendant Christopher William Smith pursuant to Federal Rule of Criminal Procedure 44 and 18 U.S.C. § 3006A, to obtain appointed counsel to file a notice of appeal and for all subsequent proceedings in this matter. The defendant was present and represented by his attorney Joseph Friedberg, Esq. The United States was represented by Assistant United States Attorney Nicole Engisch. Also present in the courtroom during the hearing was Assistant Federal Defender Katherine M. Menendez.

Based upon the evidence presented at the hearing, and on the arguments of counsel, the Court concludes that the defendant is financially unable to obtain counsel.

IT IS HEREBY ORDERED that:

1. The Federal Public Defenders Office, specifically, Assistant Federal Defender Katherine M. Menendez, is hereby appointed to represent the defendant from the date of the hearing and for all subsequent proceedings in this matter, including filing a notice of appeal and all appellate proceedings.

2. The parties have represented that they do not deem the appointment of the Federal Public Defenders Office to pose any actual conflict of interest. If either the defendant or the government should decide that there is a conflict of interest, counsel will promptly notify the Court, and if the Court determines that there is a conflict of interest, the Court will appoint an attorney from the Federal Public Defender's panel of private attorneys established pursuant to the District of Minnesota's Criminal Justice Act Plan. Attorney
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Paul Engh, counsel for one of the defendant's co-defendants, will be excluded from any such list for potential appointment as counsel for the defendant in this matter.

3. If the defendant should hereafter retain private counsel, or if it is otherwise determined that funds are available for payment from or on behalf of the defendant, the defendant shall be required to reimburse the government pursuant to 18 U.S.C. § 3006A(f) for any attorney's fees or costs already expended by the defendant's court appointed attorney. The Federal Public Defender's Office will pursue collection of those fees and costs.

Dated: August17, 2007

s / Michael J. Davis

The Honorable Michael J. Davis
United States District Court Judge

Attachment	Date	Size
OrderFPDOAppeal.pdf	06/28/09 1:05 pm	8.16 KB

REVISED INFORMATION SHEET

UNITED STATES DISTRICT COURT
District of Minnesota

REVISED INFORMATION SHEET - Criminal Cases Only

1. United States of America -v- Christopher William Smith CR 05-282 (1) MJD/JJG

2. Defendant and Address: Christopher William Smith
Reg No. 12310-041
5329 Osgood Avenue North
Stillwater MN 55082-1117

3. Date of verdict: 11/22/06. Length of trial: 19 days. (x) By jury

4. Appealing: (x) Sentence (x) Conviction (x) Both. Challenging: Both Application and Constitutionality

5. Sentence: Custody of BOP for Custody of BOP for 60 months on count 2sss, 60 months on count 3sss, 60 months on count 4sss, 36 months on count 5sss, 36 months on count 6sss, 36 months on count 7sss, 240 months on count 8sss and 360 months on count 9sss all terms to run concurrently; 5 years supervised release on counts 2sss, 3sss, 4sss, 1 year supervised release on counts 5sss, 6sss and 7sss, 3 years supervised release on count 8sss and 5 years on count 9sss, all such terms to run concurrently; $800.00 special assessment ($100 per count for counts 2sss-9sss)

6. Date sentence imposed: 8/1/07

7. Defendant incarcerated? (x) Yes

8. Financial Status: Fee paid? (x) N/A Counsel appointed by Judge Davis, see Minutes filed 8/16/07, document number 402, and Order by Judge Davis filed 8/17/07, document number 404.

9. Notice of Appeal was filed on 8/16/07

10. Court Reporter: Lori Simpson

11. Trial Counsel: Joseph S Friedberg
Joseph S Friedberg, Chartered
150 S 5th St Ste 320
Mpls, MN 55402
(612) 339-8626
Fax: 612-339-8627
Email: [redacted]@hotmail.com
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Judge Davis granted the Motion to appoint Federal Defender on 8/16/07. Judge Davis signed an Order 8/17/07 appointing Katherine Menendez to represent the defendant.

The Notice of Appeal was filed by Katherine Menendez
Katherine Menendez
Office of the Federal Defender
300 S 4th St Ste 107
Mpls, MN 55415
612-664-5858
Fax: 612-664-5850
Email: [redacted]@fd.org

12. Trial counsel was: (x) Retained APPEAL COUNSEL WAS: APPOINTED BY JUDGE DAVIS
Is there any reason why trial counsel should not be appointed on appeal? (x) No

13. Assistant U.S. Attorney: Nicole A. Engisch PHONE #: (612) 664-5600

14. List of other defendants in this case & disposition:
Philip Mach (2), Sentenced on 5/10/07
Bruce Jordan Lieberman (3), Acquitted on 11/27/06
Daniel Spivey Adkins (4), Acquitted on 11/27/06
Darrell Arden Griepp (5), Sentenced on 8/1/07

15. Additional Comments:

Probation-Please send the PSI, addendums and Statement of Reasons to the Criminal Unit (STP).

Prepared by: lg

Attachment	Date	Size
AppealInfoSheet.pdf	06/28/09 1:05 pm	12.84 KB

Appellant Brief Due

BRIEFING SCHEDULE SET: Transcript due on 09/25/2007. Clerk's record due 09/25/2007. Brief of appellant due on 10/09/2007. Appellee(s) brief due 21 days following service of appellant(s) brief. Reply brief due 7 days following service of appellee brief.[3344664] [07-2956]

[UPDATE]: CLERK ORDER:Granting in Part [3355191-2] Court Reporter motion extension of time to file transcript filed by Ms. Lori Ann Simpson [3356100] [3356100] Transcript due on 11/26/2007. Appellant brief due 12/10/2007. [07-2956]

[UPDATE]: CLERK ORDER:Granting [3388416-2] Court Reporter motion extension of time to file transcript filed by Ms. Lori Ann Simpson. Transcript now due on 05/20/2008. Brief of Christopher William Smith due 06/03/2008 [3388698] [07-2956]

[UPDATE]: CLERK ORDER:Granting [3436362-2] Court Reporter motion extension of time to file transcript filed by Ms. Lori Ann Simpson. Transcript due on 06/23/2008. Brief of Christopher William Smith due 07/14/2008 [3436436] [07-2956]

[UPDATE]: CLERK ORDER:Granting [3451554-2] motion for extension of time to file brief filed by Appellant Mr. Christopher William Smith. Brief of Christopher William Smith due 08/14/2008 [3451571] [07-2956]

[UPDATE]: CLERK ORDER:Granting [3461435-2] motion for extension of time to file brief filed by Attorney Ms. Katherine M. Menendez for Appellant Mr. Christopher William Smith. Brief of Christopher William Smith due 09/15/2008 [3461653] [07-2956]

[UPDATE]: CLERK ORDER:Granting [3469558-2] motion for extension of time to file brief filed by Attorney Ms. Katherine M. Menendez for Appellant Mr. Christopher William Smith. Brief of Christopher William Smith due 10/06/2008 [3469786] [07-2956]

Brief Of Appellant

Here is the 109 page appeal brief filed by Christopher "Rizler" Smith. I'm still reading through it myself. More when I'm done.

Attachment	Date	Size
AppealBriefDef.pdf	10/09/08 5:19 pm	378.2 KB

Appellee Brief Due

BRIEFING SCHEDULE SET: Transcript due on 09/25/2007. Clerk's record due 09/25/2007. Brief of appellant due on 10/09/2007. Appellee(s) brief due 21 days following service of appellant(s) brief. Reply brief due 7 days following service of appellee brief.[3344664] [07-2956]

[UPDATE]: CLERK ORDER:Granting [3388416-2] Court Reporter motion extension of time to file transcript filed by Ms. Lori Ann Simpson. Transcript now due on 05/20/2008. Brief of Christopher William Smith due 06/03/2008 [3388698] [07-2956]

[UPDATE]: CLERK ORDER:Granting [3436362-2] Court Reporter motion extension of time to file transcript filed by Ms. Lori Ann Simpson. Transcript due on 06/23/2008. Brief of Christopher William Smith due 07/14/2008 [3436436] [07-2956]

[UPDATE]: CLERK ORDER:Granting [3451554-2] motion for extension of time to file brief filed by Appellant Mr. Christopher William Smith. Brief of Christopher William Smith due 08/14/2008 [3451571] [07-2956]

[UPDATE]: CLERK ORDER:Granting [3461435-2] motion for extension of time to file brief filed by Attorney Ms. Katherine M. Menendez for Appellant Mr. Christopher William Smith. Brief of Christopher William Smith due 09/15/2008 [3461653] [07-2956]

[UPDATE]: CLERK ORDER:Granting [3469558-2] motion for extension of time to file brief filed by Attorney Ms. Katherine M. Menendez for Appellant Mr. Christopher William Smith. Brief of Christopher William Smith due 10/06/2008 [3469786] [07-2956]

[UPDATE]: CLERK ORDER:Granting [3482882-2] motion for extension of time to file brief filed by Attorney Ms. Nicole Ann Engisch for Appellee United States. Brief of United States due 11/07/2008. [3482909] [07-2956]

Appellee Brief

Here is the 91 page response of the US Attorney's office.

Attachment	Date	Size
AppealBriefGovt.pdf	12/02/08 1:29 pm	175.87 KB

Appellant Reply Brief Due

BRIEFING SCHEDULE SET: Transcript due on 09/25/2007. Clerk's record due 09/25/2007. Brief of appellant due on 10/09/2007. Appellee(s) brief due 21 days following service of appellant(s) brief. Reply brief due 7 days following service of appellee brief.[3344664] [07-2956]

[UPDATE]: CLERK ORDER:Granting [3388416-2] Court Reporter motion extension of time to file transcript filed by Ms. Lori Ann Simpson. Transcript now due on 05/20/2008. Brief of Christopher William Smith due 06/03/2008 [3388698] [07-2956]

[UPDATE]: CLERK ORDER:Granting [3436362-2] Court Reporter motion extension of time to file transcript filed by Ms. Lori Ann Simpson. Transcript due on 06/23/2008. Brief of Christopher William Smith due 07/14/2008 [3436436] [07-2956]

[UPDATE]: CLERK ORDER:Granting [3451554-2] motion for extension of time to file brief filed by Appellant Mr. Christopher William Smith. Brief of Christopher William Smith due 08/14/2008 [3451571] [07-2956]

[UPDATE]: CLERK ORDER:Granting [3461435-2] motion for extension of time to file brief filed by Attorney Ms. Katherine M. Menendez for Appellant Mr. Christopher William Smith. Brief of Christopher William Smith due 09/15/2008 [3461653] [07-2956]

[UPDATE]: CLERK ORDER:Granting [3482882-2] motion for extension of time to file brief filed by Attorney Ms. Nicole Ann Engisch for Appellee United States. Brief of United States due 11/07/2008. [3482909] [07-2956]