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United States v. Dachman

United States Court of Appeals, Seventh Circuit

February 18, 2014

UNITED STATES OF AMERICA, Plaintiff-Appellee,
v.
KENNETH A. DACHMAN, Defendant-Appellant

Argued January 9, 2014.

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 11-cr-00504-- James B. Zagel, Judge.

For UNITED STATES OF AMERICA, Plaintiff - Appellee: Sunil R. Harjani, Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Chicago, IL.

For KENNETH A. DACHMAN, Defendant - Appellant: Jeffrey B. Steinback, Attorney, LAW OFFICE OF JEFFREY B. STEINBACK, Chicago, IL.

Before MANION and SYKES, Circuit Judges, and GRIESBACH, District Judge.[*]

OPINION

Page 255

Manion, Circuit Judge.

Kenneth Dachman was indicted by a grand jury on eleven counts of wire fraud for stealing funds elderly individuals had invested in his three sleep-related illness-treatment companies. He pleaded guilty to all eleven counts and, at sentencing, the district court denied him credit for acceptance of responsibility and sentenced him to 120 months' incarceration. On appeal, Dachman argues that the district court erred in calculating the loss amount, by denying him credit for acceptance of responsibility, and by imposing an " objectively unreasonable" 120-month term of imprisonment in light of his severe infirmities. We affirm.

I. Factual Background

Beginning in June 2008, and continuing until September 2010, Dachman promoted and participated in a scheme to defraud investors. He operated three sleep-related illness-treatment companies and sold shares of these companies to the public. Through his offer and sale of these shares, Dachman raised over $4 million from fifty-one investors.

From the outset, Dachman engaged in a pattern of deception. Between July 2008

Page 256

and January 2009, he falsely represented to fifteen investors that their combined invested funds of approximately $1.4 million would be used to operate one of Dachman's sleep-treatment companies when, in fact, he had used almost $1 million of those funds for purely personal reasons, including over $200,000 on personal stock trading, over $180,000 on a tattoo parlor, and over $160,000 in checks payable to him and his wife. During this time, the businesses had not yet received any income.

But Dachman's false representations did not begin and end with his deceptions about the status of investments in his sleep-related illness-treatment businesses. The falsehoods also pervaded his personal narrative, which was vital to securing--and retaining--investors. Dachman represented to prospective investors that he personally guaranteed the repayment of their principal, but in reality he did not have the assets to do so. He represented to potential and actual investors that he was a successful businessman and researcher when his seven bankruptcies obviously proved otherwise. And he falsely represented to prospective investors and investors that he had obtained a Ph.D. from Northwestern University when in reality he had never even attended that institution.

Unsurprisingly, due to Dachman's deceptions and theft, his companies did not have sufficient revenue to pay the necessary returns to investors. Nor did he have the financial ability to personally guarantee the investors' principal, contrary to his prior representations. Consequently, the investors brought suit against Dachman and secured judgment in the amount of $2.5 million. Duff v. Dachman, No. 10-cv-06162 (N.D. Ill., July 11, 2011). Records reflected that Dachman spent the stolen funds on a tattoo parlor; family vacations and cruises to Italy, Nevada, Florida and Alaska; a new Land Rover; rare books; and to fund personal stock trading and gambling.

On July 26, 2011, subsequent to this civil judgment, a federal grand jury returned an eleven-count indictment charging Dachman with wire fraud. On July 31, 2012, he attempted to enter a plea of nolo contendere. On October 3, 2012, Dachman withdrew his plea and pleaded guilty to all eleven counts of the indictment. Along with his plea, he submitted a plea declaration whereby he admitted that he was " guilty of taking approximately $700,000 dollars in bonuses and fees above reasonable salary" ; that he was " guilty of making personal guarantees or returns on investments without sufficient means to support them" ; and that he was " guilty of failing to make clear to investors [his] educational and graduate credentials." The district court accepted the guilty plea and set the matter for sentencing.

On January 17, 2013, the district court held a sentencing hearing where, among other things, it heard testimony from three victims of Dachman's fraud. At this hearing, Dachman raised objections to the PSR's calculation of the guidelines on loss and acceptance of responsibility. With respect to loss, Dachman argued that the correct calculation of the loss amount should be $700,000--the amount by which he personally benefitted--which would result in a 14-level increase under the guidelines. The government maintained that the proper calculation of the loss amount was approximately $4 million, which would result in an 18-level guideline increase. The government argued that this number was appropriate because the pool of funds the victims lost by investing with Dachman was $4 million.

The district court found that the appropriate loss amount under Guideline ยง 2B1.1(b) was ...


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