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United States v. Ledonne

United States District Court, N.D. Indiana, South Bend Division

January 4, 2018




         Defendant James LeDonne has been found guilty on his plea of guilty to two counts of fraud. The parties objected to a number of the Presentence Report's conclusions as to Mr. LeDonne's offense level and criminal history score, so the Court held an evidentiary hearing and accepted supplemental submissions from the parties. The Court now sets forth its findings as to the appropriate calculation of the advisory guideline sentencing range.


         The Court's factual findings are set forth below as to each of the objections, but the Court offers a brief factual background to put those findings in context. James LeDonne controlled a series of businesses that produced vehicles or components used for splicing fiber optic cables. The businesses included Level 4 Technologies LLC; L6 Engineering Systems LLC; L&H Engineering & Design LLC; and LG Engineering & Design Inc. Though the business practices of the companies varied somewhat, each business would accept orders for splicing trucks or other units in return for large down payments, typically around fifty percent. The criminal conduct in this case occurred when Mr. LeDonne would accept those orders and down payments without the capacity or intent to fulfill them, and would also lie to the customers by falsely claiming that the products were being manufactured, offering false reasons for the delays, and giving false promises of refunds. Finally, the businesses would declare bankruptcy, after which Mr. LeDonne would start the next one and repeat the pattern.

         Mr. LeDonne was indicted on May 14, 2014 on 17 counts. Counts 1 through 11 charged Mr. LeDonne with wire fraud based on the scheme just described. They alleged that the scheme ran from “2008 through 2014” and involved each of the businesses noted above. The wire transfers and communications underlying each of the 11 counts occurred from August 2011 through September 2013, apparently in relation to transactions by L&H Engineering and LG Engineering. Counts 12 through 14 charged Mr. LeDonne with mail fraud based on the same scheme, and the counts were based on checks that were mailed in December 2012 and May 2013. Counts 15, 16, and 17 charged Mr. LeDonne with conspiracy to commit fraud, interstate transportation of stolen goods, and bankruptcy fraud, respectively, all involving conduct relating to the scheme to defraud.

         Mr. LeDonne was arrested on May 19, 2014, and has been continuously detained since then. The ensuing proceedings have been unusually prolonged, due in large part to multiple withdrawals of defense counsel caused by irretrievable breakdowns in communications with Mr. LeDonne. Each time new counsel was appointed, trial had to be continued to allow new counsel adequate time to prepare. Trial was also postponed when the Court ordered a competency evaluation on defense counsel's motion.

         Shortly after the Court found Mr. LeDonne to be competent and set a new trial date, Mr. LeDonne filed a notice of intent to plead guilty to two counts: Count 8, a wire fraud charge based on an email sent in March 2013; and Count 14, a mail fraud charge based on a check mailed in May 2013. At the change of plea hearing on April 19, 2017, Mr. LeDonne admitted to a subset of the scheme to defraud charged in the indictment. He admitted that the two transactions by LG Engineering underlying those counts were fraudulent, in that he accepted down payments for orders he knew he could not fulfill, made false statements about the status of the orders and his ability to fulfill them, and never provided the products or refunds on those orders. He did not further admit that the scheme began in 2008 or that it encompassed other companies such as Level 4 or L6 Systems, as charged in the indictment, though those facts were not necessary to make an adequate factual basis for Mr. LeDonne's guilt as to the two counts.

         The Court accepted Mr. LeDonne's guilty pleas and adjudged him guilty of Counts 8 and 14. At the government's request, the Court vacated trial and held the remaining counts in abeyance until sentencing. The Probation Office then prepared a Presentence Report, to which both parties objected. Accordingly, the Court held an evidentiary hearing at which both parties presented witnesses and exhibits, and the parties have since filed supplemental memoranda, so the objections are ripe for ruling.


         The Presentence Report concluded that Mr. LeDonne has a base offense level of 7, plus the following enhancements: 16 levels for a loss amount of more than $1.5 million; 2 levels for 10 or more victims; 2 levels for a misrepresentation during the course of a bankruptcy proceeding; and 4 levels for being an organizer or leader of criminal activity that involved five or more participants or was otherwise extensive. The Presentence Report did not include any reduction for acceptance of responsibility. As to the criminal history score, the Presentence Report gave Mr. LeDonne 3 criminal history points for each of three separate cases in which he was convicted in 1993, for a criminal history score of 9.

         The government offered a limited objection, arguing only that Mr. LeDonne should also receive a 2-level enhancement for obstruction of justice. Mr. LeDonne offered a number of objections, arguing that he should only receive 14 levels for the loss amount; that he should not receive an enhancement for misrepresentations in a bankruptcy proceeding; that he should only receive 2 levels for being an organizer or leader; that he should receive a 3-level reduction for acceptance of responsibility; and that he should only have 3 criminal history points in total. In making those objections, Mr. LeDonne contends that he does not object to the factual content of the Presentence Report, but is arguing the legal consequences of those facts. [DE 338 p. 17; 354 p. 38]. Accordingly, the Court adopts the factual content of paragraphs 1-171 of the Presentence Report. To the extent Mr. LeDonne or the government have objected to the legal conclusions and guideline calculations contained in those paragraphs, the Court addresses them below.

         A. Loss Amount

         The first point in dispute is the loss amount calculation. Under § 2B1.1(b)(1), an offense level is increased by 16 levels if the loss exceeded $1.5 million, or by 14 levels if the loss exceeded $550, 000. The Presentence Report applied a 16-level enhancement for a loss amount of over $1.5 million. It concluded that Mr. LeDonne's relevant conduct began in April 2008, with transactions by Level 4, and that the relevant conduct continued over the years with transactions by L6 Systems, L&H Engineering, and LG Engineering. It thus concluded that the loss amount included 64 transactions entered by those companies during that time, amounting to $1, 550, 680.31. It also concluded that Mr. LeDonne's relevant conduct included defrauding Roger Roy, an investor in LG Engineering, out of $120, 900. Therefore, the Presentence Report applied a 16-level enhancement for a loss amount of $1, 671, 580.31.

         In response, Mr. LeDonne argues that only a 14-level enhancement should apply. He first argues that the transactions by Level 4 in 2008, and by L6 Systems in 2009 and 2010, should not be considered relevant conduct. He also argues that the loss amounts should be reduced by the value of products that he did deliver in some instances. Finally, he argues that Mr. Roy's investment is not relevant conduct and should not be included in the loss amount. The Court addresses each issue in turn.

         1. Level 4 and L6 Systems

         Mr. LeDonne first objects to including any transactions by Level 4 and L6 Systems as part of his relevant conduct. Those transactions took place in 2008 through 2010, and amounted to $691, 612. Mr. LeDonne argues that those transactions were distinct from the fraudulent transactions by L&H Engineering and LG Engineering in 2011 through 2013, and that they should not be included in his relevant conduct.

         Under the Guidelines, a defendant is accountable for all acts “that occurred during the commission of the offense of conviction, in preparation for that offense, or in the course of attempting to avoid detection or responsibility for that offense, ” in addition to all acts “that were part of the same course of conduct or common scheme or plan as the offense of conviction.” § 1B1.3(a)(1), (a)(2). Acts are part of the “same course of conduct” if “they are sufficiently connected or related to each other as to warrant the conclusion that they are part of a single episode, spree, or ongoing series of offenses.” § 1B1.3 n. 5(B)(ii). For acts to constitute part of a “common scheme or plan, ” “they must be substantially connected to each other by at least one common factor, such as common victims, common accomplices, common purpose, or similar modus operandi.” Id. n.5(B)(i).

         Here, the Court finds that Mr. LeDonne's relevant conduct includes the transactions by Level 4 and L6 Systems. To begin with, the indictment explicitly charges that the scheme to defraud included those companies and occurred during that time frame. It alleges that “LeDonne utilized the following companies to execute a scheme to defraud victim purchasers of these mobile fiber optic splicing and testing units: Level 4 Technologies LLC; L6 Engineering Systems LLC; L&H Engineering & Design LLC . . .; and LG Engineering & Design Inc.” [DE 1 p. 1]. And though the wires and mailings underlying each of the individual counts took place in 2011 through 2013, the indictment charged that the schemes ran from “2008 through 2014” and from “2009 through 2013.” Id. at 3, 5. Thus, the transactions by Level 4 and L6 Systems are within the offense conduct charged in the indictment.

         In addition, the transactions by those companies are part of a common scheme or plan as the later transactions, as they share a common class of victims, some common accomplices, a common purpose, and a similar modus operandi. The scheme involving LG Engineering (to which Mr. LeDonne has admitted) aimed to defraud purchasers of fiber optic units out of their payments by offering to sell units that it could not provide, making false promises to customers about the status of the orders and the delivery dates or making false promises of refunds, and failing to produce the products or refunds, before finally declaring bankruptcy to avoid collection efforts. The transactions at issue involving Level 4 and L6 Systems were essentially the same: the companies accepted orders and down payments for units they could not produce, offered the customers a variety of lies about delivery dates and refunds, failed to actually deliver the products or provide refunds, and eventually declared bankruptcy.

         Mr. LeDonne argues that those companies were not part of the scheme to defraud because, unlike LG Engineering, they were each able to provide products to at least some customers. He argues that the “criminal activity in this case commenced when decisions were made to accept orders even though the company did not have the capacity to produce the unit.” [DE 338 p. 8]. However, the evidence shows that that happened at both Level 4 and L6 Systems too. Christine Banke, who worked for several of Mr. LeDonne's companies, testified that Level 4 was satisfying some orders at the beginning. [DE 347 p. 52-53]. By 2008, though, it could no longer pay its vendors and thus could not obtain materials and could not produce products. Id. at 52-55; see also Id. at 211-12 (similar testimony by Ann Kaser, another employee). Nevertheless, Mr. LeDonne continued approving sales knowing that he could not provide the products to the customers, and Level 4 sold trucks that it did not own. Id. at 52-56 (“Q. In 2008, was Mr. LeDonne approving sales knowing that he couldn't manufacture product or provide product to customers? A. Yes.”). Ms. Banke also testified that in the last six months of Level 4's existence, she and other employees lied to customers at Mr. LeDonne's direction on a daily basis, misrepresenting the status of the orders and making false excuses for their failure to produce either the products or refunds. Id. at 56-58. Ms. Banke further testified that a similar pattern occurred with L6 Systems, which fulfilled some orders but increasingly suffered similar problems and offered similar lies to its customers. Id. at 61. Moreover, the Presentence Report's descriptions of each of the transactions by Level 4 and L6 Systems largely mirror each of the transactions by L&H Engineering and LG Engineering. Each time, the companies extracted large down payments, falsely told the customers the units would be delivered by certain dates, but never provided the units or provided a refund.

         Those commonalities suffice to show that the transactions at issue, which came during the latter portions of Level 4 and L6 Systems' respective existences, were fraudulent and were part of the same scheme to defraud as the offenses of conviction. Accordingly, the Court overrules Mr. LeDonne's objections in this respect.

         2. Reductions for Products Supplied

         Mr. LeDonne next argues that the loss amount should be reduced in certain instances by the value of products that his companies did provide to some customers. In each instance, however, Mr. LeDonne's companies never lawfully conveyed the products in question, as they did not actually own them. For example, El Oso bought a truck from L6 Systems, but Mr. LeDonne sold the truck knowing that it actually belonged to the bankruptcy estate of a previous company. Mr. LeDonne later retrieved the truck from El Oso and El Oso never received a replacement or a refund. Pine Tree also purchased a truck from L6 Systems, but L6 Systems did not provide a certificate of origin, as the truck likewise belonged to the other company's bankruptcy estate, and the truck Pine Tree received was not what it had ordered. Vorcom received one of the two vans it bought from L&H Engineering, but it did not receive the title, as L&H Engineering did not actually hold the title to the van.[1] Lightride eventually received a used loaner trailer from L&H Engineering, but that trailer had actually been stolen under the guise of a recall from Accelerated Networks, another customer.

         Mr. LeDonne notes that some of these customers eventually obtained ownership of the vehicles, so he argues that their actual losses were mitigated. Even so, these transactions would still count at least as intended loss, as Mr. LeDonne's companies conveyed units that they did not actually own and that could have been (and in some cases were, DE 335 ¶¶ 19, 31) taken back from those customers. Under § 2B1.1, the loss amount is the greater of the actual loss-“the reasonably foreseeably pecuniary harm that resulted from the offense”-or the intended loss- “the pecuniary harm that the defendant purposely sought to inflict.” § 2B1.1 n. 3(A); see United States v. Higgins, 270 F.3d 1070, 1075 (7th Cir. 2001) (noting that intended loss “turns upon how much loss the defendant actually intended to impose, ” regardless of whether the loss materialized or was even possible).[2] Here, Mr. LeDonne gave some customers possession of units, but he did not and could not lawfully transfer the rights of ownership of those units. El Oso and Pine Tree's units belonged to the bankruptcy estate of a different company; Vorcom's unit belonged to a financing company; and Lightride's unit was stolen from another customer.

         That Mr. LeDonne provided those customers with possession of units to placate them and delay their collection efforts does not change that he intended to defraud them out of their payments. Nor does it make a difference that some of the customers were eventually able to obtain ownership of the units through their own means.[3] Again, those self-help measures do not change the fact that Mr. LeDonne intended to defraud those companies out of their payments by promising them units he could not lawfully convey, which makes this intended loss. United States v. Dunham, 766 F.3d 672, 687 (7th Cir. 2014) (“[T]he amount of the intended loss, for purposes of sentencing, is the amount that the defendant placed at risk by misappropriating money or other property.” (quoting Lauer, 148 F.3d at 768)). In fact, ...

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