Kevin Coleman's Sentencing Memo

7/31/2019 Kevin Coleman's Sentencing Memo

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UNITED STATES DISTRICT COURTDISTRICT OF CONNECTICUT

UNITED STATES OF AMERICA ::

::V. : CRIM. NO. 3:12cr35 (SRU)

:::

KEVIN COLEMAN : JUNE 27, 2012

DEFENDANT KEVIN COLEMANSMEMORANDUM IN AID OF SENTENCING

Defendant Kevin Coleman submits this memorandum in aid of sentencing to

assist the Court in fashioning a sentence that is sufficient, but not greater than

necessary, to fulfill the federal sentencing requirements of 18 U.S.C. 3553(a).

Sentencing is scheduled for July 10, 2012 at 4:00 p.m.

Introduction

Through his pre-indictment guilty plea, Mr. Coleman has promptly accepted

responsibility for his self-indulgent and reckless behavior while he was the CEO at Latex

International (Latex), a pattern of behavior for which he is now branded a convicted

felon. His behavior has also cost him his reputation, his career, his friends, and his

marriage. In the span of just two years, Mr. Coleman has gone from earning hundreds

of thousands of dollars as a top corporate executive to collecting unemployment and

living alone in a house in Minnesota that he will soon need to vacate as part of his

divorce. At this stage of the proceedings, in terms of punishment, many of the goals of

sentencing have already been achieved. While additional punishment is clearly

Case 3:12-cr-00035-SRU Document 24 Filed 06/27/12 Page 1 of 26


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warranted, the only question is how much more is necessary to achieve general

deterrence, protect the public, rehabilitate this defendant, and provide for restitution.

The offense conduct in this case is not in dispute. As noted in the Pre-Sentence

Report (PSR), for a period of two years, from 2008 to 2010, Mr. Coleman abused his

position as CEO by purchasing expensive personal items on company credit cards and

failing to reimburse the company for those charges. His offense conduct included lavish

spending while traveling abroad on business; he bought expensive clothing and jewelry

for himself and his wife before their eventual divorce; and he wined and dined a

girlfriend who lived in England who has since abandoned him. All of these business

expenses and personal expenditures were paid for by Latex.

Mr. Colemans conduct did not occur in a vacuum, however. What has become

increasingly clear is that his behavior was fueled by rampant alcohol and drug abuse,

and it appears he was tempted by an atmosphere within the company that overlooked

the spending habits of its executives and directors. As alluded to in the sentencing

memorandum filed by the other individual prosecuted in this case, Joanne Osmolik, the

corporate culture at Latex was rampant with excessive spending. Executives and

company directors (Coleman included) participated in expensive dinners, entertained

themselves lavishly on business trips, made improvements to their personal residences,

accepted gifts from the company (including beds and flat screen TVs), and routinely

overlooked the companys policies concerning business reimbursement and use of

company credit cards.1

1According to Ms. Osmoliks sentencing memorandum there clearly was extravagant and reckless

spending by Joanne Osmolik, Kevin Coleman, and others (including one or more individuals stillemployed by Latex). This irresponsible spending took the form of international business trips, longvacations, gaudy raffles, exorbitant home improvements, flashy parties, expensive cars, material goods



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In the final analysis, however, every criminal case comes down to what the

defendantdid and what harm that the defendantcaused. It is not about what others

also did, or may have done. Moreover, in this particular case, what Mr. Coleman and

Ms. Osmolik did during their time at Latex pales in comparison to what others in the

company may have done during the same time frame. Mr. Coleman has accepted this

fact, which is why he authorized his counsel to bring this matter to a close in the most

expeditious way possible, without further contesting the loss figures pressed by Latex

and the Government. By pleading pre-indictment, Mr. Coleman allowed the

Government to focus its resources on other cases and he spared the victim in the case,

Latex, from having to incur any additional burden associated with participating in a

lengthy and complex trial.

Instead, on February 27, 2012, Mr. Coleman returned to Connecticut from his

home in Waseca, Minnesota, waived his right to be indicted by a grand jury, and pled

guilty to a two-count information charging him with one count of wire fraud in violation of

18 U.S.C. 1343 (Count 1) and one count of tax evasion in violation of 18 U.S.C. 7201

(Count 2). As noted in the PSR, the wire fraud charge relates to the credit card

scheme, which caused a fraud loss of $1,700,459. See PSR 6-14. The additional

tax charge stems primarily from Mr. Colemans failure to file tax returns for the years

2007 2011, conduct that overlapped with the commission of the wire fraud offense.

Although his accountant filed extensions with the IRS for those years, Mr. Coleman

(gifts), purchases in lieu of raises, golf clubs, fancy watches, baby shower gifts, gift card bonuses tosalesmen, Halloween costumes, alcohol/wine/liquor for Mr. Coleman and for the customers just to namea few. See United States v. Osmolik, 3:12CR248 (SRU), Sentencing Mem. at 7 [Doc. 18].



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never got around to filing the returns when the extensions expired, believing he would

eventually do so.2

By this memorandum, Mr. Coleman respectfully requests that the Court sentence

him to a period of incarceration of no more than 48 months, followed by a period of

supervised release. A fine should not be imposed in order to enhance Mr. Colemans

ability to make restitution. Such a sentence would be the least restrictive sentence that

accomplishes all of the goals of sentencing in this case, a case in which the Court must

balance the societal need for punishment against the need for Mr. Coleman to begin the

process of making restitution to Latex and the IRS. A sentence of 48 months would

also avoid any unwarranted disparity between the sentences imposed on Mr. Coleman

and Ms. Osmolik; it would be a sentence consistent with the Guideline stipulation

agreed to by the parties as part of Mr. Colemans pre-indictment plea; and it would

enable Mr. Coleman to seek employment as soon as possible a significant factor in

determining how successful he will be in meeting his weighty restitution obligations.

With regard to the restitution order itself, the Court should enter a restitution

order requiring payment of the specific amounts stipulated to by the parties. The Court

should refrain from including any additional amounts, unless and until the requesting

party has provided the Court and Mr. Coleman with detailed information supporting the

2While it is true that the mere passive failure to file a tax return is insufficient to establish the crime of tax

evasion, in this case the Government was prepared to argue that Mr. Colemans affirmative decision tominimize his withholding and his efforts to conceal the underlying embezzlement crime were sufficient toprove a tax evasion motive. See Spies v. United States, 63 S.Ct. 364, 368 (1943) (If the tax-evasionmotive plays any part in such conduct the offense may be made out even though the conduct may alsoserve other purposes such as concealment of other crime.) But compare United States v. Mesheski, 286F.2d 345, 347 (7th Cir.1961 (reprehensible actions, designed to hinder detection of the strictly local crimeof embezzlement, do not constitute such affirmative conduct as clearly and reasonably infers a motive toevade or defeat the tax.).



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demand and Mr. Coleman has had a meaningful opportunity to contest the additional

amounts requested.

Argument

A sentence that is sufficient, but not greater than necessary under 18 U.S.C.

3553(a) is the lowest possible sentence that accounts for all of the relevant statutory

factors. Those statutory factors include: (1) the nature and circumstances of the offense

and the history and characteristics of the defendant; (2) the need for the sentence to

reflect the seriousness of the offense, to promote respect for the law, and to provide just

punishment; (3) the kinds of sentences available; (4) the Guidelines range; (5) policy

statements issued by the Sentencing Commission; (6) the need to avoid unwarranted

sentencing disparities; and (7) the need to provide restitution. See 18 U.S.C. 3553(a).

As discussed below, consideration of these factors supports a sentence of no more than

48 months incarceration for Mr. Coleman.

I. PERSONAL HISTORY AND CHARACTERISTICS / NATURE ANDCIRCUMSTANCES OF THE OFFENSE 18 U.S.C. 3553(a)(1)

Children raised in physically abusive, alcoholic households can sometimes

become alcoholics themselves. They can also become impulsive by nature, sometimes

locking themselves into a course of action without giving serious consideration to

alternative behaviors or possible consequences. This impulsivity leads to confusion,

self-loathing, and loss of control of their environment. As a result, they spend

tremendous amounts of time cleaning up their messes. All of these observations apply

to Kevin Coleman.

Mr. Coleman never knew his biological father. His mother remarried and Mr.

Coleman grew up in a household with his biological siblings and several half-siblings.



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His step-father was an alcoholic who routinely beat Mr. Coleman. See PSR 52. [T]he

the abuse started when he was just 3 years old and did not stop until he was big

enough to fend it off at 16 years old. Id. Even more tragic, Mr. Coleman also

witnessed his own mother being punched, hit, and beaten by his step-father. Id.

When Mr. Coleman turned 16, he turned to alcohol. It was not long before it

became a daily habit. His drinking and discipline problems in high school eventually

caused his mother to request assistance from the state, which resulted in Mr. Coleman

being admitted to an in-patient program at a local hospital. He was supposed to only

stay for 30 days, but he ended up being a patient for nearly 200 days. See PSR 70.

Over the course of the next 35 years, Mr. Coleman has continued to struggle with

his use of alcohol, a fact confirmed by Mr. Coleman, his mother, and his criminal history.

His drinking contributed to two DWI convictions before the age of 40, and played a role

in another conviction for driving while under suspension, for which he was ordered to

undergo outpatient treatment. See PSR 33-36. His drinking also carried over into his

professional life. When he was CEO at Latex, he and another senior member of

management would go out to restaurants and get drunk two to three times per month.

They even would come up with reasons to have dinner meetings so that they could get

drunk and run up large dinner tabs that would be expensed to the company. When he

traveled abroad, Mr. Coleman went on drinking binges and ran up enormous traveling

expenses. According to Mr. Coleman, during the last three to four years he worked at

Latex International, he drank 90% of the nights. PSR 64.

In addition to his drinking, Mr. Colemans impulsive personality caused him to

experiment with illegal and prescription drugs, including marijuana, cocaine,



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speed/crystal methamphetamine, Oxycontin, mushrooms, and LSD. See PSR 65-69.

In 2007 and 2008, the years leading up to his spending spree, Mr. Coleman began

abusing Oxycontin, a drug he was first exposed to when he was recuperating from

surgery. He used the pills when he had difficulty sleeping a product of his heavy

alcohol use, constant hours of working, and frequent international business trips. This

Oxycontin habit ballooned from 30 mg pills to 1000 mg pills, and he was taking 9000 mg

of Oxycontin per day in the days and months after his resignation from Latex. See PSR

68.

During his pre-sentence interview, Mr. Coleman lamented that his marriage and

family life suffered through the years as a result of financial stresses, his drinking, his

drug abuse, and his constant traveling for work. Of note is the fact that Mr. Coleman

and his wife, Wendy, suffered financially as a result of their daughters medical bills.

Their daughters pre-existing diabetes condition prevented her from getting health

insurance coverage and the family became insolvent under the weight of unpaid

medical bills, eventually filing for bankruptcy in 1997. In the years after the bankruptcy,

the family finances were, once again, tight. In 2002, Mr. Coleman gave in to temptation

for the first time, misusing $14,596.44 in company funds while he was employed by a

company in Minnesota. See PSR 38. The matter was charged criminally, but later

dismissed when Mr. Coleman made full restitution in 2005.

In 2005, he was hired by Latex International, a privately held bedding

manufacturing company headquartered in Shelton, Connecticut. He was hired as a

vice-president and was quickly promoted through the ranks, eventually becoming CEO

in June 2008. While his professional career flourished, his marriage continued to suffer.



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Mr. Coleman was rarely home in Minnesota and lived most of the time at a Hilton

Garden Inn in Connecticut. His wife, Wendy, visited when she could, but the trips

became less frequent after Mr. Coleman became CEO. Mr. Coleman, in turn, occupied

himself by drinking, going out to expensive restaurants, and traveling as much as he

could.

Around this time, in 2008, Latex created a British marketing company called

DMAD Marketing Services to assist in selling off the assets of a defunct manufacturing

facility in Malaysia purchased by Latex. To help finance work on the transaction,

Latexs Board of Directors authorized the issuance of credit cards through the DMAD

entity, one of which was given to Mr. Coleman. Over the next two years, Mr. Coleman

used his DMAD credit card to take cash advances while traveling, pay for jewelry for

himself and his wife, and buy gifts for a woman he began seeing on his trips abroad to

the United Kingdom. He also used the credit card to pay for first class airfare and other

high-end travel accommodations, most of which were booked by his administrative

assistant, Joanne Osmolik. By virtue of her role, Osmolik had access to Colemans

credit card information and she began making purchases for herself, many of which

were unknown to Mr. Coleman.

Mr. Coleman ran most of his business expenditures for the years 2008 to 2010

through the DMAD credit card. These included both legitimate and illegitimate

expenses. Although he never prepared his own expense summaries or reports, Latexs

Board of Directors knew that he was running virtually all of his business expenses

through DMAD. At one point, the majority shareholder/director of Latex joked that if Mr.

Coleman ever got around to actually submitting expense reports, the director would



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have to close his eyes when they signed them. According to the records provided by

Latex to the Government, these DMAD charges exceeded $1M for the years 2008

through 2010.

The scheme was largely successful because of the manner in which the credit

card bills were paid by Latex. The process was one in which invoices would be issued

from DMAD asking for payment of the credit card charges. The invoice from DMAD

was never detailed, and no explanation of the charges was ever requested by Latex, or

provided to the Board by Coleman. Latex simply paid the charges and moved on.

In late 2010, Mr. Coleman was contacted by Latex International to discuss

questions surrounding his company credit card charges. Included among the

expenditures were jewelry purchases, personal vacation expenses, a Mercedes two-

door convertible car, and a pair of Harley Davidson motorcycles. Mr. Coleman declined

to explain the purchases to the audit committee and instead submitted his resignation.

Approximately one month later, he accepted another position in the industry working for

Sealy, a well-known bedding manufacturing company with a factory in Wilkes Barre,

Pennsylvania.

Later in 2011, after he learned of the criminal investigation by the FBI, Mr.

Coleman retained counsel to discuss the nature of the allegations with counsel for the

Government. Through this dialogue, Mr. Coleman was provided with pre-indictment

discovery and he learned that Latex had turned over the results of an internal

investigation to the Government and that this internal investigation was the basis for a

planned wire fraud charge.



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In December 2011, when Ms. Osmoliks guilty plea became public, Mr. Coleman

was afforded the opportunity to resign or be terminated. He chose to resign and

relocated from Pennsylvania back to Minnesota. Then, in January 2012, his divorce

proceedings with his wife became final. Having hit rock bottom, Mr. Coleman decided

to tackle the drinking and drug use that had fueled his excessive lifestyle and begin the

process of making amends for his criminal conduct.

On January 10, 2012, Mr. Coleman submitted to a substance abuse evaluation at

Fountain Centers, a residential treatment program in Minnesota affiliated with the Mayo

Clinic. See PSR 71. He was determined to be alcohol and drug dependent, with

attendant depression and emotional difficulties stemming from the criminal investigation.

After attending the program for between 21-24 days, disputes over payment by his

former employer required him to transfer to the out-patient program. There, he attended

two group counseling sessions per week, as well as one individual counseling session.

When not in group sessions or individual counseling, Mr. Coleman attended AA

meetings.

Today, as noted in the PSR, Mr. Coleman has been sober for almost 6 months

the longest period of sobriety since he was a teenager. See PSR 72. He stands

before the Court deeply remorseful and he has a better understanding what caused him

to engage in such reckless conduct. Seeking treatment for his alcohol and prescription

drug abuse was only the first step in this process. He also intends to seek further

counseling to address any personality traits linked to his alcoholism and the physical

abuse he experienced as a child. While his difficult upbringing and his addictions do not

fully explain his conduct, they do shed some light on the impulsive and irresponsible



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actions that gave rise to the charges in this case. By promptly pleading guilty and

affirmatively seeking treatment, Mr. Coleman has begun the process of cleaning up the

mess he created. He deserves some credit for taking those steps, and we urge the

Court to factor those efforts in to its ultimate sentencing decision.

II. AVAILABLE SENTENCES 18 U.S.C. 3553(a)(3)

Mr. Coleman faces a maximum of 20 years imprisonment on the wire fraud count

and a maximum of 5 years on the tax evasion count. See PSR 91. There is no

mandatory minimum. His Guideline range, as discussed below, suggests that a term of

imprisonment is appropriate, and we do not dispute that recommendation.

Assuming that he is sentenced to a term of imprisonment, Mr. Coleman can

expect to serve 87.1 percent of whatever sentence the Court imposes. See Barber v.

Thomas, -- U.S. --, 130 S.Ct. 2499 (2010) (affirming BOPs time credit calculation

formula). If he is sentenced consistent with the Guideline stipulation set forth in the plea

agreement (41-51 months), Mr. Coleman can expect to serve between 36-45 months in

BOP custody.

A period of between one and three years of supervised release is also called for

by statute and is consistent with the period recommended by the Guidelines. See PSR

94-95. We note that, contrary to popular perception, this non-custodial portion of the

sentence is indeed punishment under our federal sentencing laws. In Gall v. United

States, the U.S. Supreme Court squarely rejected the notion that probation and other

non-custodial sentences are not punishment under 18 U.S.C. 3553(a):

Offenders on probation are nonetheless subject to several conditions thatsubstantially restrict their liberty . . . Inherent in the very nature ofprobation is that probationers do not enjoy the absolute liberty to whichevery citizen is entitled. . . .Probationers may not leave the judicial district,



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prosecution or defense that the Guidelines sentence should not apply,perhaps because (as the Guidelines themselves foresee) the case at handfalls outside the heartland to which the Commission intends individualGuidelines to apply, U.S.S.G. 5K2.0, perhaps because the Guidelinessentence itself fails properly to reflect 3553(a) considerations, or perhaps

because the case warrants a different sentence regardless.

Rita, S.Ct. at 2465 (emphasis added).

In a recent Second Circuit opinion, United States v. Jones, 531 F.3d 163, 171

(2008), the Court of Appeals thoroughly discussed the Supreme Courts sentencing

decisions in Booker, Rita, Gall, and Kimbrough:

In short, while a sentencing court is statutorily obligated to give fair

consideration to the Guidelines before imposing sentence, 18 U.S.C.3553(a)(4); United States v. Williams, 524 F.3d at 215 (holding districtcourt committed procedural error by using sentence for which case couldhave been plea-bargained in Westchester County, rather than Guidelinesrange as initial benchmark), in the end, it must make an individualizedassessment of the sentence warranted by 3553(a) based on the factspresented, Gall, 129 S.Ct. at 597.

The Court of Appeals continued:

Sentencing is not, after all, a precise science. Rarely, if ever, do thepertinent facts dictate one and only one appropriate sentence. Rather, thefacts may frequently point in different directions so that even experienceddistrict judges may reasonably differ, not only in their findings of fact, butin the relative weight they accord competing circumstances. Suchreasonable differences necessarily mean that, in the great majority ofcases, a range of sentences frequently extending well beyond thenarrow ranges prescribed by the Guidelines must be consideredreasonable.

Id. (internal citations omitted and emphasis added).

Thus, while a sentencing court must give respectful consideration to the

Guidelines, the court also has discretion to determine that, in a particular case, a

within-Guidelines sentence is greater than necessary to serve the objectives of

sentencing. United States v. Regalado, 518 F.3d 143, 146 (2d Cir. 2008) (quoting



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United States v. Kimbrough, 128 S.Ct. 558, 564 (2007)). In fact, in fashioning an

appropriate sentence, the judge is not prohibited from including in that consideration

the judges own sense of what is fair and just under the circumstances. United States

v. Jones, 460 F.3d 191, 194-96 (2d Cir. 2006) (concluding that sentencing judges

sentence, which was imposed in part based on judges gut feeling and sense that the

defendant could do better, was reasonable).

In Mr. Colemans case, the PSR has calculated the Guidelines in manner that is

different than what the parties anticipated when they entered into the Guideline

stipulation in the plea agreement. In response, Mr. Coleman has objected to the

revised calculations, urging the Court instead to use a lower Guideline range as the

starting point in the sentencing analysis. Depending on how the Court wishes to

proceed at sentencing, this disagreement about which Guideline range applies in Mr.

Colemans case could be rendered academic. For example, given the overlapping

sentencing ranges, the Court could make the issue moot by imposing a sentence of 48

months, which is within both the 41-51 months calculated in the plea agreement and the

slightly higher 46-57 months calculated in the PSR. In the alternative, the Court could

choose, in its discretion, to impose a non-Guidelines sentence. Regardless of which

path the Court chooses, an accurate calculation of the Guidelines is procedurally

necessary, and so we address the central Guideline issues below.

A. Grouping Under U.S.S.G. 3D1.2(d)

As noted in the PSR, Mr. Coleman objects to the PSRs calculation of his the

total offense level under the grouping provisions of U.S.S.G. 3D1.2(d). If this grouping

method is used, Mr. Coleman faces a Guidelines range of 46-57 months, which is



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above that stipulated to the plea agreement. If a different grouping method is used, as

discussed below, Mr. Colemans range would be 41-51 months. The Court could

resolve this Guideline dispute in one of the following ways.

First, assuming the Court intends to group the wire fraud and tax fraud counts

under U.S.S.G. 3D1.2(d), an approach endorsed by the Second Circuit in United

States v. Gordon, 291 F.3d 25, 181, 188-90 (2d Cir. 2002), the Court should not adopt

the PSRs use of the role in the offense enhancement under U.S.S.G. 3B1.1(c) when

calculating the offense level under the tax guideline.

While Mr. Coleman has stipulated that he was an organizer, leader, manager, or

supervisor during the commission of the wire fraud offense, Mr. Coleman did not (and

could not) play such a role in committing the tax evasion. Nevertheless, the PSR has

applied the enhancement when calculating Mr. Colemans tax guideline offense level,

citing as support for his approach the introductory commentary to U.S.S.G. 3B1.1,

which states: The determination of a defendants role in the offense is to be made on

the basis of all conduct within the scope of 1B1.3 (Relevant Conduct), i.e., all conduct

included under 1B1.3(a)(1)-(4), and not solely on the elements and acts cited in the

count of conviction. That provision, however, insofar as it applies to grouping under

U.S.S.G. 3D1.2(d), permits consideration of role in the offense conduct only if it was

part of the same course of conduct or common scheme or plan as the offense of

conviction. U.S.S.G. 1B1.3(a)(2). Here, Mr. Colemans inexcusable delay in filing his

tax returns, and his further failure to pay taxes on his ill-gotten gains, was not part of the

wire fraud scheme.



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If the two-level enhancement is not used, his offense level is 24, less three points

for acceptance, yielding a total offense level of 21. This total offense level is the same

as the total offense level reached under the fraud guideline and is consistent with the

guideline range reached in the plea agreement (41-51 months).3

Alternatively, the Court may wish to consider grouping the tax evasion count with

the wire fraud count under subsection (c) of U.S.S.G. 3D1.2. Subsection (c) governs

[w]hen one of the counts embodies conduct that is treated as a specific offense

characteristic in, or other adjustment to, the guideline applicable to another of the

counts. Here, subsection (c) could be used because mail fraud appears to be a

specific offense characteristic of tax fraud: when the source of unreported income

exceeding $10,000 is criminal activity, the offense level for the tax offense is increased

two levels. Gordon, 291 F.3d at 196 (Newman, J., concurring). Grouping under

subsection (c) would also be consistent with the position taken at least informally by

the U.S. Sentencing Commission. See id. at 198 (citing United States Sentencing

Commission, Most Frequently Asked Questions About the Sentencing Guidelines No.

45, at 14 (7th ed. June 1, 1994)).

If the Court were to apply the grouping provisions of subsection (c), then the wire

fraud guideline would yield the highest offense level, as provided for in the plea

agreement, as follows:

The tax guideline would have a base offense level of 20 based on a taxloss of $741,029, see U.S.S.G. 2T1.1(a)(1) & 2T4.1, plus two pointsunder for failure to report the income derived from the wire fraud, seeU.S.S.G. 2T1.1(b)(1), and less three points for acceptance. This would

3There is typo in the plea agreement; it mistakenly calculates the offense level as 22, when the

calculations in the stipulation plainly amount to an offense level of 21 (i.e., an offense level 24, less 3points for acceptance, equals level 21). The plea agreement correctly states that this yields a range of41-51 months.



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result in a total offense level of 19. (If a role in the offense enhancementis used an approach we believe is inappropriate, as discussed above the addition of the two levels under U.S.S.G. 3B1.1(c) would still onlyresult in a total offense level of 21.)

The wire fraud guideline would have a base offense level of 7, plus 16levels under U.S.S.G. 2B1.1(b)(1)(I), based on a wire fraud loss of$1,700,459, plus two levels under U.S.S.G. 3B1.1(c), based on Mr.Colemans role in the offense, less three points for acceptance. Thiswould yield a total offense level of 21.

Because the offense level for the wire fraud guideline under the above analysis

would be higher (or the same) as the tax guideline offense level, the Court would adopt

the higher wire fraud guideline. This would result in a Level 21, CHC I (41-51 months),

and a sentence of 48 months falls comfortably within that range.

B. Downward Departure and/or Non-Guidelines Sentence to Give Effectto Parties Plea Agreement

Another approach to resolving this Guideline dispute would be a departure. If the

Court agrees with PSRs revised range of 46-57 months, the Court could downwardly

depart to give effect to the range contemplated by the plea agreement. See PSR 103;

United States v. Fernandez, 877 F.2d 1138 (2d Cir. 1989) (a district court presently

may depart from a Guidelines sentence in order to give effect to a plea bargain if such a

departure is warranted). Tracking the reasoning of Fernandez, Judge Gleeson

(E.D.N.Y.) has suggested that district courts can and should defer to the parties

bargained-for exchanges:

Judges should welcome sentence bargains because they conserve

judicial resources at both the district and appellate levels. The SecondCircuit has encouraged bargaining for precisely this reason.

See Hon. John Gleeson, Sentence Bargaining under the Guidelines, 8 Fed. Sent. R.

314-315 (1996) (citing United States v. Pimentel, 932 F.2d 1029, 1033 (2d Cir. 1991));

see also Hon. John Gleeson, The Sentencing Commission and Prosecutorial Discretion:



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The Role of the Courts in Policing Sentence Bargains, 36 Hofstra L.R. 3, 639-661

(Spring 2008).

In the alternative, the Court may wish to resolve the issue by imposing a non-

Guidelines sentence, an approach explicitly condoned by the Second Circuit in United

States v. Crosby:

Now that the duty to apply the applicable Guidelines range is not

mandatory, situations may arise where either of two Guidelines ranges,

whether or not adjacent, is applicable, but the sentencing judge, having

complied with section 3553(a), makes a decision to impose a non-

Guidelines sentence, regardless of which of the two ranges applies. Thisleeway should be useful to sentencing judges in some cases to avoid the

need to resolve all of the factual issues necessary to make precise

determinations of some complicated matters, for example, determination

of monetary loss. Similarly, close questions may sometimes arise as to the

precise meaning or application of a policy statement authorizing a

departure, and a judge who has considered policy statements concerning

departures need not definitively resolve such questions if the judge has

fairly decided to impose a non-Guidelines sentence.

397 F.3d 103, 112 (2d Cir. 2005).

D. Many of the Purposes of Sentencing Have Already Been Achieved

Mr. Coleman has been punished severely by the very public nature of the

prosecution, the significant financial sanctions involved, the loss of his jobs at both

Latex and Sealy, and the shame and public embarrassment that comes with pleading

guilty to a federal felony. See United States v. Myers, 353 F. Supp.2d 1026, 1031 (S.D.

Iowa 2005) (stating that once a defendant is convicted, the defendant has been branded

a felon and being known as such by family, friends, and society is no small

punishment).



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In addition to the consequences noted above, Mr. Coleman lost his corporate

investment in Latex. During his employment, he was loaned $215,000 by Pouschine

Cook Capital Management, LLC (the controlling shareholder of Latex) to purchase

shares in Latex. The shares were pledged as collateral for the loan. When Mr.

Coleman lost his job at Latex, and thereafter was terminated from Sealy in the wake of

this investigation becoming public, he could not repay the loan, prompting Pouschine

Cook to exercise its rights to take his shares. Mr. Coleman did not challenge the

valuation of these shares which Latex placed at less than $250,000 but Mr.

Coleman now has reason to believe that the shares may have been worth much more.

Some of this money could have been used to support himself and his family, pay

restitution, and/or satisfy his tax obligations. That possibility is now lost.

At the end of the day, when all is said and done, Mr. Coleman will have lost two

jobs, his corporate investment in Latex, his reputation, his friends, his wife of 30 years,

and he will be obligated to make restitution payments for the rest of his life. Such harsh

collateral consequences demonstrate that many of the goals of sentencing have been

achieved in this case by the prosecution itself. Under such circumstances, a departure

or non-Guidelines sentence is permissible. See, e.g., United States v. Redemann, 295

F.Supp.2d 887, 894-896 (E.D. Wis.2003) (downward departure under U.S.S.G. 5K2.0

warranted where purposes of sentencing, including punishment, specific deterrence and

general deterrence already partially achieved through imposition on defendant of, inter

alia, payment of substantial restitution, public shame, and collateral damage to family).



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IV. THE NEED FOR THE SENTENCE IMPOSED TO ACCOMPLISH THE GOALSOF SENTENCING 18 U.S.C. 3553 (a)(2)

Having given due consideration to a defendants history and characteristics and

to the nature and circumstances of the offense, the Court must, subject to the principle

of parsimony, identify a sentence that reflects the seriousness of the offense, promotes

respect for the law, provides a just punishment for the offense, affords adequate

deterrence to criminal conduct, and protects the public from further crimes of the

defendant, though a particular purpose may apply differently, or even not at all,

depending on the kind of sentence under consideration. Tapia v. United States, -- U.S.

--, 131 S.Ct. 2382, 2387-88 (2011); see United States v. Crosby, 397 F.3d 103, 112-14

(2d Cir. 2005). In other words, the Court is tasked with balancing the goals of

sentencing in determining a fair and appropriate disposition. See ABASTANDARDS ON

CRIMINAL JUSTICE, Sentencing 18-6.1(a), p. 219 (The sentence imposed should be no

more severe than necessary to achieve the societal purposes for which it is

authorized.).

There is no doubt that the mess Mr. Coleman created was accomplished through

the commission of very serious crimes. Now more than ever, the community at large

relies on upon executives to abide by their fiduciary obligations, and each and every

American citizen must be diligent in paying their taxes. Here, Mr. Colemans

embezzlement activities and his simultaneous failure to file timely tax returns for four

years even if he intended to file them at some future date deserve harsh

punishment.

With regard to general deterrence, it is clear that the impact of this prosecution

on Mr. Coleman both financially and emotionally has already been severe. As a



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result of his guilty plea, Mr. Coleman has agreed to pay over $3M in restitution, which is

a significant sanction in view of Mr. Colemans fragile financial condition and diminishing

employment opportunities. When combined with the very public nature of the

prosecution which has been followed closely in the press there can be no question

that a message has been sent to the community (and to others in the corporate

community) that similar conduct will be prosecuted vigorously.

V. THE NEED TO AVOID UNWARRANTED SENTENCING DISPARITIES 18U.S.C. 3553(a)(6)

Pursuant to 3553(a)(6), a sentencing court must also take into account the

need to avoid unwarranted sentencing disparities among defendants with similar

records who have been found guilty of similar conduct. See alsoUnited States v. Wills,

476 F.3d 103, 109 (2d Cir. 2007) (the plain language of 3553(a)(6) does not on its

face restrict the kinds of disparity a court may consider); United States v. Fernandez,

443 F.3d 19, 31 n. 9 (2d Cir. 2006) (same). By virtue of its day-to-day experience in

federal sentencing, this Court is uniquely situated to assess this statutory factor.

Here, the Court is faced with a situation in which Mr. Coleman is not the only

Latex executive to be convicted and sentenced. Earlier this year, on April 26, 2012, the

Court sentenced Mr. Colemans colleague, Joanne Osmolik, to a non-Guidelines

sentence of 48 months. This sentence was above Ms. Osmoliks Guideline range of 33-

41 months and was harsher than anything contemplated by Ms. Osmoliks plea

agreement. Heading into this sentencing proceeding, we understand and appreciate

that it is likely that the Court may impose the same sentence here in view of the

comparable fraud loss numbers and the harm caused to Latex. What we urge the Court



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not to do, however, is impose a sentence more than 48 months, as it would be greater

than necessary to achieve the goals of sentencing with respect to Mr. Coleman.

Several factors are worthy of consideration in this regard. First, Mr. Coleman has

affirmatively demonstrated his acceptance of responsibility and that he is genuinely

remorseful. He intends to address the Court further on this issue at sentencing. As

noted in the PSR, he checked himself in to a substance abuse treatment program,

successfully completed it, and he has been fully compliant with his conditions of release

since the time of his change of plea over four months ago. This behavior suggests that

Mr. Coleman can abide by court conditions and he is amenable to non-incarceration

alternatives in lieu of additional incarceration.

Second, to the extent Mr. Coleman may be viewed as more culpable based on

his position as CEO, this factor has already been accounted for in his Guideline

calculations through a role in the offense enhancement, resulting in a sentencing range

above Ms. Osmoliks range: Mr. Colemans advisory range is 41-51 months under his

plea agreement and 46-57 months according to the PSR.

Finally, while it is true that Mr. Coleman has pled to the additional crime of tax

evasion for failing to pay taxes on his ill-gotten gains, that fact alone does not warrant a

harsher sentence. Ms. Osmolik was guilty of essentially the same thing. While she filed

her tax returns, it is now clear that she filed false returns, because she failed to report

and pay taxes on the money she embezzled from Latex. In other words, were it not for

an exercise of prosecutorial discretion, Ms. Osmolik could have been charged with and

convicted of a tax offense, just like Mr. Coleman. Here, Mr. Coleman should not be



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punished more harshly than Ms. Osmolik simply because he chose to delay filing his tax

returns, instead of lying on them.

For all these reasons, justice would not be served by sentencing Mr. Coleman to

a period of incarceration longer than Mr. Osmolik, an individual who engaged in similar

conduct and who was equally culpable.

VI. RESTITUTION 18 U.S.C 3553(a)(7)

As noted above, the personal and financial ramifications of Mr. Colemans plea

are substantial. Mr. Colemans reputation has been ruined, his professional career is

lost, and now he must make restitution payments to Latex and the IRS for the rest of his

life. By virtue of his plea agreement, Mr. Coleman must pay a total of $1,700,459.00 in

restitution to Latex, and another $1,375,627.83 in taxes, penalties and interest to the

IRS. Because he is unemployed, and because the scheme involved lavish spending on

restaurants, hotels, dinners, and first class airfare none of which can be recouped or

liquidated now Mr. Coleman has been unable to come forward with a substantial

restitution payment. Any hope of upfront restitution would have to come from the sale of

the tangible items recovered by the Government. To date, approximately $181,884.00

worth of jewelry and other items subject to forfeiture have already been recovered by

the Government. Another $148,585.00 in forfeiture items remains outstanding. Mr.

Coleman has agreed to the forfeiture of these items and has communicated with

counsel for Latex and the Government about how the proceeds of any forfeiture could

be paid to the Latex as the victim.

Recently, in connection with Ms. Osmoliks sentencing, outside counsel for Latex

submitted a victim impact letter discussing other potential losses identified by Latex.



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This letter was provided to the Government and was included as an attachment to the

Governments sentencing memorandum in Ms. Osmoliks case. That letter from latex

catalogs a number of business decisions made by Latex, the cost of which Latex now

claims were a consequence of Mr. Colemans conduct. These additional losses include:

a reduction in the Latex work force; factory shut downs; longer lead times to key

customers due to financial constraints; loss of advertising; suspension of the 401(k)

plan; $300,000 in attorney and professional fees; and a $250,000 penalty imposed by a

bank for additional borrowing by Latex.

While Mr. Coleman is genuinely remorseful, and while he also recognizes that his

conduct and faulty leadership may have jeopardized the financial health of the

company, he cannot agree that all of the losses set forth in Latexs victim impact letter

were proximately caused by his embezzlement. The legal and factual reasons

supporting his position are set forth in defense counsels PSR objection letter dated May

8, 2012, which is appended to the PSR. Even assuming, however, that any of those

losses can be tied directly to Mr. Colemans conduct, we are unaware of any statutory

provision that provides Latex with standing to prosecute such claims in these

proceedings. Although restitution does resemble a judgment for the benefit of the

victim, the context in which it is imposed undermines that conclusion. The victim has no

control over ... the decision to award restitution. Kelly v. Robinson, 479 U.S. 36, 52,

107 S.Ct. 353 (1986). Cf. 18 U.S.C. 3554(e) (identifying the Government as the party

with the burden of demonstrating the amount of the loss sustained by the victim).

Given the enormous restitution amounts already stipulated to by Mr. Coleman,

the Court should exercise its discretion and simply order restitution in the amount



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agreed to by the parties in the plea agreement. See 18 U.S.C.A. 3663A(c)(3)(B)

(court need not order restitution for full amount of victims losses if determining complex

issues of fact related to the cause or amount of the victim's losses would complicate or

prolong the sentencing process to a degree that the need to provide restitution to any

victim is outweighed by the burden on the sentencing process).

Conclusion

For all of the foregoing reasons, and based on any additional grounds that may

be brought to the attention of the Court prior to sentencing, Mr. Coleman respectfully

requests that the Court impose a sentence of no more than 48 months, followed by a

period of supervised release, with a restitution order entered in accordance with the

amounts stipulated to in the plea agreement.

Respectfully submitted,

/s/ Robert M. Frost, Jr.

Robert M. Frost, Jr. (ct 19771)

FROST BUSSERT, LLC129 Church Street, Suite 226New Haven, CT 06510Tel: (203) 495-9790Fax: (203) 495-9795Email: [email protected]

Attorney for Kevin Coleman



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CERTIFICATION

I hereby certify that on this date a copy of the foregoing pleading was filed

electronically and served by mail on anyone unable to accept electronic filing. Notice of

this filing will be sent by e-mail to all parties by operation of the Court's electronic filing

system and by mail to anyone unable to accept electronic filing as indicated on the

Notice of Electronic Filing. Parties may access this filing through the Court's CM/ECF

system.

Courtesy copy via email to:

January SatrazemisUnited States Probation OfficerU.S. Probation Office915 Lafayette Blvd, Room 200Bridgeport, Connecticut 06604

Dated at New Haven, Connecticut on this 27th day of June, 2012.

/s/ Robert M. Frost, Jr.

Robert M. Frost, Jr.


Kevin Coleman's Sentencing Memo

Documents

Transcript of Kevin Coleman's Sentencing Memo