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United States v. Heine

United States District Court, D. Oregon

June 14, 2018

DAN HEINE and DIANA YATES, Defendants.

          Billy J. Williams, United States Attorney, and Claire M. Fay, Michelle Holman Kerin, and Quinn P. Harrington, Assistant United States Attorneys, United States Attorney's Office for the District of Oregon, Of Attorneys for the United States of America.

          Jeffrey Alberts and Mark Weiner, Pryor Cashman, LLP, Of Attorneys for Defendant Dan Heine.

          Janet Lee Hoffman, Andrew T. Weiner, Katherine Feuer, and Douglas J. Stamm, Janet Hoffman & Associates, LLC, Of Attorneys for Defendant Diana Yates.


          Michael H. Simon, United States District Judge.

         Imposing a sentence on a fellow human being is one of the most difficult acts that a judge is required to perform. The judge's decision likely will affect not only the criminal defendant, but also his or her family and the victims of the crime and their families. A sentence also may affect the future safety, security, and sense of well-being of the community. In addition, a sentence should deter future criminal conduct, not only by the defendant being sentenced but also by others. In white collar cases dealing with economic crimes involving financial institutions, a sentence also may affect the confidence the public holds in those institutions as well as the government's ability effectively to regulate and supervise those institutions. Many complex factual and legal issues must be considered and balanced to find a just and appropriate sentence.

         Because we live under the rule of law, judges must make decisions under objective, common, and discernable legal principles. The discretion possessed by a judge at sentencing tests the limits of this principle. Sentencing is constrained by both substantive bounds (such as statutory minimum or maximum terms) and procedural bounds (such as mandated methodology and explanatory requirements). Nevertheless, even within these bounds, there is often more than one lawful solution, which provides both the legal basis for the court's discretion and the tension between this discretion and the rule of law. In recognition of this tension, it is incumbent upon a judge to explain the bases for a criminal sentence. Others may agree or disagree with the sentence imposed, but a judge should leave no doubt about the factors that he or she has considered or the reasons for imposing a particular sentence.


         In 2004, Defendant Dan Heine (“Heine”) founded The Bank of Oswego (the “Bank”) and became its President and Chief Executive Officer. He also served as a member of the Bank's Board of Directors (“Board”). Defendant Diana Yates (“Yates”) was the Executive Vice President (“EVP”) and Chief Financial Officer (“CFO”) of the Bank. In addition to serving in these positions, Yates was the Secretary of the Board. Yates resigned from the Bank on March 22, 2012. Heine left the Bank in September 2014. On June 24, 2015, a federal grand jury indicted Heine and Yates for conduct related to their time with the Bank; the indictment was unsealed two days later. As alleged in the superseding indictment, Heine and Yates were charged with one count of conspiring to commit bank fraud, in violation of 18 U.S.C. § 1349, and 18 counts of making false bank entries, in violation of 18 U.S.C. §§ 2 and 1005. In essence, Heine and Yates were charged with concealing the true financial condition of the bank to the Board and regulators by falsely reporting that the Bank had title to a property obtained in a “straw buyer” transaction, falsely reporting that delinquent loans were paid, and falsely reporting the sale of bank-owned property received in foreclosure.

         Until August 2016, the Bank was a financial institution engaged in the business of personal and commercial banking and lending, headquartered in Lake Oswego, Oregon. The Bank was insured and supervised by the Federal Deposit Insurance Corporation (“FDIC”). On August 12, 2016, the Bank sold its loans and other assets to HomeStreet Bank (“HomeStreet”). The Bank continues to exist as a corporate entity, but has relinquished its banking charter and now operates as Oswego Resolution.

         Beginning October 10, 2017, and ending November 28, 2017, a federal jury in Portland, Oregon heard testimony from 43 witnesses, received 584 exhibits admitted in evidence, and deliberated for four days. The 12-person jury then returned a unanimous verdict, finding both Heine and Yates guilty on the same 13 out of 19 charges. The jury found both Defendants guilty on one count of conspiracy to commit bank fraud and 12 counts of making false bank entries. The jury also found both Defendants not guilty on six counts of making false bank entries.


         A. Sentencing Considerations and Methodology

         Congress has directed that a federal court shall impose a sentence that is “sufficient, but not greater than necessary” to achieve the purposes of sentencing. As explained by Congress, a just and appropriate sentence should reflect the seriousness of the offense, promote respect for the law, provide just punishment for the offense, afford adequate deterrence to criminal conduct, protect the public from further crimes of the defendant, and provide the defendant with needed educational or vocational training, medical care, or other correctional treatment in the most effective manner. 18 U.S.C. § 3553(a)(2). In determining the particular sentence to be imposed, the court shall consider the nature and circumstances of the offense and the history and characteristics of the defendant. 18 U.S.C. § 3553(a)(1). The court must also consider the advisory sentencing guidelines established by the United States Sentencing Commission (“USSC”) as well as all relevant policy statements issued by the USSC. 18 U.S.C. § 3553(a)(4)-(5). Further, the court must attempt “to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct.” 18 U.S.C. § 3553(a)(6).

         White collar crime is peculiarly amenable to general deterrence. That is because white collar criminals, oftentimes, premeditate their crimes and engage in a cost-benefit analysis. See, e.g., United States v. Martin, 455 F.3d 1227, 1240 (11th Cir. 2006) (“Because economic and fraud based crimes are more rational, cool, and calculated than sudden crimes of passion or opportunity, these crimes are prime candidates for general deterrence. Defendants in white collar crimes often calculate the financial gain and risk of loss, and white collar crime therefore can be affected and reduced with serious punishment.”). Indeed, the congressional drafters of § 3553(a) recognized the distinction between white collar criminals and other criminals when it comes to deterrence:

The second purpose of sentencing is to deter others from committing the offense. This is particularly important in the area of white collar crime. Major white collar criminals often are sentenced to small fines and little or no imprisonment. Unfortunately, this creates the impression that certain offenses are punishable only by a small fine that can be written off as the cost of doing business.

S. Rep. No. 98-225, at 76 (1983), as reprinted in 1984 U.S.C.C.A.N. 3182, 3259. White collar criminals may weigh the benefits of creating and maintaining a fraudulent enterprise, including the financial, professional, and social benefits that come with their crimes. Against these benefits, they may weigh the costs, including the likelihood of getting caught, being charged, and being convicted, as well as the degree of punishment they will face. These are all factors to be considered in sentencing the white collar criminal.

         Determining a proper sentence begins with a properly calculated advisory sentencing guideline range. Gall v. United States, 552 U.S. 38, 39 (2007); United States v. Carty, 520 F.3d 984, 991 (9th Cir. 2008). The United States Sentencing Guidelines (“USSG”) serve as the initial benchmark in every sentencing proceeding, Gall, 552 U.S. at 39, and “reflect a rough approximation of sentences that might achieve § 3553(a)'s objectives.” United States v. Rita, 551 U.S. 338, 350 (2007). The sentencing table in the guidelines presents a defendant's adjusted offense level in the vertical axis and a defendant's criminal history category in the horizontal axis. Both the offense level and the criminal history category must be correctly calculated, and their intersection yields the advisory sentencing guideline range. After correctly calculating the advisory sentencing guideline range, the court then considers that range and all of the other sentencing factors identified in 18 U.S.C. § 3553(a) before arriving at a final sentence.

         B. Relevant Conduct

         The USSG directs the court to consider all “relevant conduct” when evaluating the nature and circumstances of the offense to determine the correct offense level. USSG § 1B1.3. The USSG defines “relevant conduct, ” in part, as follows:

Relevant Conduct (Factors that Determine the Guideline Range)
(a) Chapters Two (Offense Conduct) and Three (Adjustments). Unless otherwise specified, (i) the base offense level where the guideline specifies more than one base offense level, (ii) specific offense characteristics and (iii) cross references in Chapter Two, and (iv) adjustments in Chapter Three, shall be determined on the basis of the following:
(1) (A) all acts and omissions committed, aided, abetted, counseled, commanded, induced, procured, or willfully caused by the defendant; and
(B) in the case of a jointly undertaken criminal activity (a criminal plan, scheme, endeavor, or enterprise undertaken by the defendant in concert with others, whether or not charged as a conspiracy), all acts and omissions of others that were-
(i) within the scope of the jointly undertaken criminal activity,
(ii) in furtherance of that criminal activity, and
(iii) reasonably foreseeable in connection with that criminal activity; 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;
(2) solely with respect to offenses of a character for which §3D1.2(d) would require grouping of multiple counts, all acts and omissions described in subdivisions (1)(A) and (1)(B) above that were part of the same course of conduct or common scheme or plan as the offense of conviction;
(3) all harm that resulted from the acts and omissions specified in subsections (a)(1) and (a)(2) above, and all harm that was the object of such acts and omissions; and
(4) any other information specified in the applicable guideline.

USSG § 1B1.3(a). In addition, the USSC explains: “Conduct that is not formally charged or is not an element of the offense of conviction may enter into the determination of the applicable guideline sentencing range.” USSG §1B1.3, cmt, background.

         C. Standard of Proof

         “District courts generally use the preponderance of the evidence standard of proof when finding facts at sentencing, such as the amount of loss caused by a fraud. The higher ‘clear and convincing' standard may apply, however, when a sentencing factor has an extremely disproportionate effect on the sentence relative to the offense of conviction.” United States v. Hymas, 780 F.3d 1285, 1289 (9th Cir. 2015) (emphasis added) (citations and quotation marks omitted). Because the advisory sentencing guideline adjustment for loss, which is discussed below, has the potential to exert a substantial upward influence on the ultimate advisory guideline range, the Court will apply a “clear and convincing” standard for that specific factor. The Court will apply the “preponderance of the evidence” standard for all remaining factors.

         D. Evidence that ...

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