Case 'l:04-cr-0028'1 Document 43 Filed 03/21106 Paqe 33 of 49

Electronic Database (previously provided to thc govcunent)). Similarly, the reserve accoLrnt al

ti.S. Bank of Oregon, rvhich rvas being finded at a rate of $25,000 per week, toialed

approxirnately $710,000.00 by the end ofMay, 1997. (Ex.8 io Del Memo. U.S. Bank Letters;

Ex. 9 to Del. Memo, U.S. Bank Statemcnts).

Signifioantll for purposes of delermirring actual loss, the rcscfvoir ol credil cafd

authorizations $'as an integral part ofthe tloat itsell In I997.thc float cifculatcd bclween three

separate banks: Clolc Taylor, South Shore. and U.S. tsank. lwo ofPublic Action's accounts at

U.S. Bank wcre involved in the float: (1) thc crcdit card pfoccssing accourlt used by Public

Actioi lo charge credit cards; and (2) a stanclard checking account. When credit card chalges

\!ere processed at thc cnd of each delay period. the funds automatically flowed t'rom the credit

card processing accounl directly into Public Action's standard chccking account al U.S. Bank.

These legitin,ate f'unds fiom the U.S. Bank checking account \\'cfc thcn transl-erred to South

Shore Bank and ultimately 10 Cole Ta)'lor. in conjunction n'ith thc same circuit of kited checks

used to maximize thc float. Public Action also maintained a second cr'edil cafd processing

account at Flcct Bank. ihe Fleet Bank account was established with speoific instructions lbal all

credit card charges processed in that acoount were to be automaticall)' and excllBively deposited

into South Shofc's CACCR checking account. (Ex. 1l 1o Del Menro. Fleet Mefchant Accolnl

Application). Therefore. the credit card sales processed at Fleet Bank feprcsented additiolal

legitimate funds that also flowed dircctl) into South Shore Bank in connecrion \\ith the float.

(Ex. 12 to Def. tr4emo. Diagram oi Check Kite).

Thus. during thc pcriod ofthe 1997 chcck kitc, legitirnate lunds frolr credit card salcs
were deposited into the aflecled accounts on a daily basis. ln fact, fromMay I through May 27,

1997, the organization deposited more than $1.5 million in crealit oard sales into thc accounls

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 Case 1:04-cr-00281 Document43 Filed 03/21106 Paqe34of49

involved in the check kjte. (Ex. 10 to Def'. Merno. Nlerchanl Accounl Stelements). At ally given

time. the account balances inclucled a substantial portion of legitimate fitnds gcncrated by lhe

credit card membership program. fhlls, the crcdit card sales, both dcposited and rwaiting

deposit, were an integral part olthe llow offunds involved in the cheok kite.

It is clear thal. as oflate May, 1997. the credit card sales awaiting deposil were more than

sut'ficieni io covef any potential overdrafi creatcd by the check kite. The parties agree lhat on

Ma] 28. 1997. rvhen Cole laylor Bank notified Mr. Creamer that it would no longer pay out on

checks that were not slrppofted by collected funcls, the total amoun! of the float cqualed $1.4

million.r (PSR at 8. 11.256-57). Ilowever. as nored above. I'ublic Action posscsscd over g1.6

million in delayed credit card sales merely awaiting deposit on May 28- 199'7. ir\ addition to a

rescNe account ofover $700,000.

IllLe to the immcdiate processing ofcrcdit card sales in the delay progran, a nct overdratl

teyel developcd in 1997. After Mr. Creamer directed the stafl at Public Action to capture a

substantial poflion of the authorized cfedit card salcs that had been awaiting deposit, sufficient

funds rvcrc deposited into Public Action s accounts lo cure the entire float - befirrc all of the

kitcd checks had evcn been presented fof deposil at the various banks. In facl. the majority of

the floated checks $ere not presentcd f'or deposit until June 3. I997. (Lx. l3 to Det Memo. Cole
Taylor Bal* Statemcnt, June 1997 (shorl'itg 17 floated checks prcscntcd tor deposit on Junc 3.

1997)). Bv the lime thcse lloated checks \!cre presented lor deposit, Public Action had alrcady

' The PSR mistakenl_v states that the "thc pafiies agree that thc ,c/ 1o.!s related to the 1997 check-
kiteistil.4rrilliot." (PSR at 8) (emphasis addcd). This is not quite accuraie. Irr 1acl, the pafiies
agrce thal, as of May 28. 1997. thc total amount of kited chccks lhnt were unsuppoded by
sufficient lunds totalcd $l .4 million. The pafties dlsdslee d.r to thc net bss of the 1997 chcck-
kile. As set forth herein. the defcndant asserts that thcrc was no net loss in 1997 duc to lhe funcls
that PlLblic Actiorl possessecl in the delay progranr and reservc accounl. which funds immcdiately
cured the floal before all kitcd checks werc or.esented 1or Davment.

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