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Case 3:12-cr-00035-SRU

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UNITED STATES DISTRICT COURT

DISTRICT OF CONNECTICUT

UNITED STATES OF AMERICA

:

:

v.

:

Crim. No. 3:12cr35(SRU)

:

KEVIN COLEMAN,

:

July 8, 2012

:

Defendant.

:

GOVERNMENT’S RESPONSE TO DEFENDANT’S MEMORANDUM IN AID OF SENTENCING

I.

INTRODUCTION

Kevin Coleman was the Chief Executive Officer of Latex International. He reached a

level of importance, prestige and income that very few people reach. But instead of fulfilling his

responsibilities and obligations to the company’s owners and employees, he pillaged Latex to

fund an absurdly extravagant lifestyle. Coleman also cheated the IRS and his fellow citizens out

of approximately $791,000 in taxes. He did not even file his tax returns for four years. His

crimes are egregious, and he should be sentenced to a lengthy period of incarceration to punish

him and to deter others from committing such crimes.

Coleman’s crimes were audacious. He fraudulently purchased hundreds of thousands of

dollars of jewelry for himself, his wife and his mistress in London. Indeed, he purchased – with

Latex’s money – an emerald cut diamond for a ring for himself valued at $56,900. He purchased

a Mercedes convertible for his mistress with Latex’s money. He fraudulently purchased

hundreds of thousands of dollars in merchandise at Frontgate, Bulgari, Christian Dior, Louis

Vuitton, Nordstrom and other merchants, all with Latex money. He spent Latex money on lavish

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travel expenses for him and his family. Coleman engaged in a shocking and widespread crime

spree – all at the company’s expense, monetarily and otherwise.

Nothwithstanding the fact that he was earning wage income of between $359,000 and

$460,000 in the tax years 2007 to 2010, Coleman never filed a federal tax return in those years.

During that period, he directed Osmolik to minimize federal tax withholdings from his wage

income. The loss to the government in taxes was nearly $800,000.

Coleman must be sentenced to a lengthy period of imprisonment to pay for his crimes.

This Court sentenced Joanne Osmolik, a vice president and Coleman’s subordinate, to 48 months

of imprisonment for her embezzlement of approximately the same amount of money. Given that

sentence, the government respectfully requests that this Court sentence Coleman to a non-

guidelines sentence of substantially higher than 48 months in prison. Coleman not only

embezzled from Latex, but also evaded hundreds of thousands of dollars in taxes. Moreover,

Coleman was Osmolik’s superior and a CEO who led by example – the worst possible example.

While Osmolik was clearly responsible for what she embezzled, it seems clear that Osmolik was

following Coleman’s lead in pilfering from Latex to satisfy her own desire for material goods

that she could not otherwise legally obtain.

In sentencing Osmolik to four years of imprisonment, this Court stated the following

about the impact her crime had on the victim, Latex:

The sentence of imprisonment is a non-Guideline sentence that reflects the exceptionally adverse impact of Osmolik’s crime on the victims of her offense. Her former employer laid off 43 individuals, temporarily shut down a factory, lost sales, closed a plant in England, and suspended the 401(k) plan for employees, among other things, in an effort to survive the financial impact of this fraud. The financial and emotional toll from Osmolik’s conduct will be felt for a generation.

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Judgment, United States v. Osmolik, 3:11cr248(SRU) [Doc. #25, 05/21/12]. Coleman’s crime,

of course, had the very same devasting impact, and his responsibility for that impact given his

position as CEO and his role in the offense as Osmolik’s supervisor is clearly greater than

Osmolik’s. Accordingly, he should be sent to prison for a substantially longer period than 48

months.

II. THE OFFENSE CONDUCT

The PSR accurately summarizes the offense conduct at paragraphs 6 through paragraph

16 of the PSR.

From approximately October 2008 to approximately November 2010, Coleman engaged

in a scheme defraud Latex International. Coleman fraudulently enriched himself by converting

and embezzling corporate funds belonging to Latex International and using those funds for

substantial personal expeditures. The scheme included, but was not limited to, misusing

corporate credit cards and expense accounts and concealing their fraudulent use from others.

Coleman and Osmolik charged substantial personal expenditures on corporate credit

cards belonging to Latex International.

Coleman and Osmolik prepared, and cause to be prepared, expense reports in order to

obtain and use Latex International corporate funds to pay off the amount owed on the credit

cards for their personal expenditures and to use for other personal expenditures not charged to

corporate credit cards.

Coleman and Osmolik affirmatively concealed from individuals at Latex International

and others, including representatives of Latex International’s owner, that they were using

corporate funds to pay for substantial personal expenditures.

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Coleman made use of a credit card provided to Coleman by a United Kingdom subsidiary

of Latex International. Coleman used the credit card to charge hundreds of thousands of dollars

in diamond jewelry at Exclusively Diamonds in Minnesota. Coleman charged tens of thousands

of dollars in merchandise at Harrod’s in London, tens of thousands of dollars at Harley

Davidson, and hundreds of thousands of dollars at other merchants, such as Frontgate, Bulgari,

Christian Dior, Louis Vuitton and Nordstrom. Coleman also fraudulently obtained cash

advances from the card.

Coleman directed Osmolik to charge personal items to the Latex International AmEx

card of an employee working at Latex International (hereinafter referred to as “Employee #1”) in

order to conceal the expenses of Coleman and Osmolik, and the nature of those expenses from

the finance department at Latex International. Those expeneses included tens of thousands of

dollars in personal travel expenses for him and his family, including travel to St. Martin and to

Europe. The expenses also included a weekend at the Four Seasons in New York that cost

$14,964.

Coleman instructed Osmolik to destroy expense reports so as to conceal their fraudulent

nature from others at Latex International. Osmolik carried out those instructions and destroyed

the records.

Altogether, Coleman embezzled approximately $1,700,459 from Latex International,

which does not include an additional $1,777,791 in fraudulent personal expenditures incurred by

Osmolik. It is the defendant’s position that the fraudulent expenditures by Osmolik were not

undertaken at COLEMAN’s direction, and the Government has agreed not to argue otherwise.

Coleman and Osmolik used and caused the use of wire communications in interstate and

foreign commerce in furtherance of the scheme, including email, the internet, and interstate and

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international telephone calls, and the use of wire communications in interstate and foreign

commerce in furtherance of the scheme was reasonably foreseeable to both of them.

On October 13, 2009, Latex International wired $100,000 USD to DMAD Marketing

Services LTD in the United Kingdom. This payment was a partial payment to settle the debt

from DMAD’s September 2009 invoice for services. Part of that invoice included $200,713

USD (124,000 GBP) worth of charges made on COLEMAN’s DMAD card, including $78,276

USD (48,502 GPB) for jewelry purchased and given to COLEMAN’s wife. The wire was sent

from Latex International’s Wachovia Account in the United States (Account #xxxxxxxxxx276)

to DMAD’s HSBC Bank in London (SWIFT/CHIPS Account #xxxxxxxBHX).

COLEMAN did not file a federal income tax return for the tax years 2007, 2008, 2009,

and 2010 when due. During that time period, COLEMAN directed Osmolik to minimize federal

tax withholdings from his wage income. The tax loss resulting from the offense is $741,029, as

set forth by relevant tax year in the following table:

 

2007

2008

2009

2010

Total

Wages

$371,230

$460,569

$359,776

$393,553

$1,585,128

Unreported

N/A

N/A

$614,030

$1,086,429

$1,700,459

Other

Income

Balance of Tax Due

$45,445

$65,851

$225,604

$404,129

$741,029

III. SENTENCING GUIDELINES

The PSR calculates Coleman’s guidelines range to be 46 to 57 months (total offense

level 23). PSR at ¶ 92. The guidelines are calculated at paragraphs 23 to 31 of the PSR.

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The government and the defendant agreed to the following guidelines calculations in the

plea agreement:

Base offense level (§ 2B1.1(a)(1)):

7

Loss of more than $1,000,000 (§ 2B1.1(b)(1)(I)):

16

Role in the offense (§ 3B1.1(c)):

+2

Adjusted Offense Level:

=25

Acceptance of Responsibility Total Offense Level:

-

3

= 22 (41 - 51 months)

The parties agreed that the defendant owes restitution to Latex International in the amount of

$1,700,459, and that the defendant owes restitution to the IRS in the amount of $1,375,627.83.

The latter number should be corrected to read $1,372,711.66, and the judgment should reflect as

much. 1

IV.

COLEMAN SHOULD BE SENTENCED ABOVE THE GUIDELINES RANGE.

A sentence above the guidelines range of 41-51 months agreed to by the parties is

warranted here and will promote the sentencing goals of 18 U.S.C. § 3553(a). 2

A. Application of the 3553(a) Factors

Section 3553(a) provides that the sentencing “court shall impose a sentence sufficient,

but not greater than necessary, to comply with the purposes set forth in paragraph (2) of this

subsection,” and then sets forth seven specific considerations:

1 Two other corrections should be noted for the record which will not be part of the Court’s order. First, in Count Two, Coleman’s taxable income for 2010 was $1,451,916 (not $1,457,358). Second, also in Count Two, the amount of income tax on that taxable income in 2010 was $478,479 (not $480,383).

2 The plea agreement makes clear that both parties reserved the right to advocate for a non-guidelines sentence: “The Government and the defendant reserve their rights to seek a departure or a non-[g]uidelines sentence, and both sides reserve their right to object to a departure or non-guidelines sentence.” Plea Agreement at 5.

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(1)

the nature and circumstances of the offense and the history and

(2)

characteristics of the defendant; the need for the sentence imposed—

(A)

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

(B)

to afford adequate deterrence to criminal conduct;

(C)

to protect the public from further crimes of the defendant; and

(D)

to provide the defendant with needed educational or vocational

(3)

training, medical care, or other correctional treatment in the most effective manner; the kinds of sentences available;

(4)

the kinds of sentence and the sentencing range established [in the

(5)

Sentencing Guidelines]; any pertinent policy statement [issued by the Sentencing Commission];

(6)

the need to avoid unwarranted sentence disparities among defendants with

(7)

similar records who have been found guilty of similar conduct; and the need to provide restitution to any victims of the offense.

Here, a review of the § 3553(a) factors demonstrates that a sentence above the guidelines range,

either as calculated by the parties (41-51) or the PSR (46-57) is warranted.

1. The Nature and Circumstances of the Offense

As this Court well knows, the nature of the offense is serious: Coleman fraudulently

obtained over $1.7 million in Latex money and property for his personal benefit. The

circumstances of the offense are appalling: Coleman (and Osmolik) went about “secretly

siphoning off millions of dollars for their extravagant lifestyles, driving the company to the brink

of bankruptcy and concealing their theft from others.” Letter, James I. Glasser to Eric J. Glover,

dated April 24, 2012, at page 2 (hereinafter “Latex Victim Letter”) (attached as Exhibit A to the

government’s sentencing memorandum in Osmolik).

Coleman, like Osmolik, did not undertake his crime spree out of need. He undertook it

out of greed. His wage income as CEO was ranged between $359,000 and $460,000 in the years

in question. That was not enough for Coleman. And in fact, it is hard to purchase hundreds of

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thousands of dollars in jewelry and to support a mistress in London with that salary. So

Coleman just stole the money he needed from Latex, and of course did not file a tax return and

pay the government almost $800,000 in taxes that were due and owing.

2. History and Characteristics of Coleman

Coleman’s personal history and characteristics not provide him with any mitigation from

the offenses he has committed. While many people have to cope with substance abuse issues,

very few of them end up committing the kinds of crimes on the scale of magnitude that Coleman

has.

Most relevant from Coleman’s personal history is that the fact Coleman embezzled from

a previous employer, Progress Castings Group Incorporated, for whom he worked as Vice

President of Operations. PSR at ¶ 38-43. Coleman was arrested for this conduct in July 2002

and later pled guilty to the charge. Coleman’s manner in carrying out the embezzlement in that

case was similar to the manner in which he carried out the embezzlement at issue in this case,

albeit on a much larger scale. PSR at ¶ 40 (discussing how Coleman made sure that no one in

the company would see documents that would incriminate him). This prior criminal conduct

clearly gives the lie to Coleman’s notion that he was somehow enticed by the “corporate culture”

at Latex to embezzle from the company. Coleman Sent. Mem. at 2.

Coleman had no regard for complying with the law, either as CEO of Latex or as a

citizen with an obligation to file a tax return and pay taxes. In addition to his multiple

embezzlements, he engaged in tax evasion for many years. He failed to file a tax return for the

four years leading up to the detective of the current offense.

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3. The Guidelines Sentence Would Satisfy the Goals of General Deterrence.

A sentence substantially in excess of 48 months would serve to advance the goal of

general deterrence. This Court’s sentence of 48 months for Joanne Osmolik made it clear that

anyone who steals significant sums of money from one’s employer will go to prison for a long

period of time. A sentence in excess of that for Coleman, which is warranted given his role and

his tax evasion, would do the same.

This Court can— and should— send a strong message that

persons like Osmolik and Coleman, who are handsomely compensated in corporate positions but

still decide to steal to fund a lavious lifestyle, will be punished by imprisonment for a

meaningful period of time.

4. The Need to Promote Respect for the Law and to Provide Just Punishment.

A sentence in excess of 48 months will promote respect for the law and provide just

punishment. Coleman’s crime calls out for a meaningful term of imprisonment, and a sentence

in excess of 48 months will provide that.

5. Full Restitution is Mandatory and Should Be Ordered.

Under the Mandatory Victim Restitution Act (“MVRA”), 18 U.S.C. § 3663A and 3664,

this Court is required to impose an order of restitution in this case in favor of Latex, the victim of

the defendant’s crime, for the full amount of its losses, without consideration of the defendant’s

ability to pay that amount. 18 U.S.C. § 3664(f)(1)(A) (“In each order of restitution, the court

shall order restitution to each victim in the full amount of each victim’s losses as determined by

the court and without consideration of the economic circumstances of the defendant.”); see

United States v. Ekanem, 383 F.3d 40, 44 (2d Cir. 2004); United States v. Johnson, 378 F.3d

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230, 244-45 (2d Cir. 2004); see also U.S.S.G. § 5E1.1 (directing the sentencing court to enter a

restitution order if there is an identifiable victim).

Here, the Court should impose an order of restitution to Latex in an amount agreed to by

the parties of $1,700,459, and to the IRS in the amount of $1,372,711.66.

V.

CONCLUSION

For the reasons set forth above, the Government respectfully requests that the defendant

be sentenced to a term of imprisonment substantially in excess of 48 months.

DAVID B. FEIN UNITED STATES ATTORNEY

/s/

Eric J. Glover

ERIC J. GLOVER ASSISTANT UNITED STATES ATTORNEY Federal Bar No. Ct23923 eric.glover@usdoj.gov 157 Church Street New Haven, Connecticut 06510 Tel. (203) 821-3700

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CERTIFICATE OF SERVICE

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I hereby certify that on July 8, 2012, a copy of the foregoing was filed electronically.

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

filing system. Parties may access this filing through the Court’s system.

/s/

Eric J. Glover

ERIC J. GLOVER (CT23923) ASSISTANT U.S. ATTORNEY Connecticut Financial Center 157 Church Street, 23rd Floor New Haven, CT 06510 Phone: (203) 821-3735 Fax: (203) 773-5378 E-mail: eric.glover@usdoj.gov