United States v. Tartaglione, CRIMINAL ACTION NO. 15-491

UNITED STATES OF AMERICA v. RENEE TARTAGLIONE, Defendant.

CRIMINAL ACTION NO. 15-491

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

April 11, 2018

OPINION

Slomsky, J.

TABLE OF CONTENTS

I. INTRODUCTION ............................................................................................................... 4

II. BACKGROUND ................................................................................................................. 9

III. FINDINGS OF FACT ........................................................................................................ 10

A. Defendant Directly Acquired $2,041,750 in Proceeds from Juniata Community Mental Health Clinic ("JCMHC") ........................................... 10

1. Defendant Acquired $615,000 in Proceeds from Above-Market Rent, Extra Monthly Rent, and a Rent Deposit for the 3rd Street Building ............................ 10

i. JCMHC Paid Above-Market Rent and Four Extra Months' Rent for Use of the 3rd Street Building .......................................................................... 10

ii. The Board of Directors of JCMHC Did Not Approve Increased Rent for the 3rd Street Building ...................................................................................... 15

iii. Fair Market Rent for the 3rd Street Building Was $4,500 from May 2007 to January 2010 and $4,800 from February 2010 to January 2013 ........................ 16

iv. JCMHC Paid Defendant a Rent Deposit of $15,000 for the 3rd Street Building that Was Never Returned to JCMHC .......................... 18

v. Defendant Acquired a Total of $615,000 in Proceeds from the 3rd Street Building ................................................................................... 19

2. Defendant Acquired $522,000 in Proceeds from Above-Market Rent and a Rent Deposit for the 5th Street Building .............................................................. 20 i. JCMHC Paid $35,000 Each Month in Above-Market Rent for Use of the 5th Street Building ......................................................................... 20

ii. The Board of Directors of JCMHC Did Not Approve $35,000 in Monthly Rent for the 5th Street Building .......................................................... 22

iii. Fair Market Rent for the 5th Street Building Was $23,000 .................................... 23

iv. JCMHC Paid Norris Hancock a $150,000 Rent Deposit for the 5th Street Building that Was Never Returned to JCMHC .......................... 25

v. Defendant Acquired $522,000 in Proceeds from Above-Market Rent and the Rent Deposit for the 5th Street Building ................................................... 26

3. Defendant Acquired $599,000 in Proceeds from Construction Costs Funded by JCMHC for the 5th Street Building ............................................................. 27

4. Defendant Acquired $305,750 in Proceeds from JCMHC Through a Check-Cashing Scheme Involving Sandy and Leslie Acosta ....................... 28

B. The 5th Street Building Appreciated in Value by $1,126,000, with $360,100 of this Appreciation Attributable to Construction Costs Paid by JCMHC ....................... 31

C. Defendant Acquired a Total of $2,401,850 in Criminal Proceeds as a Result of Her Scheme to Defraud JCMHC ................................................................ 33

D. Defendant Engaged in Banking Practices that Prevented the Government from Tracing Money that She Acquired ............................................................................ 34

IV. LEGAL STANDARD ........................................................................................................ 35

V. CONCLUSIONS OF LAW ................................................................................................ 36

A. Defendant Must Forfeit a Personal Money Judgment of $2,041,750 as Gross Proceeds Directly Obtained as the Result of Her Crimes .................................. 39

1. Defendant Acquired $615,000 in Criminal Proceeds from the 3rd Street Building ...... 40

2. Defendant Acquired $522,000 in Criminal Proceeds from Above-Market Rent and the Rent Deposit for the 5th Street Building ........................................................... 42

3. Defendant Acquired $599,000 in Proceeds from Construction Costs Funded by JCMHC for the 5th Street Building ............................................................. 45

4. Defendant Acquired $305,750 in Criminal Proceeds from Cash Produced by the Check-Cashing Scheme .................................................... 46

B. Criminal Proceeds Directly Traceable to the 3rd Street Building and the 5th Street Building ............................................................................................... 47

1. The Government Has Not Proven that $25,600 in Rent-Related Funds Were Used to Pay the Mortgage on the 3rd Street Building .......................................... 50

2. The Government Has Not Proven that $210,813 in Rent-Related Funds Were Used to Pay Down the Mortgage on the 5th Street Building But Has Proven that JCMHC Paid $599,000 in Construction Costs for the 5th Street Building ............ 52

i. The Government Has Not Proven the Requisite Nexus Between $210,813 in Rent-Related Funds and the 5th Street Building ................. 52

ii. The Government Has Proven the Requisite Nexus Between $599,000 in Construction Costs and the 5th Street Building ................................................. 53

C. Defendant Must Forfeit $959,100 of the Escrow Proceeds from the 5th Street Building, Accounting for the Building's Appreciated Value ............. 54

D. Defendant Must Forfeit Substitute Assets to Satisfy the Forfeiture Judgment ................. 57

E. The Forfeiture Judgment Does Not Violate the Excessive Fines Clause .......................... 62

VI. CONCLUSION .................................................................................................................. 65

I. INTRODUCTION

On June 23, 2017, after a five-week trial, a jury found Defendant Renee Tartaglione guilty on all counts of a fifty-three count Superseding Indictment ("Indictment"). The Indictment charged Defendant with the following:

• Conspiracy to Commit Mail Fraud, Wire Fraud, Theft from a Health Care Benefit Program, and Theft from a Program Receiving Federal Funds in Excess of $10,000, in violation of 18 U.S.C. § 371 (Count 1);

• Mail Fraud, in violation of 18 U.S.C. §§ 1341 and 1349 (Counts 2-13);

• Wire Fraud, in violation of 18 U.S.C. §§ 1343 and 1349 (Counts 14-25);

• Theft from a Health Care Benefit Program, in violation of 18 U.S.C. § 669 (Counts 26-37);

• Theft from a Program Receiving Federal Funds in Excess of $10,000, in violation of 18 U.S.C. § 666 (Counts 38-49); and

• False Statements on Tax Returns, in violation of 26 U.S.C. § 7206(1) (Counts 50-53).

The charges stem from Defendant's conduct in charging excessive rent to Juniata Community Mental Health Clinic ("JCMHC") and causing JCMHC to issue other unjustified payments to her, all accomplished through her position as President of its Board of Directors.

In order to fully understand the nature of Defendant's acquisition of criminal proceeds in this case, a brief discussion of her scheme to defraud JCMHC is required. Defendant gained control of JCMHC through her position as President of its Board and used its money for her own personal benefit. (Doc. No. 3 at 5, ¶¶ 23-26.) She and her co-conspirators filled JCMHC's Board of Directors with individuals whom they believed would not question her conduct. (Id. at 6, ¶ 27.) Sandy Acosta, a co-conspirator and administrator at JCMHC, would fabricate Boardminutes at the direction of Defendant and Defendant's husband, Carlos Matos, to document events that had not actually been discussed with the Board. (S. Acosta Tr. at 110:15-111:5, May 31, 2017.) Defendant, Sandy Acosta, and the other co-conspirators did not disclose to JCMHC's Board of Directors that money was being taken from JCMHC to benefit Defendant. (Doc. No. 3 at 6, ¶ 29.)

While Defendant served as President of the JCMHC Board, as part of her scheme, she caused JCMHC to issue her unauthorized payments in several ways. She caused JCMHC to make payments of above-market and excessive rent to herself and then to Norris Hancock, LLC, Defendant's solely-owned company. (Id. at 6 ¶ 30(a).) JCMHC originally paid rent for use of a building located at 2254-60 North 3rd Street, Philadelphia, Pennsylvania ("3rd Street Building"), and thereafter for use of a building located at 2637-45 North 5th Street, Philadelphia, Pennsylvania ("5th Street Building"). She also continuously subjected JCMHC to unauthorized rent increases well above the fair market rate and caused JCMHC to pay undue and unjustified payments, including more than twelve months of rent in one year. (Id. ¶ 30(b)-(c).) It also was part of the conspiracy that beginning in July 2010, Defendant and her co-conspirators caused JCMHC to make unauthorized payments for repairs and renovations to a building that it ultimately would rent from Norris Hancock, located at the 5th Street Building. (Id. at 9, ¶ 50.)

As part of her scheme, Defendant also acquired money by causing JCMHC to issue checks to its employees, Sandy and Leslie Acosta, which they cashed and gave the money to Defendant. (Id. at 6, ¶ 30(d).) Defendant would sign the majority of the checks to Sandy and Leslie on behalf of JCMHC, Sandy and Leslie would cash their checks, and Sandy would give the cash to Defendant. (S. Acosta Tr. at 121:2-4; 122:6-10, May 31, 2017.) The check-cashing process fell into a pattern, in which Sandy and Leslie cashed checks every fifteen days foramounts ending in the numbers 22 and 78, so that they would add up to a round number. (Id. at 124:13-16; 127:3-136:20.)

This conduct formed the basis of the charges against Defendant in the Indictment. (Doc. No. 3.) In Count 1, the Indictment charges all of the conduct described above as part of the manner and means and overt acts in furtherance of...