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					     CASE 0:10-cr-00032-JNE-SER Document 265                  Filed 02/02/11 Page 1 of 47



                             UNITED STATES DISTRICT COURT
                             FOR THE DISTRICT OF MINNESOTA

__________________________________

UNITED STATES OF AMERICA,                             Case No. 10-CR-32(01) (JNE/SER)

               Plaintiff,

       v.

DENNIS EARL HECKER,

               Defendant.

_________________________________

       DEFENDANT DENNIS EARL HECKER’S MEMORANDUM OF LAW
IN SUPPORT OF DEFENDANT’S POSITION ON SENTENCING AND DEFENDANT’S
                 MOTION FOR DOWNWARD VARIANCE

                                        INTRODUCTION

       Defendant Dennis Earl Hecker submits the following in support of his position on

sentencing, and respectfully moves the Court for a downward variance to a sentence of eight

years. Hecker seeks an evidentiary hearing to resolve disputes related to his Guideline range and

other accusations of relevant conduct, and asks the Court to find that his appropriate Adjusted

Offense level is 31, making the 10 year maximum sentence contained in his plea agreement

within his Guideline range. In addition Hecker requests this Court to find that economic factors

beyond his control unduly aggravate his advisory Guideline sentence, which is greatly influenced

by the loss amount associated with the wire fraud conspiracy, and impose a downward variance

to eight years as a result. Given the many mitigating facts present in Hecker‟s personal and

business history, such a sentence is reasonable. Finally Hecker asks this Court for a number of

findings and rulings in relation to restitution and his prison placement.




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I.     HECKER’S APPROPRIATE SENTENCING GUIDELINE ADJUSTED OFFENSE
       LEVEL IS 31, PROVIDING A RANGE OF 108 – 135 MONTHS.

       While Hecker‟s plea agreement provides a ten year maximum sentence, the Presentence

Investigation Report‟s (hereinafter “PSR”) range is well above ten years based on the erroneous

application of a number of adjustments, most of which the Government joins Hecker in

opposing. The Government has agreed not to seek an obstruction of justice enhancement, an

enhancement for abuse of position of trust and a four level enhancement for aggravated role

based on the offense having five or more criminal participants. For these adjustments, the

Government acknowledges that the plea agreement precludes it from introducing evidence to

support the PSR‟s conclusory allegations. An evidentiary hearing on these issues, therefore, is

unnecessary. Hecker requests a hearing on the issue of acceptance of responsibility, however,

asking this Court to find that because he has taken no actions fatally inconsistent with a two

point acceptance of responsibility reduction. Additionally Hecker will argue that from the time

of his guilty plea on September 7, 2010, he has complied with the conditions of his plea

agreement and deserves a three level downward adjustment.

       With a three level downward adjustment for acceptance, Hecker‟s offense level is 31,

thus the ten year statutory cap is within his guideline range. In addition, Hecker requests an

evidentiary hearing on three relevant conduct issues, acknowledging that resolution of these

issues will not lower the guideline range below the ten year maximum sentence. In light of the

Government‟s position that what makes this case extraordinary is repeated criminal conduct,

Hecker does not simply concede criminal responsibility for these allegations because the end

result would elevate the sentencing guideline starting point for the downward variance motion.

       The first issue is whether or not Hecker‟s refinancing of the Hyundai vehicles with

Hyundai Capital America (hereinafter “HCA”), when these vehicles were originally procured

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with loans illegally obtained from Chrysler Financial, amounts to relevant conduct thereby

justifying the Court in considering HCA‟s economic loss as related to the crime of conviction.

The second and third issues are whether Hecker fraudulently concealed personal assets from the

United States Bankruptcy Trustee (hereinafter “Trustee”), by titling boats and automobiles in a

company of his, Northstate Financial, and by failing to disclose, in sufficient detail, his

membership in various country clubs.

        Hecker will first address those allegations in the PSR that could affect his sentencing

guideline range, and then discuss the relevant conduct issues mentioned above.

        A.      Defendant Is Entitled To A Two Or Three Level Decrease Of The Offense
                Level For Acceptance Of Responsibility.

        The PSR, at Paragraph 41, would bar Hecker from a two or three point downward

adjustment for acceptance of responsibility based on three allegations. These three episodes are:

1) testimony at the change of plea hearing relating to the lease of a Kia Soul; 2) testimony at a

motion to permit substitution of counsel hearing before Chief Judge Michael Davis on October

18, 2010, where Hecker correctly stated that he had received a Toyota Tundra vehicle as part of a

settlement in bankruptcy and truthfully disclosed that he had received $33,000 from John

Prosser, but incorrectly attributed this entire amount to the sale of the Toyota Tundra. Hecker

then corrected his testimony the next day at a proffer session, and subsequently disclosed his

error in testimony at the continued hearing before Chief Judge Davis on October 20, 2010; and

3) the receipt of a personal loan from Dr. Sheldon Burns without the prior approval of pre-trial

services, although Hecker did inform pretrial that he had made a payment on this loan shortly

after receiving it.

        None of these incidents are a bar to an acceptance of responsibility decrease. United

States Sentencing Guidelines Manual (“U.S.S.G.”) §3E1.1, cmt. n. 1 provides factors for the

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court to consider in assessing whether the defendant qualifies for a two level decrease. One

important consideration is whether the defendant has shown that he is “truthfully admitting the

conduct comprising the offense[s] of conviction, and truthfully admitting or not falsely denying

any relevant conduct for which the defendant is accountable under U.S.S.G. §1B1.3 (Relevant

Conduct).” U.S.S.G. §3E1.1, cmt. n. 1(A) (2010). None of the three instances identified in

paragraph 41 of the PSR relate to the offenses of conviction or relevant conduct.

       Hecker has truthfully admitted the offenses of conviction and has not falsely denied

relevant conduct. U.S.S.G. §3E1.1 emphasizes the importance of a timely entry of a guilty plea,

the truthful admission to the offense of conviction and of admitting or not falsely denying

relevant conduct. These actions “will constitute significant evidence of responsibility for

purposes of subsection A.” Id., cmt. n. 3. Hecker entered a guilty plea on September 7, 2010,

long before the scheduled commencement of trial. Hecker truthfully admitted the offenses of

conviction in his plea agreement, in his testimony during the change of plea hearing and in a

written submission to the probation officer. He also provided testimony, on three separate

occasions, about his assets, and provided an accurate statement of financial affairs in connection

with his PSR. To obtain an acceptance decrease, the defendant is not required to admit all

relevant conduct, indeed he may even remain silent as to relevant conduct accusations, a

defendant simply needs to avoid falsely denying relevant conduct. U.S.S.G. §3E1.1, cmt. n.

1(A). Hecker has not falsely denied any relevant conduct. To the contrary, he has admitted all

but three relevant conduct allegations. The three allegations of misconduct contained in the

PSR, paragraph 41, do not relate to the offenses of conviction or relevant conduct and are not the

type of conduct that would rise to the level of preventing the defendant from receiving

acceptance of responsibility.



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            1. The Kia Lease Dialogue.

         The issue of the Kia lease is unrelated to the offenses of conviction or identified relevant

conduct. Rather, it related to the issue of reimbursement of public funds expended for Hecker‟s

defense under the Criminal Justice Act (hereinafter CJA). At the plea hearing on September 7,

2010, Hecker maintained that in applying for the Kia lease he was asked about income:

         THE DEFENDANT: The representation to get the Kia was one to four thousand
         dollars per month.

         MS. ENGISCH: And do you have one to four thousand dollars per month in
         income?

         THE DEFENDANT: Your Honor, we had a source of income in December for
         one settlement spread out over several months. But a thousand to four thousand a
         month is divided the money received in December by nine months, about four
         months is well within the range.

(Affidavit of Casey T. Rundquist, Exhibit A)(hereinafter “Rundquist Affidavit”)1

Hecker‟s attorney then clarified that:

         Mr. Hecker has a company called New Dimension Advisors that received a lump
         sum payment in December of ‟09, and everyone knows about this. This was all
         disclosed. Almost as soon as it was received, it was dispersed.

         So, then to say that a business received a certain amount of money but received it
         all at one time, was there a representation made that there was one to four
         thousand dollars per month? There was. But it was based upon the fact that if
         you took this money that was received in December and divided by 12, that‟s
         what it would amount to. And Mr. Hecker has no assets. He certainly does not
         make one to four thousand dollars per month. Certainly, he‟s had no money
         coming in as income since December of ‟09.

(Id.)

Subsequently the Court asked:

         You were, in your mind, taking this lump sum that everybody knows about and
         kind of spreading that out over nine months or something?


1
  Page number citations to the exhibits in the Rundquist Affidavit will refer to the page number of the
underlying document, as opposed to the page number within the Affidavit.

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(Id.) Hecker replied, “Yes. In addition, Your Honor, it was co-signed by -- the loan was

really approved because of the co-signer.” (Id.)

         The Kia issue was neither part of the offenses of conviction nor relevant conduct. Rather,

as this Court is aware, the Government raised the subject at Hecker‟s plea hearing because it

related to the issue of reimbursement under the CJA since it evidenced that Hecker might have

ongoing income. The Court asked Hecker if he understood that the assets should be sold to pay

for the publicly appointed attorney; he answered that he did understand but that the leased Kia

Soul had no equity. No evidence contradicts Hecker‟s assertion that the Kia Soul lease has no

value.

         Because this Court was well aware of the Kia lease issue, the question is whether or not

Hecker‟s representation to the Court about what he told the Kia employee was true, and

furthermore whether the nature of Hecker‟s representations were material. The issue is not the

truth or falsity of the underlying statement to the Kia employee regarding the income of New

Dimension Advisors. The Government‟s interest in asking questions about the Kia lease was

solely related to the reimbursement issue and not an effort to secure admissions to charged or

uncharged criminal conduct.

         The PSR also asserts that Hecker falsely claimed before Chief Judge Davis that the Kia

dealership did not rely on his income, but rather on the income of the co-signer, Dr. Sheldon

Burns, a personal friend and physician of Hecker.

         On October 20, 2010, Hecker testified that:

         I called and discussed a lease with St. Cloud Kia in the name of new Dimension
         Advisors. I did not sign the credit application or lead them to believe that I was
         making $10,000 a month consulting. I explained that I had received some
         consulting fees, $200,000, late in December and if you spread that over a 12-
         month period it was approximately $10,000. I explained that at that point in time



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         I didn‟t have income, but the co-signor who was willing to help me had very good
         credit and good income.

(Rundquist Affidavit, Exhibit B)

         When asked whether the Kia dealer “needed to know you were going to have income of

this amount,” Hecker replied:

         A. Ms. Engisch, I was a car dealer for 30 years. The credit application is
            important for the information, but it‟s important that it‟s signed and correct. I
            didn‟t sign for that application at all. They said that New Dimensions, I was
            told, wasn‟t in business long enough or had a credit history, that it needed a
            strong co-signor or a number one person to finance the car.

         Q. And so you got your friend Dr. Burns to sign for it?

         A. Exactly.

(Id.)

         From the above testimony, there is arithmetic confusion between Hecker‟s testimony on

September 7, 2010 and October 20, 2010, as to whether the statement to the Kia employee was

that the lump sum payment averaged out to “one to four thousand dollars per month” or whether

“it was approximately $10,000.” This discrepancy, however, is not material. The issue in the

hearings pertained to whether Hecker had ongoing income or assets, not whether he

misrepresented his income to a Kia employee. At both hearings Hecker took the same position,

that he had received a large distribution in December of 2009 and that he did not have ongoing

income or assets, but that he was taking a lump sum payment and “spreading it out” in order to

average out an income over a period of time. Therefore, no material discrepancy exists between

Hecker‟s testimony on September 7, 2010 and October 20, 2010. Hecker testified truthfully at

both hearings. Importantly, Hecker‟s assertion that he needed a co-signer with good credit was

undoubtedly true.




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       Even if this Court views Hecker‟s testimony on September 7, 2010 and October 20, 2010

as inconsistent in relation to the Kia lease, any inconsistency would not be so egregious to

warrant a conclusion that Hecker has not accepted responsibility. While a defendant who enters

a guilty plea may still lose acceptance of responsibility if he engages in even unrelated criminal

conduct after the plea, Hecker‟s statements are not criminal conduct. See e.g., United States v.

Ngo, 32 F.3d 1231, 1233 (8th Cir. 1997) (no acceptance where defendant minimized his

involvement in the offense of conviction and was charged with driving while intoxicated after

the plea); United States v. Fronk, 606 F.3d 452, 454 (8th Cir. 2010) (defendant pled guilty to

obtaining a controlled substance by fraud and following her plea attempted to obtain a controlled

substance by fraud).

       Cases denying acceptance of responsibility for false statements usually involve false

testimony or false denials about the offenses of conviction or false testimony or false denials

about relevant conduct. United States v. Woods, 596 F.3d 445, 448 (8th Cir. 2010) (court denied

acceptance when defendant waited until first day of trial to change plea then entered an Alford

plea and falsely denied relevant conduct relating to gun possession); United States v. Pierce, 237

F.3d 693, 695 (5th Cir. 2001) (false denial of relevant conduct in child pornography case). In

United States v. Whitman, 209 F.3d 619, 622 (6th Cir. 2000) the court reversed a trial court‟s

denial of acceptance of responsibility where the trial court had cited multiple instances in which

the defendant had lied or did not volunteer truthful information. The Sixth Circuit found that

“the majority of these instances were unrelated to the questions of whether the defendant had

accepted responsibility for the crime of embezzlement.” The court held, “[s]ection 3E1.1 . . . is

concerned solely with whether a defendant admits or denies material conduct during her




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investigation, prosecution or sentencing. Whether [the defendant] is or is not a generally candid

person is thus not the proper inquiry in the case before us.” Id. at 623.

       Those cases cited by the Government are not to the contrary. While the Government

maintains that any false testimony categorically justifies a finding that defendant has not

accepted responsibility, its cases are readily distinguishable. United States v. Gleason, 25

F.3d 605, 608-09 (8th Cir. 1994), involved a defendant‟s false testimony, at a suppression

hearing, that he had not consented to the search of his vehicle, thus the false testimony was

directly relevant to the offense of conviction and, further, the court found his acceptance to be

“half-hearted.” In United States v. Keene, 915 F.2d 1164, 1170 (8th Cir. 1990), the district court

found the defendant testified “in an untruthful manner and attempted to justify his criminal

conduct with „lame excuses.‟” Moreover, the case is distinguishable because the defendant,

unlike Hecker, “put the government to its burden of proof at trial by denying the essential

factorial elements of guilt. . . .” U.S.S.G. §3E1.1, cmt. n. 2. United States v. Harrison, 431 F.3d

1007, 1013 (7th Cir. 2005) is also clearly distinguishable as it involved a defendant lying to the

jury directly about his offense conduct. Finally, in United States v. Williams, 408 F.3d 745 (11th

Cir. 2005), at the plea hearing and at sentencing the defendant denied using a gun during a series

of bank robberies, but this denial was directly contradicted by several eyewitnesses to the

robbery and by videotape evidence shown to the court. (Id. at 747-48, 757.) Williams is clearly

distinguishable because the defendant‟s false denial related to relevant conduct, whereas

Hecker‟s testimony has not.




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           2. Hecker’s Testimony About Funds From John Prosser Does Not Amount To
              Perjury.

       The PSR accuses Hecker of perjury based on inconsistencies in his testimony on October

18, 2010 and October 20, 2010 before Chief Judge Davis, pertaining to funds received from John

Prosser. Under 18 U.S.C. § 1621, perjury occurs when:

        Whoever… having taken an oath before a competent tribunal… in any case in
        which a law of the United States authorizes an oath to be administered, that he
        will testify… truly… willfully and contrary to such oath states or subscribes any
        material matter which he does not believe to be true…

18 U.S.C. §1521 (2009). Courts have held that when an individual makes a misstatement under

oath, but then corrects that misstatement, the correction is relevant as to whether the individual

intended to testify falsely. Beckanstin v. United States, 232 F.2d 1, 4 (5th Cir. 1956). In a

similar context, the obstruction adjustment commentary warns, “[i]n applying this provision in

respect to alleged false testimony or statements by the defendant, the court should be cognizant

that inaccurate testimony or statements sometimes may result from confusion, mistake or faulty

memory and, thus not all inaccurate testimony or statements necessarily reflect a willful attempt

to obstruct justice.” U.S.S.G. §3C1.1, cmt. n. 2.

       While Hecker truthfully disclosed that he received $33,000 from John Prosser, he made

an incorrect statement on October 18, 2010 by claiming that the entire $33,000 came from the

sale of the Toyota Tundra. Yet, on October 18, 2010, he believed this statement was true.

(Rundquist Affidavit, Exhibit C at 57). After court that day, defense counsel visited Hecker in

the Sherburne County Jail, Hecker was able to refresh his recollection by reviewing documents

and realized his mistake. (Rundquist Affidavit, Exhibit D). Then, on October 19, 2010, he

voluntarily corrected the statement by telling the Assistant United States Attorney about the error




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in a proffer session. (Rundquist Affidavit, Exhibit B at 104 - 05). Finally, under oath on

October 20, 2010, Hecker disclosed the error in his October 18, 2010 testimony stating:

        On Monday I wasn‟t clear on how I was thinking, so I apologize to the Court if it
        was a misunderstanding, but until today when I had my meds, I sat in the jail cell
        thinking about that transaction.

(Id. at 106)

        The Government asked, “[p]rior to yesterday you hadn‟t told anybody with the

Government or the Chapter 7 trustee about that $7,000 that you got from the sale of that Cadillac

Escalade?” (Id.) Hecker responded “Prior to Monday I never thought about it in the transaction

of the Toyota Tundra. It certainly wasn‟t to hide it.” (Id.)

        In summary, Hecker believed on October 18, 2010, that the entire $33,000 came from the

sale of the Toyota Tundra. After reviewing documents and considering the issue in more detail,

he realized that in fact, some of this money came from a share of John Prosser‟s profit from

selling a Cadillac Escalade. (Id.) Because Hecker promptly corrected his prior

misunderstanding, his incorrect testimony was not willful and does not amount to perjury.

Moreover, the testimony did not relate to the offenses of conviction or relevant conduct and

should not bar an acceptance of responsibility decrease in offense level.

               3. The Post-Plea Personal Loan from Dr. Burns.

        After Hecker‟s plea hearing, he received a loan from his friend, Dr. Sheldon Burns.

Hecker received this loan shortly before his anticipated disbursal from a retirement account that

was exempt from his bankruptcy but frozen by Hennepin County District Court Judge Jay Quam

in his divorce proceedings. Hecker did disclose to Pretrial Services that he was paying back a

personal loan but he did not obtain prior approval for the loan. (Rundquist Affidavit, Exhibit E).

At the change of plea hearing on September 7, 2010 this Court continued bond with additional



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conditions stated on the record including a “prohibition against opening any new lines of credit

through a financial institution or related entity” and a “prohibition against acquiring any major

assets as defined by anything having a value of over $250.” (Rundquist Affidavit, Exhibit A at

40 - 42) It would have been prudent and wise for Hecker to disclose the receipt of a short term

loan in anticipation of approved funds. Still most people would not regard a loan from a friend

as “opening a line of credit through a financial institution” or acquiring a “major asset” because a

loan is a liability that must be paid back. Nevertheless, the failure to obtain personal loan pre-

approval is not criminal conduct, it does not involve false statements or false testimony and it

does not relate to the offenses of conviction or relevant conduct. Hecker‟s conduct was not so

reprehensible that it would be fatally inconsistent with Hecker‟s acceptance of responsibility for

his offenses as demonstrated by his timely admissions to the offenses of conviction.

       At a minimum, the defendant should receive a two level acceptance of responsibility

adjustment. U.S.S.G. §3E1.1(a). Upon motion of the Government, consistent with their

obligations under the plea agreement, he should receive an additional one level decrease.

U.S.S.G. §3E1.1(b). It is the position of the defendant that he has complied with the plea

agreement and entered his guilty pleas “at a sufficiently early point in the process so that the

government may avoid preparing for trial and the court may schedule its calendar efficiently.”

U.S.S.G. §3E1.1, cmt. n. 6. The failure of the Government to file a motion for a third acceptance

point would constitute a breach of the plea agreement. The defendant objects to the failure of the

Government to request a three level decrease. See United States v. Smith, 590 F.3d 570, 576 (8th

Cir. 2009).




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       B.      The Obstruction Of Justice Adjustment Does Not Apply.

       The PSR, at paragraph 39, erroneously assigns a two point upward adjustment to Hecker

asserting that he “obstructed justice in reference to the investigation, prosecution or sentencing of

this offense,” citing U.S.S.G. §3C1.1. The asserted obstruction consists precisely of the three

incidents that the PSR claims constituted a lack of acceptance of responsibility, namely, the Kia

lease, the testimony before Chief Judge Davis relating to the Toyota Tundra sale and the

unreported loan from Dr. Burns. A close reading of U.S.S.G. §3C1.1 and its commentary clearly

demonstrates that these three incidents cannot be the subject of an obstruction of justice

adjustment. Section 3C1.1 provides:

       If (A) the defendant willfully obstructed or impeded, or attempted to obstruct or
       impede, the administration of justice with respect to the investigation,
       prosecution, or sentencing of the instance offense of conviction, and (B) the
       obstructive conduct related to (i) the defendant‟s offense of conviction and any
       relevant conduct; or (ii) a closely related offense, increase the offense level by 2
       levels.

U.S.S.G. §3C1.1. Although the text of U.S.S.G. §3C1.1 is quite clear, the commentary further

emphasizes that the alleged obstructive conduct must relate to the investigation, prosecution or

sentencing of the defendant‟s instant offense of conviction and relate to the offense of conviction

and relevant conduct or “an otherwise closely related case, such as that of a co-defendant.” Id.,

cmt. n. 1. None of the three allegations in the PSR relate to the investigation, prosecution or

sentencing of Hecker‟s instant offense, none relate to the defendant‟s offense of conviction, none

relate to relevant conduct identified in the PSR and none relate to a closely related case.

Consequently, this adjustment does not apply.

       Courts applying U.S.S.G. §3C1.1 have little difficulty applying its literal terms: “The

sentencing guidelines provide for a two-level enhancement „if the district court finds by a

preponderance of the evidence that the defendant willfully obstructed or impeded, or attempted

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to obstruct or impede, the administration of justice during the investigation, prosecution, or

sentencing of the instant offense of conviction.‟” United States v. Jones, 612 F.3d 1040, 1046

(8th Cir. 2010). Moreover, “the obstructive conduct must relate to the defendant‟s offense of

conviction and any relevant conduct, or closely related offense.” Id. (quoting U.S.S.G. §3C1.1).

In Jones, the district court imposed an obstruction enhancement for two reasons. The court

found that during the investigation the defendant attempted to establish an alibi by telling lies to

law enforcement officers and, secondly, the defendant gave his brother, who testified before the

grand jury, false information in order to support that alibi. Id. The district court found the

conduct to be “material to the offense of conviction” because it sought to support an alibi defense

to that offense by suborning perjury. Id. Similarly, in United States v. Aleman, 548 F.3d 1158,

1163 (8th Cir. 2000) the court affirmed an obstruction enhancement based on the defendant‟s

false testimony under oath at trial. In so doing, the Court noted that “[a]n obstruction of justice

enhancement is proper if the defendant has testified falsely under oath, but the false testimony

must relate to a material matter and be done willfully rather than out of confusion or mistake. Id.

(citing United States v. Vickers, 528 F.3d 1116,1122 (8th Cir. 2008); U.S.S.G. §3C1.1, cmt. n.

4(b)). The district court had concluded that the defendant had lied at trial and that his perjury

was knowing and willful and that it was material to the issue of the defendant‟s guilt. Id. at

1163; accord United States v. Alvarado, 615 F.3d 916, 922 (8th Cir. 2010) (affirming district

court‟s decision that defendant‟s conduct amounted to obstruction of justice because the

defendant pled guilty but then sought to withdraw the plea falsely stating that he was innocent of

the charged offense.)

       As it relates to the testimony concerning the Kia, Hecker did not commit perjury. In any

event “to impose an obstruction of justice enhancement for perjury, the district court must review



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the evidence and make an independent finding that, by a preponderance of the evidence, the

defendant gave „false testimony concerning a material matter with the willful intent to provide

false testimony rather than as a result of confusion, mistake or faulty memory.‟” United States v.

Mashek, 606 F.3d 922, 933 (8th Cir. 2010) (quoting United States v. Kessler, 321 F.3d 699, 702

(8th Cir. 2003)). Hecker‟s testimony about the Kia lease was truthful, and it did not relate to a

material matter because it is not related to the offenses of conviction or relevant conduct.

Similarly, the testimony relating to the Toyota Tundra did not concern a material matter, was not

done with the willful intent to provide false testimony but was a result of confusion, mistake or

faulty memory and was promptly corrected at the first opportunity in court. See U.S.S.G.

§3C1.1, cmt. n. 2. Finally, the Dr. Burns loan does not relate to a material matter because it is

disconnected from the offenses of conviction and relevant conduct identified in the PSR.

       The three allegations contained in paragraph 39 of the PSR do not relate to the offenses

of conviction or relevant conduct and cannot provide a basis for the obstruction enhancement.

Consequently, the defendant should not receive the two level adjustment of U.S.S.G. §3C1.1.

       C.      The Defendant Did Not Abuse A Position Of Trust.

       The PSR, at paragraph 53, claims that Hecker abused a position of trust thus justifying an

aggravating role adjustment under U.S.S.G. §3B1.3. The Government and the defense agree that

this adjustment does not apply. The PSR‟s theory is that as president of the Hecker

Organization, Hecker was subject to less supervision than other employees and that he used the

Hecker Organization in committing the wire fraud conspiracy. This assertion is contrary to the

numerous examples of abuse of position of trust provided in the commentary to U.S.S.G.

§3B1.3. Application Note 1 to §3B1.3 provides a number of situations where it is appropriate to

apply the adjustment. For instance, the embezzlement of client funds by an attorney, a bank



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executive‟s fraudulent loan scheme which would be directed against the bank‟s own clients, or

the criminal sexual abuse of a patient by a physician, are all examples of people who have a

position of private trust committing crimes against people who trust them based on their role.

U.S.S.G. §3B1.3, cmt. n. 1. These guideline examples do not apply to individuals who conduct

arm‟s-length business dealings.

        To determine whether the defendant was in a position of trust to warrant the adjustment,

the district court must apply the perspective of the victim. In United States v. Broderson, 67

F.3d 452, 456 (2nd Cir. 1995), the court reversed the enhancement because though the defendant

had a position of trust within his company as a leader of the company he did not have a position

of trust as to the government which was the victim of his fraud. No abuse of position of trust

was found by the appellate court. Similarly, in United States v. Wadena, 152 F.3d 831, 856-7

(8th Cir. 1998), no abuse of position of trust was found where though the defendants were

members and leaders of a tribal council, they did not significantly use that position to facilitate

their money laundering activities, depositing contractor‟s checks into their personal accounts,

thus their crime did not relate to their position of trust within the tribe.

        In relation to the fraud conspiracy count involving the Hecker Organization, the victims

identified in the PSR are Chrysler Financial, Hyundai Capital and a number of banks. Hecker‟s

relationship with these victims was purely commercial even though Hecker occupied the most

important position within his own company. There must be “a trust relationship between [the

defendant] and his victim” for the adjustment to apply. United States v. Hickman, 991 F.2d

1110, 1112 (3rd Cir. 1993). Hecker had an arm‟s-length business relationship with Chrysler

Financial and Hyundai Capital, this cannot constitute an abuse of position of trust “because

ordinary commercial relationships do not constitute a trust relationship sufficient to invoke the



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    CASE 0:10-cr-00032-JNE-SER Document 265                  Filed 02/02/11 Page 17 of 47



§3B1.3 enhancement.” United States v. Moore, 29 F.3d 175, 179-180 (4th Cir. 1994) (reasoning

that because defendant had only a buyer-seller relationship with the victim, adjustment did not

apply). Hecker should thus not receive a two level increase for an abuse of position of trust.

        D.       The Defendant Should Receive A Two Level Increase For Role In
                 Offense, Not A Four Level Increase.

        The PSR, at paragraph 52, improperly applies a four level increase for role in the offense,

U.S.S.G. §3B1.1(a), based upon the assertion that “for the instant offense, the defendant was the

leader of these criminal activities involving five or more participants. Specifically, the criminal

participants included James Gustafson, Eric Dove, Dick Page, Steven Leach, and Hecker.” The

Government and the defense agree that only a two level increase is justified by the facts pursuant

to U.S.S.G. §3B1.1(c).

        Although James Gustafson and Steven Leach have been identified as criminal

participants with Hecker and have entered guilty pleas, Eric Dove and Dick Page are not criminal

participants and thus there are not five or more participants properly identified as criminal

participants in the PSR. Application Note 1 to U.S.S.G. §3B1.1 defines “participant”: “a

„participant‟ is a person who is criminally responsible for the commission of the offense, but

need not have been convicted. A person who is not criminally responsible for the commission of

the offense… is not a participant.” U.S.S.G. §3B1.1, cmt. n. 1. Although the PSR identifies

Leach and Gustafson as criminal participants within the meaning of Application Note 1, there is

no evidence that Eric Dove and Dick Page were criminally responsible for the commission of the

offenses. United States v. Mann, 161 F.3d 840 (5th Cir. 1998) (finding that persons with

knowledge of the offense were not participants because they were not criminally responsible);

United States v. King¸257 F.3d 1013 (9th Cir. 2001) (holding that innocent workers not

participants).

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    CASE 0:10-cr-00032-JNE-SER Document 265                 Filed 02/02/11 Page 18 of 47



       This adjustment does not apply. Certainly, no evidence has been presented to establish

by a preponderance of the evidence that this four level adjustment should apply. Consequently

the Court should impose a two level increase under U.S.S.G. §3B1.1(c) and not apply a four

level increase.

       E.         Hyundai Capital America Made An Informed Business Decision To Fund
                  Hecker’s Fleet Operation, Therefore Its Loss Is Not An Actual Or Intended
                  Loss Of Hecker’s Offense.

       The PSR at paragraphs 12 - 15 appropriately describes the Hyundai fraud scheme to

which Hecker plead guilty, the victim of this fraud was Chrysler Financial (hereinafter “CFC”).

To summarize, Hecker and Leach misrepresented the nature of their agreement with Hyundai

Motor America (hereinafter “HMA”) to CFC by intentionally causing CFC to believe that the

5,000 HMA risk vehicles were subject to a repurchase agreement. They did this by altering an

HMA letter. Hecker specifically admitted to this offense in open court on September 7, 2010, by

identifying CFC as a victim and explaining that he mislead them in order to retain incentive

payments from HMA. (Rundquist Affidavit, Exhibit A). Hyundai Capital America (hereinafter

“HCA”) was not neither mentioned at the plea hearing nor contemplated in the plea agreement as

a victim. Hecker also admitted defrauding CFC, in relation to American Suzuki Motors, by not

disclosing that his organization had received significant financial incentives from American

Suzuki Motors. Id.

       A separate allegation, with HCA as victim, is set forth in paragraphs 16 and 18 of the

PSR, which asserts that Hecker desperately needed refinancing from a source different from CFC

in order to hide his offense against CFC related to the use of the altered document. The PSR‟s

theory, at paragraph 16, depends on proof that Hecker fraudulently induced HCA to refinance




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    CASE 0:10-cr-00032-JNE-SER Document 265                   Filed 02/02/11 Page 19 of 47



2,502 cars and that HCA suffered a loss from as a result. Alternatively, the Government argues

that the HCA refinancing covered up (partially) the CFC offense and is thus an integral part of it.

       It is the position of the defense that HCA made an informed business decision to support

Hecker‟s fleet business by refinancing some 2,502 of the Hyundai vehicles originally financed

by CFC in reliance on the altered HMA letter. In the analogous context of loss causation for

purposes of determining restitution, the Ninth Circuit has held that when a third party to a

transaction suffers loss not directly related to the fraudulent misrepresentations, that loss lacks

sufficient nexus to the crime to be considered a criminal loss. See United States v. Meksian, 170

F.3d 1260, 1263 (9th Cir. 1999)(holding that a poor business decision, independent of fraudulent

misrepresentations, is an intervening cause of loss and therefore justified denying restitution).

The critical distinction between CFC and HCA is that while Hecker misled CFC into believing

the HMA vehicles had a repurchase guarantee, HCA was fully aware that the HMA vehicles

were at risk and had no such guarantee. (PSR at 4 ¶ 16)

       Application Notes 3(a)(i) & (ii) define loss under Guideline §2B1.1 as the greater of the

actual loss, “the reasonably foreseeable pecuniary harm that resulted from the offense” or the

intended loss, “the pecuniary harm that was intended to result from the offense.” A “victim” is a

person who sustained an “actual loss.” U.S.S.G. §2B1.1, cmt. n.1. Thus the fundamental

question in determining whether or not HCA is a victim for purposes of counting their loss under

§2B1.1 is whether their loss was either a reasonably foreseeable result of Hecker‟s offense, or

else an intended result of Hecker‟s offense. As will be explained, it was neither.

       In order to determine what the “offense” is under Guideline §2B1.1, the Government

references U.S.S.G. §1B1.3(a)(1) to claim that Hecker refinanced with HCA in order to “avoid

detection or responsibility for [the offense of conviction]," the offense of conviction being



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    CASE 0:10-cr-00032-JNE-SER Document 265                  Filed 02/02/11 Page 20 of 47



Hecker‟s misrepresentations to CFC evidenced by the altered letter. (Government‟s Sentencing

Position at 39). The Government‟s theory, however, has no basis in fact. Hecker had a purely

innocent, business motivation to refinance with HCA that was independent of the original CFC

financing of the cars. Hecker was aware that in August of 2007, CFC was purchased by

Cerberus, a private equity firm. Because of this Hecker feared that the lucrative credit

arrangement he had negotiated with CFC under the Advantage purchase would be in jeopardy,

specifically as it related to CFC‟s willingness to fund the purchase of non-Chrysler vehicles such

as Hyundais. Indeed e-mails between Hecker and John Bowker, Hecker‟s main contact at CFC,

indicate that Hecker‟s credit line for non-Chrysler vehicles was over its limit during the relevant

time period. (Rundquist Affidavit, Exhibit F).

       In addition, HCA was not defrauded by Hecker. Instead HCA made a legitimate business

decision to finance Hecker‟s fleet operations that later proved to be unwise. HCA‟s own

complaint in Hecker‟s personal bankruptcy admits that HCA was considering financing Hecker‟s

fleet business in November of 2007. (Rundquist Affidavit, Exhibit G, 3 ¶ 7). Hecker did not

even present the altered HMA letter until on or about November 15, 2010. The HCA credit

committee apparently did not formally discuss Hecker‟s application under December 21, 2007.

(Rundquist Affidavit, Exhibit H). The committee did not officially approve the application until

January 17, 2008. (Id.) The Government cites a communication in December of 2007 between a

Hecker employee and an HCA employee, expressing that Hecker urgently needed refinancing in

order to place the HMA risk vehicles in service with Advantage, as evidence that HCA was

deceived. This communication, however, was not explicitly mentioned in the internal Hyundai

document upon which HCA‟s credit committee relied in deciding to finance Hecker‟s fleet

operation. (Id.) Furthermore HCA did not in fact finalize the refinance of the 2,502 HMA units



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      CASE 0:10-cr-00032-JNE-SER Document 265               Filed 02/02/11 Page 21 of 47



until February 7, 2008, which undermines the claim that HCA acted in reliance on any claim of

urgent need by Hecker. (Rundquist Affidavit, Exhibit I at 1). An internal HCA memorandum

issued after the transaction provides further evidence of HCA‟s motivation for the refinance

stating “Mr. Hecker has been one of HMA‟s longest term and most consistent fleet customers

over the years.” (Rundquist Affidavit, Exhibit J at 1). The proposition that HCA was motivated

to finance Hecker in order to sell additional HMA vehicles is also supported by e-mail

correspondence between HMA sales staff and Hecker, on November 19 and 20, 2007 a few days

after Hecker presented the HCA altered document to CFC in Detroit, offering to sell him an

additional 5,000 or more repurchase guaranteed vehicles. (Rundquist Affidavit, Exhibit K at 1 -

4).

        Furthermore there is no indication that the Hyundai fraud scheme had been detected by

CFC, or would soon be detected by CFC at the time HCA refinanced the 2,502 units. E-mails

and memorandum exchanged between HCA and CFC show that the Hyundai fraud was not

discovered until late October of 2008, when CFC sought to redeem the risk vehicles it thought

were repurchase. (Rundquist Affidavit, Exhibit L). The Government‟s theory that Steve Leach‟s

resignation caused Hecker to fear detection is erroneous because there is no evidence that Leach

took any action towards reporting the Hyundai fraud to CFC or Government authorities. Indeed

as mentioned by the Government, though Leach formally resigned in early December 2008, he

continued to assist Hecker for a period of time after his resignation and subsequently worked in a

business closely associated with Hecker. (Government‟s Sentencing Position With Respect to

Leach 9 - 10). In addition, Leach received a bonus for his work for Hecker during 2007.

        In conclusion, HCA made an informed business decision to fund Hecker‟s fleet business

based on Hecker‟s past viability. As a result their loss was neither an intended result of Hecker‟s



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    CASE 0:10-cr-00032-JNE-SER Document 265                  Filed 02/02/11 Page 22 of 47



offense against CFC, nor a reasonably foreseeable result of that offense. Instead it was an arm‟s-

length commercial transaction. HCA exercised its business judgment to accept a business risk to

refinance 2,502 cars knowing they were at risk and knowing the history of the Hecker entities.

The HCA loss should not be considered as part of Hecker‟s loss amount.

       F.        Hecker Did Not Fraudulently Conceal The Assets of Northstate Financial

       Hecker stipulated in his plea agreement that many of the bankruptcy fraud allegations

contained in the Second Superseding indictment would be considered relevant conduct,

presumably under §1B1.3. The allegations related to Northstate Financial (hereinafter

“Northstate”) contained in the PSR were also alleged in the Second Superseding indictment,

therefore under the plea agreement they are appropriately considered relevant conduct, if proven.

Since these allegations are not directly related to a crime of conviction, however, the

Government must prove that they are independent violations of 18 U.S.C. § 152, which reads in

relevant part:

       Concealment of assets; false oaths and claims…

       A person who--

       (1) knowingly and fraudulently conceals from a custodian, trustee, marshal, or
       other officer of the court charged with the control or custody of property, or, in
       connection with a case under title 11, from creditors or the United States Trustee,
       any property belonging to the estate of a debtor;

       …

       (3) knowingly and fraudulently makes a false declaration, certificate, verification,
       or statement under penalty of perjury as permitted under section 1746 of title 28,
       in or in relation to any case under title 11;

The PSR claims that though Hecker disclosed his ownership of Northstate, and that Northstate

owned various valuable items, because the value received at auction of Northstate‟s property

exceeded the amount listed by Hecker and because Hecker made personal use of some of

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    CASE 0:10-cr-00032-JNE-SER Document 265                    Filed 02/02/11 Page 23 of 47



Northstate‟s property, Hecker fraudulently concealed the value of Northstate. The Government

appears to agree with the PSR‟s theory.

       Hecker requests an evidentiary hearing on this issue, and will argue that his actions in

respect to Northstate Financial do not evidence any intent to conceal its assets from the

bankruptcy court or other creditors. See United States v. Martin, 408 F.2d 949 (7th Cir. 1969)

(stating bankruptcy fraud requires intent to conceal). Hecker will present evidence that he had a

history of purchasing and titling boats, motorcycles and other items in Northstate Financial,

using those items for a short period of time and then reselling them. Some of the items Hecker is

alleged to have concealed were purchased or titled in Northstate Financial well before any

credible claim can be made that Hecker was personally insolvent. Furthermore the assets of

Northstate were in fact subject to a valid claim by Bremer Bank, based on Northstate‟s

indebtedness to Bremer, as Hecker stated in his bankruptcy schedules. The fact of a security

interest in these assets would reduce their apparent value to the debtor. Bremer asserted a claim

in Hecker‟s bankruptcy to recover on their loans. See Seaver v. Northstate Financial

Corporation, Rosedale Leasing, LLC, and Bremer Bank, N.A., D. Minn. Bky Adv. Case No. 10-

05011, Doc. # 6, 5 - 8 (asserting security interest in Northstate as the factual basis for a cross

claim). The Trustee settled with Bremer, awarding it a portion of the proceeds from liquidation

of Northstate‟s assets. In re Hecker, D. Minn. Bky Case No. 09-50779, Doc # 675 (noticing

settlement; # 697 (approving settlement).

       G.      Hecker Did Not Fraudulently Conceal His Country Club Memberships.

       As with Northstate, allegations of Hecker‟s concealment of various country club

memberships are before this Court on the theory that the plea agreement contemplates




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      CASE 0:10-cr-00032-JNE-SER Document 265                Filed 02/02/11 Page 24 of 47



consideration of discrete acts of bankruptcy fraud as relevant conduct. Hecker requests an

evidentiary hearing on this issue.

        The PSR claims that Hecker did not disclose valuable memberships in four country clubs

on his bankruptcy schedules. (PSR at 8 ¶ f). Hecker‟s schedules, in fact, listed one of these

clubs – the Spring Hill Club – by name but claimed that the membership had no value.

(Rundquist Affidavit, Exhibit M). Hecker also noted on his schedules that he owned “Social

memberships in various clubs believed to have no value.” (Id.) In response to questioning at

various Bankruptcy Rule 2004 Examinations, Hecker told the Trustee about his other club

memberships, but continued to maintain that they had no value. (Rundquist Affidavit, Exhibit

N).

        Hecker will seek to prove that except in one case, these club memberships do not have

value. In each case, Hecker paid a membership deposit to join the club. While the membership

deposits are nominally refundable, in order to receive a deposit back, the Trustee would have to

put each membership on a waiting list for sale and continue to pay dues for an undetermined

period of time. The value of the dues paid while on the waiting list would likely negate any

value in the membership deposit. Unpaid dues could also lead to cancellation of the

memberships. For these reasons, Hecker‟s assertion that the club memberships had no value was

true. The one exception is the Timbers Club Snowmass Village, which may have some resale

value. It is listed but no sale has taken place, to Hecker‟s knowledge.

II.     THE CIRCUMSTANCES OF HECKER’S WIRE FRAUD CONSPIRACY
        OFFENSE JUSTIFY A DOWNWARD VARIANCE TO AN EIGHT YEAR
        SENTENCE.

        This Court will impose a reasonable sentence that is sufficient but not greater than

necessary to comply with the purposes listed in 18 U.S.C. § 3553(a). Gall v. United States, 552



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    CASE 0:10-cr-00032-JNE-SER Document 265                         Filed 02/02/11 Page 25 of 47



U.S. 38 (2007) (emphasis added); 18 U.S.C. § 3553(a). Section 3553(a) contains seven factors

to be considered at sentencing including:

          (1) the nature and circumstances of the offense and the history and
              characteristics of the defendant;

          (2) the need for the sentence imposed to reflect the seriousness of the offense, to
              promote respect for the law, and to provide just punishment for the offense;
              to afford adequate deterrence to criminal conduct; to protect the public from
              further crimes of the defendant; and to provide the defendant with needed
              educational or vocational training, medical care, or other correctional
              treatment in the most effective manner;

A consideration of these factors focused on “the need for the sentence imposed to reflect the

seriousness of the offense and to provide just punishment for the offense,” when Hecker‟s

offense severity is determined largely by an extremely flawed guideline for economic crimes,

establishes that an 8 year sentence is sufficient to achieve these purposes.

        While Hecker‟s adjusted offense level is 31, assuming the Court adopts his position on

the disputed Guidelines issues discussed above, he receives a 22 point adjustment for causing a

loss greater than $20,000,000 based on U.S.S.G. §2B1.1. Without Guideline §2B1.1‟s 22 point

adjustment, Hecker‟s bankruptcy sentencing range would likely be 46 to 57 months, not 108 to

135 months.2 This Court should grant a downward variance because Guideline §2B1.1 lacks

empirical support and ignores that much of the underlying loss amount from Hyundai wire fraud

conspiracy was aggravated by the dramatic downturn of the automotive industry from 2007 to

2009. Hecker also asks the Court to consider that in the context of an economic offense with a

high loss amount, certain Guideline §2B1.1 upward adjustments unduly exaggerate the degree of

culpability and harm. Finally consideration of Hecker‟s entire business history does not make

his offenses so heinous as to require punishment beyond eight years.


2
 This assumes a bankruptcy fraud loss of between $400,000 and $1,000,000. The advisory guideline range
would then be only slightly below the maximum sentence for one count of bankruptcy fraud.

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    CASE 0:10-cr-00032-JNE-SER Document 265                   Filed 02/02/11 Page 26 of 47



       A.      Because the Application of Guideline §2B1.1 Does Not Exemplify the
               Commission’s Exercise of Its Characteristic Institutional Role, a Downward
               Variance is Appropriate.

       Kimbrough v. United States, 128 S.Ct. 558, 574 (2007) and Spears v. United States, 129

S.Ct. 840, 843. (2009), solidified the proposition that this Court has absolute discretion to

consider whether Guidelines sentencing ranges actually serve the purposes of sentencing in 18

U.S.C. § 3553(a). When “the Guidelines do not exemplify the Commission's exercise of its

characteristic institutional role,” defined as developing “Guideline sentences using an empirical

approach based on data about past sentencing practices”, this Court‟s discretion is at its zenith.

Kimbrough, 128 S. Ct. at 575, 567; United States v. O'Connor, 567 F.3d 395, 398 (8th Cir.

2009); United States v. Davis, 538 F.3d 914, 918 (8th Cir. 2008). Guideline §2B1.1 as applied to

Hecker presents just such a case.

      As in Kimbrough and Spears, which dealt with the sentence disparity between crack and

powder cocaine, the application of §2B1.1 to high loss economic crimes does not exemplify the

Commission's exercise of its characteristic institutional role. A brief history of the United States

Sentencing Commission‟s (hereinafter “Commission”) treatment of sentencing for economic

crimes shows that while its initial guidelines were based on solid empirics, the current guidelines

are not. As a result Hecker‟s advisory Guideline range, which the greatly influenced by

§2B1.1‟s treatment of large loss economic crimes, is not justified by any Section 3553(a) factor.

Hecker‟s range thus violates Section 3553(a)‟s parsimony principle that any sentence be

“sufficient, but not greater than necessary” to meet the Section 3553(a) factors.

      Until 1989, §2F1.1 provided a base offense level of 6 for fraud crimes, an enhancement of

11 for a loss amount over $5,000,000, resulting in a 37 - 46 month sentence for Hecker‟s offense

under that the 1988 guideline. U.S.S.G. §2F1.1 (1988). The Commission could correctly justify



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    CASE 0:10-cr-00032-JNE-SER Document 265                    Filed 02/02/11 Page 27 of 47



this computation based on two empirical calculations. First, the Commission increased fraud

sentences from pre-guidelines practice to eliminate disparities between larceny crimes and

economic crimes with similar loss amounts. U.S. Sentencing Commission, Fifteen Years of

Guidelines Sentencing: An Assessment of How Well the Federal Criminal Justice System is

Achieving the Goals of Sentencing Reform, 56 (Nov. 2004)(hereinafter Fifteen Year Report).

Second, the Commission decided that white-collar offenses required “a short but definite period

of confinement” to “achieve adequate deterrence.” Id. The fact that certainty of punishment, as

opposed to severity of punishment, has a proven general deterrent effect justifies this approach.

See e.g. United States Sentencing Commission Symposium on Federal Sentencing Policy for

Economic Crimes and New Technology Offenses, Remarks of Professor Daniel Nagin at 22

(stating “one consistent finding in the deterrence literature is that the certainty rather than the

severity of punishment seems to be the most effective deterrent”). As a result of the

Commission‟s decisions, “the rate of imprisonment for fraud offenders rose from about 50

percent in the pre-guidelines era to almost 70 percent by 2001.” Fifteen Year Report at 58.

       Beginning in 1989, the Commission lost its empirical moorings by increasing the prison

term for fraud offenders “often in response to congressional directives.” Fifteen Year Report at

56. The Commission itself admits that,

       The appearance early in the guidelines era of these mandated sentence increases
       for economic crimes, and the perceived absence of empirical research establishing
       the need for them, led one former Commissioner to warn that the SRA‟s promise
       of policy development through expert research was being supplanted by symbolic
       “signal sending” by Congress.

Id. In support of increased punishment in 1989, the Commission simply stated “the purposes of

this amendment are… to increase the offense levels for larger losses to provide additional

deterrence and better reflect the seriousness of the conduct.” Commentary to U.S.S.G. §2F1.1



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    CASE 0:10-cr-00032-JNE-SER Document 265                 Filed 02/02/11 Page 28 of 47



(1989). These justifications supported the 1988 guideline, which already greatly increased

punishment for fraud offenses from pre-guideline levels by limiting the availability of probation.

Fifteen Year Report at 56.

      The next increase in Guideline punishment for fraud crimes came in 2001, when the

Commission approved a series of changes known as the “2001 Economic Crimes Package,”

which culminated from six years of debate amongst a variety of stakeholders in the federal

criminal justice community, including the Department of Justice, the United States Probation

Office and representatives of the criminal defense bar. THE 2001 FEDERAL ECONOMIC CRIME

SENTENCING REFORMS: AN ANALYSIS AND LEGISLATIVE HISTORY, 35 INLR 5, 29 - 30 (2001).

The resulted heightened sentence range for large dollar offenses derived from a compromise

between the defense bar and the other stakeholders in which punishment decreased slightly for

low loss offenders. Id.

      The Commission itself cited three factors justifying the 2001 increase, which were

feedback from public opinion studies, input from the Department of Justice and survey results

from the federal judiciary. Federal Register (Vol. 62, No. 1, 152-198) at 18. Before the 2001

enhancements, 53% of Federal District Court Judges expressed the opinion that Guideline

§2F1.1 did not provide adequate punishment for economic crimes. The U.S. Sentencing

Guidelines, Results of the Federal Judicial Center’s 1996 Survey, Report to the Committee on

Criminal Law of the Judicial Conference of the United States. Federal Judicial Center (1997).

When discussing the Economic Crimes Package of 2001, however, a commentator noted that

under the Guidelines before 2001, were federal judges truly dissatisfied with Guideline § 2F1.1‟s

perceived leniency, they would have imposed upward departures more frequently, for example

under Guideline § 5K2.5. United States Sentencing Commission Symposium on Federal



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    CASE 0:10-cr-00032-JNE-SER Document 265                   Filed 02/02/11 Page 29 of 47



Sentencing Policy for Economic Crimes and New Technology Offenses, Remarks of James

Felman at 61 – 63. Thus, the empirical data available to justify the 2001 Economic Crimes

Package increases was, at best, equivocal as to the true position of the federal judiciary.

Nonetheless, due to the 2001 Economic Crimes Package, a loss amount of over $20,000,000 lead

to the 22 level enhancement that Hecker is facing. U.S.S.G. § 2B1.1

       The initial fraud guideline, U.S.S.G. § 2F1.1 (1987) appropriately called for “a short but

definite period of confinement” in order “both to ensure proportionate punishment and to achieve

adequate deterrence.” Fifteen Year Report at 56. The Commission justified this conclusion with

empirical analysis based on the need to provide similar sentencing for fraud and larceny

offenders, as well as to assure general deterrence for fraud offenders with short but meaningful

prison terms. Id. Since then, the Adjusted Offense Level has increased for Hecker‟s crime from

a range of 37 - 46 months to 108 - 135. No solid empirical evidence exists to justify this trifold

increase, instead the Commission relied either on political direction from Congress, compromise

between stakeholders or survey results. Guideline §2B1.1, thus should not be given deference

under Kimbrough v. United States, 128 S.Ct. 558, 574 (2007) and Spears v. United States, 129

S.Ct. 840, 843. (2009), because there is no empirical evidence supporting §2B1.1 as it applies to

Hecker. This lack of empirical evidence provides foundational support for this Court to consider

a downward variance.

       B.      A Downward Variance Is Justified By The Fact That The Loss Caused By
               Hecker Through The Hyundai Fraud Scheme Was Aggravated By Poor
               Economic Conditions From 2007 Through 2009.

       Economic factors from 2007 through 2009 play a strong aggravating role in Hecker‟s loss

amount associated with the Hyundai fraud scheme. Specifically the depressed market for resale

of leased automobiles through auctions in 2008 and 2009 caused Hecker‟s collateral for his



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    CASE 0:10-cr-00032-JNE-SER Document 265                   Filed 02/02/11 Page 30 of 47



financing to be worth less than it would have been in prior years or in the present. In additional,

the differing reactions to the Advantage bankruptcy between Chrysler Financial, on the one

hand, and the other lenders, further exacerbated the loss amount. Hecker asks this Court to

consider these facts and find that a 22 level aggravated adjustment for loss amount exaggerates

the severity of the offense. Had market factors not been so negative for Hecker‟s business, the

loss amount could easily have been significantly less than $20 million, therefore a downward

variance to an eight year sentence is appropriate.

       A defendant can properly assert that a sentence is unreasonable based on the affect of

market factors, when that defendant did not defeat his creditor‟s security interest in collateral

through his offense conduct. Compare United States v. Rutksoke, 506 F.3d 170 (2d Cir.

2007)(allowing consideration of market factors for secured creditor victims in a securities fraud

case); United States v. Woolf Turk, 2d Cir. No. 09-5091-cr, 11/30/2010)(holding that market

factors are not relevant with unsecured victims in a mortgage fraud case). Fundamentally,

Hecker‟s wire fraud conspiracy offenses involve misrepresenting the value of collateral, as

opposed to misleading lenders as to the fundamental nature and anticipated use of the collateral.

Application Note 3(E)(i) and (ii) to §2B1.1 provide the basis for a Guidelines based argument

related to aggravating market factors, as the value of collateral and repaid principal are deducted

from the total loss amount. Hecker asks the Court to consider the role of market factors as

ground for a downward variance as opposed to justifying a lower actual loss amount. See United

States v. Adelson, 441 F.Supp.2d 506, 512 - 513 (S.D.N.Y. 2006)(considering market factors in

granting a substantial downward variance). Furthermore in the analogous context of loss amount

determination for purposes of restitution, case law suggests that market forces can play an




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    CASE 0:10-cr-00032-JNE-SER Document 265                    Filed 02/02/11 Page 31 of 47



independent, intervening role in aggravating the loss amount. United States v. Tyler, 767 F.2d

1350, 1351 - 52 (9th Cir. 1985).

       The timing and structure of Hecker‟s Advantage Rental Car purchase in early 2006,

which will be discussed in greater detail below, is critical to understanding the loss amount

related to the Hyundai wire fraud conspiracy, because Hecker obtained the Hyundai risk

vehicles, to be leased to Advantage and then resold at auction. This general business model of

leasing and reselling rental vehicles had been extremely successful for Hecker in the past, which

led to Hecker‟s lucrative sale of a large potion of this business to General Electric Fleet in

October 2005. (Rundquist Affidavit, Exhibit O at 6)(providing a purchase price of $20 million).

Because of the non-competition aspects of his agreement with GE Fleet, Hecker could only

employ this business model with rental car companies he owned or controlled, such as

Advantage. Id. at 8 - 9.

       Based on Hecker‟s negotiations with Hyundai Motor America and CFC that formed the

basis for the Hyundai wire fraud conspiracy, the relevant Hyundai vehicles were leased to

Advantage and in service starting in late 2007 or early 2008. The intention was for Advantage to

use those vehicles for up to 18 months, and then auction them in 2009 to satisfy CFC and HCA‟s

liens. As a general rule for the rental business, risk vehicles should be active in the rental fleet

for as long as possible, in order to generate the maximum returns. (Rundquist Affidavit, Exhibit

P, 54 - 56). In the case of the vehicles that secured CFC‟s loan, Advantage was only able to use

them for less than a year, as CFC demanded their return in November of 2008. (Rundquist

Affidavit, Exhibit Q, 7 - 9)(explaining the process by which CFC, Rosedale and Advantage

agreed to begin the return of collateral). The vehicles were then sold at auction. In the case of

HCA‟s collateral, the vehicles remained in service at Advantage until well into 2009 because



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    CASE 0:10-cr-00032-JNE-SER Document 265                  Filed 02/02/11 Page 32 of 47



HCA elected to allow this through Advantage‟s bankruptcy. (Rundquist Affidavit, Exhibit R, 3,

6 - 7)(stipulating that Advantage could continue to use the HCA risk vehicles in exchange for

adequate protection payments).

       With the forgoing in mind, depressed auction prices in late 2008 through 2009 could

certainly aggravate the loss amount associated with the Hyundai fraud. In this regard, the

leading industry index focused on the automotive remarketing industry, produced by Manheim

Consulting, supports the conclusion that late 2008 through 2009 was a historically bad time to

bring vehicles to auction. (Rundquist Affidavit, Exhibit P, 55; Exhibit S, 1). As a result, market

factors aggravated the Hyundai fraud loss amount by as much as 25%. Id.

       Manheim Consulting, the most utilized source of data related to automotive remarketing,

states that while the average auction price for rental risk units was nearly $12,000 at the end of

2007, the average price bottomed out at nearly $9,000 in December of 2008 and did not return to

$12,000 until between August and September of 2009. (Rundquist Affidavit, Exhibit P, 55).

Thus the average auction price from 2008 through the summer of 2009 was depressed by as

much as 25% for rental risk units. In a somewhat cruel irony, the average auction price for 2010,

and estimated into 2011, is at an all time high because the decline in new vehicle sales has

decreased the supply of used vehicles to be remarketed. (Rundquist Affidavit, Exhibit S, 1).

These macroeconomic factors related to automobile auctions aggravated Hecker‟s loss amount

by as much as 25%. (Id.)

       Additional support for this argument comes from the difference in the PSR‟s claimed loss

amounts between HCA and CFC. HCA claims a loss of $10,404,029 while CFC claims a loss of

$13,326,949. This nearly $3 million difference is puzzling at first blush because HCA

refinanced 2,502 cars, of a total just under 4,250 Hyundai risk vehicles, leaving CFC with 1,748



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    CASE 0:10-cr-00032-JNE-SER Document 265                   Filed 02/02/11 Page 33 of 47



risk vehicles financed through the Hyundai wire fraud conspiracy. Why would HCA suffer a

smaller loss when it financed more cars? The answer is that CFC took its collateral out of

service in November of 2008, thereby not receiving payments through the Advantage bankruptcy

and having to auction its cars in early 2009, the worst possible period to take its cars to auction.

HCA‟s decision to leave the cars in service allowed it to receive payments through Advantage‟s

bankruptcy, as well as receive the unanticipated benefit of taking its cars to auction in a better

market. (Rundquist Affidavit, Exhibit T, 6)(stating in a June 2009 internal Hyundai

memorandum that “most vehicles have been marshaled to auctions awaiting disposal). In fact

HCA has received over $6 million in payments through the Advantage bankruptcy, and may be

entitled to more upon completion of the bankruptcy. (Rundquist Affidavit, Exhibit U)(ordering

dispersal of Advantage Chapter 11 sale proceeds).

       In summary, Hecker through the Hyundai fraud scheme, took unauthorized risks that

resulted in an aggregate loss of $23 million. (PSR at 4, ¶ 17, 18). This amount, however, was

aggravated by the fact that the collateral Hyundai vehicles were taken to auction in the worst

possible economic period. Based on the leading reputable index, economic conditions

aggravated the loss amount associated with the Hyundai fraud scheme by up to 25%. Twenty

five percent of the total aggregate loss of $23 million is roughly $5.75 million, thus the Hyundai

fraud loss amount (even with HCA considered a victim) would have been below $20 million had

exogenous economic factors not aggravated the loss amount. As a result, the overall loss amount

would be less than $20 million. Given that the victim lenders were aware of, and consented to,

the general structure of the leasing transaction with Advantage, Hecker should be given a modest

downward variance due to the aggravating effect of the economic downturn on automotive resale

prices. A downward variance resulting in a sentence of 8 years is appropriate because it reflects



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    CASE 0:10-cr-00032-JNE-SER Document 265                  Filed 02/02/11 Page 34 of 47



the guideline range that would have been applicable were it not for the cataclysmic economic

conditions that aggravated the loss amount.

       C.      Hecker’s Adjusted Offense Level Results From “Factor Creep” and Does Not
               Reflect The Seriousness of This Offense, Nor Promote Respect for The Law,
               Nor Provide Just Punishment for This Offense.

      In the context of economic crimes with high loss amounts, such as Hecker‟s wire fraud

conspiracy offense, the Sentencing Guideline ranges are unjustifiably harsh due to “factor

creep”. Fifteen Year Report at 137; quoting Ruback, Barry & Jonathan Wroblewski. 2001. The

Federal Sentencing Guidelines – Psychological and Policy Reasons for Simplification.

PSYCHOLOGY, PUBLIC POLICY, & LAW 7(4):739-775. Reflecting on its first fifteen years, the

Sentencing Commission stated:

      While many guideline amendments have clarified ambiguous terms or simplified
      guidelines operation, other amendments have added to their complexity. It is
      possible to imagine countless circumstances that would make an offense more
      serious… it is difficult to argue that any of these considerations are irrelevant, yet,
      as more and more adjustments are added to the sentencing rules, it is increasingly
      difficult to ensure that the interactions among them, and their cumulative effect,
      properly track offense seriousness.

      Guideline §2B1.1, if applied in the manner suggested by the PSR, illustrates this dilemma.

Guideline §2B1.1 contains at least 29 sentence enhancing adjustments. SENTENCING HIGH-LOSS

CORPORATE INSIDER FRAUDS AFTER BOOKER, 20 Fed.Sent.R. 167 at 6. The suggested

adjustments in this case, for deriving more than $1,000,000 in gross receipts from one or more

financial institutions, for a false statement in a bankruptcy proceeding, and loss amount, as well

as the Guideline § 3B1.1 adjustments for leadership role and abuse of trust, seek to approximate

mens rea and degree of harm. Id. Many of these adjustments were important culpability factors

considered by judges in the pre-guidelines era. Commentary to U.S.S.G. § 2B1.1, at 15(b)




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(2001). They were not necessarily used in tandem, however, in the same arithmetic fashion

called for by the Guidelines. 20 Fed.Sent.R. 167 at 6.

      For Hecker utilization of these four factors overstates both the degree of harm and the

degree of culpability. Compare United States. v. Lauersen, 362 F.3d 160, 164. (2nd Cir.

2004)(finding that in a high loss economic crime case, “although the Guidelines contemplate the

aggregation of applicable enhancements… what is present to a degree not adequately considered

by the Commission is the combined effect of the aggregation of substantially overlapping

enhancements”). Guideline § 2B1.1 is premised on the idea that loss amount is a proxy both for

degree of harm and degree of culpability. Commentary to U.S.S.G. § 2B1.1, at 15(b) (2001).

The numerous enhancements, other than loss amount, at issue in Hecker‟s case are essentially

proxies for degree of harm and degree of culpability, and therefore substantially overlap with the

underlying purpose of relying on loss amount to aggravate punishment.

       If loss amount is viewed as the degree of harm, then there is some overlap with the

adjustment for deriving over $1 million from a financial institution and for aggravating role. It is

difficult to conceive of how a large loss amount can be reached without either risking harm to

large institutional lenders, or else having a high number of victims and thereby receiving a

different upward adjustment. Similarly to commit a large loss economic offense, there is usually

a need for numerous co-conspirators, leading to an adjustment for aggravating role. In addition,

if loss amount is viewed as a proxy for degree of mental culpability, there is overlap with the

adjustments for abuse of trust. Abusing a position of trust, as previously explained, necessarily

requires a level of victim reliance and therefore relates to the offender‟s culpability. Finally it

bears mention that it would be impossible to commit bankruptcy fraud without receiving the




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    CASE 0:10-cr-00032-JNE-SER Document 265                   Filed 02/02/11 Page 36 of 47



enhancement for making a misrepresentation or other fraudulent action during the course of a

bankruptcy proceeding, which creates double counting of culpability in bankruptcy fraud cases.

       In summary a variance is appropriate because “factor creep,” an aggregation of

substantially overlapping enhancements, creates an unduly severe Adjusted Offense Level for

Hecker. The scope of the appropriate variance will depend on this Court‟s finding on the

disputed Guidelines issues mentioned above, including aggravating role and abuse of position of

trust. Assuming the Court agrees with Hecker and the Government that these adjustments do not

apply, “factor creep” still justifies a modest downward variance because of the double counting

inherent when there is a high loss amount, as well as over $1 million in receipts from a financial

institution and an adjustment for aggravating role, as there is here. Specifically Hecker‟s

adjusted offense level would be only 25 or 26, depending on whether he receives a 2 or 3 level

downward adjustment for acceptance, if this Court only considered the loss amount of over 20

million along with his base offense level. This would justify a Guideline range of between 57 -

78 months, which is below Hecker‟s requested sentence of 8 years.

       D.      Hecker’s Offenses Must Be Understood In The Context Of Hecker’s Entire
               Business History.

       While the Government asks this Court to look only at Hecker‟s actions over the past four

or five years, Hecker offers the following facts to put his offenses in the appropriate context.

Faced with extraordinary problems that threatened to, and eventually did, wipe away his entire

life‟s work, Hecker made a number of poor decisions for which he will be severely punished.

Hecker requests that this Court consider his entire history, however, when fashioning a sentence,

and find that an eight year sentence is sufficient but not greater than necessary to satisfy the

purpose of Section 3553(a).




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    CASE 0:10-cr-00032-JNE-SER Document 265                  Filed 02/02/11 Page 37 of 47



       Describing his youth in North Minneapolis, with parents working at a drycleaner and as a

hospital cook, Hecker told a reporter in 2003 that “we didn‟t even know we were poor then.”

Denny Hecker’s Drive, St. Paul Pioneer Press. (Sunday May 16, 2004)(Business at 7D). So

when Hecker began working at a young age for his father, or when at age 15 he took a job

helping Don Byerly before Byerly became a household name in Minnesota, or when he at age 19

began his career in the car business at Anderson Dodge on Lake Street, it was not about money.

(Id.) When Hecker‟s long time business partner Walter Bush said “he loves to make deals...

I‟ve told him to put something away for a rainy day because not everything you do will have

gold edges on it,” Bush foresaw Hecker‟s current predicament. (Id.) An advertising executive

familiar with Hecker echoed this sentiment saying “if you look around at the really successful

people in this world, they are gamblers at heart. They‟re people who aren‟t content with the

status quo.” Under The Radar. Minnesota Business Journal. (November 2003, 57).

       Hecker‟s boundless energy and work ethic served him well in building a business empire

that survived economic downturns in the early 1980‟s and 1990‟s. Between 1973 and 1979

Hecker rose from a salesman at Anderson Dodge to owning his first dealership, Central Chrysler

Plymouth in Roseville. Denny Hecker’s Drive at 7D. Though Hecker had to close Central

Chrysler Plymouth in the early 1980s due to the oil crisis and related recession, he quickly

rebounded by first working for and then purchasing the Minneapolis Auto Auction. Under The

Radar at 52. After building up the auction through hard work and strategic risk taking, in 1986

Hecker made his first large deal, selling the auction and reinvesting his profits in dealerships and

a leasing company, which would become the backbone of the Denny Hecker Automotive Group




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     CASE 0:10-cr-00032-JNE-SER Document 265                              Filed 02/02/11 Page 38 of 47



– a network of dealerships, financing institutions and leasing companies that at its peak

employed over 1,000 people.3 (Id.)

         Despite challenges, Hecker developed a reputation for being able to repay lenders. In the

early 1990‟s Hecker‟s fleet leasing business lost roughly $6 million when Major Rental Car,

Hecker‟s biggest credit at the time, went out of business. (Id. at 7). It took Hecker nearly five

years to repay his loans on vehicles leased to Major, but he paid his lenders in full. Similarly the

collapse of Daewoo in the late 1990‟s left Hecker with 5,000 worthless repurchase guarantees

resulting in a $10 million loss to Hecker. He was still able to pay his lender Chrysler Financial

back for the underlying fleet loans.

         Through these difficulties, Hecker succeeded in growing his fleet business and acquiring

numerous dealerships in Minnesota and elsewhere. The success of his fleet leasing companies

was evidenced by Hecker‟s sale of a large portion of that business to General Electric Fleet. For

the price of $20 million, Hecker agreed to transfer his leasing business to GE for $20 million.

The deal was completed in October of 2005, and limited Hecker from engaging in fleet leasing to

large rental car companies except with those that Hecker retained a significant ownership interest

in as well as a few smaller rental business, including Advantage Rental Car. (Rundquist

Affidavit, Exhibit O at 6, 8 - 9).

          While Hecker negotiated the GE sale, it became apparent that Hecker‟s largest source of

credit - CFC - faced significant losses due to its extension of credit to Advantage Rental Car.

(Rundquist Affidavit, Exhibit V at 5 - 10). In late 2005, estimates made by CFC internally, and

by Hecker at CFC‟s behest, showed that the failure of Advantage would cause a loss to CFC of


3
  Before sentencing, Hecker will submit character letters from former employees, business associates and
friends attesting to Hecker‟s positive influence on, and dedication to, the people he interacted with. These
letters will also, in part, attest to the significant amount of lawful charitable contributions made by Hecker
over the years.

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    CASE 0:10-cr-00032-JNE-SER Document 265                 Filed 02/02/11 Page 39 of 47



between $40 and $70 million. (Id. at 6 - 7, ¶ 21 - 23). CFC turned to Hecker and after

negotiating between October of 2005 and February of 2006, Hecker agreed to buy Advantage.

Hecker was able to do so, in large part, based on his strong cash position resulting from the GE

sale. (Id. at 8, ¶ 32).

        Though Hecker paid $5 million to Advantage‟s prior owners, he also assumed

Advantage‟s significant debts owed to CFC. Furthermore he agreed to a profit sharing

arrangement whereby CFC would earn 35% of whatever value Hecker realized by reselling

Advantage. (Id. at 9, ¶ 36) In exchange, CFC committed to provide Hecker with a 5 year credit

line to support the purchase of fleet vehicles, through Hecker‟s fleet leasing business Rosedale

Dodge, Inc. d/b/a Rosedale Leasing (hereinafter “Rosedale”), to be used by Advantage. (Id. at 9,

¶ 37). Had Hecker not intervened, Advantage would have declared bankruptcy, causing

significant loss to CFC.

        Regrettably Hecker‟s purchase of Advantage would prove to be the first and most

important step in the demise of his business empire and his resort to criminal conduct to keep his

business in operation. From 2006 to 2008, Hecker sank close to $50 million in Advantage,

focusing on closing low performing locations while increasing the amount of vehicles available

at airports. (Rundquist Affidavit, Exhibit Q at 5 ¶ 13). Hecker‟s business plan was solid at its

inception, the rental car market saw a significant upswing between 2002 and 2006 as the leisure

and vacation markets improved in the wake of the September 11, 2001 attacks and the dot.com

bubble, yet overall rental revenues began to stagnate between 2007 and 2008, and then fell

significantly in 2009 with the deepening of a global economic crisis unprecedented since the

Great Depression. (Id.);(Rundquist Affidavit, Exhibit W). Upon filing for bankruptcy,

Advantage showed operating losses of over $29 million in 2007 and $42 million in 2008.



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    CASE 0:10-cr-00032-JNE-SER Document 265                  Filed 02/02/11 Page 40 of 47



(Rundquist Affidavit, Exhibit X at 6). While Hecker‟s timing in purchasing Advantage could

hardly have been worse, the forces that lead to its bankruptcy in early 2009 were not of his

making.

       Hecker did control how he would respond to Advantage‟s difficulties. His choice to

illegally generate capital by misleading CFC and other lenders about the nature of his dealings

with Hyundai and Suzuki led, in large part, to his indictment in February of 2009 and subsequent

guilty pleas. That Hecker largely used the proceeds of the Hyundai and Suzuki frauds to support

Advantage, an entity in which CFC had an economic interest, and Rosedale, which relied on

Advantage for revenue, does not excuse his conduct. It does, however, explain how a legitimate,

successful businessman would commit crimes that eventually generated a large enough

economic loss to send him to prison.

       The overall collapse of Hecker‟s business empire, however, resulted from

macroeconomic trends affecting the auto industry. Between December of 2007 and May of

2009, new cars sales declined significantly due to the economic downturn. (Rundquist Affidavit,

Exhibit P at 38 - 39). This trend led to massive closings of domestic manufacturer dealerships

across the country in 2008 and 2009, as well as the much publicized bankruptcies of Chrysler

and General Motors. In light of this, Hecker cannot be faulted for the closing of his Minnesota

dealerships, which resulted in the vast majority of the job loss associated with the collapse of the

Hecker automotive empire.

       Throughout late 2008 into 2009, Hecker strove to maintain what diminishing value he

could in his businesses. Though Advantage declared bankruptcy in December 2008, Hecker

subsequently invested a significant amount of time seeking buyers for its assets. His efforts led

to a bidding war between Hertz and Enterprise, which culminated in Hertz‟s purchase of most of



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       CASE 0:10-cr-00032-JNE-SER Document 265                       Filed 02/02/11 Page 41 of 47



Advantage‟s assets for $30 million. (Rundquist Affidavit, Exhibit Y at 4 - 5). These funds were

primarily used to repay creditors, including fleet lenders like HCA. (Rundquist Affidavit,

Exhibit V). Were it not for Hecker‟s efforts, Advantage‟s bankruptcy estate would have realized

significantly less value.

         Though Hecker will be punished for his response to the financial crises facing

Advantage, his greatest fault lies in the disastrous choices he made in 2009 and 2010, when faced

with the outright collapse of the business empire, and associated familial wealth he lawfully built

over the past 30 years. Few will empathize with a formerly wealthy man hiding over $500,000

in value from his creditors.4 Hecker asks the Court to consider that he has already received

significant punishment for these actions, in the form of hundreds of millions in non-

dischargeable debt. Because of Hecker‟s actions, and non-compliance with discovery orders, an

$83,000,000 judgment was entered against him in favor of CFC. The result Hecker received in

bankruptcy court ensures that he will never again be wealthy, and that the fruit of any future

labors will largely go towards repaying his creditors. Hecker also requests this Court to consider

that while $500,000 is a large loss amount for bankruptcy fraud, most of the loss amount is not

actual loss but intended loss.

III.     HECKER ASKS THAT RESTITUTION BE LIMITED TO THE LOSS AMOUNTS
         ASSOCIATED WITH HIS CRIMINAL CONDUCT.

         Both Hyundai Capital and Chrysler Financial have requested restitution in an amount

equal to their non-dischargeable debts determined in Hecker‟s personal bankruptcy. The

defendant objects to the restitution amounts identified in paragraphs 34-5 and 98-9 of the PSR as

it relates to the entire non-dischargeable judgment of $83,070,987.00 obtained by Chrysler

Financial against Hecker, and the $10,404,029.00 alleged loss of Hyundai Capital and the

4
 Though the PSR alleges a bankruptcy fraud loss amount of over $1.5 million, Hecker contests that two
discrete accusations were in fact fraudulent.

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    CASE 0:10-cr-00032-JNE-SER Document 265                    Filed 02/02/11 Page 42 of 47



$22,963,893.09 HCA judgment against Hecker. The Government agrees that, at least as to CFC,

the proper restitution amount is the respective loss associated with the Hyundai and Suzuki fraud

schemes, as well as appropriate interest and administrative costs ($16,261,871.91). Hecker‟s

non-dischargeable debts to HCA and CFC are significantly greater than the loss associated with

the criminal behavior here because HCA and CFC claimed losses in bankruptcy that went

beyond the Hyundai and Suzuki fraud schemes. Because there is no showing whatsoever that the

larger claimed loss amounts have any relationship to the criminal conduct, the Court should only

award restitution to CFC in the amount suggested by the PSR as the loss amount and award no

restitution to HCA.

          The Mandatory Victims Restitution Act (“MVRA”), 18 U.S.C. §§3663A et seq., applies

to the defendant‟s sentencing, nevertheless, restitution orders must be based on actual losses

suffered by victims of the criminal conduct. The MVRA defines “victim” as:

          A person directly and proximately harmed as a result of the commission of an
          offense for which restitution may be ordered, including, in the case of an offense
          that involves as an element a scheme, conspiracy, or pattern of criminal activity,
          any person directly harmed by the defendant‟s criminal conduct in the course of
          the scheme, conspiracy, or pattern.

          While the compensable harm is broader in a conspiracy case, still the restitution is limited

to harm caused “by the defendant‟s criminal conduct in the course of the scheme, conspiracy or

pattern.” United States v. Mickle, 464 F.3d 804, 810 (8th Cir. 2006), cert denied, 549 U.S. 1232

(2007).

          The non-dischargeable bankruptcy judgments obtained by Chrysler Financial and

Hyundai Financial are not based on losses resulting from the defendant‟s conduct. A restitution

award cannot simply be based on a civil judgment because there is a different calculus of harm in

civil matters and criminal restitution. United States v. Havens, 424 F.3d 535, 538 - 39 (7th Cir.



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      CASE 0:10-cr-00032-JNE-SER Document 265               Filed 02/02/11 Page 43 of 47



2005). The CFC judgment was ordered in large part as a result of discovery violations, not on an

assessment of losses caused by the defendant‟s criminal conduct. Similarly, HCA‟s judgment

was not a considered decision on actual loss based on Hecker‟s criminal conduct.

        The $10,404,029.00 asserted as the HCA loss for restitution, PSR at paragraph 98, is also

not a loss to a victim directly harmed by the defendant‟s conspiracy. As discussed in depth

above, HCA made a business decision to refinance the Hyundai cars for Hecker, they were not

directly harmed by Hecker‟s criminal conduct against Chrysler Financial in obtaining financing

based on a materially altered document. HCA should not be the beneficiary of a restitution

award. See United States v. Meksian, 170 F.3d 1260, 1263 (9th Cir. 1999)(holding that a poor

business decision, independent of fraudulent misrepresentations, is an intervening cause of loss

and therefore justified denying restitution).

IV.     ADDITIONALLY, HECKER REQUESTS THIS COURT TO FIND THAT
        HECKER SHOULD BE DESIGNATED TO THE FEDERAL PRISON CAMP IN
        DULUTH, THAT HECKER SHOULD HAVE THE BENEFIT OF THE
        RESIDENTIAL DRUG ABUSE PROGRAM, THAT HE RECEIVE A SLIGHT
        HARDSHIP VARIANCE FOR TIME SERVED IN SHERBURNE COUNTY AND
        A SELF-SURRENDER DATE.

        Having addressed the major issues that will be before the Court on February 11, 2010,

Hecker raises a number of more modest requests for the Court‟s consideration.

        A.    This Court Should Recommend That Hecker Be Placed At The Federal
              Prison Camp in Duluth.

        Hecker respectfully asks this Court to include a written Statement of Reasons with its

Judgment containing a recommendation to the Bureau of Prisons (hereinafter “BOP”) that

Hecker be designated to a minimum security institution and that the most appropriate placement

for Hecker would be the Federal Prison Camp in Duluth, Minnesota. See BOP Program

Statement P5100.08, September 12, 2006. Chapter 4, Page 5 (allowing for Judicial



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    CASE 0:10-cr-00032-JNE-SER Document 265                   Filed 02/02/11 Page 44 of 47



recommendation of facility). This Court‟s recommendation will, of course, not bind the BOP,

but it will give Hecker the best possible chance of being placed in Duluth.

        Hecker has an obvious personal interest in remaining in Minnesota so that he can best

maintain connections with friends and family in the area. Such connections will be necessary for

Hecker‟s successful reintegration once he has served his sentence. In addition such a placement

will benefit the bankruptcy Trustee, as it will most easily facilitate future meetings related to

liquidating Hecker‟s remaining business assets and Hecker‟s further assistance in litigation

against third parties.

        B.      This Court Should Recommend That Hecker Participate In The Residential
                Drug Abuse Program.

        As this Court is aware, the BOP offers a comprehensive Residential Drug Abuse Program

(RDAP) in which federal inmates complete the last portion of their sentence in a segregated

atmosphere that is akin to in-patient drug or alcohol abuse treatment and offers the possibility of

an earlier release. Hecker asks this Court to state, in its written Statement of Reasons, that

Hecker would benefit from this program. See BOP Program Statement P5100.08, September 12,

2006. Chapter 4, Page 5 (allowing for Judicial programming recommendation).

        While Hecker has not raised drug and alcohol dependency as an excuse for his criminal

conduct, there is ample evidence that alcohol and prescription drug abuse played a role in his

offenses, particularly his bankruptcy fraud convictions. The PSR, paragraph 58, indicates that

before his bankruptcy filing, Hecker was in a car accident that resulted in part from the presence

of prescription drugs in his system. The PSR also lists numerous prescription drugs he had used.

PSR at paragraphs 69, 72. Although initially denying a dependency problem, Hecker has

acknowledged drinking heavily as his business and personal fortunes collapsed. PSR at

paragraphs 74, 75. The Government itself has pointed out Hecker‟s chemical dependency issues.

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    CASE 0:10-cr-00032-JNE-SER Document 265                   Filed 02/02/11 Page 45 of 47



(Government‟s Opposition to Defendant‟s Motion for Release at 16; Government‟s Sentencing

Position at 37 (citing “[a] number of witnesses who told the government that Hecker had a

prescription drug problem”)).

       C.      Hecker Respectfully Requests A Slight Hardship Variance For Time Served
               In Sherburne County

       On February 11, 2010, Hecker will have served 117 days in the Sherburne County jail.

In addition to receiving credit for this time served in pre-sentence detention, Hecker asks this

Court to, in effect, grant him double credit by imposing a downward variance of 117 days due to

the nature of incarceration in Sherburne County.

       While the Sherburne County Jail and the United States Marshal‟s staff have made every

effort to keep Hecker safe and prove for his medical needs, the fact remains that conditions in the

Sherburne County are significantly more difficult than they will be in the federal institution

where Hecker will serve the balance of his sentence. The Sherburne County Jail, by necessity,

houses a diverse array of state level offenders and pre-trial detainees, as well as federal

detainees. Many of these individuals would not qualify for placement in a federal minimum

security facility, as Hecker likely will, due to the more violent or repeat nature of their crimes.

For this reason Hecker has sacrificed those limited personal liberties available to inmates,

particularly recreational time, social interaction and educational opportunities, for the security

policies of the jail administration. The result is that Hecker spends an average of 23 hours a day

in what is essentially solitary confinement.

       Based on the above Hecker asks this Court to grant him a downward variance of an

additional 117 days, in consideration of the relatively spartan conditions under which he has

lived since October 18, 2010




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    CASE 0:10-cr-00032-JNE-SER Document 265                   Filed 02/02/11 Page 46 of 47



       D.      Hecker Asks That This Court Set A Self-Surrender Date.

       Hecker asks that this Court grant him a self-surrender three weeks after the sentencing

date and that he be released to home incarceration with GPS monitoring until his surrender.

Hecker makes this specific request for two reasons.

       First self-surrender is an important factor the BOP considers in making its placement

decision. Having the ability to turn himself in to the U.S. Marshal‟s office, or to the security

institution if designated by that time, will give Hecker a better chance of actually being placed at

Duluth. See BOP Program Statement P5100.08, September 12, 2006. Chapter 4, Page 5

(discussing the relationship between voluntary surrender and security designation). Furthermore

the process of transport to a federal institution is costly for the BOP, but unnecessary for an

older, non-violent inmate like Hecker.

       Second because Hecker was detained on October 18, 2010, he did not get the opportunity

to personally say goodbye to his children and close friends. Since that date, he has only had

person to person contact with other inmates, jail staff, court personnel and his lawyers.

Voluntary surrender would allow Hecker to spend time saying goodbye to his friends and family,

putting his affairs in order and then surrendering to the U.S. Marshal. During this short period,

Hecker would be monitored by GPS and in daily contact with a pre-trial services staff member.




                       [THIS SPACE LEFT INTENTIONALLY BLANK]




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                                         CONCLUSION

       By pleading guilty well-before trial, testifying truthfully on three different occasions

since his guilty plea and generally not taking any actions fatal to acceptance of responsibility,

Hecker‟s 10 year maximum sentence is within the appropriate Guidelines adjusted offense level.

Furthermore, because the loss amount from the Hyundai fraud scheme was greatly aggravated by

poor market conditions, and because Hecker‟s offenses are not otherwise extraordinary when put

in the context of Hecker‟s business history, this Court should grant a downward variance to a

sentence of 8 years imprisonment. Hecker also asks for various judicial recommendations that

will give him the best chance to be placed at the Federal Prison Camp in Duluth and best treat his

chemical dependency issues while incarcerated.


Date: February 2, 2011                                 Respectfully submitted,


                                              By:        /s/ William J. Mauzy
                                                    William J. Mauzy (#68974)
                                                    Casey T. Rundquist (#390475)
                                                    510 First Avenue North
                                                    Suite 610
                                                    Minneapolis, MN 55403
                                                    (612) 340-9108
                                                    Attorneys for Defendant Dennis E. Hecker




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