JANET C. HALL, District Judge.
On September 3, 2013, defendant David J. Crespo ("Crespo") pled guilty to Count Twelve on the Indictment, wire fraud in violation of sections 1341 and 2 of title 18 of the United States Code. On December 16-17, 2014, the court conducted an evidentiary hearing regarding factual issues in dispute relevant to Crespo's sentencing. On January 16, 2015, Crespo was sentenced to 57 months imprisonment, three years supervised release, a special assessment of $100, and restitution in an amount to be determined pursuant to section 3663A of title 18 of the United States Code. Upon the retirement of the sentencing judge, this case was transferred to the undersigned to resolve the issue of restitution and other pending motions.
Currently pending before the court is the government's Amended Application for Restitution (Doc. No. 167). The government requests entry of an order granting restitution to thirteen individuals it has identified as victims pursuant to 18 U.S.C. § 3663A, for a total of $352,831. Crespo, through counsel, has filed an opposition in which he objects to the entry of restitution in total, and also sets forth specific objections as to certain alleged victims. Defendant's Objections to Amended Application for Restitution (Doc. No. 168) ("Def.'s Obj.")
Pursuant to the Mandatory Victims Restitution Act (MVRA), the court must order restitution for victims of certain offenses. 18 U.S.C. § 3663A(a)(1). The MVRA defines a "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 . . . of criminal activity, any person directly harmed by the defendant's criminal conduct in the course of the scheme." 18 U.S.C. § 3663A(a)(2). In cases where the offense resulted in loss of property to a victim, the amount of restitution is equal to the greater of the value of the property on the date of loss or the value of the property on the date of sentencing, less the value of any part of the property that is returned. 18 U.S.C. § 366A(b).
The court resolves any dispute as to the proper amount or type of restitution by a preponderance of the evidence. 18 U.S.C. § 3664(e). The government has the burden of demonstrating the amount of loss sustained by a victim as a result of the offense.
Crespo objects to the entry of any restitution order on the ground that the government has not met its burden to show that any of the artwork at issue is fraudulent, and therefore worthless (or at least worth less than its represented value). He argues that none of the pieces were independently appraised, and that none of the Government's witnesses who testified at the evidentiary hearing "were competent to testify as to the value of the purportedly fraudulent artworks." Def.'s Obj. at 6.
Based on the record before the court, and in particular the evidence set forth below, the government has shown, by a preponderance of the evidence, that the "Arruza Collection" paintings, which Crespo represented to be original Picassos, were not original Picassos. Further, the pieces originating from Gallery 25, which Crespo represented to be original Chagall lithographs, were not original Chagall lithographs.
At the sentencing hearing, FBI Agent Kurt Siuzdak testified to expert Emanuel Benador's opinion that pieces of art from the Arruza Collection and Gallery 25 lithographs that he examined — some in person, some via photographs — were fake. Transcript of Sentencing Hearing Vol. I, Dec. 16, 2014 (Doc. No. 159) ("Sent. Hrg. Tr."), at Tr. 90:1-2,14-91:1. Siuzdak also testified that appraisers from Sotheby's, the Shannon Gallery, and Skinner's auction house had reviewed certain pieces from Crespo's gallery and opined that they were fake.
In addition, the FBI document examiner that reviewed the "Judgment of Chloe" Chagall, which Crespo sold to an undercover agent as an original lithograph, opined that it was in fact a printed reproduction.
A 2006 email from Crespo to Hector Pinera, who sold him the Arruza Collection, indicates that Crespo knew the "Picassos" were fake. Gov't Sent. Mem., Exh. 4 (Doc. No. 99-1). False provenances for the Arruza Collection Picassos, purportedly from Hector Pinera, were recovered from Crespo's computer.
Finally, in his November 2010 interview with Agent Siuzdak, Crespo himself admitted that the Arruza Collection and Gallery 25 works were fake. Gov't Resp., Exh. 1 (Doc. No. 174-1); Agent Siuzdak Testimony, Sent. Hng. Tr. 39:5-58:23. At the sentencing hearing, Crespo testified that the circumstances under which these inculpatory statements were made should cause the court to discredit them, in that they were a product of coercion and diabetic shock. However, the sentencing judge found his testimony on this issue was not credible, and that "much of it, if not all of it, was intended to mislead."
In addition, the sentencing judge already made findings that certain pieces of art were fraudulent. In particular, the sentencing judge explicitly found that the "Olga" Picasso was fake in connection with her finding of intended loss. Mem. of Decision at 3. She characterized the letters of provenance and pieces of art admitted into evidence at the hearing as "fake."
At oral argument, and in his subsequent memorandum, Crespo argued that allowing victims whose pieces were not already seized by the government to keep the fraudulently purchased artwork in addition to restitution for the full purchase price would result in a windfall to those victims that exceeds their actual loss. While the court is unconvinced that these pieces have anything other than nominal value, the court agrees that retention of the pieces by some victims in addition to restitution would be improper. Thus, the court will order those victims who have retained possession of the pieces sold to them by Crespo, for which they seek restitution, to return said pieces to the government for sale. The proceeds from any sale will be used to make restitution for all victims on a
Crespo also argues that in order to order restitution, the pieces purchased by the victims must be independently appraised, and the appraised valued deducted as an offset from any restitution ordered. Given that none of the victims seeking restitution will retain ownership of the pieces, the court views this argument as moot in terms of calculating an offset to the victim's actual loss. While the proceeds from the sale of any artwork will be applied to satisfy the restitution order on a
The court understands that Crespo also objects to the sale of pieces through a government sale, on the basis that any sale prices will be lower than the actual market value. However, the court views this as a separate issue from the issue of the amount of the loss actually suffered by the victims and caused by Crespo's offense; namely, by Crespo's inducing the victims to make purchases in the first instance by falsely representing to them the essential character of what they were buying. The court notes that the "primary and overarching purpose of the MVRA is to make victims of crime whole, to fully compensate these victims for their losses and to restore these victims to their original state of well-being."
Dr. Jan Ehrenwerth ("Ehrenwerth") entered into two separate agreements with Crespo in 2002 and 2003. The first involved an initial investment of $22,000. The second involved an initial investment of $32,500 for two works by Joan Miró. Testimony of Jan Ehrenwerth, Sent. Hng. Tr. 130:4-24, Gov't Resp. In 2005, Ehrenwerth rolled the money from his prior investments, along with an additional $78,000, to invest in the Arruza Collection, for a total of $132,500.
Crespo further argues that the two initial investments predate the period set forth in the Indictment, and that there is no evidence that any of the pieces involved in those investments were fake. However, whether the pieces that were the subject of the initial investments were fake is beside the point, because those investments were then reinvested in exchange for a percentage of profits for sales from the Arruza Collection. As stated previously, falsely representing that this later transaction was for authentic Picasso originals was part of Crespo's scheme to defraud. Thus, Ehrenwerth's actual loss includes the value of the investments that, in addition to the $78,000 cash, were exchanged with Crespo for Ehrenwerth's investment in the fraudulent works.
Rather than receive back the value of the Miró investment, Ehrenwerth requests return of the two Miró pieces. Crespo further argues that Ehrenwerth is not entitled to return of the two Mirós because their 2003 agreement, which provided a right for Ehrenwerth to repurchase the Mirós, was rolled into the investment in the Arruza Collection. Def.'s Obj. at 12. The court disagrees. As stated previously, Ehrenwerth's investment in the Arruza Collection was based on Crespo's false representations that the works were authentic original Picassos. Part of the actual loss Ehrenwerth suffered as a result of Crespo's offense was the loss of his Miró investment and its attached rights, including the right to purchase the Mirós for his own collection. Thus, allowing the Mirós to be returned to Ehrenwerth as restitution is appropriate.
Crespo sold to Mark Lewis ("Lewis") a painting he fraudulently represented to be an original Picasso. Lewis paid $35,000 plus another piece of artwork valued at $30,000 for the piece.
Crespo sold to Daniel Beardsley ("Beardsley") a painting he fraudulently represented to be an original Picasso. Beardsley paid $35,000 for the piece, and the government requests restitution in the amount of $35,000. Aside from his general objection regarding proof of inauthenticity, addressed
Crespo sold to John Johannemann ("Johannemann") a piece he fraudulently represented to be an original Picasso. Johannemann paid $6,307 for the piece, PSR ¶ 30, and the government requests restitution in this amount. Aside from his general objection regarding proof of inauthenticity, addressed
Crespo sold to Robert Marullo ("Marullo") seven items that he falsely represented to be original Chagall lithographs. Marullo paid $11,000 for the pieces, PSR ¶ 35, and the government requests restitution in this amount. Aside from his general objection regarding proof of inauthenticity, addressed
Crespo sold to Robert Chiapetta ("Chiapetta") four items that he falsely represented to be original Chagall lithographs. Chiapetta paid $8,249 for the pieces, PSR ¶ 36, and the government requests restitution in this amount. Aside from his general objection regarding proof of inauthenticity, addressed
Crespo sold to Thomas Lombardi ("Lombardi"), among other pieces, two items that he falsely represented to be original Chagall lithographs. Chiapetta paid $3,700 for the pieces, and the government requests restitution in this amount. Aside from his general objection regarding proof of inauthenticity, addressed
Crespo sold to Michael Board five purported Picassos and two purported Chagall pieces between June — October 2004 and in September 2009, as set forth in a letter from Board's lawyer, Government's Response ("Resp.") Exh. 6 (Doc. No. 174-1). One of these pieces, entitled the "Artist and the Model" or "Painter and the Model," was consigned back to Crespo for resale, who then sold the piece to Daniel Beardsley and replaced it on the wall of his studio with a framed copy.
Crespo argues, first, that restitution should be denied because the government has not shown that the artworks detailed in the letter from Board's attorney came from Gallery 25 or Arruza Collection, and none of the artwork has been independently determined to be fake. However, there is evidence in the record that works outside these groupings were falsely represented to be Picasso or Chagall originals. According to the FBI 302 Report of Interview, Crespo's own expert, Dr. Jay St. Mark, examined the "Opium Smoker" piece, which was not from the Arruza collection, and stated that it did not appear to be an authentic original by Pablo Picasso. Rep. Exh. 4 (Doc. No. 174-1) at 1. In addition, the "Olga" piece found by the sentencing judge to be fraudulent was not from the Arruza Collection. The evidence of record, including the evidence discussed with regard to Crespo's general objection,
Crespo also argues that Board traded the "Painter and the Model" piece that was later sold to Daniel Beardsley back to him, rather than consigning it for sale, and so Board is not entitled to restitution for the piece. In support, he submits a document entitled "Mike Trade ins" that appears to include the piece. Defendant's Supplemental Memorandum re: Restitution, Exh. 1 (Doc. No. 181-1). In response, the government submitted a sworn statement by Board confirming that he never traded in, exchanged, or sold the piece, but rather left it with Crespo to hold onto it in his gallery. Government's Response to Defendant's Supplemental Memorandum Re: Restitution, Exh. 1 (Doc. No. 182-1). Having reviewed both documents, it is unclear what the "Trade-ins" document signifies, and it thus inconclusive as to whether Board retained ownership of the piece. In light of Board's sworn statement to the contrary, in addition to other evidence of record,
Crespo further argues that Board is entitled, at most, to $6,316.67 for the "Painter and the Model." Having concluded that the restitution order properly includes all three Picassos listed on the invoice in question — which lists a total price of $18,950.00 without breaking down the price by piece — the court need not address this argument. Having reviewed the evidence of record, primarily the letter and receipts submitted by the government, the court concludes that the restitution sought by the government, $49,935, is an accurate measure of the purchase prices paid by Board for the purported Picasso and Chagalls, and thus of Board's actual loss. Thus, Board is entitled to restitution from the defendant in the amount of $49,935.
Crespo sold to John Desjardins ("Desjardins") four Picasso works as well as one Chagall "Daphnis & Chloe" in exchange for three works by Doug Ault valued at $8000 and an additional $5,995 paid on checks and a credit card, on October 31, 2004. PSR ¶ 38, Government's Response ("Resp.") Exh. 7 (Doc. No. 174-1). Desjardins also purchased a signed Chagall lithograph for $850 on April 3, 2005, and invested $3000 on October 21, 2006, for three purported signed Picassos that were to be sold at auction.
Crespo first objects on the basis that the government has not shown that certain works came from the Gallery 25 or Arruza Collection, or have been independently shown to be fake. For the same reasons discussed,
Crespo also argues that the amount requested by the government improperly includes $5,995.00 for framing. Based upon its review of the supporting documents submitted by the government, the court concludes that the restitution amount requested does not include the separate charge for framing, but rather represents the actual loss suffered by Desjardins based upon his purchase of fraudulent Picasso/Chagall pieces.
Crespo sold to Sherry Hansley ("Hansley") a hand signed, framed lithograph by Picasso and a hand signed etching by Chagall. Hansley paid $3,150 for the pieces, PSR ¶ 39, and the government requests restitution in this amount. Crespo objects on the basis that the government has not shown that either work came from the Gallery 25 or Arruza Collection, or that either work is fake. For the same reasons discussed,
Crespo sold to Edwin Elliot ("Elliot") items that he represented to be authentic hand-signed Picassos and Chagalls. PSR Second Addendum. Elliot paid a total of $4,195 for the pieces, and the government requests restitution in this amount. Crespo objects on the basis that the government has not shown that either work came from the Gallery 25 or Arruza Collection, or that either work is fake. For the same reasons discussed,
Crespo sold to Richard Friswell ("Friswell") nine Picassos and seven Chagalls between 2005 and 2007. PSR Second Addendum. Friswell paid a total of $36,950 for the pieces,
At oral argument, Crespo, through counsel, alleged that Friswell had since sold some of the pieces, and that any amount received in connection with those sales should be deducted from any restitution. Following the hearing, the government submitted a supplemental brief including a confirmation from Friswell that "the works purchased from Brandon Gallery are in my possession." Supplement to Oral Argument (Doc. No. 180) at 1. Based on this representation, no offset to restitution is required. Thus, Friswell is entitled to restitution from the defendant in the amount of $36,950.
In its Supplement to Oral Argument (Doc. No. 180), the government withdrew its application for restitution on behalf of Mazidis.
The government's Amended Application for Restitution (Doc. No. 167) is
According to the FBI 302 interview report, Crespo's own expert, Dr. Jay St. Mark, opined that pieces he examined — including Robert Marullo's Gallery 25 lithograph and several alleged Picassos — had "frame value" of $50 or $200, or "would be a fine purchase for $25.00 at a tag sale." Gov't Resp., Exh. 4 (Doc. No. 174-1).
