Case: 1:21-cr-00491-JPC Doc #: 593 Filed: 04/22/25 1 of 9. PageID #: 11879
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`UNITED STATES OF AMERICA,
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`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF OHIO
`EASTERN DIVISION
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`Case No. 1:21-cr-491-1
`
`Judge J. Philip Calabrese
`
`Magistrate Judge
`Jonathan D. Greenberg
`
`
`MEMORANDUM OPINION
`
`Plaintiff,
`
`
`v.
`
`PAUL SPIVAK,
`
`
`Defendant.
`
`
`
`Following a sixteen-day trial, a jury convicted Defendant Paul Spivak of
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`conspiracy to commit securities fraud and two counts of wire fraud. It returned
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`verdicts of not guilty on some twenty-nine counts against him charging securities
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`fraud and wire fraud. Then, Mr. Spivak pled guilty to a second charge of conspiracy
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`to commit securities fraud and six counts of securities fraud and wire fraud rather
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`than proceed to trial on those charges.
`
`At sentencing, application of the new guideline governing acquitted conduct
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`presented questions of first impression in determining the loss amount. In particular,
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`the questions involve calculation of the loss amount where Defendant was convicted
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`of conspiracy but acquitted on certain substantive fraud counts. Because of the
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`novelty and complexity of this issue, the Court memorializes its analysis of this issue
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`under the United States Sentencing Guidelines.
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`
`
`
`
`UNITED STATES OF AMERICA,
`
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF OHIO
`EASTERN DIVISION
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`Case No. 1:21-cr-491-1
`
`Judge J. Philip Calabrese
`
`Magistrate Judge
`Jonathan D. Greenberg
`
`
`MEMORANDUM OPINION
`
`Plaintiff,
`
`
`v.
`
`PAUL SPIVAK,
`
`
`Defendant.
`
`
`
`Following a sixteen-day trial, a jury convicted Defendant Paul Spivak of
`
`conspiracy to commit securities fraud and two counts of wire fraud. It returned
`
`verdicts of not guilty on some twenty-nine counts against him charging securities
`
`fraud and wire fraud. Then, Mr. Spivak pled guilty to a second charge of conspiracy
`
`to commit securities fraud and six counts of securities fraud and wire fraud rather
`
`than proceed to trial on those charges.
`
`At sentencing, application of the new guideline governing acquitted conduct
`
`presented questions of first impression in determining the loss amount. In particular,
`
`the questions involve calculation of the loss amount where Defendant was convicted
`
`of conspiracy but acquitted on certain substantive fraud counts. Because of the
`
`novelty and complexity of this issue, the Court memorializes its analysis of this issue
`
`under the United States Sentencing Guidelines.
`
`
`
`
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`Case: 1:21-cr-00491-JPC Doc #: 593 Filed: 04/22/25 2 of 9. PageID #: 11880
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`FACTUAL AND PROCEDURAL BACKGROUND
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`Along with a number of co-Defendants, Paul Spivak was charged as part of a
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`criminal scheme to defraud investors and potential investors in US Lighting Group,
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`Inc., a publicly traded company. At its core, the scheme involved the artificial
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`manipulation of the share price of this penny stock to allow Defendant to enrich
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`himself at the expense of investors.
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`The Second Superseding Indictment
`A.
`In the second superseding indictment, the grand jury charged Paul Spivak
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`with two counts of conspiracy to commit securities fraud (Count 1 and Count 2),
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`securities fraud (Counts 5 through 12 and Counts 18, 19, 20, and 22), wire fraud
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`(Counts 23 through 43 and Counts 44 through 47), and obstruction of justice (Counts
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`48, 49, and 50).
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`Because the conspiracies charged in Count 1 and Count 2 involved different co-
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`conspirators and took place over different periods of time, the Court severed trial on
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`each conspiracy and its related substantive charges into separate phases before the
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`same jury. Before trial, others charged in each conspiracy pled guilty, leaving
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`Mr. Spivak to stand trial in the first phase of the trial on the Count 1 conspiracy with
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`one other Defendant, Charles Scott.
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`The Jury’s Verdicts in Phase 1 and Phase 2
`B.
`Following the first phase of trial on Count 1 and the related substantive
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`charges, the jury returned a verdict on September 10, 2024. The jury found Paul
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`Spivak guilty of Count 1, conspiracy to commit securities fraud and on two wire fraud
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`charges (Count 27 and Count 28). It found him not guilty on securities fraud
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`Case: 1:21-cr-00491-JPC Doc #: 593 Filed: 04/22/25 3 of 9. PageID #: 11881
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`(Counts 5 through 12 and Counts 18 and 19) and on other wire fraud charges
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`(Count 23 through 26 and Counts 29 through 43). The jury found co-Defendant
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`Charles Scott not guilty on Count 1 and on one count of securities fraud (Count 13).
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`Before the phase two trial commenced, Mr. Spivak pled guilty to the conspiracy
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`charged in Count 2 and the related substantive charges, which included six counts of
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`securities and wire fraud. The United States agreed to dismiss the obstruction of
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`justice charges. Mr. Scott then proceeded to trial on the Count 2 conspiracy and its
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`related substantive charges. The jury found him guilty on Count 2 and Count 20, a
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`substantive count of securities fraud, but not guilty on two wire fraud charges
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`(Count 45 and Count 47).
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`ANALYSIS
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`Under federal law, “[n]o limitation shall be placed on the information
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`concerning the background, character, and conduct of a person convicted of an offense
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`which a court of the United States may receive and consider for the purpose of
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`imposing an appropriate sentence.” 18 U.S.C. § 3661.
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`I.
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`The Acquitted Conduct Guideline (Section 1B1.3(c))
`Section 1B1.3 of the United States Sentencing Guidelines addresses the
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`relevant conduct a court may consider in determining the guideline range for a
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`particular defendant. Until recently, conduct of which a defendant was acquitted at
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`trial could serve as relevant conduct because of the different standards of proof for
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`finding guilt (proof beyond a reasonable doubt) and at sentencing (preponderance).
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`See United States v. Watts, 519 U.S. 148, 156 (1997) (per curiam).
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`3
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`Case: 1:21-cr-00491-JPC Doc #: 593 Filed: 04/22/25 4 of 9. PageID #: 11882
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`Effective November 1, 2024, Amendment 826 modified Section 1B1.3 to
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`prohibit the consideration of acquitted conduct in determining a defendant’s
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`guideline range, adding subsection (c), which provides that “[r]elevant conduct does
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`not include conduct for which the defendant was criminally charged and acquitted in
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`federal court.” U.S.S.G. § 1B1.3(c). This new guideline comes with an important
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`qualification: “unless such conduct also establishes, in whole or in part, the instant
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`offense of conviction.” Id. The amended guideline provides, in its entirety:
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`Acquitted Conduct.—Relevant conduct does not include conduct for
`which the defendant was criminally charged and acquitted in federal
`court, unless such conduct also establishes, in whole or in part, the
`instant offense of conviction.
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`Id.
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`In the run of cases, the line between acquitted conduct and “the instant offense
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`of conviction” might prove fairly straightforward or, at least, manageable. In a case
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`involving a conspiracy, however, matters quickly become more complicated. In
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`conspiracy offenses, relevant conduct embraces “all acts and omissions committed . . .
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`and in the case of a jointly undertaken criminal activity all acts and omissions of
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`others that [are] [1] within the scope of the jointly undertaken criminal activity, [2]
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`in furtherance of that criminal activity, and [3] reasonably foreseeable in connection
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`with that criminal activity.” U.S.S.G. § 1B1.3 cmt. n.3(A)–(B). Even without
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`accounting for acquitted conduct, identifying relevant conduct in a conspiracy can
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`prove difficult because relevant conduct and the scope of a conspiracy are not
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`necessarily the same. Id. cmt. n.3(B). To determine a defendant’s accountability
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`under the guidelines, “the court must first determine the scope of the criminal activity
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`4
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`Case: 1:21-cr-00491-JPC Doc #: 593 Filed: 04/22/25 5 of 9. PageID #: 11883
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`the particular defendant agreed to jointly undertake (i.e., the scope of the specific
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`conduct and objectives embraced by the defendant's agreement).” Id. “Acts of others
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`that were not within the scope of the defendant's agreement, even if those acts were
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`known or reasonably foreseeable to the defendant, are not relevant conduct.” Id.
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`Against this backdrop, the new acquitted conduct guideline in Section 1B1.3(c)
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`makes what might appear to be a modest change, removing from the equation
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`responsibility for conduct for which a defendant was federally charged and acquitted.
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`For a defendant such as Mr. Spivak, however, whose conduct the record shows
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`extends to the ends of the conspiracy, the jury’s verdict of guilty on the conspiracy
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`stands in some tension with acquittal on the underlying substantive offenses. To be
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`clear, that tension arises only for guideline purposes—specifically, determining the
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`loss amount. As the Court explained elsewhere (see, e.g., ECF No. 540, PageID
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`#10370–72), the verdicts are not inconsistent. Put another way, a conspiracy may—
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`as in this case—subsume underlying substantive counts such that, when determining
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`the guideline range, not taking that conduct into account understates the conduct at
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`issue in the conspiracy, notwithstanding an acquittal on that underlying charge.
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`Recognizing the complexity of the issue, the Sentencing Commission explained in a
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`podcast that it did not “try and come up with a resolution to every single murky case.
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`[The Commission] actually left it to the discretion of the federal judge who hopefully
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`sat through that trial and will be able to better parse through” the record. Sentencing
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`Practice Talk: Episode 27, Part 2, United States Sentencing Commission (Oct. 31,
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`2024).
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`5
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`Case: 1:21-cr-00491-JPC Doc #: 593 Filed: 04/22/25 6 of 9. PageID #: 11884
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`Based on its study and analysis of this issue since the jury returned its
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`verdicts, the Court determines that the “unless” clause in the new acquitted conduct
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`guideline in Section 1B1.3(c) does a lot of work to address this problem. That is,
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`where the offense of conviction also establishes what would otherwise be acquitted
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`conduct, then the sentencing court may take the acquitted conduct into account in its
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`guideline calculation. A new application note confirms this reading of the guideline:
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`Subsection (c) provides that relevant conduct does not include conduct
`for which the defendant was criminally charged and acquitted in federal
`court, unless such conduct establishes, in whole or in part, the instant
`offense of conviction. There may be cases in which certain conduct
`underlies both an acquitted charge and the instant offense of conviction.
`In those cases, the court is in the best position to determine whether
`such overlapping conduct establishes, in whole or in part, the instant
`offense of conviction and therefore qualifies as relevant conduct.
`U.S.S.G. § 3B1.3(c) cmt. n.10. In short, when calculating the guideline range, a court
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`may consider any evidence of the total loss within the scope of the conspiracy, even if
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`a jury acquitted a defendant of some conduct accounting for some specific losses.
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`II.
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`The Loss Amount and Paul Spivak’s Acquitted Conduct
`Defendant Paul Spivak objects to the loss amount in his guideline calculation
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`based on the inclusion of amounts in the Count 1 conspiracy of which he was
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`acquitted. He maintains that the recommended guideline calculation relied on
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`acquitted conduct to determine the loss amount. (ECF No. 532, PageID #10291.)
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`However, Defendant did not undertake a loss calculation of his own or propose (or
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`demonstrate) such a calculation using a different method. For its part, the United
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`States maintains, simply, that the acquitted conduct rules do not prelude the Court
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`6
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`Case: 1:21-cr-00491-JPC Doc #: 593 Filed: 04/22/25 7 of 9. PageID #: 11885
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`from considering the full range of conduct underlying a conspiracy conviction. (ECF
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`No. 573, PageID #11096.)
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`
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`For purposes of the Count 1 conspiracy, the loss consists of the sum of (1) the
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`amount investors spent to acquire restricted stock, plus (2) the amount they spent to
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`acquire free-trading stock. These are actual losses, not intended losses. At trial, the
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`evidence showed that the Count 1 conspiracy involved a total of $6.9 million. (ECF
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`No. 461, PageID #5367; see also id., PageID #5437.) Notwithstanding the efforts of
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`the United States to point to greater losses now (ECF No. 573, PageID #11099–
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`11102), the Court sticks to the evidence presented at trial for purposes of calculating
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`the guideline loss amount and declines to engage in creative accounting to augment
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`or tamp down the number.
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`
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`But that calculation of the loss amount from the phase one trial comes before
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`accounting for acquitted conduct. As Defendant summarizes in his post-trial motion
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`for a judgment of acquittal (ECF No. 480, PageID #9003-04), the jury acquitted
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`Mr. Spivak of charges involving investor purchases of restricted USLG stock,
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`commissions paid from USLG to the pirates, and two transactions with co-Defendant
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`Richard Mallion (though the jury unanimously convicted Mr. Spivak on two counts of
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`wire fraud in connection with transactions involving Mr. Mallion). Because many of
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`acquittals involve transactions charged as both securities fraud and wire fraud, the
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`number of not guilty verdicts looks like it has a greater effect than it does. By the
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`Court’s calculation, the counts of acquittal amount to $303,500 of the total loss
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`amount.
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`7
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`Case: 1:21-cr-00491-JPC Doc #: 593 Filed: 04/22/25 8 of 9. PageID #: 11886
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`Under the acquitted conduct guideline in Section 1B1.3(c), however, the court
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`may consider this amount in calculating the loss amount if Mr. Spivak’s conviction
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`for conspiracy in Count 1 also establishes this loss amount. Assuming that it does,
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`the traditional relevant conduct guideline counsels against including at least some of
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`this amount in the loss calculation. See U.S.S.G. § 1B1.3 cmt. n.3(B). “Acts of others
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`that were not within the scope of the defendant's agreement, even if those acts were
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`known or reasonably foreseeable to the defendant, are not relevant conduct.” Id.
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`Erring on the side of caution, excluding the entirety of this amount drops the loss
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`amount to just under $6.6 million.
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`To this amount, the Court must add the amount of intended loss for the
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`Count 2 conspiracy, which involved an undercover operation and, accordingly, did not
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`involve actual losses. (See ECF No. 573, PageID #11099.) At the sentencing of
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`Charles Scott, the Court found a loss amount of $3.25 million for the Count 2
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`conspiracy and noted that that figure was conservative. Again, the Court need not
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`wade through various calculations or additional brokerage account statements or the
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`like to try to adjust this figure. To be sure, there are different amounts of stock
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`available for the co-conspirators in this count, and application of the relevant conduct
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`guideline might result in a different calculation for each. In this case, however, the
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`interests of judicial economy and consistency among the primary co-conspirators in
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`Count 2 weighs in favor of using the same loss amount. In any event, with additional
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`points in the guideline calculation at losses of $9.5 million and $25 million, there is
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`not much reason to calculate the loss to the penny. For those reasons too, the Court
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`8
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`Case: 1:21-cr-00491-JPC Doc #: 593 Filed: 04/22/25 9 of 9. PageID #: 11887
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`does not delve into the intricacies of determining how much of the $303,500 in losses
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`tied to Mr. Spivak’s acquitted conduct may still be relevant conduct under the new
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`guideline. The specific answer to that question simply does not affect the calculation
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`of the loss amount under the guidelines.
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`CONCLUSION
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`After sitting through weeks of trial, and after analyzing for months how the
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`issue of acquitted conduct and the guideline might affect sentencing following a
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`conspiracy conviction, the Court finds itself in the position the Sentencing
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`Commission contemplated—using its experience and familiarity with the record to
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`apply the acquitted conduct guideline to a complicated set of facts. For all the
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`foregoing reasons, giving Defendant the benefit of the doubt in its application of the
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`guidelines, the Court finds that the loss amount for Mr. Spivak in the Count 1
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`conspiracy is just under $6.6 million plus $3.25 million in the Count 2 conspiracy, for
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`a total loss amount of more than $9.5 million, which adds 20 levels to the guideline
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`calculation.
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`Dated: April 22, 2025
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`
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`J. Philip Calabrese
`United States District Judge
`Northern District of Ohio
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`9
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