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United States v. Falte

United States District Court, M.D. Tennessee, Nashville Division

August 13, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
PATRICK DANE FALTE, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          WAVERLY D. CRENSHAW, JR. CHIEF UNITED STATES DISTRICT JUDGE

         Before the Court are the parties' objections to aggravating role enhancements applied in the Defendants' Presentence Reports. The Government objects to the enhancements applied to Defendants Faulkner, Leslie, and Budesek for Count 1. (See Doc. Nos. 167, 169, 171.) Falte objects to the enhancement applied to him for Counts 4 through 9. (See Doc. No. 160.) For the following reasons, the Government's objections are sustained and Falte's objection is overruled.

         I. Background and Enhancements Applied by Probation in the Defendants' Presentence Reports

         Defendants Falte, Faulkner, Leslie, and Budesek pled guilty to Count One, which charges that, between July 16, 2015, and October 2, 2016, they knowingly engaged in a child exploitation enterprise, in violation of 18 U.S.C. § 2252A(g). Falte also pled Guilty to Counts 4, 5, and 6, advertising child pornography, in violation of 18 U.S.C. § 2251(d)(1)(A) and (d)(2)(B), and Counts 7, 8, and 9, distribution of child pornography, in violation of 18 U.S.C. § 2252(a)(2). The offense conduct in the case centers around the Giftbox Exchange, a website that operated as a “hidden service” on the Tor anonymity network, which is designed specifically to facilitate anonymous communication over the Internet. The Giftbox Exchange was dedicated to the advertisement and distribution of child pornography and served as a forum for networking by individuals, including Defendants, interested in the sexual exploitation of children.

         The U.S. Probation Department calculated Defendants' offense level in their Presentence Reports. Under U.S.S.G. § 3B1.1(a), Probation assessed Falte a 4-level adjustment on Count 1 because he was “an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive.” Specifically, Probation found that the instant offense involved “a sophisticated child pornography scheme” over which Falte “had ultimate decision-making authority, ” including “develop[ing] and implement[ing] the website and set[ting] up the rules for membership in the website, ” and “review[ing] and approv[ing] posts containing child pornography.” Falte Presentence Report (“PSR”) at ¶ 54. Further, Probation found that Falte “maintained a public key cryptography system to verify the identity of Giftbox Exchange members and paid for the computer server hosting Giftbox Exchange using bitcoin, a type of encrypted digital currency. Id. He also controlled the private key access. Id. Probation assessed Falte a 4-level upward adjustment on Counts 4, 5, 6, 7, 8, and 9 on the same “organizer or leader” basis under U.S.S.G. § 3B1.1(a). Specifically, Probation found that Falte oversaw other Defendants and members of Giftbox Exchange when he:

advertised and distributed child pornography to induce website visitors to become members and post additional child pornography. He distributed child pornography from this site by creating content for [Giftbox Exchange], advertising for [Giftbox Exchange], and reviewing and approving posts containing child pornography by users who sought membership to [Giftbox Exchange]. Once a user was a member, the defendant continued to review and approve posts containing child pornography by the members and members who sought to become VIP members.

Falte PSR at ¶ 65.

         Probation assessed Faulkner a 3-level upward adjustment, under U.S.S.G. § 3B1.1(b) because he was “a manager or supervisor of a criminal activity that involved five or more participants or was otherwise extensive.” Specifically, Probation concluded that Faulkner was “an administrator of [Giftbox Exchange]” and, in that role, (1) “reviewed and approved posts containing child pornography”; (2) with Defendant Falte maintained a public and private key cryptography system to verify the identity of Giftbox Exchange members; and (3) maintained backup databases that would allow Faulkner to restore Giftbox Exchange if it went down. Faulkner PSR at ¶ 42.

         Probation did not assign any aggravating role enhancement to Leslie or Budesek.

         II. Legal Standards

         The Sentencing Guidelines provides that, “[b]ased on the defendant's role in the offense, ” the Court may increase a defendant's offense level as follows:

(a) If the defendant was an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive, increase by 4 levels.
(b) If the defendant was a manager or supervisor (but not an organizer or leader) and the criminal activity involved five or more participants or was otherwise extensive, increase by 3 levels.
(c) If the defendant was an organizer, leader, manager, or supervisor in any criminal activity other than described in (a) or (b), increase by 2 levels.

U.S.S.G. § 3B1.1. The Sixth Circuit has explained:

In distinguishing a leadership and organizational role from one of mere management or supervision . . . the court should consider the exercise of decision making authority, the nature of participation in the commission of the offense, the recruitment of accomplices, the claimed right to a larger share of the fruits of the crime, the degree of participation in planning or organizing the offense, the nature and scope of the illegal activity, and the degree of control and authority exercised over others. ...

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