Case 2:18-cr-00124-MWF Document 34 Filed 06/05/18 Page 1 of 10 Page ID #:172
`
`NICOLA T. HANNA
`United States Attorney
`LAWRENCE S. MIDDLETON
`Assistant United States Attorney
`Chief, Criminal Division
`MARK AVEIS (Cal. Bar No. 107881)
`EDDIE A. JAUREGUI (Cal. Bar No. 297986)
`Assistant United States Attorneys
`Major Frauds Section
`1100 United States Courthouse
`312 North Spring Street
`Los Angeles, California 90012
`Telephone: (213) 894-4477/4849
`Facsimile: (213) 894-6269
`E-mail:
`mark.aveis@usdoj.gov
`
`eddie.jauregui@usdoj.gov
`Attorneys for Plaintiff
`UNITED STATES OF AMERICA
`
`
`
`UNITED STATES DISTRICT COURT
`
`FOR THE CENTRAL DISTRICT OF CALIFORNIA
`
`UNITED STATES OF AMERICA,
`
`No. CR 18-124-MWF
`
`
`
` Plaintiff,
`GOVERNMENT’S RESPONSE TO
`
`DEFENDANT’S APPLICATION FOR BAIL
` v.
`REVIEW
`
`
`PHILIP JAMES LAYFIELD,
`Hearing date: June 6, 2018
` aka Philip Samuel Pesin,
`Time: 11:00 a.m.
`
`
` Defendant.
`
`
`
`
`
`
`The government, by and through its counsel of record, the
`United States Attorney for the Central District of California,
`hereby responds to defendant Philip Layfield’s application for bail
`review, the support for which was filed on June 5, 2018. Dkt. 33.
`I.
`SUMMARY
`The government submits that defendant’s application should be
`denied because there are no conditions nor is there any combination
`of conditions to support bail for at least the following reasons:
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`NICOLA T. HANNA
`United States Attorney
`LAWRENCE S. MIDDLETON
`Assistant United States Attorney
`Chief, Criminal Division
`MARK AVEIS (Cal. Bar No. 107881)
`EDDIE A. JAUREGUI (Cal. Bar No. 297986)
`Assistant United States Attorneys
`Major Frauds Section
`1100 United States Courthouse
`312 North Spring Street
`Los Angeles, California 90012
`Telephone: (213) 894-4477/4849
`Facsimile: (213) 894-6269
`E-mail:
`mark.aveis@usdoj.gov
`
`eddie.jauregui@usdoj.gov
`Attorneys for Plaintiff
`UNITED STATES OF AMERICA
`
`
`
`UNITED STATES DISTRICT COURT
`
`FOR THE CENTRAL DISTRICT OF CALIFORNIA
`
`UNITED STATES OF AMERICA,
`
`No. CR 18-124-MWF
`
`
`
` Plaintiff,
`GOVERNMENT’S RESPONSE TO
`
`DEFENDANT’S APPLICATION FOR BAIL
` v.
`REVIEW
`
`
`PHILIP JAMES LAYFIELD,
`Hearing date: June 6, 2018
` aka Philip Samuel Pesin,
`Time: 11:00 a.m.
`
`
` Defendant.
`
`
`
`
`
`
`The government, by and through its counsel of record, the
`United States Attorney for the Central District of California,
`hereby responds to defendant Philip Layfield’s application for bail
`review, the support for which was filed on June 5, 2018. Dkt. 33.
`I.
`SUMMARY
`The government submits that defendant’s application should be
`denied because there are no conditions nor is there any combination
`of conditions to support bail for at least the following reasons:
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`Case 2:18-cr-00124-MWF Document 34 Filed 06/05/18 Page 2 of 10 Page ID #:173
`
`(1) defendant remains a flight risk, and the risk of flight has
`increased since defendant has seen discovery that overwhelmingly
`proves the charges, especially evidence that shows that defendant is
`facing substantial prison time; (2) defendant remains an economic
`danger to the community because, among other things, he negotiated
`from Costa Rica the disposition of at least one personal injury case
`that was property of defendant’s former firm’s bankruptcy estate,
`and without the client’s knowledge, and defendant has concealed
`computers and computer files by directing others to take such
`property from the U.S. to Costa Rica where such property was, in
`effect, wholly unavailable to the bankruptcy trustee for defendant’s
`former firm; (3) defendant is a danger to others as he has
`intimidated at least one witness and threatened to turn that witness
`over to immigration authorities for deportation, thereby also
`potentially interfering with the government’s ability to prepare for
`trial and to prosecute this case.
`II. FACTS
`A.
`Defendant’s Plan to Relocate to Costa Rica
`In a sworn statement before the bankruptcy court in the case
`involving his former firm, Layfield & Barrett (“L&B”), in which he
`was the 100% owner, defendant planned to wind-down L&B in 2016, and
`to then relocated to Costa Rica to “remove [him]self from the day-
`to-day handling of cases . . . .”1 It is undisputed that, at all
`relevant times, defendant (and his wife) were sole signatories for
`
`
`1 The government will provide supporting evidence before the
`time of the hearing.
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`Case 2:18-cr-00124-MWF Document 34 Filed 06/05/18 Page 3 of 10 Page ID #:174
`
`L&B’s “Interest on Lawyer’s Trust Account” (“IOLTA”) at Esquire
`Bank, account number ending in 2012 (“IOLTA 2012”), and into which
`the proceeds of dozens of L&B clients’ settlement proceeds were
`deposited concurrently with the time that defendant had decided to
`relocate to Costa Rica. The government’s accounting of the IOLTA
`account shows hundreds of thousands of dollars, if not well more,
`was transferred out of the IOLTA account and to the L&B operating
`account and to defendant’s personal account. At the relevant time,
`defendant had a substantial and rather lavish monthly cost of
`living, with his residence loan alone at more than $15,000, not to
`mention thousands of dollars in car payments and horse maintenance
`costs.
`B.
`
`Unpaid Clients
`1.
`Client J.N.
`As alleged in the indictment, and supported by substantial
`evidence disclosed prior to the present bail review to defendant as
`government’s discovery, J.N. engaged L&B in March 2016 to represent
`her in a personal injury case. The case was settled in August 2016
`for $3.9 million, the entire amount of which was deposited at the
`end of August into the IOLTA 2012 account. Save for a single
`“lulling payment” of $25,000 paid to J.N. in March 2017, J.N.
`received nothing, even though, as defendant concedes, L&B’s fee was
`at most approximately $1.5 million. J.N. may face a collection
`action by Medical for nearly $300,000, all of which defendant was
`supposed to ensure was paid as a lien against J.N.’s settlement
`proceeds.
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`Case 2:18-cr-00124-MWF Document 34 Filed 06/05/18 Page 4 of 10 Page ID #:175
`
`
`2.
`Client R.P.
`R.P. suffered a significant personal injury and retained
`counsel. That counsel referred the matter to defendant’s firm to
`associate into the case and split fees. Defendant was not
`responsible for the case at L&B; it was handled by other lawyers
`there. R.P.’s matter was settled for approximately $1.3 million and
`the settlement proceeds were deposited into the IOLTA 2012 account,
`of which approximately 50% was to be split between L&B and the
`referring firm. The referring firm receiving nothing. R.P.
`received a small “lulling” payment. After relocating to Costa Rica,
`and when confronted by the referring firm in a recorded call dated
`August 25, 2017, to explain why the client’s portion was simply not
`in the IOLTA 2012 account whose balance at the time of the call was
`practically zero, defendant said he would pledge new money from new
`cases to cover the obligation. Defendant also told the referring
`firm that defendant had provided L&B bank records to the L&B
`bankruptcy trustee (L&B had been placed in bankruptcy about three
`weeks earlier, a fact about which defendant well knew) when,
`according to the trustee’s counsel, defendant had failed to turn-
`over anything. The L&B lawyers who worked on the case got nothing.
`3. The Pineda Matter and the DRB Advance
`Another L&B matter involved a wrongful death case in which the
`decedent’s minor children were co-represented by two firms and L&B.
`Much of the work at L&B was done by an associate who quit the firm,
`no less because defendant refused to pay him a bonus earned in
`connection with the associate’s work. The Pineda matter was settled
`in late May 2017. On or about June 2, 2017, defendant applied to
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`Case 2:18-cr-00124-MWF Document 34 Filed 06/05/18 Page 5 of 10 Page ID #:176
`
`borrow against the entire amount of legal fees due all of the firms,
`not just the amount due L&B. Defendant did not disclose to the
`other firms that defendant was seeking the loan. By this time, by
`defendant’s own admissions, L&B was in dire financial condition,
`including because it could not meet its own payroll obligations and,
`at defendant’s direction, it had not paid its quarterly payroll
`taxes. Nonetheless, defendant still had enough money to pay to ship
`his cars and horses to Costa Rica. In any event, on June 8th and 9th,
`2017, as a condition of and in order to induce the lender for the
`Pineda fee advance to approve the loan, defendant caused the Pineda
`plaintiffs to execute new fee agreements, retaining defendant’s
`wholly-owned and new firm, that authorized defendant to receive all
`of the Pineda attorney’s fees. The loan, $700,000, was approved and
`funded on June 9, 2017. At the last minute, defendant directed the
`loan proceeds to be wired to his personal account instead of the L&B
`operating account. Four days later, defendant flew and relocated
`with his family to Costa Rica. The loan was never repaid and its
`balance has ballooned to more than $925,000.
`C.
`State Bar Recommendation of Disbarment
`In September 2017, the California State Bar charged defendant
`with multiple counts of comminging funds and related counts
`(including counts relating to J.N. and R.P., as described above).
`The State Bar had received over 50 complaints from former L&B
`clients, many of whom were non-English speakers, who had not
`received any money from settlements that were clearly deposited into
`the IOLTA 2012 account during the time that defendant had planned to
`relocate to Costa Rica. Defendant responded to the State Bar
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`Case 2:18-cr-00124-MWF Document 34 Filed 06/05/18 Page 6 of 10 Page ID #:177
`
`charges by claiming that he had been victimized by others at L&B to
`whom, in part, he entrusted passwords to L&B accounts. None of the
`witnesses whom the government has interviewed, and none of the
`numerous individuals who have volunteered information that defendant
`was in charge of the IOLTA 2012 account, have in any way supported
`defendant’s claim.
`In January 2018, defendant failed to appear for his State Bar
`trial, despite his recent claim in his bail application that he has
`freely traveled to the U.S. from Costa Rica and could, therefore,
`have attended. As a result of his failure to appear, the State Bar
`has recommended disbarment. Defendant failed to take action to set
`that order aside.
`D.
`S.J. Matter, Continuing Law Practice, and Illegal Use of
`Bankruptcy Estate Property
`L&B represented S.J. in a civil matter. On August 3, 2017, L&B
`was placed into an involuntary bankruptcy case by former
`client/plaintiffs who, as the indictment in this case has alleged in
`a similar manner, received virtually none of their settlement
`proceeds that were deposited into the IOLTA 2012 account that was
`solely controlled by defendant. On August 7, 2017, defendant
`signed, in Costa Rica, a declaration under penalty of perjury that
`he caused to be filed in the L&B bankruptcy case in which he stated
`that he should be permitted to wind-down L&B and that a trustee
`should not be appointed. On August 21, 2017, a trustee was
`appointed in the L&B case, in part because defendant’s own counsel
`withdrew and stated in a sworn statement that defendant was not
`available to file the required bankruptcy schedules. After the
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`Case 2:18-cr-00124-MWF Document 34 Filed 06/05/18 Page 7 of 10 Page ID #:178
`
`appointment of the L&B trustee, defendant negotiated the disposition
`of S.J.’s case; clearly, the S.J. case was property of the L&B
`bankruptcy estate. No less, S.J. did not consent to the settlement.
`And, defendant attempted to have S.J. execute new fee agreements
`with defendant’s recently (late 2017) formed new entity that
`defendant solely controlled from Costa Rica and which used a drop-
`box address in Florida as its principal business address.
`E.
`Concealment of Bankruptcy Estate Property and
`Destruction/Concealment of Evidence
`In or about July 2017, after defendant had relocated to Costa
`Rica, defendant instructed two of his employees, R.M. and R.M., to
`take and ship to Costa Rica computer servers from L&B’s offices.
`They did so. The servers contained books, records, files, and other
`materials that related to the operation of L&B business and which
`were (and are) relevant to the L&B bankruptcy. Defendant remains in
`control of the servers and has not turned them over to the
`bankruptcy trustee.
`F.
`Physical Threat to Witness R.M., and Threat to Deport
`R.M. is a citizen of India. Defendant arranged for R.M. to
`work at L&B to perform IT services, and then to move to Costa Rica
`to work for defendant to do the same. Defendant owed R.M.
`substantial wages and R.M. was essentially marooned in Costa Rica
`with his legal residency there and in the U.S. at defendant’s mercy.
`When R.M. demanded his fair wages, defendant physically threatened
`R.M. and further threatened to report R.M. to immigration
`authorities to cause his deportation.
`///
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`Case 2:18-cr-00124-MWF Document 34 Filed 06/05/18 Page 8 of 10 Page ID #:179
`
`
`
`G. Exposure and Notice to Defendant
`In discussions with defendant’s former counsel of record in
`this case, the government provided information regarding Guidelines
`loss and other sentencing factors. During a hearing in this case,
`defendant indicated that he had a document that included that
`information. The charges yield a statutory maximum sentence of more
`than 10 years. The Guidelines in this case, as determined by the
`government at this point and based on losses of more than $9
`million, could exceed 97 months.
`III. ARGUMENT
`The government must establish by a “clear preponderance of the
`evidence” that defendant is a flight risk, United States v.
`Motamedi, 767 F.2d 1403, 1406 (9th Cir. 1985), and by clear and
`convincing evidence that defendant poses a danger to the community,
`767 F.2d. at 1405. The Court may consider both the nature of the
`charges as well as punishment. United States v. Townsend, 897 F.2d
`989, 995 (9th Cir. 1990). Equally important, especially at this
`point in this case where the government has produced substantial
`discovery, is that “the government's evidence [i]s enough to put the
`defendant[] on notice that [he is] . . . subject to a trial in which
`[he] could reasonably believe [he] might be convicted.” Id.
`The government has had minimal notice of this bail review, yet
`even with minimal time to respond the evidence of defendant’s
`offense conduct is overwhelming, indefensible, and, no less to a
`lawyer like defendant, apt to place him on notice that he will spend
`many years in prison if convicted. There remains at this point no
`conclusive evidence about where millions of dollars in client funds
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`Case 2:18-cr-00124-MWF Document 34 Filed 06/05/18 Page 9 of 10 Page ID #:180
`
`and borrowed funds, not properly used by defendant to run his firm
`to enable his relocation to Costa Rica, may be. Defendant continued
`to practice law in Costa Rica and, it appears, to convert clients
`from his prior firm and from the bankruptcy estate. None of that
`activity can possibly be controlled by any type of bail. The nature
`of the charges, the proffered evidence, the history and
`characteristics of defendant’s brazen behavior and tangled business
`web, and the concern for witnesses and victims establish that
`defendant is both a flight risk and a danger to the community.
`IV. PROFFERED SURETIES
`None of the proffered pledges contains sufficient equity after
`costs of sale or disposition, and after reducing equity for
`homeowners’ exemptions or similar debtor’s rights, to provide any
`relief in the event of defendant’s failure to appear or breach of
`bond. None of the proffered sureties can realistically be able to
`assess whether any of them could actually prevent defendant from
`doing the things for which he ought, instead, to remain in custody
`to protect against repeating. Thus, the proffered pledges and
`sureties are simply insufficient to ensure defendant’s bond
`compliance, no matter how onerous the terms may be on defendant
`himself. Furthermore, notwithstanding that a number of family
`members have proffered to serve as sureties, there is insufficient
`evidence to determine defendant’s allegiance to them any more than
`was defendant’s allegiance to his former clients to whom he owed a
`fiduciary responsibility to keep their money secure and to pay it
`over to them.
`///
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`Case 2:18-cr-00124-MWF Document 34 Filed 06/05/18 Page 10 of 10 Page ID #:181
`
`V.
`
`CONCLUSION
`Among other factors under 18 U.S.C. § 3142 that the Court must
`now consider, the nature and circumstances of the offenses charged,
`the weight of the evidence against defendant, defendant’s character
`and record concerning appearances at court proceedings, and the
`nature and seriousness of danger to any person or the community all
`cut squarely against granting bail.
`Accordingly, for the reasons stated herein, and respectfully
`requesting an opportunity to supplement its position as may be
`permitted, the government requests that defendant’s bail review
`application be denied.
`
`
`
`
`
`
`
`Dated: June 5, 2018
`
`Respectfully submitted,
`
`NICOLA T. HANNA
`United States Attorney
`LAWRENCE S. MIDDLETON
`Assistant United States Attorney
`Chief, Criminal Division
`
` /s/
`MARK AVEIS
`EDDIE A. JAUREGUI
`Assistant United States Attorney
`Attorneys for Plaintiff
`UNITED STATES OF AMERICA
`
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