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United States v. Chan

United States District Court, D. Connecticut

June 19, 2018

UNITED STATES OF AMERICA
v.
EDDIE CHAN, Defendant.

          ORDER RE MOTION TO STAY

          Jeffrey Alker Meyer, United States District Judge

         Defendant Eddie Chan is at the mercy of a compulsive gambling disorder. It led him to steal hundreds of thousands of dollars over the course of three years from a company for whom he worked as chief financial officer. He did not report his stolen money to the Internal Revenue Service, and he pleaded guilty for failing to do so.

         At sentencing Chan convinced me that his gambling disorder was a mitigating condition that warranted a sentence of probation rather than a Sentencing Guidelines range of imprisonment. Chan is happy about that. But he is not happy that I also concluded his employers should know about his conviction before they entrust him with a finance job. I decided to require notification to his employers because I took Chan and his counsel at their word that Chan's decades-long gambling disorder was “pathological, ” that it was “insidious, ” that it involved self-delusion about taking other people's money, and that it was “always lurking” and subject to relapse notwithstanding his significant efforts at rehabilitation.

         Chan is now appealing this employer notification condition. He thinks he should be free to work with his employers' finances while keeping them in the dark about his conviction. And now by moving for a stay of this condition pending appeal he hopes to delay his employers' learning the truth for however long it takes for his appeal to play out.

         I don't agree. In light of all the factors that govern a court's authority to enter a stay pending appeal, I conclude that Chan has not shown a likelihood of success on the merits, that he has not shown that he will suffer irreparable harm, and that he has not shown that the public interest weighs in his favor. Accordingly, I will deny Chan's motion to stay execution of the employer notification condition pending the outcome of his appeal, although I will temporarily extend the stay that is now in place in order to allow Chan to promptly seek a stay pending appeal from the court of appeals.

         Background

         On October 26, 2017, Chan appeared before the Court to enter a plea of guilty to making and subscribing a false tax return, in violation of 26 U.S.C. § 7206(1). His guilty plea arose from his failure to report on his federal tax returns hundreds of thousands of dollars that he stole from a fine arts company in New York City, where he had been employed as a bookkeeper and chief financial officer. All in all, Chan embezzled $386, 362 from the art firm's accounts beginning in 2013, continuing throughout 2014, and into 2015.

         According to Chan, he stole money to feed a pathological gambling disorder that has plagued him for most of his life. Now almost 60 years old, Chan first got hooked on gambling as a teenager when he started betting on the horses. He dropped out of high school to start working but “[a]s I started working and making more money, my gambling got heavier, ” and “[o]ne time I was gambling and was losing $1000 a day, ” and “I couldn't find money fast enough to get to the next day.” PSR ¶ 46.

         Gambling went on to wreck Chan's first marriage in 1991. According to Chan, “[i]t destroyed my first marriage, ” and “I had issues back then, ” and he “went and got help and was good for 5 to 6 years.” Ibid. But “[t]hen I got remarried and got complacent, ” and once again “[a] little fun turned into full time, full blown addiction.” Ibid.

         Chan's gambling addiction raged on for the next 15 years or so until he got caught stealing from his employer and faced the criminal investigation and prosecution in this case. Chan not only hid his gambling and thieving from his employer but he hid all that from his family as well. According to Chan, his family “always knew he gambled, but they did not know the extent of his addiction until he pled guilty for the instant offense.” PSR ¶ 46.

         Chan started gambling treatment again in November 2015. Yet notwithstanding his participation in weekly treatment sessions, he continued to gamble until before Thanksgiving 2017.

         Chan's employer fired him from his job after learning that he had been stealing money. Prior to pleading guilty in this case, Chan secured three new financial accounting jobs, including one full-time job with a company in New Canaan, Connecticut, and two part-time jobs with companies in Stamford, Connecticut. He did not tell his full-time employer about his guilty plea and asked the probation officer who prepared his presentence report not to do so.

         Chan described to the probation officer who wrote his presentence report about how gambling had taken over his life: “The reason that it got out of control is because I was helpless and powerless over it. Gambling is such an insidious disease, no different than drugs or alcohol. The only difference is they need it for their physical issues, [while] for gamblers it's a mental issue.” PSR ¶ 44. Chan also wrote a letter to the Court for sentencing purposes describing his life-long battle against gambling and noting in part that he had relapsed because “this insidious disease, compulsive gambling, is always lurking.” Doc. #21-1 at 3.

         At sentencing, Chan faced a sentencing guideline range of between 12 to 18 months of imprisonment. But he argued for a downward departure on grounds of what his counsel described as no less than a “mental illness” of “pathological gambling.” Doc. #45 at 7; Doc. #21 at 9-10 (requesting “diminished capacity” departure pursuant to USSG § 5K2.13). Among other documents, Chan submitted a gambling “fact sheet” attesting that “[u]p to half of persons with severe gambling disorder commit illegal acts to support their gambling” and that “[e]mbezzlement is rare, but gambling-related fraud and embezzlement cases are growing especially in regions close to casinos.” Doc. #21-7 at 2.

         Chan's own gambling treatment provider attested to the criminal dangers that accompany severe gambling disorders: “[T]his disease is so severe, that illegal acts such as writing bad checks and stealing or ‘borrowing' money, or goods from friends or relatives, with the intent of returning these items is very common, ” and “[e]mbezzlement cases, in fact, are growing within this population.” Doc. #21-6 at 2.

         Chan's counsel insisted at the sentencing hearing that Chan had taken his employer's money believing that he would strike it rich and pay it all back. I asked counsel “[s]o when you say he believed he was going to pay it back, was he essentially deluded about that by his sickness?” Counsel replied: “I believe so, by the sickness, ” and he went on to describe the views of Chan's treatment provider that “in a lot of people she treats [for gambling disorder] that, you know, they have deluded themselves into thinking that these are loans or I just am this close to winning and everything is going to be fine.” Doc. #45 at 8-9.

         Chan's counsel also acknowledged that Chan had lied to law enforcement agents when they initially questioned him about his diversion of funds (calling the large amount of monies deposited to his bank account a “bonus”). Although he soon reached out to the agents to set the record straight, he nonetheless continued to gamble even after knowing that he was under investigation. See Doc. #25 at 2-3, 7. During the course of the Government's investigation, the Government was assured by Chan's “gambling counselor” that Chan “had ceased gambling and had excluded himself from all gambling operations in the state, ” only for the Government to learn later on its own “that was not the case, ” and the Government “verified that his activity at off-track-betting parlors had continued and continued consistently.” Doc. #45 at 27.

         To explain the fact that Chan had kept on gambling even after being confronted by law enforcement authorities, Chan's counsel observed that “long-term addiction … doesn't go away very easily.” Id. at 10. He cited again the views of the treatment provider that “[w]hat she would see in her patients and indeed with Mr. Chan is that there's a resistance to thinking that this is a problem, resistance to thinking that they need to stop.” Id. at 10-11.

         No matter the risk of relapse, Chan's counsel stated at sentencing that “our efforts at rehabilitation don't have to be perfect, that what can happen is that we have a lot of false starts, but really we're on an upward trajectory now where Mr. Chan has excluded himself from all of the gaming establishments in Connecticut and in New York.” Id. at 11. When I asked about whether Chan engages in internet gambling, Chan's counsel had no reply: “I don't know, your Honor, off the top of my head whether that includes internet gaming.” Ibid.

         At sentencing I described at length to Chan's counsel my concerns about the risk that Chan's gambling addiction posed to any current or future employers in the event that they unknowingly entrusted him with access to their assets and funds:

So you have somebody here who, by your description, is a pathological gambler, doesn't go away easily, it's been a lifelong issue for him. Although he is not-does not have criminal history, he's not a criminal recidivist, he is a gambling recidivist, right, because he's had times, even by his own acknowledgement and his own letter to the Court, where he addresses issues and then relapses.
He's very secretive, right, from what we know. His wife didn't know about, according to the Presentence Report, the extent of what he was doing even just until about the time that he pled guilty last October.
When you combine all of those and a track record of having taken hundreds of thousands of dollars from an employer here, I can't see how it would be consistent with serving the purposes of protecting the public not to require notification to employers, any employers who trust him in some manner with financial activities of some sort in which he might have access to financial institutional assets or access to confidential financial information, essentially access to financial assets or ...

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