Mark McDermott

Miller sentenced to nine months in jail after Judge rejects plea for probation

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by Mark McDermott

Manhattan Beach resident Jim Miller was sentenced to nine months jail time Monday morning in United States District Court.

Miller, 68, a former attorney for the Securities Exchange Commission and later for Body Glove International, was convicted in June on five counts of wire fraud and four counts of filing false tax returns after a short trial and jury deliberations of only 30 minutes. The charges derive from $332,000 he embezzled from MWRC Internet Sales, a company he co-founded with former Manhattan Beach mayor and Body Glove President Russ Lesser.

In an emotional plea before Judge George Wu near the end of Monday’s sentencing proceedings, Miller acknowledged his wrongdoing and apologized to Lesser, his friend of 40 years.

“I take full responsibility,” Miller said. “I apologize to you. I apologize to my family. I apologize to my friends. And I apologize to Russ Lesser.”

His voice breaking, Miller said he regretted ruining their friendship. “It was my fault,” he said.

Miller sought the judge’s leniency. Under federal sentencing guidelines, his convictions called for 41 t0 51 months incarceration. Miller and his attorney, James Duff, asked for probation, arguing that Miller’s lack of criminal history, his repayment of most the funds, and his work helping wounded Marines as a  co-founder of the Jimmy Miller Foundation warranted a relaxation of sentencing standards.

Miller told the judge he leads a “productive life” and said he hoped to give “for people who are very deserving of it, whatever help I can provide,” an apparent reference to his work with wounded warriors.

“I would plead with the court to allow me to continue to lead a productive life, with as little interruption as possible,” Miller said.

Judge Wu, acknowledging he found Miller’s statement persuasive,  reduced his initial sentence from 12 months and day to 9 months. Assistant U.S. Attorney Rebecca Kanter sought 36 months.

Lesser, who earlier in the sentencing proceedings declined an opportunity to address the court, finally did so after the judge made a reference to Lesser’s earlier stance that Miller should not get jail time. In brief remarks to the court, Lesser gave context to that suggestion —  which came four years ago, prior to Miller’s indictment, when the U.S. Attorney’s Office offered a plea deal that Lesser supported that would have prevented Miller from going to jail.

Lesser said the four year legal battle had sullied his own reputation. He said Miller had perpetuated the perception that the whole matter was a “business dispute,” rather than a crime, and that he was behaving vindictively in pursuing legal remedies. Lesser said he was surprised when acquaintances suggested he’d been vindicated after Miller’s conviction in June.

“I was vindicated because I was the bad guy,” Lesser said. “That hurt. I feel like I went overboard trying to help [Miller]. It’s been a very stressful period of time in our life. And that’s why I believe there should be some jail time. It shouldn’t go unpunished.”

Kanter suggested that the judge should take into consideration the fact that Miller had been given several opportunities to make amends, including at the time he first confessed he’d taken money from MWRC in March 2011.

“He had that opportunity,” Kanter said. “Unfortunately, he squandered it.”

They were doing accounting in order to file tax returns for 2010 when Miller told Lesser he’d taken money from company accounts, which as co-managing partner he oversaw. Miller “looked me in the eye,” Lesser said in court documents and promised to repay what he’d taken and to never take money from company accounts for personal use again.  According to Lesser’s testimony, Miller said he’d taken about $30,000; Lesser later discovered the amount was $104,000.

A year earlier, in January 2010, Miller told Lesser he was having financial difficulties, and Lesser agreed to personally loan him $3,000 per month; after Miller’s initial confession, Lesser continued to write Miller a monthly check for $3,000, with the stipulation that it would go towards paying back the money taken from MWRC.

“But then, after two months, he started writing checks to himself again,” Kanter said, noting that from 2009 to 2012 Miller wrote 110 checks to himself from MWRC funds.

According to court documents, Miller received personal loans from Lesser totaling $108,000. He repaid MWRC $95,500, including some payments he made before his theft, was discovered. During this time, court records indicate he was paid $60,000 a year as managing partner of the company, and $60,000 a year for contract work on Body Glove’s behalf.  Evidence at the trial showed Miller made false entries MWRC’s check register, which he described as “my scratch pad” in the course of the trial. Some of the checks from 2009 he coded “loan/advance.” Checks thereafter contained no such description.  

Miller had control over MWRC’s accounts. The friends had co-founded the company in 2000 and had high hopes that it would provide the missing link between online sales and brick-and-mortar stores, allowing brand name companies to sell online without competing with retailers who carried their product. MWRC developed patented software, initially tested by Body Glove, that allowed a customer to purchase from the manufacturer online but gave the retail store closest to where the order came from a share of each individual sales’ profit.

But the company never really took off. Miller testified that many of his financial struggles came from MWRC’s underperformance, although Lesser noted that by 2012 Miller’s total income was $160,000.

Lesser discovered that the embezzlement was ongoing in November 2012. While updating that year’s accounting, he saw that Miller had written himself more checks from the MWRC account. Lesser, who is a CPA, then investigated the matter further and discovered the scope of the theft. He hadn’t previously realized it had begun in 2009, that the amount Miller took in 2010 was far more than he had been lead to believe, and that Miller had written himself $116,000 in checks in 2011 and $77,000 in 2012.

“The day I figured out how much he had taken was the worst day of my life,” Lesser later wrote in a letter to the Department of Justice. “I felt totally betrayed by my closest  friend.”

 

Friendship

The first friends Jim and Nancy Miller made after arriving in Manhattan Beach in 1972 were Russ and Charlotte Lesser. Miller was regional counsel for the SEC and Lesser was a partner in the accounting firm of Windes and McClaughry. The Millers had two young boys and the Lessers two young boys and a young girl. Over the next four decades, the two men and their families would remain inseparable.

Never was that more apparent than during the tragedy that befell the Miller family in 2004. Their son Jimmy, a locally beloved 34-year-old adventure surfer and surf school owner, sank into depression and took his own life in his parents’ home. Jim Miller’s first phone call after calling paramedics was to Lesser, who immediately came to the Miller’s home. The Millers, unable to stay in their own home in the month after they found their son’s body, stayed at the Lesser’s home. Later, when they attempted to make something good out of their terrible loss and founded the Jimmy Miller Foundation, Lesser contributed the first $10,000 to the nonprofit, which provides ocean therapy to physically and psychologically wounded military veterans.

Lesser was shaken by the discovery he made in November 2012. He shared it with his son, Greg, an assistant U.S. Attorney, who suggested he turn the matter over to the FBI, which was better equipped to handle such an investigation than a local police department. Lesser also recorded a confrontation with Miller, unbeknownst to Miller, during which he conveyed how seriously he took the matter.

“This is called embezzlement…This is three hundred thousand dollars,” Lesser told Miller during the confrontation. “There was an article on the front page of the Wall Street Journal last week. Guy took a million dollars and he’s in the slammer. People go to jail for this kind of stuff. Do you understand that?”

“I do,” Miller said.

But over the course of the next four years, Miller maintained that what he’d done was not embezzlement. His characterization of the matter, both to the FBI and during the trial, was that he’d borrowed money from MWRC and that he’d eventually paid it all back. Which was largely true, although Lesser was never fully paid back the money he’d personally loaned Miller. After the FBI investigation began, Miller sold his house, which due to an extraordinarily complex business deal he and Lesser had entered a few years earlier involving Dive ‘N Surf had a $300,000 lien on it. This meant that indirectly, Dive ‘N Surf made MWRC whole from Miller’s depredations following the sale of Miller’s home.

This repayment was a central part of why Miller’s attorney James Duff argued that the case against his client was a “no loss” case and thus worthy of leniency in sentencing. The prosecution countered that most of the repayment that occurred was compelled, not voluntary (Miller also was found to owe the IRS $64,000 because he’d not reported any of the money he’d taken from MWRC as income).

But Duff also argued that the value of the work Miller does on behalf of local charities such as the Richstone Family Center, the SeaKeepers Society, and especially the Jimmy Miller Foundation far outweighs the benefits society would gain by imprisoning his client. Duff filed 22 character letters asking for leniency in sentencing, including three from U.S. Marine Corps officers.

“My involvement with Jim has been one of the most positive experiences in my life, as well as for literally hundreds of the lives that have passed through Wounded Warrior Battalion (West),” wrote Lt. Col. Paul Swanson, a retired Marine officer.  “From day one,  Jim has volunteered and personally left no stone unturned for our troubled population, and he continually went tremendously out of his way for us, with no desire for, or expectation of anything in return.”

Letters came from many different parts of Miller’s life. His minister of 25 years, John Calhoun of Manhattan Beach Community Church, wrote of Miller’s  generosity and gift for community service. A county lifeguard, Mike Murphy, wrote of how Miller provided guidance, love, and support during difficult days of his own life, not long after Jimmy’s death. Stephen Nordeck,  former Manhattan Beach mayor and mutual friend of Lesser’s, wrote he believed Miller’s intent was not to to steal “as a common thief” but with the intent to repay.

“The error has been repaid, but in the process, his life has been basically destroyed,” Nordeck wrote. “If I were Russ Lesser I would be very disappointed, like he is, but life is so short. Sometimes we must learn to move forward for the better.”

Miller’s brother-in-law, attorney David Harvis, spoke of how the work on behalf of the foundation had given Miller the satisfaction of helping others but had also come at some cost.

“I know that in the necessity of relating Jimmy’s story countless times to further the message and healing activities of the Foundation, Jim and Nancy are forced in their own minds to remember the horror of coming home from an afternoon movie to find their beautiful beloved oldest child hanging from their stairway balcony,” Harvis wrote, later in the letter noting that the years of trying to hold things together after the tragedy in part explained Miller’s actions. “I believe that Jim, because of some warped and distorted value assessment, felt that he needed to present a (falsely) prosperous face to the world to make and keep both the Foundation (and his business ventures with Russ) successful and growing. I believe that because Jim knew that he could (and ultimately did) pay back the funds, that his friend Russ would forgive him; obviously in his distorted thinking, not realizing that getting the money back was not the main issue to Russ, but the dishonesty and disloyalty was….My only explanation, (not excuse) for his actions is that the emotional upheaval caused by the suicide of his son Jimmy and the pressures to keep himself and his family recovering and functioning since then, had gradually so warped his judgement and values that he made some highly uncharacteristic, stupid, cowardly, and (even worse to the Jim Miller I knew) disloyal decisions.”

“I know that the punishment he has already begun to experience; the loss of the respect in the community, the loss of his license to practice law, the guilt of the pain he has brought to those of us who love him, and the knowledge that he will forever carry with him the burden of being a convicted felon, will be a punishment far worse to Jim than incarceration, and unlike incarceration, it will not end of its own accord, but only be lessened by his own efforts.”

Even the other co-managing partner of MWRC, Mark Kelly, wrote a letter in which he said that he believed Miller had always intended to repay the money and that his incarceration would not serve justice. “I believe the loss of his career, in a company which he worked so hard to make successful, and the loss of respect of his friends and colleagues and much of his community, has been a significant punishment already,” Kelly wrote.

One letter that was requested but not written on Miller’s behalf was from Lesser, who told the court that on June 28 he received an unexpected call from Miller. According to Lesser, he picked up the phone to find an “upbeat, happy” Miller on the other end. “Hello, Russ. This is Jim,” he said before Lesser told Miller that he didn’t think it was legally appropriate to talk and hung up the phone. A month later he received an email request from Jeff Miller, Jim’s son, asking for a letter supporting a probation only sentence.

“There are multiple reasons for my request, including the most obvious that your letter would be the most impactful to the court and what I hope we both agree on that jail time is a bit excessive in this case,” wrote Jeff Miller, who also wrote a letter to the judge in which he defended his father’s character and reluctantly noted the changes in his father’s personality since his other son’s death. “However, my main reasons are a bit more personal. I am trying to avoid explaining to my kids that their ‘pops’ is in jail and not to have my mom feel the full legal burden of his actions.”

Lesser instead wrote a letter to the court outlining why he thought probation would be too light a “slap on the wrist.” He wrote the matter had caused him anguish. He listed seven reasons, including Miller’s refusal of the initial plea bargain and a 1992 “business dispute” in which Miller was accused of defrauding another Manhattan Beach resident of $2 million (the matter was eventually settled out of court).

“The embezzlement of a third of a million dollars is a crime, not a business dispute,” he wrote. “Had I just forgiven him a second time, or quietly resolved it…Jim could seemingly credibly tell people in town his embezzlement from MWRC had been just another ‘business dispute.’ It is important that the community know about this crime and that this crime has serious consequences, not just probation, so there is not a third victim —  someone knocking on my door in a few years to ask, ‘Why didn’t you tell me Jim stole that money?”

Kanter, the U.S. Attorney prosecuting the case, said that Miller’s behavior —  particularly testimony that ran counter to facts —  bordered on obstruction of justice. She argued that too often white collar criminals are judged differently from other criminals and receive light sentences. She cited a precedent from a New York District Court ruling that addressed this disparity.

“Typically, these offenders appear at their sentencing well-represented and well-prepared, offering ample reasons why the Court should exercise exceptional discretion and show maximum leniency,” that opinion noted. “An outpouring of sympathy and support from relatives, friends, business colleagues, community leaders, and even some of the victims, accompanies the presentation. The beneficiaries of the defendant’s charitable work, in some cases, intensified since his arrest, testify about his devotion of good will and donation of resources . . . Compelling as it sounds on the surface, [the argument] fails in some essential ways. Fundamentally, it is flawed by what it omits. In particular, it makes no account of several other circumstances courts are instructed to weigh adequately in ordering a fitting sentence: to reflect the severity of the crime; to promote general respect for the law; to avoid unwarranted sentencing disparities; and to consider the impact of the crime not only on its immediate victims but on the larger social order.”

Judge Wu seemed to find both sides of the question of whether Miller deserved jail time partly compelling, at one point describing Miller as a “model citizen.” But he ultimately rejected the argument that a probation sentence adequately addressed the seriousness of the crime

“The commission of some good works is not a get-out-of-jail card,” Wu said.

Miller was ordered to report for incarceration at a facility yet to be determined by Nov. 13 and to pay the IRS $64,000 in restitution. Both sides have 14 days to appeal the decision.

Immediately after the sentencing, Lesser expressed little satisfaction other than to say he hoped the matter was finally over.

“It should have been over four years ago,” he said.

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