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United States v. Lord

United States District Court, W.D. Louisiana, Shreveport Division

April 20, 2017

UNITED STATES OF AMERICA
v.
MICHAEL A. LORD AND RANDALL B. LORD

          HORNSBY MAGISTRATE JUDGE

          MEMORANDUM RULING

          S. MAURICE HICKS, JR. UNITED STATES DISTRICT JUDGE

         Before the Court is Defendants Michael A. Lord (“Michael Lord”) and Randall B. Lord's (“Randall Lord”) (collectively “Defendants”) Motion to Withdraw their guilty pleas (Record Document 51). The Government opposes Defendants' Motion. See Record Document 54. For the reasons contained in the instant Memorandum Ruling, Defendants' Motion is DENIED.

         FACTUAL AND PROCEDURAL BACKGROUND

         Randall Lord is a former chiropractor and resident of Shreveport, Louisiana. See Record Document 1. Michael Lord is Randall Lord's son, and he lives with his father in Shreveport. See id. Beginning in 2013, Defendants began operating a business in which they exchanged cash, credit card payments, and other forms of payment for bitcoins. See Record Document 42 at 11-13 (guilty plea hearing testimony of Darrin Heusel, IRS Criminal Investigations Division). The bitcoin is a decentralized form of online currency that is maintained in an online “wallet.” See id. Bitcoins can be purchased from online exchangers or brokers, who often charge a fee for making such an exchange. See Id. Bitcoins can then be exchanged for other goods or services online and transferred to another person's wallet. See id. That person can then either use such bitcoins to purchase other goods and services or convert them back to U.S. dollars or some other traditional form of currency. See id.

         Defendants operated their bitcoin business through a website called localbitcoins.com, on which they posted advertisements for bitcoin exchange services. See id. at 14. Persons who engaged Defendants' services would transfer money to Defendants by some traditional means, such as cash or wire transfer. See id. Then, Defendants would purchase bitcoins from Coinbase, another online bitcoin broker, and transfer the bitcoins back to the buyer after subtracting their commission. See Id. Though Defendants initially used personal bank accounts for these transactions, they eventually used accounts associated with the following: (1) Randall Lord's former chiropractic clinic, Jewella Chiropractic Clinic; (2) two “doing business as” designations, Crypto Processing Solutions and Quantum Health; and (3) two newly-formed Nevada limited liability companies, Data Security LLC and Pelican Mining LLC. See id. at 12; see Record Document 1 at ¶ 1.

         At some point in the spring of 2014, Coinbase contacted Defendants regarding the volume of activity that had been occurring in their account and its consequences. See Record Document 42 at 15-16. Coinbase informed Defendants that because they were acting as bitcoin exchangers they were required to register with the Federal Crimes Enforcement Network (“FinCEN”), a division of the Department of the Treasury, under March 2013 guidance from FinCEN that clarified that bitcoin exchangers were subject to registration requirements. See id. In July 2014, Defendants represented to Coinbase that they were registered with FinCEN, though they were not registered with FinCEN at that time. See id. Defendants did not register with FinCEN until November 2014. See id. By that time, Defendants' bitcoin business had exchanged more than $2.5 million for bitcoins for customers all around the United States. See id. at 15-17. Defendants continued operating the bitcoin exchange business through 2015. See id. at 11-25.

         At the same time, Michael Lord became involved in a drug conspiracy. See id. at 27-40 (guilty plea testimony of Richard Brian Upchurch, Department of Homeland Security Investigations Division). Evidently, Randall Lord was not involved in this separate conspiracy. See id. In May 2015, agents of the Department of Homeland Security in San Francisco intercepted a package from China that contained approximately one kilogram of 5F-AB-PINACA, a synthetic cannabinoid that is a controlled substance. See id. at 27-28. The package was addressed to 711 Seventh Street, Springhill, Louisiana. See id. at 28. On May 18, 2015, the Department of Homeland Security conducted a controlled delivery of the package to that address and subsequently arrested Al Hasnat Langhari (“Langhari”) in connection with receiving the package. See id.

         While discussing this package and other matters in an interview with Homeland Security agents, Langhari stated that he had been a customer of Defendants' bitcoin exchange business on localbitcoins.com, and that he had come to know and trust Michael Lord after several exchanges. See id. at 29. Langhari stated that he and Michael Lord had decided to start a business for the distribution of Xanax, a commercial name for the Schedule IV controlled substance alprazolam, and use the “darknet” website Agora to set up this business. See id. To start this business, they had acquired a pill press, a binding agent to be mixed with alprazolam, a powder containing alprazolam itself, and a metal part called a “Xanax die.” See id. at 29-32. Agents either intercepted these materials in the mail or found all of these materials during a search of a business owned by Langhari's father in southern Arkansas. See id.

         After Langhari's arrest, he contacted his girlfriend, Michell Duhé, a student at Louisiana State University in Baton Rouge. See id. at 35-36. He convinced her and several friends of hers to sell what was described as 10, 000 Xanax pills to attempt to raise bail money for Langhari. See id. However, the pills were in north Louisiana, and needed to be taken to south Louisiana to be sold. See id. Michael Lord took the pills to south Louisiana and delivered them to a friend of Duhé's, Zach Bajat (“Bajat”). See Id. at 36-37. In a subsequent interview with federal agents, Bajat was able to identify Michael Lord out of a six-person lineup as the person who delivered the pills to him. See id. at 37. Michael Lord later denied involvement in this drug conspiracy when interviewed by federal agents in July 2015. See id. at 37-38.

         On November 18, 2015, a federal grand jury for the Western District of Louisiana issued a 15-count indictment against Defendants. See Record Document 1. Count 1 of the indictment charged Defendants with conspiracy to operate an unlicensed money service business in violation of 18 U.S.C. § 371 (conspiracy) and 18 U.S.C. § 1960 (unlicensed money transmitting businesses). See id. at 1-3. Counts 2-14 charged Defendants with various other crimes associated with operating their bitcoin exchange business. See id. at 7-16. Count 15 charged Michael Lord with being a member of a drug conspiracy in violation of 21 U.S.C. § 846, 841(a)(1), and (b)(1)(C). See id. at 17. On April 19, 2016, Defendants appeared before this Court and pleaded guilty to Count 1 of the indictment and Michael Lord pleaded guilty to Count 15 of the indictment pursuant to a plea agreement with the Government. See Record Documents 31, 34, and 35. Defendants filed the instant Motion to Withdraw their guilty pleas on February 21, 2017. See Record Document 51. The Government opposes the Motion, and the Motion is fully briefed. See Record Documents 54 and 57.

         LAW AND ANALYSIS

         I. Legal Standards

         Federal Rule of Criminal Procedure 11(d)(2)(B) states that a criminal defendant may withdraw a plea of guilty after the court accepts the plea but before the imposition of a sentence when “the defendant can show a fair and just reason for requesting the withdrawal.” Thus, a defendant “does not have an absolute right to withdraw a plea, ” and a defendant bears the burden of persuading the Court that the reason advanced for withdrawal is “fair and just.” United States v. Conroy, 567 F.3d 174, 177 (5th Cir. 2009); Fed. R. Crim. P. 11(d)(2)(B). A district court has ...


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