Metropolitan News-Enterprise


Wednesday, February 21, 2018


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Ninth Circuit Affirms 33-Month Sentence For Con Man Who Fleeced Investors

Panel Rejects Claim That Judge’s Comment That Defendant Might Have Come To Believe His Own Falsehoods Doesn’t Create an Inconsistency in Findings


By a MetNews Staff Writer


The Ninth U.S. Circuit Court of Appeals has affirmed a prison term of two years and nine months imposed on a laid-off FedEx driver who, lacking a trader’s license, conned victims into investing in a non-existent hedge fund, with the three-judge panel rejecting the asserted significance of the judge’s finding that the man might have come to believe his lies were actually true.

In a memorandum opinion on Friday, the panel upheld Joseph Knaup’s 33-month sentence and an order that he pay restitution to his six victims totaling $556,629.

Knaup, who pled guilty to two counts of wire fraud, insisted on appeal that the sentence was infirm based on the supposed internally inconsistent findings by District Court Judge Cathy Ann Bencivengo of the Southern District of California. Rejecting the contention, the panel—comprised of Senior Circuit Judge Ferdinand Fernandez and Circuit Judges Edward Leavy and Mary Helen Murguia—said:

“The district court’s remarks consistently reflect its finding that Knaup defrauded investors. The court’s speculation that Knaup may have come to believe his misstatements was not inconsistent with that finding.”

Prosecution Sought Less

The maximum period of incarceration Knaup faced was 20 years, but the sentence imposed by Bencivengo was six months longer than what the prosecution had said was the highest sentence that should be considered. The Ninth Circuit panel said the sentence “is substantively reasonable” in light of statutory sentencing criteria “and the totality of the circumstances, including the need to provide just punishment for the offense.”

Victims included Lois Mathews, who runs a small business, and her husband, Henry Mathews, who suffers from dementia. Knaup struck up a friendship with the couple and, at the celebration of their 45th wedding anniversary, urged them to make a $240,000 investment which, he promised, would be safe and enable Lois Mathews to retire.

The money was never invested; it was pocketed by Knaup.

Lois Mathews wrote to the court:

“I am 72 years old and work very hard in a very physical and stressful business and I will have to continue to work this hard for the rest of my life because of what Josh stole from us.”

Sentensing Judge’s Comments

In imposing sentence, Bencivengo told the defendant:

“This is theft, there is no question this is theft. You didn’t steal from a stranger, you stole as a friend, and in this court’s opinion that’s even worse. That’s a theft that goes right to the heart and soul and stays with the victim for a very long time.”

The judge commented:

“The idea that white collar crime should not be treated as seriously as drug smuggling or illegal entry…I think that’s wrong.”

Knaup was remanded to immediate custody in light of indications he was a flight risk. He had earlier gone to Mexico after his scheme began crumbling, but his defense attorney insisted that the move was not to avoid apprehension but because the costs of housing there are lower.

The case is U.S.A. v. Knaup, No. 17-50107.


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