II!'"
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DOR1G1NAL
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STATE OF ILLINOIS
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COUNTY OF DU PAGE. )
IN THE CIRCUIT COURT OF DU PAGE COUNTY
FOR THE EIGHTEENTH JUDICIAL CIRCUIT OF ILLINOIS
FOR THE PEOPLE OF THE
STATE OF ILLINOIS,
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Plaintiff,
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vs.
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SS:
KEVIN CARNEY,
Defendant.
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No.
09 CF 2565
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REPORT OF PROCEEDINGS had at the hearing of the
above-entitled cause, before the Honorable JUDGE GEORGE
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BAKALIS, Judge of said Court, commencing on the 11th day
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of May, A.D. 2011 .
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PRESENT:
MR. ROBERT BERLIN, State's Attorney of
DuPage County, by
MR. EDWARD SNOW, Assistant Attorney General,
. appeared on behalf of the Illinois Attorney
General's Office.
MR. MICHAEL ROSENBLATT,
appeared on behalf of the defendant.
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Renee Apuzzo, CSR
Official Court Reporter
Circuit Court of the 18th Judicial Circuit
County of DuPage
License No. 084-004274
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(Whereupon, proceedings were
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had which are herein
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t r-anscr i bed. )
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THE CLERK:
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MR. SNOW:
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Kevin Carney.
Ed Snow on behalf of the Attorney
General's Office.
MR. ROSENBLAT:
Mike Rosenblat on behalf of Kevin
Mr. Carney is going to accept the Court's offer
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Carney.
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to plead guilty and be sentenced to 13 years in the
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Illinois Department of Corrections to run concurrently
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with his 8-year sentence out of Cook County, and he
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would serve the time at 50 percent.
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guilty to 1, 5, 6, 12, 13, 24, 25, 50, 51, and 60.
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would like to present some mitigation letters from his
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family which we presented to the Court.
He will plead
He
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THE COURT:
This is not an agreement or is it?
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MR. SNOW:
We recommended a higher sentence, and
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that's the only thing we don't agree on.
THE COURT:
If we don't have an agreement,then
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it's basically it's an open plea.
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I've recommended, but I would have to order a
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pre-sentence report.
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MR. SNOW:
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I understand what
Judge, we relied on a pre-sentence
report from Cook County before when we had the
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1
conference last time.
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THE COURT:
Do I still have that?
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MR. SNOW:
We tendered that before.
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THE COURT:
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MR. SNOW:
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Other than what had been discussed in
the conference, we would not put on any agg ravat ion ..
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THE COURT:
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MR. SNOW:
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THE COURT:
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Let me see.
Do you have a copy?
I would have to dig it out.
I have to look at that.
briefly.
(Whereupon, the case was passed.)
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THE CLERK:
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MR. SNOW:
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Let's pass it
Recalling Kevin Carney.
Ed Snow on behalf of the Attorney
General's Office.
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MR. ROSENBLAT:
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THE COURT:
Mike Rosenblat for Kevin Carney.
Let the record reflect that we had
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another conference, and it's my understanding based on
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that conference that although the State is not
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necessarily in agreement with what I recommended, we are
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going to proceed on the basis of the recommendation as
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an agreed disposition, correct?
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MR. SNOW:
That's correct.
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MR. ROSENBLAT:
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THE COURT:
That's correct.
Okay.
Mr. Carney, you have a number of
,.
4
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counts here.
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$500,000, a Class 1 felony.
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of wire fraud, a Class 3 felony.
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offense of mail fraud, a Class 3 felony.
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alleges the offense of securities fraud, a Class 3
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felony.
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fraud as a Class 3 felony.
Count 5 alleges the offense
Count 6 alleges the
Count 12
Count 13 alleges the offense of securities
Count 24 alleges another separate count of
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Count 1 alleges theft by deception over
securities fraud as a Class 3 felony.
Count 25 alleges
1.(}
the separate count of securities fraud as a Class 3
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felony.
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securities fraud as a Class 3 felony.
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a separate count of securities fraud as a Class 3
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felony.
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registering, a Class 4 felony.
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Count 50 alleges another separate count of
Count 51 alleges
Count 60 alleges selling securities without
Class 4 felonies in your case have a range of
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possible penalties of 1 to 6 years in the Illinois
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Department of Corrections.
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range of 2 to 10 years in the Illinois Department of
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Corrections.
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years in the Illinois Department of Corrections.
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Class 3 felonies have a
A Class 1 felony has a range of 4 to 30·
A sentence to the Department of Corrections on
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a Class 4 felony will be followed by one year of
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mandatory supervised release or parole.
And on a Class
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,
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3, also one year mandatory supervised release or parole.
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On a Class 1 felony, the sentence will be followed by
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two years of mandatory supervised release or parole.
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There are also possible fines of up to $25,000.
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addition, you could be ordered to pay restitution as
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part of the disposition in this case.
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maximum penalties.
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In
Those are the
The minimum penalties on a Class 3 is up to 30
months of probation or conditional discharge.
Up to six
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months of that could be county jail time, and a Class 1
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is up to 48 months of probation or conditional
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discharge, and up to 6 months of that could be county
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jail time.
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MR. SNOW:
Judge, because of the $500,000 amount,
the Class 1 is non-probationable.
THE COURT:
Excuse me.
Count 1 is a
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non-probationable Class 1, which means if you're
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pleading guilty, probation would not be an option.
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will have to be sentenced to the penitentiary for some
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range from 4 to 40 years.
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various charges and the range of possible penalties?
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THE WITNESS:
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THE COURT:
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You
Do you understand these
Yes.
Is it true today based on the
recommendations which I have made that you wish to enter
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pleas of guilty to these charges?
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THE WITNESS:
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THE COURT:
Yes.
Do you understand that you have the
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right to continue with your plea of not guilty and to
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have asked that your case proceed to trial?
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THE WITNESS:
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THE COURT:
Yes.
You are entitled to have a jury trial
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where we selected 12 jurors to hear the evidence, and
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they would have decided if you are guilty or not guilty,
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or you could have waived your right to a jury and asked
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for a judge to hear your case, and the judge would have
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decided whether you are guilty or not guilty.
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understand that?
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THE WITNESS:
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THE COURT:
Do you
Yes.
Do you understand that by pleading
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guilty today, you are giving up your right to have a
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trial?
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THE WITNESS:
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THE COURT:
Yes.
You are also giving up your right to
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have required the State to bring in witnesses to try to
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prove these charges, witnesses that you and your
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attorney could confront and cross examine.
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giving up your right to have subpoenaed witnesses on
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your own behalf.
You are
You are giving up your right to
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present evidence or defenses ih your own behalf.
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given up your right to either testified or remained
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silent, and you've given up your right to have required
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the State to prove you guilty by proof beyond a
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reasonable doubt, do you understand all of that?
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THE WITNESS:
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THE COURT:
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You've
Yes.
Are you pleading guilty to these
charges freely and voluntarily?
THE WITNESS:
THE COURT:
Yes.
Has anyone forced you or coerced you
into doing this?
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THE WITNESS:
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THE COURT:
No.
Other than the recommendations which I
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have made in this case, has anyone made any other
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promise or representation to you in order to get you to
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plead guilty?
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THE WITNESS:
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THE COURT:
No.
Are you presently taking any medication
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or drug that would interfere with your ability to
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understand what is taking place here today?
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THE WITNESS:
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THE COURT:
No, your Honor.
You understand what is taking place,
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you just entered pleas of guilty and what is left to be
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done is to impose sentence?
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THE WITNESS:
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THE COURT:
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THE WITNESS:
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THE COURT:
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MR. SNOW:
Yes, your Honor.
Are you a citizen of the United States?
Yes, your Honor.
State.
If this were to proceed the trial, the
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State would present the testimony of Special Agent Bill
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Harmening from Secretary of State Securities Department
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who would call as a witness, Thomas Walsh, a manager or
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somebody in the capacity to talk about E-trade and the
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records and the way they do business.
Judge, we also have an accountant, William
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Grabowski, Mr. Carney's previous accountant, and a
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civilian by the name of Jennifer Belmonte,
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B-e-l-m-o-n-t-e, who has been referred to several times
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as Jenny B.
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Judge, we would also call witnesses or the
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victims as listed in Schedule A and there is over 20 of
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them, Judge, so we would just incorporate Schedule A as
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a part of the statement of facts.
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By way of exhibits, we have the records from
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E-Trade from 2006 to all of 2008 in name of Kevin
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Carney, and we have the keeper of records from certain
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accounts from WAMU, Chase, and TCF Bank.
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in the way of exhibits excel spread sheets which were
We also have
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referred to as client account statements.
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are signed and some are unsigned.
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Some of those
For the victims as well, we would have copies
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of their checks, their signed statements, the excel
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spread sheets signed by the defendant, and their bank
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statements showing wire transfers showing that they, in
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fact, invested with the defendant.
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photographs of the Carney house in Elk Grove Village and
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he office that he opened in March of 2008 in Elk Grove
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We also have
Village.
As part of our exhibits, we would have a
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summary list prepared by Investigator Harmening of the
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excel spread sheets provided by the defendant and others
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that
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withdrawals and it has a gross investment and a net
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loss.
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Carney and Mr. Harmening between Mr. Carney and certain
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investors.
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the amounts that people invested or
We also would have various E-mails between Kevin
Judge, as part of the business records of the
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investment business Mr. Carney was in, we would offer
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certain E-mails that Jenny B had with certain investors
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showing the ongoing course of business.
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exhibits would show was that starting from the
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indictment on January 1, 2007 through October 9, 2008,
What the
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Mr. Carney was running a Ponzi scheme where he would
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tell investors, through his special software program,
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that he was able to get into the market on his E-Trade
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account and have an awareness of when stocks were going
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to move three minutes before the market, and he was able
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to go in buy and hold it for a short time, sometimes
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only 10 or 15 minutes, and then he would sell it.
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would make a little bit of a percentage each and every
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transaction he had, and by the end of the month, he
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He
would make 20 percent or more.
He then indicated that he would be able to, if
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they gave their money to him, give them a return of 20
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percent a month.
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investment business grew, certain people were brought in
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by other people, and as the indictment indicates, there
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was a 15-percent return for some, and that was because
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some of the people that brought other people in were
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getting 5 percent of their 20 percent, like a sales
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commission, each month.
And in some regards, Judge, as this
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In addition to the software program which had
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certain candles appear on the screen where he operated,
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and he would show people how he invested, and he
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explained the system that he developed and how he was
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able to move in and out of the market quickly.
There
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were also several explanations as detailed in the
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securities fraud, ma t lvf r-aud , and the theft by deception
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count that witnesses would discuss as well.
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As part of the evidence, what we have from
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December of 2007 is an ending balance.
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did was to -- with $100,000 up to $200,000, he could buy
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and sell stock, and by turning it over, E-Trade kept an
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account of how much was traded total, and at the end of
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2007, Mr. Carney had purchased $167,081,624.50 worth of
What Mr. Carney
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stocks, which he then sold for $166,586,123.29 and
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that's for 2007.
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In 2008,Judge, a similar amount which only
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goes up to October when certain accounts'were seized.
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Mr. Harmening would explain he was able to obtain search
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and seizure warrants and only approximately $525,000 was
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on hand at the time that the authorities stepped in, so
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the accounts for December of 2008 show that he had
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purchased $113,218,596.53 worth of stocks but then sold
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them for $112,740.720.01.
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Judge, each and every year they operate, 06,
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07, and 08, he in fact lost money.
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produced a chart showing that -- this is just a
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calculation of the E-Trade statements
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there was a loss of approximately $512,000.
Mr. Harmening also
but that in 06,
In 2007, a
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loss of $495,000, and 08, a
of $477,000 for a total
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of $1,485,824, that loss would also include the cost of
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each transaction in E-Trade which is about $8 a trade.
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When the victims would testify as to where
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their money came from, they would tell you that from
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some of the representations that Mr. Carney made,
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because he was giving them a 20-percent a month return,
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he had indicated or told some people to max out their-
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credit cards so that they would get a better return with
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him.
He told some people that
they should get a
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.
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home equity line of credit to invest with Mr. Carney,
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and some people took money out of their IRA accounts.
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Mr. Carney explained that after four or five months, he
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would be able to pay them more than what it cost for the
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penalty income or income tax they would have to pay and
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other costs of moving their IRA over to him.
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One of the victims who was a soldier and is
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now in the reserves had invested his $500,000
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re-enlistment bonus with the Army to Mr. Carney.
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In October of 2008 when Mr. Harmening became
aware of the situation, he met with Mr. Carney and
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interviewed him on October 9, 2008 and an additional
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meeting later that month, October 21; 2008, and during
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those meetings, Mr. Carney explained that he did, in
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fact, promise investors a 20 percent rate of return a
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month.
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figure.
He admitted that that was sort of an arbitrary
He acknowledged that when it got out of hand,
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I think his words were, "too big too fast," that he used
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some of the money people were investing to pay other
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investors a return, and he also acknowledged he had been
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losing money in the market for about three years.
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He also acknowledged that he never told
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investors that he had been losing money as specified in
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the indictments.
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untrue when he told them they would earn 20 percent a
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month.
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He also acknowledged that it was
Judge, he explained that he had various
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accounts at WAMU and Chase for different things, but
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that some of the debits went to pay for car payments,
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payments of his mortgage, and other personal use of the
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investors' money.
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Judge, the investors and Mr. Harmening would
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be able to identify the defendant in open court.
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would testify that they are people that lived in DuPage
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County and opened up their E-mails and were sent account
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statements -- this is another thing Mr. Carney did.
They
He
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got behind or out of hand at the end, but through most
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of 2008, he was regular in sending people their monthly
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account statements so the people that opened their
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account statements would be the basis for the wire fraud
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because a statement was sent to them via wire.
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individual actually mailed a check to Mr. Carney that
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was deposited in U.S. mail here in DuPage County.
One
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With regards to Mr. Harmening, he would also
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testify that a check of the records with the Secretary
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of State's Office showed that Mr. Carney had no license
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to deal with any type of securities, nor did he register
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with the Secretary of State's Office any kind of
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investment plan he was involved with, which would be the
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basis of the Class 4 felony.
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THE COURT:
That sums it up.
The State has witnesses who, if called
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to testify, would testify substantially in that manner
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and sufficient to support all of the allegations in the
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various counts.
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MR. ROSENBlAT:
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THE COURT:
We stipulate.
The Court finds a factual basis for the
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plea, finds that it was entered voluntarily.
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defendant understands the nature of the proceeding.
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Court accepts the plea and enters the findings of
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gUilty.
Anything else?
The
The
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MR. SNOW:
When we had our 402 conference, you were
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made aware of a fact that Mr. Carney was convicted in
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Cook County in 10 CR 5591 in 2010, so when you were
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going through the ranges of sentence, we argued that he
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was technically extendable and qualified under the
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statute, so I wanted to make that clear.
7.
of agreement, we are asking for restitution to be
8
ordered.
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number there of roughly 10.2 million.
We provided a copy to the Court.
Also as part
There is a
With regards to how that shows up in the
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record. Judge, when Mr. Harmening went and made his list
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of investors, he included people that had a net gain,
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people that had no gain at all, and people that had a
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net loss.
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he added people, it was no longer alphabetical.
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It was alphabetical at one point, but because
But when it skips numbers in the order, that's
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because those are the numbers that were not related to
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that's because investor No. 8 made money and would not
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qualify for restitution.
Harmening's chart, so when you don't see No.8,
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THE COURT:
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MR. ROSENBLAT:
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THE COURT:
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basis here.
Okay.
Any statement?
N9, your Honor.
Mr. Carney, you listened to the factual
I hope you could appreciate the damage that
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you've ·done to a vast number of people.
2 ...
that kind of expectation for those kinds of returns was
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totally unrealistic, and, unfortunately, people bought
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into that and believed that you could give them that
5
rate of return, so it's had some devastating effects on
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them, so I am entering this order of restitution that we
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all know there's no way you'll ever even be able to pay
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back to these people.
All right.
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To hold out
In regards to the sentence on
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Count 1, the Class 1 felony, you will be sentenced to 13
11
years in the Illinois Department of Corrections followed
12
by two years of mandatory supervised release.
On the Class 3 felony, you will be sentenced
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to five years; and the Class 4 to one year in the
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Illinois Department of Corrections.
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followed by one year of mandatory supervised release to
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run concurrently; assess all statutory fines and costs.
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He has previously done DNA.
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enter.
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incarceration.
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Those will be
The restitution order will
He shall receive credit for 179 days of pretrial
Mr. Carney, you do have a right to appeal.
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you wanted to appeal, you would have to file a written
23
motion with the Court within 30 days of today's date
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asking the Court to withdraw your plea of guilty and
If
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1
vacate the judgment.
In that motion, you would have to
2
put forth the reason or basis you would ask the Court to
3
do that, otherwise it could be waived for appeal
4
purposes.
If you could not afford it, a copy of the
5
6
transcript of the proceedings would be provided to you
7
at no cost, and an attorney would be provided to help
8
you prepare that motion.
If I granted the motion, the case would be
9
10
reset down for trial.
The State could reinstate any
11
charges that were dismissed.
12
you would have 30 days from that date to file your
13
notice of appeal.
If I denied your motion,
Again, if you could not afford it, an attorney
14
15
would be appointed to represent you on appeal, and
16
transcripts would be provided to you at no cost.
17
MR. SNOW:
Judge, one more thing, in this
18
particular situation, there was a double-jeopardy motion
19
and there was a notice of appeal that was filed by the
20
defendant.
21
At the appellate level, the state appellate
22
defenders were representing Mr. Carney, and that appeal
23
was withdrawn.
24
are not here, by his plea, there is no going back to
And since the state appellate defenders
18
1
that appeal.
He is waiving that as well.
2
THE COURT:
3
THE WITNESS:
4
THE COURT:
5
MR. ROSENBLAT:
6
THE COURT:
7
MR. SNOW:
Do you understand that, sir?
Yes.
Anything else?
Strike the May 15th date?
Yes.
As to the remaining counts, 2 were
8
dismissed by you on a prior motion, but the remaining
9
counts would be nolle prosed.
10
THE COURT:
I need an order.
11
MR. SNOW:
12
THE COURT:
13
MR. ROSENBLAT:
Can I add it to the minimus order?
Yes.
Thank you.
14
(Whereupon, were all
15
proceedings had in said
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cause on said date and time.)
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STATE OF ILLINOIS.
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COUNTY OF DU PAGE
SS:
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I HEREBY CERTIFY that I reported in shorthand
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the proceedings had at the hearing of the above-entitled
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cause, and that the foregoing Report of Proceedings,
9
consisting of Pages 1 to 19, inclusive, is a true,
10
correct and complete transcript of my shorthand notes so
11
taken at the time and place hereinabove set forth.
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15
Official Court Reporter
16
Renee Apuzzo, CSR, Lic. No. 084-004274
17
Eighteenth Judicial Circuit of Illinois,
18
DuPage County.
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