United States v. Johnson, 5:16-cr-00045

Background

Charles E. Johnson Jr. was serving a 3‑year term of supervised release following a federal conviction and 108‑month prison sentence for securities fraud, conspiracy, witness tampering, and obstruction; he owed $9.7 million in restitution (monthly payment set at $300).
While on supervision (transferred to E.D. Ky.), Johnson managed multiple LLCs (e.g., JW2, Luminary Diffusion Systems, Diffusion Investments, Privato) but did not disclose those roles or related accounts to probation.
From 2018–2019 Johnson gambled repeatedly in Las Vegas (Red Rock and Wynn); records show $52,200 winnings at Red Rock and losses of $442,190 (2018) and $34,675 (2019) at Wynn. He wired and transferred funds between business accounts, a personal account, and casino accounts.
The government alleged four supervised‑release violations: (1) omission of casino and business accounts on Probation Form 48; (2) false statements denying use of a $200,000 investor payment (Lockstadt) for gambling; (3) failure to report gambling losses on monthly reports; (4) false certification that monthly reports were true.
At the revocation hearing the court found, by a preponderance of the evidence, that Johnson knowingly omitted and concealed accounts and business interests, lied about the source of gambling funds, failed to report substantial gambling losses, and falsely certified his monthly reports. The court revoked his supervised release, granted Johnson’s motion to strike a post‑hearing email (but found the violations proved without it), and scheduled a dispositional hearing.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
1. Did Johnson violate 18 U.S.C. § 1001 by omitting casino and business accounts on Probation Form 48?	Johnson knowingly omitted Red Rock, Wynn, JW2 and other business holdings and transfers to conceal assets and ability to pay restitution.	The casino entries were not "accounts" or belonged to casinos/businesses; omissions were inadvertent or because funds belonged to businesses.	Court: Omission was knowing and willful; casino and business accounts were assets Johnson controlled; §1001 violation sustained.
2. Did Johnson make false statements to his probation officer about using Lockstadt’s $200,000 for gambling (§1001)?	Forensic tracing shows $8,000–$25,000 of Lockstadt’s funds reached the Wynn account; Johnson repeatedly denied such use.	Defendant argues answers were literally true, non‑responsive, or ambiguous under Bronston.	Court: Questions were unambiguous in context; Johnson knowingly lied; §1001 violation sustained.
3. Did Johnson fail to submit truthful monthly reports by omitting gambling losses?	Monthly reports required disclosure of gambling losses over $500; Johnson failed to report large Wynn losses in 2018–19.	Defendant claims losses were business‑related (not his) because he gambled to raise capital.	Court: Losses were personal (winnings were not returned to businesses) and should have been reported; violation sustained.
4. Did Johnson falsely certify that his monthly reports were true and correct (§1001)?	Johnson certified reports knowing they omitted material gambling losses and undisclosed accounts.	Defendant repeats business‑use justification and denies intent to mislead.	Court: Certification was false and willful; §1001 violation sustained.

Key Cases Cited

United States v. Steele, 933 F.2d 1313 (6th Cir.) (elements for §1001 proof)
United States v. Chandler, 752 F.2d 1148 (6th Cir.) (false statement elements)
United States v. Vreeland, 684 F.3d 653 (6th Cir.) (§1001 covers statements to probation officers while on supervised release)
United States v. Gaudin, 515 U.S. 506 (U.S.) (definition of materiality)
Bronston v. United States, 409 U.S. 352 (U.S.) (literally true but misleading answers doctrine)
United States v. DeZarn, 157 F.3d 1042 (6th Cir.) (context resolves ambiguity in false‑statement inquiries)
United States v. Kestenbaum, 908 F. Supp. 2d 364 (E.D.N.Y.) (undisclosed finances to avoid restitution responsibility material to probation decisions)
United States v. Jones, [citation="332 F. App'x 801"] (3d Cir.) (financial statements to probation affect ability‑to‑pay analysis)
United States v. Moses, 289 F.3d 847 (6th Cir.) (government’s preponderance burden in supervised‑release revocation)