USA v. Cutler, No. 05-2516 (2d Cir. 2008)
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05-2516-cr(L), 05-3303*-cr(L), 05-6178*-cr(XAP) USA v. Cutler 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 - - - - - - 4 August Term, 2006 5 (Argued: April 24, 2007 Decided: March 17, 2008) 6 Docket Nos. 05-2516(L), 05-3303*-cr(L), 05-6178-cr*(XAP) 7 8 _________________________________________________________ 9 UNITED STATES OF AMERICA, 10 Appellant, 11 - v. - 12 13 JAMES CUTLER, 14 UNITED STATES OF AMERICA, Defendant-Appellee. 15 Appellee-Cross-Appellant, 16 - v. - 17 18 19 20 SANFORD FREEDMAN, 21 Before: Defendant-Appellant-CrossAppellee. _________________________________________________________ JACOBS, Chief Judge, KEARSE and POOLER, Circuit Judges. 22 Appeals by the United States challenging the sentences 23 imposed on the above defendants in the United States District Court 24 for the Southern District of New York, Loretta A. Preska, Judge, 25 following their convictions of, inter alia, bank fraud, tax * Appeals by the government consolidated for purposes of this opinion. 1 evasion, and false statements, and conspiracy to commit those 2 offenses and mail fraud, 18 U.S.C. §§ 371, 1014, 1341, 1344, and 3 1623, and 26 U.S.C. § 7201. 4 Vacated and remanded for resentencing. 5 Judge Pooler concurs in a separate opinion. 6 7 8 9 10 11 12 13 JUSTIN S. WEDDLE, Assistant United States Attorney, New York, New York (Michael J. Garcia, United States Attorney for the Southern District of New York, Stanley J. Okula, Jr., Peter G. Neiman, Assistant United States Attorneys, New York, New York, on the brief), for Appellant in No. 05-3303. 14 15 16 17 18 19 20 21 22 STANLEY J. OKULA, Jr., Assistant United States Attorney, New York, New York (Michael J. Garcia, United States Attorney for the Southern District of New York, Justin S. Weddle, Barbara A. Ward, Celeste L. Koeleveld, Assistant United States Attorneys, New York, New York, on the brief), for Appellee-Cross-Appellant in No. 05-6178. 23 24 25 26 27 WILLIAM J. SCHWARTZ, New York, New York (Jason M. Koral, Kronish Lieb Weiner & Hellman, New York, New York, on the brief), for Defendant-Appellee James Cutler in No. 05-3303. 28 29 30 31 32 33 AUDREY STRAUSS, New York, New York (Andrew T. Gardner, Lisa H. Bebchick, Sloan S. Johnston, Fried, Frank, Harris, Shriver & Jacobson, New York, New York, on the brief), for Defendant-Appellant-CrossAppellee Sanford Freedman in No. 05-6178. 34 KEARSE, Circuit Judge: 35 Defendants James Cutler and Sanford Freedman, following a 36 jury trial in the United States District Court for the Southern 37 District of New York, Loretta A. Preska, Judge, were convicted, 38 along with others, on various charges relating to extensive bank 39 frauds and tax frauds. 40 been dealt with in a summary order filed today, see United States v. Issues raised in an appeal by Freedman have -2- 1 Freedman, Nos. 05-2516, -6068. This opinion deals with an appeal by 2 the government, No. 05-3303, challenging the sentence imposed on 3 Cutler, 4 challenging the sentence imposed on Freedman. and a cross-appeal by the government, No. 05-6178, 5 Cutler was convicted on one count of conspiracy to commit 6 bank fraud, in violation of 18 U.S.C. § 371; two counts of bank 7 fraud, in violation of 18 U.S.C. § 1344; one count of making false 8 statements, in violation of 18 U.S.C. § 1014; one count of tax fraud 9 conspiracy, in violation of 18 U.S.C. § 371; and two counts of tax 10 evasion, in violation of 26 U.S.C. § 7201. 11 principally to a prison term of one year and one day, to be followed 12 by 13 restitution in the amount of $29,775,000 and to forfeit $1,381,974. 14 Freedman was convicted on one count of conspiring, in violation of 15 18 U.S.C. § 371, to defraud financial institutions and the Internal 16 Revenue Service ("IRS") through false statements in violation of 18 17 U.S.C. § 1014, bank fraud in violation of 18 U.S.C. § 1344, and mail 18 fraud in violation of 18 U.S.C. § 1341; four counts of bank fraud, 19 in violation of 18 U.S.C. § 1344; six counts of making false 20 statements, in violation of 18 U.S.C. § 1014; and one count of 21 perjury, in violation of 18 U.S.C. § 1623. 22 principally to a three-year term of probation and was ordered to 23 perform 24 probationary 25 $14,600,000, and to forfeit $3,013,739.48. five years' 700 supervised hours of period, release, community to pay and He was sentenced was ordered to pay Freedman was sentenced service restitution per in year the during amount the of 26 The government contends that under the 1997 version of the 27 Sentencing Guidelines ("Guidelines"), which was applied to both 28 defendants, and to which reference is made throughout this opinion, -3- 1 a proper sentencing calculation for Cutler would have resulted in a 2 recommended prison term in the range of 78-97 months. 3 that the district court abused its discretion in granting downward 4 departures to reach a range of 12-18 months and that the prison term 5 imposed, one year and one day, was substantively unreasonable. 6 to 7 calculations would have resulted in a Guidelines-recommended prison 8 term in the range of 108-135 months. 9 the district court erred in certain Guidelines-application rulings 10 and abused its discretion in granting downward departures, and that 11 the sentence imposed--in failing to order a substantial term of 12 imprisonment--was substantively unreasonable. 13 follow, we vacate both sentences and remand for resentencing. Freedman, the government 14 I. contends that It contends proper As sentencing The government contends that For the reasons that BACKGROUND 15 The prosecutions that are the focus of these appeals arose 16 out of the business and financial dealings in the early 1990s of 17 codefendants Stanley S. Tollman and Monty D. Hundley, hotel magnates 18 whose principal business organization in the 1980s, Tollman-Hundley 19 Hotels ("Tollman-Hundley"), owned a network of hotels, including the 20 Days Inn of America ("Days Inn") chain and more than 100 individual 21 hotels. Hundley was tried with Cutler, codefendant Howard Zukerman, 22 and Freedman and convicted on 28 counts relating to these matters. 23 Tollman 24 arraignment in this case and remains a fugitive. 25 left the United States just prior to his scheduled Cutler was Tollman-Hundley's chief financial officer. -4- 1 Zukerman was vice president for finance. 2 Hundley's executive vice president for development and its general 3 counsel. Government exhibits ("GX") showed that Freedman also owned 4 various percentages (generally between 2.5 and 4.75 percent) of most 5 of the business entities owned by Tollman and Hundley. 6 GX 7 license); GX 601-B (Tollman's 1995 application for a Mississippi 8 gaming license).) 9 601 (Freedman's 1993 application Freedman was Tollman- for a (See, e.g., Mississippi gaming The evidence as to the principal events, taken in the 10 light most favorable to the government, is described below. 11 A. 12 The $100 Million Bank Fraud Scheme By the late 1980s, Tollman and Hundley each had an 13 estimated net worth of over $100 million, gained largely from the 14 Tollman-Hundley venture. 15 growth of their hotel network by borrowing hundreds of millions of 16 dollars from banks and others. 17 money through limited liability entities, they also gave their 18 creditors personal guarantees. Tollman and Hundley had financed the Although they usually borrowed the 19 In the early 1990s, many of the Tollman-Hundley properties 20 were unable to meet their debt service obligations, and a voluntary 21 restructuring 22 required Tollman and Hundley to sign deficiency notes instead of 23 guarantees. 24 obligated to Tollman-Hundley creditors for much of its debt. 25 Trial Transcript ("Trial Tr.") at 4256 (contrasting guarantees, 26 which are obligations to pay "in case someone else doesn't," with of the These debt notes ensued. made Part Tollman -5- of and the restructuring Hundley personally (See 1 deficiency 2 Ultimately, Tollman and Hundley emerged from the restructuring of 3 the Tollman-Hundley debt personally responsible for approximately 4 $100 million of the debt. Freedman participated in the negotiations 5 that led to this restructuring. 6 1. notes, which "[a]re direct obligations to pay").) Coordination and Misrepresentations by Freedman 7 Also in the early 1990s, Tollman and Hundley negotiated an 8 agreement to sell key assets of Days Inn to Hospitality Franchise 9 Systems ("HFS" (now known as Cendant Corporation)), in exchange for 10 the right to receive a specified amount of HFS stock over a several- 11 year period if Days Inn franchises met certain financial targets 12 (the "earn-out agreement"). 13 ultimately resulted in Tollman and Hundley receiving HFS shares 14 worth "somewhat in excess of 100 million dollars." (Trial Tr. 3155; 15 see also GX 1504 (citing 16 other exhibits) showing net proceeds 16 totaling more than $107 million from the sales of the HFS stock 17 accruing to Tollman and Hundley.) The performances of those franchises 18 Due in large part to the more than $100 million in HFS 19 stock earn-out rights accruing to Tollman and Hundley during the 20 course of the earn-out agreement, Tollman and Hundley appeared to 21 have the capacity to pay off their approximately $100 million in 22 deficiency-note debts to the Tollman-Hundley creditors in full. 23 Instead, Tollman and Hundley planned to use the proceeds from their 24 HFS 25 However, the large outstanding Tollman-Hundley debt, along with the 26 obligations of Tollman and Hundley on the deficiency notes (the 27 first payments on which were due on June 1, 1993), had the potential stock to fund a riverboat casino -6- venture in Mississippi. 1 to lay claim to $100 million of the proceeds from the HFS stock and 2 to cast a pall on their casino plans. 3 Hundley embarked on a plan in early 1993, assisted principally by 4 Freedman, 5 creditors to settle for far less than the balances due on the loans. 6 Zukerman, In the and spring Cutler, of to 1993, Accordingly, Tollman and induce the the Tollman-Hundley coconspirators did the 7 following. 8 earn-out 9 "Bryanston Group"). Bryanston Group was owned principally by 10 Tollman Freedman 11 executive vice president. 12 Bryanston by Freedman. Tollman and Hundley assigned their rights under the HFS agreement and to Hundley; Bryanston Group, owned 4.75 Inc. ("Bryanston" percent and was or its The assignment agreement was signed for 13 In addition, Tollman, Hundley, Zukerman, and Freedman 14 contacted Tollman-Hundley's creditors and represented that Tollman 15 and Hundley were having "great financial problems" (Trial Tr. 2071) 16 and would be unable to satisfy their deficiency-note obligations. 17 Richard 18 testified that beginning early in 1993, he had several discussions 19 on that subject, meeting principally with Zukerman and Freedman. 20 (See id. at 2068-69.) 21 from the hotels owned by Tollman-Hundley was insufficient to satisfy 22 all the debts and that Tollman-Hundley itself and Tollman and 23 Hundley individually would consider filing for bankruptcy if they 24 were not able to get all the creditor banks to enter into repayment 25 agreements; Zukerman said they "were in deep financial trouble." 26 (Id. at 2071.) Werner, a manager at Marine Midland Bank (now HSBC), Zukerman told the bankers that the cash flow 27 Freedman, "[i]n those conversations and throughout those 28 conversation[s], . . . made other comments in support of those -7- 1 claims about the[] financial distress [of Tollman and Hundley]." 2 (Id. at 2072.) 3 support of they don't have the financial wherewithal to meet these 4 obligations." 5 Werner testified that Freedman "made statements in (Id.) Contemporaneously with these representations, in 6 connection with their casino plans, Tollman, Hundley, and Freedman 7 were submitting applications to the Mississippi Gaming Commission 8 (or "Gaming Commission") for gaming licenses. 9 attached a schedule ("D Schedule") listing the applicant's business 10 assets and showing, inter alia, the name of the asset, its market 11 value, the names of the other investors in each asset, and the 12 market value of each investor's interest in the asset. 13 D Schedule showed that the total market value of his own interests 14 in these assets was $3,224,805; it also showed the total market 15 values of Tollman's interests, $34,477,181, and Hundley's interests, 16 $37,183,441. 17 applications of Tollman and Hundley were identical to that of 18 Freedman. 19 (See GX 601.) Each application Freedman's The D Schedules attached to the (See GX 601-B, 601-E.) In addition to contacting Tollman-Hundley creditors and 20 telling 21 trouble, 22 coconspirator 23 riverboat casino venture, to approach some of the creditor banks and 24 offer to buy their Tollman-Hundley loans at steeply discounted 25 prices. 26 relationship with Tollman and Hundley and to tell the banks instead 27 that he represented an off-shore investor that wanted to do business 28 with Tollman-Hundley and wanted to own the Tollman-Hundley debts, them that Tollman Tollman and James and Cohen, who were in deep financial enlisted Hundley Hundley the aid of unindicted was to be an investor in the Hundley and Freedman instructed Cohen to conceal his -8- 1 but that the interested investor would not be willing, in light of 2 the (supposed) financial straits of Tollman and Hundley, to pay more 3 than pennies on the dollar to purchase those debts. 4 Cohen a list of banks to contact, showing the maximum amounts for 5 which they hoped to persuade the banks to settle, to wit, 20 percent 6 or less of the outstanding balances. Cohen was instructed on what 7 to the 8 Freedman. 9 negotiations, Cohen made progress reports to Freedman and continued 10 to receive general overall instructions from Tollman, Hundley, and 11 Freedman. say, 12 in the conversations with (See Trial Tr. 3736-39.) banks, by Freedman gave Hundley and During the period of his (See, e.g., id. at 3751.) There was, however, no independent interested off-shore 13 investor. 14 by Cohen, Freedman had Tollman-Hundley's outside counsel incorporate 15 two companies, Paternoster Second Holdings Inc. ("Paternoster") and 16 Chelsea Acquisitions Inc. ("Chelsea"), that Cohen would say were 17 controlled by the foreign investor. 18 controlled by Tollman and Hundley, their expenditures being funded 19 by Bryanston (see GX 1506 ("Debt Purchases by Paternoster/Chelsea 20 Funded by Bryanston")), which was owned by Tollman, Hundley, and 21 Freedman. 22 sell certain of its Tollman-Hundley loans to Chelsea contingent on 23 the receipt of assurances that Chelsea was not owned or controlled 24 by Tollman or Hundley, Freedman sent the bank a letter stating that 25 the assurances were enclosed; he enclosed a letter signed by Tollman 26 and Hundley "certify[ing] to Chemical Bank that neither [Tollman nor 27 Hundley] 28 indirectly, in [Chelsea]." (GX CH-9 (Letter from Freedman to Thomas In order to provide the purchaser supposedly represented These companies were in fact Nonetheless, when Chemical Bank made its willingness to owns any legal or beneficial -9- interest, directly or 1 H. Kozlark, Vice President, Chemical Bank, dated May 23, 1994, 2 attaching May 12, 1994 letter signed by Tollman and Hundley).) 3 Tollman and Hundley recruited others, including relatives 4 of Tollman who had surnames other than Tollman, to pose as officers 5 of 6 companies. 7 testified that he signed Paternoster contracts at the request of 8 Freedman and signed Paternoster tax returns at the request of 9 Cutler. Paternoster and Chelsea and to sign documents for those For example, Leon Smith, Tollman's nephew by marriage, Smith had never invested in Paternoster and did not know 10 the names of its investors; he had never received any money from 11 Paternoster and did not know the name of anyone who had; he did not 12 "know of any telephone number that anybody could dial in the 1990s 13 where somebody would have answered 'Paternoster.'" (Trial Tr. 2613- 14 14.) 15 When banks eventually agreed with Cohen to sell their 16 Tollman-Hundley debts, some were paid from escrow accounts held by 17 Tollman-Hundley's outside counsel that had ostensibly been funded by 18 Paternoster or Chelsea. 19 the various transactions).) The funds had in fact come largely from 20 Bryanston Group, to which Tollman and Hundley had assigned the 21 lucrative HFS stock rights. 22 paid for Tollman-Hundley debt from Bryanston accounts).) 23 The banks (See GX 1506-A to 1506-D (charts listing (See GX 1506 (chart showing amounts contacted by Cohen were not immediately 24 persuaded to sell their Tollman-Hundley loans cheaply. For example, 25 a representative of First National Bank of Chicago ("First Chicago") 26 with whom Cohen had negotiated (see Trial Tr. 3748) stopped by 27 Cohen's office in New York to "make sure [Cohen] existed" (id. at 28 3749) and expressed concern that Cohen might be seeking to purchase - 10 - 1 the loans for Tollman or Hundley (see id.). 2 assurance, as instructed by Hundley and Freedman, that this was not 3 the case. 4 Tollman-Hundley loans, the balances on which totaled approximately 5 $4.5 million, to Cohen for $1.25 million, selling them to a company 6 that Cohen testified he had set up for "[f]raudulent transactions" 7 (id. at 3752). 8 that Cohen had no agreement to resell the Tollman-Hundley loans to 9 any entity controlled by Tollman or Hundley, Cohen purchased the 10 loans with the understanding that they would be repurchased by 11 Tollman 12 Tollman, Hundley, and Freedman. 13 Paternoster later purchased those loans from Cohen's company, paying 14 Cohen $1.25 million plus interest. Cohen gave his First Chicago was eventually persuaded to sell its and Although the agreement with First Chicago recited Hundley, having received that understanding from (See, e.g., id. at 3752-54.) (See id. at 3755-57.) 15 On another occasion, Cohen was able to reach a deal in 16 which his sham foreign investor was to purchase certain of Chemical 17 Bank's Tollman-Hundley loans, whose balances totaled $21.7 million, 18 for 10 percent of that sum. 19 whether Cohen would be expected to advance the $2.17 million. 20 Freedman immediately responded that Cohen "didn't need to worry 21 about it. Cohen called Freedman to find out It was taken care of." (Id. at 3762-63.) 22 The banks repeatedly sought personal financial information 23 from Tollman and Hundley themselves as to their ability to pay the 24 deficiency notes. 25 Hundley loans whose balances totaled some $12.5 million, asked 26 Zukerman and Freedman to provide written financial statements for 27 Tollman and Hundley individually, such as balance sheets, tax 28 returns, and forecasts of future income and cash flow. Marine Midland, for example, owning Tollman- - 11 - At times, 1 Marine Midland was told that information was not available; at other 2 times 3 contained no meaningful information. 4 2102.) 5 $1.75 million. 6 it 2. received documents that were many inches thick but (See, e.g., id. at 2073, Marine Midland eventually sold its loans to Paternoster for Misrepresentations by Cutler 7 For creditors who remained unsatisfied by the documents 8 provided by Tollman and Hundley through Zukerman and Freedman, 9 misinformation was sent by Cutler, Tollman-Hundley's chief financial 10 officer. For example, in January 1995, Cutler sent Wells Fargo Bank 11 ("Wells Fargo") financial statements for Tollman and Hundley "dated 12 as of December 31, 1992," which Cutler represented were "the most 13 recently prepared" financial statements. 14 Cutler to Christine Rotter, Vice President/Manager, Wells Fargo 15 Bank, and Michael Sherrow, Eastdil Realty, Inc., dated January 26, 16 1995, at 1).) 17 Hundley's most recent financial statements; in 1993, Tollman and 18 Hundley had submitted to the Mississippi Gaming Commission personal 19 financial statements as of March 31, 1993, which also showed the 20 anticipated value of Bryanston as of May 31, 1993. 21 that Cutler sent to Wells Fargo in January 1995 contained an entry 22 for Bryanston--but only under its former name, "Buckhead"--and the 23 Buckhead entry did not include the value of the HFS stock, nearly 24 $45 million of which had been received by mid-February 1994. (GX WF-6 (Letter from These 1992 statements were not in fact Tollman's and The statements 25 In August and September 1995, Cutler provided disparate 26 financial information to three banks and to the Mississippi Gaming 27 Commission. During that period, he was meeting with and giving - 12 - 1 financial information to the Financial Evaluator for the Mississippi 2 Gaming Commission in support of Tollman's July 31, 1995 application 3 for a Mississippi gaming license. 4 a letter to the Gaming Commission enclosing numerous schedules "[a]s 5 a 6 including recent financial statements of Bryanston. 7 (Letter from Cutler to James M. Prewitt, Financial Evaluator, 8 Mississippi Gaming Commission, dated August 18, 1995).) 9 application stated that the value of his stock in Bryanston was 10 $21,135,746 (see GX 601-B, Schedule C); his Summary Financial 11 Questionnaire (see GX 601-B, at 2) stated that his net worth was 12 $27,371,230. follow-up" to supplement and On August 18, 1995, Cutler sent correct Tollman's application, (GX 1014-A Tollman's 13 Contemporaneously, Cutler sent letters to two of the 14 creditor banks stating that he was "[e]nclos[ing] . . . the latest 15 information on the financial condition of Stanley S. Tollman and 16 Monty D. Hundley." 17 Kozlark, Chemical Bank, dated August 18, 1995); GX WF-9 (Letter from 18 Cutler to Dale Christiansen, Wells Fargo Bank, dated September 27, 19 1995).) 20 Cutler's 21 supposedly summarized the business interests, personal assets, and 22 obligations of Tollman and Hundley. 23 that Tollman and Hundley, respectively, had personal assets, as of 24 July 31, 1995, of little more than $125,000 and $80,000. (E.g., GX CH-14 (Letter from Cutler to Thomas A similar letter was sent to Bank of America. letters to the banks were financial Attached to schedules that Those schedules represented 25 The schedules that Cutler sent to the banks did not 26 mention the HFS stock or the ownership interests of Tollman and 27 Hundley in Bryanston; nor did Cutler's letters mention the HFS stock 28 or Bryanston. Further, in purporting to show other outstanding - 13 - 1 debts of Tollman and Hundley, with which the debts of each creditor 2 bank would ostensibly be competing for collection, the documents 3 sent by Cutler to the banks identified most of the current note 4 holders as Paternoster or Chelsea--which, of course, unbeknownst to 5 the banks, Tollman and Hundley owned. 6 from Cutler to Dale Christiansen, Wells Fargo Bank, dated September 7 27, 1995 (unpaginated attachments)).) (See, e.g., GX WF-9 (Letter 8 Government exhibits listing the assets that were held in 9 the name of Tollman or Hundley as of July 31, 1995, but not included 10 on the schedules that Cutler sent to the banks, showed that as to 11 Tollman, the "total value of assets not listed" was $31,592,019 12 (GX 1501 (emphasis in original)), and that as to Hundley, the "total 13 value of assets not listed" was $25,640,795 (GX 1500 (emphasis in 14 original)). 15 alone worth more than $21 million. Tollman and Hundley each had an interest in Bryanston (See GX 1500, 1501.) 16 During the course of his participation in the bank frauds, 17 Cutler received more than $900,000 in salary (see GX JD-7), which 18 the 19 participation in those frauds (see Cutler Sentencing Transcript 20 ("Cutler S.Tr.") 106, 113). As additional compensation, Tollman and 21 Hundley gave Cutler the right to purchase stock in the casino 22 venture worth some $400,000. district court ultimately found was compensation for his (See GX 54; Trial Tr. 6664-65.) 23 The trial with respect to the above conduct resulted in, 24 inter alia, (1) the convictions of Cutler and Freedman (along with 25 Hundley and Zukerman) for conspiracy to commit bank fraud; (2) the 26 conviction of Freedman on four substantive counts of bank fraud and 27 six counts of making false statements to federally insured banks for 28 purposes of influencing their decisions with respect to selling the - 14 - 1 Tollman-Hundley loans; and (3) the conviction of Cutler on two 2 substantive counts of bank fraud and one count of making a false 3 statement to a federally insured bank. 4 In addition, Freedman had given deposition testimony under 5 oath in a bankruptcy proceeding in which Paternoster had filed a 6 claim. 7 Paternoster had purchased, Freedman testified, inter alia, that he 8 had no idea whether Paternoster had ever collected anything on that 9 debt and that Tollman and Hundley had expressed "concern . . . that When questioned with respect to Tollman-Hundley debt that 10 that debt has to be paid." 11 creation 12 overseen Paternoster's purchases of Tollman-Hundley notes precisely 13 to 14 deficiency notes, Freedman was convicted of perjury. 15 B. avoid of Paternoster having Tollman on (GX EM-5X.) behalf and of Hundley Having initiated the Tollman called and on Hundley to pay and their The $29 Million Tax Frauds 16 In addition to the above bank frauds, there were tax 17 frauds. 18 responsible 19 entities it comprised. 20 salaries of the senior leaders of Tollman-Hundley and certain of 21 their aides to be paid in ways that were designed to evade proper 22 taxation. 23 service, as was the case with respect to most Tollman-Hundley 24 employees, salary checks to these top employees were handwritten by 25 someone who reported directly to Cutler; they were drawn on accounts 26 of entities whose records were not sent to the payroll service; and 27 on orders from Cutler, those entities did not report those salary Cutler, as Tollman-Hundley's chief financial officer, was for the tax reporting of Tollman-Hundley and the For nearly a decade, Cutler caused the For example, instead of being generated by a payroll - 15 - 1 payments to the IRS. 2 form--such as car payments or insurance premiums--that disguised the 3 fact that they were salary; these payments too went unreported to 4 the IRS. In addition, some salary payments were simply misdescribed 5 as nontaxable reimbursement for expenses. 6 Cutler with respect to more than a dozen employees, resulted in the 7 Tollman-Hundley entities' failure to report more than $29 million of 8 the employees' earned income. Further, salaries were frequently paid in a This system, overseen by 9 Cutler himself took advantage of the system he oversaw by 10 causing tens of thousands of dollars paid to him each year not to be 11 reported to the IRS. 12 portion of his salary indirectly by making rent payments directly to 13 his landlord. 14 income. 15 income by a total of more than $236,000. For example, he had Tollman-Hundley pay a And on his own tax returns he underreported his During one seven-year stretch, Cutler understated his 16 In connection with these acts, Cutler was convicted on one 17 count of conspiracy to commit tax fraud and two counts of tax 18 evasion (collectively the "tax frauds"). 19 C. The Sentences 20 The Probation Department prepared a presentence report 21 ("PSR") on each defendant. 22 from the bank fraud conspiracy by subtracting the amounts for which 23 the banks sold the Tollman-Hundley loans from the balances on those 24 loans. The PSRs calculated the total losses The losses totaled more than $106 million. 25 Accordingly, the PSRs for both Cutler and Freedman began 26 with a base offense level of 6 pursuant to Guidelines § 2F1.1, 27 applicable to offenses involving - 16 - "[f]raud and [d]eceit," and 1 recommended that that level be increased by 18 steps because the 2 loss exceeded $80,000,000, see Guidelines § 2F1.1(b)(1)(S). 3 PSRs also recommended an additional two-step increase in offense 4 level 5 planning," 6 enhancements for Cutler and Freedman resulted in an offense level 7 of 26. because 8 9 10 "the offense Guidelines § involved . . 2F1.1(b)(2)(A). . The more than minimal Thus, the initial Additional distinct adjustments were recommended for each defendant. 1. Cutler 11 With respect to Cutler's conviction on one count of 12 conspiracy to commit tax fraud and two substantive counts of tax 13 evasion, the PSR calculated an offense level of 22 pursuant to 14 Guidelines §§ 2T1.1 and 2T4.1, based on a federal tax loss of more 15 than $5 million. 16 offense levels for Cutler's bank frauds (26) and his tax frauds 17 (22), the PSR recommended a combined total offense level of 28. 18 Cutler had no known criminal convictions, his criminal history 19 category was I. 20 recommended range of imprisonment was 78-97 months. Combining, pursuant to Guidelines § 3D1.4, the As Thus, with an offense level of 28, his Guidelines- 21 Although noting that Cutler apparently had been motivated 22 by monetary gain and that his participation was critical to the 23 success of the frauds, the PSR recommended that the court impose a 24 prison term of only 60 months. 25 belief that 78 months of imprisonment would cause undue hardship to 26 Cutler's three children (who lived with his ex-wife), to whose 27 support he contributed a total of $1,900 per month, and would It stated the probation officer's - 17 - 1 slightly overstate the level of his culpability in the offense. 2 Cutler challenged the PSR's offense-level calculation on 3 the ground that it overstated the bank fraud losses and that the PSR 4 failed to find that he had played a minor role in the bank frauds; 5 and he moved for downward departures on grounds relating to the 6 nature 7 circumstances. 8 PSR's calculation was erroneous because parts of the bank debts were 9 nonrecourse, and hence uncollectible against Tollman and Hundley 10 individually; thus, Tollman and Hundley could have repaid the 11 recourse portions of the debts and the banks would have lost the 12 remainder even in the absence of the frauds. 13 losses caused by the frauds thus totaled only between $40 million 14 and $80 million, rather than in excess of $80 million, and therefore 15 that the offense-level enhancement for amount of loss should have 16 been 17 steps rather than 18 steps. 17 contention, finding that the amounts of loss caused by the frauds 18 were the differences between the loan balances and the amounts the 19 banks received. of 20 his As to participation in the frauds and his family As to the amount of loss, Cutler argued that the his Cutler argued that the The court quickly rejected that participation in the bank frauds, Cutler 21 contended that the PSR should have recommended a downward adjustment 22 in offense level pursuant to Guidelines § 3B1.2(b), on the basis 23 that he played only a minor role. 24 contention, finding "a downward adjustment for role in the offense" 25 inappropriate "because of the criticality of Mr. Cutler's role in 26 the success of what we have been calling the money lie." 27 S.Tr. 29.) 28 of 28 is appropriate." The court also rejected this (Cutler The court thus "conclude[d] that a total offense level (Id. at 30.) - 18 - 1 Cutler moved for a downward departure pursuant to 2 Guidelines § 2F1.1, arguing that he performed only a few fraudulent 3 acts and that his personal gain was minimal, and hence that the 4 magnitude of the loss overstated his role and culpability in, and 5 his gain from, the offense. 6 ("In a few instances, the loss determined under subsection (b)(1) 7 may overstate the seriousness of the offense. 8 example, where a defendant attempted to negotiate an instrument that 9 was so obviously fraudulent that no one would seriously consider See generally id. Application Note 10 This may occur, for 10 honoring 11 warranted."). 12 Guidelines 13 "extraordinary family circumstances" (Cutler S.Tr. 30), to wit, 14 three children to whose support he would not be able to contribute 15 if he were in prison. it. § In such Cutler 5H1.6 cases, also (Policy moved a downward for a Statement), departure departure arguing may be pursuant to that he had 16 In opposition to these requests, the government pointed 17 out, inter alia, that Cutler had derived substantial benefits from 18 the offense in the form of stock and inflated salary; that, even if 19 he had not, a lack of personal profit is not ordinarily a ground for 20 departure; and that Cutler's lesser interest in the bank fraud 21 offenses, in comparison to that of Hundley, was reflected in the 22 fact that the Guidelines-recommended range of imprisonment for 23 Hundley was twice that recommended for Cutler. 24 argued that a defendant's inability, while incarcerated, to support 25 his dependents did not ordinarily provide a ground for departure and 26 that, in addition, Cutler had artificially created his inability to 27 support his children. 28 proceeds of the bank fraud, to wit, his shares in the casino The government also It stated that Cutler had sold some of the - 19 - 1 venture, and used those proceeds to buy property in Nevada; however, 2 he did not keep that property in his own name but rather put it in 3 his current wife's name, out of the reach of his creditors, his ex- 4 wife, and his children. 5 The district court granted Cutler's departure motion on 6 both grounds, reducing his offense level by a total of 15 steps. 7 First, the court departed downward by six levels, from 28 to 22, on 8 the ground that the offense level calculated on the basis of the 9 loss to the banks overstated the seriousness of Cutler's role, 10 conduct, and offense: 11 12 13 14 With respect to the application for departure on the ground that level 28 overstates the seriousness of Mr. Cutler's role in the bank fraud conspiracy, that application is granted. 15 16 17 18 19 20 21 22 23 This is, in my view, analogous to the Court of Appeals decision in United States v. Restrepo in which the court noted that "the [sentencing] commission apparently contemplated some connection between the quantity of money implicated and the extent of a defendant's participation in the offense." 936 F.2d 661, [667] (2d Cir. 1991)[,] and, indeed, it appears that the commission so contemplated that relationship. 24 25 26 Here, however that relationship does not exist, in my view, to an extent not contemplated by the commission. 27 28 29 30 31 32 Here, Mr. Cutler's communications, including those set out by the government today during sentencing, although they were necessary to the scheme, were a small part of the scheme and he received little, if any, personal gain from the bank fraud scheme. 33 34 35 36 37 38 39 40 Without reviewing it in detail, if the huge amount of money involved in the bank fraud scheme were reduced to a level more consistent with the seriousness of Mr. Cutler's offense, the offense level would likely be at or about 22. So the request for a downward departure on the ground that the seriousness of Mr. Cutler's conduct is overstated by the offense level is granted. - 20 - 1 (Cutler S.Tr. 97-98 (emphases added).) 2 From level 22, with respect to both the bank fraud counts 3 and the tax counts, the court departed downward nine levels for 4 family circumstances that the court found to be extraordinary. (See 5 id. at 98-100, 122.) 6 is a disfavored basis for a departure" (id. at 98), but it concluded The district court "acknowledge[d] that that 7 8 9 10 nevertheless I believe in this case it has been demonstrated that the extraordinary circumstances present are of a kind and to a degree not taken into account by the guidelines. 11 12 13 14 Here, as we have discussed, Mr. Cutler has three children, one of whom has finished, apparently, two years in college. The children's ages are 20, 14 and 11. 15 16 17 18 19 20 Mr. Cutler has been ordered to pay child support and has in fact paid that support over time. As I understand it from the presentence report, other costs of those children have been paid by Mr. Cutler or he has caused them to be paid, including costs of visits with him. 21 22 23 24 25 26 27 28 As we also know from the presentence report and from counsel's submissions, the children's mother makes approximately $25,000 a year as a school bus driver. And in her letter [she] pointed out that the child support payments pay the rent and otherwise allow the children who remain in lower and secondary school to remain in the public school system in which they have been brought up in. 29 30 31 32 33 34 35 The former Mrs. Cutler also writes that, without the support that Mr. Cutler provides, the children would have to be taken out of the Somers School System and the college student would be prevented from returning to college and, in all likelihood, the entire family would have to move in with Mrs. Cutler's sister in Georgia. 36 37 38 At this particularly vulnerable time in those children's educational and emotional development, it seems that that is an extraordinary price to pay. 39 40 41 42 43 I also find that a lengthy prison sentence would prevent Mr. Cutler from making the required payments, whether because child support payments would be excused in New York, which I don't know and do not rely on, or whether he just plain would not - 21 - 1 be able to make them. 2 3 4 For those reasons, I find that a downward departure on the basis of extraordinary family circumstances is appropriate. 5 6 7 8 9 10 . . . . . . . I think that the appropriate departure is to a level 13 under the guidelines. (Id. at 98-100.) The court then turned to the sentencing factors set out in 18 U.S.C. § 3553(a). It stated that 11 12 13 14 15 16 17 with respect to the nature and circumstances of the offense, I take into account that Mr. Cutler was the chief financial officer of the company with respect to the bank fraud conspiracy, and I take into account his responsibility for the tax documents of the company with respect to the tax fraud conspiracy. 18 19 20 21 I note, however, that, in addition, I have defined [sic - declined] a further reduction in offense level based on Mr. Cutler's role in the offense. 22 23 24 25 26 27 28 29 Taking into account, however, the nature and circumstances of the offense under Section [3553](a)(1), I do note, however, that the degree of culpability of Mr. Cutler is far less than the degree of culpability of other defendants. His role in the offense was far more limited than the role of other defendants and, as I mentioned, although necessary to the offense, far more limited. 30 31 32 33 34 I also take into account that . . . [Cutler] received little, if any, direct compensation as a result of it and relative to the $106 million amount, a relatively small amount of compensation indirectly as a result of the bank fraud conspiracy. 35 36 37 For those reasons, the nature and circumstances of the offense dictate a lower sentence than is required by the guidelines. 38 (Cutler S.Tr. 101-02.) 39 The court later clarified that these statements with 40 respect to Cutler's role and culpability related only to the bank - 22 - 1 fraud counts and that the court did "not" find that the offense 2 level of 22 "overstat[ed] the seriousness" of Cutler's tax offenses. 3 (See id. at 121-22.) 4 there was departure application with regard to that offense level, 5 it is denied." The court ruled that "[t]o the extent that (Id. at 121.) 6 With respect to 18 U.S.C. § 3553(a)(2)(B), which requires 7 the sentencing court to consider "the need for the sentence imposed 8 . . . to afford adequate deterrence to criminal conduct," the 9 district court stated, 10 11 12 13 14 some jail time is required to provide adequate deterrence to this type of criminal conduct. With respect to this type of an offense, however, the relative length of the sentence does not seem to be as important in providing deterrence. 15 (Cutler S.Tr. 102.) 16 restitution" and stated that "in that respect, as with Mr. Cutler's 17 family obligations, a lesser rather than greater custodial sentence 18 is required." 19 The court also cited "the need to provide (Id. at 103.) The Guidelines-recommended range of imprisonment for an 20 offense 21 departures) and a criminal history category of I is 12-18 months. 22 The district court sentenced Cutler to a prison term of 12 months 23 and one day, to be followed by a five-year term of supervised 24 release. 25 government, the court stated that even if the Guidelines departures 26 it had granted were found inappropriate as a matter of law on 27 appeal, it would still sentence Cutler to the year-and-a-day term of 28 imprisonment by imposing a non-Guidelines sentence and applying the 29 § 3553(a) factors. level of 13 (the (Id. at 103.) level resulting from the granted In response to a question from the (See id. at 123.) - 23 - 1 2. Freedman 2 The PSR on Freedman, after the initial offense-level 3 increases discussed above, i.e., 18 steps for amount of loss and two 4 steps for more than minimal planning, leading to an enhanced offense 5 level 6 discussed in Part II.C.1. below, a two-step increase pursuant to 7 Guidelines § 3C1.1 on the ground that Freedman had engaged in 8 obstruction 9 investigators in connection with its investigation of the tax of 26, recommended of justice additional by making increases, false including, statements to as IRS 10 frauds. 11 that Freedman's total offense level was 31. 12 of 13 recommended imprisonment range for Freedman would be 108-135 months. 14 Freedman principally challenged the recommended loss- 15 amount enhancement to his offense level, and he moved for downward 16 departures on several grounds. 17 enhancement, Freedman made essentially the same arguments as Cutler 18 for exclusion of the nonrecourse parts of the loans, contending that 19 the loss figure should be only $40-$80 million, with a resulting 17- 20 step, rather than 18-step, increase. 21 contentions 22 arguments when made by Cutler. 31 With all of the recommended increases, the PSR calculated and a on criminal the history same category Given an offense level of I, the Guidelines- In challenging the loss-amount grounds on The government opposed these which it had opposed the 23 The district court rejected Freedman's contention that the 24 loss-amount, for purposes of calculating his offense level, should 25 have included only the recourse part of the Tollman-Hundley debts. 26 (See Freedman Sentencing Transcript ("Freedman S.Tr.") 53, 56; see 27 also id. at 54 (accepting the PSR-recommended adjustment for more 28 than minimal planning).) However, the court stated that "the - 24 - 1 $100 million amount with respect to those defendants other than Mr. 2 Hundley, and that, of course, means Mr. Freedman, substantially 3 overstates the amount with the culpability of these defendants" and 4 "overstates [Freedman]'s participation in the offense." 5 53.) 6 accept, . . . or 17 as proposed by the defendants--[it] wildly 7 overstates the culpability of the defendant." 8 "note[d] in particular that under Restr[e]po, the loss amount is in 9 general thought to be . . . somewhat related to the gain to the 10 defendant," and stated, "[h]ere, of course, we know that they are 11 wildly disparate." 12 with the "vast[] overstate[ment of] this defendant's culpability in 13 the offense" by way of a departure. (Id. at "[A]ccordingly," the court stated, "whether it's 18, as I 14 Freedman (Id.) made (Id.) The court The court indicated that it would deal several (Id. at 56.) applications for downward 15 departures. 16 Guidelines § 2F1.1 Application Note 10 based on the argument that 17 the loss amount greatly overstated his culpability in the offense, 18 he sought a departure pursuant to § 5H1.6 for extraordinary family 19 circumstances, arguing that his relationships with his elderly, 20 mentally retarded brother who has cerebral palsy and with his 21 elderly mother-in-law were so important to his family members' well- 22 being that they merited a departure from the Guidelines. 23 also 24 Guidelines § 5H1.4 (Policy Statement), due to a serious heart 25 condition (along with attendant maladies) and depression. In addition to moving for a departure pursuant to sought 26 The a departure government for health opposed all circumstances of Freedman pursuant Freedman's to departure 27 requests. 28 Freedman's culpability, the government argued, inter alia, that As to the contention that the loss amount overstated - 25 - 1 Freedman had benefited substantially from the frauds and that his 2 role was extensive and significant. 3 family circumstances, the government pointed out that Freedman is 4 not the primary care-giver with respect to either his brother or his 5 mother-in-law, 6 facility. 7 arrangements could be made for the care of each, and that therefore 8 neither situation qualified as extraordinary. 9 as each of them With respect to Freedman's resides in an assisted living The government contended that, if necessary, alternative As to Freedman's heart condition, there were two stages of 10 presentations. 11 departure on this basis, the government submitted a letter from the 12 Health Systems Administrator of the Bureau of Prisons ("BOP"), 13 stating that the BOP was capable of providing adequate monitoring of 14 Freedman's 15 thousands of inmates with the same conditions as Freedman (see Part 16 II.C.4 below), and, after elaborating on the medical facilities 17 available in the BOP system, it asserted that "[b]ased on the 18 information 19 resources, the BOP will be able to provide appropriate care for Mr. 20 Freedman." 21 Administrator, BOP, to Stanley J. Okula, Jr., Assistant United 22 States Attorney, dated March 18, 2005 ("First Cadogan Letter"), at 23 2.) 24 Freedman's heart condition would thus not be justified. In response to Freedman's initial motion for a conditions. provided (Letter to The me from letter and my Barbara noted that knowledge J. of the Cadogan, BOP BOP's Health houses medical Systems The government argued that a departure on the basis of 25 Subsequent to these submissions and prior to sentencing, 26 Freedman suffered a near-fatal attack of sepsis from a urinary tract 27 infection, which required his hospitalization in intensive care for 28 over a week. Accordingly, additional material was submitted with - 26 - 1 respect to his request for a downward departure on account of his 2 health. 3 that the attack of urosepsis "demonstrate[d] the necessity of 4 careful and ongoing medical care, given Mr. Freedman's cardiac 5 condition. 6 would not have survived." 7 Judge Preska dated May 23, 2005 ("Reison May 23 Letter"), at 1.) 8 Freedman's urologist wrote that Freedman's problem had been caused 9 by kidney stones; that Freedman "will need to be watched very 10 closely in order to make sure that he does not have a recurrence of 11 his problem"; that a small fragment of stone remained; that "[i]f 12 this fragment does not pass," Freedman will need to have it removed; 13 and "until he is stone-free and until his condition is completely 14 stabilized, that he will need to be watched closely." 15 Michael 16 ("Wechsler May 10 Letter").) Freedman's cardiologist wrote the district court stating Without rapid attention to his deteriorating status he Wechsler, M.D., (Letter from Dennis S. Reison, M.D., to to Judge Preska dated (Letter from May 10, 2005 17 In response, the government summarized Freedman's medical 18 records from his recent health problem and argued that the "medical 19 records show that [Freedman] had a serious medical scare, but that 20 he ha[d] essentially recovered." 21 al., Assistant United States Attorneys, to Judge Preska dated June 22 10, 2005 ("Neiman Letter"), at 3.) 23 medical records, after his discharge from the hospital, Freedman was 24 essentially "'good, tolerating [a] regular diet[ and] ambulat[ing] 25 independently without problems'" (id. (quoting Discharge Summary 26 Note for Freedman, Sanford, by Michael Wechsler, M.D., dated April 27 20, 28 easily,'" (Neiman Letter at 3 (quoting cardiologist's notes)). 2005)), and was (Letter from Peter G. Neiman et "'feel[ing] - 27 - According to the summary of the well,'" though "'fatigu[ing] The 1 government also submitted a second letter from the BOP, which noted 2 that 3 regarding Freedman's medical condition. The BOP concluded that "the 4 Bureau will be able to provide appropriate care for Mr. Freedman," 5 explaining that it 6 7 8 9 10 11 12 13 14 15 16 had received and assessed the additional information [w]hen medical emergencies and the need for surgical procedures arise, . . . major medical centers [with which the BOP has contracts] offer the Bureau a wide range of trained surgical specialists. Each institution has procedures in place to contact local emergency transportation teams for the timely transportation to one of the local medical centers. If Mr. Freedman requires hospitalization during his term of incarceration, for either a routine or emergency admission, the Bureau can accommodate this need. 17 (Letter from Barbara J. Cadogan, Health Systems Administrator, BOP, 18 to Stanley J. Okula, Jr., Assistant United States Attorney, dated 19 June 10, 2005 ("Second Cadogan Letter"), at 1.) 20 The requests for 21 departure based on his age, health, and family circumstances. The 22 court made no determination as to what Freedman's total offense 23 level 24 Guidelines; and it did not specify the extent to which it was 25 granting a departure on account of its view that the loss amount 26 "vastly 27 (Freedman S.Tr. 56 ("[r]ather than actually putting a number on it, 28 I 29 consideration of the 3553(a) factors")). or think district recommended court overstate[d I will granted imprisonment Freedman]'s await both the Freedman's range would culpability be departure in under the findings the offense" and the 30 Notwithstanding the BOP's position that it would be able 31 to provide adequate care for Freedman, the court granted Freedman's 32 applications 33 "combin[ation of] Mr. Freedman's age and his health situation" (id. for downward departures, - 28 - based in part on a 1 at 57). The court stated as follows: 2 3 4 [T]he BOP does not have the ability, in my view, to monitor Mr. Freedman's situation constantly and to respond immediately. 5 6 7 8 9 And the recent health issue has made it very, very plain that without that ability to monitor constantly and respond immediately, sending Mr. Freedman to prison would in effect be a death sentence. . . . 10 11 12 13 14 15 16 17 I also note, of course, in the Bureau of Prisons letter that the rider suggests that, and I know it to be true, that in each facility there are contracts with outside medical facilities. I also know it to be true, however, that one does not get the immediate monitoring and immediate response that in this instance has proved so necessary literally for Mr. Freedman's life. 18 19 20 21 22 23 24 And I also note that the recent medical bills apparently were in excess of $200,000. It's my experience in reviewing material from prisoners from the Bureau of Prisons that this is not the kind of outlay that would easily be expended within the Bureau of Prisons, for very obvious reasons. But I find that a departure is appropriate. 25 (Id. at 58 (emphases added).) 26 The 27 extraordinary 28 relationships with his disabled brother and, separately, his mother- 29 in-law. 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 district family court also granted circumstances, based a departure on Freedman's It found that the defendant's relationship with his brother, Elliot, is a particularly extraordinary relationship for a variety of reasons. First there is, of course, the length of the relationship, but there is the fact that it is a two-way relationship; the fact that, as attested to by Dr. Gibeault[, former Program Coordinator for the Department of Mental Retardation for the Commonwealth of Massachusetts], that Elliot calls Mr. Freedman several times a week at all hours of the day and night and depends upon his availability to sooth[e] whatever problem is bothering Elliot, and otherwise to provide him with a type of support that others simply cannot provide and have not provided. That Mr. Freedman has been Elliot's foremost advocate and has achieved for him the highest possible level of independent living - 29 - for 1 2 attests to the results vigorous relationship. 3 4 5 6 7 In addition, the doctor's recitation of Mr. Freedman's including Elliot in the family events leads me to conclude that this relationship is indeed of a kind not taken into account by the guidelines. of this very obviously 8 (Id. at 59.) 9 mother-in-law, Evelyn, the district court noted that it was 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 With regard to Freedman's relationship with his tak[ing] into account Mr. Freedman's role in managing Evelyn's affairs and taking her out. And while I find that this relationship is extraordinary to an extent not contemplated by the guidelines, it is not as extraordinary as the life-long relationship with Elliot. But I find that both entitle Mr. Freedman to a downward departure. (Id. at 59-60 (emphasis added).) The district court then discussed the factors set out in 18 U.S.C. § 3553(a), and noted that [i]n considering the nature and circumstances of the offense, I've set out most of my conclusions with respect to those factors, but reiterate here that the loss amount of $100,000[,000] very seriously overstates the participation of this defendant and his culpability in the offense. . . . . 27 28 29 30 31 32 33 34 35 36 And I have discussed already I think at some length the history and characteristics of this defendant, particularly with respect to his age and health situation, his extraordinary family ties, his past charitable works and the like. Certainly the history and characteristics of the defendant, most specifically his age and health situation, argue for a noncustodial sentence. The nature and circumstances of the offense considered alone would argue for a custodial sentence. 37 38 39 40 41 With respect to the seriousness of the offense and promoting respect for the law, in the ordinary circumstance a custodial sentence would be required to reflect the seriousness of the offense and to promote respect for the law. 42 43 With respect to the discussion of providing just punishment for the offense, I take into account - 30 - 1 2 3 4 5 6 7 the discussion in [Freedman]'s sentencing materials that in light of the public nature of the prosecution, the public humiliation that the defendant has suffered, the loss of his law license and various other consequences, and the certainty of prosecution, both just punishment and deterrence in the general sense ha[ve] been accomplished here. 8 9 10 11 12 Again, all other factors being equal, just punishment would ordinarily require a custodial sentence. Here I think we all agree that there is no need to protect the public from further crimes of this defendant. 13 14 15 16 17 18 With respect to [§ 3553(a)(2)(D)], the only applicable factor seems to be providing the defendant with needed medical care. The record is very clear, and as I've mentioned, I find that adequate medical care for this defendant cannot be accomplished in prison. 19 20 21 22 23 24 25 26 27 28 I have taken into account, and obviously counsel have made submissions regarding the kinds of sentences available, the kinds of sentences and sentencing ranges established for these offenses and the policy statements set out by the sentencing commission. I have also taken into account the need to avoid unwarranted sentence disparities among defendants with similar records and, of course, will take into account in discussing restitution the need to provide restitution to any victims of the crime. 29 (Freedman 30 proceeded to impose a sentence on Freedman that included three years 31 of probation but no incarceration. 32 S.Tr. 63-64 (emphases added).) The district court The court stated that it did not need to make a final 33 ruling 34 difficulty of that question in light of the court's "find[ing] that 35 the 36 culpability" and the court's views as to an appropriate sentence. 37 (Id. at 82.) 38 found appropriate, "it is my view that a nonincarceratory sentence 39 is one that I would impose in any event, regardless of what the 40 offense level computation was," and that "consideration of the as to amount Freedman's of the loss offense-level . . . far calculation, overstates Mr. given the Freedman's The court stated that in light of the departures it - 31 - 1 3553(a) factors also would lead me to impose a nonincarceratory 2 sentence 3 calculation, including departures, was." regardless of what the outcome of the guidelines (Id.) 4 Judgment was entered sentencing Freedman to a three-year 5 period of probation, ordering him to perform 700 hours of community 6 service per year during the course of his probation (id. at 65, 80), 7 and ordering him to pay restitution in the amount of $14,600,000, 8 and to forfeit $3,013,739.48. 9 We note that although the judgment shows this forfeiture 10 amount, it also states that it is based on the court's forfeiture 11 order. 12 $3,080,739.48. 13 it to the district court to remedy this discrepancy. The amounts listed that order, however, See Order dated October 17, 2005, at 1-2. 14 II. 15 in total We leave DISCUSSION In its appeals, the government contends that the district 16 court 17 seriousness of the bank fraud offenses based on the sums of money 18 that Cutler and Freedman personally received and finding that the 19 total amount of loss suffered by the defrauded banks overstated 20 these defendants' roles and culpability; (b) in fashioning its 21 sentence on Cutler without giving sufficient consideration to his 22 conviction on the tax counts; (c) in refusing to adjust Freedman's 23 offense level on account of, inter alia, obstruction of justice; (d) 24 in 25 circumstances; and (e) in concluding that Freedman could not be 26 incarcerated because of his age and health. The government contends erred granting or abused these its discretion defendants downward - 32 - (a) in depreciating departures for the family 1 that 2 imprisonment of no more than one year and a day for Cutler and no 3 imprisonment at all for Freedman, are substantively unreasonable. 4 For the reasons that follow, we conclude that there were errors in 5 certain of the district court's Guidelines applications and in its 6 departure decisions; that the sentences imposed did not properly 7 interpret certain of the sentencing factors that the court was 8 required to consider under 18 U.S.C. § 3553(a), such as just 9 "punishment" and deterrence of others; and that some of the court's the sentences imposed, to the extent that 10 A. ordered rationales would promote disrespect for the law. 11 they Required Sentencing Considerations and Standards of Review 12 In the wake of United States v. Booker, 543 U.S. 220 13 (2005), which ruled that the Guidelines are advisory, a sentencing 14 judge may impose either a Guidelines sentence or a non-Guidelines 15 sentence. 16 F.3d 103, 113 (2d Cir. 2005) ("Crosby"). 17 of sentence, the sentencing judge must consider the factors set 18 forth in 18 U.S.C. § 3553(a). 19 part as follows: See, e.g., id. at 245-46; United States v. Crosby, 397 In arriving at either type That section provides in pertinent 20 21 22 23 24 25 (a) Factors to be considered in imposing a sentence.--The court shall impose a sentence sufficient, but not greater than necessary, to comply with the purposes set forth in paragraph (2) of this subsection. The court, in determining the particular sentence to be imposed, shall consider-- 26 27 28 (1) the nature and circumstances of the offense and the history and characteristics of the defendant; 29 (2) the need for the sentence imposed-- 30 31 (A) to reflect the seriousness of the offense, to promote respect for the law, and to - 33 - 1 provide just punishment for the offense; 2 3 (B) to afford adequate deterrence to criminal conduct; 4 . . . . 5 6 (4) the kinds of sentence sentencing range established for-- 7 8 9 and the (A) the applicable category of offense committed by the applicable category of defendant as set forth in the guidelines-- 10 11 (i) issued by Commission . . . ; the Sentencing 12 (5) any pertinent policy statement-- 13 14 15 (A) issued by the Sentencing Commission pursuant to section 994(a)(2) of title 28, United States Code . . . ; 16 . . . . 17 18 19 20 (6) the need to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct; and 21 22 (7) the need to provide restitution to any victims of the offense. 23 18 24 (a)(5)(A), (a)(6), and (a)(7). U.S.C. §§ 3553(a)(1), (a)(2)(A), (a)(2)(B), (a)(4)(A)(i), 25 Recent decisions by the Supreme Court have clarified both 26 the procedures to be followed by the district court in arriving at 27 either type of sentence and the standard of review to be applied by 28 the courts of appeals. 29 586, 594, 596-97 (2007); Kimbrough v. United States, 128 S. Ct. 558, 30 570, 574-75 (2007); Rita v. United States, 127 S. Ct. 2456, 2467-68 31 (2007). 32 consider the Guidelines," 33 34 See, e.g., Gall v. United States, 128 S. Ct. Because "§ 3553(a) explicitly directs sentencing courts to district courts must begin their analysis with the Guidelines and remain cognizant of them throughout - 34 - 1 2 the sentencing process. Gall, 128 S. Ct. at 597 n.6. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 The Gall Court elaborated that [a]s we explained in Rita, a district court should begin all sentencing proceedings by correctly calculating the applicable Guidelines range. See . . . 127 S.Ct. 2456. As a matter of administration and to secure nationwide consistency, the Guidelines should be the starting point and the initial benchmark. The Guidelines are not the only consideration, however. Accordingly, after giving both parties an opportunity to argue for whatever sentence they deem appropriate, the district judge should then consider all of the § 3553(a) factors to determine whether they support the sentence requested by a party. Gall, 128 S. Ct. at 596. 17 In Kimbrough, which dealt with the disparities between 18 sentences prescribed for powder cocaine and crack cocaine, the Court 19 stated that 20 21 22 23 24 25 26 27 as a general matter, courts may vary [from Guidelines ranges] based solely on policy considerations, including disagreements with the Guidelines. . . . [C]f. Rita v. United States, [127 S. Ct. at 2465] (2007) (a district court may consider arguments that "the Guidelines sentence itself fails properly to reflect § 3553(a) considerations"). 28 Kimbrough, 128 S. Ct. at 570 (bracketed phrase in original) (other 29 internal quotation marks omitted). In Gall, the Court noted that it 30 is 31 32 33 34 35 36 37 38 39 40 41 42 clear that a district judge must give serious consideration to the extent of any departure from the Guidelines and must explain his conclusion that an unusually lenient or an unusually harsh sentence is appropriate in a particular case with sufficient justifications. For even though the Guidelines are advisory rather than mandatory, they are, as we pointed out in Rita, the product of careful study based on extensive empirical evidence derived from the review of thousands of individual sentencing decisions. Gall, 128 S. Ct. at 594 (emphases added); see Rita, 127 S. Ct. at - 35 - 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 2464. Thus, [i]f [the sentencing judge] decides that an outsideGuidelines sentence is warranted, he must consider the extent of the deviation and ensure that the justification is sufficiently compelling to support the degree of the variance. . . . [A] major departure should be supported by a more significant justification than a minor one. Gall, 128 S. Ct. at 597 (emphasis added). Finally, [a]fter settling on the appropriate sentence, he must adequately explain the chosen sentence to allow for meaningful appellate review and to promote the perception of fair sentencing. Id. (emphasis added); Rita, 127 S. Ct. at 2468. In the wake of Booker, this Court is to apply a 16 "reasonableness standard" in reviewing sentences, Booker, 543 U.S. 17 at 262 (internal quotation marks omitted); "'reasonableness' review 18 merely asks whether the trial court abused its discretion," Rita, 19 127 S. Ct. at 2465; see, e.g., Gall, 128 S. Ct. at 594 ("Our 20 explanation of 'reasonableness' review in the Booker opinion made it 21 pellucidly clear that the familiar abuse-of-discretion standard of 22 review now applies to appellate review of sentencing decisions. See 23 [Booker,] 543 U.S., at 260-262 . . . ."). 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 Thus, [r]egardless of whether the sentence imposed is inside or outside the Guidelines range, the appellate court must review the sentence under an abuse-of-discretion standard. It must first ensure that the district court committed no significant procedural error, such as failing to calculate (or improperly calculating) the Guidelines range, treating the Guidelines as mandatory, failing to consider the § 3553(a) factors, selecting a sentence based on clearly erroneous facts, or failing to adequately explain the chosen sentence--including an explanation for any deviation from the Guidelines range. Assuming that the district court's sentencing decision is procedurally sound, the appellate court should then consider the substantive reasonableness of the sentence imposed under an abuse-of-discretion standard. When conducting this review, the court will, of course, take into account - 36 - 1 2 3 4 5 6 7 8 9 the totality of the circumstances, including the extent of any variance from the Guidelines range. . . . [I]f the sentence is outside the Guidelines range, the court may not apply a presumption of unreasonableness. It may consider the extent of the deviation, but must give due deference to the district court's decision that the § 3553(a) factors, on a whole, justify the extent of the variance. 10 Gall, 128 S. Ct. at 597 (emphases added); see id. at 594-95 (While 11 generally the district court need not have found "'extraordinary' 12 circumstances to justify a sentence outside the Guidelines range," 13 an appellate court "reviewing the reasonableness of a sentence 14 outside the Guidelines range, . . . may . . . take the degree of 15 variance into account and consider the extent of a deviation from 16 the Guidelines."). 17 18 19 20 21 22 23 And while the Guidelines are no longer binding, closer review may be in order when the sentencing judge varies from the Guidelines based solely on the judge's view that the Guidelines range "fails properly to reflect § 3553(a) considerations" even in a mine-run case. Kimbrough, 128 S. Ct. at 575 (quoting Rita, 127 S. Ct. at 2465). 24 In making our assessment of a sentencing decision, we bear 25 in mind the "familiar abuse-of-discretion standard of review." 26 Gall, 128 S. Ct. at 594 (citing Booker, 543 U.S. at 260-62). 27 cited pages of Booker, the Court embraced the standard established 28 by Koon v. United States, 518 U.S. 81, 99 (1996), which in turn had 29 endorsed the approach taken in Pierce v. Underwood, 487 U.S. 552, 30 558-60 (1988), and had "adopt[ed] the abuse-of-discretion standard 31 in Cooter & Gell v. Hartmarx Corp., 496 U.S. 384 (1990)," Koon, 518 32 U.S. at 99. 33 § 3553(a) did not explicitly set forth a standard of review, the 34 abuse-of-discretion standard was inferable "from related statutory At the The Booker Court indicated that, although 18 U.S.C. - 37 - 1 language, 2 administration of justice.'" 3 Pierce, 4 omitted). the 487 structure U.S. at of the statute, and the 'sound Booker, 543 U.S. at 260-61 (quoting 559-60) (other internal quotation marks 5 As to the elements of abuse-of-discretion review, Koon 6 pointed out that a district court's discretion is not boundless. 7 For example, 8 9 10 11 12 13 14 15 16 17 18 19 20 whether a factor is a permissible basis for departure under any circumstances is a question of law, and the court of appeals need not defer to the district court's resolution of the point. . . . [A]n abuse-of-discretion standard does not mean a mistake of law is beyond appellate correction. Cooter & Gell, [496 U.S.] at 402. A district court by definition abuses its discretion when it makes an error of law. [Id.] at 405. . . . The abuse-ofdiscretion standard includes review to determine that the discretion was not guided by erroneous legal conclusions. Koon, 518 U.S. at 100 (emphasis added). 21 Further, as noted in Cooter & Gell, a district court's 22 findings of fact, while accorded deference, are likewise subject to 23 review: 24 25 26 27 28 29 30 When an appellate court reviews a district court's factual findings, the abuse-of-discretion and clearly erroneous standards are indistinguishable: A court of appeals would be justified in concluding that a district court had abused its discretion in making a factual finding only if the finding were clearly erroneous. 31 Cooter & Gell, 496 U.S. at 401. 32 abuse its discretion if it based its ruling . . . on a clearly 33 erroneous assessment of the evidence." "A district court would necessarily Id. at 405. 34 In addition, we have noted that even where the decision is 35 not necessarily the product of an error of law or a clearly 36 erroneous finding of fact, - 38 - 1 2 3 4 5 6 [a] sentencing court abuses or exceeds its discretion when its decision . . . "'cannot be located within the range of permissible decisions.'" [United States v.] Brady, 417 F.3d [326, 333 (2d Cir. 2005)] (quoting Zervos v. Verizon N.Y., Inc., 252 F.3d 163, 169 (2d Cir.2001)). 7 United States v. Canova, 485 F.3d 674, 679-80 (2d Cir. 2007). 8 e.g., Crosby, 397 F.3d at 114 (district court has abused its 9 discretion if "the decision on its merits exceeded the bounds of 10 allowable discretion"); Eastway Construction Corp. v. City of N.Y., 11 821 F.2d 121, 123 (2d Cir. 1987) ("All discretion is to be exercised 12 within reasonable limits. 13 decision is lawful at any point within the outer limits of the range 14 of choices appropriate to the issue at hand; at the same time, a 15 decision outside those limits exceeds or, as it is infelicitously 16 said, 'abuses' allowable discretion."). See, The concept of discretion implies that a 17 As to substantive reasonableness, Booker instructed that 18 "[s]ection 3553(a) . . . sets forth numerous factors that guide 19 sentencing. 20 determining whether a sentence is unreasonable." 21 Accordingly, 22 circumstances, 23 Guidelines range," in order to determine whether a sentence is 24 substantively unreasonable, i.e., an abuse of discretion, Gall, 128 25 S. Ct. at 597, we look to see whether the sentencing court erred in 26 interpreting any of the § 3553(a) factors or made any other error of 27 law, whether it made any clear error in assessing the evidence, and 28 whether its decision was beyond the outer limits of the range of 29 decisions permitted by § 3553(a). Those factors [are to] guide appellate courts . . . in "tak[ing] including into the account extent - 39 - of 543 U.S. at 261. the totality of the any variance from the 1 B. Cutler 2 With respect to the sentencing of Cutler, our review of 3 the 4 disregarding 5 culpability 6 departure authority, and by misinterpreting certain of the § 3553(a) 7 factors. 8 erroneous, and certain of its rationales are detrimental to the 9 "perception of fair sentencing," Gall, 128 S. Ct. at 597. record 10 11 12 1. persuades the us that Guidelines for jointly the provision conducted district court addressing activity, by a erred by defendant's exceeding its In addition, certain of the court's findings are clearly Departure on the Theory that the Loss Amount Overstated Cutler's Role, Culpability, and Gain With Respect to the Bank Frauds 13 The district court's departure on the ground that the loss 14 amount overstated Cutler's role in and culpability for the bank 15 fraud offenses reflects a misapplication of the guidelines relating 16 to a defendant's responsibility for losses caused by activity in 17 concert with others and a misapprehension of its departure authority 18 with respect to role. 19 F.3d 65, 75 (2d Cir. 1997) ("O'Neil") ("loss measur[es] the gravity 20 of the offense, while the role adjustment measur[es] the culpability 21 of 22 (internal quotation marks omitted), cert. denied, 522 U.S. 1064 23 (1998). 24 a defendant's As to See generally United States v. O'Neil, 118 conduct the in amount the of commission loss for of which the a offense") defendant is 25 personally responsible, the guidelines as to relevant conduct, see 26 Guidelines § 1B1.3 ("Factors that Determine the Guideline Range"), 27 provide, inter alia, that in "'the case of a jointly undertaken - 40 - 1 criminal activity,'" such as a conspiracy to commit fraud, the 2 amount 3 foreseeable pecuniary loss caused by all "'reasonably foreseeable 4 acts 5 undertaken criminal activity.'" 6 Guidelines § 1B1.3(a)(1)(B)). 7 in which the record reveals a combination of circumstances that 8 warrant a departure from the application of this principle, any 9 finding of such circumstances in this case--had one been made--would of and loss attributable omissions of to others a in defendant is furtherance the of reasonably the jointly O'Neil, 118 F.3d at 74 (quoting Although there may be unusual cases 10 be clearly erroneous. 11 that Cutler's fraudulent representations to the banks were part of 12 the conspiracy among Tollman, Hundley, Freedman, Zukerman, Cutler, 13 and others, to cause the banks to sell more than $100 million worth 14 of loans for a small fraction of their outstanding balances. 15 coconspirators set out to, and did, inflict on the victim banks 16 losses totaling more than $106 million. 17 Cutler not only could foresee losses in that magnitude but also was 18 well aware that losses in that magnitude were intended, the court, 19 in 20 disproportionate to the seriousness of Cutler's conduct and offense, 21 failed to apply the principle set forth in § 1B1.3(a)(1)(B). departing on the As discussed below, there can be no doubt ground that The In light of the fact that the amount of loss was 22 As to a defendant's role in the offense, § 3B1.2 of the 23 Guidelines provides for either a two-step or a four-step reduction 24 of the offense level of a defendant who is found to have "play[ed] 25 a part in committing the offense that makes him substantially less 26 culpable 27 Background (emphasis added). 28 role adjustment is available for a defendant "who is less culpable than the average participant." Guidelines § 3B1.2 Under § 3B1.2(b) a two-step "minor" - 41 - 1 than most other participants, but whose role could not be described 2 as minimal." 3 added). 4 taken into consideration that a defendant may play a lesser role in 5 the offense than his coparticipants played or than the average 6 participant would play. Guidelines § 3B1.2 Application Note 3 (emphasis Thus, as a general matter, the Sentencing Commission has 7 In granting a departure to Cutler on the ground that the 8 offense level resulting from the sizeable loss overstated his role, 9 the court stated that it viewed this case as "analogous to the Court 10 of Appeals decision in United States v. Restrepo." 11 97.) 12 ("Restrepo"). 13 inapt. Restrepo arose from the government's seizure of, inter alia, 14 $18,300,000 in cash narcotics proceeds; the sentencing court found 15 that the offense levels calculated by reference to that amount of 16 money overstated the roles of three defendants who were merely 17 "laborers whose sole function was to load the boxes of money at the 18 warehouse on [a particular date]." 19 marks omitted); see, e.g., id. at 668 ("[T]he probation department, 20 after interviewing the surveillance agent and reviewing the facts of 21 the case, concluded that the roles of Andrade, Martinez, and Lara 22 were limited to loading the boxes of money."). 23 district court found those three defendants to be at most minimally 24 culpable, and it thus lowered their offense levels to the full 25 extent provided by § 3B1.2. 26 level downward departure was warranted because the effect that the 27 amount of cash seized had on the offense levels of participants 28 whose roles were so de minimis was far beyond that contemplated by (Cutler S.Tr. See United States v. Restrepo, 936 F.2d 661 (2d Cir. 1991) Given the facts of Restrepo, we find the analogy Id. at 667 (internal quotation The Restrepo It concluded that, in addition, a four- - 42 - 1 the Sentencing Commission in fashioning the Guidelines. 2 affirmed 3 extraordinarily magnified" and that the amount of money involved 4 "b[ore] 5 offense." on the little ground relation that to the "offense th[os]e level defendant[s'] This Court ha[d] role in been the Id. at 667. 6 In the present case, the district court's departure on the 7 ground that Cutler's role was overstated is inconsistent both with 8 the bases for our affirmance of the departure in Restrepo and with 9 the proper confines of departures. First, the district court in 10 Restrepo had adjusted the three defendants' offense levels downward 11 pursuant to § 3B1.2(a), i.e., as far as the Guidelines permitted for 12 minimal participation; thus that court was justified in viewing the 13 Sentencing Commission as not having made adequate provision for 14 participation that was even less than minimal. 15 the district court did not find Cutler's participation minimal; it 16 found that Cutler's role could not be regarded as even minor. 17 Cutler's role were significantly less than that of the average 18 participant 19 provision for a reduction in his offense level. Accordingly, we 20 conclude constituted 21 misinterpretation of Restrepo, as well as a misapplication of the 22 Guidelines. 23 in such that Second, an offense, departure to the on extent the this that Here, in contrast, Guidelines basis the made district If adequate court a here 24 concluded that this case was analogous to Restrepo by finding that 25 the large amount of money lost bore little relation to Cutler's role 26 in the offense, that finding is clearly erroneous. The magnitude of 27 the losses suffered by the defrauded banks was precisely what the 28 coconspirators intended, and there can be no doubt that Cutler knew - 43 - 1 the goal and that he took significant steps to help achieve it. 2 chief financial officer of Tollman-Hundley, Cutler was of course 3 aware of the size of the Tollman-Hundley debt and of the personal 4 liability of Tollman and Hundley on the deficiency notes they had 5 given in order to restructure the Tollman-Hundley debt. Those notes 6 made 7 $100 million of Tollman-Hundley's debt; Cohen was instructed to 8 negotiate to purchase the targeted banks' loans for 20 cents or less 9 on the dollar. Tollman and Hundley personally liable for As approximately The frauds were thus explicitly designed to induce 10 the banks to sell their Tollman-Hundley loans at losses in excess of 11 $80 million. 12 Aware of the magnitude of Tollman's and Hundley's 13 exposure, Cutler made significant misrepresentations to persuade the 14 banks that Tollman and Hundley had little in the way of personal 15 assets, and we see no error in the district court's denial of 16 Cutler's request to lower his offense level on the basis that he 17 played only a minor role. 18 involved in the everyday communications with the banks that the 19 coconspirators were attempting to defraud, his position as chief 20 financial officer of Tollman-Hundley made him a natural person for 21 the banks to contact for information when they could not get 22 information from Zukerman and Freedman. 23 response to repeated inquiries from banks that refused to sell their 24 loans cheaply without additional information, Cutler wrote several 25 letters to creditor banks, sending what he represented were the most 26 recent 27 statements that Cutler sent in mid-1995, for example, showed Tollman 28 and Hundley as having assets of little more than $125,000 and financial statements Although Cutler may not have been of Tollman - 44 - The record shows that in and/or Hundley. The 1 $80,000, respectively, when at the same time Cutler was overseeing 2 Tollman's 3 representing that Tollman had a net worth of more than $27 million. 4 The documents that Cutler sent to the banks concealed assets of 5 Tollman totaling $31,592,019 (see GX 1501) and concealed assets of 6 Hundley totaling $25,640,795 (see GX 1500). application to the Mississippi Gaming Commission 7 Had Cutler not participated in the frauds but given the 8 banks true information as to the personal assets of Tollman and 9 Hundley, the frauds would not have succeeded. The district court 10 accordingly found that Cutler was not a minor participant because 11 his actions were "necessary" (e.g., Cutler S.Tr. 98), and indeed 12 "critical[]" 13 conspiracy. 14 loss 15 inconsistent with these findings and with its appropriate refusal to 16 find 17 participants," 18 Note 19 participant," as specified in the Guidelines § 3B1.2 Background. (id. 3, 29), to the success of the bank fraud The court's departure on the ground that the amount of overstated that at Cutler's Cutler or as was role in either specified "substantially the "less in bank culpable Guidelines less fraud culpable § than 3B1.2 than offenses most was other Application the average 20 In sum, the coconspirators' explicit goal--reflected in 21 the list of banks, with loan balances and purchase price targets, 22 that was given to Cohen--was to induce banks that held Tollman- 23 Hundley loans with balances totaling more than $100 million to sell 24 their loans for 20 percent or less of those balances. 25 Zukerman represented that Tollman-Hundley itself and Tollman and 26 Hundley individually would consider filing for bankruptcy if they 27 could not get all the creditor banks to sell the loans cheaply; and 28 Cutler supported those misrepresentations by sending the banks - 45 - Freedman and 1 schedules that failed to disclose a total of more than $57 million, 2 or more than 99 percent, of Tollman's and Hundley's assets. 3 conclude that, in departing on the ground that the $106 million loss 4 resulted in an offense level that overstated either Cutler's conduct 5 or his role in the offense, the district court misinterpreted the 6 Guidelines in concluding that it had authority to depart downward on 7 the basis of a role that could not be considered either minimal or 8 minor, made an error of law in disregarding the principle that a 9 defendant is to be charged with the reasonably foreseeable losses 10 caused by his own conduct and the reasonably foreseeable conduct of 11 his coconspirators, and clearly erred in finding that the magnitude 12 of the banks' losses overstated Cutler's conduct and role, given 13 that his fraudulent statements to the banks were intended to defraud 14 them of those amounts and were, as the court found, critical to the 15 success of the fraud. We 16 To the extent that the court viewed the loss calculation 17 as overstating the seriousness of the offense itself (see Cutler 18 S.Tr. 97-98), we see no basis in the Guidelines--or in fact--for 19 such a view. 20 that "[i]n a few instances, the loss determined under subsection 21 (b)(1) may overstate the seriousness of the offense" and warrant a 22 downward departure, Guidelines § 2F1.1 Application Note 10, the 23 example given--an "attempt[] to negotiate an instrument that was so 24 obviously fraudulent that no one would seriously consider honoring 25 it," id.--plainly relates to intended loss, not to realized loss. 26 "The example suggests that this departure typically applies in cases 27 where there is no meaningful chance that the attempted crime would 28 have succeeded to the extent indicated by the stated loss," that is, Although the commentary to Guidelines § 2F1.1 states - 46 - 1 "where the intended loss is almost certain not to occur." 2 485 F.3d at 680 (internal quotation marks omitted). That commentary 3 to § 2F1.1 has no applicability here. 4 not only were intended but were realized. 5 out to induce the creditor banks to sell their loans at losses of 6 more than $80 million, and they did. Canova, The $106 million in losses The coconspirators set 7 In sentencing Cutler to a prison term of only 12 months 8 and one day for his bank fraud crimes, rather than the advisory- 9 Guidelines-recommended term of 78-97 months, the court sentenced 10 Cutler as if the frauds had resulted in losses of little more than 11 $70,000. 12 13 14 15 16 The court stated that some jail time is required to provide adequate deterrence to this type of criminal conduct. With respect to this type of an offense, however, the relative length of the sentence does not seem to be as important in providing deterrence. 17 (Cutler S.Tr. 102 (emphases added).) 18 fraud causing losses of more than $100,000,000 is no more serious 19 than one causing losses of little more than $70,000 reflects an 20 erroneous 21 punishment that is "just" and is antithetical to the need to 22 "promote the perception of fair sentencing," Gall, 128 S. Ct. at 23 597. interpretation of § The implicit finding that a 3553(a)(2)(A)'s requirement for 24 Finally we reject the district court's determination that 25 Cutler should be granted a departure on the basis that he "received 26 little, if any, personal gain from the bank fraud scheme" (Cutler 27 S.Tr. 98), as that finding, given the present record, is clearly 28 erroneous. 29 personal profit from the offense of conviction is not ordinarily a 30 ground for departure. See, e.g., United States v. Broderson, 67 F.3d Preliminarily, we note that a defendant's lack of - 47 - 1 452, 459 (2d Cir. 1995) ("Broderson"). 2 defendant in Broderson worthy of an exception to this general rule, 3 we did so principally not only because Broderson had not profited 4 personally from the fraud, but also because his conduct was not 5 "mainstream 6 statutory provision (requiring that the government be given the 7 benefit of a government-contractor's subsequently negotiated lower 8 costs), and because Broderson had not set out to perpetrate a fraud. 9 See id. fraud" but was fraud only Although we found the because of an unusual 10 This case bears little resemblance to Broderson. The bank 11 fraud conspiracy here was an unadulterated effort to induce creditor 12 banks to part with their property for a small fraction of its fair 13 value. 14 misrepresentations, an elaborate set of front-men and sham entities 15 (whose façade of lack of affiliation with Tollman and Hundley was 16 assisted by Cutler's having Paternoster's tax documents signed by 17 front-man Smith), false threats that Tollman and Hundley would file 18 for bankruptcy, and Cutler's sending the banks financial schedules 19 that concealed more than 99 percent of Tollman's and Hundley's 20 personal assets. The frauds were perpetrated through, inter alia, express 21 The PSR concluded that Cutler had been motivated by 22 monetary gain, and the district court found that both Cutler's 23 salary during the period of the bank fraud conspiracy (totaling more 24 than $970,000) and his receipt of stock in the casino venture (worth 25 more than $400,000) resulted from his participation in the bank 26 fraud conspiracy. 27 noting that 28 At the sentencing hearing, the court began by the clear language of 18, U.S.C., Section 982(a)(2) - 48 - 1 2 3 4 5 6 7 8 9 10 11 requires that the forfeiture amount be limited to property [or substitute property] constituting or derived from the proceeds the defendant obtained directly or indirectly as a result of the violation, here, the bank fraud conspiracy[, and] . . . that the clear language of the statute requires that at some point in time the defendant must have directly or indirectly, physically or constructively, come into possession of those proceeds. (Cutler S.Tr. 105.) 12 13 14 15 16 17 The court concluded: That having been said, it is my intention, taking into account the evidence in the case, to require forfeiture of Mr. Cutler's salary amounts during the years in question and the amount of substitute property of the value of his Alpha Hospitality stock . . . . 18 (Id. at 106.) 19 ruled that the "proceeds obtained by [Cutler] as a result of the 20 [bank fraud and bank fraud conspiracy offenses of which he was 21 convicted]" totaled "$1,381,974." 22 James Cutler dated April 15, 2005, at 2. 23 equivalent 24 $106 million loss, it is clearly erroneous--and hardly promotes 25 respect for the law--to characterize an individual's $1.3 million 26 profit from crime as "little, if any, personal gain" (Cutler S.Tr. 27 98). 28 29 2. of The district court's subsequent forfeiture order but a small Final Order of Forfeiture as to percentage Although this was the of the banks' total Departure on the Theory that the Length of Sentence Is Relatively Unimportant in Providing Deterrence 30 In imposing sentence on Cutler, the court generally dealt 31 with his bank fraud offenses and his tax offenses jointly, stating, 32 "I am only going to [explain the reasons for the extent of the 33 departure] once instead of twice" (Cutler S.Tr. 100). 34 its explanations, the court clarified that its departure on the - 49 - After giving 1 basis 2 "overstat[ed] the seriousness" of Cutler's offenses was not meant to 3 apply to his tax offenses. 4 a similar disavowal with respect to its rationale that "[w]ith 5 respect to this type of an offense, . . . the relative length of the 6 sentence does not seem to be as important in providing deterrence" 7 (id. at 102). that the Guidelines-recommended range (Id. at 121-22.) of imprisonment The court did not make 8 To the extent that the district court's views that this 9 "type" of offense did not warrant a long sentence and that the 10 relative length of the sentence was relatively unimportant in 11 providing deterrence were meant to apply to Cutler's convictions for 12 tax 13 squarely 14 Sentencing Commission. evasion 15 16 17 18 19 20 21 22 23 24 25 26 and contrary tax to fraud the conspiracy, policy the judgments court's views articulated by were the The Commission stated that [t]he criminal tax laws are designed to protect the public interest in preserving the integrity of the nation's tax system. Criminal tax prosecutions serve to punish the violator and promote respect for the tax laws. Because of the limited number of criminal tax prosecutions relative to the estimated incidence of such violations, deterring others from violating the tax laws is a primary consideration underlying these guidelines. Recognition that the sentence for a criminal tax case will be commensurate with the gravity of the offense should act as a deterrent to would-be violators. 27 Guidelines Ch. 2, Pt. T, 1, Introductory Commentary (emphasis 28 added). 29 scale of recommended prison ranges that increase with the size 30 of the loss. 31 resulting in a tax loss is the "[l]evel from §2T4.1 (Tax Table) 32 corresponding to the tax loss"). 33 that Accordingly, the guidelines for tax offenses provide a See Guidelines § 2T1.1 (base offense level for offense The commentary to § 2T1.1 states - 50 - 1 2 3 4 5 6 7 8 9 10 [t]his guideline relies most heavily on the amount of loss that was the object of the offense. Tax offenses, in and of themselves, are serious offenses; however, a greater tax loss is obviously more harmful to the treasury and more serious than a smaller one with otherwise similar characteristics. Furthermore, as the potential benefit from the offense increases, the sanction necessary to deter also increases. Guidelines § 2T1.1 Background (emphases added). 11 Cutler's tax offenses resulted in tax losses of more than 12 $5 million. 13 of which Cutler was convicted are the type of offense for which the 14 length 15 deterrence. 16 have been 22, and his recommended range of imprisonment for those 17 offenses alone would have been 41-51 months. of 18 In the Sentencing Commission's view, the tax offenses prison term is especially related to the need for His offense level for those convictions alone would Although, as discussed above, a sentencing court is 19 allowed to impose a sentence that varies from the Guidelines based 20 solely on policy considerations, including disagreements with the 21 Guidelines, the court is required by § 3553(a)(4) to consider the 22 pertinent Guidelines, and it is required to state the basis for its 23 disagreement, along with "sufficient justifications" for "the extent 24 of any departure," Gall, 128 S. Ct. at 594. 25 explanation 26 judgments, 27 background commentary, that tax offenses, in and of themselves, are 28 serious offenses; that the greater the tax loss, the more serious 29 the offense; and that the greater the potential gain from the tax 30 offense, the greater the sanction that is necessary for deterrence. 31 The court's conclusory statement that "the relative length of the 32 sentence does not seem to be as important in providing deterrence" for its reflected disagreement in the with the Guidelines - 51 - Here, the court gave no as Commission's explained policy by the 1 (id. at 102) provided no explanation whatever. 2 Thus, if the court intended its statement to apply to 3 Cutler's tax offenses, this rationale constituted procedural error 4 because for the 5 disagreement, the departure, or the extent of the departure. If, 6 instead, the court did not mean this statement to apply to the tax 7 offenses, we see in the record no indication that the court in fact 8 gave the requisite consideration to the guidelines relating to 9 Cutler's tax offenses as was required by § 3553(a)(4). it failed to provide an adequate explanation In the 10 absence of any explanation by the court, we conclude that the prison 11 term of 12 months and one day--even if all of that term were 12 attributable 13 attributable in part to his participation in the $100 million bank 14 frauds--was not commensurate with the seriousness of the offense, 15 would not act as a deterrent to would-be violators, did not promote 16 respect for the tax laws, and was substantively unreasonable. 17 3. to Cutler's tax frauds, and none of it were Departure Based on Cutler's Family Circumstances 18 "Family ties and responsibilities . . . are not ordinarily 19 relevant in determining whether a sentence should be outside the 20 applicable guideline range." Guidelines § 5H1.6 (Policy Statement). 21 This policy statement was mandated by Congress in the Sentencing 22 Reform 23 imprisonment or length of a term of imprisonment," the Commission 24 "shall assure that" the Guidelines and policy statements "reflect 25 the general inappropriateness of considering the . . . family ties 26 and responsibilities . . . of the defendant." Act, which instructed that - 52 - "in recommending a term of 28 U.S.C. § 994(e) 1 (emphasis added). 2 departure based on family responsibilities, such a departure is not 3 permitted except in extraordinary circumstances." 4 Smith, 331 F.3d 292, 294 (2d Cir. 2003) ("Smith"). Accordingly, "[b]ecause the Guidelines disfavor United States v. 5 We have found family circumstances to be extraordinary, 6 and hence a permissible basis for departure, where the defendant 7 provided substantial support for two children, his wife spoke 8 limited English and had a limited earning capacity, and his elderly 9 parents were likely to require both physical and financial 10 assistance in the near future, see United States v. Galante, 111 11 F.3d 1029, 1035 (2d Cir. 1997) ("Galante"); where the defendant was 12 the sole support of several young children, one of whom was an 13 infant, see United States v. Johnson, 964 F.2d 124, 129-30 (2d Cir. 14 1992) ("Johnson"); and where the defendant supported his wife, two 15 children, his paternal grandmother, and his disabled father who 16 depended also on the defendant's physical strength to help him get 17 in and out of his wheelchair, see United States v. Alba, 933 F.2d 18 1117, 1122 (2d Cir. 1991) ("Alba"). 19 "It is not unusual, however, for a convicted defendant's 20 incarceration to cause some hardship in the family." 21 F.3d at 294. 22 were unauthorized in circumstances less compelling than those in 23 Galante, Johnson, and Alba, 24 25 26 27 28 29 30 Smith, 331 We have found that family circumstances departures especially where other relatives could meet the family's needs, see United States v. Madrigal, 331 F.3d 258, 260 (2d Cir. 2003), or the defendant's absence did not cause a "particularly severe" hardship, United States v. Smith, 331 F.3d 292, 294 (2d Cir. 2003). United States v. Selioutsky, 409 F.3d 114, 119 (2d Cir. 2005). - 53 - 1 In Smith, for example, we found a family-circumstances 2 departure not authorized where it was based on the facts that the 3 defendant 4 relationship and in whose daily care he played a major role; that 5 his wife attended college part-time and would be forced to stop if 6 the defendant were incarcerated; and that his wife's job netted 7 approximately $17,000 a year after taxes, which was less than the 8 family's total expenses for rent and child-care. 9 Smith was neither the sole care-giver for his son nor the sole 10 financial support of the family, and that Smith's mother and half- 11 sister lived nearby and could assist in child care. 12 Smith's wife was likely to be forced to interrupt her college 13 studies and would need to supplement her income, the facts before 14 the court were simply "not the sort of extraordinary hardship that 15 justifies downward departure for family circumstances." 16 F.3d at 294. had a two-year-old son with whom he had a close We noted that Although Smith, 331 17 We have also found such a departure impermissible in a 18 case in which the defendant was a recently-divorced father of three 19 children, aged 10, 11, and 13; the children lived with their mother; 20 the mother earned approximately $40,000 annually; and the defendant 21 had 22 payments. 23 1998). 24 25 26 27 28 29 30 31 32 been contributing roughly $278 per week in child support See United States v. Faria, 161 F.3d 761, 762-63 (2d Cir. We concluded: The financial and emotional consequences of Faria's incarceration are no greater than those faced by most criminal defendants who have a family, and in fact may be somewhat less serious than those faced by many such defendants--although Faria pays child support, he no longer lives with his children, and his ex-wife earns approximately $40,000 per year. Under these circumstances, we cannot conclude that Faria's family is uniquely dependent on the support - 54 - 1 2 3 4 5 6 it currently receives from him. At a minimum, it is clear that the facts presented in Faria's case are far less grave than those that led us to approve the downward departures granted to the defendants in Alba, Johnson, and Galante. Id. at 763 (emphasis added). 7 We see little difference between Faria and the present 8 case. 9 support granting Cutler a downward departure for extraordinary 10 family circumstances were that he had three children, a 20-year-old 11 in college, and a 14-year-old and an 11-year-old in public school; 12 that his ex-wife's salary was approximately $25,000; that Cutler had 13 contributed $1,900 per month to the children's support; and that if 14 Cutler were incarcerated for a period commensurate with his crime 15 and unable to continue that support, the 20-year-old would likely be 16 prevented from returning to college, and the other two children 17 might have to leave the school system they had attended and move 18 with their mother to live with her sister in Georgia. 19 district court referred to this as a "particularly vulnerable time 20 in those children's educational and emotional development" (Cutler 21 S.Tr. 99), it gave no explanation as to why that was so. 22 facts found were Cutler's ex-wife's modest salary and the likelihood 23 that 24 interrupt the 20-year-old's college education and cause the family 25 to move away to live with a relative. 26 will no doubt face hardship, but this is true whenever family 27 members are deprived of the company and/or support of a defendant 28 who is incarcerated. 29 take 30 hardships to warrant a downward departure. The core factual findings made by the district court to the this cessation case of Cutler's financial Although the The only contributions would Cutler's wife and children The facts found by the district court do not sufficiently out - 55 - of the mainstream of family 1 More importantly, the record did not support a finding 2 that the imposition of a substantial prison term on Cutler would 3 cause him to be unable to support his children during the period of 4 his 5 government contended that if in fact Cutler is unable to support his 6 children while he is in prison, it is because he sold the casino 7 venture stock he had been given for his role in the bank frauds, had 8 used the proceeds to buy land in Nevada, and had placed that 9 property in the name of his new wife Erika, beyond the reach of his incarceration. In the district court proceedings, the 10 ex-wife and his children. 11 on this contention. 12 noted that in view of the fact "that Mrs. Erika Cutler had not been 13 employed earning a great deal" (Cutler S.Tr. 33), it was "highly 14 unlikely that Mrs. Erika Cutler contributed in any material way 15 financially to that company which she owns" (id. at 35). 16 asked, "[w]here did the initial capital come from" to buy the land. 17 (Id. at 33.) 18 been bought solely with a bank loan, not with the proceeds of the 19 sale of the casino stock, his attorney's statements at the hearing 20 included the following: The district court did not make a finding At the sentencing hearing, however, the court The court Although Cutler took the position that the land had 21 22 - "They created a new business that is in his wife's name" (id. at 35); 23 24 - Erika Cutler did not contribute anything financially to the property that is now in her name (see id. at 35-36); 25 26 27 - after getting the bank financing for the new business in his wife's name, "Cutler did lend money to it, which he lost" (id. at 36); 28 29 30 - "They structured the business . . . . The asset is in his wife's name. There is no question about that." (Id. at 33, 34); 31 - "Erika Cutler owns these properties, . . . he owns the - 56 - 1 2 3 management company, . . . he earns money in the management company" (id. at 75); his earning any money "is very unlikely without his personal services" (id. at 36); 4 5 6 7 8 - They structured the business so that it could to operate if Cutler went to jail: "Cutler and set up a business to provide for his wife . . . is away"; he would "provide for his children by when "he is out" (id. at 35 (emphases added)). 9 Thus, the government's position, i.e., continue his wife while he working" that it was 10 Cutler's choice to put his assets in the name of his new wife that 11 leaves him unable to support his children while he is in prison, was 12 supported by the plain implication of the above statements by 13 Cutler's attorney at sentencing, i.e., that the Nevada property into 14 which Cutler put money (whether as equity or debt, and regardless of 15 whether or not that money was proceeds from the bank frauds) is 16 capable of providing an income stream while Cutler is in prison. 17 That Cutler chose to put the property into his new wife's name to 18 provide for her, rather than leaving it in his own name to provide 19 for his children, may be an exceptional circumstance, but it is 20 surely not one that authorizes a downward departure. 21 defendant to elude the vast majority of the prison term that is 22 appropriate for his crime, by putting his assets out of the reach of 23 his children and then pleading the need to be out of prison in order 24 to support them, can only promote disrespect for the law. 25 4. Allowing a Departure Based on the Need for Restitution 26 Finally, in imposing on Cutler a term of imprisonment that 27 was a small fraction of the recommended term, the district court 28 stated that "the need to provide restitution," as well as "Mr. 29 Cutler's family obligations," led to the conclusion that "a lesser - 57 - 1 rather than greater custodial sentence is required" (Cutler S.Tr. 2 103). In light of the record in this case, including that discussed 3 in the immediately preceding section, we conclude that the court's 4 emphasis on the need to provide restitution could not rationally 5 provide the necessary justification for reducing Cutler's sentence 6 from 78-97 months to 12 months and a day. 7 For example, the court's reliance on the proposition that 8 Cutler's ability to pay restitution would be impaired unless he 9 received a sentence of imprisonment to a term that is shorter than 10 what would be commensurate with his crime would appear to subvert 11 the principle that the court should "avoid unwarranted sentence 12 disparities among defendants with similar records who have been 13 found guilty of similar conduct," 18 U.S.C. § 3553(a)(6). 14 handed application of the principle that a short prison term was 15 required for Cutler because of his restitution obligations would 16 imply 17 restitution in amounts exceeding their net worth should receive 18 short prison terms, a proposition that is patently untenable. that 19 virtually Further, all any defendants suggestion who that are even An even- required the to pay restitution 20 objective of sentencing would be achieved by sentencing Cutler to 21 serve a prison term of not more than a year and a day is highly 22 unrealistic. Cutler claims that he lacks the wherewithal to provide 23 even $1,900 per month to support his children. 24 restitution 25 Objectives of sentencing such as the need for deterrence and the 26 need to promote respect for the law are hardly served by imposing a 27 term 28 appropriate for the defendant's offense simply because there is an of that Cutler imprisonment that is is ordered a - 58 - small to pay The amount of is fraction of $29,775,000. the period 1 order for restitution, no more than a small fraction of which the 2 defendant is likely to pay. 3 C. Freedman 4 In sentencing Freedman, who was convicted on 12 counts 5 relating 6 resulting from his testimony about the "concern" of Tollman and 7 Hundley that Paternoster, which they owned, might try to collect 8 from them on their deficiency notes), the district court rejected 9 the PSR's recommendation that Freedman's offense-level be increased to the bank frauds (including one count of perjury 10 for, 11 downward departures on the grounds that Freedman had extraordinary 12 family circumstances, was aged, and was in poor health; and it 13 appears to have granted a departure on the ground that the offense 14 level resulting from the size of the banks' losses overstated 15 Freedman's participation and culpability in the offenses. 16 sentencing Freedman to no term of imprisonment, the court stated 17 that it would arrive at this result either as a Guidelines sentence 18 or as a non-Guidelines sentence. 19 procedural errors and that the resulting sentence was substantively 20 unreasonable. 21 1. 22 inter alia, obstruction of justice; it granted Freedman In We conclude both that there were Refusal To Consider an Obstruction-of-Justice Adjustment The Guidelines recommend a two-step increase in a 23 defendant's offense level "[i]f the defendant willfully obstructed 24 or impeded, or attempted to obstruct or impede, the administration 25 of justice during the investigation, prosecution, or sentencing of 26 the instant offense." Guidelines § 3C1.1. - 59 - Among the acts that fall 1 within this Guideline is "providing a materially false statement to 2 a law enforcement officer that significantly obstructed or impeded 3 the official investigation or prosecution of the instant offense." 4 Id. Application Note 3(g). 5 district court must find that the defendant consciously acted with 6 the purpose of obstructing justice; but the pertinent facts need be 7 proven only by a preponderance of the evidence. 8 States v. Agudelo, 414 F.3d 345, 349 (2d Cir. 2005); United States 9 v. Mafanya, 24 F.3d 412, 414 (2d Cir. 1994). In order to impose the adjustment, the See, e.g., United 10 In the present case, the PSR on Freedman recommended, and 11 the government requested, an obstruction adjustment on the ground 12 that Freedman had made false statements to IRS investigators with 13 respect to Freedman's knowledge of the tax frauds, in an attempt to 14 impede the investigation of those frauds. 15 that Freedman's statements to the IRS agents had substantially 16 impaired the investigation into the tax fraud and thereby obstructed 17 justice within the meaning of § 3C1.1. Freedman contended that such 18 an adjustment was inappropriate because he did not lie to the 19 investigating IRS agents and that, in any event, his statements did 20 not obstruct the investigation. 21 22 23 24 25 26 27 28 29 30 31 32 The government argued The district court rejected the recommended obstructionof-justice adjustment stating as follows: there was originally a charge to this effect. And I believe it is the case, and I know the government will correct me if I'm wrong, that following the evidentiary ruling that not just the statements alleged to have been false from an agent's report could be shown to the jury, but the material in the report surrounding those statements, that charge was withdrawn. So for that reason I reject [the obstruction-adjustment recommendation] of the presentence report. - 60 - 1 (See Freedman S.Tr. 55 (emphases added).) 2 any findings as to whether or not Freedman had made false statements 3 or, if he had, whether those statements were intended to impede or 4 had the effect of impeding the IRS investigation. The court did not make 5 The court's rejection of the obstruction adjustment on the 6 stated ground reflects an error of law. "Judicial authority to find 7 facts relevant to sentencing by a preponderance of the evidence 8 survives Booker," United States v. Garcia, 413 F.3d 201, 220 n.15 9 (2d Cir. 2005), and "a preponderance of the evidence is the 10 appropriate standard to be used in considering uncharged relevant 11 conduct for sentencing purposes," United States v. White, 240 F.3d 12 127, 136 (2d Cir. 2001) (so stating in the wake of Apprendi v. New 13 Jersey, 530 U.S. 466 (2000)). 14 not to have the obstruction count submitted to the jury at trial, 15 where the government's burden would have been to prove the relevant 16 facts beyond a reasonable doubt, did not provide a basis for the 17 court to refuse to consider the adjustment at sentencing, where 18 those facts need be proven only by a preponderance of the evidence. 19 The 20 obstruction adjustment was erroneous as a matter of law. 21 22 23 court's 2. decision that The fact that the government elected it need not consider the proposed Departure on the Theory that the Loss Amount Overstated Freedman's Participation and Culpability in, and His Gain from, the Bank Frauds 24 Although the district court stated that it accepted the 25 PSR's determination that Freedman's base offense level was 6 and 26 should be increased by two steps for more than minimal planning and 27 by 18 steps for the $106 million loss amount (see Freedman S.Tr. 53, 28 54, 56), the court consciously declined to make a finding as to an - 61 - 1 actual total offense level for Freedman (see, e.g., id. at 82). 2 This, in itself, was an error of the type mentioned in Gall. 3 128 4 "failing to calculate . . . the Guidelines range"). S. Ct. at 597 ("significant procedural error[s]" See include 5 Instead, the court made findings similar to those made 6 with respect to Cutler, to wit, that the "$100 million amount . . . 7 substantially overstates . . . the culpability of" the "defendants 8 other than Mr. Hundley" (Freedman S.Tr. 53), and that the 18-step 9 increase resulting from that loss amount "overstate[d Freedman's] 10 participation in the offense" (id.) and "vastly" and "wildly" 11 overstated his "culpability" (id. at 56, 53). 12 stated that it would deal with the effect of the loss amount by 13 means of departure (see id. at 56), relying on "Restr[e]po" (id. at 14 53) and "consideration of the 3553(a) factors" (id. at 56), the 15 court never actually stated the degree to which it departed on this 16 basis. Although the court 17 To the extent that the court departed at all based on its 18 view that the banks' loss overstated Freedman's culpability for 19 participating in the bank fraud conspiracy, we conclude that that 20 decision was error, essentially for the reasons discussed in Part 21 II.B.1. above with respect to Cutler. 22 "$100 million amount . . . substantially overstates . . . the 23 culpability of" the defendants other than Hundley disregarded the 24 principle 25 coconspirator 26 foreseeable amount of loss resulting from the reasonably foreseeable 27 acts of all of the coconspirators. 28 incurred by the banks not only were foreseeable, they were the set forth is to in Guidelines be held The court's view that the § 1B1.3(a)(1)(B) responsible - 62 - for the that a reasonably Here, the massive losses 1 express goal of a highly orchestrated conspiracy. 2 Further, Freedman's participation in that conspiracy was 3 pervasive. 4 Zukerman, made the initial contacts with Tollman-Hundley's creditors 5 in early 1993 to represent that Tollman and Hundley were having 6 great financial problems. 7 Marine Midland at which he and Zukerman repeatedly represented that 8 Tollman and Hundley lacked "the financial wherewithal to meet 9 the[ir] obligations." For example, Freedman, along with Tollman, Hundley, and Freedman attended several meetings with (Trial Tr. 2072; see also id. at 2068-71.) 10 Freedman introduced Cohen to representatives of Chemical Bank to 11 facilitate Cohen's attempt to negotiate the purchase of Tollman- 12 Hundley loans from that bank and attended Cohen's first meeting with 13 representatives of that bank. 14 instructed Cohen on how much to offer Bank of America on its loans. 15 (See id. at 3768.) 16 progress of Cohen's negotiations with the banks (see id. at 3751), 17 having concealed the true identity of his principals as instructed 18 by Hundley and Freedman. (See id. at 3759-60.) Freedman Cohen reported to Hundley and Freedman on the 19 At the time Freedman was making representations to the 20 banks that Tollman and Hundley lacked the financial ability to meet 21 their deficiency-note obligations, he was plainly aware of the value 22 of Tollman's and Hundley's assets; he had between a 2.5 and a 4.75 23 percent 24 Freedman's own application to the Mississippi Gaming Commission, as 25 well as those of Tollman and Hundley, showed that the market values 26 of 27 respectively, $34 million and $37 million. 28 directly involved in the hiding by Tollman and Hundley of the HFS ownership Tollman's interest and in Hundley's most of their business - 63 - business interests assets. exceeded, Freedman was also 1 stock accruing to them (worth more than $107 million) by assigning 2 their HFS stock rights to Bryanston; Freedman was executive vice 3 president of Bryanston and signed the assignment agreement on its 4 behalf, and he owned a 4.75 percent interest in Bryanston. 5 In addition, as described in Part I.A.1. above, Freedman 6 had 7 Chelsea, which were funded by Bryanston and hence were owned by 8 Tollman, Hundley, and Freedman, to purchase the victim banks' loans. 9 Freedman had Smith sign Paternoster contracts; and Freedman sent at 10 least one victim bank a letter signed by Tollman and Hundley 11 certifying that they had no beneficial or legal interest, directly 12 or indirectly, in Chelsea. 13 Thus, Tollman-Hundley's while outside attorneys Freedman was not create one Paternoster of the two and major 14 beneficiaries of the frauds, he plainly was a key participant, and 15 there can be no doubt that he was aware of the frauds' magnitude. 16 He 17 restructuring of Tollman-Hundley's debt and hence was aware that 18 Tollman and Hundley were personally liable for about $100 million of 19 that debt. 20 outstanding balances, with instructions to negotiate to purchase 21 those loans for 20 percent or less of their balances. 22 had participated in the negotiations that led to the He gave Cohen a list of the creditor banks and the Further, Freedman was a multi-million-dollar beneficiary 23 of the frauds. 24 the banks' $106 million loss was actually paid to Freedman, that was 25 a consequence of the fact that the frauds were designed to result in 26 a reduction of debt rather than an extraction of cash. 27 however, the assignment by Tollman and Hundley to Bryanston of their 28 HFS stock--which might otherwise have had to be used to pay their Although the district court stated that no part of - 64 - In fact, 1 deficiency notes--inured to the benefit of Freedman as a part owner 2 of Bryanston. 3 $107 4 percent, 5 Freedman's interest in that company by more than $5 million. 6 without regard to that increase in the value of Freedman's interest 7 in Bryanston, the amount that the district court found Freedman had 8 gained and should forfeit as a result of his participation in the 9 bank fraud offenses (to wit, salary, legal fees, and the value of 10 million the Given that the proceeds from the HFS stock exceeded and that frauds Freedman's resulted in share an of Bryanston increase in the was 4.75 value of Even shares he received in the casino venture) exceeded $3 million. 11 Thus, we conclude that the court's finding that the 12 magnitude of the banks' losses overstated Freedman's culpability and 13 was "wildly" disproportionate to his gain was a clearly erroneous 14 assessment of the evidence in the record as to the nature and 15 pervasiveness of his actions and his substantial financial interest 16 in the success of the frauds. 17 court departed downward based on its refusal to consider the entire 18 loss 19 principle that a coconspirator is to be held accountable for the 20 entire amount of loss that was reasonably foreseeable to him. caused by the And to the extent that the district coconspirators, it erred by ignoring the 21 We also conclude that in determining the sentence to be 22 imposed on Freedman, the court erred in its interpretation of 23 § 3553(a)'s requirement that the court consider the need for "just 24 punishment for the offense," 18 U.S.C. § 3553(a)(2)(A), and, as a 25 consequence, in its view as to what constitutes "adequate deterrence 26 to criminal conduct," id. § 3553(a)(2)(B). 27 although the seriousness of Freedman's offense would ordinarily 28 warrant a prison term, Freedman - 65 - had The court ruled that already received "just 1 punishment for the offense" because of "the public nature of the 2 prosecution, the public humiliation that the defendant has suffered, 3 the loss of his law license and various other consequences, and the 4 certainty of prosecution." 5 found that these factors were sufficient to accomplish "deterrence 6 in the general sense." 7 we cannot agree. 8 9 (Freedman S.Tr. 63-64.) (Id. at 64.) The court also As a matter of law and reason, First, the consequences listed by the court are hardly unusual. An attorney convicted of a felony usually loses his 10 license to practice law. 11 basis is not within the court's discretion. 12 U.S. at 110 (finding the court's downward departure based on the 13 defendants' 14 occupations to be an abuse of discretion: 15 the deference owed to the District Court, we must conclude it is not 16 unusual 17 governmental authority to violate a person's rights to lose his or 18 her job and to be barred from future work in that field." (emphasis 19 added)). 20 being for a The imposition of a light sentence on this "barred public from official future who is See, e.g., Koon, 518 work in" their chosen "Although cognizant of convicted of using his Nor is it unusual for a person convicted of participating 21 in 22 prosecuted and suffer public humiliation. 23 generally suffered by anyone accused and convicted of a crime, 24 especially a crime involving frauds causing losses of more than 25 $100 million. 26 on the basis that a defendant has suffered sufficiently simply 27 because he was prosecuted and convicted would create unwarranted 28 disparities among similarly situated defendants. a conspiracy to perpetrate massive frauds to be publicly Those are consequences Thus, the imposition of a nonincarceratory sentence - 66 - 1 Finally, the circumstances referred to by the district 2 court do not constitute punishment. 3 prosecutions is part of our constitutional fabric; the public 4 humiliation suffered by one prosecuted and convicted of a crime is 5 an ordinary consequence of his conduct, not a condition imposed by 6 the criminal codes or the judicial process. 7 though adverse, are not what § 3553(a)(2)(A) means by "punishment." 8 Hence they cannot properly be viewed as fulfilling the need for the 9 imposition of just punishment. The public nature of criminal These circumstances, And given that the more massive a 10 fraud, the more likely it is that the prosecution will generate 11 publicity, the logical extension of the district court's view--i.e., 12 that Freedman's public humiliation and the public nature of his 13 prosecution 14 flagrant 15 "punishment" it would require. 16 that is meted out, the less deterrent effect the sentence will have 17 on others contemplating similar crimes. 18 3. were the punishment crime, the enough--would less actual mean that statutorily the more prescribed And of course, the less punishment Departure for Freedman's Family Circumstances 19 As discussed in Part II.B.3. above, departures based on 20 family responsibilities are not permitted by the advisory Guidelines 21 except in extraordinary circumstances. 22 such departures in favor of Freedman on the basis of his long 23 relationship with his brother, who is mentally retarded and has 24 cerebral palsy, and, separately, on the basis of his relationship 25 with his mother-in-law, who is elderly. 26 are sympathetic, they fall short, singly and in combination, of 27 showing the extraordinary circumstances needed to relieve Freedman - 67 - The district court granted While these circumstances 1 of a substantial prison term. 2 Freedman is not his disabled brother's primary care-giver. 3 His brother lives in an assisted living facility. Further, although 4 Freedman's relationship with his brother seems more substantial than 5 some sibling relationships, their relationship does not involve 6 frequent interaction in person. 7 brother lives in Massachusetts; their communications are largely 8 telephonic. 9 provides his brother with a type of support that others cannot 10 provide and have not provided, the court did not mention the fact, 11 noted 12 Massachusetts and shares the responsibility for making decisions 13 with respect to their brother's affairs. 14 discretion to conclude that Freedman's brother's need to telephone 15 Freedman, sympathetic as it is, warrants the reduction of Freedman's 16 prison time from the PSR-recommended 108-135 months to zero. in 17 Freedman lives in New York and his In addition, although the court found that Freedman the PSR, that Freedman has a sister who lives in It is beyond the bounds of Nor is Freedman the primary care-giver for his mother-in- 18 law. 19 only finding in support of its conclusion that this relationship too 20 "entitle[d] Mr. Freedman to a downward departure" was that Freedman 21 "manag[es her] affairs and tak[es] her out." 22 60.) 23 She too lives in an assisted living facility. And the court's (Freedman S.Tr. 59- These circumstances fall far short of a basis for departure. 4. Departure on Account of Freedman's Age and Health 24 Finally, we turn to the court's departure on the basis of 25 Freedman's age--nearly 69 at the time of sentencing--and his health. 26 "Age . . . is not ordinarily relevant in determining whether a 27 sentence should be outside the - 68 - applicable guideline range." 1 Guidelines § 5H1.1 (Policy Statement). 2 troublesome because of the implications of the court's findings with 3 respect to the ability of the BOP to care for prisoners who have 4 heart conditions and because the evidence as to the ailment on which 5 the court principally relied indicated that that ailment was not 6 caused by Freedman's heart condition and was neither permanent nor 7 constant. This departure is most 8 The Sentencing Reform Act provides that the Sentencing 9 Commission "shall consider whether" various factors, including a 10 defendant's 11 "imposition of [a] sentence[] of . . . imprisonment," and that it 12 "shall take th[ose factors] into account only to the extent that 13 they do have relevance." 14 state 15 ordinarily relevant in determining whether a sentence should be 16 outside the applicable guideline range," Guidelines § 5H1.4 (Policy 17 Statement). 18 departure resulting in a nonincarceratory sentence on the basis of 19 an extraordinary health condition, the "defendant must be seriously 20 infirm with [a] medical condition that cannot be adequately cared 21 for by [the] Bureau of Prisons . . . ." 22 207 F.3d 133, 139 (2d Cir. 2000); see generally United States v. 23 Altman, 48 F.3d 96, 104 (2d Cir. 1995). that 24 In physical a condition, "have any relevance" 28 U.S.C. § 994(d)(5). defendant's "[p]hysical condition to the The Guidelines . . . is not Accordingly, we have stated that in order to warrant a connection with United States v. Martinez, Freedman's heart condition, the 25 government 26 statement that the inmates housed and cared for by the BOP include 27 "18,877 with hypertension, 4,016 with hyperlipidemia, 1,926 with 28 carotid artery disease, 4,000 with cardiac disease, 3,465 with submitted the BOP Health - 69 - Systems Administrator's 1 arteriosclerotic heart disease, 2,100 with cardiac arrhythmia, and 2 1,121 with congestive heart failure." 3 The BOP represented that it could provide adequate medical care for 4 Freedman as well. In addition, following Freedman's near-fatal bout 5 with urosepsis, the government presented evidence that the BOP has 6 contracts with major medical centers that offer the BOP "a wide 7 range of trained surgical specialists," and that each prison has 8 procedures in place to provide both "routine" care and timely 9 "emergency transportation" to one of the local medical centers. 10 (First Cadogan Letter at 2.) (Second Cadogan Letter at 1.) 11 The district court, in concluding that the BOP could not 12 adequately care for Freedman, stated that it knew that each prison 13 had contracts with outside medical facilities, but stated, "I also 14 know it to be true . . . that one does not get the immediate 15 monitoring and immediate response that in this instance has proved 16 so necessary literally for Mr. Freedman's life." (Freedman S.Tr. 58 17 (emphasis added).) 18 ability, in my view, to monitor Mr. Freedman's situation constantly 19 and to respond immediately," and that "the recent health issue has 20 made it very, very plain that without that ability to monitor 21 constantly and respond immediately, sending Mr. Freedman to prison 22 would in effect be a death sentence." 23 We have The court found that "the BOP does not have the two principal (Id. (emphases added).) difficulties with the court's that the court's 24 findings. 25 statement that "sending Mr. Freedman to prison would in effect be a 26 death sentence" appears, on this record, to be hyperbole. 27 stating, the court proceeded to address other bases for departure 28 (e.g., Freedman's relationships with his brother and mother-in-law) Preliminarily, however, - 70 - we note After so 1 and concluded that both warranted a downward departure (see id. at 2 59-60). 3 along with "the collateral consequences suffered here"--apparently 4 referring to Freedman's public humiliation and the loss of his 5 license 6 enhancements"--apparently referring to the magnitude of the losses 7 and the need for more than minimal planning in order to defraud 8 banks of amounts of such magnitude (which were the only recommended 9 enhancements that were accepted by the court)--and concluded that 10 "all of these factors . . . in combination also independently 11 deserve[d] a downward departure." 12 the 13 departure, we presume that there would have been no need to address 14 any other ground for departure if the court had literally meant that 15 a prison term for Freedman would result in his death. The court also considered Freedman's charitable works, to practice proposition that law--and these "the substantially (Id. at 60). factors could overlapping Without endorsing justify a downward 16 Our main difficulties with the court's decision that 17 Freedman's health precluded imprisonment are (1) that the district 18 court's views constitute a clearly erroneous assessment of the 19 evidence, in light of Freedman's own evidence as to both the onset 20 and the outcome of his near-fatal episode of urosepsis, and (2) that 21 the court cited no evidentiary support for its assertion that the 22 BOP cannot provide adequate care for Freedman. 23 As to the state of Freedman's health, the court referred 24 to "the recent health issue," to a need for "constant[]" monitoring, 25 and to the availability of an "immediate response that in this 26 instance has proved so necessary literally for Mr. Freedman's life" 27 (id. at 58). 28 details of Freedman's recent health scare, and those details raise The court did not refer, however, to any of the - 71 - 1 serious questions as to the court's conclusion that the BOP lacks 2 the ability to care for Freedman, for the evidence did not indicate 3 that he needs to be "monitor[ed] constantly." 4 First, while Freedman's heart condition made treatment for 5 his 6 threatening was not caused by his heart condition. Although it was, 7 as 8 "demonstrate[d] the necessity of careful and ongoing medical care, 9 given [his] cardiac condition," it nonetheless was an "event" 10 (Reison May 23 Letter at 1), rather than either an aspect of his 11 chronic heart condition or an additional permanent condition. emergency his 12 problem difficult, cardiologist stated, the "an episode that unfortunate was life- event" that Second, the reports of Freedman's physicians revealed the 13 transitory 14 blocking 15 Freedman's urologist explained that, in the hospital, a catheter was 16 inserted, 17 thereafter went into shock and urosepsis. 18 Letter.) Hospital records show that after some 3½ weeks, nearly two 19 of which Freedman spent in intensive care, a procedure was performed 20 in which Freedman's kidney stones were broken up and most of the 21 pieces removed (see Discharge Summary Note for Freedman, Sanford, by 22 Michael Wechsler, M.D., dated April 20, 2005 ("Hospital Discharge 23 Summary Note"), at 2-3); that Freedman "tolerated the procedure well 24 and was sent to the recovery room in good condition" (Operative 25 Report of Michael Wechsler, M.D., dated April 19, 2005 ("Operative 26 Report"), at 2); and that there were no complications (see Hospital 27 Discharge Summary Note at 3). 28 nature of Freedman's bypassing the event, urinary an which tract, obstructing began causing stone, as kidney pain and and that stones fever. Freedman (See Wechsler May 10 One day after that procedure, Freedman was well enough to - 72 - 1 leave the hospital. 2 tolerating 3 independently without problems." (Id.) Although after the April 19 4 procedure 5 urologist's "feeling was that these fragments would easily pass." 6 (Operative Report at 2.) 7 letter to the court, only one fragment of stone remained; the letter 8 stated that if that remaining fragment did not pass, it would have 9 to be removed surgically; but there was no suggestion that there was 10 any impediment to that procedure should it be needed. (See Wechsler 11 May 12 described only as persisting "until he is stone-free and until his 13 condition is completely stabilized." 14 Freedman had "continued to do fairly well." 10 [a] a Upon his discharge, his condition was "[g]ood, regular few diet," tiny Letter.) The and fragments he of was stone able had to "ambulate remained, the By the time of the urologist's May 10 need to "watch[ Freedman] (Id.) closely" was The letter stated that (Id.) 15 As to the period following Freedman's discharge from the 16 hospital, the records of his visits to his cardiologist's office 17 reflected that Freedman "feels well" (Notes of Dr. Reison dated 18 April 28 and May 2, 2005), and that Freedman "feels OK but still 19 fatigues easily" (Notes of Dr. Reison dated May 23, 2005). 20 cardiologist's May 23 letter to the district court stated that 21 Freedman's "recovery since his hospitalization has been slow but 22 steady. 23 Letter at 1.) 24 He currently is gaining strength . . . ." There is no question that Freedman's The (Reison May 23 episode with 25 urosepsis presented an emergency event that was nearly fatal; but 26 these records show that the event was transitory, an infection from 27 which Freedman recovered. 28 Third, the onset of Freedman's emergency was not sudden. - 73 - 1 Freedman was admitted to the hospital on March 25; however, his 2 painful symptoms had begun days earlier. 3 letter to the district court, stated that "[d]uring the week of 4 March 20, [Freedman] was experiencing great pain from kidney stones. 5 His symptoms grew worse throughout the week . . . ." 6 Frances Freedman to Judge Preska dated June 6, 2005 ("Frances 7 Freedman Letter"), at 1 (emphases added).) 8 his condition had so deteriorated that Freedman's cardiologist, Dr. 9 Reison, was consulted, and he instructed Mrs. Freedman to take Freedman's wife, in a (Letter from By the end of the week 10 Freedman to the hospital emergency room. 11 need for "rapid attention" was attributed by his cardiologist to 12 "his deteriorating status." 13 according to Freedman's wife's letter to the court, it had taken 14 nearly a week after the onset of his pain for Freedman's problem to 15 grow to crisis proportions. (See id.) The crucial (Reison May 23 Letter at 1.) However, 16 The district court, in "find[ing] that adequate medical 17 care for [Freedman] cannot be accomplished in prison" (Freedman 18 S.Tr. 64), made no reference to any of these facts--the fact that 19 Freedman's urosepsis was not caused by his cardiac condition, the 20 transitory nature of the urosepsis, the length of time it had taken 21 for his condition to reach crisis proportions, and the physicians' 22 reports that Freedman was doing well after leaving the hospital. 23 Thus, in finding that adequate medical care cannot be provided 24 because "the BOP does not have the ability, in my view, to monitor 25 Mr. Freedman's situation constantly and to respond immediately" (id. 26 at 58 (emphasis added)), the court ignored the fact that Freedman 27 did not require "constant[]" monitoring: 28 reach emergency proportions until he had been in "great pain" for a - 74 - his condition did not 1 week. 2 Further, the district court's view that Freedman's 3 condition requires "constant[]" monitoring was clearly erroneous in 4 light of the statements of Freedman's physicians and the medical 5 records. 6 survived without "rapid attention to his deteriorating status" 7 (Reison May 23 Letter at 1) was focused on a status that had been 8 preceded by several days of Freedman's own delay in seeking medical 9 attention for his painful symptoms. The cardiologist's statement that Freedman would not have As to Freedman's status after 10 leaving 11 cardiac condition requires "careful and ongoing medical care" (id.), 12 and the urologist stated that Freedman "will need to be watched very 13 closely" 14 completely stabilized" (Wechsler May 10 Letter (emphases added)); 15 but neither physician stated that Freedman needed to be monitored 16 "constantly." the hospital, "until 17 he the is cardiologist stone-free and stated until that his Freedman's condition is Indeed, we see no suggestion in the record that, following 18 his release from the hospital, Freedman was so monitored. 19 record does not indicate that he saw his cardiologist more than once 20 or twice a week; and the hospital's "discharge plans" called for 21 Freedman to "[f]ollow up with [his urologist] in 2 weeks" (Hospital 22 Discharge Summary Note at 3 (emphasis added)). The 23 Thus, the major premise of the district court's finding 24 that the BOP cannot adequately care for Freedman, i.e., that he 25 requires 26 assessment 27 Freedman's heart condition requires constant monitoring, the court's 28 view that the BOP cannot provide constant monitoring for his heart "constant[]" of the monitoring, evidence. As - 75 - reflects there a was clearly no erroneous evidence that 1 condition provides no basis for giving Freedman a nonincarceratory 2 sentence. 3 Finally, even if the record supported the court's premise 4 that Freedman's condition required constant monitoring, we see no 5 support in the record for the district court's finding that the BOP 6 could not or would not provide that care. 7 evidence that the BOP cares for many thousands of inmates who have, 8 inter alia, cardiac disease, hypertension, carotid artery disease, 9 arteriosclerotic heart 10 congestive failure. 11 "know[s] it to be true . . . that one does not get . . . immediate 12 monitoring and immediate response" from the BOP, the court cited no 13 evidence to support that statement. If there is evidence to support 14 a finding that the BOP is incapable of providing prompt response to 15 inmates' 16 essential to the sustainability of the findings in this case, it is 17 essential 18 similarly situated defendants; and it is in the best interest of a 19 humane society that any such evidence be disclosed. heart emergency for the disease, medical cardiac Although needs, avoidance of The government presented the its arrhythmia, court stated disclosure unwarranted is and/or that not disparities it only among 20 In sum, in all the circumstances indicated here, the 21 district court's reasons for imposing on Freedman a nonincarceratory 22 sentence are not supported by the evidence. 23 support the proposition that Freedman's medical condition cannot be 24 adequately cared for by the BOP, and we thus cannot conclude that 25 the departure on the basis of his health--either alone or in 26 combination with any other factors--was authorized. 27 - 76 - The record does not 1 CONCLUSION 2 We have considered and found to be without merit the 3 arguments of Cutler and Freedman in opposition to the government's 4 appeal and cross-appeal, respectively, challenging the sentences 5 imposed on them. Given the procedural errors, the clear factual 6 errors, misinterpretations 7 discussed 8 punishment, to afford adequate deterrence of crimes by others, to 9 avoid unwarranted disparities among similarly situated defendants, 10 and to promote respect for the law--we conclude that the court's 11 sentence on Cutler insofar as it ordered him to serve a relatively 12 short term of imprisonment, and its sentence on Freedman insofar as 13 it imposed no term of imprisonment, are substantively unreasonable 14 and constituted an abuse of discretion. 15 imposed on Cutler and Freedman are vacated, and the matters are 16 remanded for further proceedings not inconsistent with this opinion. and the above--in particular of - 77 - of the the § needs 3553(a) to factors provide just Accordingly, the sentences 1 POOLER, Circuit Judge, concurring: 2 I agree with the majority that the two sentences about which we 3 write today must be vacated and the cases remanded to the district 4 court. 5 discussion. 6 procedural errors committed by the district court in imposing 7 sentence. 8 each finding of error, I concur that remand for resentencing is 9 required. My disagreement is, in part, with the breadth of the The majority opinion skillfully explains the several I need not repeat them here. Whether or not I agree with Since we find that the district court has not, as yet, 10 imposed 11 United States v. Booker, 543 U.S. 220 (2005), and the triad of 12 recent cases, Rita v. United States, 127 S. Ct. 2456 (2007), 13 Kimbrough v. United States, 128 S. Ct. 558 (2007), and Gall v. 14 United States, 128 S. Ct. 586 (2007), is that it is premature for 15 the appellate court to engage in substantive review. I believe that 16 the 17 procedural errors and, if or when a procedurally correct sentence is 18 imposed, 19 reasonableness review -- applying a deferential abuse-of-discretion 20 standard, Gall, 128 S. Ct. at 591, id. at 598, and, when a sentence 21 is outside the Guidelines range, giving due deference to the 22 district court s decision that the § 3553(a) factors, on a whole, 23 justify the extent of the variance, Gall, 128 S. Ct. at 597. 24 concluding 25 substantively unreasonable, the majority is substituting its view of 26 what their proper sentences are, for that of the district court, an 27 exercise we are reminded is not within our province to accomplish. a procedurally adequate sentence, my understanding of district and court is that is entitled appealed, the to we sentences - 78 - the may of opportunity engage Cutler and in to correct substantive Freedman By are
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