Petition for Writ of Certiorari — Morris E. Zukerman, Petitioner v. United States

APPENDIX

TABLE OF CONTENTS

Public Material (Appended to Petition)

Page

Opinion of the United States Court of Appeals

for the Second Circuit, United States v.

Zukerman, 897 F.3d 423 (2d Cir. 2018).............la

Order of the United States Court of Appeals for

the Second Circuit Remanding Judgment

of the District Court, United States

v. Zukerman, 710 F. App'x 499 (2d Cir.

2018)..................................................................19a

Supplemental Memorandum of the United

States District Court for the Southern

District of New York, United States

v. Zukerman, No. 16 Cr. 194 (AT) (S.D.N.Y.

May 4, 2018), ECF No. 102 (redacted

version) (see Supplemental Appendix

volume for unredacted version)........................24a

Sentencing Hearing Transcript of the United

States District Court for the Southern

District of New York, United States v.

Zukerman, No. 16 Cr. 194 (AT) (S.D.N.Y

Mar. 21, 2017), ECF No. 60..............................44a

Statement of Reasons, United States v.

Zukerman, No. 16 Cr. 194 (AT) (S.D.N.Y.

Mar. 21, 2017) (excerpt) ...................................81a

18 U.S.C. § 3553......................................................89a

18 U.S.C. § 3572......................................................97a

18 U.S.C. § 3742 .................................................... 101a

11

Under Seal Material

(Supplemental Appendix Volume)

Supplemental Memorandum of the United

States District Court for the Southern

District of New York, United States

v. Zukerman, No. 16 Cr. 194 (AT) (S.D.N.Y.

May 4, 2018) (under seal version of ECF

No. 102) .............................................................24a

la

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

August Term, 2017

(Argued: January 17, 2018 Decided: July 27, 2018)

Docket No. 17-948

UNITED STATES OF AMERICA,

Appellee,

--

V.

--

MORRIS E. ZUKERMAN

Defendant-Appellant.

897 F.3d 423

Before:

KATZMANN, Chief Judge, KEARSE and POOLER,

Circuit Judges.

OPINION

PER CURIAM:

Defendant-Appellant Morris Zukerman appeals

from a judgment of conviction entered on March 21,

2017, in the United States District Court for the

Southern District of New York (Torres, J.). After

pleading guilty to tax evasion and to corruptly

endeavoring to obstruct and impede the due

administration of the internal revenue laws,

Zukerman was sentenced to pay restitution of $37

million, serve a 70-month term of imprisonment, and

pay a $10 million fine. On appeal, this case calls on

us to determine whether the fine imposed was

procedurally and substantively unreasonable. It was

not. In particular, the district court did not err in

2a

calculating the fine range recommended by the

Sentencing Guidelines; Zukerman was given

adequate opportunity to inform the district court of

his financial condition and ability to pay a fine; and

the imposition of a $10 million fine was within the

district court's discretion. Accordingly, the judgment

of the district court is AFFIRMED.

***

Morris Zukerman is the founder of M.E.

Zukerman & Co., an investment management firm

also known as "MEZCO." In 2007, a MEZCO

subsidiary sold certain assets for $110 million, at

which time Zukerman enacted a scheme to avoid

paying taxes on the proceeds of that sale, as well as

on approximately $12 million of operating income

MEZCO received as a result of its earlier ownership

of those assets.

Zukerman falsified several

documents in order to effectuate this scheme, which

allowed MEZCO to evade over $30 million in taxes.

When aspects of these transactions were audited by

the Internal Revenue Service in 2008, Zukerman lied

to the tax professionals working for him and

fabricated documents relating to the transactions,

causing several false statements to be made to the

IRS. See In re Grand Jury Subpoena Dated March 2,

2015, 628 F. App'x 13, 14-15 (2d Cir. 2015) (rejecting

claims of attorney-client privilege relating to those

false statements).

Separate and apart from those activities,

Zukerman engaged in several other schemes to avoid

paying taxes and to throw the IRS off of his trail. He

avoided paying over $4.5 million in state taxes related

to paintings used to decorate his and his families'

living quarters, which were purchased, in part, with

3a

his ill-gotten gains from the MEZCO tax evasion. In

addition, he provided false information in connection

with his personal tax returns, as well as those of his

family members and his household employees,

causing each of them to file false tax returns over the

course of several years. When the personal taxes of

both Zukerman and his daughter were audited,

Zukerman once again provided false documentation

and representations to the IRS. Finally, Zukerman

also failed to file several years' worth of tax returns

for the Zukerman Family Trust despite the trust's

receipt of significant taxable income.

On June 27, 2016, Zukerman pleaded guilty to tax

evasion, in violation of 26 U.S.C. § 7201, and to

corruptly endeavoring to obstruct and impede the due

administration of the internal revenue laws, in

violation of 26 U.S.C. § 7212(a). In addition to

requiring that he pay restitution in the amount of $37

million, Zukerman's plea agreement stipulated to a

Sentencing Guidelines range of between 70 to 87

months' imprisonment and a fine of between $25,000

to $250,000. On March 21, 2017, the district court

principally sentenced Zukerman to a 70-month term

of imprisonment, ordered $37 million to be paid in

restitution, and imposed a fine of $10 million.

Judgment was entered that same day, from which

Zukerman appealed.

Following oral argument, we subsequently

entered a summary order pursuant to United States

v. Jacobson, 15 F.3d 19 (2d Cir. 1994), remanding this

matter to the district court for the limited purpose of

elaborating on the rationale for the fine imposed.

United States v. Zukerman, 710 F. App'x 499 (2d Cir.

2018). The district court provided such elaboration

via a Supplemental Memorandum dated May 4, 2018

("Supp. Mem."), after which the instant appeal was

reinstated. We now address Zukerman's arguments.

On appeal, Zukerman contends that the fine

component of his sentence was procedurally and

substantively unreasonable. Because Zukerman did

not raise any procedural objections below, his

procedural arguments are "deemed forfeited on

appeal unless they meet our standard for plain error."

United States v. Villafuerte, 502 F.3d 204, 207 (2d Cir.

2007).

That standard requires Zukerman to

"establish (1) error (2) that is plain and (3) affects

substantial rights," only after which will we "consider

whether to exercise our discretion to correct it, which

is appropriate only if the error seriously affected the

'fairness, integrity, or public reputation of the judicial

proceedings." Id. at 209 (quoting United States v.

Doe, 297 F.3d 76, 82 (2d Cir. 2002)).

Zukerman's first procedural argument is that the

district court overlooked U.S.S.G. § 5E1.2(h) in

calculating the Guidelines' recommended sentencing

range, which had the effect of doubling the

recommended fine. That provision states that an

earlier version of the Guidelines should be applied

"[for offenses committed prior to November 1, 2015."

Count One of Zukerman's indictment alleges that his

corrupt endeavors to obstruct and impede the due

administration of the internal revenue laws occurred

"[fjrom in or about 2007 through in or about 2015,"

however, and Zukerman averred during his plea

allocution that the conduct underlying Count One

took place "from 2007 through 2015." A. App. 60, 99.

One cannot reasonably interpret "through 2015" to

mean only prior to November 1, 2015. Moreover,

Zukerman's plea agreement expressly recognized the

applicability of the Guidelines range of which he now

complains. That the district court did not apply the

pre-November 1, 2015 Guidelines to Zukerman was

not an error, much less a plain error.

Nor is there any merit to Zukerman's contention

that inadequate consideration was given to his ability

to pay a $10 million fine. As soon as the district court

set a date for sentencing, it foreshadowed that a major

fine was possible, requesting information concerning

"how fines have been calculated" in "cases where you

have this degree of violation of law." Jt. App. 107.

Zukerman subsequently submitted an affidavit

regarding his financial condition as of August 2, 2016,

at which time his net-worth was in the eight-figure

range. Zukerman now contends that the affidavit was

outdated by time he was sentenced in March 2017,

but he declined to provide updated information in any

of several submissions he made to the district court

after receiving a revised Pre-Sentence Report on

November 9, 2016, which incorporated information

regarding his financial condition from his August

2016 affidavit. His failure to do so continued even

after the government expressly asserted that he could

"pay a substantial fine and should be ordered to do

so—through a substantial variance from the $25,000

to $250,000 Guidelines range" in February 2017. Id.

at 322. At his sentencing hearing, Zukerman objected

neither specifically that he could not afford to pay the

fine imposed, nor more broadly that his financial

condition had materially changed since the

submission of his affidavit. He was afforded ample

opportunity to attempt to show any limitations on his

ability to pay a fine, yet he failed to do so. See United

States v. Elfgeeh, 515 F.3d 100, 136 (2d Cir. 2008)

(defendant must be given "at least a minimal

opportunity to show that he lacks the ability to pay

the fine"). Accordingly, it was not plain error for the

district court to rely on the information that

Zukerman himself had provided.'

We next address the substantive reasonableness

of Zukerman's fine, which we review "under a

'deferential abuse-of-discretion standard," United

States v. Thavaraja, 740 F.3d 253, 258 (2d Cir. 2014)

(quoting Gall v. United States, 552 U.S. 38, 41 (2007)).

We "identifyfl as substantively unreasonable only

those sentences that are so shockingly high,

shockingly low, or otherwise unsupportable as a

matter of law that allowing them to stand would

damage the administration of justice," recognizing

that although we "have a role to play in patrolling the

boundaries of reasonableness, we do so modestly, not

substituting our own judgment for that of the district

courts." United States v. Broxmeyer, 699 F.3d 265,

289 (2d Cir. 2012) (internal quotation marks, citation

and alteration omitted). Under that lenient standard,

Zukerman's fine is not unreasonable.

First, the district court "put significant weight on

the nature and circumstances of [Zukerman's] crimes"

pursuant to 18 U.S.C. § 3553(a)(1), explaining that

"[t]ax crimes represent an especially damaging

category of criminal offenses," which "striken at the

foundation of a functioning government." Supp. Mem.

at 5; cf. New York ex rel. Cohn v. Graves, 300 U.S. 308,

313 (1937) ("Enjoyment of the privileges of residence

in the state and the attendant right to invoke the

protection of its laws are inseparable from

responsibility for sharing the costs of government.");

1

Zukerman's third procedural argument—that the

district court's explanation of his sentence was inadequate—is

moot in light of our Jacobson remand.

7a

Compania Gen. de Tabacos de Filipinas v. Collector of

Internal Revenue, 275 U.S. 87, 100 (1927) (Holmes, J.,

dissenting) ("Taxes are what we pay for civilized

society . . . .").

Accordingly, the district court

expressed deserved opprobrium for Zukerman's

"calculated scheme to defraud the government of tens

of millions of dollars for the sole purpose of increasing

his personal wealth," executed through efforts that

"spanned fifteen years and involved submitting more

than 50 falsified tax forms for at least ten different

individuals." Supp. Mem. at 6.

Zukerman counters that these factors do not

support an upward variance from the recommended

fine range because they were already addressed as

part of his offense level under the Sentencing

Guidelines. But the district court was not bound to

conclude that the offense level adequately accounted

for the complexity and scope of Zukerman's actions.

To the contrary, "the historic role of sentencing

judges," which "continue[s] to be exercised," is to

consider "the judge's own sense of what is a fair and

just sentence under all the circumstances." United

States v. Jones, 460 F.3d 191, 195 (2d Cir. 2006).

Moreover, "a district court's decision to vary from the

Guidelines 'may attract the greatest respect when the

sentencing judge finds a particular case outside the

heartland to which the Commission intends

individual Guidelines to apply." United States v.

Cavera, 550 F.3d 180, 192 (2d Cir. 2008) (en banc)

(quoting Kim brough v. United States, 552 U.S. 85, 109

(2007)). In particular, the Guidelines related to tax

offenses "drastically vary as to the recommended

sentence based simply on the amount of money

involved," such that "a district court may find that

even after giving weight to the large or small financial

FM

impact, there is a wide variety of culpability amongst

defendants and, as a result, impose different

sentences." Id. Thus sentences varying from the

Guidelines in tax matters, "if adequately explained,

should be reviewed especially deferentially." Id. We

therefore accede to the finding that an aboveGuidelines fine was necessary "to reflect the

complexity, scope, and extreme nature of

[Zukerman's] criminal activity." Supp. Mem. at 7; cf.

Scott A. Schumacher, Sentencing in Tax Cases After

Booker: Striking the Right Balance Between

Uniformity and Discretion, 59 VILL. L. REV. 563, 594

(2014) (noting that the Guidelines "provide only a

two-point increase for a sophisticated means

adjustment," which "can be cancelled out by an

acceptance of responsibility adjustment, making the

defendant's culpability and the manner in which the

tax loss was generated virtually irrelevant").

Second, and again pursuant to 18 U.S.C.

3553(a)(1

), the district court concluded that

§

Zukerman's "history and characteristics also pointed

toward a substantial above-Guidelines fine." Supp.

Mem. at 7. This was based upon his "history of

uncharged criminal conduct" and his "repeated

refusal to fess up," despite having "had ample

opportunities to come clean," as weighed against his

"role in the lives of his friends and family, as well as

his philanthropy." Id. at 8. Zukerman does not

challenge the district court's weighing of these

factors, nor could he. See Broxmeyer, 699 F.3d at 289

("The particular weight to be afforded aggravating

and mitigating factors 'is a matter firmly committed

to the discretion of the sentencing judge'

(quoting United States v. Fernandez, 443 F.3d 19, 32

(2d Cir. 2006)).

.

.

.

."

9a

Third, the district court "put the most weight" on

the need for deterrence, pursuant to 18 U.S.C.

§ 3553(a)(2)(B)-(c). Supp. Mem. at 9. As regards

general deterrence, Zukerman asserts that his

Guidelines-minimum term of imprisonment "is

enough to make an example of him to others," Def. Br.

44, but the sentencing judge was by no means bound

by such an argument. Instead, the district court

determined that general deterrence "has a

particularly important role" here "due to the

significant resources required to monitor and

prosecute tax crimes," which cost the government

hundreds of billions of dollars annually. Supp. Mem.

at 9. Moreover, the district court explained that

enforcement of tax laws has "a 'significant and

positive deterrent effect' on would-be tax violators"

because, as compared to most criminals, "tax

criminals are more likely to account for the size of a

fine and the likelihood that it will be imposed" and are

therefore more likely to eschew criminal conduct if it

will be unprofitable. Id. at 10 (quoting Joshua D.

Blank, In Defense of Individual Tax Privacy, 61

EMORY L.J. 265, 321 (2011), and citing Stephanos

Bibas, White-Collar Plea Bargaining and Sentencing

After Booker, 47 WM. & MARY L. REV. 721, 749 (2005)).

That rationale is eminently reasonable. Cf. Cavera,

550 F.3d at 196 ("Where the profits to be made from

violating a law are higher, the penalty needs to be

correspondingly higher to achieve the same amount of

deterrence."); United States v. Heffernan, 43 F.3d

1144, 1149 (7th Cir. 1994) ("considerations of

(general) deterrence argue for punishing more heavily

those offenses that either are lucrative or are difficult

to detect and punish, since both attributes go to

l0a

increase the expected benefits of a crime and hence

the punishment required to deter it.").

Zukerman also summarily argues that it is

"obvious" his fine is not necessary for purposes of

specific deterrence in light of his prison term and the

"pain and humiliation his prosecution has caused."

Def. Br. 43-44. Although there can be little doubt

Zukerman has suffered, we "must give due deference

to the district court's decision" that specific deterrence

justified an upward variance in light of Zukerman's

long-running tax evasion scheme, Gall, 552 U.S. at

51. "It was clear" to the district court "that simply

being caught did not deter" Zukerman, as his

"criminal activities had only grown in size and scope"

since they first began at the turn of the century.

Supp. Mem. at 11. Given that an earlier "$233,000

slap-on-the-wrist

proved useless in dissuading

[Zukerman] from evading his taxes" thereafter, the

district court was entitled conclude that a Guidelinesrange fine of up to $250,000 would be similarly

inadequate, such that "[a] significant penalty was

required." Id. at 11-12. In light of Zukerman's

enormous resources, the district court properly

determined that a more onerous fine was needed in

order to deter future illegal conduct. See infra at 17.

.

.

19.2

2 The district court noted that a longer incarceral term

was not necessary in order to specifically deter Zukerman at his

sentencing hearing, but it referenced the totality of his

experience with the criminal justice system—including the fine

imposed upon him—as necessary to achieving that end. See

Special App. 38 ("I do not think that there is a need for a term of

imprisonment at the higher end of the guidelines range in order

to achieve the goal of specific deterrence. I have confidence that

ha

Fourth, the district court recognized that there

was some risk of an unwarranted sentencing

disparity, but it "assigned less weight than it might

typically have" to this factor because it found "few, if

any, defendants" who were similarly situated. Id. at

12. Although Zukerman's fine is certainly an outlier

as compared to the fines typically imposed in tax

cases, his arguments based on aggregated sentencing

data and vague summaries of other cases are

unconvincing. The relevant question is not simply

whether there are disparities, but whether there are

"unwarranted sentence disparities" as between

Zukerman and others "with similar records who have

been found guilty of similar conduct," 18 U.S.C.

§ 3553(a)(6). "The point merits little discussion"

because Zukerman "failed to provide sufficient

information to compel the district court to find that

these [other defendants] were so similarly situated to

himself that any disparity in sentence would be

unwarranted." Broxmeyer, 699 F.3d at 296-97; see

also United States v. Irving, 554 F.3d 64, 76 (2d Cir.

2009) ("The district court was not required to consult

statistics. Averages of sentences that provide no

details underlying the sentences are unreliable to

determine unwarranted disparity because they do not

reflect the enhancements or adjustments for the

aggravating or mitigating factors that distinguish

individual cases." (internal quotation marks and

alteration omitted)).3

this experience throughout this case has gotten that message

across loud and clear.").

The only tax offender Zukerman discusses with

specificity is Robert Pfaff, who was sentenced to 97 months'

imprisonment and fined $3 million. As explained by the district

court, however, there are myriad distinctions between

12a

Fifth, the district court "looked to 18 U.S.C.

§ 3571(d), which permits a court to set a fine that is

'twice the gross loss." Supp. Mem. at 14. In light of

the estimated $45 million tax loss caused by

Zukerman, that would allow for a fine far larger than

that which was actually imposed. The district court

also considered that Zukerman's agreed-upon

restitution was $7.5 million lower than the estimated

tax loss and that several million dollars' worth of

interest would have accrued in the years between the

beginning of Zukerman's charged criminal conduct

and his restitution payment. Taking these disparities

into account, the district court concluded that a $10

million fine was "sufficient, but no greater than

necessary," to comply with the statutorily

enumerated factors to be considered in imposing a

sentence. Id. at 15 (quoting 18 U.S.C. § 3553(a)). We

Zukerman and Pfaff: (1) Pfaff designed and implemented

fraudulent tax shelters on behalf of others but was not a direct

beneficiary of the tax loss he caused, whereas here the tax loss

directly benefitted Zukerman and his family; (2) Pfaff was

convicted alongside two co-defendants, whereas Zukerman was

the sole director of the scheme at issue; (3) Pfaff had no history

of uncharged criminal conduct, whereas Zukerman had been

dodging taxes for year prior to the conduct for which he was

ultimately indicted; and (4) Pfaff had lost his entire net worth by

time of his sentencing, whereas Zukerman still enjoyed a $35

million net worth. But even assuming arguendo that Pfaff and

Zukerman were similarly situated, the disparity in their

sentences points in both directions: Pfaff s fine may have been

smaller, but he was also sentenced to an additional 27 months'

imprisonment as compared to Zukerman. As a result, we cannot

say whose sentence was more lenient. Cf. United States v.

Rinaldi, 461 F.3d 922, 931 (7th Cir. 2006) (affirming sentence

where sentencing judge "chose not to increase [defendant's] term

of imprisonment, but opted instead to increase the fine;

punishing the perpetrator with a correlate of his own crime").

13a

infer from the district court's choice of language—i.e.,

that it "looked to" this factor rather than "putting

significant weight" on it—that this was a relatively

minor aspect of the district court's analysis. Cf.

Novella v. Westchester Cnty., 661 F.3d 128, 142 (2d

Cir. 2011) ("the presumption of consistent usage and

meaningful variation, and the textual cannon of

expressio unius est exclusio alterius" suggest that "the

presence of [a phrase] applicable to one [factor] makes

clear that the [phrase's] omission" elsewhere "was

deliberate").

Although Zukerman now asserts that the district

court erred in considering the gap between his

restitution and the estimated tax loss, as well as the

absence of interest in calculating the tax loss, he cites

no authority for the proposition that the district court

could not take these factors into account. Indeed,

these seem pertinent considerations in ensuring that

Zukerman would not ultimately profit from his tax

evasion. See 18 U.S.C. § 3572(a)(5) ("In determining

whether to impose a fine, and the amount, ... the

court shall consider . . the need to deprive the

defendant of illegally obtained gains from the offense

."). Regardless, we need not definitively rule on

the propriety of these considerations because they

were referenced in Zukerman's Pre-Sentence Report,

the district court's adoption of which was unopposed

by Zukerman.

Sixth, the district court "accorded significant

weight to [Zukerman's] income and financial

resources, as well as the limited burden of a $10

million fine." Supp. Mem. at 15. Zukerman contends

that he is being unfairly punished because of his

wealth, but 18 U.S.C. § 3572(a) mandates that "[i]n

determining whether to impose a fine," a sentencing

.

14a

judge "shall consider

the defendant's income,

earning capacity, and financial resources," as well as

"the burden that the fine will impose upon the

defendant." That is in accord with the Sentencing

Guidelines' instruction that sentencing judges "shall

consider," among other factors, "the defendant's

ability to pay the fine" and "the burden that the fine

places on the defendant and his dependents."

U.S.S.G. § 5E1.2(d)(2)-(3).

It stands to reason that a defendant's wealth is

relevant in determining whether a particular fine will

deter illegal conduct. Zukerman implies that

sentencing judges should consider only whether a

defendant is unable to pay a given fine, but nothing

in the text or history of the Guidelines, let alone

common sense, suggests that this is meant to be a oneway ratchet. A fine can only be an effective deterrent

if it is painful to pay, and whether a given dollar

amount hurts to cough up depends upon the wealth of

the person paying it. Indeed, as noted above, a

previous "$233,000 slap-on-the-wrist" did not deter

Zukerman, with his extraordinary resources, from

subsequently evading his taxes once again. Supp.

Mem. at 11. We therefore join our sister Circuits in

holding that a defendant's wealth and earning

capacity are pertinent considerations in assessing an

appropriate fine. See United States v. Teel, 691 F.3d

578, 591 (5th Cir. 2012) ("[T]he court properly utilized

its discretion to vary from the Guidelines by taking

into account [the defendant's] financial resources

when determining the appropriately punitive fine in

the first instance."); United States v. Koestner, 628

F.3d 978, 980 (10th Cir. 2010) ("[T]he amount of the

fine was reasonably related . . . to Koestner's ability

to pay a fine ... .") United States v. Blackwell, 459

.

.

.

15a

F.3d 739, 771 (6th Cir. 2006) ("[T]he district court

committed no error

in considering Defendant's

ability to pay."); see also United States v. Adams, 243

F. App'x 249, 250 (9th Cir. 2007) ("Socioeconomic

status is different than financial resources. The

former has no place in sentencing, but the latter is

required by statute." (internal citations omitted)).4

Lastly, the district court "put substantial weight"

on the payment of restitution by "corporate entities,"

as a result of which "only the fine would be paid from

[Zukerman's] own pocket." Supp. Mem. at 15.

Zukerman responds that restitution was properly

paid by MEZCO because it was MEZCO's tax evasion

that caused most of the tax losses at issue and, in any

.

.

.

We see no inconsistency between our holding and United

States v. Mancilla-Mendez, 191 F. App'x 273, 274 (5th Cir. 2006),

or United States v. Graham, 946 F.2d 19, 22 (4th Cir. 1991), on

which Zukerman relies. "Those cases deal with challenges to

upward departures, not variances." Teel, 691 F.3d at 591. The

former "is a term of art under the Guidelines and refers only to

non-Guidelines sentences imposed under the framework set out

in the Guidelines," whereas the latter "refers to a nonGuidelines sentence outside the Guidelines framework." Pepper

v. United States, 562 U.S. 476, 498 n.12 (2011) (quoting Irizarry

v. United States, 553 U.S. 708, 714 (2008)). "The pertinent

question in a departure case is whether 'there exists an

aggravating or mitigating circumstance of a kind

not

adequately taken into consideration by the Sentencing

Commission in formulating the guidelines that should result in

a sentence different from that described." Teel, 691 F.3d at 591

(quoting 18 U.S.C. § 3553(b)). In contrast, we address "variances

from Guidelines ranges that a district court may find justified

under the sentencing factors set forth in 18 U.S.C. § 3553(a)."

Irizarry, 553 U.S. at 715. The district court properly recognized

that distinction, as it "d[id] not find any grounds warranting a

departure under the guidelines," but nevertheless found "a

variance pursuant to 18 United States Code § 3553(a)

.

appropriate" in this case. Special App. 6, 38.

...

..

16a

event, payments made by MEZCO are tantamount to

payments made by him. The latter point appears to

be somewhat disingenuous, as elsewhere Zukerman

takes the position that he no longer has any interest

in MEZCO for purposes of asserting that the district

court overestimated his net worth. Zukerman cannot

have it both ways: if he no longer owns MEZCO and

believes that its value is not attributable to him, it

follows that he should not be credited with MEZCO's

restitution payments.5

Regardless of MEZCO's current ownership,

however, a more fundamental principle remains:

"Restitution is an effective rehabilitative penalty

because it forces the defendant to confront, in concrete

terms, the harm his actions have caused." Kelly v.

Robinson, 479 U.S. 36, 49 n.10 (1986); see also

Paroline v. United States, 134 S. Ct. 1710, 1726 (2014)

("The primary goal of restitution is remedial or

compensatory, but it also serves punitive purposes."

(internal citation omitted)). The district court was

charged with ensuring that Zukerman's fine should

be "punitive" when "taken together with other

sanctions imposed." U.S.S.G. § 5E1.2(d). To the

extent that the corporate payment of restitution

reduced the degree to which restitution personally

punished Zukerman, which seems likely given that it

appears he owned only a 50% interest in MEZCO even

Zukerman informed the district court that he

transferred his interest in MEZCO to his wife as a result of the

publicity surrounding his prosecution. He subsequently argued

that "Mrs. Zukerman's assets are not relevant to assessing her

husband's ability to pay," Def. Br. 18-19 n.3, and that assets

"belong[ing] exclusively to Zukerman's wife" could not "be fairly

considered in assessing Zukerman's ability to pay," Def. Reply

Br. 16.

17a

prior to transferring those interests to his wife, it was

well within the district court's discretion to

counteract that effect by increasing the fine it

imposed on him. In doing so, it "further[ed] the

traditional sentencing goals of rehabilitation and

deterrence, by forcing [Zukerman] to directly witness

the effectfl of [his] crimes." In re Silverman, 616 F.3d

1001, 1009 (9th Cir. 2010); cf. Kokesh v. S.E.C., 137 S.

Ct. 1635, 1643 (2017) ("[A] pecuniary sanction

operates as a penalty only if it is sought 'for the

purpose of punishment, and to deter others from

offending in like manner' . . . ." (quoting Huntington

v. Attrill, 146 U.S. 657, 668 (1892))).

Focusing on each facet of the district court's

reasoning individually, rather than their totality, is

to miss the forest for the trees. The district court

concluded that Zukerman, a very wealthy man who

has repeatedly and brazenly committed sophisticated

tax fraud—a rarely caught and more rarely punished

offense that undercuts the functioning of state and

federal governments—ought to pay a fine hefty

enough to take any financial benefit out of his crimes

and to give pause to others who might be tempted to

commit similar crimes. The district court further

concluded that the Guidelines range did not

encompass a fine necessary to accomplish those ends.

Instead, the district court calculated the size of the

fine based, in part, on an estimate of the tax loss

Zukerman caused less the amount of restitution he

had agreed to pay. Zukerman's fine thus "resulted

from the reasoned exercise of discretion." Cavera, 550

F.3d at 193. Under the "circumspect form of review"

we apply when the substance of a sentence is

challenged, id., we need not find a district court's

reasoning compelling in order to affirm, so long as

00

"the sentence was reasonable," Gall, 552 U.S. at 56.

Because we find that it was, we see no reason to

overturn Zukerman's sentence in any respect.

For the foregoing reasons, we AFFIRM the

judgment of the district court and DENY Zukerman's

motion to stay his sentence pending this appeal as

moot. We have considered all of the defendant's

arguments and find in them no basis for vacatur.

19a

At a stated Term of the United States Court of

Appeals for the Second Circuit, held at the Thurgood

Marshall United States Courthouse, at 40 Foley

Square, in the City of New York, on the 6th day of

February, two thousand eighteen.

Present: ROBERT A. KATZMANN,

Chief Judge,

AMALYA L. KEARSE,

ROSEMARY S. POOLER,

Circuit Judges.

UNITED STATES OF AMERICA,

Appellee,

V.

No. 17-948

MORRIS E. ZUKERMAN,

Defendant-Appellant.

710 F. App'x 499

Appeal from the United States District Court for

the Southern District of New York (Torres, J.).

ON CONSIDERATION WHEREOF, IT IS

HEREBY ORDERED, ADJUDGED,

and

DECREED that the judgment of the district court is

REMANDED.

Morris Zukerman challenges the reasonableness

of the sentence imposed after he entered into a plea

agreement for corruptly endeavoring to obstruct and

impede the due administration of the internal

revenue laws, in violation of 26 U.S.C. § 7212(a), and

tax evasion, in violation of 26 U.S.C.

§ 7201.

20a

Zukerman was sentenced by the district court for the

Southern District of New York (Torres, J.) on March

21, 2017, and judgment was entered that same day.

We assume the parties' familiarity with the

underlying facts, the procedural history, and the

issues presented for review.

Zukerman's plea agreement stipulated that the

Guidelines range for his sentence was 70 to 87

months' imprisonment and a fine of between $25,000

and $250,000, although it was further agreed that the

parties could seek a sentence outside of the stipulated

Guidelines range based upon the factors to be

considered in the imposition of sentences pursuant to

18 U.S.C. § 3553(a). Cf. Irizarry v. United States, 553

U.S. 708, 714-15 (2008) ("Although the Guidelines, as

the starting point and the initial benchmark, continue

to play a role in the sentencing determination, there

is no longer a limit

on the variances from

Guidelines ranges that a district court may find

justified under the sentencing factors set forth in 18

U.S.C. § 3553(a)." (internal quotation marks and

citation omitted)). The Government subsequently

sought a sentence consisting of "a term of

incarceration within the Stipulated Guidelines range"

and "a substantial fine

through a substantial

variance from the $25,000 to $250,000 Guidelines

range," though the Government did not specify an

amount or range for the fine it sought. App. 291, 322.

Zukerman was sentenced to 70 months'

imprisonment and fined $10 million. On appeal,

Zukerman contends that the imposition of a $10

million fine was both procedurally and substantively

unreasonable,

without

challenging

the

reasonableness of either his prison term or the

restitution he has paid.

.

.

.

...

21a

"We have declined to articulate precise standards

for assessing whether a district court's explanation of

its reason for imposing a non-Guidelines sentence is

sufficient," United States v. Pereira, 465 F.3d 515, 524

(2d Cir. 2006), and "are hesitant to require the district

court to utter any specific incantation," United States

v. Rattoballi, 452 F.3d 127, 138 (2d Cir. 2006). "The

particular weight to be afforded aggravating and

mitigating factors is a matter firmly committed to the

discretion of the sentencing judge, with appellate

courts seeking to ensure only that a factor can bear

the weight assigned it under the totality of

circumstances in the case."

United States v.

Broxmeyer, 699 F.3d 265, 289 (2d Cir. 2012) (internal

quotation marks and citations omitted).

Nevertheless, district courts "must adequately

explain the chosen sentence to allow for meaningful

appellate review," Gall v. United States, 552 U.S. 38,

50 (2007), and it remains "uncontroversial'

that a

major variance from the Guidelines range 'should be

supported by a more significant justification than a

minor one," United States v. Jones, 531 F.3d 163, 17172 (2d Cir. 2008) (quoting Gall, 552 U.S. at 50).

Because the Guidelines "covering 'offenses

involving taxation'

drastically vary as to the

recommended sentence based simply on the amount

of money involved," without a concomitant variation

to reflect the "wide variety of culpability amongst

defendants," such sentences are "reviewed especially

deferentially" to allow for sentencing disparities

"based on the factors identified in § 3553(a)." United

States v. Cavera, 550 F.3d 180, 192 (2d Cir. 2008) (en

banc). "Although a judge need not utter robotic

incantations repeating each factor that motivates a

sentence," United States v. Park, 758 F.3d 193, 197

.

.

.

.

.

.

22a

(2d Cir. 2014) (internal alterations and quotation

marks omitted), we can only defer to a sentencing

judge's justifications "if adequately explained."

Cavera, 550 F.3d at 192.

The district court

endeavored to explain its reasoning orally at the

sentencing hearing and in its written statement of

reasons, but the record nevertheless remains unclear

as to why and how it settled on $10 million as the fine

amount: for example, the relative weight assigned to

the various factors cited in its oral and written

explanations; to what extent, if any, the district court

considered the disparity between the sentence

imposed on Zukerman and those imposed in other tax

prosecutions; and the basis for its determination that

a $10 million fine (in conjunction with other aspects

of Zukerman's sentence) was "sufficient, but not

greater than necessary, to comply with the purposes"

of criminal sentencing as required by § 3553(a).

At this stage, we believe this issue is best resolved

by means of what is known in this Circuit as a

Jacobson remand, in which we remand "partial

jurisdiction to the district court to supplement the

record on a discrete factual or legal issue while

retaining jurisdiction over the original appeal."

Corporacion Mexicana de Mantenimiento Integral, S.

de R.L. de C.V. v. Pemex-Exploracion y Produccion,

832 F.3d 92, 115 (2d Cir. 2016) (Winter, J.,

concurring); see also United States v. Jacobson, 15

F.3d 19, 22 (2d Cir. 1994) (recognizing the authority

of federal appellate courts to seek "supplementation

of a record without a formal remand or the need for a

new notice of appeal before the appellate panel acts

on the supplemental record"). Accordingly, we direct

the district court to elaborate on its rationale for

imposing a fine greater than those typically imposed

23a

in tax prosecutions, and for the amount selected.

Upon such elaboration by the district court, either

party may restore the matter to the active docket of

this Court by letter, without filing a new notice of

appeal. In the event that either party seeks further

action from this Court, the matter will be referred to

this panel.

For the foregoing reasons, we hereby REMAND

the judgment of the district court for further

proceedings consistent with this order.

FOR THE COURT:

CATHERINE O'HAGAN WOLFE, CLERK

s/ CATHERINE O'HAGAN WOLFE, CLERK

[seal omitted]

QV

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

UNITED STATES OF

AMERICA,

-againstMORRIS E. ZUKERMAN,

16 Cr. 194 (AT)

SUPPLEMENTAL

MEMORANDUM

Defendant.

ANALISA TORRES, District Judge:

On June 27, 2016, Defendant, Morris E.

Zukerman, pleaded guilty to corruptly endeavoring to

obstruct and impede the due administration of the

internal revenue laws, in violation of 26 U.S.C.

§ 7212(a), and tax evasion, in violation of 26 U.S.C.

§ 7201. Plea Hr'g Tr., ECF No. 23. On March 21,

2017, the Court sentenced Defendant to a prison term

of 70 months, ordered restitution of $37.5 million, and

imposed a $10 million fine. Judgment, ECF No. 58.

Defendant appealed part of his sentence, challenging

the procedural and substantive reasonableness of the

$10 million fine. Notice of Appeal, ECF No. 63.

On appeal, the Second Circuit issued a remand

under United States v. Jacobson, 15 F.3d 19 (2d Cir.

1994). The Circuit directed the Court to "elaborate on

its rationale for imposing a fine greater than those

typically imposed in tax prosecutions, and for the

amount selected." United States v. Zukerman, 710 F.

App'x 499, 501 (2d Cir. 2018) (summ. order). The

Circuit sought an explanation of, for example, the

weight assigned to various sentencing factors, the

consideration given to the disparity between

25a

Defendant's sentence and sentences imposed in

similar tax prosecutions, and the basis for the Court's

determination that a $10 million fine was sufficient,

but not greater than necessary, to adhere to the

purposes of sentencing, as required by 18 U.S.C.

§ 3553(a). See id. at 500. This memorandum serves

to supplement the record to explain the Court's basis

for imposing the $10 million fine.

BACKGROUND

I. Facts

Defendant was educated at Phillips Academy,

Harvard College, the University of Cambridge, and

Harvard Business School.

See Final Revised

Presentence Report ("PSR") ¶J 139-40, ECF No. 29.

In the years following his business school graduation,

Defendant rose to prominence in the field of finance.

Id. ¶11 142-44. He was a Managing Director at

Morgan Stanley for almost two decades, before

starting his own investment company, M.E.

Zukerman & Co. ("MEZCO"), in 1988. Id. ¶J 142-43.

Defendant was first investigated by state

authorities in 2002 for evading sales and use taxes on

$2.8 million worth of "Old Master" paintings he had

purchased between 1999 and 2003.

Id. ¶ 70.

Defendant was never charged, however, and he

agreed to repay $233,000 in taxes owed. Id. ¶ 71.

The federal government began investigating

Defendant and MEZCO in 2008, after a MEZCO

subsidiary, the MEZCO Specialty Oil Corporation

("SOC"), failed to pay over $28 million in corporate

income taxes.

Id. ¶ 10.

The Government's

investigation ultimately revealed that, between 2007

and 2015, Defendant evaded over $45 million in taxes,

not including interest. Id. ¶ 13. During that period,

26a

Defendant committed a number of crimes involving

himself and

including personal income tax

fraud, sales and use tax fraud, healthcare fraud,

employment fraud, and auto insurance fraud. Id.

¶11 9-13.

Specifically, Defendant (1) evaded corporate

income taxes, on behalf of SOC, id. ¶11 2-3; (2) evaded

personal income tax for the tax years 2008 to 2012,

id., including by lying to a tax preparer "that he had

made a deductible contribution to a charitable land

trust, when in fact he knew the payments were in

exchange" for a house on an island off of Maine, id.

192; (3) evaded personal income tax for the tax years

2008 to 2012, on behalf of his wife, id. ¶11 2-3; (4)

evaded personal income tax for the tax years 2008 to

2012, on behalf of

id.; (5) caused to

be filed a Form 1120 return falsely claiming that, in

2008, another company he owned, Bodley Investment

Company, acquired an interest from SOC and then

sold it, id.; (6) submitted a tax protest letter in June

2012 to the Internal Revenue Service ("IRS")

containing various false statements, id.; (7) created

and submitted false and misleading documents to the

IRS in connection with his 2009 Form 1040 tax audit,

id.; (8) concealed ownership of and income from

various corporations that he, in fact, owned and

controlled, id., and (9) provided false information to

his tax preparers, in September 2008 and July 2010,

regarding the ownership and sale of SOC, id..

In addition, Defendant (10) evaded New York

State sales tax on a $645,000 pair of 8 carat diamond

earrings, id.; (11) purchased over $50 million in Old

Master and other paintings, while failing to report

those purchases to the New York State Department of

Taxation and Finance, thus depriving New York State

,

,

27a

of over $4.5 million in taxes, id.; (12) diverted funds

from corporate entities he controlled to pay the salary

of his domestic employee, id.; (13) diverted funds from

corporate entities he controlled to pay for health care

insurance for his domestic employee, id.; (14) paid

unreported cash wages to multiple domestic

employees, which caused false tax reporting by both

Defendant and those employees, id.; and (15)

fraudulently obtained reductions in the cost of his

automobile insurance by falsely informing his

insurer, Chubb, that his five vehicles were garaged in

Westchester County and not in Manhattan, going so

far as to invent a false address in the town of

Mamaroneck when a Chubb broker questioned

Defendant about this lie, id.

IL Procedural History

On May 11, 2016, Defendant was indicted on three

counts: (1) corruptly endeavoring to obstruct and

impede the due administration of the internal

revenue laws, in violation of 26 U.S.C. § 7212(a); (2)

tax evasion, in violation of 26 U.S.C. § 7201; and (3)

wire fraud, in violation of 18 U.S.C. § 1343. See

Indictment, ECF No. 3. On June 27, 2016, Defendant

pleaded guilty to Counts 1 and 2. Plea Hr'g Tr. 19:611; 22:21-23. At the plea hearing, the Court notified

Defendant and the Government that, for the purposes

of sentencing, it was "interested in

examples of

cases where [there is] this degree of violation of law,

in particular, how fines have been calculated." Id. at

27:11-14.

.

.

.

:

On November 9, 2016, the Probation Department

issued its final Presentence Report ("PSR").' The

PSR calculated the fine range under the Sentencing

Guidelines to be $25,000 to $250,000 and the

maximum fine to be $90 million per count. See PSR,

at 51. Defendant did not contest the Guidelines range,

but argued against the imposition of a fine. Def.

Sentencing Mem. at 49, ECF No. 37. Defendant

argued that fines were rarely imposed in cases with

tax losses between $20 million and $50 million. Id.

He further argued that in cases where courts did

impose a fine, the fine was below or within the

Guidelines range over 90% of the time. Id.

The Government argued for a "substantial

variance" above the Guidelines range.

Gov't

Sentencing Mem. at 80-81, ECF No. 51. The

Government contended that Defendant's argument

was "irrelevant," as it did not address whether the

defendants in other cases had the ability to pay. Id.

at 80. Here, the Government argued, Defendant had

the means to pay a substantial fine, especially

because restitution would be paid by Defendant's

corporate entities. Id. at 80-81.

On March 21, 2017, the Court sentenced

Defendant to a 70-month term of imprisonment,

followed by a one-year term of supervised release. See

Judgment; Sentencing Tr. 39:2-9. The Court also

ordered Defendant to pay a special assessment of

$200, restitution of $37,574,951.88, and a fine of $10

1

At sentencing, the Court explicitly adopted the factual

recitations set forth in the PSR. Sentencing Hr'g Tr. 5:4-5, ECF

No. 60. Both Defendant and the Government had the

opportunity to object, and neither did so. Id. at 3:17-5:5

29a

million. See Judgment; see also Statement of Reasons

("SOR") 4 (stating restitution amount).

On April 4, 2017, Defendant appealed the $10

million fine. See Notice of Appeal. On February 28,

2018, the Circuit ordered a Jacobson remand,

restoring "partial jurisdiction to the district court to

supplement the record on a discrete factual or legal

issue while retaining jurisdiction over the original

appeal." Zukerman, 710 F. App'x at 501. Specifically,

the Circuit directed the Court to "elaborate on its

rationale for imposing a fine greater than those

typically imposed in tax prosecutions, and for the

amount selected." Id.

DISCUSSION

Prior to imposing a fine, the Court considered all

the factors under 18 U.S.C. §§ 3553(a), 3571(d), and

3572(a). In the discussion below, the Court elaborates

on its key considerations. First, the Court explains

how it weighed the § 3553(a) factors. Specifically, the

Court discusses its consideration of (1) the nature and

circumstances of the offense, (2) the history and

characteristics of Defendant, (3) the need for

adequate deterrence, (4) the need to avoid unwanted

disparities, and (5) whether a $10 million fine was

sufficient, but not greater than necessary in light of

Second, the Court explains its

§ 3571(d).

consideration of the 18 U.S.C. § 3572(a) factors,

particularly Defendant's income and financial

resources.

I. 18 U.S.C. § 3553(a) Factors

A. Nature and Circumstances of the Offense

The Court put significant weight on the nature

and circumstances of Defendant's crimes when

imposing the $10 million fine. Tax crimes represent

30a

an especially damaging category of criminal offenses,

as tax evasion strikes at the foundation of a

functioning government. The Court emphasized the

harms of Defendant's conduct at his sentencing

proceeding:

The obligation to pay taxes is one of the

fundamental building blocks of our society.

Our government is able to operate only because

we, as individuals and a community, agree to

pay our fair share. Our taxes are used to defend

the homeland, to educate our children, to take

care of the needy, sick, and elderly, and, indeed,

to operate our system of justice. The public

benefits from the services of our government,

and the public is the victim of Mr. Zukerman's

fraud.

Sentencing Hr'g Tr. 38:3-11.

In addition to general harm, the specific

circumstances surrounding Defendant's crimes

supported a significant fine above the Guidelines

range. As the Court explained at sentencing,

Defendant executed a calculated scheme to defraud

the government of tens of millions of dollars for the

sole purpose of increasing his personal wealth:

These are weighty offenses over the course of

many years. Mr. Zukerman evaded taxes

totaling millions of dollars. He was driven not

by need, but by unmitigated greed. He

entangled himself in a web of lies and deceit,

lying to his tax preparer, and then hiring

lawyers to defend his lies. He went to such

extraordinary lengths in order to cheat. These

frauds were deliberate and calculated. Mr.

Zukerman thought himself to be above the law.

31a

Id. at 37:11-18.

Indeed, Defendant's fraud spanned fifteen years

and involved submitting more than 50 falsified tax

forms for at least ten different individuals, the net

result of which was cheating federal, state, and local

governments out of more than $45 million. See PSR

¶J 9-13. This complex scheme, singlehandedly

devised by Defendant, involved sophisticated means,

including the use of offshore entities to conduct and

conceal his illegal financial activity. Id. ¶ 103. To

execute such large-scale tax evasion, Defendant also

repeatedly misled his tax preparers, accountants, and

attorneys. See, e.g., id. ¶J 20-27, 32-36.

His greed also drove him to ensnare

in his criminal activities—preparing false

tax returns on behalf of

for multi le

rs, id. ¶1 38-40, enlisting the assistance of

when obtaining millions of

a

dollars of untaxed art, id. ¶ 70, and causing his wife

to sign false tax returns, id. ¶J 41-42. When

Defendant had opportunities to come clean, for

example, during IRS audits, he repeatedly failed to do

so. The Court imposed an above-Guidelines fine, in

accordance with § 3553(a)(1), to reflect the

complexity, scope, and extreme nature of Defendant's

criminal activity. See SOR at 3 (identifying extreme

conduct and complexity and scope of fraud as reasons

for a variance).

B. History and Characteristics of the Defendant

The Court concluded that the Defendant's history

and characteristics also pointed toward a substantial

above-Guidelines fine. First, although Defendant had

no formal criminal history for the purposes of the

Guidelines, he did have a history of uncharged

32a

criminal conduct that did not factor into the $45

million loss amount. PSR ¶ 66. Most notably,

between 1999 and 2003, Defendant conspired with art

gallery owners to evade New York taxes on Old

Master paintings that he purchased for nearly $3

million. Id. ¶ 70. The galleries shipped empty crates

to out-of-state locations and created sham billing and

delivery information to give the false impression that

the paintings left New York. Id. Following New

York's investigation into the conspiracy, Defendant

acknowledged that he knew that his conduct was

illegal. See Gov't Sentencing Mem. at 77. Defendant

avoided prosecution by agreeing to serve as a witness

against the art galleries and to pay back $233,000 in

sales and use taxes. PSR ¶ 72.

After being faced with the threat of criminal

prosecution for his art fraud conspiracy, Defendant

was undeterred. He engaged in an almost identical

scheme a few years later, and on an even larger scale.

From 2008 to 2014, Defendant purchased an

additional 73 paintings worth $52 million, evading

over $4.5 million in sales and use taxes in the process.

Id. ¶ 56. During this time period, Defendant also lied

about where he garaged his five cars in order to pay

lower auto insurance premiums. Id. ¶J 67-68. And,

in order to help

purchase a $4 million

apartment, Defendant directed his personal banker to

write a letter containing falsehoods about

's income, which convinced a co-op board to

approve

purchase of the apartment. Id. ¶ 69. The

Court concluded that not only the history of

uncharged criminal conduct between 1999 and 2016,

but also the flagrant repetition of his art fraud

conspiracy after having been investigated, weighed

heavily in favor of a high fine.

33a

Second, Defendant had ample opportunities to

come clean. For example, Defendant could have

avoided criminal prosecution had he confessed during

either a 2011 or 2014 IRS audit. Sentencing Hr'g Tr.

32:19-33:2 ("Mr. Zukerman had the chance

essentially to get amnesty here. If he had stepped

forward when he was first audited by the civil branch

of the IRS, there wouldn't have been any criminal

prosecution. Or if he stepped forward during this

second audit, when he was confronted by the civil

branch [of] the IRS. So he had the opportunity, just

like the people who get the amnesty did, to step

forward and take part and essentially escape criminal

prosecution."). Accordingly, the Court imposed a

substantial fine in part to account for Defendant's

repeated refusal to fess up despite the number of

investigations and audits that provided him the

opportunities to do so.

Third, the Court considered Defendant's letters of

support emphasizing his role in the lives of his friends

and family, as well as his philanthropy. Id. at 36:2537:6 ("I have received many, many letters in support

of Mr. Zukerman. Of course the unfortunate

consequence of any sentencing proceeding is the

collateral effect the sentence has on a defendant's

family and friends. I credit Mr. Zukerman for his

strong support of education through charitable

contributions and for his devotion to family, friends,

and employees. He has had a positive impact on

many lives."). Crediting Defendant's "positive impact

on many lives," id., the Court concluded that a shorter

term of incarceration at the bottom end of the

Guidelines range was appropriate. Coupled with

restitution and a high fine, the Court determined its

34a

judgment would account for the totality of the

circumstances.

C. Adequate Deterrence

The Court put the most weight on the general and

specific deterrence factors under § 3553(a) when

determining the appropriate fine for Defendant. See

id. at 38:16-19 ("I am also mindful of the fact that

others just like Mr. Zukerman are watching to

determine whether they, too, will try to avoid paying

their fair share."); see also SOR at 3 (selecting

§ 3553(a)(2)(B) as a reason for the variance from the

guidelines).

First, although general deterrence is a prescribed

goal of every sentencing, it has a particularly

important role in sentencing for criminal tax offenses

due to the significant resources required to monitor

and prosecute tax crimes. Tax avoidance, and

outright evasion, is a tremendous social problem,

costing the government over $450 billion per year

between 2008 and 2010. See Chris Matthews, Here's

How Much Tax Cheats Cost the U.S. Government a

Year, FORTUNE, Apr. 29, 2016, available at

http://fortune.com/2016/04/29/tax-evasion-cost. Due

to limited resources provided to tax crime

investigation and enforcement, the government can

only criminally prosecute a limited number of tax

evaders. The Sentencing Commission acknowledges

this challenge, explaining in its introductory note to

the tax-related guidelines 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

35a

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.

U.S.S.G. ch. 2, pt. T, introductory cmt.; see also U.S.

DEFT OF JUSTICE, CRIMINAL TAX MANUAL

§ 1.01[4] (2008), available at https://www.justice.gov/

site s/default/files/taxulegacy/2013/0 5/30/CTM% 20Cha

pter%20 l.p df. ("Because there are insufficient

resources to prosecute all violations, deterring others

from violating the tax laws is a primary

consideration."); Louis Kaplow and Steven Shavell,

Fairness Versus Welfare, 114 Harv. L. Rev. 961, 12251303 (2001).

The Sentencing Commission's commentary also

emphasizes that deterrence of large-scale tax

evasion—such as the $45 million of evaded taxes in

Defendant's case—calls for an even larger sanction.

"[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." U.S.S.G.

§ 2T1.1 cmt. background.

The importance of general deterrence in the

context of tax-related offenses is more than

theoretical: tax-enforcement actions have a

"significant and positive deterrent effect" on would-be

tax violators. See Joshua D. Blank, In Defense of

Individual Tax Privacy, 61 Emory L.J. 265, 321

36a

(2011). That is because white-collar crime appears to

be more "rational" and "calculated" than "crimes of

passion or opportunity," meaning that tax criminals

are more likely to account for the size of a fine and the

likelihood that it will be imposed. See Stephanos

Bib as, White-Collar Plea Bargaining and Sentencing

After Booker, 47 Wm. & Mary L. Rev. 721, 749 (2005)

(arguing that white-collar crime is "a prime candidate

for general deterrence" because it would "cease" if it

became "unprofitable").

The instant case, therefore, presented a unique

opportunity to deter tax evasion. Defendant was well

known in the business world. He was a Managing

Director at Morgan Stanley, and then founded his

own investment firm, specializing in acquisitions and

investments in the energy sector. PSR ¶ 139-40,

142-43. Several media outlets extensively covered

Defendant's indictment and sentencing, both because

of his name and the staggering amount of taxes he

intentionally withheld from the government. See,

e.g., Pete Brush, Tax-Dodging Moneyman Gets Nearly

6 Years, $10M Fine, LAW360 (Mar. 21, 2017),

available

at

https://www.law360.com/articles/

9043 92/tax- do dging-moneym an- gets-nearly- 6-years10m-fine; Jesse Drucker, Oil Investor Zukerman

Dodged $45M in Taxes, U.S. Says, BLOOMBERG

(May

23,

2016),

available

at

https://www.bloomberg.com/news/articles/2016-052 3/ex- morgan- stanley-energy- group -he ad- indicte dfor-tax-evasion; Nate Raymond, New York Energy

Investor Indicted for $45 Million Tax Scheme, Reuters

(May

23,

2016),

available

at

https ://www.reuters .com/article/us-new-york-crimezukerman/new-york-energy-inve stor-indicted-for-45

million-tax-scheme-idUSKCN0YE2OU. Accordingly,

-

37a

in view of Defendant's prominence in the field of

finance, and reflecting the Sentencing Commission's

commentary, the Court put significant weight on

§ 3553(a)(2)(B) when imposing a $10 million fine on

Defendant.

Second, the Court put significant weight on the

specific deterrence factor when considering the

appropriate fine. See SOR at 3 ("Given the scope and

complexity of the defendant's tax fraud, and to

provide sufficient deterrence, an upward variance to

the amount of the fine is warranted."). As explained

above, prior to his prosecution for the instant offenses,

Defendant was investigated for his participation in an

art fraud conspiracy from 1999 to 2003, PSR ¶J 7071, engaging in crimes he then repeated from 2008 to

2014, id. ¶ 56.

It was clear to the Court at the time of sentencing

that simply being caught did not deter Defendant.

Indeed, the Court carefully considered the fact that,

in the time since the state's investigation into the

1999 art-delivery conspiracy, Defendant's criminal

activities had only grown in size and scope. The Court

concluded that the $233,000 slap-on-the-wrist

Defendant received in 2002 proved useless in

dissuading him from evading his taxes. A significant

penalty was required to specifically deter Defendant

from engaging in more tax fraud.

D. Disparities

The Court put less weight on § 3553(a)(6) for the

purposes of determining an appropriate fine because,

simply put, the Court concluded that there existed

few, if any, defendants with similar records who had

been found guilty of similar conduct. See Sentencing

Hr'g Tr. 37:19-20 ("I am cognizant of the need to avoid

unwar [ranted] sentence disparities.").

With no

directly comparable cases, the Court assigned less

weight than it might typically have in another case.

The Court considered that the only post-Booker

tax crime in this Circuit with a loss magnitude

comparable to or exceeding Defendant's was that of

Robert Pfaff, who received a $3 million fine and was

sentenced to 97 months' imprisonment for a tax loss

exceeding $100 million. See MCM Data Consulting,

Defendants Scored According to USSG § 2T1.1 Who

Were Ordered to Pay a Fine, Tax Loss >$1 Million,

National

FY

1999

FY

2016,

http://www.mcmdataconsulting.com/defendants.pdf;

see also United States v. Pfaff, 407 F. App'x 506, 507

(2d Cir. 2010) (summ. order) (affirming conviction).

Although the tax loss in Pfaff s case exceeded that of

Defendant, Pfaff was not a direct beneficiary of the

tax loss. Rather, because Pfaff worked at an

accounting firm, the tax loss attributed to him was the

result of "designing, implementing, and marketing

fraudulent tax shelters" for the benefit of his clients.

United States v. Pfaff, 619 F.3d 172, 173 (2d Cir.

2010). In contrast, the tax loss in Defendant's case

benefitted only Defendant and his relatives.

Other aspects distinguished Pfaff from Zukerman.

Pfaff was convicted alongside co-defendants Raymond

Ruble and John Larson. See id. Here, Defendant was

the sole defendant in his case, and he alone directed

the tax-evasion scheme. Also, Pfaff did not have a

history of uncharged criminal conduct—nor a history

of facing investigations for such conduct, see Pfaff

Sentencing Mem., at 1, United States v. Stein, No. 05

Cr. 888, 2009 WL 7360963 (S.D.N.Y. Mar. 18, 2009),

whereas Defendant repeatedly engaged in criminal

conduct—even after being caught, see PSR ¶J 66-72.

-

39a

Finally, Pfaff had lost his entire net worth by the time

of sentencing, see Pfaff Sentencing Mem., at 1,

whereas Defendant enjoyed a net worth exceeding

$37 million, PSR ¶ 145.

Given the lack of comparable tax cases, the Court

also looked to fraud cases involving massive losses.

The Court concluded that the $10 million fine was on

par with fines imposed on similarly situated

defendants. For instance, the defendant in United

States v. Garrison, 133 F.3d 831 (11th Cir. 1998),

pleaded guilty to participating in a Medicare fraud

scheme that resulted in an $11.5 million loss to the

victims involved. Id. at 837. Though the Sentencing

Guidelines range was a prison sentence of 33 to 41

months and a fine between $7,500 and $75,000, the

district judge imposed a 33-month prison term and a

total fine of $2.5 million. Id. at 837. The defendant

challenged several aspects of her sentence, including

the fine, arguing that it was "so large and

disproportionate to the offense to be unreasonable on

its face." Id. at 849 (internal quotation marks

omitted).

In upholding the fine, the Eleventh Circuit

affirmed the district judge's reasoning that a large

fine was warranted "to be sure that the combined

sentence reflects the seriousness of the offense and

that it promotes respect for the law," especially

because it was "a very high profile case" that bore on

"the public's concern about the Medicare program and

the possibility of losing medical benefits in old age."

Id. at 850 (emphasis omitted). To that end, the

Eleventh Circuit further explained that, "[g]iven [the

defendant's] substantial profits over time from her

Medicare fraud, the district judge did not believe that

the highest Sentencing Guidelines applicable fine was

40a

sufficient to punish Garrison's calculated crime that

defrauded Medicare, our federal, public health

insurance program." Id. at 852.

The Second Circuit has likewise upheld fines well

above the Guidelines range in cases involving

defendants who defraud the government. See, e.g.,

United States v. Gushlak, 495 F. App'x 132 (2d Cir.

2012) (upholding a judgment imposing a $25 million

fine that was 33 times the Guidelines maximum

because it "was necessary to deter [defendant] from

engaging in future securities frauds" and because

defendant likely had "a greater ability to pay a fine

than his financial statements suggested"); United

States v. Merritt, 988 F.2d 1298, 1312 (2d Cir. 1993)

(upholding a judgment requiring defendant, who

pleaded guilty to conspiracy to defraud the United

States, to pay the maximum fine of double the loss, or

$1.87 million). Accordingly, the Court concluded that

a $10 million fine would not result in unwarranted

disparities.

E. Sufficiency and Necessity

Under § 3553(a), the Court arrived at an amount

that would be sufficient, but not greater than

necessary. Because Defendant's crimes involve

pecuy

niar

losses to the Government and gains to him

and

the Court looked to 18 U.S.C.

3571(d),

which

permits

a court to set a fine that is

§

"twice the gross loss." See also PSR ¶ 167; Plea Hr'g

Tr. 12:12-14 ("The maximum allowable fine is

$250,000 or twice the gain you received from the

crime or twice the loss to any victims, whichever is

greater."). Having caused an estimated $45 million

tax loss, Defendant could, therefore, be fined up to $90

million per count of conviction, id. (stating the

,

41a

maximum fine for each count to be $90 million); see

also id. at 50 (clarifying that the maximum fine was

$90 million "per count").

Mindful of this upper limit, the Court noted that

Defendant's corporate entities made restitution of

only $37.5 million out of the total $45 million tax

loss—leaving $7.5 million in unaccounted losses.

Considering that $7.5 million figure, the Court also

weighed the possible interest that would have accrued

in the 9 years between Defendant's first charged

criminal activity and his restitution payment.2 In

light of the $7.5 million in unaccounted losses, the

potential accumulated interest on such losses, and the

maximum possible fine, the Court concluded that $10

million was sufficient, but no greater than necessary

to comply with § 3553(a).

II. 18 U.S.C. §3572(a) Factors

Finally, under 8 U.S.C. § 3572(a), the Court

accorded significant weight to Defendant's income

and financial resources, as well as the limited burden

of a $10 million fine. See SOR 3. First, Defendant's

total annual income was over 0million per year.

PSR ¶ 145. Second, despite having already paid—

using corporate funds—millions in restitution prior to

sentencing, his net worth remained at over

million. Id. ¶ 145, 154; Sentencing Hr'g Tr. 37:2324 ("Mr. Zukerman remains an astonishingly wealthy

man despite paying millions owed to the

rnment."). Defendant's assets included almost

t million in securities assets, a Emillion

2 For example, applying 2% annual compound interest

only to the $28 million in tax liability owed by Defendant in 2008

yields approximately $5 million in interest.

•

42a

apartment

million in art and 0million in

jewelry—as well as over Imillion in other assets.

PSR ¶ 145. Through a trust with his wife as trustee,

Defendant also owned a 0million "cottage" in

Maine, id. ¶ 155, and his wife had interests in two

properties in Arizona, id. ¶ 156. Third, the Court put

substantial weight on the fact that Defendant's

corporate entities paid the $37.5 million in

restitution, indicating that only the fine would be paid

from Defendant's own pocket. Sentencing Hr'g Tr.

37:20-22 ("Although he has taken steps to make the

government whole through restitution, many of those

payments have come from his companies and not from

his own pocket."); Gov't Sentencing Mem. at 80.

Accordingly, the Court concluded that not only had

Defendant failed to establish his inability to pay a

substantial fine, see U.S.S.G. § 5E1.2(a) ("The court

shall impose a fine in all cases, except where the

defendant establishes that he is unable to pay and is

not likely to become able to pay any fine."), but also

that a $10 million fine was not overly burdensome in

light of Defendant's income and financial resources.

CONCLUSION

For the key reasons discussed above, the Court

concluded that the imposition of a fine well above the

Guidelines range was warranted. Defendant is

directed to file a copy of this supplemental

memorandum with the Clerk of the Court of the

Second Circuit Court of Appeals, with the request

that she forward it to the panel that issued the

aforementioned remand.

43a

SO ORDERED.

Dated: May 4, 2018

New York, New York

si Analisa Torres

ANALISA TORRES

United States District Judge

IMF

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

x

UNITED STATES OF

New York, N.Y.

AMERICA,

V.

16 Cr. 194 (AT)

MORRIS E. ZUKERMAN,

Defendant.

x

March 21, 2017

11:20 a.m.

Before:

HON. ANALISA TORRES,

-

District Judge

APPEARANCES

JOONH. KIM

Acting United States Attorney for the Southern

District of New York

BY: STANLEY J. OKULA, JR.

EDWARD A. IMPERATORE

Assistant United States Attorneys

WILLIAMS & CONNOLLY, LLP

Attorneys for Defendant

BY: JAMES A. BRUTON

DAVID M. ZINN

DAVID M. HORNIAK

AMY B. McKINLAY

45a

ALSO PRESENT:

ANTHONY RAGUSA, Internal Revenue Service

DIANA CHOU, Postal Inspection Service

THE COURT: Good morning. We are here in the

matter of the United States v. Zukerman.

Would you make you appearances, please.

MR. OKULA: Yes, your Honor. Stanley Okula for

the United States. I am joined at counsel table by

assistant United States attorney Edward Imperatore

and the two investigators in the case, starting with

the closest to me, Anthony Ragusa from the Internal

Revenue Service and Diana Chou from the United

States Postal Inspection Service. Good morning.

MR. BRUTON: Your Honor, James Bruton for Mr.

Zukerman. I have with me David Zinn, who is also on

the briefs, and David Horniak. In addition, in the

courtroom we have another one of our lawyers, Amy

McKinlay. So there are actually four of us at this

point, your Honor.

THE COURT: You may be seated.

MR. BRUTON: Thank you.

THE COURT: This matter is on for sentencing.

In connection with today's proceeding, I have

reviewed the revised presentence investigation report

dated November 9, 2016, including the

recommendation and addenda; the defendant's

sentencing submission dated January 13, 2017; the

government's sentencing letter dated February 7,

2017; the defendant's notice of supplemental

authority, dated February 22, 2017; the government's

response dated February 27, 2017; the government's

letter dated March 17, 2017; and the defendant's

response dated March 20, 2017.

A..

Have the parties received each of these

submissions?

MR. OKULA: Yes, your Honor.

MR. BRUTON: Yes, your Honor.

THE COURT: Have the submissions been filed

with the Clerk of Court?

MR. OKULA: Yes, your Honor, in the redacted

form that has been approved by the court.

MR. BRUTON: That's correct, your Honor.

THE COURT: Are there any other submissions?

MR. OKULA: Not on behalf of the government,

your Honor.

MR. BRUTON: Not on behalf of Mr. Zukerman,

your Honor.

THE COURT: Mr. Bruton, have you read the

presentence report?

MR. BRUTON: I have, your Honor.

THE COURT: Have you discussed it with your

client?

MR. BRUTON: I have, your Honor.

THE COURT: Mr. Zukerman, have you read the

presentence report?

THE DEFENDANT: Yes, your Honor.

THE COURT: Have you discussed it with Mr.

Bruton?

THE DEFENDANT: Yes.

THE COURT: Have you had the opportunity to go

over with him any errors in the report or anything

else that should be brought up with me?

THE DEFENDANT: Yes.

THE COURT: AUSA Okula, have you reviewed

the presentence report?

47a

MR. OKULA: I have, your Honor.

THE COURT: Mr. Bruton, do you have any

objections to the presentence report regarding factual

accuracy?

MR. BRUTON: No, your Honor. Although we did

point out, and I think it is in the probation officer's

report, that there are a lot of additional items that Mr.

Okula has involved that's beyond the case that is

there. He has added additional items. We, frankly,

couldn't address those. And so our position is that it

is a lot of relevant conduct that he has added, which

we have felt is not necessarily indicative of things that

Mr. Zukerman did.

But on the main issues, we have absolutely no

objection. All the heartland issues in the probation

report are

THE COURT: But you are not making an

application to in any way alter or modify the report.

MR. BRUTON: No, your Honor. We simply had

to bypass those because we couldn't keep up with all

of it.

THE COURT: AUSA Okula, do you have any

objections regarding factual accuracy?

MR. OKULA: We have none, your Honor.

THE COURT: Hearing no objections, the court

adopts the factual recitations set forth in the report.

The presentence report will be made a part of the

record in this matter and placed under seal. If an

appeal is taken, counsel on appeal may have access to

the report without further application to the court.

Although courts are no longer required to follow

the sentencing guidelines, we are still required to

consider the applicable guidelines in imposing

sentence and, to do so, it is necessary that we

--

accurately calculate the sentencing range. There is a

plea agreement in this case. Am I correct that the

parties stipulated in the agreement that the

stipulated sentencing guidelines range is 70 to 87

months' imprisonment?

MR. OKULA: Yes, your Honor.

MR. BRUTON: That's correct, your Honor.

THE COURT: I understand that this range is

based in part on a two-point increase pursuant to

United States Sentencing Guidelines Section 2T1.1(b)

because the offense as stated in Counts One and Two

involved sophisticated means.

I also understand that the government, the

defendant, and the probation department are

recommending a two-point reduction in the offense

level because Mr. Zukerman has demonstrated

acceptance of responsibility for the offense under

Section 3E1.1(a) of the guidelines and a one-point

reduction because he has given timely notice of his

intention to enter a plea of guilty under section

3E1.1B of the guidelines. Is that right.

MR. OKULA: It is, your Honor.

MR. BRUTON: That's correct, your Honor.

THE COURT: Having considered the totality of

the circumstances, including Mr. Zukerman's

acceptance of responsibility for the offense and timely

notice of his intention to enter a plea of guilty, I

conclude that Mr. Zukerman is therefore eligible for a

three-point reduction in the offense level.

Accordingly, based on my independent evaluation

of the sentencing guidelines, I find that the offense

level is 27, the criminal history category is I, and the

guidelines range is 70 to 87 months of imprisonment,

one to three years of supervised release, and a fine of

$25,000 to $250,000.

I have considered whether there is any other

appropriate basis for departure from the advisory

range within the guidelines system, and although I

recognize that I have authority to depart, I do not find

any grounds warranting a departure under the

guidelines.

Now I will hear from the parties.

Does the government wish to be heard with regard

to sentencing?

MR. OKULA: We do, your Honor, just briefly.

May I address from here or would you prefer that

I address from the podium?

THE COURT: Whatever. It is your choice.

MR. OKULA: Your Honor, we endeavored in our

sentencing memo to outline in a comprehensive

fashion all of the facts that we believe are important

for your Honor to impose sentence today. I will not

repeat all of them. I simply want to focus on two or

three critical issues, your Honor.

First, the court, when imposing sentence in cases,

oftentimes, if not more often than not, faces issues or

sees reasons essentially that give some explanation to

the criminal conduct. The court sees, for instance,

impoverished upbringing or crimes of economic

desperation, even in tax cases, your Honor, where

there are, according to the defendants, hazy rules that

they complain about that lead them to cross over the

line or an employment tax cases where an employer

will, for instance, put their money towards expenses

rather than paying their employment taxes.

This case, your Honor, presents none of those

issues. There are two words, and two words alone,

50a

that explain the conduct in this case: unmitigated

greed. It is a simple reason that the defendant carried

out this plan year after year after year. After all, the

defendant is in a financial position that is enjoyed by

very few in this country. There was no economic need

for him to do what he did. And yet he devised a

scheme and carried it out in so many different ways

on a corporate tax level, on an individual level, on a

sales tax level with respect to the artwork that he

purchased. The only explanation for the conduct,

your Honor, is greed, and I think that that's

important to take into consideration when trying to

understand what the reasons were behind the

criminal conduct.

The second point we wish to urge for the court, and

we stressed it very hard in the memo that we

submitted, is the vital importance, your Honor, that

sentences of incarceration play with respect to

deterrence in criminal tax cases. The message has to

be clear to those, especially in cases like this, where

there is no motivation other than greed, the message

has to be that there are important, significant

ramifications to the conduct. Stated otherwise, your

Honor, if the court were to accept the defendant's

arguments essentially that, well, we have to pay back

all of the money that we owe, we are going to have to

pay interest on that, and penalties on that, and, you

know, he has lost face in the community because of

his crimes, if that were the basis for the court to

essentially impose a probationary sentence, it would

send the wrong message. It would essentially say

that if you are caught, all you have to do is pay back

your money and there are not going to be meaningful

consequences.

--

51a

Our point is simply, your Honor, there have to be

meaningful consequences lest people out there who

are making the decision about whether they are going

to get caught or whether there are serious

repercussions if they do get caught, they are going to

take it into consideration and think, hey, maybe it is

worth it. They have to see the message, and that

plays an important role in cases like this, especially,

your Honor, in a case like this one, where Mr.

Zukerman had prior involvement with the criminal

justice system.

Now, to be sure, he has no criminal history

according to the guidelines, but the undisputed facts

are that he was caught up in the sales and use tax

evasion scheme and investigation that was carried

out by the D.A.'s office during the 1999 through the

2002 time period. So imagine that. They knock on his

door. He gets a criminal defense attorney. He goes

nextdoor to the D.A.'s office where he is interviewed

by the ADA who has run the investigation and, to be

sure, they are focusing, the D.A.'s office was, on the

galleries because the galleries were the ones who were

essentially orchestrating these schemes, but the

customers were just as culpable. And during Mr.

Zukerman's interview, he acknowledged his criminal

involvement in that scheme.

So what does that mean? Why is that important?

It means, and I am sure the court sees it in a lot of

other cases, and I see it when judges impose sentence,

that one of the messages that the judges send when

somebody gets a sentence is, you have to understand

that if you come back in front of me, it's going to be

bad news, because we are going to have a violation of

supervised release and you are going to jail. Judges

in this courthouse say that all the time. In other

52a

words, if you come back a second time, it's going to be

bad news for you.

Well, Mr. Zukerman had a prior involvement with

the D.A.'s office and, for better or for worse, they

decided not to prosecute him, but he was criminally

culpable. So he had the chance at that point to say,

You know what? I dodged a bullet there. I escaped.

I am going to set the path to be honest and punctilious

in everything I do going forward. But astoundingly,

breathtakingly, a handful of years later, he decides to

do the very same thing.

So this is a long way of saying, your Honor, that is

why the message of deterrence is doubly important in

a case like this. Because if the message is that even

if you were caught up once before and you get caught

a second time and you get a slap on the wrist, that's a

bad message for deterrence.

The final point I want to make, your Honor, relates

to the submission that the defendant made with

respect to the Horsky agents, the case in Virginia that

both parties made a submission on. Mr. Bruton, quite

astutely, emphasized the facts that were favorable to

Mr. Horsky in that case, including the sentence, but

one of the things that I think is important for the

court to appreciate with respect to the Horsky case

and how this case is so different is that Horsky was

the guy who had a couple hundred million dollars in

the undeclared Swiss account, that was in Israel. The

IRS starts knocking on his door once they get

information about his scheme, and immediately upon

his involvement with the criminal investigation of

the division of IRS, he makes a decision, you know

what? They got me. I'm going to set things right.

53a

This case is such a stark contrast from that, that

it is important to keep in mind all the steps that Mr.

Zukerman had to essentially change his ways, and

this doesn't even take into consideration his

involvement with the D.A. After all, he was audited

during the Bodley audit. Remember he tried to

declare during the 2008 tax year some of the Penreco

gains falsely on the Bodley tax return. But he is

audited on the Bodley tax return in about 2010 or

thereabouts. He has a decision then to make. He

knew he had engaged in false tax reporting. He knew

he had not paid taxes and all that. So what did he do

when he was faced with the auditors at that point?

He prevaricates. He essentially gets his lawyers to

tell a false story to the IRS. The court is familiar with

that whole story. So the point is that the defendant

had choices all along the way.

I was astounded in reading the explanation of

conduct that Mr. Zukerman submitted. It's at page

91 of the presentence report. In explaining what

happened with Bodley, the defendant, through his

attorney, said "The 2008 Bodley tax return came

under audit by the IRS, and the IRS disallowed the

losses and credits." And this is the important

sentence. "Having long ago committed to the position

that Bodley had acquired and sold an interest in

Penreco, it was too late for Mr. Zukerman to change

his story."

It was not. It was not too late. He could have come

clean at that point. There was nothing that prevented

him from saying, You know what? I'm under audit.

I'm going to honestly report it right now. Going

forward I will pay the back taxes. After all, it was a

civil audit then.

It wasn't even a criminal

investigation. But what was the decision that he

54a

made? He not only gave false information to the IRS,

but then he had his lawyer transmit that to the

appeals office when it was under audit after that.

And the audit fraud didn't end then. So he gets

through Bodley and there are two other instances

when the civil branch of the IRS audited Mr.

Zukerman's returns. They audited him with respect

to I believe the 2008 year that contains the false

charitable contribution figure to the main

conservation entity. What did he do when he was

faced with that audit? Did he say, You know what? I

escaped the Bodley. I'm dealing with this. Time to

come clean? No. He provided false information to the

IRS and convinced them falsely that those claims that

he made on the return were true and accurate.

And then, with respect to the family members'

audit, once again, there are a couple of important

points with respect to that. One, the damage that Mr.

Zukerman caused was not limited just to himself. By

dragging the family members into it, he wreaked

havoc on many different people with respect to their

financial accounts, their involvement in the

investigation.

And even with respect to that audit, the family

member comes to him and says, Hey, the IRS is

asking about this item. What does he do? Does he say,

You know what? I am going to be honest with respect

to this family member. I'm going to tell them that

there was no real basis for that claim on the return?

Does he do that? No. He provides false information

that's transmitted to the IRS in order, once again, to

try to get over on the IRS.

So the point, your Honor, is a simple one, and I'm

sorry to belabor it, but there were numerous points

55a

along the way that the defendant had a choice to

make. Am I going to be honest? Am I going to start

on the path of the right? Am I going to correct that

which I did which was utterly wrong? No. He just

wanted to keep going and going and going and, once

again, the only explanation was greed.

So beyond those comments, your Honor, which in

some form or another are set forth in our papers, we

will rest on our papers.

If the court has any questions, we are happy to

address anything else.

THE COURT: Does defense counsel wish to be

heard?

MR. BRUTON: Yes, your Honor.

I would like to start off a little bit because

obviously Mr. Okula's position is largely this issue of

greed. Whether that is clear or not is absolutely

uncertain. I think that in the years that I have been

dealing with taxpayers, the issues are never clear. It

is always involving other issues as well. And in his

case, what you see is somebody who has been a very,

very good person in a lot of respects. We have you

know there is a number of roughly 100 letters of

people who have come on his behalf, speaking on his

behalf. He has touched people in all walks of life. He

has done a lot of things that are truly exemplary. He

had this tax issue, and that's not good. And he is here

today to finish the guilty plea. He has pled guilty, and

he is here to take the consequences of that, and he is

not shirking that.

What I would like to point out, your Honor, is that

one of the things we have got a plea agreement here

that had a number of undertakings that he is

supposed to be involved with, and one of the things

--

--

56a

was a restitution order, $37 million agreed between

the parties. And he has never once held back or

shirked or avoided trying to do what was necessary to

respond and in fact ended up overpaying the amounts.

What happened was he submitted all the payments to

the IRS. They are in bonds. Each one the IRS already

has the money, has had the money since last April

and May, and so that's all been in their hands

awaiting your order, your Honor, and then they will

go ahead and act on that, and those monies will be in

the Treasury. They are in the Treasury now, but they

will belong to them exclusively at that point. And he

worked hard to try to get that done, and he never

shirked, never tried to avoid it, never tried to do

anything that would suggest that he was trying to

undercut the issue of pleading guilty and responding

to what your Honor is going to have to do in terms of

the ultimate result here.

He then went about, you will see in the plea

agreement, there are a list of tax returns that were to

be filed. They were all filed on February 28. It turned

out to be about between 28 and 81 tax returns that

were involved that he caused the filing of and caused

the payment of and caused the interest to be paid on

to make sure that it was there.

The point is, and I have always thought this

throughout my career, that one of the things that has

to be done is, there has to be a remedial side. It has

to be straightened out. If we get a taxpayer who has

had the problems that Mr. Okula is arguing for, the

first thing we do is make sure that that person is in

the system and operating in a way that gets all this

up to speed so that going forward the tax work will be

done and done appropriately. He has, in the process,

gotten first-rate accounting help, people who will

57a

watch and make sure things are done. He did not

have that before. That is done to make sure that he

doesn't have to worry about whether he is, as Mr.

Okula says, tempted by greed in a particular instance.

He won't be, because the accountants will be there

working with him and making sure that everything

gets covered.

That remedial part is done, and he has gone

through the process in ways, your Honor, that I think

were extraordinary. I haven't in my career had that

many returns filed in an association with a guilty plea

and a sentencing, and that's a good thing. What it

does is it gets the individual back into the system

where they need to be.

I would like to move from there to these separate

issues of deterrence. I guess we can go to that. I guess

the we have given your Honor a copy oh, forgive

me, one thing, I need to give a copy of all the tax work

that was done.

Do you mind, your Honor, if I approach and just

give you a summary of the tax that was done?

THE COURT: You may.

MR. BRUTON: So, in addition to the

$37,547,951.88 that he submitted to address the

restitution, which was more than the letter called for,

that's already in the additional items that I have

given you here, are the other tax returns in the

amounts that were paid in association with that.

Now, I was a little bit upset last week when Mr.

Okula sent a letter saying, Judge, you should treat

this as more fraud. The issue here was not that.

When I was a prosecutor, if the taxpayer would come

forward and be cleaning up his act and we could show

that he was honestly trying to do that, that was a

--

--

58a

reason to rejoice. That wasn't a reason to sit there

and suggest, well, we have got to punish him more.

We are getting him into the system. The point is that

he has got to get back into the tax system, and this is

how you do it. And so, your Honor

THE COURT: So are you arguing that his

payment of taxes that were due is somehow

praiseworthy?

MR. BRUTON: I guess, your Honor, I am. And

the reason why I am saying that is because, you know,

obviously these things weren't done and they had to

be done. If he doesn't go ahead and honestly prepare

these and honestly do this, then the government is

still hurt. The IRS is still hurt. The idea is to come

forward and get everything you can. He made

judgments on things where he decided in favor of the

government, even if he could have, for civil tax

reasons, disagreed and done something different. The

reason why he did it was to be absolutely on the safe

side, to make sure that he was doing more than he

was required to do under the law. Most of these, a lot

of them we could have said he can't no problem, go

ahead, don't take the deduction or don't take the

income. But he didn't do that. He went in, and went

through it. And I have seen a lot of these, and I have

seen situations where taxpayers are fighting even

through this process. That never happened with Mr.

Zukerman. Mr. Zukerman's position has been

always, Let's do what's right now. I can't do anything

about the past, but I can do what I can with the future

and current.

THE COURT: So you are saying that his having

paid taxes that were due is praiseworthy. Do you also

think that is extraordinary?

--

--

59a

MR. BRUTON: Extraordinary?

THE COURT: Do you think it is extraordinary to

pay taxes that are due?

MR. BRUTON: No, it is certainly not. But the

idea

there are lots of people who are not in a

situation where they are trying to get all the

payments made that need to be made.

THE COURT: So you are saying there are those

who avoid paying taxes, therefore we should praise

Mr. Zukerman for paying his taxes?

MR. BRUTON: No, we should praise Mr.

Zukerman for coming back into the system. He was

out of the system. He is now in the system. Going

forward he will be filing. He is on the right track.

That's what I am suggesting. And if somebody has

failed, the fact that they fail and then they turn

around and do what's right seems to me praiseworthy.

There are other alternatives. People can continue to

head down the bad track. People leave the country.

People do all kinds of things to avoid taxes. This man

said: Look, I know I have done wrong.

I feel horrible about what I have done.

THE COURT: So do you think he should get a

good citizenship reward for paying the back taxes?

MR. BRUTON: No, your Honor. He is just back

in the system. He is just back in the system. That's

all. And that's quite a lot. That's quite a lot, to get

somebody who has been out of the system into the

system. And I am not suggesting that a medal needs

to be there. That is not anywhere near what I am

contending. What I am contending is that he spent a

lot of time and a lot of hard work trying to make sure

it was right and trying to make sure the IRS is going

to look at all these tax returns. There are going to be

--

--

II.

penalties on top of them. He is going to pay all those.

The penalties can be as high as 75 percent on all of

these, and he is going to have to pay all of those and

he will pay all of those. He has submitted everything.

The IRS now has him within the system, doing what's

right. That's not a commendation. That's not a

community service award. It is just doing what needs

to be done to get him where he needs to be. We have

got a whole body of taxpayers out there who need to

be in the system who aren't. And we have a

circumstance here where actually the plea agreement

was a good thing because it allowed for the possibility

of making sure that we got him on all tracks, on all

the things that he was doing. So I am not trying to

suggest, your Honor, that he needs a medal. What I

am suggesting is that he has done things to show the

government and the IRS and his country that he

wants to be right, and that's the only point of it.

That's all he can do. And the remediation process

and that's what it is all he can do is show that he

wants to be back in the system where he needs to be,

and that's what he has done here, your Honor. And

that, to me, has a value, and it's a useful thing and

the government should it should be happy about it,

because it's not happening everywhere. So when I

was a prosecutor, I would have been happy about that

because most of the time the defendants try to figure

any way they can to avoid it, and he hasn't done that.

I will go ahead and move on if you would like, your

Honor.

I wanted to address this issue of deterrence

because it is crucial to what we are talking about. We

have the probation officer has suggested a possible

variance of down to 40 months

excuse me, 48

months from the original 70 to 87 months that are in

--

--

--

--

61a

the guidelines. Mr. Okula hasn't responded to that,

so I assume that's not what he wants and I don't

expect him to want that. But the fact is that she has

recognized that there are a number of qualities that

this gentleman has that are suggestive that a

variance would be a good result and an appropriate

result, given what he was doing to try to correct and

at the same time all of the good qualities, personal

qualities he has.

He has a wonderful family. I don't see that very

often. I don't see the family there is 45 years of

marriage and solid relationship. I don't see that. I

don't see that with young people who grow to be

each of these young ladies is a wonderful, wonderful

member of society. They are doing great things, and

they are good. All of that bespeaks with Mr.

Zukerman that quality that Mr. Okula keeps arguing

about, greed, greed, greed. There are other qualities

that are offsetting. And we have to understand not

everybody everybody has bears their sins, if you

will, and the issue is, how do we address those things

and what is the appropriate response in dealing with

it?

The issue that I wanted to talk to you about,

though, has to do with Judge Rakoffs views on the

sentencing guidelines, because we start with the

sentencing guidelines that are a very high level. We

argued in the brief, and I would like to give you a copy

of a little schematic that we came up with later that

may help.

In the Casperson case Judge Rakoff is raising he

was dealing with the fraud guidelines at that time,

but one of the things he argues is that these

numerical guidelines don't give us a good way to know

how to sentence somebody because the dollars are just

--

--

--

--

--

62a

numbers. It is just bean counting. It doesn't really

get to the heart of the issue, which is what's an

appropriate result here? You will see on the

schematic that we have provided, back in 1987

through the 1988 period, the same offense Mr.

Zukerman had to the penny was 27 to 33 months. I

happened to be the Deputy Assistant Attorney

General and then the Acting Assistant Attorney

General during those years. Those were years where

we were trying to figure out, guidelines put a pressure

on us that we couldn't necessarily deal with, and that

was how we were going to quantify how the sentences

should be. Because if you take dollar amounts, you

have to figure out how much time it takes or how

much time should be related to the time that

somebody would spend in prison.

And so these calculations, the initial bump took

place in '89 to '91, and it went up and it is still 41 to

51 for Mr. Zukerman is still much lower than what we

have now. And then it went down a little, and then it

bumped back up, and then look at where it is now. It

just overwhelmed the numbers for the earlier period.

And this is post-Booker, which is a surprise, because

Booker is in there trying to say we have got to start

getting a little more rational about this in connection

with the issues of handling the sentencing and how

we do it, that it is not just an issue of number

counting, but it has to be something else. So the

guidelines are putting us in a position where that is

the case. But had he been involved in this process

back in 1987, '88, '89, he would have been in

guidelines that would have been the bottom of the

guidelines would have put him under three years. Is

there any real difference with those?

--

--

63a

In fact, if you go with the guidelines, I went

through the guidelines in each case and checked the

amendments and the explanation of the amendments,

and there was none. And what you find out is that

they were bumping the fraud guidelines, and they did

tax automatically. So there was no real reason to

bump tax to here or tax to here, tax to here and tax to

here, because they were doing something over with

the fraud guidelines and they had no indication as to

whether or not this was good, whether it was helpful

from a deterrence standpoint, to what the resolution

would be.

But what Judge Rakoff talks about is, how can you

say that if you are analyzing deterrence, how can

you say that this number is any different than this

number or that that's more appropriate than the

other number? So what he says is, he sort of throws

away the guidelines. I can say to you that if we

started with the original guideline intention, which

was to say that we want some moderate tax evaders

to be put in jail, that was the calculation. And at that

time, it's interesting, because we were trying

desperately to be able to argue Mr. Okula just sort

of argues deterrence, but it's deterrence disjointed

from anything. It doesn't really tell you that if you

want to have an 87-month sentence here, why is that

more deterrent or why is that deterrent relative to the

27-33? What's the difference between the two from

the standpoint of deterrence? And he won't be able to

tell you that.

And the reason was, back in those days, the IRS

and the department, we put together a program called

the let me get that one for you, the zip code, where

they were using zip codes to determine whether or not

there were crimes in those areas, and what they

--

--

--

RM

would do is they would take every crime where

somebody went to jail and they would look around

within the surrounding area codes, and they would

determine that in those area codes they had certain

people who were civilly violating or criminally

violating or other things.

There was a problem. And the problem was that

they prosecute so few tax cases, that you can't tell

what the deterrent value of any particular

transaction is. So you won't know whether it is better

from a deterrent standpoint that Mr. Zuckerman be

at the top here based on the 2001 guidelines or

whether it is okay for him to be down here in the

original guidelines where they said this is what we

want and this is how we want to do it. You will find,

as you go across that, that there is no explanation as

to why they went up. None. They don't explain it. It

just goes.

And that bespeaks Judge Rakoff's argument that

the numbers, in the numerical program like that,

don't make any sense. And that's why we have to find

something that works, but it may be that the variance

is required for the court to say, We look at all this, and

we see all these problems, and we look at this person,

and we look at the good qualities, we look at the bad

qualities, and within that range somewhere, there is

an appropriate sentence, and that appropriate

sentence builds in deterrence, it builds in

punishment, and it builds in all the other pieces that

were there.

When I started, I was talking about trying to

remedially get him back into the system. There is

more. Obviously deterrence and punishment are

necessary and they are parts of the program. I wasn't

suggesting that we just deal with it, just the civil side.

65a

This plea agreement is much more than that. It is

more than that for a good reason.

But the question here is, if we are talking about

deterrence, how much is enough? What do we have to

have involving Mr. Zukerman that will deter without

doing damage in other areas?

He is 72 years old, almost 73. He has got a

wonderful family. He has got little grandchildren. I

have little grandchildren. I think about him all the

time when I think about my own grandchildren, just

tearing up his heart.

What's enough? What is enough in this situation?

And that is what we

I think the guidelines are

calling for and questioning when we use just

numbers. He is not a number. And part of the brief

that we have submitted shows you what kind of

person he is in the other areas, the areas that Mr.

Okula can't talk about and doesn't know. We have got

all the letters of friends and workmates and others.

You know, there are just a lot of them. There are

some there that are very compelling. And that tells

you that there is a different piece of that person that

is involved.

It's not just a situation where we are talking about

what he did. Goodness knows, we have got to get him

back in the system. We have got to get right.

But now, when we punish him and we use him for

deterrence, because it is using him for deterrence,

what's enough? And that's the question. And that's

what the variance allows the court to do is to decide

what's enough.

We listed a number of cases in there, and I would

like to talk just for a minute and I apologize for

taking so long but there are a number of cases that

--

--

--

I..

deal with this issue of offshore Swiss banking and

those kinds of things, and you saw a list of them in

our brief that were there, and none of those people are

getting much in terms of jail when they do get

prosecuted.

The fact is that there are about 54,000 of them, at

least as of the end of'15, 54,000 people had gotten into

an amnesty program with the IRS and got themselves

out completely criminally. Completely.- This in

between 2009, after the UBS case, 2009, '10, '11, '12.

And they are petering out now, because most of the

ones that really want to be bad, they are gone and the

ones who are resolved are resolved. 54,000 people, an

average of 150, $180,000 per individual of tax that

was evaded. That works out to be close to a million

dollars for each person.

So you have a group of people, 54,000 people,

walked into the system, spent all of their time hiding

money offshore, and the IRS says, we are going to give

you amnesty, come on home, and the result is that

they end up with people who pay no tax at all in the

situation who now all they have to do is pay up the

tax.

When you asked about the question of whether he

should get a medal, most of those people got tax deals,

civil deals. They paid part of it. They disclosed part

of it, and they went on about their business, and they

have never been asked a question since. This man is

doing everything he can to get right with the system

because he didn't go outside the country. He stayed

here in the U.S. These are business crimes. He

agrees and he admits it was wrong, but he stands here

with those 54,000 who essentially walked through the

system on their own. That tells you there is a

question for deterrence. Because if that many people

67a

can leave the system and walk away just for the civil

payments, what does it tell you about criminal?

Those are the worse crimes, the ones that are

overseas, the ones where they really held it.

Mr. Zukerman's stuff can be found in the books

and records of his company. There was nothing out

there. He made the wrong statements to the IRS, but

they were easily uncovered. There was no inability to

follow. In fact, they had his

one of his former

accountants working with them, leading them

through. So they had all that they needed.

But those offshore people, where is the deterrence

there? And what do we say to him now that he didn't

do something as bad as they did? I had cases that

make his dwarf that were over there that walked

through the system and came out scot-free. We paid

tax

THE COURT: Are you saying that he is being

treated unfairly by the prosecution?

MR. BRUTON: Your Honor, I am not. What I am

suggesting, the law sets it out just the way Mr. Okula

has pressed. I am suggesting that we are trying to

address the issue of deterrence. Because when we get

to the question the obligations under the guidelines

and under the law, we don't sentence for more than

will properly resolve the aims of the system. What I

am suggesting is there is something going on, there is

a tectonic split that is going on that the IRS either

didn't think about or thought about very well when

they said, We are going to let these people go free, but

the Zukermans, because they didn't leave the country,

they are still bad, maybe not even as bad as the ones

over there that they let free, isn't getting that done.

--

--

--

rs

L.r. I

He is not here to say I shouldn't be punished. He

is here to say, please punish me within a framework

that makes sense, where if there is real deterrence,

let's address the real deterrence. But he is not trying

to say I should be walking away scot-free. He is here.

He has pled guilty, and he has gone forward with this,

and he is here because it is important to be here in

this country, to be a taxpayer in this country and be

right, to have his family nearby, to have his friends

nearby, to have all those in his favor. That's what

that is all about, your Honor.

But the end, the calculation, his question of how

much is enough is critical. Is it enough for a taxpayer

we have cited some cases in there that a relatively

small jail sentence is still plenty for deterrence; that

having Mr. Okula's eight years doesn't mean an ounce

of difference for deterrent purposes.

What we have tried to argue is that already the

deterrence is kicking in. He is already dealing with

these tax issues. He is already going through the

process of paying all of this money. He is going

through all of the process of standing before the court

here, and is it necessary that that number be huge?

President Obama had a number of cases at the end

of his term where he commuted people he gave some

pardons, but a lot of commutations

and a lot of

those were situations where the guidelines, for one

reason or another, had been grossly too high in his

judgment and they got cut off because we held people

too long. It is no different with a tax person. It may

appear different, but it is not any different that the

guidelines were inflated just as the process of other

cases, drug cases, other cases, that caused the

inflation of jail times.

--

--

--

--

And so the question, and I hope, I pray, Lord,

Judge, that you see this, I pray that, yes, he is here

honorably trying to say, I want to do right, I will do

what I need to do, whatever it is on there, he has

already told me that, but in the end reducing the

number so that it is not inordinate, beyond what's

needed to actually be able to establish deterrence and

be able to punish him in a reasonable way.

Your Honor, I think I have taken a lot of your time.

I apologize. If you have questions, I am happy, but if

you want any additional I will close.

I just would say that this case

Mr. Okula's

arguing that Mr. Zukerman didn't come forward early

enough. That may largely be my fault because,

frankly, I didn't understand the case early enough,

and perhaps I would have understood it earlier and

perhaps Mr. Okula's resolution would have been

sufficient. But I didn't. And it's not on him that I

asked him to wait and assert his constitutional rights

as necessary. He disclosed everything, all of the

documents were given. There was never anything

held back, your Honor. And that wasn't on him.

That's on me.

And I just ask your Honor, if you can see a way to

bring him to a thing that makes sense here, that we

can recognize the wrongdoing without pushing this

beyond what's really necessary and what's

appropriate.

Thank you.

MR. OKULA: May I respond very, very briefly,

your Honor?

THE COURT: You may.

MR. OKULA: Just three quick points, your Honor.

--

--

70a

First, with respect to the amended returns that

were filed, we submitted that letter on Friday because

we thought it was important that the court

understand that, in addition to the criminal numbers

in the indictment, that, as a result of the defendant's

amended returns, there was $17 million of additional

unreported income that were revealed.

Let me just explain that. I like to think that we

conducted a fairly comprehensive investigation here,

your Honor, but the fact is that sometimes we can't

we have to put pens down and decide what we are

going to charge and we don't get everything. We rely

in some significant measure when a case is resolved

that the amended returns are going to make clear the

full extent of what the criminal wrongdoing was.

So the point we just tried to make is that it is

extraordinary, by my experience and I think anybody

I have worked with, that, in addition to the numbers

that we saw earlier, that you have the emergence of

$17 million of additional unreported income that had

not previously been recognized. That's why we

thought it was important. That number standing

alone is sufficient for any other criminal tax case.

Your Honor, Mr. Bruton essentially tried to make

an argument that because people who have Swiss

accounts are taking part in amnesty programs that it

is somehow unfair that he is prosecuted in this

fashion here, because all those other people are

getting away without prosecution. But Mr. Zukerman

had the chance essentially to get amnesty here. If he

had stepped forward when he was first audited by the

civil branch of the IRS, there wouldn't have been any

criminal prosecution. Or if he stepped forward during

this second audit, when he was confronted by the civil

branch the IRS. So he had the opportunity, just like

--

71a

the people who get the amnesty did, to step forward

and take part and essentially escape criminal

prosecution. He chose a different path.

That's all I want to say, your Honor.

THE COURT: Mr. Zukerman, would you like to

say something?

THE DEFENDANT: Yes, your Honor. Thank you,

your Honor, for the opportunity to speak to you.

I recognize and profoundly regret the criminal

offenses that I have committed and to which I pled

guilty before you. This is painful to acknowledge,

standing as I do now before the court, my family, my

friends, and the world, but I accept sole responsibility

for them, your Honor. This I do.

I vow within myself and before the court never to

engage in such wrongdoing again. I have undertaken

actions to ensure this, for example, by engaging

highly qualified and honorable tax accountants for in

depth advice and counseling to ensure full compliance

and accurate tax reporting at all times.

In accepting responsibility for what I have done, I

have vowed to do as much as I can to repair any and

all damage I may have caused the government, my

community, my family and friends who depend on me

for employment, and my business associates.

I have done so financially by making restitution in

full for amounts claimed by the government. I have

also filed multiple tax returns and made tax

payments for uncharged personal corporate and trust

entities for the years 2007 and 2014. And I have tried

to do this scrupulously, bending over backwards. Tax

returns are complicated, and it is not always obvious

which is right, and I have made the decisions to

always favor the government in this undertaking.

72a

Beyond financial reparations, your Honor, I have

begun volunteering as a counsellor at the Fortune

Society in Queens. As a result, I have had the

opportunity to engage in one-on-one counseling and

teaching formerly incarcerated members of the

community seeking help to reintegrate into society. I

pray that this has meaningfully impacted the lives of

the people I have met. They are often in desperate

need. It is utterly tragic to see this. Serving clients

at the Fortune Society has allowed me to see what I

am now facing and has helped me understand how I

can turn my past misdeeds into a positive and

compassionate force for helping others in need.

The reaction to my wrongdoing has already

unleashed a torrent of pain, disappointment, and

punishment suffered by my family and friends. It is

heartbreaking for me to see and feel this. It

undermines the kind of citizen, husband, father,

grandfather, employer, and friend and example I have

always hoped to be.

I recognize I have brought this on myself, your

Honor, and now I will serve the sentence your Honor

deems fit, knowing this.

Thank you.

THE COURT: Is there any reason why sentence

should not be imposed at this time?

MR. OKULA: No, your Honor.

MR. BRUTON: No, your Honor.

THE COURT: As I have stated, the guidelines

range applicable to this case is 70 to 87 months of

imprisonment, one to three years of supervised

release, and a fine of 25 to $250,000.

Under the Supreme Court's decision in Booker and

its progeny, the guidelines range is only one factor

73a

that I must consider in deciding the appropriate

sentence. I am also required to consider the other

factors set forth in 18 U.S.C. § 3553(a). These

includes:

First, the nature and circumstances of the offense

and the history and characteristics of the defendant;

Second, the need for the sentence imposed to:

reflect the seriousness of the offense, to

promote respect for the law, and to provide just

punishment for the offense;

to afford adequate deterrence to criminal

conduct;

to protect the public from further crimes of the

defendant; and

to provide the defendant with needed education

or vocational training, medical care, or other

correctional treatment in the most effective manner;

Third, the kinds of sentences available;

Fourth, the guidelines range;

Fifth, any pertinent policy statement;

Sixth, the need to avoid unwarranted sentence

disparities among defendants with similar records

who have been found guilty of similar conduct; and

Seventh, the need to provide restitution to any

victims of the offense.

Ultimately I am required to impose a sentence

sufficient, but no greater than necessary, to comply

with the purposes of sentencing that I mentioned a

moment ago.

I have given substantial thought and attention to

the appropriate sentence in this case in light of the

section 3553(a) factors and the purposes of sentencing

as reflected in the statute.

74a

Under section 3553(a), I am to take into account

the history and characteristics of the offender, Mr.

Zukerman, who is 72, was born in New Jersey to a

middle class family. He and his brother were

principally raised by their father after their mother's

premature death. Mr. Zukerman developed a strong

work ethic, going to Harvard College and Business

School, and then rose through the ranks at Morgan

Stanley before starting his own firm.

I have received many, many letters in support of

Mr. Zukerman.

Of course the unfortunate

consequence of any sentencing proceeding is the

collateral effect the sentence has on a defendant's

family and friends. I credit Mr. Zukerman for his

strong support of education through charitable

contributions and for his devotion to family, friends,

and employees. He has had a positive impact on

many lives.

I am also mindful of the fact that he has accepted

responsibility for his crime as reflected in his plea of

guilty. Although none of these facts excuse his

conduct, there is sufficient support for the

reasonableness of a guidelines sentence. These are

weighty offenses over the course of many years. Mr.

Zukerman evaded taxes totaling millions of dollars.

He was driven not by need, but by unmitigated greed.

He entangled himself in a web of lies and deceit, lying

to his tax preparer, and then hiring lawyers to defend

his lies. He went to such extraordinary lengths in

order to cheat. These frauds were deliberate and

calculated. Mr. Zukerman thought himself to be

above the law.

I am cognizant of the need to avoid unwarned

sentence disparities. Although he has taken steps to

make the government whole through restitution,

75a

many of those payments have come from his

companies and not from his own pocket. Mr.

Zukerman remains an astonishingly wealthy man

despite paying millions owed to the government.

As the government provided, as part of their

sentencing submission, many defendants who have

committed tax fraud totaling sums far less than Mr.

Zukerman's fraud have received very significant

terms of imprisonment. The obligation to pay taxes is

one of the fundamental building blocks of our society.

Our government is able to operate only because we,

as individuals and a community, agree to pay our fair

share. Our taxes are used to defend the homeland, to

educate our children, to take care of the needy, sick,

and elderly, and, indeed, to operate our system of

justice. The public benefits from the services of our

government, and the public is the victim of Mr.

Zukerman's fraud.

I do not think that there is a need for a term of

imprisonment at the higher end of the guidelines

range in order to achieve the goal of specific

deterrence. I have confidence that this experience

throughout this case has gotten that message across

loud and clear. However, I am also mindful of the fact

that others just like Mr. Zukerman are watching to

determine whether they, too, will try to avoid paying

their fair share.

In sum, my judgment, for the reasons stated, is

that a term of imprisonment within the guidelines

range of 70 to 87 months is merited here, and a fine

above the guidelines range is warranted.

Accordingly, I do believe that a variance pursuant to

18 United States Code § 3553(a) is appropriate.

76a

Mr. Zukerman, please rise for the imposition of

sentence.

It is the judgment of this court that you are

sentenced to 70 months of imprisonment, followed by

one year of supervised release. You will be required

to pay a fine of $10 million and a mandatory $200

special assessment, both of which shall be due

immediately.

You will also be required to make restitution in the

amount of $37,547,951.88. Restitution shall be due

immediately.

The defendant shall notify the United States

Attorney for this district within 30 days of any change

of mailing or residence address that occurs while any

portion of the restitution remains unpaid.

The mandatory and standard conditions of

probation shall apply. They include that:

The defendant shall not commit another federal,

state, or local crime.

The defendant shall not illegally possess a

controlled substance.

The defendant shall not possess a firearm or

destructive device.

The defendant shall cooperate in the collection

every DNA as directed by the probation officer.

However, the mandatory drug testing condition is

suspended because the court determines that the

defendant poses a low risk of substance abuse.

Mr. Bruton, will you make sure to review with

your client the other mandatory and standard

conditions of supervised release that are included in

the judgment that I will sign?

MR. BRUTON: Yes, your Honor, I certainly will.

77a

THE COURT: In addition, the following special

conditions set forth in the presentence report will

apply. They are:

The defendant shall provide the probation officer

with access to any requested financial information.

The defendant shall not incur new credit charges

or open additional lines of credit without the approval

of the probation officer unless the defendant is in

compliance with any payment schedules.

The defendant shall submit his person, residence,

place of business, vehicle, and any property or

electronic device under his control to a search on the

basis that the probation officer has reasonable

suspicion that contraband or evidence of a violation of

the conditions of supervised release may be found.

This search must be conducted at a reasonable time

and in a reasonable manner. Failure to submit to a

search may be grounds for revocation. The defendant

shall inform any other residents of the premises that

the premises may be subject to search pursuant to

this condition.

Upon release, the defendant is to report to the

nearest probation office within 72 hours. The

defendant shall be supervised by the district in which

he resides.

The sentence as I just described applies to both

counts and the time shall run concurrently.

Does either counsel know of any legal reason why

the sentence should not be imposed as stated?

MR. OKULA: No, your Honor.

MR. BRUTON: No, your Honor.

I do have a couple of matters, though, as soon as

you are finished.

im

THE COURT: Does either party wish to be heard

regarding voluntary surrender or where the term of

imprisonment should be served?

MR. OKULA: We have no opposition to voluntary

surrender on a date set appropriately by the court,

your Honor.

MR. BRUTON: Your Honor, the defendant

obviously requests self-surrender.

THE COURT: Did you have a particular time or

date?

MR. BRUTON: Well, most of these are running at

least 45 days. I don't know what the Bureau of

Prisons needs, if it needs more than that to situate

him.

We would like to ask your Honor that he be the

court ask that you make the following

recommendation to the Bureau of Prisons, that it

designate the defendant to the satellite facility SCI

Otisville to facilitate family visitation and to

accommodate his religious needs.

In addition, the court wishes to see defendant

placed as close to his daughter in New York as is

possible. We would ask that your Honor would pass

that on to the Bureau of Prisons in terms of

we

recognize that sometimes they don't listen, but you

have at least a good voice to pass that on to them if

you are able to.

THE COURT: That application is granted. I will

make that recommendation.

The defendant is to surrender by May 20, 2017, at

the institution designated by the Bureau of Prisons.

MR. BRUTON: Does that give us about 45 days,

your Honor?

THE COURT: By May 20?

--

--

79a

MR. BRUTON: May 20.

THE COURT: Yes.

MR. BRUTON: Sounds about right. 45, I have

heard it as high as 60 days for the Bureau to deal

with. Would you be willing to extend to the 60th day

so that we could do everything that's necessary so that

we can get him designated properly?

THE COURT: Yes: The 60th day is fine.

MR. BRUTON: Thank you.

THE COURT: The sentence as stated is imposed.

That is the sentence of this court.

You have a right to appeal your conviction and

sentence except to whatever extent you may have

validly waived that right as part of your plea

agreement. The notice of appeal must be filed within

14 days of the judgment of conviction. If you are not

able to pay the costs of an appeal, you may apply for

leave to appeal in. forma pauperis. If you request, the

Clerk of Court will prepare and file a notice of appeal

on your behalf.

I have a request of you, Mr. Zukerman, and that is

that you continue to use your knowledge and skills to

assist the inmates who have had far less education

and advantages than yourself.

Are there any other applications?

MR. BRUTON: Yes, your Honor. We need the

dismissal of Count Three. I think the plea agreement

provides that there is an open count that needs to be

dismissed.

MR. OKULA: We hereby move for dismissal of

Count Three, your Honor.

THE COURT: The application is granted. Count

Three is dismissed.

The matter is adjourned.

DEFENDANT: MORRIS E. ZUKERMAN

CASE NUMBER: 16 cr 194-01 (AT)

DISTRICT:

Southern District of New York

STATEMENT OF REASONS

(Not for Public Disclosure)

Sections I, II, III, IV and VII of the Statement of Reasons form must be completed in

all felony and Class A misdemeanor cases.

1.

COURT FINDINGS ON PRESENTENCE INVESTIGATION REPORT

A. E1 The court adopts the presentence investigation report without

change.

***

II. COURT FINDING ON MANDATORY MINIMUM SENTENCE (Check all that

apply)

***

C.

2 No count of conviction carries a mandatory minimum sentence.

00

PO

III. COURT DETERMINATION OF GUIDELINE RANGE:

DEPARTURES OR VARIANCES)

Total Offense Level: 27

Criminal History Category: 1

Guideline Range: (after application of §5G1. 1 and §5G1.2)

Supervised Release Range: 1 to 3 years

Fine Range: $ 25.000 to $ 250.000

El

Iv.

(BEFORE

70 to 87 months

Fine waived or below the guideline range because of inability to pay.

GUIDELINE SENTENCING DETERMINATION (Check all that apply)

2 The sentence is within the guideline range and the difference between the

maximum and minimum of the guideline range does not exceed 24 months.

El The sentence is within the guideline range and the difference between the

maximum and minimum of the guideline range exceeds 24 months, and the

specific sentence is imposed for these reasons: (Use Section VIII if necessary)

LI The court departs from the guideline range for one or more reasons provided

in the Guidelines Manual. (Also complete Section V)

Z The court imposed a sentence otherwise outside the sentencing guideline

system (i.e., a variance). (Also complete Section VI)

DEPARTURES PURSUANT TO THE GUIDELINES MANUAL (If applicable)

COURT DETERMINATION FOR A VARIANCE (If applicable)

The sentence imposed is: (Check only one)

E1 above the guideline range

LI below the guideline range

Motion for a variance before the court pursuant to: (Check all that apply

and specify reason(s) in sections C and D)

1.

Plea Agreement

LI binding plea agreement for a variance accepted by the court

El plea agreement for a variance, which the court finds to be reasonable

El plea agreement that states that the government will not oppose a defense

motion for a variance

Motion Not Addressed in a Plea Agreement

El government motion for a variance

El defense motion for a variance to which the government did not object

El defense motion for a variance to which the government objected

El joint motion by both parties

Other

Other than a plea agreement or motion by the parties for a variance

C.

18 U.S.C. § 3553(a) and other reason(s) for a variance (Check all that apply)

Il The nature and circumstances of the offense pursuant to 18 U.S.C.

§ 3553(a)(1)

00

El Extreme Conduct El Dismissed/Uncharged

Conduct

LI Role in the Offense LI Victim Impact

El General Aggravating or Mitigating Factors (Specify) Complexity and

scope of fraud

The history and characteristics of the defendant pursuant to 18 U.S.C.

§ 3553(a)(1)

LI Lack of Youthful Guidance

LI Aberrant Behavior

LI Mental and Emotional Condition

DAge

LI Military Service

LI Charitable Service/Good Works

LI Non-Violent Offender

LI Community Ties

Mens Rea

ON

LI Diminished Capacity

LI Physical Condition

LI Drug or Alcohol Dependence

LI Pre-sentence Rehabilitation

LI Employment Record

LI Remorse/Lack of Remorse

LI Family Ties and Responsibilities

El Other: (Specify) Ability to pay a

more substantial fine

LII Issues with Criminal History: (Specify)

RJ

To reflect the seriousness of the offense, to promote respect for the law, and

to provide just punishment for the offense (18 U.S.C. § 3553(a)(2)(A))

To afford adequate deterrence to criminal conduct (18 U.S.C.

§ 3553(a)(2)(B))

El To protect the public from further crimes of the defendant (18 U.S.C.

§ 3553(a)(2)(C))

El

LI

To provide the defendant with needed educational or vocational training (18

U.S.C. § 3553(a)(2)(D))

00

To provide the defendant with medical care (18 U.S.C. § 3553(a)(2)(D))

PO

LI To provide the defendant with other correctional treatment in the most

effective manner (18 U.S.C. § 3553(a)(2)(D))

El

To avoid unwarranted sentencing disparities among defendants (18 U.S.C.

§ 3553(a)(6)) (Specify in section D)

LI

To provide restitution to any victims of the offense (18 U.S.C. § 3553(a)(7))

El Acceptance of

Responsibility

D.

El Conduct Pre-trial/

On Bond

El Cooperation Without

Government Motion

for Departure

El

Early Plea Agreement

El Global Plea

Agreement

El

Time Served (not

counted in sentence)

El Waiver of

Indictment

El

Policy Disagreement with the Guidelines (Kimbrough v. U.S., 552 U.S. 85

(2007): (Specify)

El

Other: (Specify)

El Waiver of Appeal

State the basis for a variance. (Use Section VIII if necessary)

The defendant has the financial ability to pay a significant fine in addition to the

restitution agreed to in the plea agreement. Much of the restitution has been

paid by the defendant's corporate entities. Given the scope and complexity of the

defendant's tax fraud, and to provide sufficient deterrence, an upward variance

to the amount of the fine is warranted.

***

VU. COURT DETERMINATIONS OF RESTITUTION

Restitution Not Applicable.

Total Amount of Restitution: $

37,574,951.88

***

Date of Imposition of Judgment

***

3/21/2017

s Analisa Torres

Signature of Judge

Analisa Torres, U.S.D.J.

Name and Title of Judge

3/21/17

Date Signed

00

PD

Flom

18 U.S.C. § 3553

§ 3553. Imposition of a sentence

(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—

(1) the nature and circumstances of the offense

and the history and characteristics of the

defendant;

(2) the need for the sentence imposed—

to reflect the seriousness of the offense,

to promote respect for the law, and to provide

just punishment for the offense;

to afford adequate deterrence to

criminal conduct;

to protect the public from further

crimes of the defendant; and

to provide the defendant with needed

educational or vocational training, medical

care, or other correctional treatment in the

most effective manner;

(3) the kinds of sentences available;

(4) the kinds of sentence and the sentencing

range established for—

(A) the applicable category of offense

committed by the applicable category of

defendant as set forth in the guidelines—

(i) issued

by

the

Sentencing

Commission pursuant to section 994(a)(1) of

title 28, United States Code, subject to any

amendments made to such guidelines by act

am

of Congress (regardless of whether such

amendments have yet to be incorporated by

the Sentencing Commission into

amendments issued under section

994(p) of

title 28); and

(ii) that, except as provided in section

3742(g), are in effect on the date the

defendant is sentenced; or

(B) in the case of a violation of probation or

supervised release, the applicable guidelines or

policy statements issued by the Sentencing

Commission pursuant to section 994(a)(3) of

title 28, United States Code, taking into

account any amendments made to such

guidelines or policy statements by act of

Congress (regardless of whether such

amendments have yet to be incorporated by the

Sentencing Commission into amendments

issued under section 994(p) of title 28);

(5) any pertinent policy statement—

issued by the Sentencing Commission

pursuant to section 994(a)(2) of title 28, United

States Code, subject to any amendments made

to such policy statement by act of Congress

(regardless of whether such amendments have

yet to be incorporated by the Sentencing

Commission into amendments issued under

section 994(p) of title 28); and

that, except as provided in section

3742(g), is in effect on the date the defendant is

sentenced.1

1 So in original. The period probably should be

a

semicolon.

91a

the need to avoid unwarranted sentence

disparities among defendants with similar records

who have been found guilty of similar conduct; and

the need to provide restitution to any

victims of the offense.

(b) APPLICATION OF GUIDELINES IN IMPOSING A

SENTENCE.-IN GENERAL.—Except as provided in

paragraph (2), the court shall impose a sentence of

the kind, and within the range, referred to in

subsection (a)(4) unless the court finds that there

exists an aggravating or mitigating circumstance

of a kind, or to a degree, not adequately taken into

consideration by the Sentencing Commission in

formulating the guidelines that should result in a

sentence different from that described.

In

determining whether a circumstance was

adequately taken into consideration, the court

shall consider only the sentencing guidelines,

policy statements, and official commentary of the

Sentencing Commission. In the absence of an

applicable sentencing guideline, the court shall

impose an appropriate sentence, having due

regard for the purposes set forth in subsection

(a)(2). In the absence of an applicable sentencing

guideline in the case of an offense other than a

petty offense, the court shall also have due regard

for the relationship of the sentence imposed to

sentences prescribed by guidelines applicable to

similar offenses and offenders, and to the

applicable policy statements of the Sentencing

Commission.

CHILD CRIMES AND SEXUAL OFFENSES.—

92a

(A)2 SENTENCING.—In

sentencing

a

defendant convicted of an offense under section

1201 involving a minor victim, an offense under

section 1591, or an offense under chapter 71,

109A, 110, or 117, the court shall impose a

sentence of the kind, and within the range,

referred to in subsection (a)(4) unless—

(i) the court finds that there exists an

aggravating circumstance of a kind, or to a

degree, not adequately taken into

consideration by the Sentencing Commission in

formulating the guidelines that should result

in a sentence greater than that described;

(ii) the court finds that there exists a

mitigating circumstance of a kind or to a

degree, that—

has

been

affirmatively

and

specifically identified as a permissible

ground of downward departure in the

sentencing guidelines or policy statements

issued under section 994(a) of title 28,

taking account of any amendments to such

sentencing guidelines or policy statements

by Congress;

has

not been

taken

into

consideration by the Sentencing

Commission in formulating the guidelines;

and

should result in a sentence different

from that described; or

(iii) the court finds, on motion of the

Government, that the defendant has provided

2

So in original. No subpar. (B) has been enacted.

93a

substantial assistance in the investigation or

prosecution of another person who has

committed an offense and that this assistance

established a mitigating circumstance of a

kind, or to a degree, not adequately taken into

consideration by the Sentencing Commission in

formulating the guidelines that should result

in a sentence lower than that described.

In determining whether a circumstance was

adequately taken into consideration, the court shal

l

consider only the sentencing guidelines, polic

y

statements, and official commentary of the

Sentencing Commission, together with any

amendments thereto by act of Congress. In the

absence of an applicable sentencing guideline,

the

court shall impose an appropriate sentence, havi

ng

due regard for the purposes set forth in subsectio

n

(a)(2). In the absence of an applicable sentenci

ng

guideline in the case of an offense other than a petty

offense, the court shall also have due regard for

the

relationship of the sentence imposed to sentence

s

prescribed by guidelines applicable to similar offen

ses

and offenders, and to the applicable policy statement

s

of the Sentencing Commission, together with any

amendments to such guidelines or policy statemen

ts

by act of Congress.

(c) STATEMENT OF REASONS FOR IMPOSING A

SENTENCE.—The court, at the time of sentenci

ng,

shall state in open court the reasons for its imposition

of the particular sentence, and, if the sentence—

(1) is of the kind, and within the range,

described in subsection (a)(4) and that range

exceeds 24 months, the reason for imposing a

sentence at a particular point within the range; or

(2) is not of the kind, or is outside the range,

described in subsection (a)(4), the specific reason

for the imposition of a sentence different from that

described, which reasons must also be stated with

specificity in a statement of reasons form issued

under section 994(w)(1)(B) of title 28, except to the

extent that the court relies upon statements

received in camera in accordance with Federal

Rule of Criminal Procedure 32. In the event that

the court relies upon statements received in

camera in accordance with Federal Rule of

Criminal Procedure 32 the court shall state that

such statements were so received and that it relied

upon the content of such statements.

If the court does not order restitution, or orders only

partial restitution, the court shall include in the

statement the reason therefor. The court shall

provide a transcription or other appropriate public

record of the court's statement of reasons, together

with the order of judgment and commitment, to the

Probation System and to the Sentencing

Commission,,3 and, if the sentence includes a term of

imprisonment, to the Bureau of Prisons.

(d) PRESENTENCE PROCEDURE FOR AN ORDER OF

NOTICE—Prior to imposing an order of notice

pursuant to section 3555, the court shall give notice

to the defendant and the Government that it is

considering imposing such an order. Upon motion of

the defendant or the Government, or on its own

motion, the court shall—

appear.

So in original. The second comma probably should not

95a

permit the defendant and the Government

to submit affidavits and written memoranda

addressing matters relevant to the imposition of

such an order;

afford counsel an opportunity in open court

to address orally the appropriateness of the

imposition of such an order; and

include in its statement of reasons

pursuant to subsection (c) specific reasons

underlying its determinations regarding the

nature of such an order.

Upon motion of the defendant or the Government, or

on its own motion, the court may in its discretion

employ any additional procedures that it concludes

will not unduly complicate or prolong the sentencing

process.

(e) LIMITED AUTHORITY To IMPOSE A SENTENCE

BELOW A STATUTORY MINIMUM.—Upon motion of the

Government, the court shall have the authority to

impose a sentence below a level established by statute

as a minimum sentence so as to reflect a defendant's

substantial assistance in the investigation or

prosecution of another person who has committed an

offense.

Such sentence shall be imposed in

accordance with the guidelines and policy statements

issued by the Sentencing Commission pursuant to

section 994 of title 28, United States Code.

(0 LIMITATION ON APPLICABILITY OF STATUTORY

MINIMUMS IN CERTAIN CASES.—Notwithstanding any

other provision of law, in the case of an offense under

section 401, 404, or 406 of the Controlled Substances

Act (21 U.S.C. 841, 844, 846) or section 1010 or 1013

of the Controlled Substances Import and Export Act

(21 U.S.C. 960, 963), the court shall impose a sentence

pursuant to guidelines promulgated by the United

States Sentencing Commission under section 994 of

title 28 without regard to any statutory minimum

sentence, if the court finds at sentencing, after the

Government has been afforded the opportunity to

make a recommendation, that—

the defendant does not have more than 1

criminal history point, as determined under the

sentencing guidelines;

the defendant did not use violence or

credible threats of violence or possess a firearm or

other dangerous weapon (or induce another

participant to do so) in connection with the offense;

the offense did not result in death or

serious bodily injury to any person;

the defendant was not an organizer, leader,

manager, or supervisor of others in the offense, as

determined under the sentencing guidelines and

was not engaged in a continuing criminal

enterprise, as defined in section 408 of the

Controlled Substances Act; and

not later than the time of the sentencing

hearing, the defendant has truthfully provided to

the Government all information and evidence the

defendant has concerning the offense or offenses

that were part of the same course of conduct or of

a common scheme or plan, but the fact that the

defendant has no relevant or useful other

information to provide or that the Government is

already aware of the information shall not

preclude a determination by the court that the

defendant has complied with this requirement.

18 U.S.C. § 3572

§ 3572. Imposition of a sentence of fine and

related matters

(a) FACTORS TO BE CONSIDERED.—In determining

whether to impose a fine, and the amount, time for

payment, and method of payment of a fine, the court

shall consider, in addition to the factors set forth in

section 3553(a)—

the defendant's income, earning capacity,

and financial resources;

the burden that the fine will impose upon

the defendant, any person who is financially

dependent on the defendant, or any other person

(including a government) that would be

responsible for the welfare of any person

financially dependent on the defendant, relative to

the burden that alternative punishments would

impose;

any pecuniary loss inflicted upon others as

a result of the offense;

whether restitution is ordered or made and

the amount of such restitution;

the need to deprive the defendant of

illegally obtained gains from the offense;

the expected costs to the government of any

imprisonment, supervised release, or probation

component of the sentence;

whether the defendant can pass on to

consumers or other persons the expense of the fine;

and

if the defendant is an organization, the size

of the organization and any measure taken by the

organization to discipline any officer, director,

•:.

employee, or agent of the organization responsible

for the offense and to prevent a recurrence of such

an offense.

(b) FINE NOT TO IMPAIR ABILITY TO MAKE

RESTITUTION.—If, as a result of a conviction, the

defendant has the obligation to make restitution to a

victim of the offense, other than the United States,

the court shall impose a fine or other monetary

penalty only to the extent that such fine or penalty

will not impair the ability of the defendant to make

restitution.

(c) EFFECT OF FINALITY OF JUDGMENT.—

Notwithstanding the fact that a sentence to pay a fine

can subsequently be—

modified or remitted under section 3573;

corrected under rule 35 of the Federal

Rules of Criminal Procedure and section 3742; or

appealed and modified under section 3742;

a judgment that includes such a sentence is a final

judgment for all other purposes.

(d) TIME, METHOD OF PAYMENT, AND RELATED

ITEMS.—(1) A person sentenced to pay a fine or other

monetary penalty, including restitution, shall make

such payment immediately, unless, in the interest of

justice, the court provides for payment on a date

certain or in installments. If the court provides for

payment in installments, the installments shall be in

equal monthly payments over the period provided by

the court, unless the court establishes another

schedule.

(2) If the judgment, or, in the case of a restitution

order, the order, permits other than immediate

payment, the length of time over which scheduled

payments will be made shall be set by the court, but

W.

shall be the shortest time in which full payment can

reasonably be made.

(3) A judgment for a fine which permits payments

in installments shall include a requirement that the

defendant will notify the court of any material change

in the defendant's economic circumstances that might

affect the defendant's ability to pay the fine. Upon

receipt of such notice the court may, on its own motion

or the motion of any party, adjust the payment

schedule, or require immediate payment in full, as the

interests of justice require.

ALTERNATIVE SENTENCE PRECLUDED.—At the

time a defendant is sentenced to pay a fine, the court

may not impose an alternative sentence to be carried

out if the fine is not paid.

RESPONSIBILITY FOR PAYMENT OF MONETARY

OBLIGATION RELATING TO ORGANIZATION.—If

a

sentence includes a fine, special assessment,

restitution or other monetary obligation (including

interest) with respect to an organization, each

individual authorized to make disbursements for the

organization has a duty to pay the obligation from

assets of the organization. If such an obligation is

imposed on a director, officer, shareholder, employee,

or agent of an organization, payments may not be

made, directly or indirectly, from assets of the

organization, unless the court finds that such

payment is expressly permissible under applicable

State law.

SECURITY FOR STAYED FINE.—If a sentence

imposing a fine is stayed, the court shall, absent

exceptional circumstances (as determined by the

court)—

100a

require the defendant to deposit, in the

registry of the district court, any amount of the

fine that is due;

require the defendant to provide a bond or

other security to ensure payment of the fine; or

restrain the defendant from transferring or

dissipating assets.

DELINQUENCY.—A fine or payment of

restitution is delinquent if a payment is more than 30

days late.

DEFAULT.—A fine or payment of restitution is

in default if a payment is delinquent for more than 90

days. Notwithstanding any installment schedule,

when a fine or payment of restitution is in default, the

entire amount of the fine or restitution is due within

30 days after notification of the default, subject to the

provisions of section 3613A.

101a

18 U.S.C. § 3742

§ 3742. Review of a sentence

(a) APPEAL BY A DEFENDANT.-A defendant may

file a notice of appeal in the district court for review

of an otherwise final sentence if the sentence-was imposed in violation of law;

was imposed as a result of an incorrect

application of the sentencing guidelines; or

is greater than the sentence specified in the

applicable guideline range to the extent that the

sentence includes a greater fine or term of

imprisonment, probation, or supervised release

than the maximum established in the guideline

range, or includes a more limiting condition of

probation or supervised release under section

3563(b)(6) or (b)(11) than the maximum

established in the guideline range; or

was imposed for an offense for which there

is no sentencing guideline and is plainly

unreasonable.

(b) APPEAL BY THE GOVERNMENT.—The

Government may file a notice of appeal in the district

court for review of an otherwise final sentence if the

sentence—

was imposed in violation of law;

was imposed as a result of an incorrect

application of the sentencing guidelines;

is less than the sentence specified in the

applicable guideline range to the extent that the

sentence includes a lesser fine or term of

imprisonment, probation, or supervised release

than the minimum established in the guideline

range, or includes a less limiting condition of

102a

probation or supervised release under section

3563(b)(6) or (b)(11) than the minimum

established in the guideline range; or

(4) was imposed for an offense for which there

is no sentencing guideline and is plainly

unreasonable.

The Government may not further prosecute such

appeal without the personal approval of the Attorney

General, the Solicitor General, or a deputy solicitor

general designated by the Solicitor General.

(c) PLEA AGREEMENTS.—In the case of a plea

agreement that includes a specific sentence under

rule 11(e)(1)(C) of the Federal Rules of Criminal

Procedure—

a defendant may not file a notice of appeal

under paragraph (3) or (4) of subsection (a) unless

the sentence imposed is greater than the sentence

set forth in such agreement; and

the Government may not file a notice of

appeal under paragraph (3) or (4) of subsection (b)

unless the sentence imposed is less than the

sentence set forth in such agreement.

(d) RECORD ON REVIEW.—If a notice of appeal is

filed in the district court pursuant to subsection (a) or

(b), the clerk shall certify to the court of appeals—

that portion of the record in the case that is

designated as pertinent by either of the parties;

the presentence report; and

the information submitted during the

sentencing proceeding.

(e) CONSIDERATION.—Upon review of the record,

the court of appeals shall determine whether the

sentence—

-

103a

(1) was imposed in violation of law;

(2) was imposed as a result of an incorrect

application of the sentencing guidelines;

(3) is outside the applicable guideline

range, and

(A) the district court failed to provide

the written statement of reasons required

by section 3553(c);

(B) the sentence departs from the

applicable guideline range based on a factor

that—

does not advance the objectives

set forth in section 3553(a)(2); or

is not authorized under section

3553(b); or

is not justified by the facts of the

case; or

(C) the sentence departs to an

unreasonable degree from the applicable

guidelines range, having regard for the

factors to be considered in imposing a

sentence, as set forth in section 3553(a) of

this title and the reasons for the imposition

of the particular sentence, as stated by the

district court pursuant to the provisions of

section 3553(c); or

(4) was imposed for an offense for which

there is no applicable sentencing guideline and

is plainly unreasonable.

The court of appeals shall give due regard to the

opportunity of the district court to judge the

credibility of the witnesses, and shall accept the

findings of fact of the district court unless they are

104a

clearly erroneous and, except with respect to

determinations under subsection (3)(A) or (3)(B), shall

give due deference to the district court's application of

the guidelines to the facts. With respect to

determinations under subsection (3)(A) or (3)(B), the

court of appeals shall review de novo the district

court's application of the guidelines to the facts.

(f) DECISION AND DIsPosITIoN.—If the court of

appeals determines that—

the sentence was imposed in violation of

law or imposed as a result of an incorrect

application of the sentencing guidelines, the

court shall remand the case for further

sentencing proceedings with such instructions

as the court considers appropriate;

the sentence is outside the applicable

guideline range and the district court failed to

provide the required statement of reasons in

the order of judgment and commitment, or the

departure is based on an impermissible factor,

or is to an unreasonable degree, or the sentence

was imposed for an offense for which there is

no applicable sentencing guideline and is

plainly unreasonable, it shall state specific

reasons for its conclusions and—

if it determines that the sentence is

too high and the appeal has been filed under

subsection (a), it shall set aside the sentence

and remand the case for further sentencing

proceedings with such instructions as the

court considers appropriate, subject to

subsection (g);

if it determines that the sentence is

too low and the appeal has been filed under

105a

subsection (b), it shall set aside the sentence

and remand the case for further sentencing

proceedings with such instructions as the

court considers appropriate, subject to

subsection (g);

(3) the sentence is not described in

paragraph (1) or (2), it shall affirm the

sentence.

(g) SENTENCING UPON REMAND.-A district court

to which a case is remanded pursuant to subsection

(0(1) or (0(2) shall resentence a defendant in

accordance with section 3553 and with such

instructions as may have been given by the court of

appeals, except that—

(1) In determining the range referred to in

subsection 3553(a)(4), the court shall apply the

guidelines issued by the Sentencing

Commission pursuant to section 994(a)(1) of

title 28, United States Code, and that were in

effect on the date of the previous sentencing of

the defendant prior to the appeal, together with

any amendments thereto by any act of

Congress that was in effect on such date; and

(2) The court shall not impose a sentence

outside the applicable guidelines range except

upon a ground that—

was specifically and affirmatively

included in the written statement of

reasons required by section 3553(c) in

connection with the previous sentencing of

the defendant prior to the appeal; and

was held by the court of appeals, in

remanding the case, to be a permissible

ground of departure.

iftI

APPLICATION TO A SENTENCE BY A MAGISTRATE

JUDGE.—An appeal of an otherwise final sentence

imposed by a United States magistrate judge may be

taken to a judge of the district court, and this section

shall apply (except for the requirement of approval by

the Attorney General or the Solicitor General in the

case of a Government appeal) as though the appeal

were to a court of appeals from a sentence imposed by

a district court.

GUIDELINE NOT EXPRESSED AS A RANGE.—For

the purpose of this section, the term "guideline range"

includes a guideline range having the same upper and

lower limits.

j) DEFINITIONS.—For purposes of this section—

(1) a factor is a "permissible" ground of

departure if it—

advances the objectives set forth in

section 3553(a)(2); and

is authorized under section 3553(b);

and

is justified by the facts of the case;

and

(2) a factor is an "impermissible" ground of

departure if it is not a permissible factor within

the meaning of subsection 0)(1).