United States v. Cutler

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