United States v. Michael Martin

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
JUL 11, 2006
No. 05-16645 THOMAS K. KAHN
Non-Argument Calendar CLERK
________________________

D. C. Docket No. 03-00191-CR-UWC-HGD

UNITED STATES OF AMERICA,

Plaintiff-Appellant,

versus

MICHAEL MARTIN,

Defendant-Appellee.

________________________

Appeal from the United States District Court
for the Northern District of Alabama
_________________________

(July 11, 2006)

Before CARNES, HULL and MARCUS, Circuit Judges.

HULL, Circuit Judge:

This is the second time the government has appealed the sentence of
defendant-appellee Michael Martin, a former HealthSouth Corporation

(“HealthSouth”) executive, who pled guilty to conspiracy to commit securities

fraud and mail fraud and falsify books and records, in violation of 18 U.S.C. § 371,

and falsifying books and records, in violation of 15 U.S.C. §§ 78m(b)(2)(A),

78m(b)(5), and 78ff, 17 C.F.R. § 240.13b2-1, and 18 U.S.C. § 2. In both appeals

the parties have agreed that Martin’s advisory guidelines range is 108 to 135

months’ imprisonment, and that Martin’s substantial assistance to the government

warrants a downward departure pursuant to U.S.S.G. § 5K1.1. The hotly contested

dispute both times has been over whether the extremely lenient sentence the district

court gave is reasonable.

The district court originally sentenced Martin to 60 months’ probation. In

the first appeal, this Court vacated that sentence for lack of a record capable of

meaningful appellate review and remanded for resentencing. United States v.

Martin, 135 Fed. Appx. 411 (11th Cir. June 21, 2005) (unpublished).

At the resentencing, the government recommended a § 5K1.1 downward

departure to 42 months’ imprisonment, which equates to a 9-level departure.

Instead, the district court granted Martin a 23-level downward departure and

imposed a sentence of 7 days’ imprisonment. The government again appeals.

After review, we again vacate Martin’s sentence in its entirety.

2
 I. FACTUAL BACKGROUND

A factual summary outlining Martin’s fraud is attached to his guilty plea.

The Pre-sentence Investigation Report (“PSI”) also details the massive fraud in this

case, and at sentencing, Martin withdrew any objection to the PSI. Thus, the two

documents establish these facts.

At all relevant times, HealthSouth claimed to be the nation’s largest provider

of outpatient surgery, diagnostic imaging, and rehabilitative healthcare services,

with approximately 1,800 locations across all 50 states. HealthSouth’s common

stock was listed on the New York Stock Exchange. The management of

HealthSouth provided guidance to the investing public regarding anticipated

earnings per share, and in turn, professional securities analysts disseminated to the

public their estimates of the company’s expected performance. If a company, such

as HealthSouth, announces earnings that fail to meet or exceed analyst

expectations, the price of the company’s stock typically will decline.

From at least 1994 until March 2003, a group of HealthSouth officers

conspired to artificially inflate HealthSouth’s reported earnings and earnings per

share, and to falsify reports about HealthSouth’s overall financial condition. The

HealthSouth officers made, and directed accounting personnel to make, false and

fraudulent entries in HealthSouth’s books and records for the purpose of falsely

3
reporting HealthSouth’s assets, revenues, and earnings per share and in order to

defraud investors, banks, and lenders. As a result, HealthSouth’s public financial

records overstated its financial position cumulatively by billions of dollars from

1994 to 2002, and public investors purchased overvalued shares of HealthSouth’s

stock, which plummeted from $3.91 per share to $.11 per share when the massive

fraud was revealed.

Defendant Martin was employed by HealthSouth from 1989 to 2000, and

served as its Chief Financial Officer (“CFO”) from October 1997 until he resigned

in March 2000. As early as 1994, Martin became aware that HealthSouth was not

meeting its earnings-per-share projections. After Martin became CFO in 1997, he

began reviewing quarterly preliminary income statements showing HealthSouth’s

true and accurate financial results, which showed that HealthSouth was not

meeting earnings-per-share projections made by its Chief Executive Officer

(“CEO”), Richard Scrushy. By Martin’s own admission, at the direction of

Scrushy, Martin falsified numbers to inflate HealthSouth’s stated earnings to meet

Scrushy’s projections and Wall Street’s expectations.

Martin also attended numerous meetings in which members of the

accounting department discussed how the financial statements could be altered to

meet Scrushy’s earnings-per-share projections. Martin repeatedly discussed with

4
Scrushy the fact that the income statements provided to the Securities and

Exchange Commission (“SEC”) and the investors were inaccurate, and he tried to

dissuade Scrushy from perpetrating further fraud. Martin nevertheless signed

HealthSouth’s 10-Q and 10-K forms beginning in 1997 and continuing through the

third quarter of 1999, with the knowledge that the numbers in the attached financial

statements were false and thus the financial statements misrepresented the

company’s financial condition.

As noted earlier, the overstatement of HealthSouth’s financial position in its

public records as a result of the massive and prolonged fraud summed to billions of

dollars.1 The most direct victims of the fraud were the investing public,

HealthSouth shareholders, and the company. HealthSouth had many shareholders,

some of whom invested their life savings in HealthSouth stock and saw their

investment plummet to pennies per share. A conservative estimate of the stock

value loss attributable to Martin’s fraud was $1,390,800,000 or approximately $1.4

billion.

There were also many other collateral victims of Scrushy and Martin’s

fraud, including (1) HealthSouth employees, particularly those who were

1
The factual summary filed in support of Martin’s guilty plea references the false entries
in HealthSouth’s quarterly and annual financial statements filed with the SEC from 1994 to 2002
and states: “The cumulative inflations summed to billions of dollars.”

5
terminated and those who had participated in the company’s stock ownership plan

or pension fund; (2) employees of contractors who were dependent on HealthSouth

contracts for income; (3) banks and other lenders who loaned money to

HealthSouth based on falsified financial information; and (4) competing health

service providers who lost business or financing based on the false information.

See United States v. McVay, 447 F.3d 1348, 1350 (11th Cir. 2006).

Although many victims suffered devastating losses, HealthSouth’s officers

benefitted by receiving huge salaries and bonuses. Martin’s income was over $14

million from just 1997 to 2000: $3,339,237 in 1997; $5,820,910 in 1998;

$1,632,776 in 1999, and $4,080,959 in 2000. As detailed later, Martin agreed to a

$2.375 million forfeiture, and the district court also imposed a $50,000 fine, both

of which Martin immediately paid by check. At the time of the PSI in 2004,

Martin had a net worth of over $8.9 million.

II. PROCEDURAL HISTORY

In March 2003, certain of Martin’s co-conspirators revealed the fraud to

federal authorities. Martin subsequently met with Federal Bureau of Investigation

(“FBI”) agents, admitted his role in the conspiracy, and thereafter cooperated

substantially with the government.

On April 8, 2003, the government filed a three-count information against

6
Martin, charging him with: (1) one count of conspiracy to commit securities fraud

and mail fraud and falsify books and records, in violation of 18 U.S.C. § 371

(Count One); and (2) one count of falsifying books, records, and accounts, in

violation of 15 U.S.C. §§ 78m(b)(2)(A), 78m(b)(5), and 78ff, 17 C.F.R. §

240.13b2-1, and 18 U.S.C. § 2 (Count Two). The information also included a

forfeiture count (Count Three). Pursuant to a plea agreement, Martin pled guilty to

all three counts.

A. First Sentencing in 2004

The PSI indicated that Martin’s offense level was 31 and his criminal history

category was I, resulting in a guidelines sentence range of 108 to 135 months’

imprisonment.2 Martin’s base offense level of 6 was increased to level 34 by these

enhancements: (1) 18 levels under U.S.S.G. § 2F1.1(b)(1)(S) because the fraud

loss was over $80 million; (2) 4 levels under § 3B1.1(a) because Martin was an

organizer or leader of a criminal activity that was extensive; (3) 2 levels under §

3B1.3 for Martin’s abuse of a position of public and private trust; (4) 2 levels

under § 2F1.1(b)(5)(C) because his offenses involved sophisticated means; and (5)

2 levels under § 2F1.1(b)(2)(A) because his offenses involved more than minimal

2
The 1998 version of the guidelines was used in the PSI, and no party raised any issue in
the district court or on appeal as to what version applies. All guidelines cites herein are to the
1998 version of the guidelines.

7
planning. Martin’s offense level of 34 was reduced by 3 levels under § 3E1.1 due

to his acceptance of responsibility.

On June 19, 2004, the district court held a sentencing hearing. The

government had already filed a motion for downward departure, pursuant to

U.S.S.G. § 5K1.1, based on Martin’s substantial assistance. At the sentencing

hearing, the government argued that the court should depart down 6 levels to

offense level 25 and impose a sentence of 62 months’ imprisonment.3 The

government pointed out that while Martin’s assistance was valuable, Martin

nevertheless was “the most culpable of those who have been sentenced to date”;

that “[h]e was the most senior officer, he had the most authority, and he was

involved the longest”; that “he obtained substantial income and status, social

status, from this position at HealthSouth”; and that a lesser sentence would not

sufficiently deter such conduct.

The district court adopted the PSI’s calculations that Martin’s offense level

was 31, his criminal history category was I, and his guidelines sentence range was

108 to 135 months’ imprisonment. Although the district court granted the

government’s § 5K1.1 motion, the district court departed 21 levels down to offense

level 10, which yielded a guidelines range of 6 to 12 months’ imprisonment.

3
With an offense level of 25 and criminal history category I, Martin’s guidelines range
would be 57 to 71 months’ imprisonment.

8
Although objecting to the extent of the § 5K1.1 departure, the government asked

for a sentence of at least 12 months’ imprisonment. Even with that 21-level

departure, the district court still imposed no imprisonment. Rather, the district

court imposed a sentence of 60 months’ probation with a special condition of 6

months’ home detention on each of Counts One and Two, to run concurrently. At

the sentencing, Martin agreed to a forfeiture of $2.375 million, and the district

court imposed a fine of $50,000. The government objected that the extent of the

departure was unreasonable.

In its written judgment entered June 28, 2004, the district court checked the

box stating that the downward departure was “based on 5K1.1 motion of the

government based on the defendant’s substantial assistance,” and offered no

further reasons. The government appealed, and this Court vacated and remanded

because the district court failed to specify reasons for the extraordinary departure

under § 5K1.1, and thus the record was incapable of meaningful appellate review.

Martin, 135 Fed. Appx. at 415-16.

B. Resentencing

The district court held a resentencing hearing on September 20, 2005, at

which the district court again granted the government’s § 5K1.1 motion for

downward departure based on Martin’s substantial assistance. At that hearing, the

9
government adopted its previous characterization of Martin’s assistance and also

acknowledged that Martin had continued to assist the government after his first

sentencing, including testifying for at least five days at Scrushy’s trial. The

government further acknowledged that Martin had attempted to dissuade Scrushy

from pursuing the fraudulent conduct and had been at least minimally successful

for some period.

However, the government stressed that Martin nevertheless was a leader of

the conspiracy; that he abused the trust of the investors, bankers, and others who

placed him in his leadership position within HealthSouth; that his conduct was

egregious; and that he was the most culpable of the defendants to come before the

court for sentencing. To balance Martin’s cooperation against the seriousness of

his conduct and his relative culpability, the government requested that the district

court sentence Martin to 42 months’ imprisonment. This request represented a

downward departure of 9 levels from offense level 31 to 22. Thus, the

government’s requested 42-month sentence represented a reduction in excess of 60

percent from the low end of Martin’s pre-departure 108-135-month guideline

range.4

4
The government’s request was framed as a sentence of 42 months’ imprisonment.
Because Martin’s criminal history category is I, the downward departure in this case is reflected
in the extent of the reduction in Martin’s offense level. Martin’s offense level was 31, and given
Martin’s criminal history category of I, it takes a reduction of 9 levels, to level 22, to reach a

10
 Martin’s counsel disputed the government’s position that he was the most

culpable of the defendants sentenced or to be sentenced by the court and

emphasized his extraordinary cooperation with the government. Martin’s counsel

further stressed that he tried to dissuade others from the fraudulent conduct and

ultimately resigned, and that he also cooperated with plaintiffs who sued him for

his conduct, without any promise of leniency or reduced judgment.

After hearing from the government and the defense, the district court

announced its decision to depart downward by 23 levels to an offense level of 8,

which, when combined with Martin’s criminal history category of I, yielded a

guidelines range of 0 to 6 months’ imprisonment, a fine range of $1,000 to $1

million, and a supervised release term of 2 to 3 years. The district court then

sentenced Martin to 7 days’ imprisonment and 2 years’ supervised release. The

district court also reimposed the $50,000 fine and forfeiture of $2.375 million,

which Martin had paid in 2004.

In explaining its reasons for this extraordinary departure under § 5K1.1, the

district court described Martin’s “unhesitating assistance” to the FBI, the SEC, and

HealthSouth’s auditors and shareholders. The district court adopted the

government’s description of Martin’s assistance:

guidelines range of 41-51 months’ imprisonment and thus a 42-month sentence.

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 That this defendant’s assistance enabled the government to swiftly
prosecute Richard Scrushy and several other major participants in the
fraud; it allowed the government to provide a timely assurance to the
financial markets that the illegal conduct had ended and that
corrective action was being taken; and it allowed HealthSouth to
reconstruct its books and records and to begin its recovery.

The district court emphasized Martin’s crucial role in the Scrushy trial and in the

SEC’s civil proceedings, and found Martin’s assistance to have been

“outstanding,” “invaluable,” and “complete,” “completely reliable,” and

“immediate,” even as the government was appealing Martin’s previous sentence.

The district court further noted that, while there was no risk of physical injury,

Martin subjected “his financial well-being to imminent jeopardy” and would

almost certainly incur substantial civil judgments against him as a result of his

cooperation. Additionally, the district court indicated that it was remarkable that

Martin continued to cooperate with the government even as the government was

appealing his original sentence. As to the extraordinary nature of the assistance,

the district court stated: “As the Court found earlier, this is the only time in its 25-

year history as a Judge when this kind of cooperation has been forthcoming from a

defendant.”

As to the sentencing factors set forth in 18 U.S.C. § 3553(a), the district

court found that the offense conduct was “an aberration” for an otherwise

outstanding citizen; that Martin had “sacrificed his own personal fortune in favor

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of the victims of the fraud”; that the conspiracy predated Martin’s participation;

and that he tried to convince Scrushy to abandon the fraudulent course of conduct.

The district court further stated, with regard to Martin’s resignation: “While for

purposes of the sentencing guidelines he didn’t withdraw his participation in the

conspiracy;5 for purposes of Booker considerations, the Court finds that he did

withdraw from the conspiracy.”

The district court stated that it “finds that some period of incarceration is

necessary to reflect the seriousness of the crime.” Even though the court

recognized this § 3553(a) factor, the court then reasoned that a more lengthy

sentence than 7 days “would, in the court’s judgment, promote a disrespect for the

law” because “from the point of view of the government, the man most singularly

responsible for this criminal conduct [Richard Scrushy] has been found not guilty

and will serve no time at all.”6 The court concluded that “under those

circumstances, to subject this defendant to a lengthy period of imprisonment would

not serve as just punishment and would not promote respect for the law.”

The district court also determined that Martin’s “devastating experience”

5
The district court noted that Martin had not withdrawn from the conspiracy for purposes
of the sentencing guidelines because he failed to inform law enforcement officers of the fraud.
6
The district court observed that Aaron Beam, one of the “core defendants,” was
sentenced to only three months’ imprisonment, and unlike Martin, there was no evidence that
Beam ever tried to dissuade Scrushy or to withdraw from the conspiracy.

13
would deter not only Martin but others similarly situated from engaging in similar

conduct. The court found that “[a] longer period of incarceration would be greater

than necessary to achieve the deterrence objectives, and would be unjust.”

Finally, the district court noted that Martin had forfeited $2.375 million and

that Martin was also a defendant in several civil lawsuits. The district court stated

that “a longer period of incarceration [might] well impede the ability of the

plaintiffs in those cases to collect on any [civil] judgment that they may receive”

against Martin.

The government objected to the departure to 7 days’ imprisonment as an

unreasonable departure from the statutory maximum of 15 years and the low end of

the advisory guidelines of 108 months. The government now appeals.

III. DISCUSSION

Even after the Supreme Court’s decision in United States v. Booker, 543

U.S. 220, 125 S. Ct. 738 (2005), in fashioning an appropriate sentence, the district

court still must correctly calculate first the appropriate advisory Guidelines range.

United States v. Williams, 435 F.3d 1350, 1353 (11th Cir. 2006) (citing United

States v. Crawford, 407 F.3d 1174, 1178 (11th Cir. 2005)). The district court then

may consider imposing a more severe or more lenient sentence, and this Court

reviews the ultimate sentence for reasonableness. Id. “Before we conduct a

14
reasonableness review of the ultimate sentence imposed, ‘we first determine

whether the district court correctly interpreted and applied the Guidelines to

calculate the appropriate advisory Guidelines range.’” McVay, 447 F.3d at 1353

(quoting Williams, 435 F.3d at 1353). We review de novo a district court’s

interpretation of the sentencing guidelines, including § 5K1.1, and its factual

findings for clear error. Id. at 1352-53.

In this case, it is undisputed that Martin’s advisory guidelines range is 108 to

135 months’ imprisonment. Instead, the dispute is over whether the extent of the §

5K1.1 departure was reasonable and whether the ultimate sentence imposed was

reasonable under Booker. We first review the principles governing § 5K1.1

departures, then Booker, and finally apply them to Martin’s sentence.

A. Section 5K1.1 Departures

Here, the district court departed downward based on the government’s §

5K1.1 substantial-assistance motion. As we have previously explained, “[o]nce it

has made a 5K1.1 motion, the government has no control over whether and to what

extent the district court departs from the Guidelines, except that if a departure

occurs, the government may argue on appeal that the sentence imposed was

unreasonable.” Id. (quoting United States v. Pippin, 903 F.2d 1478, 1485 (11th

Cir. 1990)) (quotation marks omitted). In determining the extent of a substantial-

15
assistance departure, the district court must consider the factors set forth in §

5K1.1(a). Id. at 1355. Those factors, which are non-exclusive, are: (1) “the court’s

evaluation of the significance and usefulness of the defendant’s assistance, taking

into consideration the government’s evaluation of the assistance rendered”; (2) “the

truthfulness, completeness, and reliability of any information or testimony

provided by the defendant”; (3) “the nature and extent of the defendant’s

assistance”; (4) “any injury suffered, or any danger or risk of injury to the

defendant or his family resulting from his assistance”; and (5) “the timeliness of

the defendant’s assistance.” U.S.S.G. § 5K1.1(a).

This is not an exhaustive list. The district court may consider other factors,

but only if the factors relate to the assistance provided by the defendant. United

States v. Crisp, — F.3d —, No. 05-12304, slip op. at 8-9 (11th Cir. July 7, 2006)

(“[I]n meting out a substantial assistance departure the court may consider factors

outside the § 5K1.1(a) list, but only if they are related to the assistance rendered.”);

United States v. Luiz, 102 F.3d 466, 469 (11th Cir. 1996) (stating “[w]hen . . . a

district court grants a downward departure under U.S.S.G. § 5K1.1 . . . , the

sentence reduction may be based only on factors related to the defendant’s

substantial assistance”); United States v. Aponte, 36 F.3d 1050, 1052 (11th Cir.

1994); see also U.S.S.G. § 5K1.1 cmt. background (indicating that the focus is on

16
the “nature, extent, and significance” of the defendant’s assistance to the

government). Post-Booker, this Court has reiterated that district courts are

prohibited from considering sentencing factors unrelated to the nature and extent of

a defendant’s assistance in making § 5K1.1 departures. McVay, 447 F.3d at 1355;

United States v. Davis, 407 F.3d 1269, 1271 (11th Cir. 2005).7 Further, as

explained in McVay, a defendant may not appeal a district court’s refusal to make

a § 5K1.1 departure, but if the court departs, we will review the government’s

challenge to the extent of a departure under § 5K1.1 for an abuse of discretion.

McVay, 447 F.3d at 1353.

In addition, even pre-Booker, the extent of a district court’s departure from

the guidelines had to be reasonable. Williams v. United States, 503 U.S. 193, 202,

112 S. Ct. 1112, 1120 (1992); United States v. Blas, 360 F.3d 1268, 1274 (11th

Cir. 2004); United States v. Melvin, 187 F.3d 1316, 1322-23 (11th Cir. 1999);

United States v. Pippin, 903 F.2d 1478, 1485 (11th Cir. 1990). When a sentencing

court departed from the guidelines, the reviewing court determined the

7
A refusal to depart, however, may be based on factors other than substantial assistance.
Luiz, 102 F.3d at 469-70. While a court may reward a defendant only for substantial assistance,
the court’s decision to grant a § 5K1.1 motion remains discretionary and the court may consider
other factors, such as the seriousness of the offense, in refusing to depart. See United States v.
Manella, 86 F.3d 201, 204 (11th Cir. 1996) (stating that “the only factor that may militate in
favor of a Rule 35(b) reduction is the defendant’s substantial assistance,” but “[n]othing in the
text of the rule purports to limit what factors may militate against granting a Rule 35(b)
reduction” or “the factors that may militate in favor of granting a smaller reduction”); Luiz, 102
F.3d at 469-70 (applying Manella to § 5K1.1 departures).

17
reasonableness of the departure in light of the statutory factors to be considered in

imposing a sentence, as stated in 18 U.S.C. § 3553(a), and the reasons the district

court provided for departing. Blas, 360 F.3d at 1274; Melvin, 187 F.3d at 1322-23;

United States v. Nilsen, 967 F.2d 539, 546 (11th Cir. 1992).

B. Post-Booker

As we all now know, Booker made the guidelines advisory. District courts

still must correctly calculate the advisory guidelines range, and we review any

Booker-based departures outside that range for reasonableness in light of the §

3553(a) factors and the reasons stated by the district court for departing. See, e.g.,

Williams, 435 F.3d at 1354-55. As we recently explained, “[m]oreover, after it has

decided the length of departure warranted by the substantial assistance motion, the

district court is then obliged to take into account the advisory Guidelines range and

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

sentence.” McVay, 447 F.3d at 1356 (citing Booker, 543 U.S. at 259-60, 125 S.

Ct. at 764-65) (first emphasis added).

The § 3553(a) factors include: “‘(1) the nature and circumstances of the

offense; (2) the history and characteristics of the defendant; (3) the need for the

sentence imposed to reflect the seriousness of the offense, to promote respect for

the law, and to provide just punishment; (4) the need to protect the public; and (5)

18
the Guidelines range,’” id. at 1356-57 (citation omitted), as well as (6) the kinds of

sentences available, 18 U.S.C. § 3553(a)(3); (7) the need to avoid sentencing

disparities among similar defendants who have been found guilty, 18 U.S.C. §

3553(a)(6); and (8) the need to provide restitution to victims of the offense, 18

U.S.C. § 3553(a)(7). “[W]hen imposing a sentence falling far outside of the

Guidelines range, based on the § 3553(a) factors, an extraordinary reduction must

be supported by extraordinary circumstances.” McVay, 447 F.3d at 1357

(alteration, citation, and quotation marks omitted).

On appeal, “‘[i]n reviewing the ultimate sentence imposed by the district

court for reasonableness, we consider the final sentence, in its entirety, in light of

the § 3553(a) factors.’” United States v. Valnor, — F.3d —, 2006 WL 1529118, at

*5 (11th Cir. June 6, 2006) (quoting United States v. Thomas, 446 F.3d 1348, 1349

(11th Cir. 2006)); see also United States v. Winingear, 422 F.3d 1241, 1245 (11th

Cir. 2005) (“We do not apply the reasonableness standard to each individual

decision made during the sentencing process; rather, we review the final sentence

for reasonableness.”). The party challenging the sentence has the burden of

establishing that the sentence is unreasonable. United States v. Talley, 431 F.3d

784, 788 (11th Cir. 2005).

Further, our “[r]eview for reasonableness is deferential. We must evaluate

19
whether the sentence imposed by the district court fails to achieve the purposes of

sentencing as stated in section 3553(a).” Id. “[T]here is a range of reasonable

sentences from which the district court may choose . . . .” Id. There will also be

sentences outside the range of reasonableness that do not achieve the purposes of

sentencing stated in § 3553(a) and that thus the district court may not impose. Id.;

Crisp, — F.3d at —, slip op. at 11.

We now turn to Martin’s sentence.

C. Martin’s Sentence

As noted earlier, the government does not dispute that the district court

properly calculated Martin’s guidelines range. Nor does the government argue that

the district court erred in granting Martin a § 5K1.1 downward departure based on

his substantial assistance. Indeed, the government argued in the district court and

maintains on appeal that Martin’s assistance was extraordinary and merited an

extraordinary downward departure, such as a 42-month sentence.8 Rather, the

government argues that the district court’s 23-level departure under § 5K1.1 and

imposition of a 7-day sentence are both patently unreasonable given the massive

and prolonged fraud perpetuated by Martin in conspiracy with other HealthSouth

officers.

8
A 42-month sentence would have amounted to a 9-level departure, or more than a 60
percent departure from the low end of Martin’s guidelines range of 108 months’ imprisonment.

20
 With regard to the extent of the § 5K1.1 departure, the government points

out that while Martin’s cooperation was extraordinary, Martin did not voluntarily

approach the government and expose the fraud when he learned of it, but instead

cooperated only after other co-conspirators revealed the fraud and Martin’s role in

it. The government stresses that the district court improperly gave no weight to its

recommendation and evaluation of Martin’s cooperation. The government also

takes issue with the district court’s interpretation of § 5K1.1(a)(4) and its

consideration of Martin’s cooperation that placed him in financial (as opposed to

physical) jeopardy as a § 5K1.1(a)(4) factor in determining the extent of the

departure. The government stresses that the § 5K1.1(a)(4) factor concerns

physical, not financial, injury and that in any event the only financial risk to Martin

was that of civil lawsuits by the victims of his crimes. His exposure to civil

liability was not caused by his cooperation in the criminal case.

As to the 7-day sentence and the § 3553(a) factors, the government

emphasizes that the district court unreasonably overemphasized Martin’s assistance

and failed to consider adequately other important sentencing factors, such as the

severity of Martin’s offense, his financial gain from the crimes in salary and

bonuses, and the need to deter similar conduct by individuals who might consider

the risk of a 7-day sentence a small price to pay for the possibility of reaping

21
millions of dollars by fraudulent means.

The government also relies on McVay, wherein this Court addressed the

government’s challenge to the same district court’s extraordinary downward

departure in sentencing one of Martin’s co-conspirators. In that case, defendant

McVay’s guidelines range was 87 to 108 months’ imprisonment, and the district

court downwardly departed 21 levels (from an offense level 29 to an offense level

8) to a range of 0 to 6 months’ imprisonment, and then imposed a sentence of 60

months’ probation. McVay, 447 F.3d at 1349. As we did in the government’s

prior appeal in Martin’s case, this Court vacated McVay’s sentence and remanded,

inter alia, because the district court failed to provide reasons for the departure, and

thus the sentence was incapable of meaningful appellate review. Id. at 1355-56.

As a result, this Court did not have occasion to decide the permissible extent of the

§ 5K1.1 departure or whether McVay’s probationary sentence was reasonable.

However, the Court in McVay did provide the following guidance about the

reasonableness of a probationary sentence under the circumstances of the “multi-

billion dollar securities fraud” at HealthSouth:

We pause to note that, in the absence of truly compelling reasons–in
the face of a multi-billion dollar securities fraud at the expense of the
investing public–a six-month probationary term given to the Chief
Financial Officer, Senior Vice-President, and Treasurer of the
company at the time of the fraud (who signed the Form 10-Q with full
knowledge of its falsity), is not easily reconcilable with the basic

22
 factors enumerated by Congress in § 3553(a), including the need for a
sentence to reflect the seriousness of the offense, to promote respect
for the law, and to provide just punishment.

Id. at 1357.

In Martin’s case, we now are squarely presented with the question of

whether a 23-level departure under § 5K1.1 for his assistance and an ultimate

sentence of 7 days’ imprisonment for this multi-billion-dollar securities fraud are

reasonable. The answer is easy: they are not.

The extent of the § 5K1.1 departure alone is unreasonable in this case. We

fully accept the district court’s determination that Martin’s cooperation was

extraordinary and merits a correspondingly extraordinary departure. Indeed, the

government recognized this fact by recommending only a 42-month sentence even

though (1) Martin’s guidelines range was 108-135 months (i.e., from 9 to

approximately 11 years), and (2) his statutory maximum was 15 years (i.e., 5 years

on Count One and 10 on Count Two). We also recognize that there is always a

range of reasonable § 5K1.1 choices that district courts are in the best position to

make. However, the choice of a 23-level guidelines departure under § 5K1.1 to a

0-6 months guidelines range was unreasonable where Martin’s crimes yielded an

advisory guidelines range of 9-11 years’ imprisonment and a potential sentence of

15 years. Martin’s cooperation, while commendable and extremely valuable, is not

23
a get-out-of-jail-free card. Martin’s cooperation does not wash the slate clean. Yet

departing 23 levels to a 0-6 months range effectively accomplishes that by

permitting a sentence of no jail time at all, or 7 days, which is close to none.

The 23-level departure was also unreasonable because the district court

based the extent of the departure in part on an erroneous interpretation of

§ 5K1.1(a)(4). Section 5K1.1(a)(4) permits consideration of whether Martin

suffered “any injury” or “any danger or risk of injury to the defendant or his family

resulting from his assistance.” U.S.S.G. § 5K1.1(a)(4). The government argues

that only physical injury is encompassed within § 5K1.1(a)(4) and that the district

court erred in considering how Martin’s cooperation would help plaintiffs in civil

lawsuits against him, and thus determining that his cooperation placed his financial

well-being in imminent jeopardy. We need not decide whether § 5K1.1(a)(4) is

restricted to physical injury because, at a minimum, the type of “injury” or “risk of

injury” resulting from cooperation contemplated by § 5K1.1(a)(4) certainly does

not include civil liability to the victims of Martin’s fraud. Those plaintiffs are

entitled to pursue civil lawsuits because of Martin’s fraud and not because of his

assistance to the government. Thus, the district court’s misapplication of §

5K1.1(a)(4) also contributed to making the extent of the § 5K1.1 departure

unreasonable. Indeed, there is no evidence that Martin incurred “any injury” or

24
faces “any danger or risk of injury” resulting from his assistance to the

government. See U.S.S.G. § 5K1.1(a)(4).9

Turning to the ultimate sentence, the district court’s 7-day sentence is

shockingly short and wholly fails to serve the purposes of sentencing set forth by

Congress in § 3553(a). Martin’s crimes and the district court’s punishment are so

wildly disproportionate that we readily conclude that the district court’s 7-day

sentence is also unreasonable and must be vacated. We explain the many reasons

why the district court erred in its consideration of the § 3553(a) factors, and why

we, for the second time, must vacate Martin’s sentence.

First, the district court’s 7-day sentence wholly fails to take into account the

nature and circumstances of the offense and the need for the sentence to reflect the

seriousness of the crime. See 18 U.S.C. § 3553(a)(1), (a)(2)(A). Martin

knowingly participated in a massive and prolonged fraud, served as a leader in that

fraud, financially benefitted substantially from the fraud, and cooperated only after

the fraud was revealed. While the district court emphasized Martin’s lack of a

criminal record and viewed his fraudulent conduct as an “aberration” in his

9
Given that the PSI indicated that Martin had a net worth of $8,932,135, the district court
also erred in finding that Martin had “sacrificed his personal fortune in favor of the victims of
the fraud.” This reasoning is faulty in any event, as Martin’s salary and bonuses from
HealthSouth helped to create that personal fortune. Martin’s fraudulent conduct in artificially
inflating HealthSouth’s assets and revenues, and in turn HealthSouth’s stock price, contributed
to the perception of a successfully run company and to Martin’s receiving over $14 million in
salary and bonuses between 1997 and 2000.

25
otherwise outstanding life, Martin’s criminal history category of I already takes

into account his lack of a criminal record. Despite this lack of a criminal record,

Martin’s offense conduct spanned a period of years, during which Martin

consistently abused the public trust and played a leadership role in a conspiracy

that resulted in over a billion dollars of loss harming thousands of victims.

Martin’s crimes are major league economic crimes that harmed not only individual

victims but also many institutions and companies. This type and scale of crime is

peculiarly corrosive to the economic life of the community, as demonstrated by the

deleterious effects the large-scale fraud in this case had on the healthcare industry

and the securities markets. Martin not only participated in this fraud for over three

years as HealthSouth’s CFO before finally resigning, he also chose not to approach

authorities about the conspiracy until they had learned independently about his

criminal conduct. Put simply, the 7-day sentence imposed by the district court

wholly fails to take into account the egregious years-long nature of Martin’s

crimes.

The 7-day sentence imposed by the district court also utterly fails to afford

adequate deterrence to criminal conduct. See 18 U.S.C. § 3553(a)(2)(B). Because

economic and fraud-based crimes are “more rational, cool, and calculated than

sudden crimes of passion or opportunity,” these crimes are “prime candidate[s] for

26
general deterrence.” Stephanos Bibas, White-Collar Plea Bargaining and

Sentencing After Booker, 47 Wm. & Mary L. Rev. 721, 724 (2005). Defendants

in white collar crimes often calculate the financial gain and risk of loss, and white

collar crime therefore can be affected and reduced with serious punishment. Yet

the message of Martin’s 7-day sentence is that would-be white-collar criminals

stand to lose little more than a portion of their ill-gotten gains and practically none

of their liberty.

Our assessment is consistent with the views of the drafters of § 3553. As the

legislative history of the adoption of § 3553 demonstrates, Congress viewed

deterrence as “particularly important in the area of white collar crime.” S. Rep.

No. 98-225, at 76 (1983), reprinted in 1984 U.S.C.C.A.N. 3182, 3259. Congress

was especially concerned that prior to the Sentencing Guidelines, “[m]ajor white

collar criminals often [were] sentenced to small fines and little or no imprisonment.

Unfortunately, this creates the impression that certain offenses are punishable only

by a small fine that can be written off as a cost of doing business.” Id. The fact

that Martin’s guidelines range was 108-135 months’ imprisonment evinces

Congress’s attempt to curb judicial leniency in the area of white collar crime. The

district court’s 7-day sentence not only fails to serve the purposes of § 3553, but

even worse, undermines those purposes.

27
 While the district court stated summarily that “[Martin’s] devastating

experience will deter others similarly situated from engaging in similar

criminality,” the district court failed to explain how Martin’s 7-day sentence

contributes to general deterrence in any way. The district court’s confidence that

“this defendant has been effectively deterred from any further criminal conduct”

(emphasis added) speaks to the goal of preventing rescidivism, see 18 U.S.C.

§3553(a)(2)(C), but not to the general need “to afford adequate deterrence to

criminal conduct.” 18 U.S.C. § 3553(a)(2)(B). Indeed, the Congress that adopted

the § 3553 sentencing factors emphasized the critical deterrent value of

imprisoning serious white collar criminals, even where those criminals might

themselves be unlikely to commit another offense:

[It is our] view that in the past there have been many cases,
particularly in instances of major white collar crime, in which
probation has been granted because the offender required little or
nothing in the way of institutionalized rehabilitative measures . . . and
because society required no insulation from the offender, without due
consideration being given to the fact that the heightened deterrent
effect of incarceration and the readily perceivably receipt of just
punishment accorded by incarceration were of critical importance.
The placing on probation of [a white collar criminal] may be
perfectly appropriate in cases in which, under all the circumstances,
only the rehabilitative needs of the offender are pertinent; such a
sentence may be grossly inappropriate, however, in cases in which
the circumstances mandate the sentence’s carrying substantial
deterrent or punitive impact.

S. Rep. No. 98-225, at 91-92 (1983), reprinted in 1984 U.S.C.C.A.N. 3182, 3274-

28
75. Rather than deter crime by others, Martin’s 7-day sentence suggests that those

similarly situated to Martin could profit from fraudulent conduct and, even if

caught, escape severe consequences by cooperating with the government after the

fact.10

Finally, the district court erred by justifying Martin’s lenient sentence in part

on the basis that “from the point of view of the government, the man most

singularly responsible for this criminal conduct [Richard Scrushy] has been found

not guilty and will serve no time at all.” Regardless of the government’s original

theory of the overall fraud scheme in this case, § 3553(a)(6) does not permit the

district court to compare Martin’s sentence with the “sentence” of a man whom a

jury acquitted of criminal conduct, however groundless that acquittal may seem in

light of the evidence in this record. While the need for consistent sentences among

similarly situated defendants is a statutory sentencing factor, § 3553(a)(6) confines

10
The district court reasoned that a longer prison term might well impede the ability of
civil plaintiffs to collect on a judgment against Martin. This reasoning is also faulty because in
almost every fraud case a jail term has that effect and would mean white collar criminals could
avoid serving time to allow them to work and repay civil plaintiffs. As we noted in Crisp, the
Sentencing Commission has determined that loss serves as a measure of the seriousness of the
offense and the defendant’s relative culpability. Crisp, — F.3d at —, slip op. at 14 (quoting
U.S.S.G. § 2B1.1 cmt. background). As we further explained in Crisp,
The court’s sentencing theory turned that policy on its head. The more loss a
defendant has caused, the greater will be the amount of restitution due, and the
greater the incentive for a court that places the need for restitution above all else to
shorten the sentence in order to increase the time for the defendant to earn money to
pay restitution. Therefore, the more loss a criminal inflicts, the shorter his sentence.
That approach cannot be deemed reasonable.
Id.

29
that consideration to “the need to avoid unwarranted sentenc[ing] disparities

among defendants with similar records who have been found guilty of similar

conduct.” 18 U.S.C. § 3553(a)(6) (emphasis added). Because Scrushy was found

not guilty, he is not a valid comparator for § 3553(a)(6) purposes. As a result, the

fact that Scrushy will not serve prison time is utterly irrelevant to Martin’s

sentence.

In sum, we agree with the government’s position in its brief: “If any

sentence is unreasonable, it is this one.” A much less substantial departure than

that awarded by the district court would properly reward Martin for his substantial

and extraordinary cooperation, encourage others in his position to cooperate, and

satisfy the goals embodied in § 3553(a). Martin’s cooperation, even viewed as

extraordinary and commendable, cannot erase the enormity of Martin’s underlying

criminal conduct in the billion-dollar fraud scheme he played a major role in

perpetrating.

We do not express an opinion as to what would constitute a reasonable

sentence. The district court on remand will exercise discretion in fashioning an

appropriate sentence consistent with what we have stated in this opinion, and there

is a range of reasonable sentences. A 7-day sentence is not nearly within that

range. It is not remotely commensurate with the seriousness and extensive scale of

30
the crimes and does not promote respect for the law, does not provide just

punishment for the offense, as § 3553(a)(2)(A) requires, and does not afford

adequate deterrence to the criminal conduct here, as § 3553(a)(2)(B) mandates.

Accordingly, we vacate Martin’s sentence and remand this case for

resentencing in a manner consistent with this opinion and with the Supreme

Court’s decision in Booker.

V. REASSIGNMENT

Finally, based on our review of the record and the elements that this Court

considers in determining whether to reassign a case to a different judge where there

is no indication of actual bias, see United States v. Torkington, 874 F.2d 1441,

1447 (11th Cir. 1989) (per curiam), we have determined it wiser to remand this

case with instructions to reassign it to a different judge. This is the second appeal

in Martin’s case and the second time we have had to reverse the sentence that the

district court gave Martin. On remand, the district court changed its sentence from

60 months’ probation to only 7 days’ imprisonment and failed to properly take into

account the § 3553(a) factors. In light of the two reversals in this case and three

other appeals in which we have reversed the same judge for extraordinary

downward departures that were without a valid basis in the record,11 we find it

11
See McVay, 447 F.3d at 1356; United States v. Livesay, 146 Fed. Appx. 403, 405 (11th
Cir. Aug. 30, 2005) (unpublished) (reversing “dramatic” 18-level reduction in offense level

31
likely that “the original judge would have difficulty putting his previous views and

findings aside.” Id.

Our settled practice is to direct a specific judge to reassign a case. That

judge has been the chief judge, where the chief judge was not the original judge in

the case. See, e.g., Onishea v. Hopper, 126 F.3d 1323, 1343 (11th Cir. 1997),

vacated on other grounds, 133 F.3d 1377 (11th Cir. 1998); Chudasama v. Mazda

Motor Corp., 123 F.3d 1353, 1374 (11th Cir. 1997); United States v. Remillong, 55

F.3d 572, 577 (11th Cir. 1995); Clark v. Coats & Clark, Inc., 990 F.2d 1217, 1230

(11th Cir. 1993); United States v. Spears, 827 F.2d 705, 709 (11th Cir. 1987).

Where the chief judge is the original judge, we then direct the senior most active

judge to reassign it. See 28 U.S.C. § 136(e). Accordingly, pursuant to our

supervisory power over the district courts, we remand this case with instructions

that it be reassigned by the most senior active judge of the District Court for the

Northern District of Alabama. See Torkington, 874 F.2d at 1446 (“We have the

authority to order reassignment of a criminal case to another district judge as part

of our supervisory authority over the district courts in this Circuit.”); 28 U.S.C. §

2106.

SENTENCE VACATED AND REMANDED WITH INSTRUCTIONS.

based on record that provided “scant basis to assess reasonableness” of departure); United States
v. Botts, 135 Fed. Appx. 416, 420-21 (11th Cir. June 21, 2005) (unpublished) (reversing
“extraordinary” 26-level reduction in offense level based on record that “is incapable of
meaningful appellate review”).

32