United States v. Kenneth K. Livesay

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
April 23, 2008
No. 06-11303 THOMAS K. KAHN
________________________ CLERK

D. C. Docket No. 03-00182-CR-2-UWC-HGD

UNITED STATES OF AMERICA,

Plaintiff-Appellant,

versus

KENNETH K. LIVESAY,

Defendant-Appellee.

________________________

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

ON REMAND FROM THE UNITED STATES SUPREME COURT

Before HULL and MARCUS, Circuit Judges, and BARZILAY *, Judge.

HULL, Circuit Judge:

*
Honorable Judith M. Barzilay, Judge, United States Court of International Trade, sitting
by designation.
 This case is before us on remand from the United States Supreme Court for

reconsideration in light of Gall v. United States, 552 U.S. __, 128 S. Ct. 586

(2007). Livesay v. United States, __ U.S. __, 128 S. Ct. 872, 872-73 (2008). In

this $1.4 billion fraud scheme, defendant-appellee Kenneth K. Livesay, the former

Assistant Controller and Chief Information Officer (“CIO”) of HealthSouth

Corporation who played a major role in the fraud, was sentenced to 60 months’

probation, with the first 6 months to be served as home detention. This panel

previously vacated Livesay’s non-custodial sentence. See United States v. Livesay

(Livesay II), 484 F.3d 1324, 1325-26 (11th Cir. 2007).1 After reconsideration in

light of Gall and affording substantial deference to the district court’s sentencing

determinations, we conclude that the district court committed Gall procedural

error, and thus we must vacate Livesay’s sentence and remand.

I. FACTUAL BACKGROUND

Earlier decisions of this Court outline the $1.4 billion criminal fraud scheme

at HealthSouth. See United States v. Martin, 455 F.3d 1227, 1230-31 (11th Cir.

1
Our Livesay II decision was this Court’s second review of Livesay’s sentence. In
United States v. Livesay (Livesay I), 146 F. App’x 403, 405 (11th Cir. 2005), we vacated and
remanded Livesay’s sentence of probation after concluding that the record provided a “scant
basis to assess” the reasonableness of that sentence. On remand after Livesay I, the district court
again sentenced Livesay to probation, and we again reversed, determining the sentence to be
unreasonable. See Livesay II, 484 F.3d at 1325-26. Livesay appealed from our decision in
Livesay II, and the Supreme Court remanded to us for this reconsideration in light of Gall. See
Livesay, __ U.S. at __, 128 S. Ct. at 872-73.

2
2006); United States v. McVay, 447 F.3d 1348, 1349-50 (11th Cir. 2006).

Accordingly, in this opinion, we provide only a brief overview of that general

scheme. We then detail Livesay’s specific role in the fraud, as outlined in

Livesay’s Presentence Investigation Report (“PSI”).2

At some point in the early to mid-1990s, HealthSouth officials realized that

HealthSouth’s financial results were failing to produce sufficient earnings-per-

share to meet the expectations of Wall Street analysts. Various HealthSouth

officials, including Livesay, became aware that the earnings shortfall created a

substantial risk that, unless the earnings-per-share were artificially inflated, the

earnings would fail to meet analyst expectations, and the market price of

HealthSouth’s securities would decline.

Therefore, from at least 1994 until March 2003, a group of HealthSouth

officials “conspired to artificially inflate HealthSouth’s reported earnings and

earnings per share, and to falsify reports about HealthSouth’s overall financial

condition.” Martin, 455 F.3d at 1230. The officials “made, and directed

accounting personnel to make, false and fraudulent entries in HealthSouth’s books

and records for the purpose of falsely reporting HealthSouth’s assets, revenues, and

earnings per share and in order to defraud investors, banks, and lenders.” Id.

2
Before the district court, both Livesay and the government withdrew all objections to the
PSI.

3
 For over ten years from April 1989 to November 1999, Livesay was the

Assistant Controller in HealthSouth’s accounting department.3 According to the

PSI, during his time as Assistant Controller, Livesay had access to all of the

financial information on HealthSouth’s balance sheets and income statements. As

Assistant Controller, Livesay directly assisted the Controller and the Chief

Financial Officer in preparing the financial statements and reports that HealthSouth

was required to file with the Securities and Exchange Commission (“SEC”).

Senior executives issued instructions to defendant Livesay regarding the desired

earnings-per-share, and Assistant Controller Livesay and HealthSouth’s accounting

staff met to discuss ways to meet Wall Street’s earnings-per-share expectations.

More specifically, Livesay, as Assistant Controller, made false entries in

HealthSouth’s books and records to artificially inflate the company’s earnings-per-

share. Livesay also managed and supervised others in manipulating HealthSouth’s

books and records, instructing HealthSouth’s accounting staff to alter certain

accounts so as to inflate HealthSouth’s earnings-per-share. Livesay participated in

the preparation of HealthSouth’s 1998 quarterly and annual reports that were filed

with the SEC, and Livesay fully knew that the reports materially misstated

HealthSouth’s net income, revenue, earnings-per-share, assets, and liabilities. For

3
In late 1999, Livesay became the CIO of HealthSouth.

4
example, HealthSouth’s pre-tax income was overstated by approximately

$440,000,000 in 1997 and $635,000,000 in 1998.

This massive fraud, in which Livesay directly participated for over five

years, impacted many victims. After the conspiracy was uncovered in March 2003

and the SEC temporarily suspended trading in HealthSouth stock, the total drop in

the value of outstanding HealthSouth stock was approximately $1.4 billion. Many

shareholders had invested their life savings in HealthSouth stock, which

plummeted to pennies per share. This fraud also affected many others, including:

(1) HealthSouth employees, many of whom were long-time employees close to

retirement, who suffered by either losing their job or their retirement savings that

was invested 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

false financial information; (4) health-service competitors who lost business or

financing due to HealthSouth’s false financial representations; and (5) members of

the community who benefited from HealthSouth’s charitable activities.

II. PROCEDURAL HISTORY

A. Guilty Plea and Advisory Guidelines Range

Livesay pled guilty to an information charging him with: (1) conspiracy to

5
commit wire and securities fraud, in violation of 15 U.S.C. §§ 78m(a), (b)(2)(A)-

(B) and (b)(5), and 78ff and 18 U.S.C. §§ 371 and 1343, et al. (Count One); and

(2) falsification of financial information, in violation of 15 U.S.C. §§

78m(b)(2)(A), 78m(b)(5), 78ff, and 18 U.S.C. § 2 (Count Two). The information

also included a forfeiture count.

The PSI set Livesay’s base offense level at 6, pursuant to U.S.S.G. §

2F1.1(a).4 Livesay’s adjusted offense level was 28, however, due to four

enhancements reflecting the magnitude of the fraud and his significant role in it.

The enhancements were: (1) 18 levels, pursuant to U.S.S.G. § 2F1.1(b)(1)(S),

because the loss amount exceeded $80 million; (2) 2 levels, pursuant to U.S.S.G. §

2F1.1(b)(2)(A), because the offense involved more than minimal planning; (3) 2

levels, pursuant to U.S.S.G. § 2F1.1(b)(5)(C), because the offense involved

sophisticated means; and (4) 3 levels, pursuant to U.S.S.G. § 3B1.1(b), for

Livesay’s role in the offense as a manager or supervisor. After a 3-level reduction

for acceptance of responsibility under U.S.S.G. § 3E1.1, Livesay’s adjusted offense

level was 28. With an offense level of 28 and a criminal history category of I,

Livesay’s advisory Guidelines range was 78 to 97 months’ imprisonment.

4
The parties stipulated that the appropriate version of the Guidelines was the November
1998 edition; accordingly, all Guidelines citations are to the November 1998 edition unless
otherwise noted.

6
 The government filed a U.S.S.G. § 5K1.1 motion for downward departure,

based on Livesay’s cooperation and substantial assistance. The government noted

that Livesay: (1) met whenever needed with several government agencies, each of

which had a substantial need for his assistance; (2) met with the forensic auditor

reconstructing HealthSouth’s books and records; (3) spent many hours reviewing

financial statements and other documents; (4) provided the government with

critical documents evidencing the fraud; (5) helped quantify the fraud; and (6)

facilitated guilty pleas from other co-conspirators and the prosecution of others yet

to be convicted.

B. First Sentencing in June 2004

At Livesay’s first sentencing, the government’s § 5K1.1 motion

recommended a downward departure of 3 levels (from 28 to 25) and a sentence of

60 months’ imprisonment. The district court granted the government’s § 5K1.1

motion, but departed downward 18 levels, to an offense level of 10. Livesay I, 146

F. App’x at 404. Offense level 10, combined with Livesay’s criminal history

category of I, yielded an advisory Guidelines range of 6 to 12 months’

imprisonment. Because Livesay’s Guidelines range of 6 to 12 months’

imprisonment fell within “Zone B” of the sentencing table, the Guidelines gave the

district court the option of sentencing Livesay to probation and 6 months’ home

7
detention without any additional Guidelines departures. See U.S.S.G. §§

5B1.1(a)(2), 5C1.1(c)(3) (permitting a sentence of probation, subject to certain

conditions inapplicable here, if a defendant’s applicable advisory Guidelines range

is within “Zone B”). The government objected to the reasonableness of the

§ 5K1.1 departure.

Alternatively, the government asked that Livesay at least be sentenced to the

maximum sentence in that range (12 months’ imprisonment). The district court

nevertheless sentenced Livesay to 60 months’ probation, with the first 6 months to

be served on home detention, pursuant to U.S.S.G. §§ 5B1.1(a)(2) and

5C1.1(c)(3).5 The district court imposed a $10,000 fine and forfeiture of $750,000.

The government appealed, which resulted in our Livesay I decision. In

Livesay I, this Court vacated Livesay’s sentence and remanded Livesay’s case to

the district court for resentencing. Livesay I, 146 F. App’x at 405. This Court

concluded that the sentencing court “failed entirely to address specifically the §

5K1.1 factors or otherwise to state reasons supporting the extent of its departure.”

5
After departing downward to an offense level of 10, the district court was able to
sentence Livesay to 60 months’ probation and 6 months’ home detention without any additional
Guidelines departures because U.S.S.G. §§ 5B1.1(a)(2) and 5C1.1(c)(3) permit a sentence of
probation, subject to certain conditions inapplicable here, if a defendant’s applicable advisory
Guidelines range is within “Zone B” of the sentencing table. Because Livesay’s offense level
was 10 and criminal history category was I, Livesay fell within Zone B on the sentencing table.
Thus, by imposing 6 months’ home detention, the district court was able to sentence Livesay to
60 months’ probation. See U.S.S.G. §§ 5B1.1(a)(2), 5C1.1(c)(3).

8
Id. This Court further concluded that “[w]e do not say that every § 5K1.1 factor

must be separately addressed in the order of judgment and conviction; we say only

that this record fails to provide the minimum indicia required to allow us to review

for reasonableness.” Id.

C. Resentencing in December 2005

This current appeal is from the resentencing in December 2005. As

discussed later, the district court judge added very little to the record in this

resentencing and basically made it clear he was simply reimposing the same

sentence on remand. We outline what the brief seventeen-page resentencing

transcript shows.

This brief transcript shows that the district court actually began Livesay’s

resentencing hearing with “preliminary remarks,” in which the district court

commented that “[l]urking not too far in the background of this sentencing is the

jury’s verdict in the Richard Scrushy case.” Richard Scrushy was the Chief

Executive Officer of HealthSouth at all times pertinent, and he was acquitted by

the jury in his trial. The district court, speaking “not as one of twelve Article III

judges of the court, but as the Chief Judge of the Northern District of Alabama,”

observed that he knew of no allegations that the jury in the Scrushy case had been

in any way compromised. The district court publicly thanked the Scrushy jury for

9
its “tremendous public service,” and observed that before attacking the jury’s

verdict, “it is important to reflect on the fact that we did not sit here in the

courtroom and hear and consider all of the evidence, as the jurors did.”

The district court then noted that, in Livesay’s case, this Court had directed

the district court to outline in some detail the factors on which it relied in giving

the § 5K1.1 departure and its reasons for the extent of the departure. The

government renewed its § 5K1.1 motion, but in light of Livesay’s continued

substantial assistance since the first sentencing, recommended 20 months’

imprisonment6 (i.e., less than its recommendation for 60 months’ imprisonment at

the first sentencing).7

The district court again granted the government’s § 5K1.1 motion and said it

was “basically reimposing the original sentence.” The district court did make

specific § 5K1.1 findings that the significance and truthfulness of Livesay’s

information and testimony, as well as the nature and extent of his assistance, was

“extraordinarily high” and warranted an “extraordinary departure.” The district

court further found that Livesay’s assistance was “very timely” and warranted

6
The government did not make a specific recommendation as to how many levels
downward the district court should depart within the advisory Guidelines range.
7
Between Livesay’s first sentencing and resentencing, Livesay testified for the
government at Scrushy’s trial. Livesay also testified for the government at the trial of Sonny
Crumpler and aided the government in preparing for both Scrushy’s and Crumpler’s trials.

10
“extraordinary consideration.” The district court acknowledged that Livesay’s

“actions were not sufficient to meet the legal standards for withdrawing from a

conspiracy,” but nevertheless stated that it was “impressed with the fact that from

just an ordinary, common sense understanding, [Livesay] did substantially

withdraw from the conspiracy.”

The district court then repeated the same earlier § 5K1.1 downward

departure and departed downward 18 levels to an offense level of 10, which once

again left Livesay with an advisory Guidelines range of 6 to 12 months’

imprisonment.

At that point, the government asked to be heard before the district court

imposed its final sentence. While the government acknowledged that Livesay was

“well deserving of a downward departure,” the government stressed that Livesay

also “was a key player, a significant cog, in the operation of this fraud at

HealthSouth for a number of years.” The government emphasized that although

Livesay “did come forward early,” he nevertheless “didn’t come forward until the

fraud itself was revealed.” The government further observed that Livesay’s

“handiwork as one of the mechanics” of the fraud was reflected in the fraudulent

forms that HealthSouth filed with the SEC. The government stressed the “need for

deterrence” in sentencing Livesay, and stated its belief that some prison “sentence

11
of significance” was necessary in light of the sentencing factors found in 18 U.S.C.

§ 3553(a). The government renewed its request for a sentence of 12 months’

imprisonment under the adjusted Guidelines range found by the district court.

The district court then summarily stated, “If I’m wrong on the extent of the

departure which I have just made, I believe that the sentence I’m about to impose is

the most appropriate sentence in this case in consideration of the Booker case.”8 In

other words, even without the § 5K1.1 departure, the district court would have

made the same variance under United States v. Booker, 543 U.S. 220, 125 S. Ct.

738 (2005), from the advisory Guidelines range of 78 to 97 months’ imprisonment.

The district court proceeded to sentence Livesay to 60 months’ probation (the first

6 months to be served on home detention, which Livesay already had done). The

district court reimposed the $10,000 fine and forfeiture of $750,000, both of which

Livesay had already paid.

With regard to the sentencing factors in § 3553(a), the district court stated

that it viewed the sentence as “appropriate” based on the “nature and

circumstances” of Livesay’s crimes; Livesay’s “history and personal

characteristics”; the “need for this sentence to reflect the seriousness” of the crimes

to which Livesay pled guilty; the need to “promote respect for the law, and to

8
See United States v. Booker, 543 U.S. 220, 125 S. Ct. 738 (2005).

12
provide just punishment”; “and to afford adequate deterrence.” The district court

further stated that it considered the sentence “justified in order to avoid

unwarranted sentencing disparities among defendants with similar records who

have been found guilty of similar conduct,” and listed the sentences imposed on

twelve other HealthSouth co-conspirators as follows:

In the cases arising out of this conduct, Weston Smith received
27 months [imprisonment]; W illiam O w ens, 27 months
[imprisonment]; Emery Harris, five months [imprisonment]; Angela
Ayers, 48 months of probation; Cathy Edwards, 48 months of
probation; Rebecca Morgan, 48 months of probation; Virginia
Valentine, 48 months of probation; Michael Martin, seven days
[imprisonment]; Aaron Beam, three months [imprisonment]; Richard
Botts, 60 months of probation; Will Hicks, 24 months of probation;
and Catherine Fowler, 24 months of probation.

Livesay’s counsel then pointed out that William Owens’s sentence was actually 60

months’ imprisonment, not 27 months. The district court said, “I stand corrected.”

The district court did not discuss the nature of the conduct of these twelve other co-

conspirators or explain how their conduct was similar to Livesay’s.

This appeal followed.

III. DISCUSSION

A. District Court’s Post-Gall Duties at Sentencing

After the Supreme Court’s decisions in Booker and Gall, the district courts

are still required to correctly calculate the advisory Guidelines range. See United

13
States v. Pugh, 515 F.3d 1179, 1189 (11th Cir. 2008); see also Martin, 455 F.3d at

1235; United States v. Crawford, 407 F.3d 1174, 1178 (11th Cir. 2005). “‘[A]fter

giving both parties an opportunity to argue for whatever sentence they deem

appropriate, the district judge should then consider all of the § 3553(a) factors to

determine whether they support the sentence requested by a party.’” Pugh, 515

F.3d at 1189-90 (quoting Gall, 552 U.S. at __, 128 S. Ct. at 596). Gall also

instructs that the district court “‘must make an individualized assessment based on

the facts presented.’” Id. at 1190 (quoting Gall, 552 U.S. at __, 128 S. Ct. at 597).

If the district court decides that a sentence outside of the Guidelines is warranted, it

“‘must consider the extent of the deviation and ensure that the justification is

sufficiently compelling to support the degree of the variance.’” Id. (quoting Gall,

552 U.S. at __, 128 S. Ct. at 597) (emphasis omitted).

In addition, Gall admonishes that the district court “must adequately explain

the chosen sentence to allow for meaningful appellate review and to promote the

perception of fair sentencing.” Gall, 552 U.S. at __, 128 S. Ct. at 597; see also 18

U.S.C. § 3553(c) (stating that a district court “at the time of sentencing, shall state

in open court the reasons for its imposition of the particular sentence”); Rita v.

United States, 551 U.S. __, __, 127 S. Ct. 2456, 2468 (2007) (discussing §

3553(c)). The Supreme Court in Rita recognized that the requirement that a district

14
court explain the reasons for its chosen sentence “reflects sound judicial practice”

because “[c]onfidence in a judge’s use of reason underlies the public’s trust in the

judicial institution” and a statement of the judge’s reasoning “helps provide the

public with the assurance that creates that trust.” Rita, 551 U.S. at __, 127 S. Ct. at

2468.

The length and amount of detail of the judge’s reasoning required depends

on the circumstances. Id. A statement of reasons for a criminal sentence is

particularly important. Id. While a sentencing judge is not required to state on the

record that it has explicitly considered each of the § 3553(a) factors or to discuss

each of the § 3553(a) factors, United States v. Scott, 426 F.3d 1324, 1329 (11th

Cir. 2005), “‘[t]he sentencing judge should set forth enough to satisfy the appellate

court that he has considered the parties’ arguments and has a reasoned basis for

exercising his own legal decisionmaking authority,’” United States v. Agbai, 497

F.3d 1226, 1230 (11th Cir. 2007) (quoting Rita, 551 U.S. at __, 127 S. Ct. at 2468).

Generally, when sentencing within the advisory Guidelines range, the

district court is not required to give a lengthy explanation for its sentence if the

case is typical of those contemplated by the Sentencing Commission. See id.

(citing Rita, 551 U.S. at __, 127 S. Ct. at 2468). However, if a party requested a

sentence outside of the Guidelines range, the district court “will normally go

15
further and explain why he has rejected those arguments.” Rita, 551 U.S. at __,

127 S. Ct. at 2468. Further, Rita explained that “[w]here the judge imposes a

sentence outside the Guidelines, the judge will explain why he has done so.” Id. at

__, 127 S. Ct. at 2468. Subsequent to Rita and Gall, this Court explained in Pugh

that “a district court need not discuss each Section 3553(a) factor, although

‘[w]here the judge imposes a sentence outside the Guidelines, the judge will

explain why he has done so.’” Pugh, 515 F.3d at 1191 n.8 (quoting Rita, 551 U.S.

at __, 127 S. Ct. at 2468) (alterations in original).

B. Appellate Review

With regard to appellate review of sentences, the Supreme Court in Gall

emphasized that “‘while the extent of the difference between a particular sentence

and the recommended Guidelines range is surely relevant, courts of appeals must

review all sentences—whether inside, just outside, or significantly outside the

Guidelines range—under a deferential abuse-of-discretion standard.’” Id. at 1189

(quoting Gall, 552 U.S. at __, 128 S. Ct. at 591). Thus, the Supreme Court rejected

“‘an appellate rule that requires “extraordinary” circumstances to justify a sentence

outside the Guidelines range’” and also rejected “‘the use of a rigid mathematical

formula that uses the percentage of a departure as the standard for determining the

strength of the justifications required for a specific sentence.’” Id. at 1190 (quoting

16
Gall, 552 U.S. at __, 128 S. Ct. at 595).

Instead, under Gall, we must engage in a two-step process of sentencing

review. See id. First, we must “‘ensure that the district court committed no

significant procedural error, such as failing to calculate (or improperly calculating)

the Guidelines range, treating the Guidelines as mandatory, failing to consider the

§ 3553(a) factors, selecting a sentence based on clearly erroneous facts, or failing

to adequately explain the chosen sentence–including an explanation for any

deviation from the Guidelines range.’” Id. (quoting Gall, 552 U.S. at __, 128 S. Ct.

at 597) (emphasis added). Second, we must consider the “‘substantive

reasonableness of the sentence imposed, under an abuse-of-discretion standard,’”

taking into account the “‘totality of the circumstances.’” Id. (quoting Gall, 552

U.S. at __, 128 S. Ct. at 597). In considering the substantive reasonableness of the

sentence, we may “‘not apply a presumption of unreasonableness’” where a

sentence is outside of the Guidelines range, and we “‘must give due deference to

the district court’s decision that the § 3553(a) factors, on a whole, justify the extent

of the variance.’” Id. (quoting Gall, 552 U.S. at __, 128 S. Ct. at 597). “Gall

reminds us once again . . . to appreciate the institutional advantage that district

courts have in applying and weighing the Section 3553(a) factors in individual

cases.” Pugh, 515 F.3d at 1190-91; see also Gall, 552 U.S. at __, 128 S. Ct. at 597-

17
98.

However, Gall makes clear that “it also remains true that the district court’s

choice of sentence is not unfettered.” Pugh, 515 F.3d at 1191. The Supreme Court

in Gall emphasized that appellate courts may “‘take the degree of variance into

account and consider the extent of a deviation from the Guidelines.’” Id. at 1190

(quoting Gall, 552 U.S. at __, 128 S. Ct. at 595). Moreover, the district court is

obliged to consider all of the § 3553(a) factors, and those “‘factors in turn . . .

guide appellate courts, as they have in the past, in determining whether a sentence

is unreasonable.’” Id. at 1191 (quoting Booker, 543 U.S. at 261, 125 S. Ct. at 766).

Additionally, appellate courts “‘will, of course, take into account the totality of the

circumstances, including the extent of any variance from the Guidelines range.’”

Id. at 1190 (quoting Gall, 552 U.S. at __, 128 S. Ct. at 597). In summary, Gall’s

“directives leave no doubt that an appellate court may still overturn a substantively

unreasonable sentence, albeit only after examining it through the prism of abuse of

discretion, and that appellate review has not been extinguished.” Id. at 1191.

Applying these principles, we review Livesay’s sentence again.

C. The Section 5K1.1 Departure

It remains true that after the government has made a motion for downward

departure pursuant to U.S.S.G. § 5K1.1, the government has no control over

18
whether and to what extent the district court will depart from the Guidelines. See

Martin, 455 F.3d at 1235; McVay, 447 F.3d at 1353. The district court’s

downward departure need only be reasonable. See Martin, 455 F.3d at 1235;

McVay, 447 F.3d at 1353. And after Gall, of course, we must review the district

court’s § 5K1.1 departure under a deferential abuse-of-discretion standard.

See Gall, 552 U.S. at __, 128 S. Ct. at 597 (“[R]egardless of whether the sentence

imposed is inside or outside the Guidelines range, the appellate court must review

the sentence under an abuse-of-discretion standard.”); see also Martin, 455 F.3d at

1236 (stating that if a district court departs under § 5K1.1, we review that departure

for an abuse of discretion).

Applying Gall and affording substantial deference to the district court here,

we are once again constrained to conclude that the district court legally erred in its

§ 5K1.1 downward departure. More specifically, the district court committed

prong one, or “procedural,” Gall error in its § 5K1.1 departure, because the district

court based the extent of its § 5K1.1 departure on an impermissible consideration.

See Gall, 552 U.S. at __, 128 S. Ct. at 597.

As we outlined in Livesay II, in determining the extent of a § 5K1.1

departure, the district court must consider the five non-exclusive § 5K1.1 factors,

which are: (1) the usefulness of the defendant’s assistance; (2) the truthfulness and

19
completeness of the defendant’s information and testimony; (3) the nature and

extent of the defendant’s assistance; (4) any injury suffered or risk of injury or

danger to the defendant and his family as a result of his assistance; and (5) the

timeliness of the assistance. See U.S.S.G. § 5K1.1(a)(1)-(5); see also Livesay II,

484 F.3d at 1330-31. The district court may consider factors beyond those five,

“but only if the factors relate to the assistance provided by the defendant.” Martin,

455 F.3d at 1235, 1239 (concluding that the district court committed legal error by

considering, in its § 5K1.1 analysis, the threat of future civil liability, which was

not assistance-related) (emphasis added); see also McVay, 447 F.3d at 1354-55

(declining to consider extent of § 5K1.1 departure because district court had

committed legal error by considering only non-assistance related facts–McVay’s

“exemplary record” and his “relationship with his daughter”–in the § 5K1.1

analysis); United States v. Davis, 407 F.3d 1269, 1271 (11th Cir. 2005); United

States v. Luiz, 102 F.3d 466, 469 (11th Cir. 1996).

Here, the resentencing transcript makes clear that the district court, in

determining the extent of its § 5K1.1 departure, considered “the fact that [Livesay]

repudiated the conspiracy at an early time and no longer participated in it.” The

district court even explained in its § 5K1.1 ruling that “[a]lthough [Livesay’s]

actions were not sufficient to meet the legal standards for withdrawing from a

20
conspiracy, the Court [was] impressed with the fact that from just an ordinary,

common sense understanding, [Livesay] did substantially withdraw from the

conspiracy.” However, Livesay’s repudiation of or “common sense” withdrawal

from the conspiracy simply does not relate to the assistance that Livesay provided

to the government. Accordingly, the district court should not have considered

Livesay’s repudiation of or withdrawal from the conspiracy in determining the

extent of its § 5K1.1 departure. As such, the district court committed prong one or

“procedural” Gall error when it departed 18 levels under § 5K1.1.

Nonetheless, it is unnecessary to remand for resentencing if the § 5K1.1

procedural error did not affect the ultimate sentence imposed. See United States v.

Keene, 470 F.3d 1347, 1349 (11th Cir. 2006). In fact, the district court here clearly

indicated that it would have imposed the same sentence even if its § 5K1.1

downward departure was erroneous. In other words, even without any § 5K1.1

departure, the district court still would have varied under Booker from the advisory

Guidelines range of 78 to 97 months’ imprisonment to impose a sentence of 60

months’ probation (with 6 months’ home detention) based on the § 3553(a) factors.

Thus, we also review the district court’s alternative Booker variance from the

advisory Guidelines range of 78 to 97 months’ imprisonment.

D. The Alternative Variance Sentence

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 As to the alternative sentence, we conclude that another Gall procedural

error occurred because the district court failed to adequately explain its variance

from the advisory Guidelines range to its chosen sentence in a way that allows for

any meaningful appellate review. Gall, 552 U.S. at __, 128 S. Ct. at 597 (stating

that a district court commits procedural error by, inter alia, “failing to adequately

explain the chosen sentence–including an explanation for any deviation from the

Guidelines range”).9

Here, the district court, for the second time, failed to give any explanation of

its reasons for imposing a sentence of 60 months’ probation (with 6 months’ home

detention). After imposing its sentence, the district court did proceed to list certain

§ 3553(a) factors. So far, so good. However, the district court then gave no

reasoning or indication of what facts justified such a significant variance from the

advisory Guidelines range under its alternative sentence. See Pugh, 515 F.3d at

1190, 1191 n.8 (stating that a district court need not discuss each § 3553(a) factor,

but “‘must make an individualized assessment based on the facts presented’” and,

where it imposes a sentence outside the Guidelines range, will explain why it has

9
Ordinarily, after determining that the district court would have imposed the same
sentence notwithstanding its procedural error, we would examine whether Livesay’s ultimate
sentence was still reasonable in light of the Guidelines range calculated without the procedural
Guidelines error (i.e., the original Guidelines range of 78 to 97 months’ imprisonment). See
Keene, 470 F.3d at 1349-50. However, as noted herein, we are unable to conduct this analysis
because the district court failed to adequately explain its chosen sentence so to allow for
meaningful appellate review.

22
done so (quoting Gall, 552 U.S. at __, 128 S. Ct. at 597)); Agbai, 497 F.3d at 1230

(“‘[T]he sentencing judge should set forth enough to satisfy the appellate court that

he has considered the parties’ arguments and has a reasoned basis for exercising

his own legal decisionmaking authority’” (quoting Rita, 551 U.S. at __, 127 S. Ct.

at 2468)).

Although the district court stated that it would exercise its discretion to

impose the same sentence even if its § 5K1.1 departure was erroneous, it simply

failed to explain its reasons for why it would do so in a way that allows for

meaningful appellate review and promotes the perception of fair sentencing. See

Gall, 552 U.S. at __, 128 S. Ct. at 597. Thus, there is also procedural error under

Gall in the district court’s alternative sentence of a Booker variance from the

advisory Guidelines range of 78 to 97 months’ imprisonment to the imposed

sentence of 60 months’ probation (with 6 months’ home detention).

For example, the district court offered no explanation or reasoning of how a

sentence of 60 months’ probation (with 6 months’ home detention) for an

individual who pled guilty to knowingly playing an active and crucial supervisory

role in a massive $1.4 billion fraud for at least five years reflected the seriousness

of the offense or the nature and circumstances of the crime. The district court did

not state or explain in any way why it rejected the government’s argument that,

23
notwithstanding Livesay’s timely assistance, Livesay should receive “some

sentence of significance” in this $1.4 billion fraud scheme because he was a “key

player, a significant cog, in the operation of this fraud at HealthSouth for a number

of years.” See Rita, 551 U.S. at __, 127 S. Ct. at 2468 (“Where the defendant or

prosecutor presents nonfrivolous reasons for imposing a different sentence, . . . the

judge will normally go further and explain why he has rejected those arguments.”).

Furthermore, as this Court noted in Martin, the legislative history of § 3553

reveals that Congress “viewed deterrence as ‘particularly important in the area of

white collar crime.’” Martin, 455 F.3d at 1240 (citation omitted). However, the

district court provided nothing more than a conclusory statement that a variance

from the advisory Guidelines range of 78 to 97 months’ imprisonment to the

ultimate sentence of 60 months’ probation (with 6 months’ home detention)

satisfied Congress’s important concerns of deterrence.

The district court did summarily list twelve other individuals convicted in

the HealthSouth fraud and their respective sentences, which ranged from 24

months’ probation to 60 months’ imprisonment. However, the district court gave

no description of the criminal conduct committed by these twelve defendants,

much less any explanation of how Livesay’s criminal conduct was similar to that

of the co-conspirators who received probation. Indeed, among the sentences noted

24
by the district court was the sentence of 5 months’ imprisonment imposed on

Emery Harris, who was, according to Livesay’s PSI, the Assistant Controller of

Finance at the same time that Livesay was the Assistant Controller of Accounting.

Livesay’s PSI states that Livesay instructed Harris to manipulate HealthSouth’s

books and records. The district court also noted that Weston Smith, the

HealthSouth Controller from March 2000 through August 2001, received 27

months’ imprisonment. However, at sentencing, the district court also did not offer

any comparison of Harris’s or Smith’s conduct to Livesay’s to explain why it

imposed a lesser sentence on Livesay. In sum, the district court’s list of sentences

received by other defendants involved in the HealthSouth fraud provides no

indication or explanation as to how Livesay’s sentence serves the needs described

in § 3553(a)(6).

In contrast, the district court in Gall discussed with the government at

sentencing the circumstances of two of Gall’s codefendants who had already been

sentenced and, specifically, whether they also had voluntarily withdrawn from the

conspiracy. See Gall, 552 U.S. at __, 128 S. Ct. at 599. The district court and the

government also discussed another codefendant who engaged in comparable

conduct, but had several circumstances that distinguished him from the defendant

Gall. See id. at ___, 128 S. Ct. at 600. The Supreme Court was able to determine

25
from this colloquy that the district court had considered the needs reflected in §

3553(a)(6) and ascertain why the district court had imposed a lesser sentence on

Gall than these other codefendants received. See id. While we do not mean to

imply that such a colloquy is necessary in every case, we reference the sentencing

in Gall as an example of what type of record evidence aids appellate courts in

assessing whether the sentencing court considered the § 3553(a) factors and why it

imposed the chosen sentence.

Therefore, even though the district court stated that it would exercise its

discretion to impose the same sentence even if its § 5K1.1 departure was

erroneous, it committed Gall procedural error by failing to adequately explain why

it would do so in order to allow for meaningful appellate review. Gall, 552 U.S. at

__, 128 S. Ct. at 597.

IV. CONCLUSION

For all of the foregoing reasons, we vacate Livesay’s sentence and remand

this case for resentencing in a manner consistent with this opinion.10

SENTENCE VACATED AND REMANDED WITH INSTRUCTIONS.

10
As to the government’s request that this case be reassigned to a different district judge
on remand, we observe that the district judge has already recused himself from further
participation in this matter. Thus, we need not address this request.

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