Opinion
No. 02 Cr. 1268 (RWS).
October 20, 2005
SENTENCING OPINION
On June 18, 2003, defendant Jude T. Barbera ("Barbera") was convicted after a jury trial of eleven counts of a twelve-count indictment against him, including one count of conspiracy to defraud the United States and to commit federal tax offenses in violation of 18 U.S.C. § 371, five counts of aiding and assisting in the preparation and presentation of a false individual income tax return in violation of 26 U.S.C. § 7206(2), one count of conspiracy to commit theft of union funds, health care fraud, mail fraud, and fraud against a health care benefit program and one count of each of those four substantive fraud crimes in violation of 18 U.S.C. §§ 664, 1035, 1341 and 1347, respectively. Barbera will be sentenced to six months imprisonment to be followed by three years supervised release. Supervised release is imposed as to Counts One and Seven through Eleven, but not as to Counts Two through Six. A special assessment fee of $1,100 is mandatory and is due immediately. A fine of $20,000 is imposed and restitution in the amount of $37,800.84 is ordered.
The Sentencing Framework
In accordance with the Supreme Court's decision in United States v. Booker, 125 S. Ct. 738 (2005), and the Second Circuit's decision in United States v. Crosby, 397 F.3d 103 (2d Cir. 2005), the sentence to be imposed was reached through consideration of all of the factors identified in 18 U.S.C. § 3553 (a), including the advisory Sentencing Guidelines (the "Guidelines") established by the United States Sentencing Commission. Thus, the sentence to be imposed here is the result of a consideration of:
(1) the nature and circumstances of the offense and the history and characteristics of the defendant;
(2) the need for the sentence imposed —
(A) to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense;
(B) to afford adequate deterrence to criminal conduct
(C) to protect the public from further crimes of the defendant; and
(D) to provide the defendant with needed educational or vocational training, medical care, or other correctional treatment in the most effective manner;
(3) the kinds of sentences available;
(4) the kinds of sentence and the sentencing range established for —
(A) the applicable category of offense committed by the applicable category of defendant as set forth in the guidelines . . .;
(5) any pertinent policy statement . . . [issued by the Sentencing Commission];
(6) the need to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct; and
(7) the need to provide restitution to any victims of the offense.18 U.S.C. § 3553 (a). A sentencing judge is permitted to find all the facts appropriate for determining a sentence, whether that sentence is a so-called Guidelines sentence or not. See Crosby, 397 F.3d at 114-15.
The Defendant
Barbera was born in Brooklyn, New York in 1957 and currently resides with his wife and three children in New York, New York.
The evidence at trial established that Barbera is a urologist who ran his own urology practice located at 2519 Avenue U, Brooklyn, New York, which was called "Jude T. Barbera, M.D., P.C."
In addition to his work as a physician, Barbera holds an interest in at least five different businesses. Barbera has submitted a financial affidavit in advance of sentencing that demonstrates personal net worth in excess of $6,000,000. Barbera possesses eleven motor vehicles, six of which are leased. In addition to his primary residence, he also owns real property in Nevis, West Indies, and holds an interest in two different properties in New York.
Barbera has stated that he has no history of alcohol abuse or drug use, nor any history of treatment for the same.
According to the Federal Bureau of Investigation and the New York State Division of Criminal Justice Services, Bureau of Identification, Barbera has no prior criminal convictions.
The Offense Conduct
On February 19, 2003, a superseding indictment was filed in this action, charging Barbera in twelve counts with regard to six unlawful acts. First, it was alleged that Barbera, as a doctor authorized to practice medicine, caused his Brooklyn medical practice to pay Thomas Gelardo ("Gelardo") a salary and to provide Gelardo with W-2 forms, when in fact Gelardo was not a legitimate employee. Second, the indictment charged that Barbera caused his Brooklyn medical practice to include Gelardo in the practice's medical insurance plan, which was obtained through Local 348 of the United Food and Commercial Workers International Union (the "Union"), and that on three occasions Barbera defrauded the Union's medical insurance fund by submitting or causing to be submitted false insurance claims on both July 25, 2000 and July 27, 2000 for Gelardo and on August 16, 2000 on behalf of Gina Gelardo. Lastly, the indictment alleged that Barbera submitted false charts of the July 25 and August 16 visits in response to a grand jury subpoena.
Count One of the indictment charged Barbera with participating in a conspiracy to defraud the United States and to violate the Internal Revenue laws in violation of 18 U.S.C. § 371. Counts Two through Six charged Barbera with substantive tax crimes, specifically aiding and assisting another person in that person's filing of fraudulent personal income tax returns for the years 1996 through 2000, in violation of 26 U.S.C. § 7206 (2). Count Seven charged Barbera with a conspiracy to commit theft of union funds, health care fraud, mail fraud, and fraud against a health care benefit program, in violation of 18 U.S.C. §§ 664, 1035, 1341 and 1347. Counts Eight through Eleven charged Barbera with the related substantive fraud claims, specifically, theft of union funds, health care fraud, mail fraud, and fraud against a health care benefit program, in violation of 18 U.S.C. §§ 664, 1035, 1341 and 1347, respectively. Count Twelve charged Barbera with obstruction of a criminal investigation of federal health care offenses, in violation of 18 U.S.C. §§ 2 and 1518.
Trial commenced on June 12, 2004. The evidence at trial established that Barbera put Gelardo, a member or "soldier" of the Luchese Organized Crime Family of La Cosa Nostra, on the payroll of his medical practice and thereby gave Gelardo a "no-show" job. Barbera also put Gelardo on his medical practice's health insurance plan.
With respect to the tax fraud charges (Counts One through Six), the evidence at trial established that beginning in or about 1995, Barbera agreed with Gelardo to claim falsely in tax filings that Gelardo was an employee of Jude T. Barbera, M.D., P.C. This enabled Gelardo to claim falsely on Gelardo's own individual income tax returns that Gelardo was a legitimate salaried employee, when, in fact, he was otherwise occupied. Accordingly, for the years 1995 through 2000, Barbera arranged to have Jude T. Barbera, M.D., P.C. provide Gelardo with W-2 forms which made it appear that Gelardo was a bona fide employee of Jude T. Barbera, M.D., P.C.
Also for the years 1995 through 2000, Barbera arranged for Jude T. Barbera M.D., P.C. to file corporate income tax returns which contained a deduction for Gelardo's purported salary, which had the effect of improperly reducing Jude T. Barbera, M.D., P.C.'s ordinary income. As a result of the legal status of Jude T. Barbera M.D., P.C., Barbera's individual income tax returns under-reported Barbera's own income from Jude T. Barbera, M.D., P.C.
With respect to Counts Seven through Eleven, the evidence at trial established that Barbera arranged for Gelardo to obtain medical insurance for Gelardo, his wife Linda Gelardo, and his daughter Gina Gelardo, on the urology practice's medical insurance plan. The Gelardo family's ability to obtain medical insurance was based on the representation that Gelardo was a genuine employee of Jude T. Barbera, M.D., P.C. The medical insurance plan was a union-run plan which required that the recipient of medical insurance and related benefits be a bona fide employee and member of the Union.
In the beginning of 2000, Barbera arranged for Gelardo to join Local 348 of the Union, and for Gelardo, his wife and his daughter to receive health insurance and other benefits from the Union's Health and Welfare Fund (the "Union Fund"), by representing to the Union Fund that Gelardo was an employee of Jude T. Barbera, M.D., P.C. The application stated that Gelardo was employed as a "medical assistant" in Barbera's medical practice.
In all, Gelardo and his dependents received in excess of $13,000 in medical benefits, as well as other welfare benefits, including prescription medication and life insurance, from the Union Fund to which they were not entitled.
The jury returned a verdict on June 18, 2003, convicting Barbera of Counts One through Eleven, and acquitting him of Count Twelve, the obstruction of a criminal health care investigation charge. With respect to the substantive health care fraud counts — Counts Eight, Nine, Ten and Eleven — the jury, having responded to special interrogatories, found Barbera guilty by reason of his practice having obtained medical insurance for Gelardo, rather than having committed theft or making false statements or fraud by reason of any of the three contested medical insurance claims.
The Guidelines
The November 1, 2001 edition of the United States Sentencing Commission Guidelines Manual ("U.S.S.G.") has been relied upon in this case for calculation purposes, in accordance with U.S.S.G. §§ 1B1.11(b) (1) and 1B1.11(b) (3). Neither Barbera nor the Government has objected to the edition employed.
A. The Base Offense Level
Pursuant to U.S.S.G. §§ 3D1.2(c) and 3D1.2(d), Counts One through Eleven are grouped, as the Counts reflect conduct that is treated as a specific offense characteristic in, or other adjustment to, the guideline applicable to another of the counts, and as the offense level is determined largely on the basis of the total amount of loss.
With respect to Counts One and Seven, the guideline for a violation of 18 U.S.C. § 371 is found in U.S.S.G. § 2X1.1, which directs that the base offense level for the substantive offense be used for calculation purposes. The substantive offenses are violations of 18 U.S.C. § 1347 and 26 U.S.C. § 7206(2), the guidelines for which are found in U.S.S.G. §§ 2B1.1 and 2T1.4, respectively. Similarly, the guidelines applicable to Counts Two through Six and Eight through Eleven are found in U.S.S.G. §§ 2B1.1 and 2T1.4.
As the offenses of conviction constitute fraud and theft and are closely related, U.S.S.G. § 2B1.1 appears to provide the applicable guideline. Neither Barbera nor the Government has challenged the applicability of Section 2B1.1 in their submissions to the Court. Accordingly, pursuant to U.S.S.G. § 2B1.1(a), the base offense level applicable here is 6.
B. The Adjusted Offense Level
For the reasons set forth below, the offense level is increased by four levels, resulting in an adjusted offense level of 10. 1. Loss
The base offense level calculation may be adjusted "[i]f the loss exceeded $5,000." U.S.S.G. § 2B1.1(b) (1). The meaning of the term "loss" is elucidated in an application note following Section 2B1.1, which explains that, as a general rule, "loss is the greater of actual loss or intended loss." U.S.S.G. § 2B1.1, cmt. n. 2(A); accord United States v. O'Neil, 118 F.3d 65, 74 (2d Cir. 1997). "Actual loss" means "the reasonably foreseeable pecuniary harm that resulted from the offense," while "intended loss":
(I) means the pecuniary harm that was intended to result from the offense; and (II) includes intended pecuniary harm that would have been impossible or unlikely to occur (e.g., as in a government sting operation, or an insurance fraud in which the claim exceeded the insured value).
U.S.S.G. § 2B1.1, cmt. n. 2(A) (i)-(ii). "The district court need only make a reasonable estimate of the loss, given the available information." United States v. Carboni, 204 F.3d 39, 46 (2d Cir. 2000) (internal quotation and marks omitted); accord U.S.S.G. § 2B1.1, cmt. n. 2(c). In reaching this estimate, the calculation is made under the preponderance of the evidence standard. See United States v. Watts, 519 U.S. 148, 156 (1997) (per curiam).
In a submission to the Court dated October 11, 2004 in response to the Presentence Investigation Report ("PSR") prepared by the United States Probation Office, Barbera argues that no adjustment should be made to the base offense level under U.S.S.G. § 2B1.1(b)(1), as the only loss suffered was in the amount of $1,095.69, representing the difference between the premiums Barbera paid to the Union Fund on Gelardo's behalf for the period between January 2000 and July 2002, $13,840, and the benefits paid by the Union Fund, amounting to $14,935.69. Where a loss is $5,000 or less, no increase is applied to the base offense level.See U.S.S.G. § 2B1.1(b) (1) (A).
Specifically, according to Barbera, a net loss calculation is warranted in light of one of the application notes accompanying U.S.S.G. § 2B1.1, which provides that loss shall be reduced by "[t]he money returned, and the fair market value of the property returned and the services rendered, by the defendant or other persons acting jointly with the defendant, to the victim before the offense was detected." U.S.S.G. § 2B1.1, cmt. n. 2 (E) (i). Moreover, Barbera contends that the benefits paid by the Union Fund, amounting to $14,935.69, may not serve as the proper measure for calculating "loss" under U.S.S.G. § 2B1.1(b)(1), as there is no suggestion that he ever intended that the Union Fund lose that sum.
In its own submission to the Court dated October 12, 2004, the Government argues that the relevant loss under U.S.S.G. § 2B1.1(b)(1) is $63,540, consisting of the total amount of the fraudulent claims submitted to the Union Fund for payment on behalf of Gelardo and his dependents, amounting to $43,540, as well as $20,000 of life insurance benefits to which Gelardo was entitled by virtue of the fraudulent scheme. A loss of $63,540 would operate a six-level enhancement to the base offense level pursuant to U.S.S.G. § 2B1.1(b)(1)(D).
Where, as here, the payment of certain funds is necessary in order for the scheme to continue, the amount paid to sustain the scheme may not be used to offset the gross loss amount. See United States v. Carrozzella, 105 F.3d 796, 805 (2d Cir. 1997) (explaining that "loss in fraud cases includes the amount of property taken, even if all or part has been returned" and rejecting a net loss approach where the victims of a fraudulent investment scheme received periodic interest payments, since "the return of money as interest or other income is often necessary for the scheme to continue"), rejected as dicta on other grounds by United States v. Kennedy, 233 F.3d 157, 160 (2d Cir. 2000); see also United States v. Koh, 199 F.3d 632, 642 (2d Cir. 1999) (concluding that the defendant's argument for offsets in calculating the amount of loss failed because the defendant's claims "all involved money that was `necessary for the scheme to continue'") (quoting Carrozzella, 105 F.3d at 805); United States v. Mucciante, 21 F.3d 1228, 1238 (2d Cir. 1994) (holding that the district court properly declined to reduce the amount of loss by payments to certain of the victims and the return of money to another, as the defendant made these payments "as part of a meretricious effort to maintain their confidences" and "is therefore not entitled to credit for sums returned"). Accordingly, Barbera's argument that the only loss suffered was in the amount of $1,095.69 based on a net loss approach crediting Barbera for the payment of insurance premiums must be rejected.
Barbera's claim that the benefits actually paid by the Union Fund may not serve as the proper measure for calculating loss must also be rejected. The facts established at trial demonstrate that Barbera arranged for Gelardo to obtain medical insurance for Gelardo, his wife and daughter through Barbera's urological practice's medical insurance plan. The evidence also demonstrated that Gelardo wrote out monthly checks for Union dues and medical insurance payments on behalf of Gelardo and sent them to the Union throughout 2000. Notwithstanding Barbara's arguments to the contrary, the evidence at trial establishes beyond a preponderance that Barbera intended that the Union Fund provide Gelardo and his family with medical insurance, which insurance necessarily includes coverage for claims submitted by Gelardo and his family. The fact that Barbera may not have submitted certain of the claims himself and was unaware of the amount of the claims submitted by other caregivers is of no moment.
However, the amount of the unpaid claims submitted by Gelardo and his dependents will not be included in the calculus of loss under U.S.S.G. § 2B1.1 (b) (1). Under certain circumstances the total amount of insurance claims may provide the proper figure for calculating intended loss. See, e.g., United States v. Lghodaro, 967 F.2d 1028, 1030-31 (5th Cir. 1992) (concluding that the total amount of false claims filed was the relevant intended loss, regardless of whether the insurance companies paid the total amount of the claims). Here, however, there is no evidence suggesting that the unpaid claims relate to items or services for which the medical insurance obtained for Gelardo by Barbera offers coverage, and while Barbera intended that Gelardo and his dependents receive medical insurance, the amount of intended loss may not be expanded to include claims that may not even fall within the scope of insurance coverage provided.
The Government also argues that Gelardo received the benefit of life insurance policies totaling $20,000 obtained from the Union Fund as the result of Barbera's conduct, and that the fact that these policies did not ripen during the relevant time period does not preclude the inclusion of the amounts of the policies in the calculation of loss. In support of its argument, the Government has cited United States v. Lorefice, 192 F.3d 647 (7th Cir. 1999), in which the defendant had participated in a scheme insuring critically ill individuals under employee group life policies without their knowledge and collecting on the policies when they died. The Seventh Circuit concluded that the face value of the policies provided the proper basis for calculating intended loss because "the district court made a fact finding, not clearly erroneous, that [the defendant's] actions, including his decision to continue to pay premiums on the policies, show that he intended to collect their face values." Lorefice, 192 F.3d at 655. Lorefice is thus distinguishable on its facts, as there is no similar evidence here demonstrating that Barbera intended to collect the face values of the life insurance policies obtained by Gelardo or what role, if any, he played in setting the amount of the life insurance policies obtained. United States v. Mizrachi, 48 F.3d 651 (2d Cir. 1995), cited by the Government, is likewise distinguishable. See Mizrachi, 48 F.3d at 657 (concluding that the face value of the property insurance obtained by the defendant was the intended loss for calculation purposes, where the defendant had caused the property to be destroyed by fire and had submitted a claim under the insurance policy, and where "there was no evidence that he intended to settle his claim for less than the replacement cost"). In the absence of authority submitted by the parties applicable to the factual circumstances of this case, the face value of the insurance policies will not be included in calculating loss under U.S.S.G. § 2B1.1 (b) (1).
The government further contends that intended loss calculations should include the tax loss generated by Barbera's fraudulent conduct. Specifically, the government argues that when Barbera made improper business deductions for the purported salary paid to Gelardo for his no-show job from 1995 to 2000, Barbera decreased his taxable income by $123,000.00. Thus, according to the government, Barbera failed to pay $42,774.00 in federal taxes and failed to pay $14,125.00 in state and local taxes, producing a total tax loss of $56,899.00. The government also asserts that the taxes paid by Gelardo on the income he received from Barbera should not off-set the total tax loss imputed to Barbera because Gelardo paid taxes in order to enable the fraudulent conduct to continue.
Pursuant to § 2T1.1 (c) (1) of the Guidelines, "tax loss" is defined as "the total amount of loss that was the object of the offense." In plain language, the statute implies that tax loss should be the amount of loss that was contemplated by the defendants while conducting the fraudulent scheme. As evidence adduced at trial revealed and as echoed in the PSR, the object of Barbera's fraudulent scheme was not to evade taxes or to file fraudulent or false tax returns. Both Barbera and Gelardo paid income taxes. The purpose of Barbera's fraudulent conduct was to provide income and health care benefits to Gelardo and his family for a no-show job. The government, however, fails to cite any authority that supports its contention that participation in a no-show job scheme necessarily involves tax loss, as it is defined under the Guidelines. Given the trial record and the lack of relevant case law on point, including a tax loss calculation in the intended or actual loss calculation for the fraudulent scheme is not warranted.
Although tax loss calculations are not included in actual or intended loss calculations for the purpose of computing Barbera's applicable guideline range, the tax loss that resulted from Barbera's fraudulent scheme must be repaid through restitution. The restitution calculations are detailed subsequently. See infra at pp. 32 43-44.
For the reasons set forth, there is insufficient evidence from which to establish intended loss in the amount the Government claims. Accordingly, the actual loss to the Union Fund, $14,935.69, will be relied upon here for purposes of calculating loss, and the offense level will be increased by four levels in accordance with U.S.S.G. § 2B1.1(b) (1) (C).
2. Aggravating Role
The Government contends that a four-level enhancement for aggravating role pursuant to U.S.S.G. § 3B1.1(a) is appropriate here. Section 3B1.1(a) provides that such an increase shall be applied "[i]f the defendant was an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive." U.S.S.G. § 3B1.1 (a).
With regard to the first prong of U.S.S.G. § 3B1.1 (a), a "participant" is "a person who is criminally responsible for the commission of the offense, but need not have been convicted." U.S.S.G. § 3B1.1, cmt. n. 1. "In assessing whether a criminal activity `involved five or more participants,' only knowing participants are included." United States v. Paccione, 202 F.3d 622, 624 (2d Cir. 2000).
In assessing whether an organization is "otherwise extensive" under the second prong of U.S.S.G. § 3B1.1 (a), "all persons involved during the course of the entire offense are to be considered. Thus, a fraud that involved only three participants but used the unknowing services of many outsiders could be considered extensive." U.S.S.G. § 3B1.1, cmt. n. 3. In considering the "otherwise extensive" prong, certain factors must be considered:
(i) the number of knowing participants; (ii) the number of unknowing participants whose activities were organized or led by the defendant with specific criminal intent; (iii) the extent to which the services of the unknowing participants were peculiar and necessary to the criminal scheme.Carrozzella, 105 F.3d at 803-04. Unknowing participants are those who "facilitate a . . . defendant's criminal activities" but are not knowingly participating in the scheme. Id. at 804 (noting that examples of unknowing participants might include "salespeople who unknowingly conveyed fraudulent misrepresentations at a defendant's request" or "bank employees who facilitate the activities of a money launderer").
Reliance on the "otherwise extensive" prong "`demands a showing that an activity is the functional equivalent of an activity involving five or more participants.'" Id. at 803 (quotingUnited States v. Tai, 41 F.3d 1170, 1174 (7th Cir. 1994)). Thus, the nature of the services provided "will separate out the residue of incidental services by unknowing participants that are not the functional equivalent of knowing participation." Id. at 804 (explaining that "[l]awful services that are not peculiarly tailored and necessary to a particular crime but are fungible with others generally available to the public are not the functional equivalent of knowing participation"). It follows, as the Second Circuit has observed, that "[a] sentencing court must consider the role and actions of the unknowing participants in addition to the raw number of innocent participants, and the court must summarize its consideration of both." United States v. Chacko, 169 F.3d 140, 151 (2d Cir. 1999) (citing Carrozzella, 105 F.3d at 804).
In determining whether a defendant is an "organizer or leader," courts are directed to consider a variety of factors, including:
[T]he exercise of decision making authority, the nature of participation in the commission of the offense, the recruitment of accomplices, the claimed right to a larger share of the fruits of the crime, the degree of participation in planning or organizing the offense, the nature and scope of the illegal activity, and the degree of control and authority exercised over others.
U.S.S.G. § 3B1.1, cmt. n. 4. "There need not be proof of each and every factor before a defendant can be termed an organizer or leader." United States v. Tejado-Beltran, 50 F.3d 105, 111 (1st Cir. 1995). Nor must a defendant have been the organizer or leader of more than one participant in the offense. See United States v. Zichettello, 208 F.3d 72, 107 (2d Cir. 2000) (noting that a defendant is "subject to the enhancement even if [he] . . . managed only one other participant, not five"); see also U.S.S.G. § 3B1.1, cmt. n. 2.
The Government argues that, besides Barbera and Gelardo, the fraud scheme here involved Dr. Anthony Scarafile ("Scarafile"), Marina Adelman ("Adelman"), and Clare Watkins ("Watkins"), and that Scarafile, Adelman and Watkins were knowing participants in the underlying offense.
Scarafile, Barbera's brother, worked in the same office as Barbera and signed payroll checks on occasion for him. Scarafile testified at trial that at the time he was signing Gelardo's payroll checks, he never saw Gelardo in the office and never observed Gelardo working in the office. He also testified that he had asked Barbera why Gelardo was on the payroll, and been told in response that Gelardo was going through a difficult time and that Barbera was helping him.
Adelman, who worked for Barbera as his office manager from approximately 1990 until 2001, testified that she never saw Gelardo performing any work in Barbera's medical office. Although Adelman had the responsibility of hiring employees for the medical practice, she testified that she did not hire Gelardo and that she never had a conversation with Barbera about what Gelardo's job was. When Barbera instructed Adelman to put Gelardo on the payroll, she did not question him, and she conveyed the instruction to Watkins. When Barbera subsequently instructed Adelman to put Gelardo on the medical practice's health insurance plan, Adelman conveyed that instruction to Watkins as well.
Watkins worked as a bookkeeper for Barbera's medical practice for approximately ten years from 1993 up to and including the time of trial and testified at trial that in approximately 1995 Barbera instructed her to put Gelardo on the payroll, that she then sent a W-4 form to Gelardo's address in Mount Vernon, New York, and that she proceeded to write payroll checks to Gelardo every two weeks from 1995 through 2000, which she mailed to Gelardo. Watkins further testified that she never met Gelardo in the ten years that she worked for Barbera's medical practice.
Based on the evidence established at trial, it does not appear that Scarafile, Adelman and Watkins were all knowing participants, as it is not clear that all three had the "specific knowledge" required to qualify them as participants under the first prong of U.S.S.G. § 3B1.1(a). United States v. Brinkworth, 68 F.3d 633, 642 (2d Cir. 1995) (concluding that the defendant's accountant was criminally responsible where he "knew that certain income reported on the financial statements was not reported on the tax returns, as he himself was the person who did not place the amounts on the returns"). Accordingly, Barbara may not be deemed the organizer or leader of "a criminal activity that involved five or more participants." U.S.S.G. § 3B1.1(a).
Nor does it appear that the criminal activity here was "otherwise extensive" under the second prong of U.S.S.G. § 3B1.1(a). The Government has suggested that the scheme perpetrated by Barbera included numerous unknowing participants at the Internal Revenue Service, the Union Fund and Maloney Associates, the entity that processed the relevant claims for insurance benefits. However, it has not been established that the services of the unknowing participants at the Internal Revenue Service, the Union Fund and Maloney Associates were "peculiar and necessary to the criminal scheme," as is required.Carrozzella, 105 F.3d at 804. Any such services provided do not appear "peculiarly tailored and necessary" to the underlying offense "but are fungible with others generally available to the public." Id. Accordingly, the unspecified employees of the Internal Revenue Service, the Union Fund and Maloney Associates will not be included in any assessment of whether there was an "otherwise extensive" involvement in the underlying scheme.
Nor does the involvement of Scarafile, Adelman and Watkins as unknowing participants acting along with Barbera and Gelardo satisfy the "otherwise extensive" prong, particularly in light of Scarafile's limited role. Although district courts were not precluded "from deciding in a particular case that organizing and leading five unknowing participants was not the functional equivalent of organizing or leading five knowing participants,"id. at 804, in light of the five participant prong, "`it would be anomalous to conclude that the presence of five individuals — not all of whom are participants — warranted an increase'" unless it were shown that the activity was the functional equivalent of an activity under the first prong of Section 3B1.1(a). Id. at 803 (quoting Tai, 41 F.3d at 1174). No such finding will be made here given the limited role played by Scarafile, and, accordingly, no four-level increase may be applied under U.S.S.G. § 3B1.1(a).
C. Remaining Calculations
In light of the foregoing discussion, the resulting adjusted offense level of 10. No additional calculations are required under U.S.S.G. § 3D1.4. See U.S.S.G. § 3D1.4, cmt. n. 1.
As Barbera has no known criminal convictions, he has zero criminal history points and a Criminal History Category of I.
Based on the adjusted offense level of 10 and a Criminal History Category of I, the guideline range for imprisonment is six to twelve months. Under the guidelines, if the applicable guideline range is in Zone B of the Sentencing Table, as is the case here, the minimum term may be satisfied by (1) a sentence of imprisonment, (2) a sentence of imprisonment that includes a term of supervised release with a condition that substitutes community confinement or home detention, provided that at least one month is satisfied by imprisonment, or (3) a sentence of probation that includes a condition or combination of conditions that substitute intermittent confinement, community confinement, or home detention for imprisonment. See U.S.S.G. § 5C1.1 (c).
The statutory maximum term of imprisonment for Counts One, Seven, Eight and Nine is five years per count, pursuant to 18 U.S.C. §§ 371, 664 and 1035. The statutory maximum term of imprisonment for Counts Two through Six is three years per count, pursuant to 26 U.S.C. § 7206. The statutory maximum term of imprisonment for Count Ten is twenty years, pursuant to 18 U.S.C. § 1341. The statutory maximum term of imprisonment for Count Eleven is ten years, pursuant to 18 U.S.C. § 1347.
If a term of imprisonment is imposed on Counts One and Seven through Eleven a term of supervised release of not more than three years may be imposed, pursuant to 18 U.S.C. § 3583 (b) (2). A term of supervised release of not more than one year may be imposed if a sentence of imprisonment is imposed on Counts Two through Six pursuant to 18 U.S.C. § 3583 (b) (3). Pursuant to 18 U.S.C. § 3624 (e), multiple terms of supervised release run concurrently.
The guideline range for a term of supervised release is at least two years but not more than three years pursuant to U.S.S.G. § 5D1.2 (a) (2). The guidelines provide, however, that "the term of supervised release imposed shall not be less than any statutorily required term of supervised release." U.S.S.G. § 5D1.2 (b). If a sentence of imprisonment of one year or less is imposed, a term of supervised release is not required but is optional, pursuant to U.S.S.G. § 5D1.1 (b). Supervised release is required if a term of imprisonment of more than one year is imposed or when required by statute, pursuant to U.S.S.G. § 5D1.1 (a).
Barbera is eligible for not less than one and not more than five years' probation by statute, pursuant to 18 U.S.C. § 3561 (c) (1). Pursuant to 18 U.S.C. § 3563 (a) (2), one of the following must be imposed as a condition of probation unless extraordinary circumstances exist: a fine, restitution, or community service. Multiple terms of probation may run concurrently, pursuant to 18 U.S.C. § 3564 (b).
Because the applicable guideline range is in Zone B of the Sentencing Table, Barbera is eligible for probation provided that a condition that substitutes intermittent confinement, community confinement, or home detention for at least six months is imposed, pursuant to U.S.S.G. § 5B1.1 (a) (2). If probation is imposed, the term must be at least one year but not more than five years, pursuant to U.S.S.G. § 5B1.2 (a) (1).
The statutory maximum fine for all counts is $250,000, pursuant to 18 U.S.C. § 3571. The fine range for the instant offense under the guidelines is from $2,000 to $20,000, pursuant to U.S.S.G. § 5E1.2 (c)(3)(A).
Subject to Barbera's ability to pay, the expected costs to the Government of any imprisonment, probation, or supervised release shall be considered in imposing a fine, pursuant to U.S.S.G. § 5E1.2 (d)(7). The most recent advisory from the Administrative Office of the United States Courts suggests a monthly cost of $1,931.97 to be used for imprisonment, a monthly cost of $292.21 for supervision, and a monthly cost of $1,590.66 for community confinement.
Full restitution to the victim is required under 18 U.S.C. §§ 3663A and 3664. Pursuant to U.S.S.G. § 5E1.1 (a)(1), where there is an identifiable victim, a restitution order shall be entered for the full amount of the victim's loss if such order is authorized under 18 U.S.C. § 3663A. Restitution in the amount of $1,095.69 is owed to Local 348 of the United Food and Commercial Workers International Health and Welfare Fund Major Medical Plan. Additionally, restitution in the amount of $36,705.15 is owed in tax loss and is to be paid to the federal, New York State and New York City governments as owed, respectively. As such, Barbera must pay a total of $37,800.84 in restitution.
The government alleges that Barbera owes approximately $42,774.00 in federal taxes and $14,125.15 in state and local taxes, comprising a total of $56,899.15 in tax loss. However, the amount Barbera paid in payroll taxes to the Social Security Administration over the course of Gelardo's "employment," which totals $6,373.00, should be calculated as an off-set to the computed tax loss. Additionally, the taxes paid by Gelardo over the course of his "employment" with Barbera, which total $13,821.00, should likewise be off-set against the total amount of calculated tax loss. As such, Barbera owes $36,705.15 in tax loss ($56,899.15-$6,373.00-$13,821.00=$36,705.15). Should Barbera produce adequate documentation to evidence the amount of state and local taxes paid by Gelardo over the course of his "employment" with Barbera, the Court will consider off-setting the restitution amount accordingly.
A special assessment of $100 per count is mandatory, pursuant to 18 U.S.C. § 3013.
Pursuant to the Violent Crime Control and Law Enforcement Act of 1994, all offenders on probation, parole or supervised release for offenses committed after September 13, 1994, are required to submit to one drug test within fifteen days of commencement of probation, parole or supervised release and at least two drug tests thereafter for use of a controlled substance, unless ameliorated or suspended by the court due to its determination that the defendant poses a low risk of future substance abuse as provided in 18 U.S.C. §§ 3563(a) (5) and 3583 (d).
1. A Downward Departure Based on Barbera's Prior Charitable Works Is Not Warranted
Barbera contends that his dedication to charity warrants a downward departure from the sentencing range prescribed by the guidelines. In support his contention, Barbera has submitted numerous letters attesting to his considerable efforts and commitment to civic and charitable causes. These sustained efforts, according to Barbera, make his case "significantly [different] from the `heartland' cases covered by the guidelines," U.S.S.G. § 5K2.0 cmt., and justify a downward departure from the guidelines offense level. The Government objects to Barbera's request.
Civic, charitable and public service "and similar prior good works are not ordinarily relevant in determining whether a sentence should be outside the applicable guideline range." U.S.S.G. § 5H1.11, p.s; accord United States v. Rioux, 97 F.3d 648, 663 (2d Cir. 1996). Accordingly, prior charitable works, however commendable and extensive, constitute a discouraged factor with regard to the decision to downwardly depart from a guideline range, see U.S.S.G. § Ch. 5, Pt. H, intro. cmt., and may only provide the basis for a downward departure where "that factor is present to an exceptional degree or in some other way makes the case different from the ordinary case where the factor is present." Koon v. United States, 518 U.S. 81, 96 (1996). Whether the factor is present to the exceptional degree required in Barbera's case is to be "determined in large part by comparison with the facts of other Guidelines cases." Id. at 98.
Although the Second Circuit has upheld a downward departure premised on the combination of the defendant's charitable and civil good deeds and his serious medical condition, see Rioux, 97 F.3d at 663, Barbera has cited no authorities demonstrating that a downward departure based on such deeds alone is permissible nor any authorities suggesting that charitable and civic involvement akin to Barbera's is so exceptional as to warrant a departure here.
In opposition, the Government has pointed to several authorities rejecting the notion that the charitable and civic deeds of affluent or professionally successful defendants warrant downward departures. See, e.g., United States v. Thurston, 358 F.3d 51, 80-81 (1st Cir. 2004) (reversing the district court's grant of a downward departure because of the defendant's good works, since the defendant's position as vice president of a medical testing company, "which gave him the resources to undertake many of his charitable works, also enabled him to perform the crime" of health care fraud and helped to render his good works unexceptional), petition for cert. filed, ___ U.S.L.W. ___ (U.S. June 16, 2004) (No. 03-1670); United States v. Kohlbach, 38 F.3d 832, 838 (6th Cir. 1994) (explaining that "it is usual and ordinary, in the prosecution of similar white-collar crimes involving high-ranking corporate executives such as Crouse, to find that a defendant was involved as a leader in community charities, civic organizations, and church efforts" and concluding that the defendant's involvement was not "sufficiently unusual" to warrant a downward departure) (emphasis in original), on appeal after remand sub nom United States v. Crouse, 78 F.3d 1097, 1101-02 (6th Cir.) (noting that "it is not unusual for white collar executives to have a record of substantial community contributions because such activities are part-and-parcel of their positions" and concluding that "we must be content to thank [the defendant] for his generous efforts, [as] they are not sufficient to allow him to serve less time for the offense that he has committed"), vacated, 519 U.S. 801 (1996), on appeal after remand, 145 F.3d 786 (6th Cir. 1998) (concluding that, while charitable work is not a forbidden ground for departure, the defendant's community works were "not unusual for a prominent businessman" and the district court had failed to justify the magnitude of the downward departure related to those charitable works); United States v. Haversat, 22 F.3d 790, 796 (8th Cir. 1994) (concluding that the defendant's charitable and volunteer activities did not make him an atypical defendant and observing that "[i]t would appear that high-level business executives, those who are in a position to commit Sherman Act violations, also enjoy sufficient income and community status so that they have the opportunities to engage in charitable and benevolent activities"); cf. United States v. McClatchey, 316 F.3d 1122, 1135 (10th Cir. 2003) (noting that community and civic involvement is not out of the ordinary for high-ranking members of the business community, that district courts are expected to view evidence of such involvement "with the skepticism of experience," and that, "[l]ikewise, excellent character references are not out of the ordinary for an executive who commits white-collar crime; one would be surprised to see a person rise to an elevated position in business if people did not think highly of him or her").
The testimonial letters presented by Barbera and the information concerning his charitable and civic activities contained in the PSR demonstrate that Barbera has been involved in a number of charitable, civic and volunteer organizations and has earned the devotion and admiration of many of those with whom he has worked. According to his submission in support of a downward departure, Barbera has helped to raise over one million dollars for St. Jude's Children's Research Hospital in Memphis, Tennessee, over the past decade, including by planning an annual fundraising dinner and, since October 2002, serving on an advisory board for the hospital. He has also been involved in aiding the Cigar Family Charitable Foundation, which raises money to equip hospitals and schools in the Dominican Republic, and has supported the Cooley's Anemia Foundation through involvement in various fundraising events. It is asserted that Barbera sits on the Board of the Path to Peace Foundation, a Catholic charity, and that he is one of the largest benefactors to the Brentwood Foundation, an organization which raises money to purchase custom-fitted vans for the disabled. Since 1988, Barbera has been involved with the Columbus Citizens Foundation, an organization which he characterizes as raising and distributing funds for charitable and educational purposes and which the Government describes as primarily a social club.
No sworn affidavits or other evidence concerning the exact nature of Barbera's involvement in these various organizations have been presented.
The letters submitted by Barbera from friends, family, former patients, police officers, doctors, business leaders, lawyers, and members of the clergy, among others, attest to his considerable and laudable involvement in many of the organizations just named and to the respect and admiration he has earned through his professional and charitable activities. In view of Barbera's professional success and considerable assets and given the nature of the offense, however, this record of demonstrated commitment to charitable endeavors, while exemplary, is not extraordinary or exceptional to the degree required to justify a downward departure. See, e.g., United States v. Scheiner, 873 F. Supp. 927, 934 (E.D. Pa.) (concluding that a downward departure for a doctor convicted of conspiring to defraud an insurance company was not warranted, despite the defendant's financial sponsorship of several basketball teams, his service on various community boards, his work in a free clinic, and his helpful role in the community, because the defendant's prior good works were not extraordinary in the context of the defendant's background and in light of the absence of mitigating financial factors and the lengthy duration of the offense, among other factors), aff'd, 61 F.3d 897 (3d Cir. 1995).
Insofar as Barbera's submission may be read to suggest that the instant offense was out of character for Barbera or that his life, apart from this case, has been exemplary, the prolonged duration of Barbera's criminal conduct precludes any departure for aberrant behavior. See U.S.S.G. § 5K2.20 cmt. n. 1. Likewise, the high regard in which he is evidently held by the colleagues and friends who have written letters on his behalf does not distinguish him from other white-collar criminals in any manner that would merit a downward departure. See, e.g., McClatchey, 316 F.3d at 1135. Finally, the financial, professional and personal consequences that Barbera and his family are said to have already suffered as a result of his prosecution provide no basis for a downward departure under the facts present here. 2. A Downward Departure Based on the Adverse Effects Caused to Employees and Other Innocent Parties Is Not Warranted
Barbera argues that the Court should grant a downward departure because of the adverse consequences that would fall upon his employees and his patients, who are innocent third parties, should he be imprisoned for any period of time. To support this contention, Barbera cites United States v. Milikowsky, 65 F.3d 4, 8-9 (2d Cir. 1995), in which the Second Circuit affirmed the district court's decision to grant a downward departure because the defendant was able to show that his incarceration would cause an irreplaceable breach in the leadership of his financially troubled company, which, in turn, would lead to the closing of the business and the loss of jobs for its employees.
The defendant in Milikowsky employed between 150 and 200 employees. Barbera, on the other hand, employs only four, including his half-brother who also works as a doctor. While Barbera's conviction and potential term of incarceration may lead to the closing of his practice and the loss of jobs for his employees, these adverse consequences in no way mirror those adverse consequences caused by the incarceration of the defendant in Milikowsky. As such, no downward departure will be granted to Barbera based on the potential adverse effects imposed on his four employees.
Furthermore, the Court appreciates the hardship in finding a new doctor imposed on Barbera's patients, many of whom are elderly and ill and all of whom are innocent third parties. Although many of these patients have sought treatment from Barbera exclusively, Barbera's medical expertise is not irreplaceable. Despite the inevitable inconvenience of continuing an on-going treatment for a chronic illness with a new doctor should Barbera be incarcerated, such adverse effects thrust upon Barbera's patients provide no basis for a downward departure under the facts presented.
The Remaining Factors of 18 U.S.C. § 3553(a)
Having engaged in the Guideline analysis, this Court also gives due consideration to the remaining factors identified in 18 U.S.C. § 3553 (a) in order to impose a sentence "sufficient, but not greater than necessary" as is required in accordance with the Supreme Court's decision in United States v. Booker, 125 S.Ct. 738 (2005) and the Second Circuit's decision in United States v. Crosby, 397 F.3d 103 (2nd Cir. 2005). Barbera argues that the Court should pay particular attention to section 3553(a)(1), which asks that the sentence imposed consider both "the nature and circumstances of the offense and the history and characteristics of the defendant," and to section 3553(a)(2)(A), which demands that the penalty "provide just punishment for the offense" that simultaneously "afford[s] adequate deterrence to criminal conduct" as required by § 3553(a)(2)(B). After evaluating all the factors articulated under § 3553(a), as well as the lower likelihood of recidivism given Barbera's age and the nature of the charged conduct, see United States v. Hernandez, No. 03 Cr. 1257 (RWS), 2005 WL 1242344, at *5 (S.D.N.Y. May 24, 2005), the Court will impose a Guideline sentence.
The Sentence
For the instant offense, Barbera is sentenced to six months' imprisonment to be followed by three years' supervised release. Supervised release is imposed as to Counts One and Seven through Eleven, but not as to Counts Two through Six. A special assessment fee of $1,100 payable to the United States is mandatory and due immediately.
In consideration of the factors listed in 18 U.S.C. § 3572, a fine of $20,000 is imposed. The fine shall be paid in full not later than 30 days from imposition of sentence.
Barbera shall make restitution payable to the Clerk, U.S. District Court, for disbursement to Local 348 of the United Food and Commercial Workers International Health and Welfare Fund Major Medical Plan in the amount of $1,095.69. The amount of restitution shall be forwarded to Local 348 of the United Food and Commercial Workers International Health and Welfare Fund Major Medical Plan, 9235 Fourth Avenue, Brooklyn, New York 11209, to the attention of Raphael Chavez.
Restitution in the amount of $36,705.15 is owed as a result of tax loss to the federal, New York State and New York City governments and must be paid, respectively. Should Barbera provide to the Court adequate documentation to evidence Gelardo's payment of state and local taxes during the period of the fraudulent scheme, the necessary off-sets will be made to adjust the total restitution owed as a result of tax loss. The factors set forth in 18 U.S.C. § 3664(f) (2) having been considered, the restitution amount, totaling $37,800.84, shall be paid in full immediately.
As Barbera has kept all court appearances, has been in compliance with all terms and conditions of his pretrial release, and is not viewed as a flight risk or a danger to the community, he is deemed a good candidate for voluntary surrender. Barbera is therefore directed to voluntarily surrender to a facility designated by the Bureau of Prison, or to the U.S. Marshals, within 45 days of imposition of sentence.
If Barbera is engaged in a Bureau of Prison non-UNICOR work program, he shall pay $25 per quarter toward the criminal financial penalties. If, however, Barbera participates in the Bureau of Prison's UNICOR program as a grade 1 through 4, he shall pay 50% of his monthly UNICOR earnings toward the criminal financial penalties, consistent with Bureau of Prison regulations at 28 C.F.R. § 545.11.
As mandatory conditions of supervised release, Barbera shall (1) abide by the standard conditions of supervision (1-13); (2) not commit another federal, state, or local crime; (3) not illegally possess a controlled substance; and (4) not possess a firearm or destructive device.
The mandatory drug testing condition is suspended based on the determination that Barbera poses a low risk of future substance abuse.
Barbera shall not incur new credit charges or open additional lines of credit without the approval of the probation officer unless he is in compliance with any installment payment schedule set. In addition, he shall provide the probation officer with access to any requested financial information.
Barbera shall report to the nearest Probation Office within 72 hours of release from custody and shall be supervised by the district of residence.
This sentence is subject to modification at the sentencing hearing now set for October 20, 2005.
It is so ordered.