Opinion
01 Cr. 890 (RWS)
March 22, 2002
SENTENCING OPINION
Defendant Olga Khmelnitsky ("Khmelnitsky") pleaded guilty on September 10, 2001 to two counts of making false statements on federal income tax returns, in violation of 26 U.S.C. § 7206 (1). For the reasons set forth below, Khmelnitsky will be sentenced to 6 months imprisonment, followed by two years of supervised release. Khmelnitsky will be required to pay a fine of $3,000 by May 15, 2002, and a special assessment fee of $200 will be due immediately.
The Defendant
Khmelnitsky was born in Russia on April 4, 1958. Her parents immigrated to the United States in 1978. Khmelnitsky's father, age 63, is a retired baker and her mother, age 66, was a homemaker.
Both parents have extreme health issues. Khmelnitsky's father suffered a heart attack and had open heart surgery in 1988, which left him disabled and unable to work full time. He currently suffers from diabetes, poor circulation in his lower extremities, ulcers, and high blood pressure, for which he is medicated. Khmelnitsky's mother also suffers from high blood pressure, heart problems, ulcers, and a rare disorder named trigeminal neuralgia (intense facial pain that radiates throughout the face and jaw, which can be debilitating). As they are unable to care for themselves, Khmelnitsky plays a large role in their daily care and provides much of the finances for their monthly expenses. Khmelnitsky is also the primary caretaker for her maternal grandmother, age 82, who suffers from heart problems, high blood pressure, arthritis, and severe foot problems.
Khmelnitsky has one brother, Isaac (Fleyshmakher) Marks, age 34, who is also financially dependent on her. After failing in a business venture financed by Khmelnitsky, Marks has relied on Khmelnitsky to pay monthly bills on multiple mortgages. Marks, who lives in Chicago, is employed in the computer staffing industry earning $32,000 annually. His wife is a homemaker.
Khmelnitsky has been married for 25 years to Alex Khmelnitsky, who was also born in Russia. His field of employment is financial consulting, but his business is no longer operating. Khmelnitsky's husband assists her with the daily operations of her business, O.K. Scanning Services, which is located in their home. The two have two daughters, ages 24 and 17. The eldest daughter was born with focal seizure disorder, brain damage that occurred at birth, and is dependent on Khmelnitsky.
Khmelnitsky has been self-employed as an ultrasound technician since 1993. She owns a portable ultrasound unit and does independent contracting. To receive payment for her services, Khmelnitsky bills private insurance companies for payment of services rendered. She earns approximately $25,000 per month.
The Offense
An investigation was conducted by the Department of Health and Human Services, Office of Inspector General, Office of Investigations ("HHS-OIG-OI") and the Internal Revenue Service ("IRS"), which led to Khmelnitsky's prosecution for Medicare Fraud in the Southern District of New York. As a result of that prosecution, it was disclosed that kickbacks received by Khmelnitsky were claimed as legitimate business expenses. This determination led to the instant offense tax-related prosecution.
Khmelnitsky served as president of O.K. Scanning Services, and received payment for services from the patients' insurance companies. Many of those patients were insured by Medicare. Through use of a confidential informant, the Government established a relationship with Khmelnitsky whereby Khmelnitsky agreed to pay kickbacks to the informant in exchange for referrals of patients, some of whom were insured by Medicare. Between September 1998 and March 8, 1999, the informant received cash payments from Khmelnitsky pursuant to this arrangement.
In April 1998 and April 1999, Khmelnitsky filed income tax returns that falsely reported her income from O.K. Scanning Services. Khmelnitsky falsely claimed deductions for business expenses (the bribes discussed above) which were personal in nature. For the tax years 1997 and 1998, Khmelnitsky's actual taxes due and owing total $296,131, not the $71,910 that she reported owing.
On September 10, 2001, Khmelnitsky was charged with two counts of falsely subscribing to federal income tax returns, in violation of 26 U.S.C. § 7206 (1), in connection with her 1998 and 1999 filings.
The Guidelines
The Presentence Report prepared by the U.S. Probation Office assigns Khmelnitsky's offense conduct under the United States Sentencing Guidelines (the "Guidelines") at a base offense level of 16 in violation of 26 U.S.C. § 7206(1). Because of Khmelnitsky's timely acceptance of responsibility, three levels are subtracted pursuant to Guidelines § 3E1.1., yielding a total offense level of 13.
Khmelnitsky has one prior conviction for the kickbacks discussed above, giving her one criminal history point and a Criminal History Category of I. The Guidelines range for an offender with a total offense level of 13 and a criminal history category of I is 12 to 18 months.
The Probation Office has recommended a downward departure based on Khmelnitsky's extraordinary familial obligations pursuant to Guidelines §§ 5K2.0 and 5H1.6, and has suggested that twelve months of home detention would better serve as punishment and deterrence in this case. Khmelnitsky has submitted a memorandum in support of departure, supported by letters from various family members. The Government has opposed a departure under these circumstances.
The Sentence
A departure is warranted based upon the family circumstances described above, and Khmelnitsky will be sentenced to 6 months imprisonment. The imposition of a jail sentence is warranted by the seriousness of the crime committed, and those dependent upon Khmelnitsky are presumed to have benefitted from the tax evasion. At the same time, their dependency and fragile conditions warrant the departure. Pursuant to Guidelines § 5D1.2, the term in custody will be followed by two years of supervised release.
Khmelnitsky is to report to the nearest Probation Office within 72 hours of his release from custody, and supervision shall be in the district of residence. As mandatory conditions of supervised release, Khmelnitsky shall (1) not commit another federal, state, or local crime; (2) not illegally possess a controlled substance; and (3) not possess a firearm or destructive devise.
The standard conditions of supervision (1-13) will apply, along with the following special conditions: (1) Khmelnitsky will comply with the directives of the Internal Revenue Service and the tax law in the resolution of her outstanding taxes, interest, and penalties; (2) Khmelnitsky will provide the probation officer with access to any requested financial information; and (3) Khmelnitsky shall not incur new credit charges or open additional lines of credit without the approval of the probation officer unless Khmelnitsky is in compliance with the installment payment schedule.
Khmelnitsky must pay a fine of $3,000, which shall be paid in full no later than May 15, 2002, and a special assessment fee of $200 is mandatory and is due immediately.
This sentence is subject to modification at the sentencing hearing now set for March 25, 2002.
It is so ordered.