U.S.A v. Kumar, Docket No. 06-5482-cr(L)

Citation617 F.3d 612
Decision Date12 August 2010
Docket Number06-5654-cr(CON).,Docket No. 06-5482-cr(L)
PartiesUNITED STATES of America, Appellee,v.Sanjay KUMAR and Stephen Richards, Defendants-Appellants.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

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Eric R. Komitee, Assistant United States Attorney (David C. James, Jason A. Jones, of counsel), for Benton J. Campbell, United States Attorney for the Eastern District of New York, Brooklyn, N.Y., for Appellee.

Paul Shechtman (Nathaniel Z. Marmur and Kathryn Moore Martin, on the brief), Stillman, Friedman & Shechtman, P.C., New York, N.Y., for Defendant-Appellant Sanjay Kumar.

Christopher J. Gunther (David M. Zornow, on the brief), Skadden, Arps, Slate, Meagher & Flom LLP, New York, N.Y., for Defendant-Appellant Stephen Richards.

Before: WALKER, SACK, LIVINGSTON, Circuit Judges.

Judge SACK dissents in part in a separate opinion.

JOHN M. WALKER, JR., Circuit Judge:

Defendants-Appellants Sanjay Kumar and Stephen Richards appeal from separate judgments of conviction by the district court (I. Leo Glasser Judge ), pursuant to their guilty pleas to several counts of conspiracy, securities and wire fraud, obstruction of justice, and perjury. After accepting their pleas, the district court calculated defendants' Guidelines ranges for their fraud and obstruction offenses pursuant to the Sentencing Guidelines Manual (“Guidelines”) in effect at the time of their sentencings, and sentenced Kumar and Richards to non-Guidelines sentences of imprisonment of 144 months and 84 months, respectively, and ordered restitution payments of $800 million and $29 million, respectively.

On appeal, Richards challenges his conviction for obstruction of justice, arguing that the indictment failed to properly charge him with that offense. In addition, Richards attacks his guilty plea to all counts as constitutionally infirm because it resulted from undue coercion by the government. Both defendants argue that, by calculating their Guidelines range according to the Guidelines in effect at sentencing, instead of at the time the fraud offenses were committed, the district court sentenced them in violation of the Ex Post Facto clause. They also claim that the district court improperly denied them acceptance of responsibility credit, and that its orders of restitution were based on erroneous loss calculations.

We find no infirmity in Richards's conviction, in the district court's application of the 2005 version of the Guidelines,1 in the district court's loss determination, or in the denial of Kumar's request for acceptance of responsibility credit at sentencing. We conclude, however, that the district court erroneously denied Richards a reduction on the basis of his acceptance of responsibility and remand for resentencing on that basis.

BACKGROUND

The following facts are material to this appeal.

Kumar joined Computer Associates (“CA”), a publicly traded corporation, in August 1987 and was elevated to CEO in August of 2000 and to Chairman of the Board of Directors in 2002. Richards joined CA in 1988 and became Head of North American Sales in 1999. During the tenure of both defendants, CA engaged in a fraudulent accounting practice known as the “35-day month,” whereby CA backdated contracts executed in the first few days of a financial quarter to recognize that revenue in the prior quarter. The purpose of the 35-day month practice, which began in the 1980s under Kumar's predecessor, was to deceive investors into believing that the company had met or exceeded its quarterly earnings estimates.

In February 2002, the United States Attorney's Office (“USAO”) and Securities and Exchange Commission (“SEC”) began a joint investigation into the 35-day month practice as contravening both accounting principles and federal securities law. As part of its investigation, government investigators sought witness statements from CA personnel. On June 9, 2003, the USAO and SEC requested that CA conduct its own internal investigation into the practice and give the USAO and SEC “direct access” to company employees. CA's outside counsel advised CA to comply fully with the investigation.

On August 25, 2003, the SEC subpoenaed the testimony of ten individuals associated with CA, including Kumar and Richards. The SEC interviews were held at the USAO office in Central Islip, New York. On September 22, 2003, prosecutors and SEC staff told Richards's counsel that Richards was a target of their criminal investigation, and the SEC reiterated its demand that Richards comply with the subpoena for his testimony. In early October 2003, CA told Richards that he would be terminated if he didn't comply with the subpoena. On October 22, 2003, CA's outside counsel interviewed Richards, and the following day, Richards testified before the SEC. Richards falsely denied knowledge of the 35-day month practice during both meetings and in his testimony.

On September 22, 2004, CA entered into a deferred prosecution agreement with the USAO and a civil settlement with the SEC. The following day, an indictment charging Richards and Kumar was unsealed. A superceding indictment was filed on May 17, 2005. By this indictment, Richards was charged with both conspiracy to commit, and substantive counts of, securities and wire fraud, as well as filing false public statements with the SEC and perjury. Richards was also charged under 18 U.S.C. § 1512(c) with obstruction of justice arising out of his false exculpatory statements to CA's counsel and the SEC.

The superceding indictment charged Kumar with both conspiracy to commit, and substantive counts of, securities and wire fraud, as well as filing false public statements with the SEC and making false statements to the FBI. Kumar was also charged with obstruction of justice. However, Kumar's obstruction charge (also brought pursuant to 18 U.S.C. § 1512(c)) arose out of different conduct from that of Richards. Specifically, the government alleged that Kumar, in an effort to cover up the existence of the 35-day month practice, lied to CA's outside counsel, instructed CA's general counsel to coach CA employees to lie, authorized CA's general counsel to pay a $3.7 million bribe to an individual to procure his silence, and lied to FBI agents and others during his interview at the USAO's office.

Both Richards and Kumar made various motions to dismiss the charges against them. Relevant to this appeal, first they unsuccessfully moved to dismiss the obstruction charges, arguing that their oral statements to government investigators were beyond the reach of 18 U.S.C. § 1512(c), which they claimed was confined to documentary evidence.

Next, Richards moved to suppress his false statements to CA's outside counsel and the SEC, claiming that they were coerced in violation of the Fifth Amendment. Without addressing the merits, the district court denied the motion on the basis that Richards had not shown “good cause” for failing to timely file the motion to suppress pursuant to the court-ordered deadline.

In April 2006, both defendants pled guilty to all charges and the Probation Department prepared a Presentence Report (“PSR”) for each defendant. Both PSRs calculated defendants' Guidelines ranges based on the instructions provided in the 2005 Sentencing Guidelines, notwithstanding the fact that the 35-day month practice-the basis for the securities fraud charges-ended in 2000. Richards's PSR arrived at an offense level of 50 and a Guidelines range of life imprisonment, and Kumar's PSR recommended an offense level of 51 and a Guidelines range of life imprisonment. Both PSRs calculated losses to the public resulting from the 35-day month practice to exceed $400 million.

In August 2006, the defendants submitted objections to the Guidelines calculations in the PSR. The defendants argued that application of the 2005 Sentencing Guidelines (effective November 2005) to the securities fraud offenses instead of the 1998 Sentencing Guidelines (effective November 1998) would violate the Ex Post Facto clause because the 2005 Guidelines contained several significant enhancements for securities fraud that were not in effect when the fraud offenses were committed.2 The defendants further objected to the $400 million victim loss calculation as overinflated.3

In November 2006, the district court sentenced both defendants under the 2005 Guidelines. At sentencing, the district court rejected both defendants' objections to their PSRs, finding that (1) because the Guidelines were advisory, the Ex Post Facto clause was not implicated by sentencing decisions, and (2) the $400 million figure was not erroneous, as it was based on the persuasive testimony of the government's expert witness. The district court also rejected an application by both defendants for a two-level reduction to the Guidelines' base offense level for acceptance of responsibility. The district court found that Kumar had not sufficiently accepted responsibility for his crimes to warrant the departure and that Richards's acceptance of responsibility was [un]timely” because he pled guilty “just ... two weeks before the trial was to begin.” See Richards Sentencing Tr. 15:14, 16:1-2, Nov. 14, 2006; see also Richards Sentencing Tr. 16:5-6 (noting that, in light of Richards's non-Guidelines sentence, rejection of the two-level reduction “ma [de] very little difference insofar as what [his] sentence [was] going to be”). 4

The district court then decided to impose non-Guidelines sentences for both defendants, sentencing downwardly from the Guidelines' calculation of life imprisonment. The court found that [t]o impose th[e] sentence[s] [recommended by the Guidelines] in this case would shock the conscience of this Court ... [and] the conscience of the reasonable person.” Kumar Sentencing Tr. 65:24-66:1, Nov. 2, 2006; see also Richards Sentencing Tr. 25:5-9. Accordingly, the court sentenced Kumar and...

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