U.S. v. Jaffe
| Decision Date | 02 August 2005 |
| Docket Number | Docket No. 04-1278-cr. |
| Citation | 417 F.3d 259 |
| Parties | UNITED STATES of America, Appellee, v. Bernard JAFFE, Jr., Defendant-Appellant. |
| Court | U.S. Court of Appeals — Second Circuit |
Walter Mack, Doer Rieck & Mack (David Rivera and Eileen Minnefor, on the brief), New York, New York for Defendant-Appellant.
Miriam H. Baer, Assistant United States Attorney (David N. Kelly, United States Attorney for the Southern District of New York, on the brief, Peter G. Neiman, of counsel), for Appellee.
Before: WINTER, KATZMANN, and RAGGI, Circuit Judges.
Bernard Jaffe, Jr., who pled guilty to making false statements to a federally-insured bank, appeals from a restitution order entered by Judge Hellerstein. He claims that the restitution schedule violates the Mandatory Victims Restitution Act of 1996 ("MVRA"), 18 U.S.C. § 3663A et seq.; violates the Consumer Credit Protection Act ("CCPA"), 15 U.S.C. § 1601 et seq.; exceeds the district court's authority by ordering payment from a specific asset; violates the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1056; and should have been less severe given the uncertainties of his financial situation. We reject these arguments and affirm.
Jaffe was a Vice-President of Salomon Smith Barney and a longstanding Bank of New York ("BNY") customer. In the mid-1980's, BNY extended him ever increasing unsecured loans for purposes of his personal trading in the stock market. In order to secure a credit line for each year, Jaffe was required to repay the entire line of credit from the preceding year and provide BNY with a signed financial statement setting forth his assets and liabilities. These statements sometimes included Form W-2 Wage and Tax Statements. Each year Jaffe was able to repay BNY using the profits from trading as well as funds borrowed from other banks. Stock market declines in 2000 and 2001, however, left Jaffe unable to repay the $20 million lent him by BNY in 2000. In January 2002, Jaffe so informed BNY and proposed payment over a five year period. BNY filed a complaint with the FBI alleging that Jaffe had defrauded it out of $20 million by submitting false financial information in order to obtain his loans. The ensuing investigation revealed that Jaffe had submitted false W-2 forms, false portfolio valuation statements, and false tax returns. BNY also commenced civil litigation against both Jaffe and his daughter in New York and Florida.
On May 2, 2003, Jaffe pled guilty to one count of making a false statement to a federally insured bank in violation of 18 U.S.C. § 1014. In his plea agreement, Jaffe stipulated that his range of imprisonment under the Sentencing Guidelines was 51-63 months.
Three issues were contested at sentencing: (i) whether Jaffe was entitled to credit for acceptance of responsibility; (ii) whether Jaffe was entitled to a downward departure for extraordinary family circumstances; and (iii) the appropriate restitution schedule. United States v. Jaffe, 314 F.Supp.2d 216, 217 (S.D.N.Y.2004). In decisions not challenged on appeal, Judge Hellerstein granted Jaffe credit for acceptance of responsibility but denied his request for a downward departure for extraordinary family circumstances. Id. at 228.
The issues raised on appeal all involve the schedule for restitution payments to BNY imposed by the court.1 Prior to sentencing, the Department of Probation had recommended that Jaffe be required to pay restitution in "monthly installments of not less than 15% of [his] total monthly income over a period of supervision to commence 30 days after . . . release from custody. . . ." Instead, the district court ordered Jaffe to pay restitution "according to the following schedule: (i) $100,000 by March 19, 2004; (ii) $1.5 million by January 31, 2005; and (iii) Installments of the greater of $150,000 or fifteen percent of Jaffe's post-tax annual net income, by January 31, 2005, and every successive January 31 thereafter." Id. The district court has since modified the restitution order to set the $1.5 million payment for September 15, 2005, instead of January 31, 2005, and to begin the installment payments of $150,000 on January 31, 2006, instead of January 31, 2005.
The district court fashioned the restitution schedule based on Jaffe's assets and income. Not including almost $2 million in assets transferred between 1997 and 2002 to his daughter, son, and girlfriend, Jaffe owns a mortgage-free condominium in Palm Beach, Florida worth approximately $1.3 million; an individual retirement account ("IRA") worth approximately $1.9 million; and a Lehman Brothers annuity account worth approximately $220,000. Based on monies received from social security, his pension/annuity, his IRA distribution, and the Lehman Brothers account, Jaffe's annual gross income is $213,703. According to Jaffe, his annual net income is only $139,512.
The district court declined to consider Jaffe's claim of financial obligations to his adult daughter, Brenda Jaffe, who is said to suffer from depression and cancer. The court found that Jaffe owed "no financial obligation, legal or moral, to prefer her over the victim of his fraud." Id. at 225. The district court found that the daughter, Brenda, was neither a dependent nor a mental incompetent. Id. It stated that "Jaffe's desire to continue to funnel proceeds gained from his frauds to his family does not constitute a `financial obligation[ ]. . . to dependents' which should be considered under 18 U.S.C. § 3664(f)(2)(C), in fashioning a restitution payment schedule to the victim of his fraud." Id. (alterations in original). In creating the restitution schedule, the district court also rejected Jaffe's arguments that the lump sum payment requirements would violate Florida's homestead law by requiring him to sell his Florida condominium, id. at 226-27; that the restitution schedule would leave him destitute, especially if BNY prevailed in its civil litigation, id. at 227; and that use of payments from his pension plan to meet the schedule would violate ERISA's anti-alienation clause, id. at 227-28.
Jaffe renews on appeal the arguments made in the district court, and we deal with those in turn. In the case of restitution orders, we review issues solely of law de novo, findings of adjudicative fact for clear error, and the multi-factor balancing aspects of such an order for abuse of discretion. United States v. Lucien, 347 F.3d 45, 52-53 (2d Cir.2003). As we stated in United States v. Ismail:
Because a restitution order requires a delicate balancing of diverse, sometimes incomparable factors, . . . the sentencing court is in the best position to engage in such balancing, and its restitution order will not be disturbed absent abuse of discretion. [I]t makes little sense for an appellate court, significantly more removed from the case than the district court, to scrutinize the decision closely.
219 F.3d 76, 78 (2d Cir.2000) (per curiam) () (internal quotation marks and citations omitted).
The MVRA directs district courts to order restitution in the full amount of each victim's loss "without consideration of the economic circumstances of the defendant." 18 U.S.C. § 3664(f)(1)(A). In fashioning a schedule for full restitution the district court must consider:
(A) the financial resources and other assets of the defendant, including whether any of these assets are jointly controlled;
(B) projected earnings and other income of the defendant; and
(C) any financial obligations of the defendant; including obligations to dependents.
18 U.S.C. § 3664(f)(2)(A)-(C). With regard to financial obligations, the defendant has the burden of establishing any financial obligation to an alleged dependent. 18 U.S.C. § 3664(e).
Jaffe urges us to vacate the schedule and remand because the district court expressly declined to consider Jaffe's financial obligations to his daughter Brenda. Jaffe, 314 F.Supp.2d at 225. Brenda Jaffe is a 43-year old, educated woman who lives alone in Delray Beach, Florida. She suffers from depression, anxiety disorders, and more recently breast cancer. Jaffe does not claim that Brenda has been declared legally incompetent or that he has legally enforceable obligations to her. She has declined to disclose her financial circumstances for purposes of this proceeding, and there is no basis for knowing her financial needs.
Dependents are defined differently in different legal contexts,2 and we have never defined dependent for purposes of the MVRA. Jaffe argues that because adult spouses are considered dependents under the MVRA, see United States v. Carboni, 204 F.3d 39, 47 (2d Cir.2000), adult children should be given similar status. We do not agree.3
We hold that for purposes of Section 3664, a "dependent" is someone that the defendant has a legal obligation to support. Even if status as a "dependent" varies with the legal context, there is no reason to indulge in a judge-made expansion of the term without some basis in federal, state, or local law. The MVRA was designed to compensate victims by ensuring that criminal defendants "pay full restitution to the identifiable victims of their crimes." S.Rep. No. 104-179, at 12 (1995), reprinted in 1996 U.S.C.C.A.N. 924, 925. It would dilute that purpose to construe "dependent" as requiring sentencing judges to consider every relationship that might be deemed a moral obligation. Criminals have obligations to victims that Congress deemed sufficiently important to render them legally enforceable. To construe "dependents" to include various family members, friends, and lovers based on vague and expandable concepts of moral obligations would put such persons on a par with victims, render enforcement of restitution orders difficult by generating issues as to whether the defendant owes and is actually fulfilling such...
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