U.S. v. Newman, 90-3645

• Decision Date: 19 June 1992
• Docket Number: No. 90-3645,90-3645
• Citation: 965 F.2d 206
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Steven R. NEWMAN, a/k/a Richard Newman, a/k/a Richard Genovese, a/k/a John Rome, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 206

965 F.2d 206

UNITED STATES of America, Plaintiff-Appellee, v. Steven R. NEWMAN, a/k/a Richard Newman, a/k/a Richard Genovese, a/k/a John Rome, Defendant-Appellant.

No. 90-3645.

United States Court of Appeals Seventh Circuit.

Argued Jan. 7, 1992.

Decided May 26, 1992.

Rehearing and Rehearing En Banc Denied June 19, 1992.

Thomas E. Karmgard, Asst. U.S. Atty., Danville, Ill., Rodger A. Heaton, Asst. U.S. Atty. (argued), Office of the U.S. Atty., Springfield, Ill., for U.S.

Curtis L. Blood, Collinsville, Ill. (argued), for defendant-appellant.

Before POSNER and EASTERBROOK, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

POSNER, Circuit Judge.

Steven Newman, a 37-year-old graduate of Ohio State University, pleaded guilty to two counts of fraud and was sentenced to ten years in prison. This was less than the statutory maximum of fifteen years, but it was a departure from the applicable guidelines range (24 to 30 months)--a departure that Newman describes as "spectacular" and asks us to disallow. (He also objects to one of the adjustments made to get to the 24 to 30 month range in the first place.) Newman was also ordered to make restitution of $46,500 to the victims of the fraud, but he makes no objection to this part of the sentence.

The series of upward departures from the guideline range that cumulatively increased Newman's prison sentence to ten years was based on information contained in a meticulous presentence report of 34 single-spaced pages, the government's and Newman's written objections to the report, and a hearing before the district judge at which a psychologist who was treating Newman's principal victim testified and the parties repeated their objections to the presentence report orally. Not to be overlooked is the photograph appended to Newman's written objections, which shows him and the victim, or rather principal victim, of his fraud, Diana Scharff, in the company of three dogs. Above the photo Newman had typed the following legend: "The Very Happy Couple. Living on Love. No Drugs and No Brainwashing."

The legend is a clue to the unusual character of this fraud case. The presentence report narrates a tale of deceit, sexual abuse, and virtual enslavement that unfolded over an eight-month period in 1988 and 1989. It began when Newman, falsely representing to a modeling agency that he was seeking models for employment in his advertising agency (which did not exist), obtained the name of Diana Scharff, a 20-year-old would-be model who was working at a fitness center in California. He met with her in California and shortly afterward persuaded her to fly to Reno to discuss a modeling contract with him. She swallowed the bait, and when she arrived he told her he would give her a modeling contract worth $100,000 to her. (Of course she never received a cent.) He told her to quit her job at the fitness center, and she did. They began to travel around the country together in ostensible quest of modeling assignments. He kept telling her that he had arranged for large sums of money to be deposited in her bank accounts in California and in Illinois (where her parents lived). Believing him, she wrote a number of checks on these accounts at Newman's direction to pay their travel and living expenses, and when these checks began to bounce--Newman having deposited no money in the accounts--he asked her parents to make good the overdrafts, promising to reimburse them. The parents did so and he reimbursed them, but with checks that bounced.

Diana Scharff had problems of some sort with her colon. Newman took control of her diet and medication. He administered massive doses of drugs, which made her sick. He used threats to compel her to have sexual intercourse with him, telling her that his real name was Genovese, that he was in the Mafia, that he would have her followed wherever she went, and that he would harm her and her family if she tried to leave him or peach on him. As a result, though she visited her parents without him on several occasions, she never told them what he had done to her. He told her that she was stuck with him because they were married, his brother (he told her) having bribed a judge in Nevada to issue a marriage license for them. He told her that he was possessed by a demon named "Derrick" who could read her mind--so she should forget about trying to escape. But to be on the safe side he confined her to their hotel room for weeks on end. He tied her down with belts and raped her. She became pregnant three times; the pregnancies were terminated by miscarriage or abortion.

He told her parents that Diana and he were married, that she had cancer, that she was suicidal. He ordered a Mercedes for the Scharffs, telling the dealer that the money for the car would be wired to him; it was not. He and Diana spent a lot of time with her parents and he persuaded them to install both a satellite system and a security system in their home, and he paid for these items with a check--that bounced. The Scharffs became impatient. Newman told them that his mother in New Jersey had the money to repay them. They rented a car and drove with him to New Jersey. He went into a house and came out with a bundle that he said contained $50,000. When they got back to Illinois and Mrs. Scharff opened it, she found that it contained folded newspapers rather than money. At this point Newman owed the Scharffs a total of $46,500. He gave them a check for this amount. It bounced. Mr. Scharff became desperate. He decided to kill Newman. He made an appointment with him at the Scharff home and waited there with a gun, intending to kill him when he arrived--but true to form Newman didn't show up.

During the spree Newman defrauded limousine services, hotels, and other providers of services. And when Diana Scharff told him that she had been raped at the age of 15 by a family friend, he tried to blackmail the alleged rapist. Newman also defrauded Diana's sister and brother-in-law of several thousand dollars.

Newman denied all nonfinancial aspects of the tale told in the presentence report. He denied the rapes, the confinement, the plying with drugs, the threats, pointing for support to the photo with the three dogs, to a polygraph report, and to a letter that Diana wrote Newman's mother after the break-up, professing continued love for him and making no reference to any sexual abuse. Diana, he contended, "is a young lady trying to be a virgin princess for her daddy, and after her abortions were discovered she can only remain Daddy's princess by lying and saying I was the cause of her 'problems.' " He asked rhetorically, how could the charges of sexual abuse be true, when Diana could have broken with him when she visited her parents without him? Why, he couldn't even drive. He did not deny the fraud. Far from it. He said at the sentencing hearing "I would be a fool to try to convince you and anyone else that I haven't been a con man most of my life." The information gathered in the presentence investigation corroborates this confession. Although Newman has only one previous conviction (a Canadian conviction for fraud), the presentence investigation revealed that he had used the modeling-career ploy on a number of other women, defrauding them and attempting (though unsuccessfully) to obtain sexual favors through threats and lies similar to those he used with greater success on Diana Scharff. His employment history is, at best, spotty, lending further credence to his statement that he's been a con man most of his life.

After finally breaking with Newman, Diana Scharff underwent therapy with a psychologist to whom she told the whole story, which the psychologist repeated at the sentencing hearing. The psychologist diagnosed Scharff as suffering from post-traumatic stress and sexual abuse. Her symptoms included nightmares, crying jags, memory blocks, anxiety, depression, exhaustion, and drug withdrawal. The psychologist believed that Newman had given Diana Scharff barbiturates, amphetamines, codeine, valium, and possibly other drugs as well, and that the combination had apparently caused some "organ failure" because Diana's legs had turned black at one time and black spots would reappear from time to time on her legs. The psychologist thought Diana might have been particularly susceptible to Newman's scheme because of the sexual assault on her when she was 15.

The government did not call Diana Scharff herself as a witness. The psychologist had told her not to testify because the experience would be harmful to her. The day before the sentencing hearing, however, Newman's lawyer delivered a subpoena for her to testify, but delivered it to her father at his house without attempting to find out whether she lived there (she did not). There is no indication that she received the subpoena.

After considering all the evidence, the judge made findings that the information in the presentence report and the testimony of the psychologist were true, and Newman's denials false. Next came the calculation of the sentence. The judge accepted the conclusion in the presentence report that the applicable adjusted offense level was 17 (the level that generated the 24 to 30 month range that we mentioned at the outset of this opinion). The report also advised the judge to consider the possibility of departing upward, and this he did too. He found that the dollar amount of the fraud loss understated the gravity of the crime. (This is an authorized ground for an upward departure in a fraud case. U.S.S.G. § 2F1.1, Application Note 10.) It ignored the psychological harm that Diana had suffered, harm demonstrated not only by the psychologist's testimony but by the fact that the Social Security Administration had found her totally and permanently disabled from gainful employment and had awarded her disability benefits. It also ignored the bodily injury that Newman had inflicted on her. The guidelines allow upward departures for...