U.S. v. Rattoballi

• Decision Date: 15 June 2006
• Docket Number: No. 05-1562-CR.,05-1562-CR.
• Parties: UNITED STATES of America, Appellant, v. James RATTOBALLI, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

Page 127

452 F.3d 127

UNITED STATES of America, Appellant, v. James RATTOBALLI, Defendant-Appellee.

No. 05-1562-CR.

United States Court of Appeals, Second Circuit.

Argued: November 23, 2005.

Decided: June 15, 2006.

Amended: June 21, 2006.

Andrea Limmer, Attorney, U.S. Department of Justice, Washington, D.C. (R. Hewitt Pate, Assistant Attorney General; Thomas O. Barnett, Acting Assistant Attorney General; Makan Delrahim, Scott D. Hammond, and Gerald F. Masoudi, Deputy Assistant Attorneys General; John J. Powers, III, and Robert B. Nicholson, Attorneys, U.S. Department of Justice, Washington, D.C.; Rebecca Meiklejohn and Elizabeth Prewitt, Attorneys, U.S. Department of Justice, Antitrust Division, New York, N.Y., on the brief), for Appellant.

Randall D. Unger (Steve Zissou, on the brief), Bayside, N.Y., for Defendant-Appellee.

Before WALKER, Chief Judge, WINTER and JACOBS, Circuit Judges.

JOHN M. WALKER, JR., Chief Judge.

This appeal raises several important post-Booker issues, including the bounds of reasonableness review, United States v. Booker, 543 U.S. 220, 261, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005), and the requirement that a district judge provide a written statement of reasons for imposing a non-Guidelines sentence¹ outside the advisory Guidelines range, 18 U.S.C. § 3553(c)(2). The appeal is taken from a February 18, 2005, judgment of the United States District Court for the Southern District of New York (Thomas P. Griesa, Judge) sentencing defendant-appellee James Rattoballi to one year of home confinement and five years' probation. The district court required that Rattoballi pay $155,000 in restitution; it did not impose a fine, citing Rattoballi's inability to pay. We hold that Rattoballi's non-Guidelines sentence, which represents a substantial deviation from the recommended Guidelines range of 27 to 33 months' imprisonment, is unreasonable. We also hold that if a district court elects to impose a non-Guidelines sentence outside the applicable Guidelines range, it has a statutory obligation to include a statement in the written judgment setting forth "the specific reason for the imposition of a sentence different from" the recommended Guidelines sentence. 18 U.S.C. § 3553(c)(2). Finally, we find clear error in the district court's conclusion that Rattoballi lacked the ability to pay a fine. Accordingly, we vacate and remand for resentencing.

BACKGROUND

James Rattoballi is a forty-year veteran of the printing industry; for roughly the past twenty years, he has served as president and co-owner of Print Technical Group, Inc., a printing brokerage firm that performed about $7 million in annual sales and employed approximately twelve people. In recent years, Rattoballi also has served as a commissioned sales representative for two graphic services companies, Master Eagle Graphic Services, Inc. and LTC Fusion, Inc.

Between 1990 and 2001, Rattoballi paid substantial kickbacks to executives at advertising agencies, including Mitchell Mosallem at Grey Global Group, Inc. ("Grey"), in return for these agencies placing their business with his companies. The kickbacks included cash, made-to-order Italian clothing, a $55,000 diamond-encrusted platinum watch, limousine services, meals, airline tickets, and personal printing services. For their part, the agencies' executives would steer contracts to Rattoballi and keep his companies on their approved-vendor lists. Rattoballi managed to offset some of the costs associated with these kickbacks by submitting inflated invoices to the advertising agencies; the agencies would then pass these inflated invoices along to their clients.

Starting in 1994, Rattoballi also submitted exaggerated "cover" bids to Grey in order to help Mosallem create the illusion of competition among potential suppliers to a lucrative client account. Mosallem used Rattoballi's bids, along with those of others, to help steer contracts to other preferred vendors, all at above-market prices. In exchange for his cooperation, Rattoballi continued to enjoy favored status at Grey; his companies earned approximately $1 million annually from Grey.

In 2002, Rattoballi was charged in an information with one count of conspiracy to rig bids in violation of § 1 of the Sherman Act, 15 U.S.C. § 1, and one count of conspiracy to commit mail fraud in violation of 18 U.S.C. § 371; the information focused exclusively on Rattoballi's dealings with Mitchell Mosallem at Grey.

Rattoballi entered into a plea agreement with the government. Under the terms of the agreement, Rattoballi agreed "to provide full, complete, and truthful cooperation" to the government and to "disclose fully, completely, and truthfully all information" related to the government's investigation. Rattoballi also agreed to appear as a witness for the government in any case brought in connection with the charges. In exchange, the government agreed not to prosecute Rattoballi further for any crimes arising out of the same conduct. In addition, the government agreed that if Rattoballi abided by the terms of the plea agreement and provided "substantial assistance in any investigations or prosecutions," it would file a § 5K1.1 letter advising the sentencing judge to take Rattoballi's cooperation into account during sentencing. See U.S.S.G. § 5K1.1.

Over the next two years, the government interviewed Rattoballi on five occasions, and each time he was asked about the payments he made to Mosallem and other purchasing agents. Rattoballi readily admitted that he gave Mosallem and other purchasing agents clothing and additional goods and services; he denied ever having given Mosallem, or any of the other purchasing agents, cash or items of significant value.

In the course of preparing for Mosallem's trial, the government became suspicious that Rattoballi had been less than fully cooperative with its investigation. The government's suspicions proved accurate. After the government confronted Rattoballi with information obtained from other witnesses, Rattoballi admitted for the first time that he made substantial cash payments to Mosallem and other purchasing agents. Rattoballi also admitted that he helped to provide Mosallem with a diamond and platinum watch that listed for $87,000 but was purchased wholesale for $55,000. Finally, Rattoballi admitted that he had spoken with Mosallem about the investigation, and had agreed not to mention the cash or the watch to the government. As a result of Rattoballi's mendacity and its obvious effect on his credibility as a witness, the government determined that it could not call him as its witness at Mosallem's trial, which later was avoided when Mosallem pled guilty. The government asserts that Mosallem's restitution order was undervalued because the government was not made aware prior to Mosallem's sentencing of the full extent of the kickback scheme.

In its sentencing memorandum, the government argued that Rattoballi's total offense level under the Guidelines was 21, producing a range of 37 to 46 months' imprisonment; the Probation Office concurred in this calculation, which rested on that office's assessment of the fraud loss and included a two-level upward adjustment for obstruction of justice and no reduction for acceptance of responsibility. Rattoballi sought, in his sentencing memorandum, a non-Guidelines sentence consistent with the district court's discretionary authority following United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005), and United States v. Crosby, 397 F.3d 103 (2d Cir.2005). He challenged the government's fraud-loss calculations and its proposed adjustments, and he argued for a sentence that did not include a term of imprisonment. At the same time, Rattoballi admitted that he had "accumulated some modest wealth" and was "capable of paying a modest fine."

At sentencing, the district court accepted the government's recommendation for a two-level enhancement for obstruction of justice but concluded that Rattoballi still was entitled to a two-level reduction for acceptance of responsibility, based primarily on the fact that Rattoballi did not force the government to go to trial. The district court also adjusted the fraud-loss calculation from $796,000 to $396,000, which led to an additional one-level reduction. These rulings resulted in an adjusted offense level of 18 and a Guidelines range of 27 to 33 months' imprisonment; the rulings and the resulting range are not contested on appeal. After listening to the defendant, the district court stated that it had "considered the guidelines very, very seriously," and it acknowledged that Rattoballi stood convicted of "substantial crimes" that "require appropriate penalties." Nevertheless, the district court stated that it had a problem with giving Rattoballi a "prison sentence." It then set forth its reasons for imposing a non-Guidelines sentence:

The problem I have with a prison sentence is as follows: Despite the difficulty and the delay in coming clean with the whole range of criminal conduct, this defendant has pleaded guilty, and he has now, I believe, admitted the full range of his criminal conduct. He did not persist in denying, he did not force the government to go to trial, and that has always been regarded by courts as a very substantial matter.

Moreover, if nothing else were done to Mr. Rattoballi, this case has inflicted punishment. It has been hanging over him for a period of three years. Now, there were reasons for that, and part of it was the idea that he might cooperate and testify. But be that as it may, the case has been hanging over him for three years. Without any doubt, it has taken a severe toll on his business, although it is not completely destroyed, his business, fortunately, but he has been convicted of two federal crimes. That is not without meaning as far as punishment, and as I say, his business has been, although not completely destroyed, has been severely harmed.

It seems to me...