United States v. Kestenbaum, No. 04–cr–821.

CourtUnited States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
Writing for the CourtNINA GERSHON
Citation908 F.Supp.2d 364
PartiesUNITED STATES of America, v. Joshua KESTENBAUM, Defendant.
Decision Date14 December 2012
Docket NumberNo. 04–cr–821.

908 F.Supp.2d 364

UNITED STATES of America,
v.
Joshua KESTENBAUM, Defendant.

No. 04–cr–821.

United States District Court,
E.D. New York.

Dec. 14, 2012.


[908 F.Supp.2d 366]


Scott B. Klugman, Seth L. Levine, United States Attorneys Office, Brooklyn, NY, Plaintiff.

Alan Lewis, Buchanan Ingersoll & Rooney P.C., New York, NY, for Defendant.


OPINION AND ORDER

NINA GERSHON, District Judge:

This opinion and order sets forth my findings of fact and conclusions of law following a hearing on charges that the defendant, Joshua Kestenbaum, violated the conditions of his probation. The United States Probation Department for the Eastern District of New York charged in a probation violation report (“Violation Report”) that Mr. Kestenbaum violated mandatory conditions of his probation by: (1) providing false statements to the government and the Probation Department regarding his business enterprises and income in violation of 18 U.S.C. § 1001 (“Charge 1”); (2) committing tax evasion in violation of 26 U.S.C. § 7201 (“Charge 2”); and (3) failing to make all of his required monthly $2,500 restitution payments between April 2011 and February 2012 (“Charge 3”).

On July 9, 10, and 11, 2012, a hearing was held on Charges (1) and (3) contained in the Violation Report.1 Based upon the facts established at the hearing and after full consideration of the defendant's arguments, for the reasons stated below I conclude that the defendant knowingly, intentionally, and willfully made false statements to the government and the Probation Department, and knowingly, intentionally, and willfully failed to make all of his required monthly restitution payments of $2,500 from April 2011 through February 2012 despite his ability to do so.

BACKGROUND
A. Sentence

On September 28, 2004, pursuant to a cooperation agreement, Joshua Kestenbaum pled guilty to one count of conspiracy to commit bank and wire fraud in violation of 18 U.S.C. §§ 1349, 1343, and 1344. He was sentenced on June 12, 2008, and an amended judgment was entered on July 23, 2008. His offense level under the Sentencing Guidelines was thirty-one, which, given his criminal history category of I, resulted in a Guidelines sentencing range of 108 to 135 months. The government's motion for a downward departure based on substantial assistance was granted, and the defendant was sentenced to a five year term of probation. Mr. Kestenbaum was

[908 F.Supp.2d 367]

also ordered to pay the agreed-upon sum of $11,159,447 in restitution. The schedule for payment to the victim of his crime was set at $2,500 per month. I imposed no fine in light of the priority of his restitution obligations. A final forfeiture order in the agreed-upon amount of $2,500,000 was also entered.

The conditions of probation included that Mr. Kestenbaum: (1) not commit another federal, state, or local crime; (2) comply with his obligation to pay restitution in the amount of $2,500 per month; and (3) provide full financial disclosure to the United States Probation Department, to assure, among other things, that he paid restitution.

In setting the schedule of restitution payments at his sentencing hearing, I observed that Mr. Kestenbaum would not be in custody and would be able to work. Sentencing Tr. 26, June 12, 2008. Although I set the schedule at $2,500 per month, I noted that the amount would be subject to increase upon a more detailed review of his resources by the Probation Department. Id. I also observed the difficulty of setting the appropriate amount of scheduled payments under the restitution order: “He's living the same life-style, as far as I can see, that he lived before, when he engaged in massive fraud on other people. I need to know what efforts he's making to change his life-style so that other people who are victims of his fraud get the benefit ... he can't continue to live the same life-style and say he's making full amends.” Id. at 9–10.

Counsel argued at the sentencing that Mr. Kestenbaum should be given a non-custodial sentence so that he could continue to run Bake Me A Wish (“BMAW”), his cake delivery service company, making it “profitable and enabl [ing him] in the future to make significant payments towards his forfeiture and restitution.” Id. at 9. I noted Mr. Kestenbaum's representation that he did not make a salary in his current role as president of BMAW and questioned the efforts he might make toward monthly restitution payments. Id. at 10–11. In response to counsel's assertion that Mr. Kestenbaum relied on the support of his and his wife's family, I noted, “[H]e doesn't have to draw a salary if his in-laws are supporting him. If his in-laws weren't supporting him, presumably he would draw a salary ... but the way this has been arranged I don't really have th[e] option [of setting the amount as a percentage of his salary, as is typical].” Id.

Defense counsel stated:

It is certainly foreseeable in the near future [BMAW] will be able to pay Mr. Kestenbaum a salary and we agree that when that occurs that the Court should require that he pay a percentage of that salary toward restitution. And in the meantime I would suggest the Court impose an order of a thousand dollars a month, but make it clear that number should increase when Mr. Kestenbaum begins to draw a salary.

Id. at 11. I noted, “The defendant has indicated contrition. The best way to continue to show that is to recognize that if he's not in custody, he needs to be earning money so that he can pay back what he owes to the victim here.” Id. at 27.


B. Charges of Violation of Probation

On February 28, 2012, the Probation Department issued the Violation Report. It seeks the revocation of probation and resentencing. See18 U.S.C. § 3565 and Fed.R.Crim.P. 32.1. In response to a request for particularization of the false statement charge, the government, in a letter dated June 21, 2012, specified five categories of false statements that it intended to prove to establish Charge 1:

[908 F.Supp.2d 368]

False Statement Category # 1: MSR December 2010: In the handwritten monthly supervision report [ (“MSR”) ] for December 2010 that the defendant provided to the U.S. Probation Office, the defendant falsely reported total monthly cash inflows of $3,000.00, including $0.00 in net earnings from employment.

* * * * * *

False Statement Category # 2: MSR January 2011: In the handwritten monthly supervision report for January 2011 that the defendant provided to the U.S. Probation Office, the defendant falsely reported total monthly cash inflows of $2,916.41, consisting solely of $2,916.41 in net earnings from employment.

* * * * * *

False Statement Category # 3: DOJ Financial Statement: In the U.S. Department of Justice Financial Statement dated July 28, 2008, the defendant falsely reported (1) that the only financial support from any source or person that he had received in the last six years was from his father, Joseph Kestenbaum; (2) that his monthly take home pay was $2,614.00; and (3) that his wife Vivian Kestenbaum's total monthly income was $2,400.00 and comprised solely her income from Waldman Publishing. The defendant also falsely reported (4) that there were no payments or obligations made on his behalf by others.

* * * * * *

False Statement Category # 4: Deposition Testimony Re False Debit Log; Production of False Debit Log: In response to questions posed by an Assistant U.S. Attorney at a deposition on March 24, 2010, the defendant testified that he had documentation of all his meals claimed as BMAW business expenses, which documentation set forth the dates and individuals with whom he conducted business at those meals.... That documentation—which the defendant provided to the government—contained materially false statements about the defendant's claimed business expenses, not only concerning meals, but also, for example, the defendant's profligate use of taxis. The log did not contain true and accurate entries; Kestenbaum made these false entries intentionally; and Kestenbaum knew when he produced the log that it contained materially false entries.

* * * * * *

False Statement Category # 5: Oral Statements to Probation Officer: On December 23, 2011, the defendant told a U.S. Probation Officer that he has not been “dipping” into the BMAW business accounts since he was sentenced. He further specified that the only personal expenses that were paid by BMAW were his health insurance premiums and his therapist's fees.

Letter from Ilene Jaroslaw 2–5 (June 21, 2012), ECF No. 83.


LEGAL STANDARDS

In a probation revocation proceeding, a district court must be “reasonably satisfied” that a probationer has failed to meet his conditions of probation in order to revoke his sentence. United States v. Colasuonno, 697 F.3d 164, 180–81 (2d Cir.2012); cf. United States v. Carlton, 442 F.3d 802 (2d Cir.2006) (court must find by a preponderance of the evidence that the supervisee violated a condition of supervised release under 18 U.S.C. § 3583(e)(3)). For purposes of this case, I assume that the government must prove the violations by a preponderance of the evidence.

[908 F.Supp.2d 369]

A. Failure to Make Restitution

If a restitution payment schedule is imposed as a condition of probation, a probationer must make “all reasonable efforts to pay the fine or restitution....” Bearden v. Georgia, 461 U.S. 660, 668, 103 S.Ct. 2064, 76 L.Ed.2d 221 (1983). “If the probationer willfully refused to pay or failed to make sufficient bona fide efforts legally to acquire the resources to pay, the court may revoke probation and sentence the defendant to imprisonment within the authorized range of its sentencing authority.” Id. at 672, 103 S.Ct. 2064;see Colasuonno, 697 F.3d at 180–81; 18 U.S.C. § 3614(b)(1) (allowing court to resentence defendant to imprisonment if “defendant willfully refused ... or had failed to make sufficient bona fide efforts to pay” restitution).

If a probationer cannot meet his restitution obligations despite a bona fide effort to do so, his probation may not be...

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1 practice notes
  • United States v. Johnson, Criminal Action No. 5: 16-045-DCR
    • United States
    • United States District Courts. 6th Circuit. United States District Court of Eastern District of Kentucky
    • August 5, 2019
    ...when he indicated he had not been dipping into his business accounts to pay his personal expenses. United States v. Kestenbaum, 908 F. Supp. 2d 364 (E.D.N.Y. 2012), remanded on other grounds by United States v. Kestenbaum, 552 F. App'x 74 (2d Cir. 2014). The Court explained that the false s......
1 cases
  • United States v. Johnson, Criminal Action No. 5: 16-045-DCR
    • United States
    • United States District Courts. 6th Circuit. United States District Court of Eastern District of Kentucky
    • August 5, 2019
    ...when he indicated he had not been dipping into his business accounts to pay his personal expenses. United States v. Kestenbaum, 908 F. Supp. 2d 364 (E.D.N.Y. 2012), remanded on other grounds by United States v. Kestenbaum, 552 F. App'x 74 (2d Cir. 2014). The Court explained that the false s......

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