MEMORANDUM & ORDER WILLIAM F. KUNTZ, II, United States District Judge : On September 22, 2016, William D. Mersey ("Defendant") pled guilty to one count of willfully filing a false tax return in violation of 26 U.S.C. § 7206(1). The Court now sentences Defendant and provides a complete statement of reasons pursuant to 18 U.S.C. § 3553(c)(2) of those factors set forth by Congress and the President and contained in 18 U.S.C. § 3553(a). For the reasons discussed below, Defendant is hereby sentenced to 12 months and 1 day of incarceration, 1 year of supervised release, an order of restitution in the amount of $686,773.58, a fine in the amount of $5,000.00, criminal forfeiture, and payment of a $100.00 special assessment.
On September 22, 2016, the United States filed an Information charging Defendant with three counts of willfully filing a false tax return. Information, ECF No. 4. That same day, Defendant pled guilty before this Court, pursuant to a plea agreement, to Count Two of the Information charging willfully filing a tax return in violation of 26 U.S.C. § 7206(1). See Plea Agreement, ECF No. 6. Count Two charged that Defendant did willfully make and subscribe U.S. Individual Income Tax Return, Form 1040, for the tax year 2011, which was verified by written declaration that it was made under penalty of perjury and that was filed with the Internal Revenue Service Center at Andover, Massachusetts, which tax return Defendant did not believe to be true and correct as to every material matter, in that the return stated at Line 22 that Defendant received total income in the amount of $17,564, whereas, as Defendant then and there well knew and believed, he received materially more than he reported. Information at 1-2.
I. Legal Standard
18 U.S.C. § 3553 outlines the procedures for imposing a sentence in a criminal case. If and when a district court chooses to impose a sentence outside of the United States Sentencing Commission Guidelines Manual (the "Guidelines" or "Sentencing Guidelines") range, the court "shall state in open court the reasons for its imposition of the particular sentence, and . . . the specific reason for the imposition of a sentence different from that described" in the Guidelines. 18 U.S.C. § 3553(c)(2). The court must also "state with specificity" its reasons for so departing "in a statement of reasons form." Id.
"The sentencing court's written statement of reasons shall be a simple, fact-specific statement explaining why the guidelines range did not account for a specific factor or factors under § 3553(a)." United States v. Davis, 08-CR-332, 2010 WL 1221709, at *1 (E.D.N.Y. Mar. 29, 2010) (Weinstein, J.) (internal quotation marks and citation omitted). Section 3553(a) provides a set of seven factors for the court to consider in determining what sentence to impose on a criminal defendant. The Court addresses each in turn.
A. The Nature and Circumstances of the Offense and the History and Characteristics of the Defendant
The first § 3553(a) factor requires the Court to evaluate "the nature and circumstances of the offense and the history and characteristics of the defendant." 18 U.S.C. § 3553(a)(1).
Defendant was born on April 19, 1950, and raised in Lynbrook, New York. Presentence Investigation Report ("PSR") ¶¶ 29-30. His parents are deceased. Id. ¶ 29. He has an older brother who lives in Florida, who remains supportive. Id. ¶ 30. Defendant is single, has never been married, and has no children. Id. ¶ 32. He has no history of mental or emotional health problems. Id. ¶ 39. He began smoking marijuana when he was 18 years old and only stopped in 2016, at the suggestion of Pretrial Services. Id. ¶ 40.
Defendant severely injured his back in a bicycle accident in July 2014 and suffers from chronic lower back pain. Id. ¶ 35. Defendant also suffers from chronic shoulder pain. Id. ¶ 36. Defendant suffers from left elbow pain and limited range of motion. Addendum to PSR at 2, ECF No. 15. Defendant also previously lost hearing in both of his ears. PSR ¶ 37.
Defendant has a Bachelor of Arts degree in economics. Id. ¶ 42. He began, but did not complete, an economics Ph.D. program. Id. ¶ 41. Defendant has an eclectic work history, including the adult advertising that led to his arrest and conviction for the instant offense. Id. ¶ 45. He has worked as a writer, a cab driver, and a musician/record producer. Id. ¶¶ 46-51. While pending sentencing, he has spent most of his time volunteering at various New York City soup kitchens. Id. ¶ 52.
Defendant has two prior arrests. In 1972, he was arrested for possession of marijuana in New Orleans, Louisiana. Id. ¶ 27. According to Defendant, the case was dismissed. Id. On July 5, 2018, Defendant was arrested on a warrant. The indictment charged one count of promoting prostitution in the third degree and one count of conspiracy in the fifth degree. Addendum to PSR at 1. The case is pending in New York Supreme Court. Id.
With respect to the instant offense of conviction, Defendant worked as an advertising agent for escorts and massage parlors. Id. ¶ 4. He placed advertisements for these individuals on websites such as Craigslist, Backpage, and Darkside Productions. Id. Between March 28, 2011, and March 29, 2013, Defendant filed false income tax returns for the taxable years 2010, 2011, and 2012, underreporting his true income that he received from his advertising services on Line 22 of the IRS Tax Forms, 1040. Id. During the taxable years 2010 through 2012, the Defendant failed to report $1,205,200 of income, including failing to report $459,000 for 2011, alone, the year to which he plead guilty. Id. ¶¶ 4-5. This resulted in a tax due and owing for these periods of $686,773.58 including penalty and interest or $357,474.00 without penalty and interest. Id. ¶ 4. In July 2013, IRS agents searched Defendant's residence and obtained seizure warrants for approximately $6.5 million from his financial accounts. Id.
B. The Need for the Sentence Imposed
The second § 3553(a) factor instructs the Court to consider "the need for the sentence imposed (A) to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense; (B) to afford adequate deterrence to criminal conduct; (C) to protect the public from further crimes of the defendant; and (D) to provide the defendant with needed educational or vocational training, medical care, or other correctional treatment in the most effective manner." 18 U.S.C. § 3553(a)(2).
The Court's sentence punishes Defendant for violating federal law and is crafted to deter him and others from engaging in similar criminal activity in the future. The Court takes into account Defendant's criminal history as well as his family and community support.
C. The Kinds of Sentences Available
The third § 3553(a) factor requires the Court to detail "the kinds of sentences available" for Defendant. 18 U.S.C. § 3553(a)(3).
Defendant pled guilty to Count Two of the Information in violation of 26 U.S.C. § 7206(1). For Count Two, he faces a maximum term of imprisonment of three years. 26 U.S.C. § 7206. He also faces: up to one year of supervised release, 18 U.S.C. § 3583(b)(3); not less than one and no more than five years of probation, 18 U.S.C. § 3561(c)(1); a fine of $250,000 or twice the gross gain or twice the gross loss, 18 U.S.C. §§ 3571(b)(3), (d) and (e); restitution, United States v. Bok, 156 F.3d 157, 166 (2d Cir. 1998); and a mandatory special assessment of $100.00 per count, 18 U.S.C. § 3013.
D. The Kinds of Sentence and the Sentencing Range Established For Defendant's Offense
The fourth § 3553(a) factor requires the Court to discuss "the kinds of sentence and the sentencing range established for . . . the applicable category of offense committed by the applicable category of defendant as set forth in the guidelines." 18 U.S.C. § 3553(a)(4)(A).
The Guideline for 26 U.S.C. § 7206(1) offenses is USSG § 2T1.1(a)(1), which directs the use of the offense level from USSG § 2T4.1 (Tax Table) corresponding to the tax loss. As the instant offense involved a tax loss of more than $250,000.00 ($357,474.00), the base level offense is 18 per USSG § 2T4.1(G). USSG § 2T1.1 & n.1; USSG §1B1.3(a)(2). Defendant admitted participation in criminal activity involving the promotion of prostitution, structuring, and laundering proceeds derived from prostitution, between January 2007 and August 1, 2015. Per USSG § 2T1.1(b)(1), 2 levels are added. Defendant receives a 3-level reduction for acceptance of responsibility under USSG § 3E1.1(a) and (b). This brings Defendant's total adjusted offense level to 17, as calculated by Probation. PSR ¶ 21.
With a total offense level of 17 and a criminal history category of I, the Guidelines suggest a term of imprisonment of 24 to 30 months. USSG ch. 5, pt. A. The Guidelines further recommend a term of supervised release of one year, id. § 5D1.2(a)(3); a fine of between $5,000 and $50,000, id. §§ 5E1.2(c)(3), (h)(1); payment of the costs of prosecution, id. § 5E1.5; and restitution, id. § 5E1.1. Defendant is ineligible for probation under the Guidelines. See id. § 5B1.1.
Probation recommends restitution in the amount of $686,773.58; a $5,000 fine, due immediately and payable at a rate of 10% of gross income per month while on probation, with interest payment to be waived; and one year probation with special conditions. Probation Sentencing Recommendation at 1, ECF No. 9-1. Probation notes Defendant forfeited $3.5 million in a civil judicial proceeding and stipulation of settlement and, as noted above, is already providing community service by volunteering at soup kitchens. Id. at 2; Plea Agreement ¶ 6. It is Probation's position that recidivism is unlikely, and a one-year term of probation, in addition to a $5,000 fine and the $3.5 million forfeiture, is sufficient to comply with the purposes set forth in 18 U.S.C. § 3553(a). Probation Sentencing Recommendation at 2.
According to the PSR, restitution to the IRS was paid in full from the $3.5 million forfeited by Defendant. PSR ¶ 67. --------
The Government states it agrees with Probation's Guidelines calculation of a total adjusted offense level of 17 and states that the applicable range is 24 to 30 months. Gov't Sentencing Mem. at 2, ECF No. 16. However, the Government appears to have incorrectly added two points in the calculation they provide in their sentencing memorandum for unlawful activity involving more than $100,000.00 in a 12-month period under USSG § 2S1.3(b)(2). This would bring Defendant's total adjusted offense level to 19 and would yield a range of 30 to 37 months. However, USSG § 2S1.3(b)(2) requires that Defendant be convicted under subchapter II of chapter 53 of title 31, United States Code, which Defendant was not. Therefore, USSG § 2S1.3(b)(2) is inapplicable and the total adjusted offense level is 17, as calculated by Probation and contemplated in the plea agreement. PSR ¶ 21; Plea Agreement ¶ 2.
The Defense requests a probationary term in lieu of incarceration. Def. Sentencing Mem. at 3, ECF No. 17. The Defense also notes that any fine should be limited, as Defendant has forfeited millions of dollars already and is approaching the age where he will have to live off of his remaining funds. Id. at 3-4.
E. Pertinent Policy Statement(s) of the Sentencing Commission
The fifth § 3553(a) factor requires the Court to evaluate "any pertinent policy statement . . . issued by the Sentencing Commission." 18 U.S.C. § 3553(a)(5).
USSG § 5K1.1 provides that the Court may depart from the Guidelines, "[u]pon motion of the government stating that the defendant has provided substantial assistance in the investigation or prosecution of another person who has committed an offense[.]" The Government has submitted such motion, pursuant to USSG § 5K1.1 and 18 U.S.C. § 3553(e), to permit this Court, in its discretion, to downwardly depart from the applicable Guidelines range. Gov't Sentencing Mem.
The Guidelines direct that "[t]he appropriate reduction shall be determined by the court for reasons stated that may include, but are not limited to, consideration of the following: (1) the court's evaluation of the significance and usefulness of the defendant's assistance, taking into consideration the government's evaluation of the assistance rendered; (2) the truthfulness, completeness, and reliability of any information or testimony provided by the defendant; (3) the nature and extent of the defendant's assistance; (4) any injury suffered, or any danger or risk of injury to the defendant or his family resulting from his assistance; [and] (5) the timeliness of the defendant's assistance." USSG § 5K1.1.
The Court recognizes the value of Defendant's substantial assistance to the Government, including providing information about prostitution in the New York City area.
F. The Need to Avoid Unwarranted Sentence Disparities
The sixth § 3553(a) factor requires the Court to consider "the need to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct." 18 U.S.C. § 3553(a)(6). In considering the other six § 3553(a) factors, the Court's sentence sufficiently avoids unwarranted sentence disparities.
G. The Need to Provide Restitution
Finally, the seventh § 3553(a) factor requires the Court to touch upon "the need to provide restitution to any victims of the offense." 18 U.S.C. § 3553(a)(7). Defendant agreed, pursuant to the Plea Agreement to pay $686,773.58 in restitution, which represents Defendant's income tax liability, inclusive of penalties and interest, owed for calendar years 2010 through 2012. Plea Agreement ¶ 1.
A sentence of 12 months and 1 day of incarceration, 1 year of supervised release, an order of restitution in the amount of $686,773.58, a fine in the amount of $5,000.00, criminal forfeiture as provided in the plea agreement, and payment of the $100.00 mandatory assessment is appropriate and comports with the dictates of § 3553. This sentence is consistent with and is sufficient but not greater than necessary to accomplish, the purposes of § 3553(a)(2).
The Court expressly adopts the factual findings of the Presentence Investigation Report and addendum thereto and imposes the special conditions of release proposed by the Probation Department.
HON. WILLIAM F. KUNTZ, II
UNITED STATES DISTRICT JUDGE Dated: October 31, 2018
Brooklyn, New York