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U.S. v. Sharapan

filed: January 18, 1994.



Before: Scirica and Alito, Circuit Judges, and Pollak, District Judge*fn*

Author: Alito


ALITO, Circuit Judge :

In this appeal by the government, we must decide whether the sentence imposed by the district court on the appellee, Elliott Sharapan, is permitted by the Sentencing Reform Act and the Sentencing Guidelines. While apparently accepting that the Guidelines prescribed a sentence of imprisonment, the district court granted a downward departure and imposed a sentence of five years' probation. The district court granted this departure because of its concern that incarceration of the appellee would cause his business to fail and thereby result in the loss of approximately 30 jobs and other economic harm to the community. We hold that this departure is inconsistent with U.S.S.G. § 5H1.2, which provides that departures based on a defendant's "vocational skills" are generally not permitted. We therefore vacate the sentence imposed by the district court and remand for resentencing.


In September 1992, a federal grand jury returned a 30-count indictment against the appellee and his brother, Victor Sharapan. Both brothers were charged with 17 counts of mail fraud, in violation of 18 U.S.C. §§ 1341 and 2. These counts charged that the appellee, the president and sole stockholder of Ralph's Discount City, Inc. ("Ralph's"), and his brother, the president of Save Rite Stores, Inc., had participated in a fraudulent scheme involving the redemption of coupons that are issued by manufacturers and distributors of consumer goods and that entitle consumers to discounts when they purchase certain items. The indictment charged that the appellee had, among other things, fraudulently submitted and received payments for large quantities of coupons that had not been redeemed in connection with consumer purchases. Under this scheme, the indictment alleged, Ralph's had received approximately $2,000,000 and Save Rite Stores, Inc. had received approximately $200,000. In addition to the mail fraud charges, the appellee was indicted for three counts of filing false corporate income tax returns on behalf of Ralph's, in violation of 26 U.S.C. § 7206(1), and with 10 counts of structuring currency transactions in order to evade reporting requirements, in violation of 31 U.S.C. §§ 5324(3) and 5322(b) and 18 U.S.C. § 2.

In January 1993, the appellee pleaded guilty to two counts of mail fraud and two counts of filing false corporate income tax returns, and a presentence report was subsequently prepared. The report concluded that his mail fraud offenses had caused a loss of more than $2,000,000 and that his tax offenses had caused a tax loss of about $240,000. Based on these determinations, the report concluded that his total offense level was 20. Finding that his criminal history category was I, the report concluded that his Guidelines sentencing range was 33 to 41 months' imprisonment and a fine of $7,500 to $75,000. In addition, the report noted that restitution could be ordered pursuant to 18 U.S.C. § 3663. The report found no factors that might warrant a sentencing departure.

On the day when sentencing was originally scheduled, the district court Judge stated that he was considering the imposition of a sentence of probation because the appellee's incarceration would "perhaps inevitably" result in the demise of Ralph's and the loss of jobs for that business's 30 employees. The prosecutor responded that he had not previously been advised of the possibility of a departure on that ground, and he therefore requested the opportunity to respond. The district court then put off the sentencing for one week.

Following this proceeding, the government submitted a written objection to the proposed downward departure. The government contended that the potential loss of jobs by Ralph's employees was not an appropriate basis for departure, and the government noted that downward departures based on similar grounds had been rejected in United States v. Mogel, 956 F.2d 1555 (11th Cir.), cert. denied, 121 L. Ed. 2d 115, 113 S. Ct. 167 (1992), and United States v. Rutana, 932 F.2d 1155 (6th Cir.), cert. denied, 116 L. Ed. 2d 243, 112 S. Ct. 300 (1991).

On the new date scheduled for sentencing, the district court Judge first heard arguments from counsel in chambers. The prosecutor requested the opportunity to present evidence to show that there was "no real indication" that Ralph's would fail if the appellee was incarcerated. App. 119. The prosecutor stated that his evidence would establish that the appellee's role in running the business had been less significant than previously suggested and that the appellee had made arrangements for another person, subsequently identified as the previous owner of Ralph's, to manage the business in his absence. See id. at 119, 138. Defense counsel responded that his investigator had determined that the business could not survive without the appellee and that a bank with an outstanding loan to Ralph's would "likely pull the loan" if the appellee were incarcerated. Id. at 120-21. The prosecutor then responded that the bank had advised its investigator that, before making a decision about the loan, it would first consider the arrangements that had been made for the management of the business in the appellee's absence. Id. at 121-22.

After this exchange, the district court Judge provided a lengthy oral explanation of his sentencing decision. The Judge began by noting that, after reading the presentence report, he had "concluded that this business probably could not survive the Guideline dictated sentence." Id. at 122. The Judge expressed concern about putting Ralph's 30 employees out of work and about the broader effects on the community. He stated that he thought it made "more sense" to require the appellee "to work in his business" and pay restitution to his victims. Id. at 125. Disagreeing with the decisions in Rutana and Mogel, the Judge stated that he did not see any indication that the Sentencing Commission had considered the impact of a businessperson's incarceration on the business's employees.

In accordance with these views, the Judge imposed a sentence of five years' probation on all of the counts to which the appellee had pled guilty. The Judge also required the appellee to "operate his business conscientiously"; to pay $5,000 restitution per month for 60 months; to be subject to house arrest from 10:00 p.m. to 6:00 a.m. each day for the first two years of probation, except in case of illness or emergency; and to perform eight hours of community service per week during the second ...

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