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July 19, 1999


The opinion of the court was delivered by: Katz, Senior District Judge.


Defendant Richard Maack pleaded guilty to criminal charges arising from two separate cases. On April 29, 1998, Maack pleaded guilty to a five count information in criminal action number 98-201 charging him with mail fraud, wire fraud, and bank fraud.*fn1 While he was on release awaiting sentencing on that case, he engaged in further criminal conduct that led to new charges in criminal action number 98-578.*fn2 He pleaded guilty to two counts of bank fraud in that case on November 20, 1998. At a hearing on July 16, 1999, Mr. Maack objected to portions of the consolidated presentence report and requested a downward departure for diminished mental capacity pursuant to U.S.S.G. § 5K2.13. This memorandum provides a fuller description of the court's decision announced from the bench.

The Presentence Report

The Probation Office recommends and the government agrees that U.S.S.G. § 2F1.1(b)(7)(B)*fn3 applies to Mr. Maack's case. This provides for a four-level increase in the offense level if the offense "affected a financial institution and the defendant derived more than $1,000,000 in gross receipts from the offense[.]" Id. The application note for this section states that this "means that the gross receipts to the defendant individually, rather than to all participants, exceeded $1,000,000. `Gross receipts from the offense' includes all property, real or personal, tangible or intangible, which is obtained directly or indirectly as a result of such offense." Id. at app. note 18. The defendant objected to application of the enhancement, arguing that the government cannot prove by a preponderance of the evidence that Mr. Maack himself received one million dollars "after taking out legitimate operating expenses for ICS, including payroll, business expenses and company uses[.]" Def. Sent. Mem. at 5.*fn4

This interpretation is consistent with the case law on the subject. The Third Circuit and other jurisdictions have held that this enhancement applies in any situation in which the defendant maintained control over the monies acquired, whether that be in the form of a business or simply spending the money for personal pleasure. The clearest case in this respect is United States v. Bennett, 161 F.3d 171 (3d Cir. 1998). In that case, the defendant transferred much of the money in question to businesses in which he possessed a 100 percent interest. The Third Circuit held that the enhancement was properly applied even though the defendant subsequently used the money to pay consultants and others who did work for defendant's businesses, stating that "it is irrelevant how [defendant] spent the money after he obtained it." Id. at 193; see also United States v. Nesenblatt, 171 F.3d 1227, 1229-30 (9th Cir. 1999) (holding that enhancement was proper when defendant's illegal actions provided inflow of cash necessary for him to receive "legitimate" payments from the companies in question); United States v. Stolee, 172 F.3d 630, 631 (8th Cir. 1999) (holding that enhancement was properly applied even though money in question was transferred to a company of which defendant was sole owner and president because he indirectly benefitted); United States v. Kohli, 110 F.3d 1475, 1477-78 (9th Cir. 1997) (holding that "gross receipts" enhancement encompasses funds controlled by defendant before he compensated cohorts); United States v. Wong, 3 F.3d 667, 671 (3d Cir. 1993) (applying enhancement when defendant transferred portion of money to company because he was an indirect beneficiary). In this case, Mr. Maack was, at the time of the offense, the president of ICS, the company to which he directed part of the proceeds of the crime, and he owned approximately seventy-five percent of the stock in that company. See Presentence Report ¶¶ 13, 14. He used ICS to facilitate his illegal actions and thus cannot claim that he did not benefit from monies expended on the company.*fn6

There are also a variety of other points about which the defendant has a different interpretation of the events described in the presentence report. Rather than include these as specific objections, the Probation Office simply footnoted each of the defendant's comments. The government addresses each of these points in its sentencing memorandum. The court does not need to resolve any of these issues, though, because either "no finding is necessary because the controverted matter will not be taken into account, or will not affect, sentencing." Fed.R.Crim.P. 32(c)(1).

The Motion for Downward Departure

Mr. Maack moved for a downward departure based on diminished mental capacity. Specifically, he argues that he suffers from a "longstanding compulsive sexual addiction characterized by a narcissistic personality disorder, general anxiety disorder, low self-esteem, and compulsive lying." Def. Sent. Mem. at 6.*fn7

In general, the court may grant a motion for a downward departure if it finds "that there exists an aggravating or mitigating circumstance of a kind, or to a degree, not adequately taken into consideration by the Sentencing Commission in formulating the guidelines that should result in a sentence different from that described." 18 U.S.C. § 3553(b); see also U.S.S.G. § 5K2.0. Although the Sentencing Guidelines obviously do not list all circumstances that might warrant a downward departure, they specifically include the basis for departure suggested by defendant, diminished mental capacity. See U.S.S.G. § 5K2.13. The Third Circuit has explained that such a departure may be granted where a defendant

  (1) has committed a non-violent offense, (2) while
  suffering from a significantly reduced mental
  capacity, (3) that was not caused by the voluntary
  use of intoxicants, (4) where defendant's mental
  incapacity contributed to the commission of the
  offense, and (5) so long as the defendant's criminal
  record does not indicate a need for imprisonment to
  protect public safety.

United States v. Vitale, 159 F.3d 810, 816 (3d Cir. 1998). The Third Circuit has also made it clear that a departure on this basis may be granted either if the person "is unable to absorb information in the usual way or to exercise the power of reason" or if "the person knows what he is doing and that it is wrong but cannot control his behavior or conform it to the law." United States v. McBroom, 124 F.3d 533, 548 (3d Cir. 1997). That is, the departure is available for both cognitive and volitional defects.

Mr. Maack committed no violent offenses, and while he clearly abused alcohol and possibly other substances, there is no serious suggestion that this caused his alleged mental incapacity. Consequently, the court should look to whether Mr. Maack suffered from significantly reduced mental capacity that contributed to the commission of the offense and whether or not his imprisonment is required for the safety of the general public.*fn8 As the defendant explicitly states that his mental disorders are not cognitive, the court will look primarily to Mr. Maack's lack of volition. See Def. Sent. Mem. at 8.

The defendant argues that sexual addiction was significantly related his conviction because he felt compelled to "acquir[e] and spend[] large sums of money to buy sexual favors from, and purchase expensive gifts for, the women involved." Def. Sent. Mem. at 7. Mr. Maack argues that, although he had displayed addictive tendencies since adolescence, his addiction only began to cause problems in his life after he visited an adult ...

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