Eastern District Judge Frederic Block (NYLJ/Rick Kopstein)
Editors’ Note: This article has been updated to reflect a Correction.
A judge’s decision to keep a tax offender out of prison because he believed the government couldn’t afford the cost of incarceration during its 2013 shutdown was reversed by a federal appeals court on Wednesday.
The U.S. Court of Appeals for the Second Circuit took the rare step of declaring the sentence of Young Park “substantively unreasonable” and ordered Eastern District Judge Frederic Block (See Profile) to resentence him.
Block had said the “economic problems” caused by the federal government shutdown should be considered when sentencing Park. But the Second Circuit held that “the cost of incarceration, much less a political phenomenon styled a ‘government shutdown,’ is not a permissible factor to consider in determining whether to impose a term of imprisonment,” in United States v. Park, 13-4142.
Park waived indictment and pleaded guilty in 2012 to one count of filing a false corporate tax return in violation of 26 U.S.C. §7206 for diverting his business’s cash receipts, filing returns that understated his business’s gross receipts and underpaying payroll taxes. A presentence report calculated a sentencing range of 15 to 21 months in prison.
Park appeared before Block for sentencing on Oct. 11, 2013, at the height of the shutdown over budget battles in Washington that was testing the capacity of the court system and the criminal justice system to function.
Block agreed that Park warranted a prison term, but he decided against it.
“I’m going to say that I would give a period of incarceration, if not for the financial pressures that … the court system and the government has. Especially low-level federal employees at the present time,” he said. “And we really can’t afford the luxury of paying another $28,000 to keep this person in jail under the circumstances, and I encourage you to appeal.”
Block also made it clear he was imposing a sentence of probation “only because of the economic plight that we are facing today.”
In its opinion Wednesday, the circuit said it makes a “substantive” inquiry into whether a sentence satisfies the objectives of 18 U.S.C. §3553(a) of the sentencing guidelines, which include the nature and circumstances of the offense; the history and characteristics of the defendant; and the need for a sentence to reflect the seriousness of the offense, deter criminal conduct and protect the public.
But that inquiry, the court said, depends on a “procedural” requirement—that the district court, at sentencing, express the explanation for its sentence given the goals of §3553.
“Where as here, a district court relies on an improper factor to justify a sentence imposed, it can be difficult, if not impossible, for a reviewing court to evaluate separately the ‘procedural’ and ‘substantive’ reasonableness of a sentence,” the court said.
The lower court here was in error, the judges said, both because he deemed the cost of incarceration the only relevant sentencing factor and because it shouldn’t have been a factor in the first place.
The judges said that they agreed with the Eighth Circuit in United States v. Molina, 563 F.3d 676 (8th Cir. 2009) that “based on the plan in language of §3553(a), no sentencing factor can reasonably be read to incorporate the cost of incarceration. Nor does the statute permit the sentencing court to balance the cost of incarceration against the sentencing goals enumerated in §3553(a).”
Park had argued that nothing in the statute prohibited judges from considering the cost of locking him up, but the court said, “We are reluctant, however, to expand relevant sentencing considerations beyond those enumerated in §3553(a).”
So after finding it was a “procedural” error to not consider the factors, the Second Circuit said this was one of the “exceptional cases” where it found the sentence “substantively” unreasonable.
Taking pains to note it was not disparaging lower courts in finding their sentences substantively unreasonable, the Second Circuit said it was “simply concluding, after careful review” that first, a sentence lacked a basis in the record; second, that the sentence left them “with a definite and firm conviction that mistake has been committed;” and third, that they believed the sentence was “otherwise unsupportable as a matter of law.”
In this case, the judges said, all three concerns were present.
General deterrence, the court said, “occupies an especially important role in criminal tax offenses” and there was also a “heightened need for just punishment and specific deterrence in light of Park’s prior convictions for financial crimes.” Park, they said, had already served eight months in prison for fraud and he had been out of prison only for eight months when he began diverting cash from his business.
The court remanded the case for resentencing, saying it did not foreclose a sentence of probation—only that it must be done after considerations of the §3553(a) factors.
Patricia Pileggi of Schiff Hardin argued for Park.
Elissa Hart-Mahan of the U.S. Justice Department’s Tax Division, Appellate Section argued for the government.
Block could not be reached for comment Wednesday.