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March 30, 2004.


The opinion of the court was delivered by: ALVIN HELLERSTEIN, District Judge

Bernard Jaffe, Jr. pleaded guilty on May 2, 2003 to violating 18 U.S.C. § 1014, by knowingly making false statements to influence the lending determinations of an FDIC-insured bank. As a direct result of his fraud, Jaffe obtained a $20 million line of credit from the Bank of New York, and became indebted to it in the amount of $20,342,562.13, including interest. I conducted sentencing hearings on October 24 and December 5, 2003, and February 3, 2004, and sentenced defendant to fifty-seven months imprisonment, three years of supervised release, and restitution of $18,154,242.77 plus interest, payable according to a schedule of lump-sum and percentage of gross income payments. I write to discuss the principle sentencing issues: denying his motion for downward departure because of the alleged needs and dependency of his 43-year old daughter; finding sufficient acceptance of responsibility despite reservations arising from his resistance to full disclosure of assets and to making restitution; and fixing the scope and extent of required payments in the context of a mix of defendant's assets and income, and the claimed applicability of Florida's homestead, and federal and state pension, exemptions. Page 2


  Bernard Jaffe, Jr. is seventy-three years old. He had a wealthy, but unloving childhood, had a college education, and honorably served our country as a first lieutenant in Korea towards the end of the Korean War. He was twice married, once widowed and once divorced, with a child from each marriage: Brenda, now forty-three and single, and Anthony, now forty and married. Brenda lives close to Jaffe, in Delray Beach, Florida, and is said to be dependent on him, as discussed below. Anthony lives in Los Angeles, California.

  Jaffe worked as a stockbroker, beginning as a trainee with a salary of $55 per week, and ending as a partner of a large firm, successful in securities and commodities investments and trading, for himself and for his customers. He retired as a Senior Vice President of his stockbrokerage company on January 18, 2002, when his offenses came to light.

  Each year from 1986 to 2000, Jaffe obtained an unsecured line of credit from the Bank of New York (BNY). The size of this loan grew from $300,000 in 1986 to approximately $20 million in 2000. Each year, he "cleaned up" his line of credit by repaying BNY and not borrowing from it for a thirty-day period (although it appears that he borrowed from another bank in the interim, both to help clean up his BNY indebtedness and for general purposes). Each year's loan was induced by a current personal financial statement.

  Beginning several years before his extensive frauds were discovered, Jaffe presented false and fraudulent financial statements, overstating his assets and understating his liabilities, each year in increasingly larger amounts. In the summer of 2000, as in previous years, Jaffe cleaned up his line of credit, paying it, as in prior years, with substantial help from a short-term loan from a different bank, Chase Manhattan Bank. By 2000, he represented that his net Page 3 worth had increased to become $171 million, a sum which was two orders of magnitude greater than Jaffe's actual net worth. Jaffe thereby induced BNY to extend a $20 million line of credit to him for the year beginning August 24, 2000 and ending August 31, 2001. Jaffe drew upon the entire line, but was unable to repay it at maturity. The decline of the stock market during 2000 and 2001 dried up his credit and was too large to bridge, and Jaffe defaulted. BNY extended maturity to January 15, 2002, but still Jaffe could not repay. Jaffe then disclosed that he did not own over $162 million of the assets he had claimed to have, and asked for five years to repay. The Bank, however, having become suspicious of Jaffe's integrity, launched a private, and then instigated a criminal, investigation, which found a massive fraud on Jaffe's part. On May 2, 2003, Jaffe pled guilty to an Information which charged him with violating 18 U.S.C. § 1014, for knowingly making false statements on a loan application to influence the action of an FDIC-insured bank.

  Jaffe's plea agreement stipulated to an offense level of 27, less a three-level reduction for timely acceptance of responsibility, yielding a net offense level of 24. See U.S. Sentencing Guidelines Manual (U.S.S.G.) § 3E1.1 (Nov. 1, 2000). That net offense level, in the absence of any previous criminal history, produced a range of imprisonment of 51 to 63 months. The plea agreement left Jaffe with one ground to move for departure: extraordinary family circumstances related to his daughter, Brenda Jaffe. The government reserved the right to object.

  Jaffe's use and application of the money he had fraudulently procured over the years could not be adequately traced. Large portions of it were given to Jaffe's daughter and son, and to a female companion; other portions increased Jaffe's exempt assets, including a sumptuous residential property in Florida and his "401-K;" and still other portions were spent on Page 4 a high style of living, which included leases of two luxury cars, memberships in two country clubs, dinners at pricey restaurants, trips with his companion to New York for shopping and stays at luxury hotels, and the like. Some of it went to repay the prior year's bridge loan from Chase Manhattan Bank. Another large chunk, according to Jaffe, was lost in the stock market. In all, BNY could find only $10 million, and could recover only $5 million, against its $20 million outstanding indebtedness and accumulated interest.

  Despite protests to the contrary, Jaffe cooperated very little in BNY's investigation, forcing it to engage in expensive discovery and turn-over proceedings, in New York and Florida state courts. It took a warning from me — that Jaffe was jeopardizing my ability to find that he would be entitled to a sentencing credit for acceptance of responsibility — before he opened his records to BNY sufficiently to allow it to gain some confidence concerning Jaffe's financial condition. Even now, it appears that Jaffe is unable to account for material amounts of the funds he had fraudulent procured.

  Extraordinary Family Circumstances

  Jaffe moved for a downward departure based on extraordinary family circumstances, pursuant to U.S.S.G. § 5H1.6. Jaffe asks that his jail time be reduced, and his restitution obligations qualified, to enable him to care for his 43-year-old daughter, Brenda. Brenda is single and lives near her father in Delray Beach, Florida.

  According to the materials submitted by Jaffe, Brenda suffers from depression and anxiety disorders, stemming from the death of her mother when she was two years old and the divorce of her father and step-mother when she was twelve, and first emerging when she was Page 5 seven. Brenda is currently recovering from breast cancer after surgery and radiation. According to Jaffe, she refuses to take her medications or attend to medical appointments concerning a possible recurrence of cancer, yet she worries obsessively over her condition. Jaffe states that she calls him constantly, at all hours of day and night, and is helpless without him. According to Jaffe, she has never held a full-time or permanent job. Her younger half-brother Anthony, forty years old, lives in California with his own family, and cannot be expected to displace his father's role, even though he may wish to do so. On the other hand, Brenda works part-time and lives alone. Although Jaffe claims that she relies upon her father for financial support, that appears to be as much owing to their high style of living as to any reasonable necessity.

  "Family ties and responsibilities . . . are not ordinarily relevant" in determining whether a sentence should be reduced on grounds of departure. U.S.S.G. § 5H1.6 (Policy Statement). The grounds for departure from the applicable guideline range must be "extraordinary," United States v. Walker, 191 F.3d 326, 338 (2d Cir. 1999), particularly when the dependent is an adult. Thus, in United States v. Brechner, a departure was granted because the 37-year-old claimed dependent not only suffered from drug and emotional problems, but also had four times attempted suicide and could not be released from her hospitalization unless she was placed in her father's care. The sentence was later vacated on other grounds. Brechner, 99 F.3d 96 (2d Cir. 1996), vacating 1995 WL 804580 (E.D.N.Y. Oct. 15, 1995).

  In other cases, departures were granted because defendants had to care for spouses suffering from extraordinary illnesses or parents who were frail and elderly. For example, in United States v. Alba, 933 F.2d 1117 (2d Cir. 1991), a departure was granted to a defendant who worked at two jobs to support his wife, two children, grandmother, and a disabled father who Page 6 depended on the defendant's physical strength to help him get in and out of his wheelchair. As the Court of Appeals ruled in United States v. Johnson, 964 F.2d 124 (2d Cir. 1992), in affirming a departure where the defendant was the sole parental figure for three minor children, including one infant and one institutionalized child, and a baby grandchild, departure is appropriate only where necessary to avoid "wreak[ing] extraordinary destruction on dependents." Id. at 129. "Disruption of the defendant's life, and the concomitant difficulties for those who depend on the defendant, are inherent in the punishment of incarceration," Id. at 128, and have already been presumptively considered by the Sentencing Commission when it drew up the Guidelines. See also United States v. Madrigal, 331 F.3d 258, 260 (2d Cir. 2003) (departure reversed; only one of defendant's six children under age eighteen, and other caretakers available); United States v. Faria, 161 F.3d 761, 763 (2d Cir. 1998) (departure reversed; ex-wife available for minor children); United States v. Sprei, 145 F.3d 528, 535 (2d Cir. 1998) (departure reversed; family not uniquely dependent on defendant).

  Brenda Jaffe, despite her alleged mental fragility, is not a minor child, and is not uniquely dependent on her father for support. She is a well-educated adult woman, who lives on her own and has successfully worked part-time at various jobs. Having worked part-time, she can again find suitable work to sustain herself, perhaps not in the lavish style that her father provided her from fraudulently procured funds, but in an adequate style common to most people.

  Acceptance of Responsibility

  The crime to which Bernard Jaffe, Jr. pleaded, adjusted for the amount of money he fraudulently procured, is punishable by imprisonment of 70 to 87 months. U.S.S.G. § 2F1.1. Page 7 By pleading guilty and accepting responsibility for his offense, he potentially became entitled to a downward adjustment of two levels, and an additional level for timeliness, thereby reducing the sentencing range to which he was subject to 51 to 63 months. But Jaffe had to "clearly demonstrate[]" his acceptance of responsibility, Id. § 3El.l(a), and his conduct with regard to making restitution to the victim of his fiaud created substantial doubt that he was eligible for the adjustment he sought. As Jaffe was seventy-three years of age, the issue assumed great importance.

  Jaffe's allocution at the time of his plea was entirely satisfactory. But his conduct was quite something else. Jaffe's words were eloquent: "I accept responsibility. I am very embarrassed by what I did, I was under strain. I should never have done it." But he engaged in every artifice that he and his counsel could concoct to hold onto his fraudulently procured funds and frustrate his victim, The Bank of New York, seeking to mitigate his own culpability by blaming the Bank for lending selfishly and carelessly. He refused to give a full and fair accounting, became involved in acrimonious litigation in the state courts of Florida and New York, zealously cloaked his fraudulently procured funds in state and federal exemptions, liberally showered gifts upon his two children and companion and encouraged them to resist any return of those gifts, and lived and traveled lavishly all the while.

  A three-level adjustment does not follow automatically from a guilty plea. The eloquence of a defendant does not suffice, for it is his conduct that must be judged. As the Application Notes make clear, "truthfully admitting the conduct comprising the offense(s) of conviction, and truthfully admitting or not falsely denying any additional relevant conduct for which the defendant is accountable," is but one of several factors to be considered. U.S.S.G. § Page 8 3E1.1, App. Note 3. The court must also inquire if the defendant, among other things, has shown a "voluntary payment of restitution prior to adjudication of guilt." Id. As Application Note 3 provides:
Entry of a plea of guilty prior to the commencement of trial combined with truthfully admitting the conduct comprising the offense of conviction, and truthfully admitting or not falsely denying any additional relevant conduct for which he is accountable . . . will constitute significant evidence of acceptance of responsibility for the purposes of subsection (a). However, this evidence may be outweighed by conduct of the defendant that is inconsistent with such acceptance of responsibility.
  The issue of a defendant's acceptance of responsibility, and his entitlement to the three-level downward adjustment authorized by the Sentencing Guidelines, must be considered by the sentencing judge, evaluating all relevant facts and exercising wise discretion. Id. App. Note 5; United States v. Guzman, 282 F.3d 177, 184 (2d Cir. 2002) (sentencing judge has discretion in making this "factual determination"); see also United States v. Fisher, 38 Fed. Appx. 39, 42 (2d Cir. 2002) (same); United States v. Ortiz, 218 F.3d 107, 109 (2d Cir. 2000) (same); United States v. Goodman, 165 F.3d 169, 175 (2d Cir. 1999) (same). Thus, in Fisher, a case of tax, mail and bankruptcy fraud, the Court of Appeals affirmed Judge Amon's finding that defendant was not entitled to the downward adjustment, for his "acceptance of responsibility . . . was not clear," was equivocating, "guarded," and "disingenuous." 38 Fed. Appx. at 41. Similarly, in United States v. Zichettello, 208 F.3d 72 (2d Cir. 2000), Judge Batts denied the three-point adjustment — and the Second Circuit affirmed — where defendant reneged on his promise to pay restitution from funds available to him for that purpose. See also United States v. Harris, 38 F.3d 95, 98-99 (2d Cir. 1994) (no adjustment; failure to pay promised restitution and Page 9 attempted bribery of witnesses).*fn1

  Several cases have suggested that the determination of acceptance of responsibility, far from being a legal checklist or formalistic determination, imports into the law a moral concept. See, e.g., Mitchell v. United States, 536 U.S. 314, 330 (1999) (linking "the determination of a lack of remorse" with that of "acceptance of responsibility for purposes of the downward adjustment provided in § 3E1.1"). In United States v. Hernandez-Fundora, 58 F.3d 802, 813 (2d Cir. 1995), the Second Circuit quoted with approval Judge McAvoy's statement that "[a]cceptance of responsibility entails more than just admitting that certain conduct was committed. It also entails the concept that that conduct was wrong, violative of the law and that the individual accept the idea that he now has to be punished for it." United States v. Reves, 9 F.3d 275, 280 (2d Cir. ...

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