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United States District Court, S.D. New York

October 10, 2004.


The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge


On April 15, 2004, defendant Rick Scarbrough ("Scarbrough") appeared before the Honorable Douglas F. Eaton of this district and allocuted to the conduct charged in both counts of the information filed that same date, including one count of wire fraud in violation of 18 U.S.C. § 1343 and one count of bank fraud in violation of 18 U.S.C. § 1344. Scarbrough will be sentenced to time served and three years' supervised release. A special assessment fee of $200 is mandatory and is due immediately. There will be no ruling as to restitution at this time.


  The undersigned, having reviewed the Presentence Investigation Report prepared by the United States Probation Office, relies on the facts as set forth therein. The Offense Conduct

  From May 20, 2002 through July 4, 2003, Scarbrough fraudulently obtained funds from his employers through various schemes. From May 2002 through August 2002, Scarbrough worked for MSB Strategies, Inc. ("MSB"). Without approval and without authority, Scarbrough opened on-line computer banking facilities on behalf of MSB with Chase Bank in New York. From June 2002 through July 2002, these on-line banking facilities were used to transfer funds from MSB's account in Manhattan to Paypal accounts controlled by Scarbrough kept in California. These unauthorized transfers totaled at least $8,000.

  Scarbrough remained an employee when the owner of MSB formed a new company called Reiter/Begun Associates, LLC ("Reiter/Begun") in August 2002. In August 2002, Scarbrough began forging signatures on Reiter/Begun checks and deposited those checks to MSB's account, which remained open at Chase Bank in Manhattan. Without approval or authority, Scarbrough transferred the funds from MSB's account over the internet to Paypal accounts he controlled in California. These unauthorized checks and transfers totaled at least $56,000.

  Between June 2003 and July 2003, Scarbrough, acting without approval or authority, utilized electronic funds transfers to withdraw monies from Reiter/Begun's account with Chase Bank in Manhattan and deposited them into accounts he controlled with Paypal in California. These unauthorized transfers totaled at least $8,000.

  From March 13, 2003 through July 2003, Scarbrough forged authorization signatures on Reiter/Begun checks made payable to "Richard Scarbrough." The checks were drawn on an account with Chase Bank in Manhattan and they totaled at least $23,000.

  Scarbrough was arrested on November 7, 2003, in connection with the offenses charged and thereafter released.

  The Defendant

  Scarbrough was born in 1957 in Hiawatha, Kansas, and moved to New York in 1984. Scarbrough became involved in a romantic relationship in 1985 and the relationship lasted until Scarbrough's partner died of AIDS in 1998.

  Scarbrough reportedly commenced smoking marijuana on a daily basis in 1976 and continued until 1996, when his physician referred Scarbrough to a psychiatrist who diagnosed him with major depression and generalized anxiety disorder. Scarbrough then reportedly abused anti-anxiety medicine as well as Ketamine and Ecstasy. In 1998, after his partner died, Scarbrough added alcohol to the mix. In 1999, Scarbrough commenced a series of detoxification and drug treatment programs and he has reportedly not used any illicit substances since that time. In December 2000 he was reportedly employed by MSB as an office manager.

  In July 2003, after Scarbrough was fired by Reiter/Begun as a result of the underlying offense conduct, he became suicidal and was reportedly admitted to the St. Vincent's Hospital Psychiatric Unit in Manhattan for a period of approximately two weeks. While he was at St. Vincent's Hospital, Scarbrough reported a history of panic attacks and suicide attempts. Scarbrough was discharged against medical advice on August 5, 2003 and was admitted to Woodhull Health and Mental Health Center in Brooklyn after overdosing on over-the-counter and psychotropic medications shortly thereafter. He was discharged on August 26, 2003. In October 2003, Scarbrough was diagnosed with bipolar disorder by a psychiatrist at the Valeo Psychiatric Services Clinic in Topeka, Kansas.

  Scarbrough is currently unemployed and his credit report reflects two federal tax liens as well as several outstanding judgments and collection items/accounts.

  Based on information available from the Federal Bureau of Investigation and the New York State Division of Criminal Justice Services, Bureau of Identification, Scarbrough has no prior criminal convictions. The Guidelines

  The November 1, 2002 edition of the United States Sentencing Commission Guidelines Manual ("U.S.S.G."), in effect at the time the majority of offense conduct occurred, has been utilized in this case for calculation purposes, in accordance with U.S.S.G. § 1B1.11(b)(1).

  Pursuant to U.S.S.G. § 3D1.2(d), both counts of the information are grouped together into a single group because the offense level is determined largely on the basis of the total amount of loss.

  The guideline for a violation of 18 U.S.C. §§ 1343 and/or 1344 is found in U.S.S.G. § 2B1.1. Pursuant to U.S.S.G. § 2B1.1(a), the base offense level is 6.

  As the loss amount totaled $95,000, eight levels are added pursuant to U.S.S.G. § 2B1.1(b)(1)(E).

  Based on Scarbrough's plea allocution and his recognition of responsibility for the offense, the offense level is reduced by two levels pursuant to U.S.S.G. § 3E1.1(a).

  The resulting adjusted offense level of 12. As Scarbrough has no known criminal convictions, he has zero criminal history points and a Criminal History Category of I.

  Based on these calculations, the guideline range for imprisonment is ten to sixteen months. Under the guidelines, the minimum term of imprisonment may be satisfied by (1) a sentence of imprisonment or (2) a sentence of imprisonment that includes a term of supervised release with a condition that substitutes community confinement or home detention, provided that at least one-half of the minimum term is satisfied by imprisonment, pursuant to U.S.S.G. § 5C1.1(d). The statutory maximum term of imprisonment for Count 1 is 20 years, pursuant to 18 U.S.C. § 1343. The statutory maximum term of imprisonment for Count 2 is 30 years, pursuant to 18 U.S.C. § 1344.

  A term of supervised release of not more than three years is required if a sentence of imprisonment is imposed on Count 1, pursuant to 18 U.S.C. § 3583(b) (2). A term of supervised release of not more than five years is required if a sentence of imprisonment is imposed on Count 2, pursuant to 18 U.S.C. § 3583(b)(1). Pursuant to 18 U.S.C. § 3624(e), multiple terms of supervised release run concurrently.

  The guideline range for a term of supervised release on Count 1 is at least two years but not more than three years, pursuant to U.S.S.G. § 5D1.2(a)(2). The guideline range for a term of supervised release on Count 2 is at least three years but not more than five years, pursuant to U.S.S.G. § 5D1.2(a)(1). If a sentence of imprisonment of one year or less is imposed, a term of supervised release is not required but is optional, pursuant to U.S.S.G. § 5D1.1(b). Supervised release is required if a term of imprisonment of more than one year is imposed or when required by statute, pursuant to U.S.S.G. § 5D1.1(a).

  Scarbrough is not eligible for probation because Count 2 is a Class B felony, pursuant to 18 U.S.C. § 3561(a)(1) and U.S.S.G. § 5B1.1(b)(1).

  The statutory maximum fine is $250,000 on each count, pursuant to 18 U.S.C. § 3571. The fine range for the instant offense under the guidelines is from $3,000 to $30,000, pursuant to U.S.S.G. § 5E1.2(c) (3).

  Subject to Scarbrough's ability to pay, the expected costs to the government of any imprisonment, probation, or supervised release shall be considered in imposing a fine, pursuant to U.S.S.G. § 5E1.2(d)(7). The most recent advisory from the Administrative Office of the United States Courts suggests a monthly cost of $1,931.97 to be used for imprisonment, a monthly cost of $292.21 for supervision, and a monthly cost of $1,590.66 for community confinement. A special assessment of $200 is mandatory, pursuant to 18 U.S.C. § 3013.

  Full restitution to the victim is required under 18 U.S.C. §§ 3663A and 3664. Pursuant to U.S.S.G. § 5E1.1(a)(1), where there is an identifiable victim, a restitution order shall be entered for the full amount of the victim's loss if such order is authorized under 18 U.S.C. § 3663A. If the government is unable to identify the loss amounts, the restitution issue may be deferred for a period up to 90 days after sentencing for final determination of the victim's losses, pursuant to 18 U.S.C. § 3664(d)(5).

  Pursuant to the Violent Crime Control and Law Enforcement Act of 1994, all offenders on probation, parole or supervised release for offenses committed after September 13, 1994, are required to submit to one drug test within fifteen days of commencement of probation, parole or supervised release and at least two drug tests thereafter for use of a controlled substance, unless ameliorated or suspended by the court due to its determination that the defendant poses a low risk of future substance abuse as provided in 18 U.S.C. §§ 3563(a)(5) and 3583(d).

  The Sentence

  For the instant offense, Scarbrough is sentenced to time served and three years' supervised release, which represents a downward departure from the sentence prescribed by the guidelines. Even if the guidelines were deemed unconstitutional, the sentence imposed here would nonetheless be appropriate, as it is the same sentence that would have resulted from due consideration of the circumstances of the offense and of the individual being sentenced and in the exercise of this Court's discretion.

  A special assessment fee of $200 payable to the United States is mandatory and due immediately. As Scarbrough lacks any financial resources and in consideration of the factors listed in 18 U.S.C. § 3572, no fine is imposed.

  A reduced mental capacity, if it contributed to the commission of the offense, may represent a factor warranting consideration for downward departure under U.S.S.G. § 5K2.13 where, as here, the underlying offense was non-violent and the defendant's criminal history does not indicate a need for incarceration to protect the public.*fn1 "Diminished capacity is an exception to the general rule that `[m]ental and emotional conditions are not ordinarily relevant in determining whether a sentence should be outside the applicable range.'" United States v. Silleg, 311 F.3d 557, 562 (2d Cir. 2002) (quoting U.S.S.G. § 5H1.3). Indeed, "[d]iminished capacity is an `encouraged' basis for departure because it is a factor the Sentencing Commission generally was `not . . . able to take into account fully in formulating the guidelines.'" United States v. Kim, 313 F. Supp. 2d 295, 297-98 (S.D.N.Y. 2004) (quoting U.S.S.G. § 5K2.0 (2001)). "To establish diminished capacity . . . a defendant need only persuade a judge by a preponderance of the evidence that he suffers from `reduced mental capacity' and that a `causal link [exists] between that reduced capacity and the commission of the charged offense.'" United States v. Ventrilla, 233 F.3d 166, 169 (2d Cir. 2000) (per curiam) (citations omitted and alteration in original); accord Silleg, 311 F.3d at 561.

  Scarbrough's judgment and his ability to control his behavior during his commission of the underlying offenses were impaired by his longstanding mood disorder. According to records of his psychiatric hospitalization following commission of the offenses charged, his mental capacity appears to have been significantly impacted by an apparently pre-existing mood disorder as well as grief for the loss of his partner. In particular, it appears that Scarbrough used the proceeds of the offense to renovate the apartment in which he resided with his partner before the latter died, reportedly creating shrines for his partner. The record suggests that Scarbrough's ability to understand and fully appreciate the nature of his conduct was impaired because he suffered from a significantly reduced mental capacity during the period of the offense conduct. A downward departure is, accordingly, both authorized and appropriate here.

  The extent of the departure here, which calls for a limited period of incarceration and reflects a four-level reduction in the offense level, is proper in view of the non-violent nature of the offenses charged, Scarbrough's lack of any prior criminal history, the circumstances under which the offenses were committed, and the significant degree to which Scarbrough's reduced mental capacity contributed to the commission of the offenses. A lesser departure would require a period of incarceration that would defeat the goal of rehabilitation under these particular circumstances. The goal of punishment is adequately served by a limited period of incarceration combined with a significant term of supervised release and the constraints of the various terms and conditions imposed thereunder. As mandatory conditions of probation, Scarbrough shall (1) abide by the standard conditions of supervision (1-13); (2) not commit another federal, state, or local crime; (3) not illegally possess a controlled substance; and (4) not possess a firearm or destructive device.

  The mandatory drug testing condition is suspended due to imposition of a special condition requiring drug treatment and testing. Scarbrough shall participate in a program approved by the United States Probation Office, which program may include testing to determine whether Scarbrough has reverted to using drugs or alcohol. Scarbrough will be required to contribute to the costs of services rendered (co-payment), in an amount determined by the probation officer, based on ability to pay or availability of third-party payment.

  Scarbrough shall not incur new credit charges or open additional lines of credit without the approval of the probation officer unless he is in compliance with any installment payment schedule set with regard to restitution or co-payment. In addition, he shall provide the probation officer with access to any requested financial information.

  Scarbrough shall participate in a mental health program approved by the United States Probation Office. He shall continue to take any prescribed medications unless otherwise instructed by his health care provider. Scarbrough shall contribute to the costs of services rendered not covered by third-party payment if he has the ability to pay. The release of available psychological and psychiatric evaluations and reports to his health care provider is hereby authorized.

  Scarbrough shall report to the nearest Probation Office immediately and shall be supervised by the district of residence.

  This sentence is subject to modification at the sentencing hearing now set for October 12, 2004, at which time a date for the final determination of the victim's losses, not to exceed 90 days after sentencing, shall be set.

  It is so ordered.

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