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United States v. Zukerman

United States Court of Appeals, Second Circuit

July 27, 2018

United States of America, Appellee,
v.
Morris E. Zukerman Defendant-Appellant.

          Argued: January 17, 2018

         Defendant-Appellant Morris Zukerman appeals from a judgment of conviction entered on March 21, 2017, in the United States District Court for the Southern District of New York (Torres, J.). After pleading guilty to tax evasion and to corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws in violation of 26 U.S.C. §§ 7201 and 7212(a), Zukerman was sentenced to pay restitution of $37 million, serve a 70-month term of imprisonment, and pay a $10 million fine. On appeal, Zukerman contends that the fine component of his sentence was procedurally and substantively unreasonable. We find that the district court did not err in calculating the fine range recommended by the Sentencing Guidelines; that Zukerman was given adequate opportunity to inform the district court of his financial condition and ability to pay a fine; and that imposing a $10 million fine was within the district court's discretion. Accordingly, the judgment of the district court is AFFIRMED.

          Stanley J. Okula (Karl Metzner, on the brief), Assistant United States Attorneys, for Joon H. Kim, Acting United States Attorney for the Southern District of New York, New York, NY, for Appellee.

          Gregory G. Garre (Roman Martinez and Graham E. Phillips, on the brief), Latham & Watkins LLP, Washington, DC, for Defendant- Appellant.

          Before: Katzmann, Chief Judge, Kearse and Pooler, Circuit Judges.

          PER CURIAM.

         Defendant-Appellant Morris Zukerman appeals from a judgment of conviction entered on March 21, 2017, in the United States District Court for the Southern District of New York (Torres, J.). After pleading guilty to tax evasion and to corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws, Zukerman was sentenced to pay restitution of $37 million, serve a 70-month term of imprisonment, and pay a $10 million fine. On appeal, this case calls on us to determine whether the fine imposed was procedurally and substantively unreasonable. It was not. In particular, the district court did not err in calculating the fine range recommended by the Sentencing Guidelines; Zukerman was given adequate opportunity to inform the district court of his financial condition and ability to pay a fine; and the imposition of a $10 million fine was within the district court's discretion. Accordingly, the judgment of the district court is AFFIRMED.

         ***

         Morris Zukerman is the founder of M.E. Zukerman & Co., an investment management firm also known as "MEZCO." In 2007, a MEZCO subsidiary sold certain assets for $110 million, at which time Zukerman enacted a scheme to avoid paying taxes on the proceeds of that sale, as well as on approximately $12 million of operating income MEZCO received as a result of its earlier ownership of those assets. Zukerman falsified several documents in order to effectuate this scheme, which allowed MEZCO to evade over $30 million in taxes. When aspects of these transactions were audited by the Internal Revenue Service in 2008, Zukerman lied to the tax professionals working for him and fabricated documents relating to the transactions, causing several false statements to be made to the IRS. See In re Grand Jury Subpoena Dated March 2, 2015, 628 Fed.Appx. 13, 14-15 (2d Cir. 2015) (rejecting claims of attorney-client privilege relating to those false statements).

         Separate and apart from those activities, Zukerman engaged in several other schemes to avoid paying taxes and to throw the IRS off of his trail. He avoided paying over $4.5 million in state taxes related to paintings used to decorate his and his families' living quarters, which were purchased, in part, with his ill-gotten gains from the MEZCO tax evasion. In addition, he provided false information in connection with his personal tax returns, as well as those of his family members and his household employees, causing each of them to file false tax returns over the course of several years. When the personal taxes of both Zukerman and his daughter were audited, Zukerman once again provided false documentation and representations to the IRS. Finally, Zukerman also failed to file several years' worth of tax returns for the Zukerman Family Trust despite the trust's receipt of significant taxable income.

         On June 27, 2016, Zukerman pleaded guilty to tax evasion, in violation of 26 U.S.C. § 7201, and to corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws, in violation of 26 U.S.C. § 7212(a). In addition to requiring that he pay restitution in the amount of $37 million, Zukerman's plea agreement stipulated to a Sentencing Guidelines range of between 70 to 87 months' imprisonment and a fine of between $25, 000 to $250, 000. On March 21, 2017, the district court principally sentenced Zukerman to a 70-month term of imprisonment, ordered $37 million to be paid in restitution, and imposed a fine of $10 million. Judgment was entered that same day, from which Zukerman appealed.

         Following oral argument, we subsequently entered a summary order pursuant to United States v. Jacobson, 15 F.3d 19 (2d Cir. 1994), remanding this matter to the district court for the limited purpose of elaborating on the rationale for the fine imposed. United States v. Zukerman, 710 Fed.Appx. 499 (2d Cir. 2018). The district court provided such elaboration via a Supplemental Memorandum dated May 4, 2018 ("Supp. Mem."), after which the instant appeal was reinstated. We now address Zukerman's arguments.

         On appeal, Zukerman contends that the fine component of his sentence was procedurally and substantively unreasonable. Because Zukerman did not raise any procedural objections below, his procedural arguments are "deemed forfeited on appeal unless they meet our standard for plain error." United States v. Villafuerte, 502 F.3d 204, 207 (2d Cir. 2007). That standard requires Zukerman to "establish (1) error (2) that is plain and (3) affects substantial rights," only after which will we "consider whether to exercise our discretion to correct it, which is appropriate only if the error seriously affected the 'fairness, integrity, or public reputation of the judicial proceedings.'" Id. at 209 (quoting United States v. Doe, 297 F.3d 76, 82 (2d Cir. 2002)).

         Zukerman's first procedural argument is that the district court overlooked U.S.S.G. § 5E1.2(h) in calculating the Guidelines' recommended sentencing range, which had the effect of doubling the recommended fine. That provision states that an earlier version of the Guidelines should be applied "[f]or offenses committed prior to November 1, 2015." Count One of Zukerman's indictment alleges that his corrupt endeavors to obstruct and impede the due administration of the internal revenue laws occurred "[f]rom in or about 2007 through in or about 2015," however, and Zukerman averred during his plea allocution that the conduct underlying Count One took place "from 2007 through 2015." Jt. App. 60, 99. One cannot reasonably interpret "through 2015" to mean only prior to November 1, 2015. Moreover, Zukerman's plea agreement expressly recognized ...


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