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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
JUL 11, 2006
No. 05-16645 THOMAS K. KAHN
Non-Argument Calendar CLERK
________________________
D. C. Docket No. 03-00191-CR-UWC-HGD
UNITED STATES OF AMERICA,
Plaintiff-Appellant,
versus
MICHAEL MARTIN,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Alabama
_________________________
(July 11, 2006)
Before CARNES, HULL and MARCUS, Circuit Judges.
HULL, Circuit Judge:
This is the second time the government has appealed the sentence of
defendant-appellee Michael Martin, a former HealthSouth Corporation
(âHealthSouthâ) executive, who pled guilty to conspiracy to commit securities
fraud and mail fraud and falsify books and records, in violation of 18 U.S.C. § 371,
and falsifying books and records, in violation of 15 U.S.C. §§ 78m(b)(2)(A),
78m(b)(5), and 78ff, 17 C.F.R. § 240.13b2-1, and 18 U.S.C. § 2. In both appeals
the parties have agreed that Martinâs advisory guidelines range is 108 to 135
monthsâ imprisonment, and that Martinâs substantial assistance to the government
warrants a downward departure pursuant to U.S.S.G. § 5K1.1. The hotly contested
dispute both times has been over whether the extremely lenient sentence the district
court gave is reasonable.
The district court originally sentenced Martin to 60 monthsâ probation. In
the first appeal, this Court vacated that sentence for lack of a record capable of
meaningful appellate review and remanded for resentencing. United States v.
Martin, 135 Fed. Appx. 411 (11th Cir. June 21, 2005) (unpublished).
At the resentencing, the government recommended a § 5K1.1 downward
departure to 42 monthsâ imprisonment, which equates to a 9-level departure.
Instead, the district court granted Martin a 23-level downward departure and
imposed a sentence of 7 daysâ imprisonment. The government again appeals.
After review, we again vacate Martinâs sentence in its entirety.
2
I. FACTUAL BACKGROUND
A factual summary outlining Martinâs fraud is attached to his guilty plea.
The Pre-sentence Investigation Report (âPSIâ) also details the massive fraud in this
case, and at sentencing, Martin withdrew any objection to the PSI. Thus, the two
documents establish these facts.
At all relevant times, HealthSouth claimed to be the nationâs largest provider
of outpatient surgery, diagnostic imaging, and rehabilitative healthcare services,
with approximately 1,800 locations across all 50 states. HealthSouthâs common
stock was listed on the New York Stock Exchange. The management of
HealthSouth provided guidance to the investing public regarding anticipated
earnings per share, and in turn, professional securities analysts disseminated to the
public their estimates of the companyâs expected performance. If a company, such
as HealthSouth, announces earnings that fail to meet or exceed analyst
expectations, the price of the companyâs stock typically will decline.
From at least 1994 until March 2003, a group of HealthSouth officers
conspired to artificially inflate HealthSouthâs reported earnings and earnings per
share, and to falsify reports about HealthSouthâs overall financial condition. The
HealthSouth officers made, and directed accounting personnel to make, false and
fraudulent entries in HealthSouthâs books and records for the purpose of falsely
3
reporting HealthSouthâs assets, revenues, and earnings per share and in order to
defraud investors, banks, and lenders. As a result, HealthSouthâs public financial
records overstated its financial position cumulatively by billions of dollars from
1994 to 2002, and public investors purchased overvalued shares of HealthSouthâs
stock, which plummeted from $3.91 per share to $.11 per share when the massive
fraud was revealed.
Defendant Martin was employed by HealthSouth from 1989 to 2000, and
served as its Chief Financial Officer (âCFOâ) from October 1997 until he resigned
in March 2000. As early as 1994, Martin became aware that HealthSouth was not
meeting its earnings-per-share projections. After Martin became CFO in 1997, he
began reviewing quarterly preliminary income statements showing HealthSouthâs
true and accurate financial results, which showed that HealthSouth was not
meeting earnings-per-share projections made by its Chief Executive Officer
(âCEOâ), Richard Scrushy. By Martinâs own admission, at the direction of
Scrushy, Martin falsified numbers to inflate HealthSouthâs stated earnings to meet
Scrushyâs projections and Wall Streetâs expectations.
Martin also attended numerous meetings in which members of the
accounting department discussed how the financial statements could be altered to
meet Scrushyâs earnings-per-share projections. Martin repeatedly discussed with
4
Scrushy the fact that the income statements provided to the Securities and
Exchange Commission (âSECâ) and the investors were inaccurate, and he tried to
dissuade Scrushy from perpetrating further fraud. Martin nevertheless signed
HealthSouthâs 10-Q and 10-K forms beginning in 1997 and continuing through the
third quarter of 1999, with the knowledge that the numbers in the attached financial
statements were false and thus the financial statements misrepresented the
companyâs financial condition.
As noted earlier, the overstatement of HealthSouthâs financial position in its
public records as a result of the massive and prolonged fraud summed to billions of
dollars.1 The most direct victims of the fraud were the investing public,
HealthSouth shareholders, and the company. HealthSouth had many shareholders,
some of whom invested their life savings in HealthSouth stock and saw their
investment plummet to pennies per share. A conservative estimate of the stock
value loss attributable to Martinâs fraud was $1,390,800,000 or approximately $1.4
billion.
There were also many other collateral victims of Scrushy and Martinâs
fraud, including (1) HealthSouth employees, particularly those who were
1
The factual summary filed in support of Martinâs guilty plea references the false entries
in HealthSouthâs quarterly and annual financial statements filed with the SEC from 1994 to 2002
and states: âThe cumulative inflations summed to billions of dollars.â
5
terminated and those who had participated in the companyâs stock ownership plan
or pension fund; (2) employees of contractors who were dependent on HealthSouth
contracts for income; (3) banks and other lenders who loaned money to
HealthSouth based on falsified financial information; and (4) competing health
service providers who lost business or financing based on the false information.
See United States v. McVay, 447 F.3d 1348, 1350 (11th Cir. 2006).
Although many victims suffered devastating losses, HealthSouthâs officers
benefitted by receiving huge salaries and bonuses. Martinâs income was over $14
million from just 1997 to 2000: $3,339,237 in 1997; $5,820,910 in 1998;
$1,632,776 in 1999, and $4,080,959 in 2000. As detailed later, Martin agreed to a
$2.375 million forfeiture, and the district court also imposed a $50,000 fine, both
of which Martin immediately paid by check. At the time of the PSI in 2004,
Martin had a net worth of over $8.9 million.
II. PROCEDURAL HISTORY
In March 2003, certain of Martinâs co-conspirators revealed the fraud to
federal authorities. Martin subsequently met with Federal Bureau of Investigation
(âFBIâ) agents, admitted his role in the conspiracy, and thereafter cooperated
substantially with the government.
On April 8, 2003, the government filed a three-count information against
6
Martin, charging him with: (1) one count of conspiracy to commit securities fraud
and mail fraud and falsify books and records, in violation of 18 U.S.C. § 371
(Count One); and (2) one count of falsifying books, records, and accounts, in
violation of 15 U.S.C. §§ 78m(b)(2)(A), 78m(b)(5), and 78ff, 17 C.F.R. §
240.13b2-1, and 18 U.S.C. § 2 (Count Two). The information also included a
forfeiture count (Count Three). Pursuant to a plea agreement, Martin pled guilty to
all three counts.
A. First Sentencing in 2004
The PSI indicated that Martinâs offense level was 31 and his criminal history
category was I, resulting in a guidelines sentence range of 108 to 135 monthsâ
imprisonment.2 Martinâs base offense level of 6 was increased to level 34 by these
enhancements: (1) 18 levels under U.S.S.G. § 2F1.1(b)(1)(S) because the fraud
loss was over $80 million; (2) 4 levels under § 3B1.1(a) because Martin was an
organizer or leader of a criminal activity that was extensive; (3) 2 levels under §
3B1.3 for Martinâs abuse of a position of public and private trust; (4) 2 levels
under § 2F1.1(b)(5)(C) because his offenses involved sophisticated means; and (5)
2 levels under § 2F1.1(b)(2)(A) because his offenses involved more than minimal
2
The 1998 version of the guidelines was used in the PSI, and no party raised any issue in
the district court or on appeal as to what version applies. All guidelines cites herein are to the
1998 version of the guidelines.
7
planning. Martinâs offense level of 34 was reduced by 3 levels under § 3E1.1 due
to his acceptance of responsibility.
On June 19, 2004, the district court held a sentencing hearing. The
government had already filed a motion for downward departure, pursuant to
U.S.S.G. § 5K1.1, based on Martinâs substantial assistance. At the sentencing
hearing, the government argued that the court should depart down 6 levels to
offense level 25 and impose a sentence of 62 monthsâ imprisonment.3 The
government pointed out that while Martinâs assistance was valuable, Martin
nevertheless was âthe most culpable of those who have been sentenced to dateâ;
that â[h]e was the most senior officer, he had the most authority, and he was
involved the longestâ; that âhe obtained substantial income and status, social
status, from this position at HealthSouthâ; and that a lesser sentence would not
sufficiently deter such conduct.
The district court adopted the PSIâs calculations that Martinâs offense level
was 31, his criminal history category was I, and his guidelines sentence range was
108 to 135 monthsâ imprisonment. Although the district court granted the
governmentâs § 5K1.1 motion, the district court departed 21 levels down to offense
level 10, which yielded a guidelines range of 6 to 12 monthsâ imprisonment.
3
With an offense level of 25 and criminal history category I, Martinâs guidelines range
would be 57 to 71 monthsâ imprisonment.
8
Although objecting to the extent of the § 5K1.1 departure, the government asked
for a sentence of at least 12 monthsâ imprisonment. Even with that 21-level
departure, the district court still imposed no imprisonment. Rather, the district
court imposed a sentence of 60 monthsâ probation with a special condition of 6
monthsâ home detention on each of Counts One and Two, to run concurrently. At
the sentencing, Martin agreed to a forfeiture of $2.375 million, and the district
court imposed a fine of $50,000. The government objected that the extent of the
departure was unreasonable.
In its written judgment entered June 28, 2004, the district court checked the
box stating that the downward departure was âbased on 5K1.1 motion of the
government based on the defendantâs substantial assistance,â and offered no
further reasons. The government appealed, and this Court vacated and remanded
because the district court failed to specify reasons for the extraordinary departure
under § 5K1.1, and thus the record was incapable of meaningful appellate review.
Martin, 135 Fed. Appx. at 415-16.
B. Resentencing
The district court held a resentencing hearing on September 20, 2005, at
which the district court again granted the governmentâs § 5K1.1 motion for
downward departure based on Martinâs substantial assistance. At that hearing, the
9
government adopted its previous characterization of Martinâs assistance and also
acknowledged that Martin had continued to assist the government after his first
sentencing, including testifying for at least five days at Scrushyâs trial. The
government further acknowledged that Martin had attempted to dissuade Scrushy
from pursuing the fraudulent conduct and had been at least minimally successful
for some period.
However, the government stressed that Martin nevertheless was a leader of
the conspiracy; that he abused the trust of the investors, bankers, and others who
placed him in his leadership position within HealthSouth; that his conduct was
egregious; and that he was the most culpable of the defendants to come before the
court for sentencing. To balance Martinâs cooperation against the seriousness of
his conduct and his relative culpability, the government requested that the district
court sentence Martin to 42 monthsâ imprisonment. This request represented a
downward departure of 9 levels from offense level 31 to 22. Thus, the
governmentâs requested 42-month sentence represented a reduction in excess of 60
percent from the low end of Martinâs pre-departure 108-135-month guideline
range.4
4
The governmentâs request was framed as a sentence of 42 monthsâ imprisonment.
Because Martinâs criminal history category is I, the downward departure in this case is reflected
in the extent of the reduction in Martinâs offense level. Martinâs offense level was 31, and given
Martinâs criminal history category of I, it takes a reduction of 9 levels, to level 22, to reach a
10
Martinâs counsel disputed the governmentâs position that he was the most
culpable of the defendants sentenced or to be sentenced by the court and
emphasized his extraordinary cooperation with the government. Martinâs counsel
further stressed that he tried to dissuade others from the fraudulent conduct and
ultimately resigned, and that he also cooperated with plaintiffs who sued him for
his conduct, without any promise of leniency or reduced judgment.
After hearing from the government and the defense, the district court
announced its decision to depart downward by 23 levels to an offense level of 8,
which, when combined with Martinâs criminal history category of I, yielded a
guidelines range of 0 to 6 monthsâ imprisonment, a fine range of $1,000 to $1
million, and a supervised release term of 2 to 3 years. The district court then
sentenced Martin to 7 daysâ imprisonment and 2 yearsâ supervised release. The
district court also reimposed the $50,000 fine and forfeiture of $2.375 million,
which Martin had paid in 2004.
In explaining its reasons for this extraordinary departure under § 5K1.1, the
district court described Martinâs âunhesitating assistanceâ to the FBI, the SEC, and
HealthSouthâs auditors and shareholders. The district court adopted the
governmentâs description of Martinâs assistance:
guidelines range of 41-51 monthsâ imprisonment and thus a 42-month sentence.
11
That this defendantâs assistance enabled the government to swiftly
prosecute Richard Scrushy and several other major participants in the
fraud; it allowed the government to provide a timely assurance to the
financial markets that the illegal conduct had ended and that
corrective action was being taken; and it allowed HealthSouth to
reconstruct its books and records and to begin its recovery.
The district court emphasized Martinâs crucial role in the Scrushy trial and in the
SECâs civil proceedings, and found Martinâs assistance to have been
âoutstanding,â âinvaluable,â and âcomplete,â âcompletely reliable,â and
âimmediate,â even as the government was appealing Martinâs previous sentence.
The district court further noted that, while there was no risk of physical injury,
Martin subjected âhis financial well-being to imminent jeopardyâ and would
almost certainly incur substantial civil judgments against him as a result of his
cooperation. Additionally, the district court indicated that it was remarkable that
Martin continued to cooperate with the government even as the government was
appealing his original sentence. As to the extraordinary nature of the assistance,
the district court stated: âAs the Court found earlier, this is the only time in its 25-
year history as a Judge when this kind of cooperation has been forthcoming from a
defendant.â
As to the sentencing factors set forth in 18 U.S.C. § 3553(a), the district
court found that the offense conduct was âan aberrationâ for an otherwise
outstanding citizen; that Martin had âsacrificed his own personal fortune in favor
12
of the victims of the fraudâ; that the conspiracy predated Martinâs participation;
and that he tried to convince Scrushy to abandon the fraudulent course of conduct.
The district court further stated, with regard to Martinâs resignation: âWhile for
purposes of the sentencing guidelines he didnât withdraw his participation in the
conspiracy;5 for purposes of Booker considerations, the Court finds that he did
withdraw from the conspiracy.â
The district court stated that it âfinds that some period of incarceration is
necessary to reflect the seriousness of the crime.â Even though the court
recognized this § 3553(a) factor, the court then reasoned that a more lengthy
sentence than 7 days âwould, in the courtâs judgment, promote a disrespect for the
lawâ because âfrom the point of view of the government, the man most singularly
responsible for this criminal conduct [Richard Scrushy] has been found not guilty
and will serve no time at all.â6 The court concluded that âunder those
circumstances, to subject this defendant to a lengthy period of imprisonment would
not serve as just punishment and would not promote respect for the law.â
The district court also determined that Martinâs âdevastating experienceâ
5
The district court noted that Martin had not withdrawn from the conspiracy for purposes
of the sentencing guidelines because he failed to inform law enforcement officers of the fraud.
6
The district court observed that Aaron Beam, one of the âcore defendants,â was
sentenced to only three monthsâ imprisonment, and unlike Martin, there was no evidence that
Beam ever tried to dissuade Scrushy or to withdraw from the conspiracy.
13
would deter not only Martin but others similarly situated from engaging in similar
conduct. The court found that â[a] longer period of incarceration would be greater
than necessary to achieve the deterrence objectives, and would be unjust.â
Finally, the district court noted that Martin had forfeited $2.375 million and
that Martin was also a defendant in several civil lawsuits. The district court stated
that âa longer period of incarceration [might] well impede the ability of the
plaintiffs in those cases to collect on any [civil] judgment that they may receiveâ
against Martin.
The government objected to the departure to 7 daysâ imprisonment as an
unreasonable departure from the statutory maximum of 15 years and the low end of
the advisory guidelines of 108 months. The government now appeals.
III. DISCUSSION
Even after the Supreme Courtâs decision in United States v. Booker, 543
U.S. 220, 125 S. Ct. 738 (2005), in fashioning an appropriate sentence, the district
court still must correctly calculate first the appropriate advisory Guidelines range.
United States v. Williams, 435 F.3d 1350, 1353 (11th Cir. 2006) (citing United
States v. Crawford, 407 F.3d 1174, 1178 (11th Cir. 2005)). The district court then
may consider imposing a more severe or more lenient sentence, and this Court
reviews the ultimate sentence for reasonableness. Id. âBefore we conduct a
14
reasonableness review of the ultimate sentence imposed, âwe first determine
whether the district court correctly interpreted and applied the Guidelines to
calculate the appropriate advisory Guidelines range.ââ McVay, 447 F.3d at 1353
(quoting Williams, 435 F.3d at 1353). We review de novo a district courtâs
interpretation of the sentencing guidelines, including § 5K1.1, and its factual
findings for clear error. Id. at 1352-53.
In this case, it is undisputed that Martinâs advisory guidelines range is 108 to
135 monthsâ imprisonment. Instead, the dispute is over whether the extent of the §
5K1.1 departure was reasonable and whether the ultimate sentence imposed was
reasonable under Booker. We first review the principles governing § 5K1.1
departures, then Booker, and finally apply them to Martinâs sentence.
A. Section 5K1.1 Departures
Here, the district court departed downward based on the governmentâs §
5K1.1 substantial-assistance motion. As we have previously explained, â[o]nce it
has made a 5K1.1 motion, the government has no control over whether and to what
extent the district court departs from the Guidelines, except that if a departure
occurs, the government may argue on appeal that the sentence imposed was
unreasonable.â Id. (quoting United States v. Pippin, 903 F.2d 1478, 1485 (11th
Cir. 1990)) (quotation marks omitted). In determining the extent of a substantial-
15
assistance departure, the district court must consider the factors set forth in §
5K1.1(a). Id. at 1355. Those factors, which are non-exclusive, are: (1) âthe courtâs
evaluation of the significance and usefulness of the defendantâs assistance, taking
into consideration the governmentâs evaluation of the assistance renderedâ; (2) âthe
truthfulness, completeness, and reliability of any information or testimony
provided by the defendantâ; (3) âthe nature and extent of the defendantâs
assistanceâ; (4) âany injury suffered, or any danger or risk of injury to the
defendant or his family resulting from his assistanceâ; and (5) âthe timeliness of
the defendantâs assistance.â U.S.S.G. § 5K1.1(a).
This is not an exhaustive list. The district court may consider other factors,
but only if the factors relate to the assistance provided by the defendant. United
States v. Crisp, â F.3d â, No. 05-12304, slip op. at 8-9 (11th Cir. July 7, 2006)
(â[I]n meting out a substantial assistance departure the court may consider factors
outside the § 5K1.1(a) list, but only if they are related to the assistance rendered.â);
United States v. Luiz, 102 F.3d 466, 469 (11th Cir. 1996) (stating â[w]hen . . . a
district court grants a downward departure under U.S.S.G. § 5K1.1 . . . , the
sentence reduction may be based only on factors related to the defendantâs
substantial assistanceâ); United States v. Aponte, 36 F.3d 1050, 1052 (11th Cir.
1994); see also U.S.S.G. § 5K1.1 cmt. background (indicating that the focus is on
16
the ânature, extent, and significanceâ of the defendantâs assistance to the
government). Post-Booker, this Court has reiterated that district courts are
prohibited from considering sentencing factors unrelated to the nature and extent of
a defendantâs assistance in making § 5K1.1 departures. McVay, 447 F.3d at 1355;
United States v. Davis, 407 F.3d 1269, 1271 (11th Cir. 2005).7 Further, as
explained in McVay, a defendant may not appeal a district courtâs refusal to make
a § 5K1.1 departure, but if the court departs, we will review the governmentâs
challenge to the extent of a departure under § 5K1.1 for an abuse of discretion.
McVay, 447 F.3d at 1353.
In addition, even pre-Booker, the extent of a district courtâs departure from
the guidelines had to be reasonable. Williams v. United States, 503 U.S. 193, 202,
112 S. Ct. 1112, 1120 (1992); United States v. Blas, 360 F.3d 1268, 1274 (11th
Cir. 2004); United States v. Melvin, 187 F.3d 1316, 1322-23 (11th Cir. 1999);
United States v. Pippin, 903 F.2d 1478, 1485 (11th Cir. 1990). When a sentencing
court departed from the guidelines, the reviewing court determined the
7
A refusal to depart, however, may be based on factors other than substantial assistance.
Luiz, 102 F.3d at 469-70. While a court may reward a defendant only for substantial assistance,
the courtâs decision to grant a § 5K1.1 motion remains discretionary and the court may consider
other factors, such as the seriousness of the offense, in refusing to depart. See United States v.
Manella, 86 F.3d 201, 204 (11th Cir. 1996) (stating that âthe only factor that may militate in
favor of a Rule 35(b) reduction is the defendantâs substantial assistance,â but â[n]othing in the
text of the rule purports to limit what factors may militate against granting a Rule 35(b)
reductionâ or âthe factors that may militate in favor of granting a smaller reductionâ); Luiz, 102
F.3d at 469-70 (applying Manella to § 5K1.1 departures).
17
reasonableness of the departure in light of the statutory factors to be considered in
imposing a sentence, as stated in 18 U.S.C. § 3553(a), and the reasons the district
court provided for departing. Blas, 360 F.3d at 1274; Melvin, 187 F.3d at 1322-23;
United States v. Nilsen, 967 F.2d 539, 546 (11th Cir. 1992).
B. Post-Booker
As we all now know, Booker made the guidelines advisory. District courts
still must correctly calculate the advisory guidelines range, and we review any
Booker-based departures outside that range for reasonableness in light of the §
3553(a) factors and the reasons stated by the district court for departing. See, e.g.,
Williams, 435 F.3d at 1354-55. As we recently explained, â[m]oreover, after it has
decided the length of departure warranted by the substantial assistance motion, the
district court is then obliged to take into account the advisory Guidelines range and
the sentencing factors set forth in 18 U.S.C. § 3553(a) in fashioning a reasonable
sentence.â McVay, 447 F.3d at 1356 (citing Booker, 543 U.S. at 259-60, 125 S.
Ct. at 764-65) (first emphasis added).
The § 3553(a) factors include: ââ(1) the nature and circumstances of the
offense; (2) the history and characteristics of the defendant; (3) the need for the
sentence imposed to reflect the seriousness of the offense, to promote respect for
the law, and to provide just punishment; (4) the need to protect the public; and (5)
18
the Guidelines range,ââ id. at 1356-57 (citation omitted), as well as (6) the kinds of
sentences available, 18 U.S.C. § 3553(a)(3); (7) the need to avoid sentencing
disparities among similar defendants who have been found guilty, 18 U.S.C. §
3553(a)(6); and (8) the need to provide restitution to victims of the offense, 18
U.S.C. § 3553(a)(7). â[W]hen imposing a sentence falling far outside of the
Guidelines range, based on the § 3553(a) factors, an extraordinary reduction must
be supported by extraordinary circumstances.â McVay, 447 F.3d at 1357
(alteration, citation, and quotation marks omitted).
On appeal, ââ[i]n reviewing the ultimate sentence imposed by the district
court for reasonableness, we consider the final sentence, in its entirety, in light of
the § 3553(a) factors.ââ United States v. Valnor, â F.3d â, 2006 WL 1529118, at
*5 (11th Cir. June 6, 2006) (quoting United States v. Thomas, 446 F.3d 1348, 1349
(11th Cir. 2006)); see also United States v. Winingear, 422 F.3d 1241, 1245 (11th
Cir. 2005) (âWe do not apply the reasonableness standard to each individual
decision made during the sentencing process; rather, we review the final sentence
for reasonableness.â). The party challenging the sentence has the burden of
establishing that the sentence is unreasonable. United States v. Talley, 431 F.3d
784, 788 (11th Cir. 2005).
Further, our â[r]eview for reasonableness is deferential. We must evaluate
19
whether the sentence imposed by the district court fails to achieve the purposes of
sentencing as stated in section 3553(a).â Id. â[T]here is a range of reasonable
sentences from which the district court may choose . . . .â Id. There will also be
sentences outside the range of reasonableness that do not achieve the purposes of
sentencing stated in § 3553(a) and that thus the district court may not impose. Id.;
Crisp, â F.3d at â, slip op. at 11.
We now turn to Martinâs sentence.
C. Martinâs Sentence
As noted earlier, the government does not dispute that the district court
properly calculated Martinâs guidelines range. Nor does the government argue that
the district court erred in granting Martin a § 5K1.1 downward departure based on
his substantial assistance. Indeed, the government argued in the district court and
maintains on appeal that Martinâs assistance was extraordinary and merited an
extraordinary downward departure, such as a 42-month sentence.8 Rather, the
government argues that the district courtâs 23-level departure under § 5K1.1 and
imposition of a 7-day sentence are both patently unreasonable given the massive
and prolonged fraud perpetuated by Martin in conspiracy with other HealthSouth
officers.
8
A 42-month sentence would have amounted to a 9-level departure, or more than a 60
percent departure from the low end of Martinâs guidelines range of 108 monthsâ imprisonment.
20
With regard to the extent of the § 5K1.1 departure, the government points
out that while Martinâs cooperation was extraordinary, Martin did not voluntarily
approach the government and expose the fraud when he learned of it, but instead
cooperated only after other co-conspirators revealed the fraud and Martinâs role in
it. The government stresses that the district court improperly gave no weight to its
recommendation and evaluation of Martinâs cooperation. The government also
takes issue with the district courtâs interpretation of § 5K1.1(a)(4) and its
consideration of Martinâs cooperation that placed him in financial (as opposed to
physical) jeopardy as a § 5K1.1(a)(4) factor in determining the extent of the
departure. The government stresses that the § 5K1.1(a)(4) factor concerns
physical, not financial, injury and that in any event the only financial risk to Martin
was that of civil lawsuits by the victims of his crimes. His exposure to civil
liability was not caused by his cooperation in the criminal case.
As to the 7-day sentence and the § 3553(a) factors, the government
emphasizes that the district court unreasonably overemphasized Martinâs assistance
and failed to consider adequately other important sentencing factors, such as the
severity of Martinâs offense, his financial gain from the crimes in salary and
bonuses, and the need to deter similar conduct by individuals who might consider
the risk of a 7-day sentence a small price to pay for the possibility of reaping
21
millions of dollars by fraudulent means.
The government also relies on McVay, wherein this Court addressed the
governmentâs challenge to the same district courtâs extraordinary downward
departure in sentencing one of Martinâs co-conspirators. In that case, defendant
McVayâs guidelines range was 87 to 108 monthsâ imprisonment, and the district
court downwardly departed 21 levels (from an offense level 29 to an offense level
8) to a range of 0 to 6 monthsâ imprisonment, and then imposed a sentence of 60
monthsâ probation. McVay, 447 F.3d at 1349. As we did in the governmentâs
prior appeal in Martinâs case, this Court vacated McVayâs sentence and remanded,
inter alia, because the district court failed to provide reasons for the departure, and
thus the sentence was incapable of meaningful appellate review. Id. at 1355-56.
As a result, this Court did not have occasion to decide the permissible extent of the
§ 5K1.1 departure or whether McVayâs probationary sentence was reasonable.
However, the Court in McVay did provide the following guidance about the
reasonableness of a probationary sentence under the circumstances of the âmulti-
billion dollar securities fraudâ at HealthSouth:
We pause to note that, in the absence of truly compelling reasonsâin
the face of a multi-billion dollar securities fraud at the expense of the
investing publicâa six-month probationary term given to the Chief
Financial Officer, Senior Vice-President, and Treasurer of the
company at the time of the fraud (who signed the Form 10-Q with full
knowledge of its falsity), is not easily reconcilable with the basic
22
factors enumerated by Congress in § 3553(a), including the need for a
sentence to reflect the seriousness of the offense, to promote respect
for the law, and to provide just punishment.
Id. at 1357.
In Martinâs case, we now are squarely presented with the question of
whether a 23-level departure under § 5K1.1 for his assistance and an ultimate
sentence of 7 daysâ imprisonment for this multi-billion-dollar securities fraud are
reasonable. The answer is easy: they are not.
The extent of the § 5K1.1 departure alone is unreasonable in this case. We
fully accept the district courtâs determination that Martinâs cooperation was
extraordinary and merits a correspondingly extraordinary departure. Indeed, the
government recognized this fact by recommending only a 42-month sentence even
though (1) Martinâs guidelines range was 108-135 months (i.e., from 9 to
approximately 11 years), and (2) his statutory maximum was 15 years (i.e., 5 years
on Count One and 10 on Count Two). We also recognize that there is always a
range of reasonable § 5K1.1 choices that district courts are in the best position to
make. However, the choice of a 23-level guidelines departure under § 5K1.1 to a
0-6 months guidelines range was unreasonable where Martinâs crimes yielded an
advisory guidelines range of 9-11 yearsâ imprisonment and a potential sentence of
15 years. Martinâs cooperation, while commendable and extremely valuable, is not
23
a get-out-of-jail-free card. Martinâs cooperation does not wash the slate clean. Yet
departing 23 levels to a 0-6 months range effectively accomplishes that by
permitting a sentence of no jail time at all, or 7 days, which is close to none.
The 23-level departure was also unreasonable because the district court
based the extent of the departure in part on an erroneous interpretation of
§ 5K1.1(a)(4). Section 5K1.1(a)(4) permits consideration of whether Martin
suffered âany injuryâ or âany danger or risk of injury to the defendant or his family
resulting from his assistance.â U.S.S.G. § 5K1.1(a)(4). The government argues
that only physical injury is encompassed within § 5K1.1(a)(4) and that the district
court erred in considering how Martinâs cooperation would help plaintiffs in civil
lawsuits against him, and thus determining that his cooperation placed his financial
well-being in imminent jeopardy. We need not decide whether § 5K1.1(a)(4) is
restricted to physical injury because, at a minimum, the type of âinjuryâ or ârisk of
injuryâ resulting from cooperation contemplated by § 5K1.1(a)(4) certainly does
not include civil liability to the victims of Martinâs fraud. Those plaintiffs are
entitled to pursue civil lawsuits because of Martinâs fraud and not because of his
assistance to the government. Thus, the district courtâs misapplication of §
5K1.1(a)(4) also contributed to making the extent of the § 5K1.1 departure
unreasonable. Indeed, there is no evidence that Martin incurred âany injuryâ or
24
faces âany danger or risk of injuryâ resulting from his assistance to the
government. See U.S.S.G. § 5K1.1(a)(4).9
Turning to the ultimate sentence, the district courtâs 7-day sentence is
shockingly short and wholly fails to serve the purposes of sentencing set forth by
Congress in § 3553(a). Martinâs crimes and the district courtâs punishment are so
wildly disproportionate that we readily conclude that the district courtâs 7-day
sentence is also unreasonable and must be vacated. We explain the many reasons
why the district court erred in its consideration of the § 3553(a) factors, and why
we, for the second time, must vacate Martinâs sentence.
First, the district courtâs 7-day sentence wholly fails to take into account the
nature and circumstances of the offense and the need for the sentence to reflect the
seriousness of the crime. See 18 U.S.C. § 3553(a)(1), (a)(2)(A). Martin
knowingly participated in a massive and prolonged fraud, served as a leader in that
fraud, financially benefitted substantially from the fraud, and cooperated only after
the fraud was revealed. While the district court emphasized Martinâs lack of a
criminal record and viewed his fraudulent conduct as an âaberrationâ in his
9
Given that the PSI indicated that Martin had a net worth of $8,932,135, the district court
also erred in finding that Martin had âsacrificed his personal fortune in favor of the victims of
the fraud.â This reasoning is faulty in any event, as Martinâs salary and bonuses from
HealthSouth helped to create that personal fortune. Martinâs fraudulent conduct in artificially
inflating HealthSouthâs assets and revenues, and in turn HealthSouthâs stock price, contributed
to the perception of a successfully run company and to Martinâs receiving over $14 million in
salary and bonuses between 1997 and 2000.
25
otherwise outstanding life, Martinâs criminal history category of I already takes
into account his lack of a criminal record. Despite this lack of a criminal record,
Martinâs offense conduct spanned a period of years, during which Martin
consistently abused the public trust and played a leadership role in a conspiracy
that resulted in over a billion dollars of loss harming thousands of victims.
Martinâs crimes are major league economic crimes that harmed not only individual
victims but also many institutions and companies. This type and scale of crime is
peculiarly corrosive to the economic life of the community, as demonstrated by the
deleterious effects the large-scale fraud in this case had on the healthcare industry
and the securities markets. Martin not only participated in this fraud for over three
years as HealthSouthâs CFO before finally resigning, he also chose not to approach
authorities about the conspiracy until they had learned independently about his
criminal conduct. Put simply, the 7-day sentence imposed by the district court
wholly fails to take into account the egregious years-long nature of Martinâs
crimes.
The 7-day sentence imposed by the district court also utterly fails to afford
adequate deterrence to criminal conduct. See 18 U.S.C. § 3553(a)(2)(B). Because
economic and fraud-based crimes are âmore rational, cool, and calculated than
sudden crimes of passion or opportunity,â these crimes are âprime candidate[s] for
26
general deterrence.â Stephanos Bibas, White-Collar Plea Bargaining and
Sentencing After Booker, 47 Wm. & Mary L. Rev. 721, 724 (2005). Defendants
in white collar crimes often calculate the financial gain and risk of loss, and white
collar crime therefore can be affected and reduced with serious punishment. Yet
the message of Martinâs 7-day sentence is that would-be white-collar criminals
stand to lose little more than a portion of their ill-gotten gains and practically none
of their liberty.
Our assessment is consistent with the views of the drafters of § 3553. As the
legislative history of the adoption of § 3553 demonstrates, Congress viewed
deterrence as âparticularly important in the area of white collar crime.â S. Rep.
No. 98-225, at 76 (1983), reprinted in 1984 U.S.C.C.A.N. 3182, 3259. Congress
was especially concerned that prior to the Sentencing Guidelines, â[m]ajor white
collar criminals often [were] sentenced to small fines and little or no imprisonment.
Unfortunately, this creates the impression that certain offenses are punishable only
by a small fine that can be written off as a cost of doing business.â Id. The fact
that Martinâs guidelines range was 108-135 monthsâ imprisonment evinces
Congressâs attempt to curb judicial leniency in the area of white collar crime. The
district courtâs 7-day sentence not only fails to serve the purposes of § 3553, but
even worse, undermines those purposes.
27
While the district court stated summarily that â[Martinâs] devastating
experience will deter others similarly situated from engaging in similar
criminality,â the district court failed to explain how Martinâs 7-day sentence
contributes to general deterrence in any way. The district courtâs confidence that
âthis defendant has been effectively deterred from any further criminal conductâ
(emphasis added) speaks to the goal of preventing rescidivism, see 18 U.S.C.
§3553(a)(2)(C), but not to the general need âto afford adequate deterrence to
criminal conduct.â 18 U.S.C. § 3553(a)(2)(B). Indeed, the Congress that adopted
the § 3553 sentencing factors emphasized the critical deterrent value of
imprisoning serious white collar criminals, even where those criminals might
themselves be unlikely to commit another offense:
[It is our] view that in the past there have been many cases,
particularly in instances of major white collar crime, in which
probation has been granted because the offender required little or
nothing in the way of institutionalized rehabilitative measures . . . and
because society required no insulation from the offender, without due
consideration being given to the fact that the heightened deterrent
effect of incarceration and the readily perceivably receipt of just
punishment accorded by incarceration were of critical importance.
The placing on probation of [a white collar criminal] may be
perfectly appropriate in cases in which, under all the circumstances,
only the rehabilitative needs of the offender are pertinent; such a
sentence may be grossly inappropriate, however, in cases in which
the circumstances mandate the sentenceâs carrying substantial
deterrent or punitive impact.
S. Rep. No. 98-225, at 91-92 (1983), reprinted in 1984 U.S.C.C.A.N. 3182, 3274-
28
75. Rather than deter crime by others, Martinâs 7-day sentence suggests that those
similarly situated to Martin could profit from fraudulent conduct and, even if
caught, escape severe consequences by cooperating with the government after the
fact.10
Finally, the district court erred by justifying Martinâs lenient sentence in part
on the basis that âfrom the point of view of the government, the man most
singularly responsible for this criminal conduct [Richard Scrushy] has been found
not guilty and will serve no time at all.â Regardless of the governmentâs original
theory of the overall fraud scheme in this case, § 3553(a)(6) does not permit the
district court to compare Martinâs sentence with the âsentenceâ of a man whom a
jury acquitted of criminal conduct, however groundless that acquittal may seem in
light of the evidence in this record. While the need for consistent sentences among
similarly situated defendants is a statutory sentencing factor, § 3553(a)(6) confines
10
The district court reasoned that a longer prison term might well impede the ability of
civil plaintiffs to collect on a judgment against Martin. This reasoning is also faulty because in
almost every fraud case a jail term has that effect and would mean white collar criminals could
avoid serving time to allow them to work and repay civil plaintiffs. As we noted in Crisp, the
Sentencing Commission has determined that loss serves as a measure of the seriousness of the
offense and the defendantâs relative culpability. Crisp, â F.3d at â, slip op. at 14 (quoting
U.S.S.G. § 2B1.1 cmt. background). As we further explained in Crisp,
The courtâs sentencing theory turned that policy on its head. The more loss a
defendant has caused, the greater will be the amount of restitution due, and the
greater the incentive for a court that places the need for restitution above all else to
shorten the sentence in order to increase the time for the defendant to earn money to
pay restitution. Therefore, the more loss a criminal inflicts, the shorter his sentence.
That approach cannot be deemed reasonable.
Id.
29
that consideration to âthe need to avoid unwarranted sentenc[ing] disparities
among defendants with similar records who have been found guilty of similar
conduct.â 18 U.S.C. § 3553(a)(6) (emphasis added). Because Scrushy was found
not guilty, he is not a valid comparator for § 3553(a)(6) purposes. As a result, the
fact that Scrushy will not serve prison time is utterly irrelevant to Martinâs
sentence.
In sum, we agree with the governmentâs position in its brief: âIf any
sentence is unreasonable, it is this one.â A much less substantial departure than
that awarded by the district court would properly reward Martin for his substantial
and extraordinary cooperation, encourage others in his position to cooperate, and
satisfy the goals embodied in § 3553(a). Martinâs cooperation, even viewed as
extraordinary and commendable, cannot erase the enormity of Martinâs underlying
criminal conduct in the billion-dollar fraud scheme he played a major role in
perpetrating.
We do not express an opinion as to what would constitute a reasonable
sentence. The district court on remand will exercise discretion in fashioning an
appropriate sentence consistent with what we have stated in this opinion, and there
is a range of reasonable sentences. A 7-day sentence is not nearly within that
range. It is not remotely commensurate with the seriousness and extensive scale of
30
the crimes and does not promote respect for the law, does not provide just
punishment for the offense, as § 3553(a)(2)(A) requires, and does not afford
adequate deterrence to the criminal conduct here, as § 3553(a)(2)(B) mandates.
Accordingly, we vacate Martinâs sentence and remand this case for
resentencing in a manner consistent with this opinion and with the Supreme
Courtâs decision in Booker.
V. REASSIGNMENT
Finally, based on our review of the record and the elements that this Court
considers in determining whether to reassign a case to a different judge where there
is no indication of actual bias, see United States v. Torkington, 874 F.2d 1441,
1447 (11th Cir. 1989) (per curiam), we have determined it wiser to remand this
case with instructions to reassign it to a different judge. This is the second appeal
in Martinâs case and the second time we have had to reverse the sentence that the
district court gave Martin. On remand, the district court changed its sentence from
60 monthsâ probation to only 7 daysâ imprisonment and failed to properly take into
account the § 3553(a) factors. In light of the two reversals in this case and three
other appeals in which we have reversed the same judge for extraordinary
downward departures that were without a valid basis in the record,11 we find it
11
See McVay, 447 F.3d at 1356; United States v. Livesay, 146 Fed. Appx. 403, 405 (11th
Cir. Aug. 30, 2005) (unpublished) (reversing âdramaticâ 18-level reduction in offense level
31
likely that âthe original judge would have difficulty putting his previous views and
findings aside.â Id.
Our settled practice is to direct a specific judge to reassign a case. That
judge has been the chief judge, where the chief judge was not the original judge in
the case. See, e.g., Onishea v. Hopper, 126 F.3d 1323, 1343 (11th Cir. 1997),
vacated on other grounds, 133 F.3d 1377 (11th Cir. 1998); Chudasama v. Mazda
Motor Corp., 123 F.3d 1353, 1374 (11th Cir. 1997); United States v. Remillong, 55
F.3d 572, 577 (11th Cir. 1995); Clark v. Coats & Clark, Inc., 990 F.2d 1217, 1230
(11th Cir. 1993); United States v. Spears, 827 F.2d 705, 709 (11th Cir. 1987).
Where the chief judge is the original judge, we then direct the senior most active
judge to reassign it. See 28 U.S.C. § 136(e). Accordingly, pursuant to our
supervisory power over the district courts, we remand this case with instructions
that it be reassigned by the most senior active judge of the District Court for the
Northern District of Alabama. See Torkington, 874 F.2d at 1446 (âWe have the
authority to order reassignment of a criminal case to another district judge as part
of our supervisory authority over the district courts in this Circuit.â); 28 U.S.C. §
2106.
SENTENCE VACATED AND REMANDED WITH INSTRUCTIONS.
based on record that provided âscant basis to assess reasonablenessâ of departure); United States
v. Botts, 135 Fed. Appx. 416, 420-21 (11th Cir. June 21, 2005) (unpublished) (reversing
âextraordinaryâ 26-level reduction in offense level based on record that âis incapable of
meaningful appellate reviewâ).
32