Filed: Dec. 15, 2010
Latest Update: Feb. 21, 2020
Summary: FILED United States Court of Appeals Tenth Circuit December 15, 2010 UNITED STATES COURT OF APPEALS Elisabeth A. Shumaker Clerk of Court TENTH CIRCUIT _ UNITED STATES OF AMERICA, Plaintiff-Appellee, No. 09-1521 v. (D.Ct. No. 1:08-CR-00089-JLK-1) (D. Colo.) ARNOLD ZALER, Defendant-Appellant. _ ORDER AND JUDGMENT * Before MURPHY, BALDOCK, and BRORBY, Circuit Judges. After examining the briefs and appellate record, this panel has determined unanimously that oral argument would not materially assist
Summary: FILED United States Court of Appeals Tenth Circuit December 15, 2010 UNITED STATES COURT OF APPEALS Elisabeth A. Shumaker Clerk of Court TENTH CIRCUIT _ UNITED STATES OF AMERICA, Plaintiff-Appellee, No. 09-1521 v. (D.Ct. No. 1:08-CR-00089-JLK-1) (D. Colo.) ARNOLD ZALER, Defendant-Appellant. _ ORDER AND JUDGMENT * Before MURPHY, BALDOCK, and BRORBY, Circuit Judges. After examining the briefs and appellate record, this panel has determined unanimously that oral argument would not materially assist ..
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FILED
United States Court of Appeals
Tenth Circuit
December 15, 2010
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
TENTH CIRCUIT
__________________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
No. 09-1521
v. (D.Ct. No. 1:08-CR-00089-JLK-1)
(D. Colo.)
ARNOLD ZALER,
Defendant-Appellant.
______________________________
ORDER AND JUDGMENT *
Before MURPHY, BALDOCK, and BRORBY, Circuit Judges.
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist in the determination
of this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument.
Appellant Arnold Zaler pled guilty to one count of wire fraud in violation
of 18 U.S.C. § 1343, two counts of bank fraud in violation of 18 U.S.C.
*
This order and judgment is not binding precedent except under the
doctrines of law of the case, res judicata and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
Cir. R. 32.1.
§ 1344(2), and one count of mail fraud in violation of 18 U.S.C. § 1341. Mr.
Zaler appeals his fifteen-year concurrent sentences which the district court
imposed following its decision not to apply the advisory United States Sentencing
Guidelines (“Guidelines” or “U.S.S.G.”). The district court determined
application of the Guidelines would produce sentences less than necessary to
achieve the purposes of the sentencing factors in 18 U.S.C. § 3553(a). We
exercise jurisdiction pursuant to 28 U.S.C. § 1291 and affirm Mr. Zaler’s
sentences.
I. Background
For the purposes of this appeal, we find it unnecessary to recount in full
detail the fraudulent conduct involved in this case other than to provide a general
account of the financial schemes perpetrated by Mr. Zaler, as set forth in the
stipulated facts contained in his plea agreement and the unobjected-to facts
provided in the presentence report.
To begin, Mr. Zaler owned and operated Zaler’s Kosher Meats (Kosher
Meats), a company selling kosher hot dogs and other food products in Denver,
Colorado. In the Fall of 2005, he arranged with Kroenke Sports Enterprises
(Kroenke) to operate a single concession stand at the Pepsi Center, a professional
sports and entertainment facility in Denver, Colorado. Similarly, he contracted
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with another entity to operate a single hot dog concession, known as Kosher
Korner, LLC, at Invesco Field, the stadium for the Denver Broncos football team.
It is during these ventures Mr. Zaler fraudulently obtained loans from various
individuals and entities by making false representations and using fake purchase
orders to convince them he had outstanding accounts receivable for hot dogs from
which he would repay the loans.
A. Fraudulent Misrepresentations and Conduct
1. Fraud Against MEP Group
(Wire Fraud Count)
On October 17, 2005, Mr. Zaler obtained a loan for $181,000 plus interest
from MEP Group based on his false representation Kroenke ordered 241,000 hot
dogs from his business, Kosher Meats, and his presentation of a fake purchase
order indicating Kroenke would pay $771,200 for purchase of those hot dogs.
When Mr. Zaler failed to repay the loan on schedule and MEP Group requested
payment assurances from Kroenke, Mr. Zaler arranged for Ryan Smith, his
contact at Kroenke, to meet with one of MEP Group’s principals. At Mr. Zaler’s
behest, Mr. Smith falsely represented Kroenke owed Kosher Meats $771,200 for
the purchase order in question and would pay Mr. Zaler on April 3, 2006. Later,
Mr. Zaler signed a document fraudulently representing to MEP Group that
Kroenke owed his business $771,200 and Mr. Zaler would satisfy his obligation
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with MEP Group after receiving payment from Kroenke. On April 4, 2006, Mr.
Zaler repaid MEP Group $306,764.25 from monies obtained through a loan from
Spivak Funding (Spivak), as discussed hereafter. After receiving the payment,
MEP Group agreed to advance Mr. Zaler’s business more money.
In June 2006, Mr. Zaler provided MEP Group another false and fraudulent
Kroenke purchase order signed by Mr. Smith showing Kroenke ordered 150,000
hot dogs from Kosher Meats for $480,000. As a result, MEP Group caused its
bank to wire transfer $228,000 to Kosher Meats’ account at another bank.
Similarly, on August 2, 2006, MEP Group made a third loan to Kosher Meats for
$150,000 through a bank wire transfer based on Mr. Zaler’s misrepresentation he
had an order for 98,100 hot dogs from Centerplate, a company operating
concession stands at Invesco Field. As part of the same scheme, Mr. Zaler also
provided a fake Centerplate purchase order containing the forged signature of a
Centerplate employee which falsely showed Centerplate owed more than
$300,000 to Kosher Meats. In early 2007, when Mr. Zaler failed to repay these
loans, MEP Group threatened to sue him, after which he signed a repayment
agreement; however, Mr. Zaler only made one payment of $100,000 after
executing the agreement.
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2. Fraud Against Spivak
(First Bank Fraud Count)
On February 23, 2006, while Mr. Zaler was defrauding MEP Group, he
obtained the aforementioned loan from Spivak by showing the owner two fake
Kroenke purchases orders, including the previously-mentioned $771,200 purchase
order for 241,000 hot dogs and another for $506,918.40 for 158,400 hot
dogs–both with the forged signature of Kroenke’s vice-president. On March 2,
2006, Mr. Zaler arranged for the owner of Spivak to meet with Mr. Smith, who,
again, at the direction of Mr. Zaler, misrepresented the authenticity of the
purchase orders and stated Kroenke intended to buy more hot dogs from Kosher
Meats. Mr. Smith also signed a document falsely representing the authenticity of
the purchase orders and agreeing that, in the event of a dispute between Kroenke
and Kosher Meats, Kroenke would pay all outstanding invoices “factored by
Spivak.”
Thereafter, Mr. Zaler and Spivak entered into a “Factoring Agreement” in
which Kosher Meats, through Mr. Zaler, assigned its Kroenke accounts receivable
to Spivak in exchange for loans, even though the accounts receivable did not
exist. With the help of Mr. Smith, from March 2006 through June 2006, Mr.
Zaler sent Spivak eight sets of false and fraudulent documents relating to Kroenke
purchase orders for hot dogs from Kosher Meats. These sets of documents
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included letters signed by Mr. Smith falsely stating Kroenke received the
specified hot dogs from Kosher Meats. On receipt of each set of documents,
Spivak directed its bank to make interbank transfers from its bank account into
the bank account of Kosher Meats.
In addition to the Kroenke fraudulent purchase orders, Spivak transferred
additional funds to Kosher Meats’ account based on two other fake purchase
orders prepared by Mr. Zaler. The first falsely represented Coors Field–the
stadium of the Colorado Rockies baseball team–ordered hot dogs from Kosher
Meats, and the other similarly misrepresented Centerplate at Invesco Field
ordered hot dogs from Kosher Meats.
After Mr. Zaler failed to pay back the loans and Spivak contacted Mr.
Smith for payment from Kroenke, Mr. Smith again made false representations at
Mr. Zaler’s direction stating the money would be forthcoming. When Spivak did
not receive payment from Kroenke, it contacted Mr. Zaler, who provided a
$100,000 payment and made multiple additional false representations concerning
Kroenke’s alleged failure to pay the money due his company. Finally, on August
18, 2006, a Spivak representative contacted Kroenke’s general counsel and
learned Kroenke never purchased hot dogs from Kosher Meats. On the same day,
Mr. Zaler returned to Spivak the $188,352 he received from it as a result of the
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fake purchase order for hot dogs at Invesco Field.
3. Fraud Against Skupsky
(Second Bank Fraud Count)
In August 2006, Mr. Zaler commenced yet another fraudulent scheme when
he contacted Donald Skupsky about funding his single hot dog concession stand
at Invesco Field. After Mr. Skupsky agreed to invest, they created Kosher
Korner, to which Mr. Zaler assigned his Invesco Field concession stand contract.
Mr. Zaler then provided Mr. Skupsky with a fake purchase order for hot dogs in
the amount of $313,920 with the forged signature of Steve Hall, a representative
of Centerplate. Based on this purchase order, between September 15, 2006, and
January 31, 2007, Mr. Skupsky made a series of loans by interbank transfer from
his account to the Kosher Korner account totaling $142,500. Meanwhile, in
December 2006, Mr. Zaler contacted Mr. Hall and asked him to create a false
document stating the fake Centerplate purchase order would be paid soon.
Instead, Mr. Hall contacted an FBI agent.
4. Fraud Against Perlmutter
(Mail Fraud Count)
Between November 8, 2006, and February 8, 2007, while Mr. Zaler
conducted the aforementioned fraud schemes, he obtained three loans from a
Denver businessman, Jordan Perlmutter, in the amount of $323,000. Thereafter,
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between March 9, 2007, and June 4, 2007, Mr. Zaler provided Mr. Perlmutter
three personal checks for repayment of the loans, but all three checks were
returned for insufficient funds. In September 2007, Mr. Zaler misrepresented to
Mr. Perlmutter that his company contracted with Centerplate for the purchase of
$320,000 worth of hot dogs and that Super Target stores also owed his business,
Kosher Korner, $310,000 for hot dogs. Based on these false representations, Mr.
Perlmutter entered into an agreement and irrevocable assignment with Mr. Zaler,
in which Mr. Zaler misrepresented these companies owed him money and
assigned $300,000 of the fake accounts receivable to Mr. Perlmutter.
On September 7, 2007, Mr. Perlmutter’s attorney sent, by FedEx, the
agreement and irrevocable assignment to Centerplate and a Super Target store.
Three days later, Mr. Zaler went to the Centerplate office, told a Centerplate
employee his attorney mistakenly sent Centerplate a package, and asked her to
retrieve the package without anyone seeing it. Apparently, no package was
retrieved, causing Mr. Zaler to call the same employee three times that day and
then approach her outside the Centerplate office, asking again about the FedEx
package and offering her tickets to a sporting event if she helped him retrieve the
package. The package arrived at Centerplate the next day, at which time the
employee gave it to her supervisor, who delivered it to the FBI.
-8-
B. Fugitive Flight and False Representations
On February 25, 2008, a thirty-count indictment issued against Mr. Zaler,
charging him with mail, bank, and wire fraud. On March 11, 2008, in conjunction
with a summons, Mr. Zaler appeared in district court, at which time a magistrate
judge released him on certain conditions, including he surrender “any passport or
other international travel documents to the clerk of the court immediately upon
release” and not leave Colorado except with the court’s permission. The same
day, Mr. Zaler surrendered his United States passport and a temporary Israeli
travel document; however, he failed to surrender another Israeli travel document
previously issued to him. Following his arraignment, Mr. Zaler left Colorado,
traveled to Atlanta, and then flew to Israel. A few weeks later, he contacted his
probation officer in Denver, pretending to be in Colorado and indicating his intent
to go to Telluride, Colorado; he called again four days later, explaining he could
not travel back to Denver due to a snowstorm. Almost a year later, on February
20, 2009, Mr. Zaler voluntarily returned to the United States.
C. Guilty Plea and Plea Agreement
On July 24, 2009, Mr. Zaler pled guilty to one count of wire fraud in
violation of 18 U.S.C. § 1343, two counts of bank fraud in violation of 18 U.S.C.
§ 1344(2), and one count of mail fraud in violation of 18 U.S.C. § 1341. As part
of the plea agreement, Mr. Zaler stipulated to the foregoing facts and also
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acknowledged his understanding the maximum statutory penalty for violation of
§§ 1341 and 1343 was not more than twenty years and the maximum statutory
penalty for violation of § 1344(2) was not more than thirty years. The parties
also agreed any estimate of the advisory Guidelines range did not preclude
departure for aggravating or mitigating circumstances and that the court could
impose any sentence up to the statutory maximum, regardless of any Guidelines
range computation.
The plea agreement also reflected the parties’ disagreement on the losses
Mr. Zaler caused victims for the purpose of calculating an increase in his offense
level under U.S.S.G. § 2B1.1(b)(1). The government calculated the loss in excess
of $2,500,000, for an increase of eighteen levels, while Mr. Zaler calculated it at
$2,215,808.97, for an increase of sixteen levels. 1 Using its loss calculation to
assess the total offense level, the government calculated the Guidelines range at
seventy-eight to ninety-seven months but noted it “could conceivably result in an
advisory guidelines range from sixty-three months ... to 150 months,” depending
on a final criminal history category. In turn, using his loss calculation, Mr. Zaler
1
U.S.S.G. § 2B1.1(b)(1) provides a scale to calculate the offense level
increase based on the amount of monetary loss caused to victims; under
§ 2B1.1(b)(1)(I), the offense level increase is sixteen if the total loss is more than
$1,000,000 but less than $2,500,000, while § 2B1.1(b)(1)(J) provides for an
increase of eighteen levels if the loss is more than $2,500,000 but less than
$7,000,000.
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estimated his Guidelines range at sixty-three to seventy-eight months but noted it
“could conceivably result in an advisory guidelines range from fifty-one months
... to 125 months,” depending on his final criminal history category. Both parties
agreed, however, “[t]he sentence would be limited, in any case, by the statutory
maximum.” While the parties disagreed over the loss calculation, they agreed the
restitution amount should be $2,664,573.22. At his plea hearing, Mr. Zaler
acknowledged his understanding of the maximum statutory penalties and admitted
no one guaranteed or promised him a specific length of sentence within the
statutory limit. In addition, his counsel reminded the district court of the parties’
disagreement over the § 2B1.1(b)(1) loss calculation.
D. Presentence Report
Prior to sentencing, a probation officer prepared a presentence report,
reiterating the applicable maximum statutory sentences were twenty and thirty
years and using the 2008 Guidelines to calculate Mr. Zaler’s total offense level
and criminal history category. In assessing Mr. Zaler’s criminal history, the
probation officer noted, in part, the following: (1) in 1995, he pled guilty and
received two felony convictions in Colorado for “theft” and “fraud by check” for
which he received a two-year deferred sentence on the theft count, a two- to six-
month sentence on the fraud count, and an order of restitution for $11,000; (2) in
1997, he pled guilty and received a felony conviction in Arizona for “fraudulent
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schemes and artifice” involving the sale of Phoenix Suns and Cardinals season
and playoff tickets to various victims, for which he received a five-year sentence
and was ordered to pay restitution in the amount of $29,740, of which he paid
none; (3) in 1997, he received a felony conviction in Arizona for “fraud schemes”
concerning a scheme similar to the instant one in which he used his computer
software company to defraud investors of millions of dollars based on fake
purchase orders for computer software and a forged letter from a United States
Senator’s office indicating he had been approved for a small business loan in the
amount of $1,250,000; he received a sentence of twelve years, of which he served
only five years, and was ordered to pay $982,541.19 in restitution, of which he
paid only $1,480; according to his probation officer at that time, Mr. Zaler
attributed his conduct to a bipolar disorder, his ego, and a fear of failure; and (4)
in 1997, he received a felony conviction in Arizona for “theft” after defrauding a
bank out of $153,275.33 and another individual out of $41,000, for which he
received a thirty-month sentence and was ordered to pay $138,275.33 in
restitution, of which he paid none.
On the basis of his criminal record, the probation officer calculated Mr.
Zaler’s criminal history category at III but noted it might warrant an upward
departure of one level given its under-representation, stating:
In light of the pattern of fraud activity in which the defendant has
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engaged since 1995 and the nature of that conduct, it appears that
criminal history category IV may more appropriately represent both
the seriousness of the defendant’s criminal history and the likelihood
that the defendant will commit other crimes.
In determining his total offense level, the probation officer determined it
would be twenty-six if the government’s estimated loss of more than $2,500,000
was used in conjunction with U.S.S.G. § 2B1.1(b)(1)(J), which, combined with
his criminal history category of III, resulted in an advisory Guidelines range of
seventy-eight to ninety-seven months imprisonment. Thus, if the recommended
one-level upward departure, using a criminal history category of IV, was applied
to the government’s offense level calculation, the Guidelines range would be
ninety-two to 115 months imprisonment. See U.S.S.G., Ch. 5, Pt. A (Sent’g Tbl.).
Alternatively, the probation officer determined the total offense level would be
twenty-four if Mr. Zaler’s estimated loss of less than $2,500,000 was used in
conjunction with § 2B1.1(b)(1)(I), which, combined with a criminal history
category of III, resulted in an advisory Guidelines range of sixty-three to seventy-
eight months imprisonment.
In addition, the probation officer exhaustively presented aspects of Mr.
Zaler’s history and characteristics in conjunction with the § 3553(a) factors,
including an account of: (1) Mr. Zaler’s contention, as well as a psychiatrist’s
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report, he suffers from manic behavior and bipolar disorder; (2) his failure to
voluntarily seek treatment or receive treatment for such a condition while
incarcerated; (3) some of his family members’ impressions he committed the
instant crimes based on his ego and fear of failure, rather than for malicious
reasons; and (4) his past charitable work with various Jewish, political, and other
organizations. The probation officer also noted Mr. Smith, who obtained no
monies as a result of Mr. Zaler’s fraud schemes but acted out of friendship, 2 lost
his job with Kroenke, pled guilty to one count of fraud, and was ordered to pay
$1,886,574.82 in restitution to Spivak Funding and $128,000 to MEP Group,
payable jointly and severally with Mr. Zaler.
The probation officer also provided information from Mr. Zaler’s girlfriend
who explained he financially exploited her by means of false representations,
causing her to suffer significant negative financial and personal consequences,
including: (1) the loss of all her money and good credit, forcing her to file
bankruptcy and incur legal fees; and (2) emotional stress and hardship. In
addition, the probation officer provided information from the FBI that after Mr.
Zaler fled to Israel in 2008, he attempted to negotiate a deal with an Israeli
Supersol grocery chain for hot dogs, was borrowing money related to that
2
While Mr. Zaler did not object to the probation officer’s Guidelines
calculations, other than to the loss calculation, he did object to the assessment Mr.
Smith acted out of friendship, as discussed hereafter.
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endeavor, had a civil suit pending against him, and returned to the United States
only because he knew he was facing a number of problems in Israel.
The probation officer also pointed out: (1) Mr. Zaler left the country
without permission while on bond and remained a fugitive for more than ten
months before voluntarily returning from Israel to the United States; (2) he began
the instant schemes less than two years after being discharged from parole in
other fraud-related cases; (3) in the last fifteen years, he had committed several
fraud schemes which have financially impacted or even devastated the lives of
multiple individuals; (4) he previously received a total of fourteen and one-half
years imprisonment for his prior fraud convictions but served only six years and
eight months and failed to pay back most of the restitution due his prior victims;
(5) his prior periods of incarceration and orders for restitution did not appear to
serve as a sufficient deterrent as he continued to turn to crime to solve his
business problems, including similar fraud schemes; (6) in committing his fraud
schemes he acted deliberately, motivated by greed, and with no remorse, nor
means or intention of paying the victims back; (7) his prior conduct indicated a
high likelihood of recidivism; and (8) he failed to voluntarily seek and refused to
accept treatment while incarcerated for his asserted bipolar disorder, resulting in a
question as to whether his disorder should serve as a mitigating factor. Based on
these factors, the probation officer recommended a sentence at the high end of the
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government’s “loss calculation” Guidelines range for a sentence of ninety-seven
months on each count. The probation officer also recommended three years of
supervised release on the wire and mail fraud counts and five years of supervised
release on the bank fraud counts, all to run concurrently.
The only objection Mr. Zaler filed in response to the Guidelines calculation
was to the loss calculation and resulting higher Guidelines range, arguing the
probation officer incorrectly used the government’s loss calculation instead of
his. He also argued in favor of a variant sentence under the § 3553(a) sentencing
factors, noting, in part: (1) his victims charged usurious interest rates on their
loans; (2) he used the monies obtained to keep his businesses afloat and did not
spend a significant amount of money on himself; (3) his actions and the absurdity
of his schemes showed he was delusional and had an “untreated brain disorder”;
and (4) Mr. Smith did not act out of friendship but benefitted from the schemes
by receiving significant cash compensation for his assistance.
E. Sentencing
At the beginning of Mr. Zaler’s sentencing hearing, the district court stated,
“[t]he parties, [c]ounsel, are hereby advised, if I haven’t notified you earlier, that
I will not be imposing a sentence according to the Sentencing Guidelines, which
are, as you know, advisory only; and I have considered them and will not be
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following that advice.” Then, again, after pointing out it had considered the
materials presented, including the presentence report and its attachments, it
stated, “[n]ow, as I’ve indicated, I’m not following the Sentencing Guidelines. I
am thoroughly familiar with the presentence report and the analysis of those
guidelines contained in that report.” It then allowed the parties to provide
argument and Mr. Zaler an opportunity for allocution, during which Mr. Zaler
apologized for his actions and explained he committed the instant fraud, in part,
based on his ego and fear of failure.
In imposing his sentence, the district court provided the following
explanation for Mr. Zaler’s fifteen-year sentence:
The guideline calculations contained in the presentence report
are correct; however, as directed by the Tenth Circuit Court of
Appeals in the cases of United States [v.] Huckins 3 and United States
[v.] Munoz-Nava, 4 I make the following findings:
(1) The guidelines are not mandatory;
(2) The facts have been provided by the probation officer and
subjected to objection by both the prosecution and the defense;
Aside from objections to matters of restitution, which I sustain
and will comment upon later, 5 there are no objections having any
3
529 F.3d 1312 (10th Cir. 2008).
4
524 F.3d 1137 (10th Cir. 2008).
5
Contrary to the district court’s statement, our review of the record shows
(continued...)
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effect on my consideration of the appropriate sentence to be imposed.
Both parties have been advised that the ... sentences will not
be guideline sentences, and both parties have been given full
opportunity to argue their positions as to condign sentences.
....
I find the application of the guidelines produces sentences less
than necessary to achieve the purposes of Title 18 [U.S.C.
§] 3553(a). They fail to take into full consideration the multiple
repetitions of the defendant committing various kinds of fraud
following punishment and arrest.
I find the defendant is a hard-core recidivist and that sentences
of lesser time imposed on him in the past have utterly failed to
prevent him from committing further crimes involving fraud and
deception. At his present age of sixty, there is no reason based on
his record to believe that he will ever cease committing crimes of
this nature. Those crimes deserve punishment and deterrent
sentences in excess of those recommended by the guidelines.
Perhaps more to the point, the defendant has previously been
sentenced to [fourteen and one-half] years for felonies but served less
than half of that time in prison and yet recidivated again and again. I
think a greater sentence is thus called for.
The public needs to be protected from further crimes of this
defendant, and I think the only hope for such protection is that he be
imprisoned until such times as he is too old to offend again.
For almost a two-year period after having served prison
sentences and parole supervision, this defendant obtained moneys
5
(...continued)
Mr. Zaler did not object to the recommended restitution amount of $2,664,573.22
contained in the presentence report, which the parties agreed in the plea
agreement was the amount of restitution due victims. However, as later
discussed, the district court reduced the amount of restitution below the amount
recommended in the presentence report and as agreed to by the parties, which
neither party disputes on appeal.
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and business loans through fraud and deceit, causing more than $2
million in loss to the parties named in the indictment. Other parties,
some far less able to bear the brunt of his criminality, suffered as
well.
The defendant created fraudulent documents and enlisted the
aid and complicity of a younger man [Mr. Smith] whose life is now
in tatters as a result.
The defendant states he intended to repay the victims involved
and that he used his ill gotten gains to benefit his struggling
businesses. That is a tale that is told more often than not by
fraudsters, and it means nothing. The path to hell is paved with such
good intentions.
The defendant believes that his crimes may have been caused
at least in part by bipolar disorder. If that is, indeed, the case–and
the diagnosis is not entirely credible–it is equally true that [he]
refused to take medication that would have significantly, if not
entirely, reduced his symptoms. It seems he is suggesting ... that
because he didn’t like the effects of the medications, others should
suffer.
The final factor relating to the defendant’s persistent criminal
conduct is that he left the United States in violation of his bond, lied
to others about where he was, and even then as a fugitive attempted
to resume his practice of cheating and deceiving others.
From age forty-five to the present, this defendant’s acts are the
very tissue of lies and deceit. What is perhaps most troubling of all
is that many of the victims he sought are those who, by their affinity
to the same proud culture and belie[f]s, were most eager to give him
a helping hand. In addition to being criminal, these acts are
shameful.
I am acutely aware of the awesome finality of sentencing a
man of sixty to prison; but in this case, the safety of the community,
the ability of people to be free of his predations, clearly outweighs
any claim for compassion.
The district court then imposed fifteen-year sentences for each count, to be served
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concurrently, and concurrent terms of supervised release for five years on the
bank fraud counts and three years on the wire and mail fraud counts.
It also imposed restitution and, in so doing, stated a difference existed
between the determination of loss for the purposes of restitution and for loss
calculations under the Guidelines–the latter of which requires only a reasonable
estimate of loss and may be based on the greater of the intended or actual loss. It
then explained “[t]hough I will not engage in a lengthy discussion of the
guidelines, it is quite possible that a different calculation would result were I to
consider the intended loss inflicted upon your victims.” It then imposed a total
order of restitution of $2,479,946.87. 6
At the conclusion of the sentencing hearing, Mr. Zaler’s attorney objected
to the fifteen-year sentences on grounds the district court failed to sufficiently
address his Guidelines objections or otherwise set out sufficient factors to justify
the sentence. In response, the district court explained:
I think that I addressed the fact that the guidelines are not being
6
This amount included $152,235.75 to MEP Group; $1,921,073.22 to
Spivak Funding; $142,500 to Donald Skupsky; and $264,137.90 to Kroenke. As
to the amount of restitution due to Mr. Perlmutter, the district court determined
Mr. Zaler’s fraudulent conduct was not a direct or proximate cause for his
decision to make loans to him, resulting in no order of restitution for the amount
of loss he incurred.
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applied in this case. And hence, the objections as to conformity with
the guidelines ... have no bearing at all upon my sentence. And the
reason which I gave and which I adhere to in this case is, as I have
found, that the guidelines do not sufficiently take into consideration
the repeated recidivist activities of this defendant.
II. Discussion
A. Arguments on Appeal
On appeal, Mr. Zaler contends his sentences are both procedurally and
substantively unreasonable. Mr. Zaler claims the district court committed
procedural error in three ways. First, he claims it failed to specifically calculate
the Guidelines, which the presentence report estimated ranged anywhere from
sixty-three to 115 months, depending on different variations of Guidelines
calculations, including the upward departure, and, instead, the district court
merely stated, “the guideline calculations in the [presentence report] were
correct.” Next, he suggests the district court failed to consider the mandatory
sentencing factors in 18 U.S.C. § 3553(a)(4) and (6) 7 because it failed to calculate
his applicable Guidelines offense level and criminal history category or consider
7
Section 3553(a)(4) provides that in imposing a sentence sufficient, but
not greater than necessary, to comply with the purposes of the sentencing factors,
the district court shall consider “the kinds of sentence and the sentencing range
established for ... the applicable category of offense committed by the applicable
category of defendant as set forth in the guidelines ....” Similarly, § 3553(a)(6)
states the district court shall consider “the need to avoid unwarranted sentence
disparities among defendants with similar records who have been found guilty of
similar conduct ....”
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the need to avoid unwarranted sentence disparities with other similarly-situated
defendants. Finally, he claims the district court failed to adequately explain the
chosen sentence, particularly in light of its substantial deviation from the
Guidelines range and certain Guidelines which already took into account the
“ordinary” circumstances on which the district court relied to impose a variant
sentence. He contends none of these procedural errors are harmless given they
affected the district court’s selection of the sentences imposed.
As to the substantive reasonableness of his fifteen-year sentences, Mr.
Zaler claims they are substantively unreasonable: (1) in view of the totality of the
information before the district court and the reasons articulated by it; and (2)
because they are nearly double the top of the highest Guidelines range set forth in
the plea agreement and requested by the government. More specifically, he
claims the district court failed to explain why Mr. Zaler’s situation was different
or meaningfully distinct from the circumstances already covered by the
Guidelines calculations or the probation officer’s recommendation that an upward
departure would more accurately represent the seriousness of his criminal history
and his potential to re-offend.
B. Standard of Review and Legal Principles
We review sentences for reasonableness, giving deference to the district
-22-
court under an abuse of discretion standard. See United States v. Smart, 518 F.3d
800, 802, 805-06 (10th Cir. 2008). Thus, we review “‘all sentences–whether
inside, just outside, or significantly outside the Guidelines range–under a
deferential abuse-of-discretion standard,’” in which we “afford substantial
deference to the district courts.”
Id. at 806 (quoting Gall v. United States,
552
U.S. 38, 41 (2007)). The district court abuses its discretion if the resulting
sentence is “arbitrary, capricious, whimsical, or manifestly unreasonable.”
Huckins, 529 F.3d at 1317 (internal quotation marks omitted).
“Our appellate review for reasonableness includes both a procedural
component ... as well as a substantive component, which relates to the length of
the resulting sentence.” Smart, 518 F.3d at 803. “Procedural reasonableness
addresses whether the district court incorrectly calculated or failed to calculate
the Guidelines sentence, treated the Guidelines as mandatory, failed to consider
the § 3553(a) factors, 8 relied on clearly erroneous facts, or failed to adequately
explain the sentence.”
Huckins, 529 F.3d at 1317. In determining whether the
district court properly calculated a sentence, we review its legal conclusions de
8
The § 3553(a) factors include not only “the nature of the offense” but the
history and “characteristics of the defendant, as well as the need for the sentence
to reflect the seriousness of the crime, to provide adequate deterrence, to protect
the public, and to provide the defendant with needed training or treatment ....”
United States v. Kristl, 437 F.3d 1050, 1053 (10th Cir. 2006) (per curiam); see 18
U.S.C. § 3553(a).
-23-
novo and its factual findings for clear error. See Kristl, 437 F.3d at 1054.
In turn, “[a] challenge to the sufficiency of the § 3553(a) justifications
relied on by the district court implicates the substantive reasonableness of the
resulting sentence.” Smart, 518 F.3d at 804. Stated another way, “substantive
reasonableness addresses whether the length of the sentence is reasonable given
all the circumstances of the case in light of the factors set forth in 18 U.S.C.
§ 3553(a).”
Huckins, 529 F.3d at 1317 (internal quotation marks omitted). In
assuring the district court has considered the § 3553(a) factors before imposing a
sentence, we have said it must “state in open court the reasons for its imposition
of the particular sentence” and satisfy us that it “has considered the parties’
arguments and has a reasoned basis for exercising [its] own legal decisionmaking
authority.” Rita v. United States,
551 U.S. 338, 356 (2007). Further, if the
sentence is within the correctly-calculated Guidelines range, we may apply a
rebuttable presumption of reasonableness to the sentence. See
Kristl, 437 F.3d at
1053-55.
However, a sentence falling outside the Guidelines range, like the one at
issue here, is not entitled to a presumption of reasonableness, nor is it presumed
to be unreasonable. Huckins, 529 F.3d at 1317. Instead, district courts may, in
their discretion, conclude a non-Guidelines sentence best serves the purpose of
-24-
the § 3553(a) sentencing factors but “must provide reasoning sufficient to support
the chosen variance,” Smart, 518 F.3d at 807, including “a specific reason for
deviating from the Guidelines,”
Huckins, 529 F.3d at 1317 (internal quotation
marks omitted). As a result, “a district [court] must give serious consideration to
the extent of any departure from the Guidelines and must explain [its] conclusion
that an unusually lenient or an unusually harsh sentence is appropriate in a
particular case with sufficient justifications.”
Id. “An adequate explanation of
the chosen sentence allows for meaningful appellate review and promotes the
perception of fair sentencing.”
Id.
While the district court must provide an adequate explanation for a
variance, “[w]e may not examine the weight a district court assigns to various
§ 3553(a) factors, and its ultimate assessment of the balance between them, as a
legal conclusion to be reviewed de novo,” and, instead, “we must give due
deference to the district court’s decision that the § 3553(a) factors, on a whole,
justify the extent of the variance.”
Smart, 518 F.3d at 808. In making its
assessment of the sentencing factors, “[i]t is well established that the sentencing
court is entitled to rely on uncontested facts contained in the [presentence report]
for certain sentencing purposes,” including to draw conclusions about the nature
of the offense and history and characteristics of the defendant relevant to the
sentencing factors in 18 U.S.C. § 3553(a). United States v. Mateo, 471 F.3d
-25-
1162, 1166-67 (10th Cir. 2006).
As to the degree of any variance, the district court need not adhere to “a
rigid mathematical formula that uses the percentage of a departure as the standard
for determining the strength of the justifications required for a specific sentence”
nor “necessarily provide ‘extraordinary’ facts to justify any statutorily
permissible sentencing variance, even one as large as [a] 100% variance ....”
Smart, 518 F.3d at 807 (internal quotation marks omitted). “Although the degree
of variance from the Guidelines range remains a consideration on appeal, ... it
may not define our threshold standard of review.”
Id. In the same vein, we do
not require the district court to “distinguish the defendant’s characteristics and
history from those of the ordinary offender contemplated by the Guidelines” when
imposing a variance, nor do we require the “existence of extraordinary defendant
characteristics and history.”
Id. at 808. While the Guidelines “reflect a rough
approximation of sentences that might achieve § 3553(a)’s objectives” and
provide a “measure of national practice to use as a starting point,” we recognize
the district court has “greater familiarity with the individual case and the
individual defendant” for the purpose of imposing a variance.
Id. Finally, as we
instructed in Smart:
In many cases, the Guidelines recommendation and the district
court’s individualized determination will continue to overlap, but we
may not assume that the Guidelines perfectly express the § 3553(a)
-26-
factors present in an individual case in the face of a district court’s
conclusion to the contrary.
We may not conclude that simply by diverging from the
Guidelines, a district court has disregarded the policy considerations
which led the Commission to create a particular Guideline .... If
district courts are required to balance the Guidelines against the other
§ 3553(a) considerations, then we cannot say they disregard the
Guidelines simply by striking a different balance and imposing a
variance in a particular case.
Id. at 809.
C. Procedural Reasonableness
Applying these principles, we begin with Mr. Zaler’s argument his sentence
is procedurally unreasonable because the district court failed to correctly
calculate the Guidelines or apply the recommended upward departure, as required
by the Guidelines themselves or under 18 U.S.C. § 3553(a)(4)(A). As
demonstrated by the record, Mr. Zaler did not object to any portion of the
Guidelines calculation in the presentence report except to dispute the
government’s § 2B1.1(b)(1) loss calculation. When the district court stated the
Guidelines calculations were correct, it was patently aware of the dispute over the
loss calculation and the resulting two sentencing ranges based on the parties’
different loss calculations. Thus, its assessment of the correctness of the
Guidelines calculations pertained to all but the two different loss calculations in
dispute by the parties, which it concluded made no difference in its decision to
-27-
impose non-Guidelines sentences based on its determination that application of
the Guidelines would produce sentences less than necessary to achieve the
purposes of 18 U.S.C. § 3553(a). As a result, it is evident it rejected even the
highest calculation of the sentencing ranges as well as the probation officer’s
recommendation for an upward departure. It also indicated it was “quite
possible” the loss calculation would be more than its restitution determination of
$2,479,946.87, further demonstrating application of the higher loss calculation
would not affect its decision to impose non-Guidelines sentences. Accordingly,
regardless of which loss calculation and resulting sentencing range applied, or if
an upward departure was applied, it is clear the district court concluded such
Guidelines calculations produced sentences “less than necessary to achieve the
purposes of Title 18 [U.S.C. §] 3553(a).”
To the extent the district court erred in failing to make an express
determination as to which loss calculation applied or by failing to explicitly state
why the recommended upward departure would provide insufficient punishment,
the error is harmless. This is because it is clear the result (i.e., its imposition of
fifteen-year sentences) would be the same, regardless of which loss calculation
the district court considered accurate or if it explicitly rejected the recommended
upward departure. In other words, a remand merely for the purpose of having the
district court explain which of the two loss calculations and resulting sentencing
-28-
ranges is correct, or why an upward departure would be insufficient, would not
result in it imposing a lesser sentence.
We next address Mr. Zaler’s contention the district court committed
procedural error in failing to consider the need to avoid unwarranted sentence
disparities with other similarly-situated defendants, as required by § 3553(a)(6).
As previously discussed, we no longer require a district court to distinguish the
defendant’s characteristics and history from those of the ordinary offender
contemplated by the Guidelines when imposing a variance, nor do we require
facts demonstrating the existence of extraordinary defendant characteristics and
history. See Smart, 518 F.3d at 806-08 (overturning United States v. Garcia-
Lara,
499 F.3d 1133 (10th Cir. 2007)). Here, the record shows the district court
considered the Guidelines calculations, which are the starting point for
calculating sentences for similarly-situated defendants committing the same
offense, but determined, based on its greater familiarity with Mr. Zaler and the
aggravating circumstances, that a variance was warranted beyond the advisory
Guidelines ranges for the reasons it provided. As a result, we discern no
procedural error in its failing to explicitly distinguish Mr. Zaler’s case from
others.
Finally, Mr. Zaler claims the district court committed procedural error by
-29-
failing to adequately explain the chosen sentence, particularly in light of its
substantial deviation from the Guidelines range and because it failed to explain
why the Guidelines did not already take into account the circumstances in his
case. In claiming the Guidelines addressed the circumstances presented, he
claims: (1) the recommended one-level upward departure for under-representation
of his criminal history category took into account his recidivist activities; (2) the
sixteen- to eighteen-level increase under § 2B1.1(b)(1) for the loss calculation
took into account the over $2,000,000 loss he caused his victims; (3) the two-
level increase under § 3B1.1(c) for his role in the offense took into account his
enlistment of another person, Mr. Smith, in the commission of his fraud; and (4)
the two-level increase under § 3C1.1 for obstruction of justice took into account
the fact he left the United States while on bond.
As previously noted, we require district courts to “provide reasoning
sufficient to support the chosen variance,” Smart, 518 F.3d at 807, including “a
specific reason for deviating from the Guidelines.”
Huckins, 529 F.3d at 1317.
Here, the district court set out a straight-forward and specific reason as to why it
decided to deviate from the Guidelines when it concluded their application would
produce sentences less than necessary to achieve the purposes of 18 U.S.C.
§ 3553(a) because they failed to take into full consideration Mr. Zaler’s “hard-
core” recidivism in which he repeatedly committed various kinds of fraud
-30-
following his previous punishments for similar conduct, and the fact those
previous punishments “utterly failed” to prevent his committing crimes involving
the same fraud and deception. In providing further explanation in support of its
determination, the district court pointed out Mr. Zaler was “sentenced to [fourteen
and one-half] years for felonies but served less than half of that time in prison,”
and still “recidivated again and again.” It further explained the public needed to
be protected from Mr. Zaler’s further crimes and stated its belief, based on the
record, that he would never “cease committing crimes of this nature” and “the
only hope for such protection” was his imprisonment “until such time as he is too
old to offend again.” It also discussed other factors supporting a variance, such
as the fact his fraudulent schemes occurred within two years after his
incarceration and parole supervision for similar conduct; the devastating financial
and personal consequences Mr. Zaler caused his girlfriend and Mr. Smith; his
refusal to seek treatment or take medication to reduce his alleged bipolar disorder,
which he had previously used as an excuse for prior fraudulent conduct for which
he was incarcerated; the resumption of his fraud while a fugitive in Israel; and his
disingenuous reason for voluntarily returning to the United States. As a
consequence, we perceive no error in the district court’s specific reasons or
explanation for the variance imposed.
While Mr. Zaler contends the Guidelines took into account the aggravating
-31-
circumstances on which the district court relied in applying a variance, the district
court provided sufficient information in its explanation for us to understand why
it determined they did not. For instance, while U.S.S.G. § 2B1.1(b)(1) took into
account the two different monetary loss calculations caused by Mr. Zaler, the
district court also pointed out he caused these losses after only a two-year period
following his incarceration and parole supervision and imposed suffering on other
victims far less able to bear the brunt of his criminality, as indicated by the harm
he caused to his girlfriend and Mr. Smith. Clearly, it determined § 2B1.1(b)(1)
did not fully take into account these aggravating circumstances. Similarly, while
the Guidelines recommendations took into account Mr. Zaler’s role in the offense
under § 3B1.1(c) for being an organizer, leader, manager, or supervisor in the
criminal activity, the district court indicated they did not take into account Mr.
Zaler’s complicity in causing Mr. Smith’s “life [to be] in tatters.” While Mr.
Zaler received a two-level increase in his offense level for obstruction of justice
under § 3C1.1, the district court noted he not only fled the country and lied to his
probation officer about where he was, but incredibly attempted to resume his
practice of cheating and deceiving others even while a fugitive in Israel. The
presentence report also indicated he was a fugitive for an extensive period of ten
months and only voluntarily returned to the United States because he was facing
possible criminal charges in Israel. Again, it is clear the district court determined
the Guidelines did not take into account such aggravating circumstances.
-32-
Most importantly, it is clear the district court determined the Guidelines,
including the calculation of his criminal history and the probation officer’s
recommendation of an upward departure for the under-representation of his
criminal history, did not adequately take into account his extensive or “hard-core”
recidivism which prior punishments in the form of incarceration and restitution
orders did not halt or even stymie. Instead, as the district court thoroughly
explained, Mr. Zaler zealously and unabashedly continued to defraud various
individuals and entities in fraud schemes similar to those he previously committed
and for which he received punishment. Thus, while the Guidelines
recommendations and the district court’s individualized determinations may have
had some overlap, we may not assume the Guidelines perfectly expressed the
§ 3553(a) factors present in Mr. Zaler’s case in the face of the district court’s
conclusions to the contrary. Moreover, as previously noted, the error, if any, in
the district court failing to explain in more detail why the Guidelines did not take
these aggravating circumstances into account is harmless. Again, nothing in the
record suggests the district court would have imposed a lesser sentence had it
engaged in a more extensive discussion of the applicable Guidelines and its
reasoning as to why they produced sentences “less than necessary to achieve the
purposes of Title 18 [U.S.C. §] 3553(a).”
-33-
D. Substantive Reasonableness
As to the substantive reasonableness of his fifteen-year sentences, Mr.
Zaler claims they are substantively unreasonable in view of the totality of the
information before the district court and the reasons articulated by it and because
they are nearly double the top of the highest Guidelines range set forth in the plea
agreement and requested by the government. In support, Mr. Zaler again claims
the district court failed to explain why his situation was different or meaningfully
distinct from the “ordinary” circumstances covered by the Guidelines calculations
or why the probation officer’s recommendation of an upward departure would not
accurately represent the seriousness of his criminal history and his potential to re-
offend.
Despite Mr. Zaler’s arguments to the contrary, we conclude his sentences
are not substantively unreasonable in light of the sentencing factors in § 3553(a).
As previously noted, the district court determined application of the Guidelines
would produce sentences less than necessary to achieve the purposes of 18 U.S.C.
§ 3553(a) because they failed to take into full consideration Mr. Zaler’s extensive
recidivism in which he perpetrated multiple fraud schemes following previous
punishments for similar conduct. It also discussed other aggravating factors
which it believed also warranted a variance, as previously discussed. As a result
of these factors, it determined fifteen-year sentences would best achieve the
-34-
purposes of the § 3553(a) sentencing factors, including protecting the public from
Mr. Zaler’s recidivist activities. Under our deferential standard of review, we
may not examine the weight the district court assigned these § 3553(a) factors or
its ultimate assessment of the balance between the § 3553(a) factors, but, instead,
we give due deference to its decision, as made here, that the § 3553(a) factors, on
a whole, justify the extent of the variance. See Smart, 518 F.3d at 808.
Similarly, as discussed in our procedural reasonableness discussion, the
district court did consider the Guidelines and determined the Guidelines did not
adequately take into account certain aggravating circumstances, including, but not
limited to, the extensive degree of Mr. Zaler’s recidivism issues; the fact he
perpetrated his nefarious schemes within two years following incarceration and
parole supervision for similar conduct; the negative financial and personal
consequences Mr. Zaler caused his girlfriend and Mr. Smith; Mr. Zaler’s refusal
to seek treatment or take medication to reduce his alleged his bipolar disorder;
resumption of his fraud while a fugitive in Israel; and his disingenuous reason for
voluntarily returning to the United States. In addition, we repeat for clarity’s
sake that the district court was not required to distinguish Mr. Zaler’s
characteristics and history from those of the ordinary offender contemplated by
the Guidelines when imposing the variance. Smart, 518 F.3d at 808. Instead, it
could rely on the uncontested facts contained in the presentence report to make its
-35-
own conclusions concerning the nature of the offense and Mr. Zaler’s
characteristics relevant to the sentencing factors in 18 U.S.C. § 3553(a). See
Mateo, 471 F.3d at 1166-67.
As to Mr. Zaler’s complaint his sentences are double the advisory
Guidelines sentences, the district court was not required to use a mathematical
formula, including a percentage calculation, to determine the variance, nor
provide extraordinary facts to justify the statutorily permissible sentence imposed.
As we have said, the degree of variance from the Guidelines range remains a
consideration on appeal but cannot define our threshold standard of review.
While the non-Guidelines variant sentences imposed in this case were
substantially more than the recommended advisory Guidelines sentences, they
were within the statutory limit for such crimes, of which Mr. Zaler was advised,
and produced sentences which the district court determined best reflected the
purposes of the § 3553(a) sentencing factors, including the seriousness of Mr.
Zaler’s criminal history, his recidivism or potential to re-offend, and the need to
protect the public. Applying our deferential standard of review to the
circumstances presented, we conclude the district court did not abuse its
discretion in imposing fifteen-year sentences, as the lengths of the sentences
imposed are not “arbitrary, capricious, whimsical, or manifestly unreasonable.”
Huckins, 529 F.3d at 1317. As a result, we conclude Mr. Zaler’s sentences are
-36-
substantively reasonable.
III. Conclusion
For the foregoing reasons, we AFFIRM Mr. Zaler’s sentences on appeal.
Entered by the Court:
WADE BRORBY
United States Circuit Judge
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