United States v. Kadonsky ( 2001 )

Opinions of the United
2001 Decisions States Court of Appeals
for the Third Circuit
3-9-2001
United States v. Kadonsky
Precedential or Non-Precedential:
Docket 00-5120
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"United States v. Kadonsky" (2001). 2001 Decisions. Paper 46.
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Filed March 9, 2001
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
NO. 00-5120
UNITED STATES OF AMERICA
v.
STEVEN J. KADONSKY,
Appellant
On Appeal From the United States District Court
For the District of New Jersey
(D.C. Crim. Action No. 97-cr-00154)
District Judge: Honorable Garrett E. Br own, Jr.
Argued October 26, 2000
BEFORE: McKEE, RENDELL and STAPLETON,
Circuit Judges
(Opinion Filed March 9, 2001)
George S. Leone
Michael Martinez
Maggie L. Hughey (Argued)
Office of the United States Attorney
970 Broad Street, Room 700
Newark, NJ 07102
Attorneys for Appellee
Joshua Markowitz
Howard A. Teichman (Argued)
Markowitz & Zindler
3131 Princeton Pike, Building 3D
Lawrenceville, NJ 08648
Attorneys for Appellant
OPINION OF THE COURT
STAPLETON, Circuit Judge:
Defendant Steven J. Kadonsky appeals from the
imposition of a $40,000 fine subsequent to pleading guilty
to violating 31 U.S.C. S 5324(a)(3) (structuring money
transactions in order to avoid statutory r eporting
requirements).
Kadonsky tendered evidence to the Probation Office and
the Court tending to show that he was unable to pay, and
not likely to become able to pay, a fine in any significant
amount. This evidence indicated that Kadonsky alr eady
owed the State of New Jersey $515,000 in unpaidfines.
Over Kadonsky's objection, the District Court imposed a
$40,000 fine based on the fact that he had two suits
pending against the government in which the claims totaled
$527,715. The Court did so without evaluating these claims
and, accordingly, without making a deter mination as to
whether it was more likely than not that Kadonsky would
become able to pay the fine. Instead, the Court indicated
that if it turned out that Kadonsky did not ultimately
realize sufficient funds in this litigation to pay the fine, he
could always return to court and secur e a reduction of the
fine.
We exercise plenary review with r espect to issues of law,
including the issue of the legal sufficiency of a District
Court's findings of fact. United States v. Mobley, 956 F.2d
450, 451-52 (3d Cir. 1992); Gover nment of the Virgin
Islands v. Davis, 43 F.3d 41, 44 (3d Cir . 1994). In the event
legally adequate findings of fact are made r egarding a
defendant's ability to pay a fine, we review those findings
for clear error. United States v. Seale, 20 F.3d 1279, 1284
(3d Cir. 1994). We will reverse and remand for resentencing.
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I.
Kadonsky's difficulties stem from his involvement in a
nationwide marijuana network which he headed for mor e
than four years. Kadonsky was convicted in a New Jersey
state court of being the leader of this narcotics
organization. As a result, he is curr ently serving a sentence
of life imprisonment with a twenty-five year period of parole
ineligibility. He was also ordered to pay a fine of $500,000
and $5000 in penalties. Kadonsky owes an additional
$10,000 fine in New Jersey stemming from a different
conviction. Both of Kadonsky's New Jersey fines were
imposed prior to his sentencing in the instant case.
Subsequent to the New Jersey state proceedings,
Kadonsky entered a guilty plea in the United States District
Court for the District of New Jersey to one count of
structuring monetary transactions by causing mor e than
$200,000 to be deposited in amounts of less than $10,000,
in violation of 31 U.S.C. S 5324(a)(3) and 18 U.S.C. S 2.
Kadonsky was sentenced to twenty-four months in prison
to run concurrently with the state prison sentence. As
Kadonsky's federal imprisonment will end long befor e his
state sentence, the federal sentence is effectively irrelevant
to him. However, the District Court also imposed a fine of
$40,000, and it is this fine which motivates Kadonsky's
appeal.
II.
The PSR concluded that Kadonsky could not pay afine
and was unlikely to become able to pay one. The
government, however, sent a sentencing memorandum to
the Court asking that a fine of $250,000 be imposed. While
acknowledging that Kadonsky had no other assets, the
government pointed to two lawsuits that he hadfiled
against the government: "the Texas Lawsuit" and "the Utah
Lawsuit." The government provided the Court with the
following information concerning those lawsuits:
The lawsuits . . . are suits which seek the return of
money that was forfeited to the Government as being
the proceeds of drug transactions. In the T exas
Lawsuit, the defendant, in the first cause of action,
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admits that he transferred $125,000.00 to an
undercover agent in return for marihuana. Defendant
also admits, in the second cause of action, that he
instructed another individual to transport
approximately $50,000.00 from the New Y ork area to
Texas to purchase additional marihuana. After he was
arrested, the defendant informed authorities that the
second individual was transporting money to T exas to
purchase marihuana and the authorities appr ehended
this individual and seized the $50,893.00 he was
carrying.
In the third cause of action seeking r eturn of
forfeited money, the defendant alleges that he informed
an Assistant U.S. Attorney of the wher eabouts of a
substantial amount of money in the Dallas ar ea.
Undoubtedly, the defendant did this under the
auspices of cooperating with authorities. The way it
worked was that the defendant claimed that he was
aware of other drug dealers' activities and sometimes
would learn where they kept money or drugs. The
defendant would then put some of his own money or
drugs in a self storage unit and inform the authorities
of its whereabouts, claiming that it belonged to these
"other" drug dealers. Through this scheme, the
defendant attempted to, in effect, "buy" a motion for
leniency at his sentencing. . . . In the Texas Lawsuit,
the Defendant seeks the return of $225,893.00
claiming that he was not given notice of the for feiture.
* * *
In the Utah lawsuit, the defendant, pursuant to his
then cooperative efforts, informed agents of the U.S.
Customs Service that property had been pur chased in
Park City, Utah with the proceeds of drug distribution
activity. When the property was sold for appr oximately
$300,000.00, the Government forfeited the proceeds.
After the money was forfeited by the Gover nment,
Kadonsky claims to have "found out" that the property
was actually his and that perhaps it was not drug
money that was used to purchase the property.
Kadonsky was not given notice of the forfeitur e and
now claims, as he does in the Texas Lawsuit, that the
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forfeited money -- approximately $300,000.00 --
should be returned to him. Thus, the defendant,
Kadonsky, is presently seeking in these two civil suits,
approximately $650,000.00. Were he to prevail in one
or both lawsuits, he would be well able to pay afine of
$250,000.00.
Appellee's Supp. App. at 67, 68 (footnote omitted).
The District Court was advised at the sentencing hearing
that the court in the Texas Lawsuit had granted summary
judgment in the government's favor, but that Kadonsky had
filed an appeal. At that hearing, Kadonsky characterized
the prospects of his winning the Utah Lawsuit as not "very
promising." The District Court ultimately imposed a
$40,000 fine. It explained its decision as follows:
Now, as to the fine, I have said that based upon the
assets declared by the Defendant, these lawsuits, it
appears that he has the ability to pay the fine if the
position he's taken these -- in these lawsuits is
sustained. It may well not be. If it is not, he can
certainly petition the Court for relief fr om all or part of
the fine after and if he loses these lawsuits at the trial
and Appellate level and there's a final judgment against
his position.
Appellant's App. at 52.
Two weeks later, the United States District Court for the
District of Utah granted summary judgment to the
government relying in part on Kadonsky's concession that
he had told the government that the Park City property had
been purchased using Weinthal's "drug money." Shortly
after that defeat, Kadonsky reported it to the District Court
in this case in a motion to vacate the $40,000 fine. The
motion was denied. Six months later, Kadonsky lost his
appeal from the Texas summary judgment.
III.
U.S.S.G. S 5E1.2(a) provides that "[t]he court shall impose
a fine in all cases, except where the defendant establishes
that he is unable to pay and is not likely to become able to
pay any fine." As the Guideline text indicates, the defendant
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has the burden of coming forward with evidence from which
the Court could find it more likely than not that any fine
would remain unpaid. The defendant "may meet that
burden by an independent showing or by r eference to the
PSR." United States v. Kassar, 47 F .3d 562, 567 (2d Cir.
1995). If the defendant comes forward with such evidence,
the Court may not impose a fine without makingfindings
concerning the defendant's ability to pay it. United States v.
Seale, 20 F.3d 1279, 1284 (3d Cir . 1994). The burden of
persuasion is on the defendant to show that an inability to
pay will be more likely than not. United States v. Torres,
209 F.3d 308, 313 (3d Cir. 2000).
Where a sentencing court looks to the possibility of
future income to satisfy the contemplated fine, it is crucial
that the court take carefully into account the risk that such
income will not in fact be realized. As we explained in
Seale, where the District Court had r elied upon the
prospect of royalties from the futur e publication of a book,
careful analysis is mandated because curr ent federal law
provides the defendant with no opportunity to seek an
adjustment of the fine in the event the futur e income is not
received. The cautionary counsel that we gave in Seale
remains appropriate:
We note that careful, deliberate analysis on the
district court's part--concerning both its determination
of a future, hypothetical ability to pay afine and the
precise amount of the fine imposed--is crucial today,
since the amendment of 18 U.S.C. S 3573 in 1987.
Previously, section 3573 permitted a defendant to
petition the court to remit or modify a fine upon
demonstrating that he or she had made a good faith
effort to comply and that changed circumstances had
rendered the fine unwarranted. . . . Under the present
statutory scheme, this right no longer exists. Rather,
current section 3573 permits only the government to
petition for modification or remission of afine, and
only upon the basis of administrative efficacy.
The present statutory scheme severely hampers the
court's ability to leave itself a safety valve.
Seale, 20 F.3d at 1286 n.8.
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At the sentencing hearing, Kadonsky insisted that he
could not pay a fine and was highly unlikely to become able
to pay one. He pointed to the net worth statement he had
provided to the Probation Office and to the PSR. The
government's sole response was to point to the Texas and
Utah Lawsuits. Accordingly, the sole issue for the District
Court was whether the reliable information before it
indicated that Kadonsky would more likely than not be
unable to pay a $40,000 fine.
We hold that the District Court committed two related
errors of law. First, it erred in concluding that Kadonsky
could come back and have a $40,000 fine reduced in the
event the two lawsuits did not produce sufficient funds to
pay both the New Jersey and federal fine. As we indicated
in Seale, this remedy is not available to him.
As a result of this first erroneous legal conclusion, the
District Court found no occasion to evaluate -- or , as the
Court put it, "handicap" -- the claims asserted in the two
lawsuits. This, too, was an error of law. While it is, of
course, true that some uncertainty necessarily attends
placing a value or range of values on claims asserted in
litigation, this is not a task that is foreign to district judges,
and it is an essential prerequisite in situations of this kind
to a factual finding on the issue of whether the defendant
is likely to be able to pay the fine the Court is considering.
Because the District Court believed that its fine would be
subject to adjustment at any time, it accepted the face
value of the claims without considering the infor mation
before it bearing on the likelihood of Kadonsky's success.
On remand, the District Court must consider that
information and make a finding as to whether it is more
likely than not that Kadonsky will be unable to pay any
contemplated fine.
IV.
The judgment of the District Court will be r eversed, and
this matter will be remanded to the District Court for
resentencing only.
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A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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