United States v. Holz ( 2004 )

NOT RECOMMENDED FOR PUBLICATION
File Name: 04a0188n.06
Filed: December 21, 2004
No. 03-2059
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellant,
v. ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR THE
WALDEMAR HOLZ, EASTERN DISTRICT OF MICHIGAN
Defendant-Appellee.
/
BEFORE: CLAY and GILMAN, Circuit Judges; O’Malley, District Judge.*
CLAY, Circuit Judge. Plaintiff, the United States of America, appeals from the judgment
issued by the United States District Court for the Eastern District of Michigan, filed on July 15,
2003, finding Defendant, Waldemar Holz, guilty of subscribing a false tax return, in violation of 26
U.S.C. § 7206(1) and sentencing Defendant to three years probation, with a fine and assessment.
For the reasons set forth below, we AFFIRM the district court.
BACKGROUND
Procedural History
*
The Honorable Kathleen M. O’Malley, United States District Judge for the Northern District
of Ohio, sitting by designation.
No. 03-2059
On August 13, 2002, an indictment was filed, charging Defendant with two counts (which
were listed jointly, under one heading) of subscribing a false tax return, in violation of 26 U.S.C. §
7206(1). On February 24-27, 2003, a (four-day) jury trial was conducted. On February 28, 2003,
a jury verdict was entered, finding Defendant guilty on both counts. On July 15, 2003, the district
court entered a judgment on the verdict of guilty, and sentenced Defendant to three years probation,
with a fine ($40,196.34) and assessment ($200).
In sentencing Defendant, the district court had determined that under the sentencing
guidelines Defendant’s imprisonment range was twelve to eighteen months. However, the district
court did not sentence Defendant to a term in prison, but instead the court granted Defendant’s
motion for a downward departure under U.S. SENTENCING GUIDELINES MANUAL (U.S.S.G.) § 5K2.0,
based upon a combination of business impact and family circumstances. The district court ruled that
in the aggregate these factors warranted a departure, though neither business impact nor family
circumstances would have been sufficient to justify a departure, taken individually.
On August 11, 2003, Plaintiff filed a timely notice of appeal.
Substantive Facts
The Presentence Investigation Report stated that, as “owner and president of DBA Holz
Homes and general contractor in a condominium development,” Defendant subscribed false 1994
and 1995 Form 1040’s. (J.A. at 109.) Defendant failed to report in the purchase price of the
condominiums, as reported income, certain work on the condominiums (upgrade work and
additions) that was done prior to sale which was paid for separately, in checks written to Defendant
(Waldemar Holz), not to Holz Holmes. “Also, HOLZ failed to report income from garages he built
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No. 03-2059
for individuals after they closed on the condominiums and completed other side jobs during the
years in question that were not included in his income.” (J.A. at 110.)
At the sentencing hearing, Holz’s attorney explained the circumstances, many of which were
later relied upon by the district court. Defendant’s wife had continuing mental health problems for
years prior to the trial; these problems were exacerbated by the trail, which precipitated “a nervous
breakdown” and a six-day hospitalization for “acute anxiety, depression, suicidal ideation as a
consequence of the ordeal that she and her husband had gone through, and his sentencing.” (J.A.
at 19.) According to Holz’s attorney, the treating doctor “indicated that Mrs. Holz needs a family
member with her at all times, and that her recovery will take at least a year.” (J.A. at 20.)
In addition, one of Defendant’s three children, daughter Heidi Holz, had a heart condition
that rendered her unable to work and “almost entirely [dependent] on her parents for financial
support.” (J.A. at 20.) The same physical problem allegedly rendered Heidi Holz unable to care for
her mother (Defendant’s wife).
As to business impact, Defendant was affiliated with the Plumbrook Greens Townhouse
project, “a $9 million construction of a condominium project” that was scheduled for completion
in 2004. (J.A. at 20.) Yet the project’s completion became jeopardized. One of Defendant’s
brothers, Roy Holz, the plumbing contractor for the project, suffered a debilitating stroke; “several
other master plumbers were hired to continue the project, and they could not comply with the
requirements of the building inspectors in that community.” (J.A. at 20-21.) Apparently, Defendant
himself was eventually able to meet the plumbing requirements. Yet delays caused by Roy Holz’s
stroke threatened the project, which had already overrun costs, leading lenders to refuse to make
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No. 03-2059
further advances. Defendant’s incarceration allegedly would have made completion of the project
far more difficult, thus jeopardizing the $4.5 million investment (of largely borrowed funds) by
Defendant’s other brother, Rudolf Holz.
Defendant’s attorney also stated:
Of course, if Mr. Holz is incarcerated, Holz Homes as an entity will cease to exist.
. . . [T]here are many other innocent persons who had nothing to do with this offense
who will be made to suffer. One person, Alen Mocnaj, is an independent contractor
who works full time for Holz Homes. He and his wife are the very recent parents of
twin children, and in this economy today, Mr. Mocnaj would have a very difficult
time becoming quickly reemployed.
....
There are three other employees who have now been temporarily laid off,
awaiting the sentencing in this case . . . . All formerly worked full time at Holz
Homes, and they all rely on Mr. Waldemar Holz for guidance and training in
developing their skills in the building industry, and they relied on Holz Homes for
their jobs.
(J.A. at 22.) These assertions by Defendant’s counsel are contested by Plaintiff, who disputes the
extent to which any employee or independent contractor relied upon Defendant.
The district court’s ruling, which is quoted from below, set forth various specific and general
factual findings, many of which are challenged by Plaintiff. We address the factual disputes in our
discussion below.
DISCUSSION
The only issue on appeal is the district court’s grant of a downward departure to Defendant.
After setting forth the applicable standard of review, we examine this issue.
The district court’s legal conclusions and factual findings are reviewed under different
standards. Under the the Prosecutorial Remedies and Tools Against the Exploitation of Children
Today Act of 2003, Pub. L. No.108-21, 117 Stat. 650 (“PROTECT Act”), the standard of review for
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No. 03-2059
the district court’s application of the sentencing guidelines to the facts was changed from abuse of
discretion to de novo. 18 U.S.C. § 3742(e); United States v. Alfaro, 336 F.3d 876, 880-81 (9th Cir.
2003) (explaining the change from the prior standard of review). The de novo standard applies to
appeals (such as the present one) that are conducted after April 30, 2003. United States v. Mallon,
345 F.3d 943, 946 (7th Cir. 2003). Under the PROTECT Act, an appeals court “shall accept the
findings of fact of the district court unless they are clearly erroneous.” 18 U.S.C. § 3742(e).
Under this bifurcated standard of review, the following formulation applies: first, this Court
must review the district court’s factual findings for clear error; second, under the de novo standard,
this Court must determine whether the departure was based on a permissible factor (or a combination
of permissible factors) and whether, taking into account only those factual findings that were not
clearly erroneous, the departure is justified by the facts.
“The defendant bears the burden to prove by a preponderance of the evidence that the
circumstances of his or her case warrant a downward departure.” United States v. Lipman, 133 F.3d
726, 730 (9th Cir. 1998) (discussing U.S.S.G. § 5K2.0).
Only certain grounds for departure are permissible. The guidelines specifically exclude
certain factors from ever being considered, alone or in combination:
Notwithstanding subsections (a) and (b) of this policy statement, or any other
provision in the guidelines, the court may not depart from the applicable guideline
range based on any of the following circumstances:
(1) Any circumstance specifically prohibited as a ground for departure in §§
5H1.10 (Race, Sex, National Origin, Creed, Religion, and Socio-Economic Status)
....
....
(6) Any other circumstance specifically prohibited as a ground for departure in the
guidelines.
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No. 03-2059
Id. § 5K2.0(d).
In addition, a district court is “discouraged” but not prohibited from considering certain
other factors. These factors may be considered – but only under extraordinary circumstances.
Relevant to the present appeal are two such factors, family responsibilities and employment-related
contributions to society. Id. § 5H1.6 (“Family ties and responsibilities are not ordinarily relevant
in determining whether a departure may be warranted.”); id. § 5H1.11 (“employment-related
contributions . . . are not ordinarily relevant in determining whether a sentence should be outside the
applicable guideline range.”).
Finally, there are factors–none of which is implicated in the instant case–which are
specifically encouraged for consideration, under the guidelines. Koon v. United States, 518 U.S. 81,
94 (1996), superseded on other grounds by statute1 (“Victim provocation, a factor relied upon by
the District Court in this suit, is an example of an encouraged downward departure factor, § 5K2.10
. . . .”).
Overall, there are three categories of factors: those where “the Commission [has] forbidden
departures based on those features;” those where “the Commission [has] discouraged departures
based on those features;” and those where “the Commission [has] encouraged departures based on
those features.” Id. at 95.
Under the sentencing guidelines, a downward departure may be granted based upon any
single encouraged factor, or (in extraordinary circumstances) based upon any single discouraged
1
See 18 U.S.C. § 3742(e) (providing for de novo review of departures).
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No. 03-2059
factor. In addition, a downward departure may be granted based upon a combination of mitigating
factors:
The court may depart from the applicable guideline range based on a combination
of two or more offender characteristics or other circumstances, none of which
independently is sufficient to provide a basis for departure, only if--
(1) such offender characteristics or other circumstances, taken together, make the
case an exceptional one; and
(2) each such offender characteristic or other circumstance is--
(A) present to a substantial degree; and
(B) identified in the guidelines as a permissible ground for departure, even if
such offender characteristic or other circumstance is not ordinarily relevant to a
determination of whether a departure is warranted.
U.S.S.G. § 5K2.0(c).
Here, the district court granted a departure because it found that sentencing Holz to prison
would impact his family and his business and that the combination of the family impact and business
impact would cause extraordinary harm. At the sentencing hearing, the district court stated:
I would indicate that it is the combination of factors here, not any one factor
individually which convinces me that a downward departure is warranted.
First, as outlined by Mr. Harrison and supported by exhibits which include
medical records of Mrs. Holz, she is in precarious mental health, she suffered a
nervous breakdown, she had suicidal ideation, and has been unable to function on her
own particularly in the last several months, and although the government suggests
that’s not unusual in a white collar case, different people react differently. I certainly
have seen a fair number of white collar cases in the 11 and-a-half years that I’ve been
on the bench. Not every spouse suffers a nervous breakdown, not every child has a
heart condition. I believe that the medical records submitted with respect to Mrs.
Holz indicate that she does need ongoing support and care which her husband is
uniquely able to provide, particularly given that her daughter has her own physical
limitations which preclude her from really stepping in and taking over her care.
In addition, not only would Mr. Holz’ business disintegrate, but all of the
people who are involved in the Plumbrook project would suffer similar problems.
There are many people depending on that project. There is no one, apparently, able
to take it over. Many independent contractors in addition to the employees of Holz
Homes would be affected by this. I want to be more specific about it, too.
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No. 03-2059
The defendant has his brother Roy Holz’ contractual obligations which he has
taken on responsibility for, in addition to the plumbing contracting. That’s Mr.
Rudolph Holz’ obligation. All of those would affect many people and many other
jobs, and I think that the combination of those factors take it outside of the guidelines
of criminal tax fraud cases, and white collar cases generally.
(J.A. at 32-33.)
On appeal, the government argues that the grant of the departure was erroneous. To make
this argument, the government impugns the district court’s reasoning as to both family impact and
business impact; in addition, the government challenges the district court’s factual findings, its
application of the law to the facts, and its consideration of business impact. The government’s
argument is structured in five parts. First, regarding family impact, the government argues that
Defendant’s incarceration would not place an atypical burden on Defendant’s wife. Secondly, the
government avers that the incarceration would not place an atypical burden on Heidi Holz
(Defendant’s daughter). The third argument is that the district court was forbidden from considering
harm to Defendant’s business. Fourth, the government argues that Defendant’s incarceration would
not cause atypical harm to third parties. Finally, the government argues that, in combination, the
various impacts are not exceptional, as is required for a departure. These arguments can be taken
in order.
1. Family impact: Defendant’s wife
The government contests the district court’s factual finding that Defendant was uniquely able
to provide for his mentally ill wife. The government argues that this finding was clearly erroneous,
contending that “[t]here is no evidence in the record to support a conclusion that defendant provides
an irreplaceable care or support to his wife.” (Plaintiff’s Br. at 16.) The government argues that
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No. 03-2059
either of Holz’s two children who live close-by, Heidi Holz and Richard Holz, could serve as an
adequate caregiver. The district court noted Heidi Holz’s heart condition; the government contests
the significance of this health problem, arguing that Defendant’s wife does not need care beyond the
simple company of a relative, which Heidi could provide. Defendant argues that “other family
members have lives, responsibilities, and worries of their own that will prevent them from providing
Mrs. Holz with the constant emotional support she needs.” (Defendant’s Br. at 16.)
Although the evidence here is subject to debate, there is no basis for a ruling that the district
court committed clear error. “Clear error occurs only when the panel is left with the definite and
firm conviction that a mistake has been committed. If there are two permissible views of the
evidence, the factfinder's choice between them cannot be clearly erroneous.” Caver v. Straub, 349
F.3d 340, 351 (6th Cir. 2003) (citations and internal quotation marks and brackets omitted).
The government does not provide grounds for a definite and firm conviction that Heidi Holz
could provide Defendant’s wife the care that she needs, despite Heidi Holz’s own medical problems,
or that Richard Holz has the time or ability to provide such care. Rather, the government has simply
alleged the viability of a conclusion which is contrary to that reached by the district court. We
acknowledge that reasonable minds could differ with respect to the district court’s factual findings.
But in order to show clear error the government must persuade us that the district court’s factual
findings were not viable. The government cannot persuade us that the district court committed clear
error merely by arguing that factual findings different from those reached by the district court also
would have been plausible.
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No. 03-2059
The government also argues that other cases have found that family circumstances more
severe than those involved here were not “extraordinary.” But this argument lacks merit and
relevance. The only case from this Circuit which the government cites is factually inapposite,
however. In the case relied upon by the government, United States v. Reed, 264 F.3d 640 (6th Cir.
2001), this Court dismissed as factually insupportable the district court’s finding that the defendant
had a vital role in taking care of her sister’s children.2 The district court’s factual conclusions in this
case, on the contrary, find meaningful support in the record. Even if the government were correct,
moreover, that Defendant’s family circumstances legally were insufficiently severe to justify a
departure, it is clear that the district court itself concluded that, taken alone, Defendant’s family
circumstances were not extraordinary. The district court granted the departure based on its
determination that the combination of family and business circumstances was extraordinary; thus,
a conclusion that the family circumstances (taken alone) were not extraordinary would not
demonstrate that the departure was erroneous. See United States v. Marine, 94 Fed.Appx. 307, 312,
2
In Reed, this Court stated:
We agree with the government that, given the fact that Reed does not live with her
sister’s children nor does she financially support them, her responsibility for her
nieces and nephews falls far short of that of a typical parent, much less a typical
single parent. Also troubling is the fact that the district court did not address the
government’s contention that, prior to her criminal conviction, Reed spent one to
several months in Jamaica every year. If Reed's family responsibilities permitted her
to take extended vacations to Jamaica without the children every year, as it appears
from the record, then we do not believe that her responsibility for her sister's children
can be characterized as “exceptional,” nor can her family circumstances be
distinguished from the heartland of cases in which single parents convicted of a
crime will be separated from their young children.
264 F.3d at 655.
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No. 03-2059
2004 WL 771851, at **5 (6th Cir. Apr. 8, 2004) (unpublished opinion) (“any departure in this area
is susceptible to a divide-and-conquer response in which each individual factor is open to criticism
as a ground for departure by itself. The point here, as the district court correctly recognized, is that
this aggregation of circumstances presents the rare instance where the constellation of pertinent
factors warrants a departure.”).
2. Family impact: Heidi Holz (Defendant’s daughter)
The government attempts to establish that, even if Defendant were incarcerated, Defendant
could support Heidi Holz financially, through the use of Defendant’s financial assets. This point
is irrelevant because the district court did not consider Heidi Holz’s financial situation in granting
a departure. While it is true that, at the sentencing hearing, Defendant’s counsel argued that Heidi
Holz had a heart condition that rendered her unable to work, financially dependent on her parents,
and unable to care for her mother (Defendant’s wife), the district court considered Heidi Holz only
insofar as to note her inability to care for Defendant’s wife. The district court did not rely at all on
Heidi Holz’s alleged need for financial support in granting the departure now before us.
3. Legal permissibility of consideration of business impact
The government argues that any consideration of Defendant’s business, Holz Homes, and
the Plumbrook project was improper, because business impact falls under the prohibited category
of socio-economic status. U.S.S.G § 5K2.0(d)(1) (forbidding any consideration of a defendant’s
“Socio-Economic Status”); see also id. § 5H1.10 (policy statement that Race, Sex, National Origin,
Creed, Religion and Socio-Economic Status are not relevant in sentencing). There is a distinction
between socio-economic status and business impact, however. The prohibition against consideration
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No. 03-2059
of socio-economic status simply precludes a district court from determining that a defendant’s
prominence, or lack thereof, weighs in favor of, or against, a departure. Yet considerations of
business impact necessarily take into account the impact, if any, on innocent third parties, such as
other businesses, consumers or clients, and employees.
Although there is often a correlation between business impact and socio-economic status,
the prohibition on consideration of socio-economic status does not extend to prohibit all
considerations that are correlated with socio-economic status. This much is clear from the fact that
various expressly enumerated permissible factors are correlated with socio-economic status. E.g.,
U.S.S.G. § 5H1.2 (education and vocational skills), § 5H1.5 (employment record), § 5H1.11
(military, civic, charitable, or public service; employment-related contributions; record of prior good
works).3 Since there are certain expressly enumerated permissible factors that are correlated to
socio-economic status, it would violate basic canons of statutory construction4 to read the
3
Indeed, the impact on Defendant’s business ventures is a permissible consideration, under
U.S.S.G. § 5H1.11, as an “employment-related contribution.” Defendant’s business ventures
provide employment to independent contractors and workers; this is a contribution. Also, Defendant
is self-employed, which may be a form of “employment” that is related to other contributions, under
U.S.S.G. § 5H1.11. See generally Carden v. Westinghouse Elec. Corp., 850 F.2d 996, 1005 (3d Cir.
1988) (“a self-employed person is ‘employed’ for the purposes of mitigating damages if establishing
a business of his own was a reasonable alternative to finding other comparable employment.”)
(citations omitted).
But the permissibility of considerations relating to Defendant’s business, under U.S.S.G. §
5H1.11, does not in itself demonstrate that such considerations are permissible. A consideration
may implicate multiple provisions of the sentencing guidelines; if a consideration is impermissible
under any one provision, then this trumps its permissibility under other provisions. See U.S.S.G.
§ 5K2.0(d) (“Notwithstanding subsections (a) and (b) of this policy statement, or any other provision
in the guidelines, the court may not depart from the applicable guideline range based on any of the
following circumstances . . . .”).
4
Although the federal sentencing guidelines are not a statute, principles of statutory
construction govern their interpretation. United States v. Bahhur, 200 F.3d 917, 927 (6th Cir. 2000)
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No. 03-2059
prohibition against the consideration of socio-economic status as forbidding consideration of all
factors that are correlated with socio-economic status. TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001)
(“It is a cardinal principle of statutory construction that a statute ought, upon the whole, to be so
construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or
insignificant.”) (citations and internal quotation marks omitted); Grable & Sons Metal Prods. v.
Darue Eng’g & Mfg., 377 F.3d 592, 596-97 (6th Cir. 2004) (“a basic rule of statutory construction
mandates that a court should read statutes as a whole and not interpret one provision in a way that
would render another meaningless or superfluous. Beck v. Prupis, 529 U.S. 494, 506, 146 L. Ed.
2d 561, 120 S. Ct. 1608 (2000); Lake Cumberland Trust v. EPA, 954 F.2d 1218, 1222 (6th Cir.
1992).”).
No ruling by this Court has ever suggested that the prohibition of consideration of socio-
economic status renders business impact an impermissible consideration. The government cites
United States v. Rutana, 932 F.2d 1155 (6th Cir. 1991), in which this Court discussed the relevance
of business considerations:
The guidelines specifically state that a defendant's socioeconomic status is not
relevant in the determination of a sentence. Furthermore, even assuming that
Rutana’s imprisonment would lead to the failure of his business and the loss of his
employees’ jobs, this fact does not distinguish Rutana from other similar offenders.
(“In determining the manner in which to apply U.S.S.G. § 2J1.7, we utilize the basic rules of
statutory construction because the Guidelines should be interpreted as if they were a statute.”)
(citation omitted); United States v. Edge, 989 F.2d 871, 876 (6th Cir. 1993) (“Defining the word
‘plant’ for purposes of the Sentencing Guidelines is a question of statutory construction . . . .”)
(citations omitted).
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No. 03-2059
Id. at 958 (citations omitted). Yet Rutana’s reasoning simply left open the question of the
permissibility of considering business impact. In Rutana, we did not conclude that the prohibition
against considering socioeconomic status barred any consideration of business impact. If this Court
had concluded that business impact was an impermissible consideration, it would not have reached
the question of whether the impact on the defendant’s business rendered the circumstances
extraordinary compared to other defendants; an impermissible factor can never be considered, even
if it presents extraordinary circumstances. U.S.S.G. § 5K2.0(d). The government also cites a case
in which this Court ruled that extraordinary monetary charitable contributions cannot be considered,
because such contributions are too closely connected with socio-economic status. United States v.
Tocco, 200 F.3d 401 (6th Cir. 2000). But Tocco does nothing to forbid the consideration of a
defendant’s business involvements, which involve the expenditure of a defendant’s time and energy.
Id. at 434 (“In assessing the effect of Tocco’s community involvement in this case, we believe that
much of Tocco's contributions may have consisted of contributions of money, not time and
energy.”); United States v. Crouse, 145 F.3d 786, 790 (6th Cir. 1998) (“charitable work is not a
forbidden ground for departure”).
In fact, in United States v. Crouse, this Court held that a district court’s consideration of
business impact was permissible, because “[c]onsideration of the loss of Crouse’s business as a
result of the fraud is not categorically prohibited by the Guidelines.” Id. at 790 (reviewing business
impact to determine whether it removed the defendant’s case from the heartland of cases). The
government argues that Crouse did not address the question of whether business impact and socio-
economic status are essentially the same thing and, hence, both forbidden considerations – in other
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No. 03-2059
words, in that case the government did not make the argument that it makes here. We decline to
assume that another panel of this Court was unaware of the scope of its and the district court’s
authority under the Guidelines.5 The Crouse Court’s explicit holding that business impact is not
a categorically forbidden factor presupposes that the Guidelines’ prohibition on consideration of
socio-economic status does not forbid all consideration of business impact.
Crouse could not have ruled otherwise on this matter, after the Supreme Court’s decision in
Koon v. United States, 518 U.S. 81 (1996). The First and Second Circuits have both found that
business impact is a permissible consideration in considering whether to grant a downward
departure. See United States v. Olbres, 99 F.3d 28, 36 (1st Cir. 1996); United States v. Milikowsky,
65 F.3d 4, 9 (2d Cir. 1995) (affirming a downward departure that was granted on the basis of
economic impact on the defendant’s business, stating, “While we agree with our sister circuits that
business ownership alone, or even ownership of a vulnerable small business, does not make
downward departure appropriate . . . , departure may be warranted where, as here, imprisonment
would impose extraordinary hardship on employees.”); see also United States v. Patel, 164 F.3d 620,
1998 WL 650589, at *4 (2nd Cir. Aug. 21, 1998) (affirming the district court’s grant of a downward
departure based upon a combination of family considerations and business impact). The First
Circuit based its reasoning on Koon:
“socio-economic status and job loss are not the semantic or practical equivalents of
each other.” Koon [v. United States], 116 S. Ct. [2035,] 2051 [(1996)].
5
145 F.3d at 789 (“The Guidelines list certain factors which may never form the basis for
departure. See USSG § 5H1.10 ( . . . socio-economic status)”).
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No. 03-2059
As Koon holds that job loss by the defendant resulting from his incarceration cannot
be categorically excluded from consideration, we think it follows that job loss to
innocent employees resulting from incarceration of a defendant may not be
categorically excluded from consideration.
Olbres, 99 F.3d at 36. As the First Circuit noted, the Supreme Court’s ruling in Koon runs contrary
to the argument that business impact is an impermissible consideration. In Koon, the Supreme Court
stated, “a defendant’s career may relate to his or her socioeconomic status, but the link is not so
close as to justify categorical exclusion of the effect of conviction on a career.” 518 U.S. at 110.
We agree with the First Circuit’s assessment that Koon made clear that business impact
considerations were not forbidden by the prohibition of consideration of socio-economic status. In
light of Koon, the Crouse Court was left with no choice but to clarify that business impact is a
permissible factor.
The prohibition of consideration of socio-economic status does not forbid consideration of
business impact. The district court did not err by considering the impact of Defendant’s potential
incarceration on Defendant’s business and the Plumbrook project.
4. Factual findings as to business impact
The government argues that even if consideration of Defendant’s business and the
Plumbrook project was permissible, nevertheless the district court’s factual finding that Defendant’s
incarceration would cause great economic harm to the individuals involved in the Plumbrook
condominium project was clearly erroneous.
The district court stated that Holz Homes’ employees and independent contractors would
lose their jobs if Defendant were to be incarcerated. The government disputes these findings,
arguing that Holz Homes would not disintegrate while Defendant was in jail. Alen Mocnaj, the
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No. 03-2059
independent contractor who was working full time for Holz Homes–and whose wife had recently
given birth to twins–had indicated that he would not be able to find another job with the same salary.
The government states, “There is no explanation in the record why Mocnaj could not just as easily
work for another contractor.” (Plaintiff’s Br. at 28.) Also, the government states that Holz Homes
has no employees.
Yet the record indicates that Holz Homes had employees. The government makes no
mention of “three other employees who have now been temporarily laid off, awaiting the sentencing
in this case . . . . All formerly worked full time at Holz Homes, and they all rely on Mr. Waldemar
Holz for guidance and training in developing their skills in the building industry, and they relied on
Holz Homes for their jobs.” (J.A. at 22) (Defendant’s attorney, at sentencing hearing).
As to the Plumbrook project, the government notes the testimony of Rudolf Holz, one of
Defendant’s brothers, stating that it would be impossible to replace Defendant as the leader of the
project. The government nonetheless argues that this assertion is unsupported and that, alternatively,
the project was scheduled to be completed by the end of 2003, meaning that Defendant could be
incarcerated thereafter, when the appeal was decided.
The government’s arguments are not well-taken. As mentioned, the government does not
discuss the three employees who were temporarily laid off. Also, the record indicates that Holz
Homes–which the government admits is thinly-staffed–had a contract to provide electrical units,
furniture, and appliances to Plumbrook Greens Townhouses. This suggests that Defendant’s
incarceration would have harmed this project. Finally, we could not remand the case simply upon
a determination that the circumstances have changed, because the project may have been completed;
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No. 03-2059
the government could have suggested to the district court the possibility of a delayed designation
pending completion of the project – but there is no indication that this argument was ever made
before the district court.
For all of these reasons, we are not left with a definite and firm conviction that the district
court erred. As with the government’s challenge to the district court’s factual findings regarding
family impact (discussed above), so too here, the government’s argument does not establish clear
error. The government invites us to engage in alternative fact-finding, by determining that the
record lacked adequate support for Mocnaj’s statement that he could not find work with comparable
pay with someone other than Defendant and for the testimony of Rudolf Holz that Defendant was
irreplaceable as the leader of the project. But we are not free to engage in de novo fact-finding.
Perhaps, the district court could have reached findings here consistent with the government’s
position. Yet, as explained above, that is not enough to prevail on clear error review. Certainly,
there is nothing implausible about the notion that a contractor may have a relationship with a
businessperson in which a level of compatibility has been established over time, such that the
contractor cannot readily find a comparable alternative. Similarly, it is plausible that the leader of
a project has amassed knowledge and contacts, in addition to having relevant (potentially rare) skills,
which cannot be duplicated; the leader may be irreplaceable. Defendant’s argument might well have
been stronger with more support; but there is no basis for a finding that district committed clear error
in finding that Defendant’s incarceration would have caused great economic harm to others.
5. The combination of the family and business impacts
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No. 03-2059
The government argues that the combination of factors here is not cumulatively sufficient
to justify a departure. The guidelines state: “Departures based on a combination of not ordinarily
relevant circumstances that are present to a substantial degree should occur extremely rarely and
only in exceptional cases.” U.S.S.G. § 5K2.0, cmt. n.3(C). A departure is only warranted where the
combination of factors removes the case from the “heartland” of cases. United States v. Sabino, 274
F.3d 1053, 1078 (6th Cir. 2001).
The question, then, is whether, based upon the factual findings of the district court (which
were not clearly erroneous, for the reasons explained above) Defendant is entitled to a downward
departure. Accepting the district court’s factual findings (as explained above), we review its
application of the guidelines to these facts de novo.
As recounted and discussed above, the district court found that Defendant is uniquely able
to care for his wife, who has documented mental health problems, and that Defendant’s wife cannot
be cared for by Defendant’s daughter (due to her own health problems); the district court also found
that Defendant’s business ventures, whose success affects numerous other people, are dependent on
Defendant’s continued involvement.
It is difficult to determine with exact certainty what facts would constitute an “exceptional”
or “extremely rare” combination of factors. U.S.S.G. § 5K2.0, cmt. n.3(C). These terms are quite
vague; also, there is a dearth of guiding precedent, because the de novo standard of review is
relatively new, and because this Court does not review the substantive basis of district courts’
denials of motions for a downward departure, under U.S.S.G. § 5K2.0. E.g., United States v. Ridge,
329 F.3d 535, 545 (6th Cir. 2003) (regarding U.S.S.G. § 5K2.0, “we do not review a district court's
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No. 03-2059
refusal to grant a downward departure, unless the court erroneously believed that it did not have the
authority to depart downward.”) (citations omitted).
We know of no case that is squarely on-point with the combination of family and economic
impact in the present case. A departure for a combination of family and economic impact was
affirmed in United States v. Patel, 164 F.3d 620, 1998 WL 650589 (2d Cir. Aug. 21, 1998)
(unpublished opinion). But Patel provides little guidance, due to the abuse of discretion standard
of review that was in place at the time the case was decided; the appeals court largely deferred to
the sentencing expertise of the district court. Id. at *4 (“district courts have an ‘institutional
advantage over appellate courts’ and a ‘“special competence”’ in sentencing matters. See Koon v.
United States, 518 U.S. at 98-99 (1996).”).
In the absence of cases with similar combinations of family responsibilities and business
impact, the best approach is to, first, separately assess the standards governing family circumstances
and business impact and, second, determine whether, when aggregated, Defendant’s family
circumstances and the impact his incarceration would have on his business support the downward
departure. Regarding family considerations, various factors are set forth in U.S.S.G. § 5H1.6, cmt.
n.1. Looking at these factors, there is no indication that Defendant’s family was involved in the
offense (id. § 5H1.6, cmt. n.1(A)(ii)) or was endangered by the offense (id. § 5H1.6, cmt.
n.1(A)(iii)). Thus, two of the factors relating to the offense do not disfavor a departure. As to
caretaking (id. § 5H1.6, cmt. n.1(B)), the district court found that Defendant’s wife would suffer a
loss of essential caretaking, if Defendant were incarcerated. The mental illness of Defendant’s wife
and the heart ailment of Heidi Holz, who appears to be the person besides Defendant who is most
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No. 03-2059
likely best situated to care for Defendant’s wife, present individual circumstances that may not be
exceptional taken individually but which are quite rare, when aggregated. See United States v.
Marine, 94 Fed.Appx. 307, 311-12, 2004 WL 771851, at **5 (6th Cir. Apr. 8, 2004) (unpublished
opinion) (affirming, on de novo review, the district court’s ruling that multiple family circumstances,
none of which was exceptional taken alone, were exceptional in the aggregate, in demonstrating that
the defendant was an irreplaceable caregiver to her children). In the present case, Defendant’s
family circumstances weigh in favor of a departure, even if, if considered alone, they might not be
sufficient to justify one. We thus proceed to an assessment of business impact.
Just as the family considerations favor a departure, so too do the business impact
considerations. In United States v. Milikowsky, 65 F.3d 4, 9 (2d Cir. 1995), on de novo review, the
Second Circuit affirmed a downward departure on the basis of business impact. In that case, the
defendant was a businessperson, involved in steel trading; for a violation of the Sherman Act
through price-fixing, the court departed downward from a sentence of eight-to-fourteen months,
instead sentencing the defendant to two years probation, six months home confinement, a fine, and
community service, with no prison time. Id. at 5-6. Although the defendant argued for a departure
based on family circumstances and business impact, the court granted the departure solely based on
business impact. Id. at 6. There are differences between Milikowsky and the instant case. In the
instant case only a handful of employees would lose work if Defendant were incarcerated, as
opposed to the 150 to 200 employees in the Milikowsky. Id. at 9. Also, the amount of money at
stake here is less. The failure of the Plumbrook project would expose bank creditors and Rudolf
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No. 03-2059
Holz to a combined loss of $4.5 million dollars.6 Estimates of the project’s total cost and value are
at $9 million. In Milikowsky larger amounts were at stake, as the debt alone was $20 million. 65
F.3d at 9. Yet, there are also similarities between the cases: in the present case, as in Milikowsky,
65 F.3d at 9, the defendant was found to be indispensable to a business or project with employees
and large financial obligations. The economic considerations here are similar to those in
Milikowsky, where business impact was the sole grounds for a departure, as opposed to the
combination of family circumstances and business impact, as is the case here.
We find that family circumstances and business impact are each “present to a substantial
degree.” USSG § 5K2.0(c). Furthermore, we conclude that the likely impact of Defendant’s
incarceration on his family, and its likely impact on his business, “taken together, make [this] case
an exceptional one.” Id. We therefore hold that the downward departure was not erroneous.
CONCLUSION
For the aforementioned reasons, we AFFIRM the judgment of the district court.
6
(J.A. at 20) (Defendant’s counsel stated, “Waldmar Holz’ other brother, Rudolph Holz, has
literally invested everything he has in this project. He has invested $4.5 million in personal but
mostly borrowed funds for this project.”); see also (J.A. at 71) (Rudolf Holz’s statement that “[t]here
have been considerable cost over-runs on some parts of the project. So far the bank has provided
the extra funding for the over-runs.”).
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No. 03-2059
RONALD LEE GILMAN, Circuit Judge, dissenting. Waldemar Holz is a general
contractor who was convicted of tax evasion for failing to report $188,652 in income that he
received for upgrade work and additions on a condominium project in Michigan. The unreported
income came from checks that were made out to him personally and not run through his business
entity. Under the United States Sentencing Guidelines, he was subject to a minimum term of 12
months in prison. The district court instead granted a downward departure and sentenced him to
three years of probation, with no jail time. I respectfully dissent because I find nothing
extraordinary concerning Holz’s circumstances that justify taking this case out of the “heartland”
of cases controlled by the Sentencing Guidelines.
The problem I have with the majority opinion is not in its statement of the governing legal
principles, but rather with what I believe is its failure to properly apply those principles to the facts
before us. One key principle recognized by the majority is set forth in the following Official
Comment to the Sentencing Guidelines: “Departures based on a combination of not ordinarily
relevant circumstances that are present to a substantial degree should occur extremely rarely and
only in exceptional cases.” U.S. Sentencing Guidelines § 5K2.0, cmt. n.3(C). Another key principle
acknowledged by the majority is that a departure is warranted only where the combination of factors
removes the case from the “heartland” of factors covered by the Sentencing Guidelines. (Maj. Op.
p. 19, citing United States v. Sabino, 274 F.3d 1053, 1078 (6th Cir. 2001)).
In applying the above principles to the case at hand, the majority opinion engages in a
lengthy explanation of Holz’s family and business problems as found by the district court. Although
I do not dispute the details recited, they basically boil down to the government’s characterization
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No. 03-2059
that Holz’s “wife is very distressed that he will go to prison, and incarceration will disrupt his
business affairs.” I have no doubt that this distress and disruption are legitimate concerns; my
problem is in trying to justify the proposition that these concerns are either “exceptional” or “occur
extremely rarely.”
After reviewing all of the details that purportedly justify a downward departure from the
Sentencing Guidelines in the present case, the fact remains that each detail falls into one of two
categories: either family responsibilities or a vocational skill. Yet the Sentencing Guidelines
specifically state that neither category is “ordinarily relevant” in determining whether a departure
is warranted. U.S. Sentencing Guidelines §§ 5H1.6 (family responsibilities); 5H1.2 (vocational
skill). In fact, a “departure for ‘family responsibilities’ is a discouraged factor . . . and therefore is
only proper in ‘exceptional cases.’” United States v. Reed, 264 F.3d 640, 653 (6th Cir. 1991).
I find nothing exceptional about Holz’s family or business situation, especially when heeding
the United States Supreme Court’s admonition that such status is “determined in large part by
comparison with the facts of other Guidelines cases.” Koon v. United States, 518 U.S. 81, 98 (1996).
In surveying the few cases where a departure has been granted for family or business reasons, I note
that all of them involve situations far more compelling than that presented by Holz. See, e.g., United
States v. Leon, 341 F.3d 928, 933 (9th Cir. 2003) (granting a departure where the defendant’s wife
suffered from kidney cancer and long-standing depression, and the defendant was found to be “an
irreplaceable caretaker”); United States v. Milikowsky, 65 F.3d 4, 8-9 (2d Cir. 1995) (granting a
departure where the defendant’s incarceration would cause the immediate bankruptcy of two steel-
related businesses with an indebtedness of $20 million and the loss of 150-200 jobs).
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No. 03-2059
The Holz situation pales in comparison to these cases. There is nothing in the record to
establish that Holz’s wife suffered from any depression that preexisted the investigation of his tax
fraud, or that the couple’s two adult children who live nearby could not adequately look after their
mother’s needs during Holz’s incarceration. Similarly, the scope of Holz’s business operations is
minuscule in comparison to a case like Milikowsky. This court, in fact, has held that there is
“nothing special” about the negative effects of incarcerating a white-collar business owner. United
States v. Rutana, 932 F.2d 1155, 1158 (6th Cir. 1991) (“[E]ven assuming that Rutana’s
imprisonment would lead to the failure of his business and the loss of his employees’ jobs, this fact
does not distinguish Rutana from other similar offenders.”).
My primary concern with the result reached by the majority in this case is that it opens a
gaping hole in the application of the Sentencing Guidelines that by law is to be reserved for truly
exceptional situations. In effect, it sanctions a “get out of jail free” card for tax cheats who own a
small business and have a nervous spouse. I therefore respectfully dissent.
25