United States v. Frank Castaldi

In the
United States Court of Appeals
For the Seventh Circuit
Nos. 10-3406 & 12-1361
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
FRANK A. CASTALDI,
Defendant-Appellant.
Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 09 CR 059 — John W. Darrah, Judge.
ARGUED MAY 23, 2012 — DECIDED FEBRUARY 24, 2014
Before MANION, ROVNER, and HAMILTON, Circuit Judges.
HAMILTON, Circuit Judge. Defendant Frank A. Castaldi
made an entire career out of a Ponzi scheme. When it collapsed
in December 2008, net losses to the investors and the Internal
Revenue Service totaled roughly $40 million. When the scheme
was on the brink of collapse, Castaldi found a lawyer and
turned himself in to the government. He eventually pled guilty
to just one count of mail fraud, 18 U.S.C. § 1341, and one count
of corruptly impeding the IRS, 26 U.S.C. § 7212(a). The district
2 Nos. 10-3406 & 12-1361
court imposed the longest prison sentence possible under the
plea agreement—maximum consecutive sentences of twenty
years on the mail fraud charge and three years on the tax
charge. Castaldi appeals his sentence, which is about 50
percent longer than the high end of the agreed Sentencing
Guideline range.
Castaldi’s strongest argument on appeal is that the district
judge said too little about one important mitigation argument,
the fact that he told the government about his scheme and
cooperated with its investigation. The judge’s few references
to this argument give us pause under United States v.
Cunningham, 429 F.3d 673, 679 (7th Cir. 2005), and its progeny,
which instruct district courts to address expressly a defen-
dant’s principal arguments in mitigation. In Cunningham and
many other cases, however, we have also made clear that a
judge imposing sentence “need not belabor the obvious” or be
explicit where anyone acquainted with the facts would have
known without being told why the judge did not accept the
argument. E.g., United States v. Gary, 613 F.3d 706, 709 (7th Cir.
2010), citing Cunningham, 429 F.3d at 679. That is the case here.
The sentencing transcript shows that the judge was well aware
of all the mitigation arguments, including Castaldi’s disclosure
and cooperation, and that the judge gave thoughtful and
individualized consideration to the case. The transcript makes
clear that the judge found that the devastating financial harm
Castaldi inflicted on the family members, friends, and neigh-
bors he victimized simply overwhelmed all of his arguments
in mitigation. We need not remand so that the judge can
belabor the obvious in a new sentencing hearing. Castaldi’s
Nos. 10-3406 & 12-1361 3
remaining arguments on appeal also are not persuasive. We
therefore affirm his sentence.
I. Castaldi’s Ponzi Scheme and its Collapse
Castaldi is actually a second-generation fraud artist. He
began helping his father in his accounting and other businesses
in the 1960s when he was still in high school and later joined
his father’s businesses full time. The most important business
consisted of selling promissory notes to investors with fraudu-
lent promises of between ten and fifteen percent annual
interest. Castaldi also assured his “investors” that the interest
need not be reported to the IRS as taxable income. In fact, the
proceeds from selling the notes were used for Castaldi’s
benefit. When investors were paid interest or return of their
principal, the payments were made with only the later invest-
ments of new investors, so this was a Ponzi scheme. See
Cunningham v. Brown, 265 U.S. 1 (1924) (sorting out assets
available in bankruptcy of the original Charles Ponzi); Ponzi v.
Fessenden, 258 U.S. 254 (1922) (authorizing federal authorities
to produce Ponzi for trial on criminal charges in state court).
Such a scheme can work for a while, but it will inevitably
collapse when the supply of new investors dries up or enough
earlier investors ask for their money back. See, e.g., In re
Bernard L. Madoff Inv. Securities LLC, 654 F.3d 229, 232 (2d Cir.
2011), affirming 424 B.R. 122, 128 (Bankr. S.D. N.Y. 2010).
In November 2008, one of Castaldi’s investors demanded
the return of $500,000 within ten days. Castaldi did not have it.
He tried to get the money by soliciting new victims, but he
could not raise enough to make the payment. He consulted
counsel and then met with the United States Attorney’s Office
4 Nos. 10-3406 & 12-1361
to confess his decades-long fraud. When Castaldi made his
disclosure to the government, it had no prior indications of his
fraud scheme. Until that time, Castaldi had been able to make
all demanded payments of principal and interest to his
“investors.” After the initial disclosure, he met with the
government repeatedly, providing detailed records of his fraud
and the victims in at least thirty meetings without any assur-
ances of leniency.
II. The Plea Agreement
Castaldi and the government agreed eventually on the
terms of a plea agreement, but the sentencing terms were not
binding on the court. Castaldi would waive indictment and
plead guilty to one count of mail fraud and one count of
impeding the IRS, and would fully cooperate by providing
complete and truthful debriefings and testimony if called upon
to do so. The parties agreed on preliminary Sentencing
Guideline calculations that would produce a total offense level
of 34 and criminal history category I, for a guideline range of
151 to 188 months in prison. The government agreed to
recommend a sentence at the low end of the guideline range.
The agreement allowed Castaldi to argue for a below-guideline
sentence.1
1
Using the 2009 Sentencing Guidelines, the agreed calculation began with
a base offense level of 7 under § 2B1.1(a)(1) for the mail fraud charge
because the statutory maximum sentence was 20 years. The loss exceeded
$20 million, adding 22 levels under § 2B1.1(b)(1)(L). More than 250 victims
added 6 levels under § 2B1.1(b)(2)(C), and Castaldi’s abuse of a position of
trust added 2 more levels under § 3B1.3, for an adjusted offense level of 37.
The tax charge had a separate offense level of 28, but the 9-level difference
(continued...)
Nos. 10-3406 & 12-1361 5
III. The Sentencing Decision
Castaldi submitted a detailed sentencing memorandum
with supporting evidence and letters. He argued for a below-
guideline sentence of 100 months. He based this argument on
several arguments in mitigation, including the circumstances
of the offense (Castaldi in effect inherited the Ponzi scheme
from his father and convinced himself he had to keep it going
to protect his father); his lack of intent to cause harm; the
absence of a greedy or lavish lifestyle; his extraordinary
cooperation by voluntarily disclosing the scheme and laying
out the details for the government without assurances of
leniency; his wife’s serious health problems; his own age (then
57 years old) and health problems; and numerous letters from
family and friends attesting to his good character and genuine
remorse. The government’s memorandum was much shorter.
It urged the court to impose a low-end guideline sentence and
acknowledged both the harm to victims and Castaldi’s
voluntary disclosure of his scheme and its details.
Judge Darrah began the sentencing hearing by establishing
that there were no objections to the presentence report and its
guideline calculations. He established that he had read the
defendant’s memorandum and all 44 attachments. He had also
read the government’s memorandum and all the victims’
1
(...continued)
between the two crimes meant that the tax crime did not actually affect the
combined offense level at all. See § 3D1.4(c). With a 3-level reduction for
acceptance of responsibility under § 3E1.1, the total offense level was 34,
with an imprisonment range of 151 to 188 months for criminal history
category I.
6 Nos. 10-3406 & 12-1361
letters and statements submitted by the government. The judge
reviewed with defense counsel the arguments in mitigation
and then summarized the many letters written on Castaldi’s
behalf.
The judge reviewed the government’s memorandum with
the prosecutor and then began reading from and summarizing
many letters from victims. To describe these letters as compel-
ling is an understatement. Victims described how Castaldi had
deprived them of their life savings, college money for their
children, money saved for retirement, money saved to start a
business, money for medical care, and the life insurance money
when a spouse died. One of Castaldi’s last victims described
how he convinced her family to take out a new mortgage for
$200,000 and invest it with him in late 2008, meaning it was
lost. One letter pointed out that on November 15, 2008, when
Castaldi knew his scheme was collapsing, he conned his own
92-year-old aunt to “invest” $120,000 with him so she could
pay a care-giver with the interest. The aunt’s money was also
lost, of course.
Letter after letter described the victims’ loss of financial
security and self-confidence, and their new lives of sleepless
nights, stress, worry, and depression. In short, these victims
trusted Castaldi not only with their money but also with their
security, their pride, their hopes, and their dreams. That’s what
he stole when he stole their money.
The hearing then shifted to oral statements by victims
exercising their right to be heard under the Crime Victims’
Rights Act, 18 U.S.C. § 3771. They described how they had
loved Castaldi and trusted him with their life savings only to
Nos. 10-3406 & 12-1361 7
have him steal everything. The oral statements were similar in
content and power to the victims’ letters. As one victim said,
“Frank Castaldi was able to send his daughters to college. I
won’t be able to help my granddaughter … [go] to college.” So
many victims wanted to speak that the judge eventually
imposed time limits and limited repetition. Passions ran high
in the courtroom. Some victims applauded or otherwise
disturbed the decorum of the proceeding from time to time.
The judge had to insist on order several times, and he warned
audience members they could be removed if the disturbances
continued.
After the victims finished their statements, Castaldi’s
lawyer spoke. He first acknowledged that it had been “an
extraordinary afternoon” and that it was hard to imagine a
more moving presentation. He reminded the court again of
Castaldi’s confession, unprompted by an investigation, and his
efforts to help the government sort out the case. The prosecutor
also spoke once more, acknowledging that the government had
not been aware of the Ponzi scheme when Castaldi confessed.
Castaldi then exercised his right of allocution and briefly stated
his apologies to the victims and his family.
IV. The Explanation of the Sentence
Then it was the judge’s turn to impose the sentence and
explain it. He reviewed accurately the legal framework for
sentencing under 18 U.S.C. § 3553(a) and the Sentencing
Guidelines. He outlined the case in terms of those factors,
beginning with the nature and circumstances of the offense,
focusing on the 22 years of fraud in the charges, the hundreds
8 Nos. 10-3406 & 12-1361
of victims, and the tens of millions of dollars in losses. He then
got to the heart of his thinking about the offense:
In my view, the total offense level grossly under-
states the seriousness of the defendant’s criminal
conduct.
Upon reading all of the letters that were submitted
on behalf of some of the victims and listening to the
statements of some of the victims in this Court, it is
abundantly clear that the defendant purposely
targeted a group of people, many elderly people
with strong ethnic traditions in this case, people that
had immigrated here from Italy. These strong ethnic
traditions included life-long hard work, doggedly
saving their earnings, all to provide security for
themselves, their children and to perhaps leave a
financial legacy to their children and their grandchil-
dren.
* * *
These people, the victims, paid taxes, they obeyed
the laws, and they respected and relied upon our
government and its institutions, including this
Court.
Many values were mentioned here today, and
most often mentioned were pride and dignity and
trust and family. Pride and dignity and family all, in
a sense, depend on security, and it was this security
that the victims sought in living the American
dream, to preserve security and, hence, preserve
Nos. 10-3406 & 12-1361 9
pride and trust for their later years. Frank Castaldi
abused that trust and had a horrific impact on the
victims. And that impact must be considered in
imposing a sentence that promotes respect for the
law and provides just punishment.
I think it was Mr. Cesare [a victim who spoke] that
said it best. He eloquently said that the defendant
took the spoils of their youth, all that effort that was
intended to provide them security and the things
that are synonymous with strong ethnic values,
pride and dignity, and now that’s gone.
Therefore, considering the nature and history of
the offense in itself, and considering a sentence that
promotes respect for the law and provides just
punishment, it’s clear a sentence beyond the guide-
line range is necessary.
The judge then turned to Castaldi’s background and
characteristics, noting both the absence of any criminal record
but also his decades-long criminal conduct. The judge ad-
dressed deterrence, both specific and general, and said that a
Guideline sentence would not be adequate as a deterrent to
this crime. He said he had taken into consideration all the
mitigating factors that the defense had set forth in the memo-
randum, which he had reviewed in detail with counsel earlier
in the hearing. As noted, the sentence was the longest possible
under the plea agreement: maximum consecutive sentences for
a total of 276 months (twenty-three years) in prison.
Castaldi’s principal argument on appeal is that the judge
made a procedural error by failing to address what he now
10 Nos. 10-3406 & 12-1361
calls his principal argument in mitigation, his voluntary
disclosure of the offense and his efforts to help the government
with its investigation. Perhaps the most frequently argued
issue on our docket in recent years is whether a district judge
provided a sufficient explanation for rejecting a convicted
defendant’s arguments in mitigation at sentencing. As one
rough measure, our key case on the issue is United States v.
Cunningham, 429 F.3d 673 (7th Cir. 2005), and as of February
19, 2014, we had cited Cunningham in 197 later opinions and
orders. The vast majority of citations concern this issue.
When a district court must exercise its discretion, it ordi-
narily must provide enough of an explanation to allow a
reviewing court to see that the court actually exercised that
discretion by considering the relevant factors. Cunningham,
429 F.3d at 679. “A judge who fails to mention a ground of
recognized legal merit (provided it has a factual basis) is likely
to have committed an error or oversight.” Id. At the same time,
the judge need not address arguments that have no apparent
merit, and need not spend time addressing an argument if
“anyone acquainted with the facts would have known without
being told why the judge had not accepted the argument.” Id.We have applied the Cunningham standard many times,
both to remand sentences and to affirm them. Compare, e.g.,
United States v. Johnson, 643 F.3d 545, 549 (7th Cir. 2011)
(remanding; court failed to address argument based on
crack/powder cocaine ratio); United States v. Villegas-Miranda,
579 F.3d 798, 801–02 (7th Cir. 2009) (remanding; court failed to
address argument for concurrent state and federal sentences);
and United States v. Miranda, 505 F.3d 785, 792–94 (7th Cir.
2007) (remanding; court failed to address argument based on
Nos. 10-3406 & 12-1361 11
severe mental illness); with United States v. Spiller, 732 F.3d 767,
769 (7th Cir. 2013) (affirming; record showed sentencing court
considered mitigation arguments “even if implicitly and
imprecisely”); United States v. Stinefast, 724 F.3d 925, 931–32
(7th Cir. 2013) (affirming; court acknowledged mitigation
argument and rejected it briefly but expressly); United States v.
Gary, 613 F.3d 706, 709–10 (7th Cir. 2010) (affirming; court
implicitly considered family circumstances arguments by
sentencing husband and wife so that they would serve sen-
tences in sequence); United States v. Diekemper, 604 F.3d 345, 355
(7th Cir. 2010) (affirming; court acknowledged argument,
which was sufficient to show consideration at least “implicitly
and imprecisely”); and United States v. Poetz, 582 F.3d 835,
837–40 (7th Cir. 2009) (affirming; “totality of the record”
showed that judge considered defendant’s mitigation argu-
ments and implicitly rejected them; Cunningham principle
“does not apply mechanically or without regard to the con-
text”).
Cunningham and its progeny do not provide a bright line
that lets district judges know when they have provided enough
of an explanation. Yet “we try to take careful note of context
and the practical realities of a sentencing hearing. District
judges need not belabor the obvious.” Gary, 613 F.3d at 709.
Under that standard, the district judge made his thinking clear
enough in this case.
Castaldi argues that the district judge’s explanation fails to
show meaningful consideration of his voluntary disclosure and
cooperation. Paying close attention to the context and practical
realities here, however, we see that the judge was well aware
of the disclosure and cooperation. The judge mentioned the
12 Nos. 10-3406 & 12-1361
point specifically when reviewing the defendant’s many
arguments at the beginning of the sentencing hearing. The
judge was paying such close attention during defense counsel’s
final argument, which emphasized the disclosure and coopera-
tion, that the argument was more of a conversation than a
speech. The government’s final presentation emphasized both
the defendant’s disclosure and cooperation and the serious
harm he inflicted on his victims. In explaining the sentence, the
judge said he had taken into consideration all of the defense
mitigation arguments. Although a “rote statement that the
judge considered all relevant factors will not always suffice,”
Cunningham, 429 F.3d at 679, this was not a rote statement. It
was a shorthand reference to earlier discussions in a long
hearing that showed the judge’s close attention to the specifics
of the case. The district judge did not overlook Castaldi’s
voluntary disclosure and efforts to lay out the details of the
crime for the government.2
After hearing a brief statement from Castaldi in allocution,
the judge imposed the most severe sentence he could for the
2
The Cunningham principle is usually articulated in terms of the court’s
obligation to address the defendant’s “principal” arguments in mitigation
that are not so weak as not to merit discussion. E.g., Villegas-Miranda,
579 F.3d at 801. It is not always easy to identify which or how many
arguments are principal, and there is real danger that an appeal can give an
argument much more emphasis than it received in the district court.
Castaldi’s sentencing memorandum and opening oral presentation in the
hearing made at least five distinct arguments in mitigation. His voluntary
disclosure has been emphasized much more on appeal than in the district
court. Nevertheless, we will assume for purposes of argument that it was
a “principal” argument under Cunningham.
Nos. 10-3406 & 12-1361 13
two offenses of conviction. The judge’s explanation, quoted at
length above at pages 8–9, emphasized the “horrific” harm that
Castaldi inflicted on his victims. He explained clearly why the
agreed Guideline calculation “grossly understated” the
seriousness of the offense. The judge also walked carefully
through all of the applicable sentencing factors under § 3553(a).
It is obvious that he thought carefully about the sentence and
tailored it to the circumstances of the individual case and the
individual defendant. He knew he was imposing a
non-guideline sentence that required an explanation, and he
provided it.
In explaining the sentence, the judge did not specifically
address the defense argument about disclosure and coopera-
tion. It would be easy to affirm this sentence if he had added
just one sentence to his explanation, something like: “The harm
you caused your victims by betraying their trust for more than
twenty years and by stealing their life savings, their hopes for
financial security, and their dreams of a better future for
themselves, their children, and grandchildren, was so devastat-
ing as to dwarf your late disclosure of your crime when
discovery became virtually inevitable.” Despite the absence of
such a statement, the judge’s thinking on this point was so
obvious that we need not remand for him to make that point
explicit in a second hearing. The judge’s explanation empha-
sized so strongly the harm to the victims that we know that
factor dominated his thinking. And his questions to defense
counsel at the beginning and end of the hearing show that he
understood but was not moved by Castaldi’s decision to come
forward and confess after more than twenty years of fraud.
Castaldi made that decision only when he was unable to meet
14 Nos. 10-3406 & 12-1361
a victim’s demand for return of his principal and exposure was
both inevitable and imminent. Again, district judges need not
belabor the obvious or be explicit where anyone acquainted
with the facts would have known without being told why the
judge did not accept the argument. Gary, 613 F.3d at 709, citing
Cunningham, 429 F.3d at 679. That’s the case here.
V. Other Procedural Issues
A. The Policy Statement — Section 5K2.16
Castaldi raises several other procedural objections to his
sentence. First, he argues that the district court erred by failing
to address the application of Guideline § 5K2.16, which
suggests downward departures for defendants who volun-
tarily disclose their crimes and accept responsibility for them
“if such offense was unlikely to have been discovered other-
wise.” The district court noted that it was required to consider
policy statements of the Sentencing Commission and said there
were no relevant ones. Castaldi argues that § 5K2.16 was
applicable and that the district court erred by failing to address
it.
The procedural problem with this argument is that neither
the government nor the defense brought § 5K2.16 to the
attention of the district court, so the applicable standard of
review is for plain error. That requires an error that is plain,
meaning clear or obvious, that affected the defendant’s
substantial rights, and that seriously affected the fairness,
integrity, or reputation of judicial proceedings. United States v.
Olano, 507 U.S. 725, 732, 736 (1993); United States v. Dooley,
688 F.3d 318, 321 (7th Cir. 2012); United States v. Burge, 683 F.3d
Nos. 10-3406 & 12-1361 15
829, 833, 836 (7th Cir. 2012); United States v. Anderson, 604 F.3d
997, 1002 (7th Cir. 2010).
We find no error, let alone a plain or obvious one. Section
5K2.16 would apply only if Castaldi’s fraud were unlikely to
have been discovered without his disclosure. It does not apply
if his disclosure was motivated by his knowledge that discov-
ery was likely or imminent. United States v. Ekeland, 174 F.3d
902, 905 (7th Cir. 1999), quoting § 5K2.16 policy statement.
Ponzi schemes will inevitably collapse at some point, when the
volume of new money from new investors/victims is no longer
sufficient to meet the demands and expectations of the earlier
investor/victims. Castaldi’s own account of his crimes showed
that discovery was inevitable and probably imminent when he
confessed in December 2008. One investor/victim was demand-
ing the return of $500,000 in principal within ten days in
November 2008. Castaldi knew he could not make the pay-
ment, though he scrambled and continued to defraud new
victims in those last weeks of 2008. In applying the plain error
standard, we can reasonably infer that some of the many
victims who lost so many millions would have found their way
to law enforcement. See United States v. Brinley, 684 F.3d 629,
634 (6th Cir. 2012) (affirming denial of § 5K2.16 departure;
defendant confessed to Ponzi scheme as it was about to
collapse when victims demanded payments he could not
make). There was no plain error here.
B. Sentencing Disparities
Castaldi argues that the district court made a procedural
error by failing to address the extent to which the
above-guideline sentence would produce unwarranted
16 Nos. 10-3406 & 12-1361
sentencing disparities with similarly situated offenders. See
18 U.S.C. § 3553(a)(6). The issue did not arise in the sentencing
hearing, perhaps because the court did not signal ahead of time
that it might impose an above-guideline sentence. There is
always some risk of disparities with any sentence, whether
above, below, or within the guideline range. The key word is
“unwarranted.” The district judge’s explanation for his
above-guideline sentence was sufficient to indicate that any
disparities were likely to be warranted by the devastating
impact that Castaldi’s crimes had on his victims. As noted
below regarding the substantive reasonableness of the sen-
tence, we have often affirmed above-guideline sentences in
fraud cases based on especially severe harm to victims.
Castaldi cannot prove that his sentence is unfair by pointing to
a few other cases around the country where similar or worse
defendants received lighter sentences, and this was not such a
major part of his sentencing position as to trigger special
obligations to explain under Cunningham. See 429 F.3d at 679.
C. Speculative Inferences
Castaldi also argues that the district court’s comments
about targeting victims based on ties in the ethnic community
were speculative. The court said “it is abundantly clear that the
defendant purposely targeted a group of people, many elderly
people with strong ethnic traditions in this case, people that
had immigrated here from Italy. These strong ethnic traditions
included life-long hard work, doggedly saving their earnings,
all to provide security for themselves, their children and to
perhaps leave a financial legacy to their children and their
grandchildren.” In context, the foundation for those comments
was clear. Castaldi preyed upon his network of friends,
Nos. 10-3406 & 12-1361 17
extended family, and neighbors, many of whom were of Italian
heritage and part of a community of recent immigrants who
valued that heritage and the commitments to family and thrift
to build a legacy for their children and grandchildren. Many
victims made the points the district judge was summarizing in
the challenged comments. We see no speculation or other error
on this score.
VI. Substantive Reasonableness
Finally, Castaldi argues that his sentence was substantively
unreasonable. He also frames essentially the same issue as a
procedural error by arguing that the above-Guideline sentence
was based on facts that are simply the “normal incidents of the
offense,” but we view that as essentially a substantive objec-
tion. We reject this challenge. The simplest way to understand
our rejection of this argument is to read the 103-page transcript
of the sentencing hearing. Even the proverbially cold record
shows the wrenching human consequences of Castaldi’s
decades-long crime.
The district judge firmly believed that Guideline offense
level 34 did not reflect the seriousness of Castaldi’s crime
because of the “horrific” impact his fraud had on his hundreds
of victims. A closer look at the agreed Guideline calculation
shows why. The fraud Guideline’s principal adjustments for
the seriousness of the offense are in § 2B1.1(b)(1), which adjusts
for the total financial loss that was inflicted or threatened, and
(b)(2), which adjusts for the number of victims. The upward
adjustment for amount of loss can range from just 2 levels for
a loss of more than $5000 to 30 levels for a loss of more than
$400 million. The upward adjustment for number of victims
18 Nos. 10-3406 & 12-1361
can range from 2 levels for 10 or more victims to 6 levels, as in
this case, for 250 or more victims.
These adjustments remain rough and imprecise. They do
not prevent the need for a sentencing judge to consider the
specific details of the individual case. Most important here, the
adjustments in (b)(1) and (b)(2) do not take into account how
slight or devastating the victims’ financial losses were for their
lives or businesses. To illustrate, consider these alternative
scenarios that all involve total losses of $30 million and more
than 250 victims.
First, suppose a fraud scheme imposes an average loss of
$100,000 on each of 300 people, corporations, and hedge funds
with a net worth in excess of $100 million each. All of those
victims could absorb the loss and some might not even notice
it.
Next, suppose a fraud scheme imposes an average loss of
$100 on each of 300,000 victims. Those losses might be noticed
but would not change most victims’ lives.
Third, suppose the fraud scheme imposes an average loss
of $10,000 on each of 3,000 small businesses, most of which
would be covered by insurance. Again, the losses may be
significant, but especially if they are covered by insurance, they
are not likely to make a difference in each victim’s overall
financial success or survival.
Under § 2B1.1(b)(1) and (b)(2), the Guideline calculations
for each of those frauds would be the same that we have here:
add 22 levels for the amount of loss and 6 levels for the number
of victims. In this case, the fraud scheme inflicted losses of
Nos. 10-3406 & 12-1361 19
more than $30 million on a few more than 300 victims (ignor-
ing here the tax loss to the IRS), for an average loss of around
$100,000 per victim. What makes this fraud different is that the
record shows the victims here are people of relatively modest
means who were not sophisticated in financial matters, and
what they lost was virtually all of their savings. Many worked
for years or decades in tough jobs in factories and construction
work. They scrimped, did without, and saved their money to
provide security for their retirement and perhaps a legacy for
their children and grandchildren. As the victims told the judge,
Castaldi stole not only their money but also their security, their
pride, their dignity, and their dreams.
The three hypotheticals and this case all produce Guideline
calculations for serious prison time. But we do not demean the
losses of victims in the three hypotheticals or similar cases by
recognizing as Judge Darrah did that Castaldi’s crimes were
much more devastating for his victims and deserve greater
punishment. For that reason, the judge reasonably concluded
that the agreed Guideline calculation of the offense level
“grossly understated” the gravity of Castaldi’s crimes. See
United States v. Scott, 657 F.3d 639, 641 (7th Cir. 2011) (affirming
above-guideline sentence in fraud case based on severe harm
to victims and their relationships to defendant; collecting
similar cases); United States v. Schlueter, 634 F.3d 965, 967–68
(7th Cir. 2011) (affirming above-guideline sentence in fraud
case based on severe harm to victims).
These observations are not intended as a criticism of the
Guidelines. They are guidelines, after all, not mandates, and
the Sentencing Commission itself has explained since the first
edition of the Guidelines that they cannot capture all relevant
20 Nos. 10-3406 & 12-1361
considerations in every case. That is why the Guidelines have
always allowed for departures from the applicable range and
why judges must give individualized consideration to the
particular offense and offender, as the judge did here.3
3
To reach a Guideline range that includes the sentence of 276 months
imposed here, it would be necessary to add 4 levels to the total offense level
of 34 used by the court. There are two paths for reaching a similar result
within the framework of the Guidelines. First, the fraud Guideline advises
the sentencing court to add 4 levels if, among other reasons, the defendant
“substantially endangered the solvency or financial security of 100 or more
victims.” § 2B1.1(b)(14)(B)(iii) (emphasis added). Complicating the issue
further, § 2B1.1(b)(14)(C) would limit the upward adjustment in this case to
only 2 levels instead of 4, because the cumulative adjustments under (b)(2)
(number of victims) and (b)(14) (victim impact) may not exceed 8 levels,
with an inapplicable exception. Like all other provisions in the Guidelines,
though, the cap in (b)(14)(C) is advisory. The Sentencing Commission
explained that the cap is only a rough approximation designed to account
for “the overlapping nature of such conduct in some cases,” inviting some
latitude in its application. See USSG Supp. App. C, Amdt. 653 (effective
Nov. 1, 2003). Section 3A1.1(b) offers a second path that could add 4 levels
to the offense level here. That provision for “vulnerable victims” adds 2
levels for one vulnerable victim and 2 more levels for “a large number of
vulnerable victims.” See, e.g., United States v. Christiansen, 594 F.3d 571,
574–75 (7th Cir. 2010); United States v. Grimes, 173 F.3d 634, 638 (7th Cir.
1999) (affirming adjustment in fraud scheme that targeted unsophisticated
victims, and noting that vulnerable victims in fraud cases may also include
“recent immigrants with poor command of English”); United States v.
Rumsavich, 313 F.3d 407, 411–12 (7th Cir. 2002) (affirming adjustment in
fraud case similar to this one). The record before us does not indicate
whether the parties, the probation officer, or the court considered these
possible adjustments. We note them to indicate that as the Guidelines have
evolved, they have become more sensitive to concerns like those expressed
by the judge here.
Nos. 10-3406 & 12-1361 21
As part of his argument that the sentence was substantively
unreasonable, Castaldi also argues that the maximum sentence
on a defendant who voluntarily disclosed his crime and helped
the government trace the details will discourage other defen-
dants from coming forward and confessing their crimes. The
government agreed to let Castaldi plead guilty to only two
offenses. That was a substantial concession to Castaldi that
limited the district court’s sentencing latitude. If a defendant
wants a plea agreement that imposes even tighter restrictions
on the sentence, he can try to negotiate a binding plea agree-
ment under Federal Rule of Criminal Procedure 11(c)(1)(C).
That did not happen here. This sentence was within the broad
range of reasonable sentences that might have been imposed
in this case.
The court’s sentence well above the agreed Guideline range
here was not unreasonable. Finding no reversible error in
Castaldi’s sentence, we AFFIRM the judgment of the district
court.
22 Nos. 10-3406 & 12-1361
ROVNER, Circuit Judge, dissenting. Despite a recommenda-
tion from the government for a sentence at the low end of the
applicable 151-188-month guidelines range and a request from
the defendant for a below-guidelines sentence of 100 months,
the district court sentenced Frank Castaldi to 276 months—the
maximum possible under statute and forty-six percent above
the high end of the advisory guidelines range. The majority
acknowledges that Castaldi’s sentence would be much easier
to affirm had the judge specifically addressed his arguments
on disclosure and cooperation, supra at 13, but characterizes
the judge’s thinking on this point as “so obvious” that we need
not remand for him to make the point explicitly in a second
hearing, id. I do not think it at all obvious, from a legal stand-
point, why the longest possible sentence allowed by statute is
reasonable for a defendant who turned himself in and cooper-
ated extensively with the government, particularly when the
total offense level had already been adjusted upward by thirty
levels to account for the loss, the number of victims, and his
abuse of a position of trust.1
It goes without saying that when a sentencing court makes
such a dramatic departure from the advisory guidelines range,
it must provide a particularly compelling justification for its
sentence. Gall v. United States, 552 U.S. 38, 50 (2007) (“We find
it uncontroversial that a major departure should be supported
1
Castaldi’s adjusted offense level of 34 included a 22-level increase under
U.S.S.G. § 2B1.1(b)(1)(L) for a loss exceeding $20 million, a 6-level increase
under § 2B1.1(b)(2)(C) because the offense involved more than 250 victims,
and a 2-level increase under § 3B1.3 because Castaldi abused a position of
trust.
Nos. 10-3406 & 12-1361 23
by a more significant justification than a minor one.”); see also
United States v. Miller, 601 F.3d 734, 739 (7th Cir. 2010). Such
justification may have been present here. As the majority ably
recounts, Castaldi committed a horrific abuse of trust against
his victims, many of whom were Italian-American immigrants
who lost everything for which they had worked so hard. I too
have read the transcript and am shocked and appalled at the
utter ruin he wrought on honest, hard-working friends and
family. It is apparent from the sentencing transcript that the
court was outraged at the trail of devastation Castaldi left in
his wake. But I cannot agree with the majority that because the
judge made clear his thinking on the magnitude of harm
caused by the crime that he necessarily provided enough
information for us to be able to tell that he meaningfully
considered Castaldi’s mitigating arguments.
United States v. Cunningham, 429 F.3d 673, 679 (7th Cir.
2005), and its progeny make clear that if a defendant has a
well-supported argument in mitigation, we must be able to tell
from the record why the district court either rejected the
argument or deemed it unpersuasive in light of other relevant
factors, id. at 679 (“A judge who fails to mention a ground of
recognized legal merit (provided it has a factual basis) is likely
to have committed an error or oversight.”); see also United States
v. Patrick, 707 F.3d 815, 819–20 (7th Cir. 2013) (remanding
where it was unclear from the record whether district court
adequately considered defendant’s cooperation); United States
v. Miranda, 505 F.3d 785, 793–94 (7th Cir. 2007) (remanding
based on district court’s failure to adequately address defen-
dant’s contention that mental illness warranted reduced
sentence under § 3553(a) factors). Of course I am well aware
24 Nos. 10-3406 & 12-1361
that a sentencing court need neither address every mitigating
argument raised by the defendant, e.g., United States v. Vizcarra,
668 F.3d 516, 527 (7th Cir. 2012) (noting that we routinely
uphold sentences where the district court does not explicitly
discuss all of defendant’s mitigating arguments), nor “belabor
the obvious,” United States v. Gary, 613 F.3d 706, 709 (7th Cir.
2010). But I also believe that Castaldi’s decision to turn himself
in to authorities—instead of any number of other decisions,
including fleeing (after all, no one was looking for him)—was
atypical enough so as to deserve some discussion from the
district court.
Over the course of the entire sentencing hearing, the district
court twice made specific mention of Castaldi’s confession and
cooperation. The first was at the start of the hearing when
detailing Castaldi’s arguments. Noting that both the govern-
ment and Castaldi’s memo focused on his “extraordinary
cooperation,” the court inquired whether Castaldi had legal
counsel when he turned himself in (he did). Tr. 6–7. Later,
when imposing Castaldi’s sentence, the district court never
directly discussed Castaldi’s cooperation or the fact that he had
reported his own fraud to police. The court simply stated
generally that it had taken into consideration all the mitigating
factors outlined by Castaldi in his memorandum. Despite
Cunningham’s admonition that a “rote statement that the judge
considered all relevant factors will not always suffice,” 429
F.3d at 679, the majority deems just such a statement adequate
here, supra at 12. Specifically, the majority considers the court’s
statement to be a “shorthand reference to longer discussions
earlier in the hearing” that demonstrate the judge’s close
attention to the specifics of the case, supra at 12. But there were
Nos. 10-3406 & 12-1361 25
no such longer discussions on the topic of Castaldi’s coopera-
tion, despite efforts of both parties to direct the court to
Castaldi’s noteworthy cooperation. Following up on defense
counsel’s discussion of Castaldi’s cooperation, the government
stated:
Your honor, to follow up on what Mr. Monico
said, the situation was unusual. Obviously these
are times of significant financial frauds amidst
the media reports that frequently—Mr. Castaldi
did come in in December of 2008. The govern-
ment was not aware of, or investigating, or, as
far as I know, hadn’t received complaints about
his investment scheme, his ponzi scheme at that
time. And he came in and he gave up a $77
million ponzi scheme. He brought in all the
records, he gave consent to search his businesses,
he provided sworn testimony and other state-
ments without any legal protections. And then
he met with the government. He met with the
government to unwind this largely cash busi-
ness, largely cash payments, cash receipts, that
were undocumented other than through notes.
And so, Mr. Castaldi in mitigation, which lends
to the government’s recommendation of the 151-
month sentence—Mr. Castaldi did self-report
and did give this up.
Tr. 81.
Instead of responding to or acknowledging Castaldi’s and
the government’s arguments, the sentencing judge focused
26 Nos. 10-3406 & 12-1361
instead on an alleged $18 million in unaccounted-for losses.
Although recognizing that the $18 million was technically
unaccounted-for, government counsel attempted to explain to
the court that over the 22–year period Castaldi was “running
a myriad of businesses as well as businesses that were losing
a significant amount of money.” Tr. 83. The government then
reiterated its recommendation of a sentence at the low end of
the guidelines range, but the district court remained focused
on the $18 million, going so far as to hypothesize that if
Castaldi received a sentence at the low end of the guidelines,
“an $18 million return for spending twelve years in jail may be
attractive.” Tr. 85. This discussion is puzzling, since, unlike the
mitigating arguments the parties sought to point out, the issue
of the $18 million was not raised by the parties. Cf. United
States v. Miller, 601 F.3d 734, 739–40 (7th Cir. 2010) (remanding
for resentencing based in part on court’s discussion of recidi-
vism of sex offenders despite lack of record evidence on the
subject).
Castaldi’s case has much in common with United States v.
Patrick, 707 F.3d 815 (7th Cir. 2013), where we remanded for
resentencing after concluding that the district court failed to
give adequate consideration to the defendant’s cooperation
with authorities. Defendant Sean Patrick, a pimp who traf-
ficked both minor and adult women, pled guilty in state court
to reckless homicide for the death of a fellow pimp. Id. at 817.
He was then charged and convicted in federal court of conspir-
acy to traffic minor and adult women for the purpose of
prostitution. Id. Although Patrick’s advisory guidelines range
was 360 months to life imprisonment, the government recom-
mended a 300-month sentence in light of Patrick’s cooperation;
Nos. 10-3406 & 12-1361 27
it also requested that Patrick’s sentence run concurrently to his
twenty-year state sentence. Id. at 817–18. The court rejected the
government’s suggestion but stated that based on Patrick’s
cooperation it would impose a 360-month sentence (running
consecutively to the twenty-year state sentence) instead of life,
despite the fact that Patrick’s lengthy criminal history made it
hard to find “positives” about him. Id. We remanded for
resentencing after noting that it was unclear from the record
why the district court believed Patrick’s cooperation did not
warrant a less severe sentence and relatedly, whether the court
appreciated the severity of what may have amounted to an
effective life sentence. Id. at 819–20.
Like the defendant in Patrick, Castaldi and his nearly life-
long fraud of the worst sort hardly makes him a candidate for
leniency.2 But the sympathetic nature of his victims does not
relieve the district court of its obligation to explain why
Castaldi’s extensive cooperation counts for nothing. In yet
another similarity to Patrick, it is impossible to tell from the
record whether the court appreciated that by imposing a 276-
month sentence it may have been effectively sentencing
Castaldi to life imprisonment for his fraud. See Patrick, 707 F.3d
at 820 (“Most worrisome is our inability to discern whether the
court appreciated the severity of the sentence it imposed, and
in particular its equivalence to the life sentence that it purport-
edly rejected.”). Castaldi was 57 at the time of sentencing.
2
Patrick is described as “a man who recruited disadvantaged minor girls
for prostitution, who subjected them to beatings and other abuse to control
them, and who killed a rival pimp by shooting him with a semi-automatic
handgun.” Patrick, 707 F.3d at 820.
28 Nos. 10-3406 & 12-1361
According to the Social Security Actuarial Life Tables, the
average life expectancy for a male Castaldi’s age is precisely
the length of his sentence—twenty-three years. See Social
Security Administration, Actuarial Life Table: Period Life
T a b l e , 2 0 0 9 , a v a i l a b l e a t
http://www.ssa.gov/OACT/STATS/table4c6.html. Thus, the
district court’s sentence may amount to life imprisonment for
a male of average health. But as outlined in Castaldi’s sentenc-
ing memorandum, he suffers from stage one primary biliary
cirrhosis and several other health problems that make it all the
more unlikely that he will outlive his sentence. Cf. United States
v. Wurzinger, 467 F.3d 649, 652 (7th Cir. 2006) (“There is a
worthy tradition that death in prison is not to be ordered
lightly, and the probability that a convict will not outlive his
sentence should certainly give pause to a sentencing court.”).
When imposing the equivalent of a life sentence on an individ-
ual who turned himself in—whether or not that decision was
only motivated by fear of discovery—I believe the district court
must do more than make its thinking “clear enough,” supra at
11, as to why it is rejecting mitigating arguments urged by both
the government and the defendant.
Thus, although the majority may be correct that the judge
was “well aware” of Castaldi’s disclosure and cooperation,
supra at 11, being aware of an argument seems a far cry from
meaningfully considering it. It is this latter element that is
lacking here. The majority concludes that this case presents the
exception to the general rule on legally supported mitigation
arguments because “anyone acquainted with the facts would
have known without being told why the judge had not
accepted the argument.” Id. But that statement from
Nos. 10-3406 & 12-1361 29
Cunningham refers to arguments “so weak as not to merit
discussion,” which is hardly the case with Castaldi’s self-
surrender and cooperation. See also Patrick, 707 F.3d at 818–19
(“If a defendant’s argument for a reduced sentence is clearly
without merit—‘[i]f anyone acquainted with the facts would
have known without being told why the judge had not
accepted the argument’—then the judge need not specifically
address that point.” (quoting Cunningham, 429 F.3d at 679)). It
is undisputed that Castaldi’s request for a reduced sentence
was supported by the record and based on “‘a ground of
recognized legal merit.’” See Patrick, 707 F.3d at 820 (quoting
Cunningham, 429 F.3d at 679). Cf. U.S.S.G. § 5K2.16 (allowing
what was formerly known as a “downward departure” when
a defendant motivated by remorse “discloses an offense that
otherwise would have remained undiscovered”).
If we affirm consecutive sentences at the statutory maxi-
mum (and far above the guidelines range) when the court does
not carefully explain why a legitimate mitigating argument is
unpersuasive, I believe we risk sanctioning district courts in
the tempting practice of simply making a blanket statement
that mitigation arguments have been considered. See
Cunningham, 429 F.3d at 679 (noting the “temptation to a busy
judge to impose the guidelines sentence and be done with it,
without wading into the vague and prolix statutory factors”).
It is well-established that if a mitigating argument may be
meritorious, the court needs to simply state explicitly why it is
unpersuasive. It is not an onerous burden, and we should not
have to read between the lines to understand the court’s
thinking, particularly when the court intends to impose the
maximum penalty possible on a defendant. Cf. United States v.
30 Nos. 10-3406 & 12-1361
Padilla, 520 F.3d 766, 775 (7th Cir. 2008). Castaldi’s fraud was
atrocious, of that there is no question; however, his is an
unusual case because of the sentencing court’s significant
deviation from the advisory guidelines range and the atypical
nature of Castaldi’s extensive cooperation. Given those
considerations, I cannot agree with the majority that the district
court’s thorough discussion of certain § 3553(a) factors can
stand proxy for its obligation to make explicit why Castaldi
deserves the highest possible sentence for his crimes despite
his self-surrender and cooperation. In short, I cannot join the
majority in affirming in the face of the district court’s failure to
more explicitly acknowledge what was essentially a joint
request for leniency. For that reason, I would remand for
resentencing so that we could assure ourselves that the district
court adequately considered Castaldi’s mitigating arguments
and recognized the gravity of the de facto life sentence it
imposed.