Here's a piece I wrote for the Connecticut Law Tribune about an unusual sentencing request:
The normal drill for punishment in federal court is prison time, fines or probation. But a North Branford-based construction company that ran afoul of the law is asking U.S. District Judge Janet Bond Arterton to consider sentencing the company to build two homes.
The hook is that the houses wouldn't be sold for profit. They would be constructed for Habitat for Humanity, and the efforts would be considered community service.
Cherry Hill Construction Co. pleaded guilty to filing a false tax return and a making a false statement in connection with the documents required by the Employee Retirement Income Security Act of 1974, which sets out a minimal standard for retirement plans. The company stated that its contributions to the retirement plans needed to be only $52,198 when they should have totaled nearly $580,000.
The company faces a $500,000 fine and five years' probation. But instead of paying the fine, Cherry Hill wants to build two new family homes in New Haven on behalf of Habitat and donate all the labor and materials. The company placed the value of such an effort at $155,000 to $200,000.
The government is opposing the proposal for several reasons. U.S. Attorney Deirdre Daly and Assistant U.S. Attorney Douglas Morabito said in court papers that Cherry Hill should be made to pay the full $500,000 because corporations can't be imprisoned and fines are the principal deterrent against criminal behavior by corporations.
The government officials said they also oppose providing a benefit to just one organization, rather than society in whole. "The proposal puts the court in the unusual position of directing that community service be done for the benefit of a specific entity," prosecutors said. "Although Habitat for Humanity is a wonderful organization, to some extent this proposal puts the court in the position of picking and choosing beneficiaries of a criminal sentence."
The government also had qualms about the possibility of Cherry Hill reaping positive news from the proposal even though it has promised not to seek any such publicity for any court-ordered community service.
Cherry Hill owner Robert Sachs, who authorized the guilty plea of his family's firm, said in a statement to the court that the 42-year-old company's financial problems started because an employee embezzled money. With the economy in a tough spot in 2010, the company's cash flow dried up. That led to the company underfunding its employee benefit plans and submitting false paperwork to the plan's administrator, Sachs said. The company also falsely claimed a tax deduction for more than the company actually paid into the plan.
In court papers, Cherry Hill's counsel, Robert Casale, argued that community service should be substituted for a monetary fine because the diversion of funds from the employee benefit plan was not driven by corporate greed but because the company's cash flow was eaten up from embezzlement and poor conditions in the construction market.
Robert Santillo, who worked as Cherry Hill's manager, pleaded guilty in 2012 to two counts of tax evasion. He had received more than $790,000 from a subcontractor used by Cherry Hill on asbestos removal projects and created a limited liability company to conceal his taxable income. Casale said in court papers that Santillo is also estimated to have stolen between $1 million and $2 million from Cherry Hill, eating "away at the company like an intestinal parasite."
"Cherry Hill is a defendant in this case because it made a bad decision during a time of crisis," Casale wrote. "There is no question that the company appreciates the wrongfulness of its actions and has taken steps to ensure that this will not happen again."
The company also agreed to make full restitution to the retirement plan funds and to pay back the taxes it owes to the Internal Revenue Service.
Casale declined to comment. Morabito did not respond to a request for comment.
Alan Sobol, chairman of Pullman & Comley's white collar, criminal defense and corporate investigations practice, said the defense strategy was interesting, but not likely to succeed. For one thing, he said, fines are meant to benefit all of society, not just one particular cause. He called Cherry Hill's idea an "interesting and creative approach. [But] it's not likely to carry the day with the court."
Sobol said he would instead recommend arguing that the sentencing guidelines for white-collar crimes regarding financial fraud are not based on empirical data and can be set aside altogether since sentencing guidelines are no longer mandatory.
An example of guidelines that are based on data are the drug offenses involving powder cocaine, Sobol said. But he argues the guidelines regarding financial fraud and drug offenses involving crack cocaine were developed out of knee-jerk reactions to, respectively, financial scandals over the last three decades and fears about the increasing use of crack in the 1980s. That is a strong reason, he said, that one could argue against the $500,000 fine in the Cherry Hill case.
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