Court Grants Compassionate Release to High Profile Tax Felon Morris Zukerman

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COVID-19 is spreading throughout prisons. The first federal prisoner died of the virus on March 28th. A week later Attorney General Barr ordered the federal Bureau of Prisons to prioritize the release of vulnerable inmates. In today’s post I will explore the impact of COVID-19 on one high profile tax felon.

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In 2016, wealthy investor Morris Zukerman pled guilty to one count of tax evasion and one count of corruptly endeavoring to obstruct and impede the administration of the internal revenue laws. He was sentenced to 70 months in prison for evading $45 million in federal income and state taxes. His crime included a phony $1 million charitable donation which actually funded his purchase of land on tony Block Island, providing fake documents to his accountants and lawyers representing him during the IRS audit, and funneling corporate funds to pay personal expenses.

In sentencing Zukerman, Federal District Court Judge Analisa Torres said that “Zukerman’s crimes were driven by unmitigated greed,” and that he “thought himself to be above the law.”

Zukerman reported to federal prison in Otisville New York in June of 2017. 

Fast forward to 2020. Prison populations are especially vulnerable to COVID-19, with prisoners living and eating in close quarters, and much of the prison population elderly and suffering from pre-existing health conditions. This has led to the early release of some high profile felons, including President Trump’s former fixer Michael Cohen, a fellow inmate of Zukerman’s at Otisville, who left prison last week to serve the balance of his term in home confinement.

On March 27th, the day before the first reported death in federal prisons, Zukerman filed a request with his warden asking for compassionate release. Three days later and prior to any response from the warden, Zukerman filed a motion in federal district court asking that the court grant his request. The government opposed the motion, and the same judge who sentenced Zukerman granted his request. Zukerman is now finishing his term in home incarceration. 

Under what authority can federal prisoners like Cohen or Zukerman seek early release? The First Step Act of 2018 amended Title 18 USC § 3582 and provides that a court may modify a sentence “upon motion of the Director of the Bureau of Prisons, or upon motion of the defendant after the defendant has fully exhausted all administrative rights to appeal a failure of the Bureau of Prisons to bring a motion on the prisoner’s behalf…” The statute grants the court power to reduce a sentence or impose supervised release if the court finds that  “extraordinary and compelling reasons warrant such a reduction … and that such a reduction is consistent with applicable policy statements issued by the Sentencing Commission.”

Under normal circumstances, a prisoner seeking compassionate release is required to present an application to the BOP and then either (1) administratively appeal an adverse result if the BOP does not agree that his sentence should be modified, or (2) wait for 30 days to pass and then appeal.  

On March 27, 2020, Zukerman submitted a request for compassionate release to his warden. Three days later, after not receiving a response, Zukerman filed a motion in court to modify his sentence in light of the COVID-19 pandemic. The motion included information about Zukerman’s risk factors for getting COVID-19 in light of his age, health and Otisville’s dorm-like living arrangements:

Zukerman is 75 years old and suffers from diabetes, hypertension, and obesity. He is currently serving his sentence at Otisville, where, as of March 27, 2020, at least one inmate has tested positive for COVID-19…. At Otisville, 120 inmates eat elbow-to-elbow at the same time, share one large bathroom with a handful of stalls and a handful of showers, and sleep together in bunks beds only a few feet apart that are divided principally between two dormitories (as opposed to individual cells). The two dormitories are separated only by the shared bathroom.

As Zuckerman’s motion describes, the dorm like setting makes it impossible to isolate. The response at the prison has been to quarantine all prisoners to their dorms or other common areas (Otisville, as one might surmise from the description, is a minimum security federal “camp”–for more on Otisville, see this New York Times article from a year or so ago). 

Zukerman’s doctor wrote in support of the motion that based on the Centers for Disease Control and Prevention guidelines for COVID-19, Zukerman is in “the highest risk category for complications and death from the disease.” 

The government’s opposed the motion on two grounds. First, it argued that Zukerman failed to exhaust the administrative process, a process that the statute seems to mandate. Second, it argued that the severity of Zukerman’s crimes warranted against finding that there were extraordinary and compelling reasons to grant the request.

The Exhaustion Requirement

In finding that Zukerman could bypass the requirement that prisoners exhaust the administrative process, the court noted that while it is strictly construed, there are circumstances when courts could waive it:

 “Even where exhaustion is seemingly mandated by statute … , the requirement is not absolute.”… There are three circumstances where failure to exhaust may be excused. “First, exhaustion may be unnecessary where it would be futile, either because agency decisionmakers are biased or because the agency has already determined the issue.” . Second, “exhaustion may be unnecessary where the administrative process would be incapable of granting adequate relief.” Id. at 119. Third, “exhaustion may be unnecessary where pursuing agency review would subject plaintiffs to undue prejudice.” 

In light of the potential harm of the virus, the court concluded that “requiring [Zukerman] to exhaust administrative remedies, given his unique circumstances and the exigency of a rapidly advancing pandemic, would result in undue prejudice and render exhaustion of the full BOP administrative process both futile and inadequate.”

The court’s brush off of the exhaustion requirement warrants a bit more discussion. I note that in the block quote above there is a footnote I omitted discussing a recent Supreme Court case where the Supreme Court seemed to make it very clear that in considering exhaustion “Congress sets the rules” and “courts have a role in creating exceptions only if Congress wants them to.”, citing Ross v. Blake , 136 S. Ct. 1850, 1857 (2016). Despite that admonition, the district court stated that some times the claimant’s interest is so great that courts can sidestep strictly following the rules so long as the person has made some request to the agency, citing the 1976 Supreme Court case Mathews v Eldridge and Washington v Barr, a 2019 Second Circuit opinion discussing how that in extraordinary circumstances the courts can relax the exhaustion requirements. As Zukerman did submit a release request to the warden three days before he filed his motion in court, and in light of the risks to his health, the court found that Zukerman need not go through normal channels. 

Extraordinary and Compelling 

Given that Zukerman was able to convince the court to waive the exhaustion rules, it also is not surprising that the judge found that his motion presented extraordinary and compelling reasons for his release.  In discussing this issue, the opinion notes that the statute gives the US Sentencing Commission  (USSC) authority to define what is extraordinary and compelling. USSC comments on the standard focus on whether “[t]he defendant is … suffering from a serious physical or medical condition … that substantially diminishes the ability to provide self-care within the environment of a correctional facility and from which he or she is not expected to recover.”

The opinion discusses a number of cases in the last month where other courts have looked at the health, age and prison conditions, and concluded that the pandemic justified early release from prison.

Yet the government also argued that the severity of Zukerman’s tax crimes warranted against finding that the reasons for early release were extraordinary and compelling. While acknowledging Zukerman’s offenses, the court noted however that the pandemic was a game changer: 

The Court does not disagree that Zukerman’s misconduct was egregious. As the Court observed at sentencing, “Zukerman evaded taxes totaling millions of dollars. He was driven not by need, but by unmitigated greed. He entangled himself in a web of lies and deceit, lying to his tax preparer, and then hiring lawyers to defend his lies. He went to such extraordinary lengths in order to cheat. These frauds were deliberate and calculated. Zukerman thought himself to be above the law.” The severity of Zukerman’s conduct remains unchanged. What has changed, however, is the environment where Zukerman is serving his sentence. When the Court sentenced Zukerman, the Court did not intend for that sentence to “include incurring a great and unforeseen risk of severe illness or death” brought on by a global pandemic.  Citing United States v. Rodriguez , 03 Cr. 271-1, 2020 WL 1627331, at *12 (E.D. Pa. Apr. 1, 2020) (emphasis added)

Conclusion 

The upshot of the opinion is that Zukerman was able to leave prison at least a year before he was otherwise eligible to do so. I do not have any special expertise in requests to modify prison sentences. The Zukerman opinion and order highlights just one of the many ways that the pandemic is having an impact on tax administration. With many well-heeled felons like Zukerman able to afford the costs of getting a motion for early release before a court, one hopes that the BOP takes a proactive approach with other inmates who do not have the same resources. While the pandemic should not necessarily amount to a get out of jail card for all felons, it should not amount to a pass for only those who can pay for their freedom.

Leslie Book About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.

Comments

  1. William Schmidt says

    The U.S. District Court for the District of Nevada denied Ramon Desage’s request to serve his sentence at home. He is 69 years old, with diabetes, obesity and heart problems. He pled guilty to conspiring to defraud the United States and was sentenced in September 2019 to three years in prison for his more than $28 million tax underpayment.

  2. Jack Townsend says

    Thanks, Les, great post.

    Peter Reilly has a discussion of this issue in the setting of the Daugerdas case (biggest tax evasion case ever) and mentions Les Book’s Procedurally Taxing entry:

    https://www.forbes.com/sites/peterjreilly/2020/05/06/judge-urges-prison-furlough-for-author-of-biggest-tax-fraud-ever/#2dac37b945dc

    I also updated my prior summary discussion on my Federal Tax Crimes Blog:

    https://federaltaxcrimes.blogspot.com/2020/05/a-thought-on-confluence-of.html

  3. Linda Cale says

    I am curious as to how much, if any, of the $45 million he has paid back prior to reporting or surrendering for his sentence.

  4. I wish the government had appealed the release to home detention. Stealing $45 million really ought to result in more than a six year prison sentence to begin with. It’s outrageous what judges let white-collar criminals get away with.

  5. Vincent Bruno says

    Well, Morris Zukerman Aka Mo , or as we in his hometown on Vineland NJ, he always thought he was above the law.

    He treated his sister as if she was no one.
    Karma goes around

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