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at $955,000), even though Mr. Skelos served the public for nearly 37 years before the criminal
activity alleged in this case.
The Court should reject the governments proposed fine because: (1) it
undermines the pension-protective policy of the New York State Constitution and statutory law;
(2) the government has failed to justify a fine exceeding the Guidelines maximum; (3) the
government has failed to identify any similar case where a fine of this magnitude was imposed to
deprive a public servant of pension payments; (4) the governments calculation unfairly
discounts Mr. Skeloss many years of service; (5) Gail Skelos has an interest in the pension; and
(6) the fine will impose an excessive burden on Mr. Skeloss innocent dependents. For the
reasons that follow, a Guidelines fine along the lines suggested by the Probation Office would be
appropriate in this case.
I.

The Governments Proposed Fine Would Undermine New York State Policy

Despite New Yorks strong protections for pension payments, the government
claims that [c]onsidering Dean Skeloss pension income in setting a fine amount implicates no
State law concerns. Govt Letter at 4. That is simply not true, and the government vastly
understates the tension between its proposed fine and New York State policy.
The New York State Constitution provides that membership in any pension or
retirement system of the state or of a civil division thereof shall be a contractual relationship, the
benefits of which shall not be diminished or impaired. N.Y. Const. art. V, 7. This provision
prohibits unilateral action by either the employer or the Legislature that impairs or diminishes
the rights established by the employees membership in a public pension system. Ballentine v.
Koch, 674 N.E.2d 292, 294 (N.Y. 1996). It operates to prevent a reduction in existing rights,
but it allows the legislature to limit the rights of those who might thereafter become members of
the [pension] [s]ystem. Fisher v. New York State Emp. Ret. Sys., 110 N.Y.S.2d 16, 18-19 (3d
Dept 1952), affd, 304 N.Y. 899 (1953).
When Mr. Skelos became a member of his state pension plan several decades ago,
a criminal conviction could not affect his entitlement to pension benefits otherwise earned
through public service. Only in 2011 did New York enact its pension forfeiture statute, which
provides that public officials pensions may be reduced or revoked if the officials commit a
crime related to their public office. As a result, the statute expressly provides that absent a
constitutional amendment, its coverage is limited to public officials who become members of the
pension system after 2011. See N.Y. Retire. & Soc. Sec. Law 156(6), 157(1); 2011 N.Y.
Sess. Laws ch. 399, pt. C, 1 (McKinney); 2015 N.Y. Sess. Laws ch. 56, pt. CC, 10-11, 16
(McKinney).2 It is unsurprising, then, that many New York officials convicted of crimes related
to their public office nevertheless receive state pensions. Their right to pension payments is
secured by the New York State Constitution.
2

Even if the constitution is amended, and the pension forfeiture statute covers public officials
who began their service before 2011, crimes committed before the ratification of the
constitutional amendment will not trigger the statute. See 2015 N.Y. Sess. Laws ch. 56, pt. CC,
16 (McKinney).
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The government argues that it would be unjust for Mr. Skelos to keep pension
income paid by the State of New York. Govt Letter at 6; Dkt. 173 at 42. But the State of New
York thought it sufficiently important to preserve public officials pension rights that it wrote
these rights into its constitution and made no exception for officials convicted of bribery. We
respectfully submit that it would be appropriate for a federal sentencing court to respect New
Yorks wishes, rather than crafting a punishment for the express purpose of circumventing state
law. As the United States Supreme Court has stated in other contexts, [f]ew public interests
have a higher claim upon the discretion of a federal chancellor than the avoidance of needless
friction with state policies. R.R. Commn of Tex. v. Pullman Co., 312 U.S. 496, 500 (1941).
The federal government should generally be wary of alter[ing] sensitive federal-state
relationships by regulating activity traditionally subject to state regulation. Rewis v. United
States, 401 U.S. 808, 812 (1971); accord Cleveland v. United States, 531 U.S. 12, 24 (2000);
United States v. Enmons, 410 U.S. 396, 411-12 (1973) (noting the sensitive relation between
federal and state criminal jurisdiction (internal quotation marks omitted)). The regulation of
state officials and the proper allocation of funds from the state treasury are, without a doubt, core
areas of state concern. See Gregory v. Ashcroft, 501 U.S. 452, 460 (1991) (the selection and
regulation of state officers is not merely an area traditionally regulated by the States; it is a
decision of the most fundamental sort for a sovereign entity and go[es] to the heart of
representative government (internal quotation marks omitted)); cf. Bond v. United States, 134 S.
Ct. 2077, 2089 (2014) (Perhaps the clearest example of traditional state authority is the
punishment of local criminal activity.).
The government claims that its proposed fine would not technically violate the
New York State Constitution because it would not diminish or impair Dean Skelos pension
rights and in any event, federal law preempts New York State law. Govt Letter, at 4-5.
However, the government has expressly based the $500,000 fine upon the pension Dean Skelos
and his family will receive and argues that it would be the equivalent of approximately five
years of pension payments. Govt Letter, at 4. Thus, taking what the government contends is
approximately five years of pension payments would significantly diminish and impair
such payments. Also, this indirect attack on Dean Skelos pension would unnecessarily frustrate
New York State pension protections.
Moreover, even if the state constitution protects only the right to receive pension
payments from the state, state statutory law goes further. Section 110 of the N.Y. Retirement
and Social Security Law shields a retirement allowance from creditors both while the funds are
in the possession and control of the Retirement System and after disbursement to retirees. N.Y.
State Office of Victim Servs., ex rel. Balogh v. Raucci, 964 N.Y.S.2d 290, 292 (3d Dept 2013)
(emphasis added). Some intermediate appellate courts have found an exception for private
actions for damages brought by crime victims, since the statute concerning such actions was
enacted after 110. See Kane v. Galtieri, 996 N.Y.S.2d 78, 82-83 (2d Dept 2014).3 There is no
3

There are also exceptions for the payment of support obligations and equitable distribution
upon divorce. See N.Y. State Office of Victim Servs. ex rel. Balogh v. Raucci, 946 N.Y.S.2d 657,
660 (3d Dept 2012), revd on other grounds sub nom. State Office of Victim Servs. v. Raucci,
985 N.E.2d 917 (N.Y. 2013). This is because the pension-protective laws were not designed to
relieve a member of the Retirement System of the special obligations to support his or her
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indication, however, that this statute would permit New York State to recover Mr. Skeloss
pension as a fine for corruption. Section 110 is, therefore, further proof that New York State
prioritizes the sanctity of pensions over punishment.
The governments preemption argument is misplaced as well. Citing United
States v. Seabrook, the government argues that state-law protections for pensions are irrelevant
under the Supremacy Clause. See Govt Letter at 5. However, in Seabrook, Judge Castel wrote
that the Supremacy Clause only applies when it is impossible to comply with both state and
federal law, or where the state law stands as an obstacle to the accomplishment of the full
purposes and objectives of Congress. Govt Letter Ex. F at 9-10 (quoting Silkwood v. KerrMcGee Corp., 464 U.S. 238, 248 (1984)). In this case, it is not impossible to comply with both
state and federal law, and forcing Mr. Skelos to forfeit his pension is not necessary to
accomplish[] . . . the full purposes and objectives of Congress. Id. An appropriate fine within
the Guidelines range can be imposed without demeaning the New York laws protecting Mr.
Skeloss pension.4
The government also notes that sentencing court[s] can consider ERISAprotected assets in determining a fine amount notwithstanding ERISAs anti-alienation
provisions. Govt Letter at 4. But ERISA is a manifestation of federal policy, and Congress
chose to override this federal policy in enacting the Mandatory Victim Restitution Act of 1996
(which also covers fines). See United States v. Irving, 452 F.3d 110, 126 (2d Cir. 2006).
Moreover, ERISA does not apply to government-sponsored plans like Mr. Skeloss. See 29
U.S.C. 1003(b)(1).
II.

A Fine Three Times The Guidelines Maximum Is Unprecedented And Unwarranted

The government proposes a fine of $500,000 even though this far exceeds the
Probation Offices recommended fine of $100,000 and the Guidelines maximum of $175,000
(under the governments excessively high calculation of Mr. Skeloss offense level). PSR at 33,
35, 37. It would be unjustified and unreasonable to impose an above-Guidelines fine, and it
would violate 3553(a)s requirement that the Court impose a sentence sufficient, but not
greater than necessary to effectuate the statutory purposes of sentencing. See also Kimbrough v.
United States, 552 U.S. 85, 101 (2007).

dependents, but to preserve the funds from claims that are hostile to those of the members
dependents. Kaplan v. Kaplan, 624 N.E.2d 656, 660 (N.Y. 1993).
4

Moreover, Seabrook arose in a post-judgment proceeding where the Court had ordered
forfeiture jointly and severally against co-defendants, and, after a period of non-payment, sought
pension funds as a substitute asset under the substitute asset provision. This was only after a
period where the government despite the exercise of due diligence, ha[d] been unable to locate,
obtain, or collect the proceeds of Seabrooks offenses. Govt Letter Ex. F at 2. Seabrook dealt
with the mandatory substitute asset provision providing that substitute assets shall be forfeited,
id. at 4, unlike here, where it is possible to impose an appropriate fine without infringing on Mr.
Skeloss pension rights.
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In setting a fine, the Court must consider the 3553(a) factors applicable to
sentencing generally, as well as the considerations set forth at 18 U.S.C. 3572 and U.S.S.G.
5E1.2. The government argues that an above-Guidelines fine is necessary to deter others,
promote respect for the law, and provide a just punishment. Dkt. 173 at 43. These factors are
among those listed in 3553(a). As Mr. Skelos has previously argued, however, the 3553(a)
factors strongly counsel in favor of a sentence well below the Guidelines range. See Dkt. 166 at
24-45. For its part, the government has acknowledged that a sentence of incarceration within or
above the Guidelines range is not necessarily appropriate. Dkt. 173 at 36; see also id. at 39
(seeking a sentence within or approaching the applicable Guidelines ranges).
Contradicting its position on the prison sentence, the government proposes an
above-Guidelines fine because it objects to Mr. Skeloss receipt of a pension funded entirely by
New Yorkers tax money. Govt Letter at 4. This is true of many of the convicted New York
officials identified in the governments sentencing chart. See Govt Letter Ex. B. The largest
fine imposed on any of these officials, however, was a $50,000 fine on Thomas Libous. This
militates against imposing a fine ten times larger on Mr. Skelos. See 18 U.S.C. 3553(a)(6)
(requiring sentencing courts to consider the need to avoid unwarranted sentencing disparities).
Notably, the government has not pointed to any similar cases where a defendant was ordered to
pay a fine of nearly 300% the Guidelines maximum.
In its initial sentencing submission, the government cites cases that consider a
defendants pension in determining whether the defendant has met his burden to establish[]that
he is unable to pay and is not likely to become able to pay any fine under U.S.S.G. 5E1.2(a).
See Dkt. 173 at 41 n.19. Mr. Skelos has not argued that he is entirely ineligible for any fine on
this basis. The inquiry is not whether Mr. Skelos has the means to pay a fine, but whether the
government has established the need for a fine vastly exceeding the Guidelines range. It has not.
III.

A $500,000 Fine Would Discount Mr. Skeloss Many Years Of Honest Service

The fine proposed by the government also fails to take into account Mr. Skeloss
years of faithful service to the people of New York. Mr. Skelos served for over three decades in
the New York State Senate, during which time he helped pass crucial legislation and made
lasting contributions to the community. See Dkt. 166 at 9-15. In total, Mr. Skelos was in public
service for 41.77 years. See Govt Letter Ex. D.6 According to the government, Mr. Skeloss

The governments exhibit, a letter from NYSLRS, explains that Mr. Skelos has accrued 43.77
years of service credit; however, two of these years reflect additional service credit awarded by
law on top of time worked. Prior to serving as a legislator for 34 years, Mr. Skelos accrued
retirement credit working for the judiciary. See Dkt. 166 at 1, 6, 9.
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criminal conduct began only in late 2010. See Dkt. 173 at 6, 25. Thus, Mr. Skelos was entitled
to a substantial pension long before he committed any crime.7
The government argues that a $500,000 fine is fitting because it supposedly
amounts to five years of pension payments, and Mr. Skelos stands convicted of corrupting his
office for the same approximate five-year period of time. Govt Letter at 4. But $500,000 is
more than half of the present value of Mr. Skeloss pension. See id. As this pension is
overwhelmingly attributable to Mr. Skeloss honest services as a legislator, a $500,000 fine
would be disproportionate.
For similar reasons, Judge Karas declined to impose a fine or restitution when
sentencing Malcolm Smith, a former New York State Senate majority leader convicted in this
district for bribery, honest services fraud, and extortion. See United States v. Malcolm Smith,
No. 7:13-cr-00297, ECF No. 461, at 26-27 (S.D.N.Y. July 28, 2015), Sentencing Transcript. Mr.
Smith is receiving a state pension despite these convictions. The government had argued that
Judge Karas should require Mr. Smith to forfeit his salary because public servant[s] ha[ve]
been paid to do a job and when they engage in corruption they dont do the job. Id. at 26.
Judge Karas rejected this argument, as [t]he evidence certainly didnt suggest that [Mr. Smith]
stopped doing his job while the scheme was going on. Id.
The same can undoubtedly be said of Mr. Skelos. See Dkt. 166 at 9-15. But even
if the Court were to assume that Mr. Skelos was not doing his job during the five years of
alleged criminal conduct, five years is only 12% of Mr. Skeloss tenure in public service. To
require Mr. Skelos to forfeit over half the present value of his pension would dramatically
overweight the few years of alleged criminal activity in Mr. Skeloss otherwise stellar career in
service to the people of his state and district.
It is also misleading for the government to equate its proposed fine with five years
of pension payments. $500,000 is 5 years of pre-tax pension payments ($95,000 each), but 8
years of pension payments after taxes ($60,000 each). See Dkt. 173 at 42. It will also take Mr.
Skelos far longer than five years to pay the fine with his pension. As explained further below,
the pension payments will be used almost entirely to support Mr. Skeloss dependents.
IV.

The Court Should Consider The Impact Of A Fine On Gail Skelos And Other
Innocent Parties

In asking this Court to impose an unprecedented $500,000 fine, the government

disregards the impact of its proposal on Mr. Skeloss wife, Gail Skelos. As the government
concedes, Gail Skelos is an innocent party. Govt Letter at 6. Her interest in Mr. Skeloss
pension should be taken into account in setting the appropriate fine. See U.S.S.G. 5E1.2(d)(8)
7

Mr. Skelos is a Tier 1 member of the Section 75-h plan. See Govt Letter Exs. D, E. Thus, his
benefits vested after five years of service.
See http://www.osc.state.ny.us/retire/word_
and_pdf_documents/publications/1500s/1504-t1newcar.pdf (Plan Pamphlet) at 4. Notably,
New Yorks amended pension forfeiture law directs the state court to consider the years of
service in public office by the defendant where no criminal activity has been found by a court.
N.Y. Retire. & Soc. Sec. Law 157(8)(i) (2015 amendment).
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(permitting the Court to take into account any pertinent equitable considerations). Moreover,
the governments request fails to account for the burden that the fine places on the defendants
and his dependents relative to alternative punishments, under U.S.S.G. 5E1.2(d)(3), or the
burden that the fine will impose upon the defendant, or any other person . . . that would be
responsible for the welfare of any person financially dependent on the defendant, under 18
U.S.C. 3572(a)(2). Here, the burden of a $500,000 fine would largely bear upon innocent
partiesGail Skelos, Ann Marie Skelos, and Ann Maries sons Dean and Dylan. This factor far
outweighs the other factors to be considered by the Court.
As described more fully in the defendants sentencing submissions, Adam
Skeloss wife will be moving out of her house with her two children, Dean and Dylan (both of
whom have mental disabilities), and moving in with Gail Skelos. Mr. Skeloss pension plan will
be used almost entirely for their housing, living, medical, and other expenses. Thus, the
imposition of a fine that is nearly 300% the Guidelines maximum primarily serves to burden
these innocent partiesMr. Skeloss wife, daughter-in-law, and grandsons.
Moreover, Gail Skelos has an interest in Mr. Skeloss pension. Under New York
law, marriage constitutes an economic partnership . . . in which the contribution of each
spouse, in whatever form, is recognized as furthering the partnership interest. McDermott v.
McDermott, 507 N.Y.S.2d 390, 396 (2d Dept 1986). Pension benefits earned by one spouse
during marriage are assets of the marriage that both spouses expect to enjoy at a future date.
Kraus v. Kraus, 14 N.Y.S.3d 55, 59 (2d Dept 2015). Accordingly, under New York law,
pension benefits are treated as marital property subject to equitable distribution upon
divorce. Id. at 59-60.
While the Skeloses remain married, the classification of Mr. Skeloss pension as
marital property technically does not give Gail Skelos a legally enforceable interest in the
pension. It does, however, provide a reason for this Court to reject the governments proposed
fine. Marital property is subject to allocation between spouses precisely because both spouses
have an interest of some sort in the property. See McDermott, 507 N.Y.S.3d at 397 (noting that
Mrs. McDermott began acquiring an interest in the pension from the moment her husband
joined the plan). Even though Mr. Skelos elected to forego survivor benefits for his spouse in
exchange for greater present monthly payments from his pension, see Govt Letter at 5, Gail
Skelos has an interest in these present monthly payments, and she and other innocent parties will
be the primary beneficiaries. After carefully considering his options and consulting with a
financial planner, Mr. Skelos chose to maximize the present monthly payments from his pension
because this was in the best interests of Gail Skelos and his family. Notably, Gail Skelos is not
employed. See PSR at 22 (listing no employment income). Calibrating the fine to deprive Mr.
Skelos of his pension is therefore, in a real sense, punishing Gail Skelos. Perversely, the only
way she could ensure that her share of the pension could not be garnished by the government
would be to divorce Mr. Skelos.
At a minimum, the Court should exclude half of Mr. Skeloss pension from its
fine calculation in order to account for Gail Skeloss interest. Cf. In re Marciano, 372 B.R. 211,
215-16 (Bankr. S.D.N.Y. 2007) (finding it equitable to exclude half of joint tax refund from
debtors estate because non-debtor spouse had marital interest in refund as well); United States v.
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Basurto, 117 F. Supp. 3d 1266, 1270, 1312 (D.N.M. 2015) (excluding half of the value of the
defendants home from calculation of fine because of husbands interest in the home). Any fine
should be taken solely out of the remaining half. As explained above, only 12% of Mr. Skeloss
career was tainted by alleged criminal activity. Applying that percentage to his half-interest in
the pension would yield a within-Guidelines fine of $57,300 ($955,000 x 0.5 x 0.12).9
For the reasons set forth herein, the Court should reject the governments request
for a $500,000 fine.
Dated:

April 27, 2016

New York, New York
Respectfully submitted,

By:

/s/
G. Robert Gage, Jr.
Joseph B. Evans
Gage Spencer & Fleming LLP
410 Park Avenue, Suite 900
New York, New York 10022
(212) 768-4900
Attorneys for Dean Skelos

CC:

All counsel of record (via ECF)

The government notes that Mr. Skelos has nearly $2 million in assets. It bears relevance that
the house in Long Island and the small Florida home are jointly owned with Gail Skelos, and the
carrying costs were paid by both Dean and Gail Skelos when Gail was employed. See PSR at 21
(noting joint ownership). Moreover, the Skeloses primary residence is not a liquid assetGail
Skelos will be living in the home, as will Ann Marie Skelos and her sons.
8