Wednesday, April 20, 2016
Judge Valerie Caproni, the Southern District of New York judge presiding over the case of convicted former New York State Assembly Speaker Sheldon Silver, has unsealed papers submitted by United States Attorney Preet Bharara alleging that the convicted politician had affairs with two women who allegedly received favorable treatment from him in his professional capacity. The women, whose names were redacted from court papers (but identified, with accompanying photos, by the New York Daily News) were allegedly a prominent lobbyist who dealt regularly with Silver in his official capacity and a former state official whom Silver allegedly helped get a state position.
The government, whose efforts to introduce evidence of the relationships at trial were rebuffed by the judge, argued it should be able to provide such evidence at sentencing, purportedly to demonstrate that these relationships and favors provided by Silver demonstrated a pattern of abuse of power and possibly to rebut any evidence, including Silver's 50-year marriage, of Silver's good character. The judge seemed to accept the first argument, stating that she viewed this information "as a piece with the crimes for which Mr. Silver stands convicted," although "not exactly the same since no one is suggesting a quid pro quo, but of a piece of a misuse of his public office, and that's why I think it is relevant."
Generally, a federal judge has a right to consider virtually any information on sentencing, but I am uneasy about the injection of information of extramarital affairs of a defendant into the sentencing decision. If "no one is suggesting a quid pro quo," as Judge Caproni said, I question its relevance. Unless there is some basis that Silver did something favorable for these women because of their alleged sexual relationships - which I would call a "quid pro quo - I wonder whether his alleged actions constitute a "misuse of public office."
There, of course, is a difference between allowing a party to present evidence or argument at sentencing and factoring that information into the sentencing decision, and, absent specific facts, I am hesitant to say the material should not be considered. I am troubled, however, by the possibility that a defendant's alleged marital infidelity will become a regular part of a prosecutor's sentencing toolbox.
I am relatively sure that my first boss, from almost fifty years ago, Frank Hogan, the legendary and exemplary longtime District Attorney of New York County, would not have proffered such evidence, but Mr. Hogan was a man with a perhaps old-fashioned notion of fair play in a perhaps gentler age in which prosecutors rarely took aggressive (or even any) positions on sentencing (and the press did not publicize the dalliances of public officials).
(I note that Mr. Silver, whom I never met or spoke with, or contributed to, appointed me three times (and failed to reappoint me a fourth) to serve on the New York State Commission on Judicial Conduct).
Monday, March 14, 2016
In November 2014, the American Bar Association Criminal Justice Section Task Force on the Reform of Federal Sentencing for Economic Crimes published its final report. The report recommended major changes to the structure of the Federal Sentencing Guidelines for economic crimes. In particular, the report sought to reduce the current Guideline's dominant focus on loss in favor of a more balanced approach that weighed loss, culpability, and victim impact. I discussed these proposed amendments more fully here. Though the ABA CJS Task Force recommendations were not adopted by the Federal Sentencing Commission (see here and here), some courts have begun to use the ABA "Shadow Guidelines" when varying in economic crimes cases.
Last week, a federal judge in New York used the ABA "Shadow Guidelines" in sentencing Mair Faibish, former CEO of Synergy Brands, Inc. Faibish was accused of kiting checks worth in excess of $1 billion. According to the DOJ press release in the case:
Synergy was a publicly-held food products company that traded on the NASDAQ and Over-the-Counter exchanges and manufactured and distributed various food products. As proven at trial, Faibish and his co-conspirators, on behalf of Synergy, funneled approximately $1.3 billion in checks that were not backed by sufficient funds through Signature Bank, Capital One Bank, and various Canadian bank accounts of associated food manufacturers and distributors in Canada. The Canadian companies then sent checks in corresponding amounts, which were also not backed by sufficient funds, back to Faibish-controlled shell companies. Because the banks made deposited funds immediately available for withdrawal, the scheme artificially inflated the companies’ account balances. Faibish and his co-conspirators used Synergy’s inflated bank account balances to book millions of dollars in fictitious accounts receivable and revenue.
As a result of this fraud, FDIC-insured Signature Bank lost approximately $26 million that Faibish and his co-conspirators had withdrawn before the bank uncovered the scheme. Following the scheme’s collapse, Synergy was taken into bankruptcy, and its publicly traded stock became essentially worthless, causing millions of dollars in investor losses. On November 4, 2014, the Court ordered Faibish to pay $51,166,000 in forfeiture.
The trial evidence also established that Faibish falsely inflated the values of Synergy’s sales, cost of goods sold, and pre-paid expenses in filings with the SEC for the quarter ending June 30, 2008. These material misrepresentations were breaches of the defendant’s fiduciary duties to investors.
The Federal Sentencing Guideline range in the case was life in prison, though the maximum available sentence was actually less due to applicable statutory maximums. Despite the Federal Sentencing Guideline range and the government's request for decades in prison for Faibish, the Court rejected these arguments and sentenced him to 63 months in prison (see here and here). According to LAW360, the judge stated at sentencing that the Federal Sentencing Guidelines for economic crimes are "almost useless" because of their reliance and focus on loss in calculating the applicable sentencing range. Instead, the judge used the ABA "Shadow Guidelines" to determine what he considered to be a more appropriate sentence.
This seems to be yet another indication of the growing dissatisfaction among judges with the Federal Sentencing Guidelines for economic offenses (see here and here) and should serve as yet another call for the Federal Sentencing Commission to consider more significant reforms in the future.
Tuesday, December 22, 2015
Today in U.S. v. Gregory Bell, aka Boy-Boy, the D.C. Circuit denied appellants' consolidated petitions for rehearing en banc, which challenged the sentencing court's use of acquitted conduct to dramatically enhance appellants' sentences. Two separate and outstanding concurrences are worth a view. Judge Patricia Millett incisively critiques current sentencing jurisprudence which condones such horrific results. Judge Brett Kavanaugh agrees with Judge Millett and provides guidance for district courts who find by a preponderance of the evidence that acquitted conduct occurred, but do not want to enhance the sentence. What is the guidance? In a nutshell, utilize Booker to downwardly vary the sentence. Hopefully the Supreme Court will grant certiorari and end this appalling vestige of sentencing law.
Sunday, December 20, 2015
Last week in U.S. v. James Wendell Brown the United States Court of Appeals for the D.C. Circuit reversed a Booker upward variance in a child pornography case. The majority found Judge Richard Leon's sentence procedurally unreasonable, even under the plain error standard. The problem? Judge Leon was too general, and generic, in explaining how the four (out of seven) 3553(a) factors that he referenced applied to the defendant and justified an upward variance. As a white collar practitioner I always get nervous when a variance of any kind is sent back. Case law supporting upward and downward variances is substantial, and generally very favorable to the defense, and any chink in the armor of broad district court sentencing discretion is worrisome. Here there should be no great cause for concern. While talismanic recitation of all Booker factors is not required in any federal circuit to justify an upward or downward variance, there has to be some specific effort to link the factors relied upon to the individual conduct or character of the defendant standing before the sentencing court. Making sure that the court performs this linkage is the practitioner's job. Here, Judge Leon was simply too vague in reciting the 3553(a) factors and explaining why they justified a significant upward variance, and no practitioner chose to fill in the details, because the variance was opposed by both the prosecution and defense. In the mine run case, where defense counsel is arguing for a downward variance, it is his or her job to convince the trier of fact and, if necessary, help the court articulate, on the record, the reasons for the variance, such that the sentence will stand up on appeal. To fail is to screw your own case up and create a bad precedent for your peers.
Judge Edwards, writing for the majority, distinguished U.S v. Ransom. In writing about Ransom here last year, I noted that the DC Circuit "rejected appellants' argument that the sentencing court improperly relied on factors in varying upward that the Guidelines had already accounted for. Joining some sister circuits the Court held (internal quotes and citations omitted) that:
It is not error for a district court to enter sentencing variances based on factors already taken into account by the Advisory Guidelines, in a case in which the Guidelines do not fully account for those factors or when a district court applies broader [Section] 3553(a) considerations in granting the variance.
Notice that there are two alternative prongs to this portion of Ransom. The Brown court seems to indicate that the failure of the Guidelines to fully account for certain factors will only occur when the sentencing court sees and identifies special additional factors that exist in a specific defendant's particular circumstance. Thus, in Ransom, although the Guidelines already assessed two points for committing the offense while on probation, the sentencing court stated on the record that the offense of conviction (embezzlement) and the identity of the co-defendant were identical to the violated probationary offense and that this (and other things) justified an upward variance. Contrat this with Brown, where Judge Leon failed to articulate anything about Brown's particular offense/conduct/background that was not fully accounted for in the applicable Guidelines provisions.
The other prong of Ransom is completely undisturbed. A sentencing court can apply broader Section 3553(a) considerations, that is, broader considerations than those contained in the Guidelines, in granting an upward or downward variance. Again, there must be an explanation by the sentencing court. The sentencing court is always free to articulate its disagreement with the Guidelines' approach, and as long as that disagreement is rational and reasonable, the sentence cannot be disturbed. Two classic examples of this are family circumstances and aberrant conduct, both of which are nearly impossible to achieve as grounds for downward departure, but which regularly enter in to downward variance judgments in the post-Booker-Gall-Kimbrough world.
Judge Sentelle, who wrote the majority opinion in Ransom, dissented in Brown, because he did not see plain error.
Friday, December 4, 2015
This morning's Wall Street Journal contains an opinion piece I wrote on the subject of the "trial penalty." Entitled "The Injustice of the Plea-Bargaining System," the commentary examines the manner in which the trial penalty induces too many defendants to give up their constitutional right to trial. In examining the issue, the piece includes a discussion of the tragic case of Orville (Lee) Wollard. Wollard, who was charged with a crime after firing a warning shot in his home into the wall next to his daughter's allegedly abusive boyfriend, turned down a plea offer of five years probation and ended up receiving a sentence of twenty-years in prison after conviction at trial. I hope you will have an opportunity to read the entire piece.
Thursday, December 3, 2015
The New York Times reported today (Goldstein, "Witness in Insider Trading Inquiry Sentenced to 21 Days, see here) what it called a "surprising" 21-day prison sentence imposed by Judge P. Kevin Castel upon a felony conviction broke "what has been the standard practice" in insider trading cases in the Southern District of New York. Anyone not familiar with the customs of that court's prosecutors and judges might think that such a sentence was out-of-the-ordinary lenient. However, as the article makes clear, that sentence, for a major cooperator, was apparently considered out-of-the-ordinary harsh.
The defendant, Richard Choo-Beng Lee, was a California hedge-fund owner who, after being approached by FBI agents with evidence that he (and his partner, Ali Far, who was later sentenced to probation by a different judge) had broken securities laws, cooperated with the government by recording 171 phone calls with 28 people, including Steven A. Cohen, DOJ's no. 1 target, who has not been indicted (although his firm, SAC Capital Advisers, was and pleaded guilty and paid a multi-billion dollar fine).
New York City is the cooperation capital of the world. As the Times article indicates, cooperators in white-collar (and other) cases in the Southern District of New York are given considerable benefits for cooperating (far greater than in most jurisdictions) and the default and almost uniform sentence for them is probation and not jail. To be sure, cooperators make cases, and many of those cases and the individuals charged would go undetected without cooperators looking to provide assistance to the government to lessen their own potential sentences.
However, the cooperation culture in New York has many deleterious consequences. To the extent that deterrence is achieved by jail sentences (and I believe it is in white-collar cases, but not in many other areas), its effect has been minimized. The clever white-collar criminal (and most but not all are intelligent) knows that he has in his pocket a "get-out-of-jail card," the ability to cooperate against others and get a non-jail sentence. The mid-level financial criminal can commit crimes, enjoy an outrageously lucrative, high-end life style, and, when and if caught, cooperate, stay out of jail and pay back what assets, if any, remain from his wrongdoing.
Knowledgeable white-collar defense attorneys are well aware of the benefits of cooperation. It is often good lawyering to urge cooperation, at times even in marginal cases, to avoid jail sentences. Indeed, more than a a trifling number of those who plead guilty in white-collar cases are actually innocent, often because they lack the requisite mens rea (a difficult, even when accurate, defense). And sometimes, at the urging of their lawyers, they admit guilt and tailor their stories and testimony to what the prosecutors and agents (who usually see only the dark side of equivocal facts and circumstances) believe actually occurred so that others actually innocent are convicted (or also choose to plead guilty and perhaps cooperate against others). The bar for indictment and conviction has been lowered. The adversary system has been turned sideways, if not upside-down.
To many, probably most, lawyers, cooperation is personally easier than going to trial. Cooperation avoids the stress of battle and the distress of (statistically probable) defeat at trial. No longer do lawyers walk around with "no-snitch" buttons. The white-collar bar has become generally a non-combative bar. To the extent it ever had one, it (with notable and not-so-notable exceptions) has lost its mojo. The first (and often only) motion many lawyers make upon being retained is to hail a taxi to the prosecutor's office.
I write about the role of the bar as a lament more than a criticism. I too represent cooperators when I think cooperation is to their benefit. There is a great penalty (or, to put it gently, "loss of benefit") for not cooperating. Those accused who choose not to cooperate, or those whose own scope of criminality and knowledge of wrongdoing of others is so limited that they cannot, receive (in my opinion sometimes, but far from usually, appropriate) severe jail sentences. Those who cooperate, except for the unfortunate Mr. Lee, almost always avoid jail.
Lawyers and professors talk about the "trial penalty," the extra, often draconian, prison time one receives for exercising his right to trial. The principal "penalty" in white-collar cases is not the trial penalty, but the "non-cooperation penalty." Even those who choose not to go to trial and plead guilty are punished much more severely than those who cooperate.
Monday, November 2, 2015
Last Friday attorney Steven H. Levin posted a guest blog disagreeing with my view in a blog earlier that day that Dennis Hastert should not have been prosecuted. Hastert was charged with, and pleaded guilty to, structuring withdrawals from financial institutions of his own apparently legitimately derived funds, purportedly to conceal payoffs to an alleged extortionist whom he had purportedly sexually victimized over 30 years ago. Hastert, Mr. Levin said, "had to be prosecuted" because his prosecution had "potential deterrent effect" on "would-be structurers" and "would-be extortionists."
Even if the Hastert prosecution were to have a deterrent effect on such "would-be" criminals, I still believe, for the reasons I expressed, that this case was an appropriate one for the exercise of prosecutorial discretion. I do recognize that deterrence is a commonly recognized goal of prosecution and sentencing, and accept that prosecutions do have a deterrent effect on some "would-be" white-collar criminals (but far less an effect on those who might commit crimes involving violence and narcotics). Nonetheless, I question whether this prosecution will cause a positive deterrent effect on those who are considering the commission of either structuring or extortion.
I do accept that the publicity attendant to the prosecution will to an extent increase public awareness of the existence of a crime called structuring whose broad expanse covers acts committed by otherwise law-abiding citizens to maintain their privacy and avoid disclosure of things they prefer be confidential, and therefore may have some deterrent effect on those persons. However, deterring people from committing essentially harmless acts even though criminalized by an overbroad statute does not appear to me to be much of a societal benefit. And, to the extent that the attendant publicity will educate money launderers of criminal proceeds and deter them from violating the structuring statute, of which sophisticated criminals are overwhelmingly aware in any case, the positive effect is also questionable since its potential effects will be further concealment and consequent limitations on governmental discovery of criminality.
Additionally, I doubt that many would-be extortionists would be deterred from acts of extortion by this prosecution, in which, it so far appears, the purported extortion victim has been prosecuted and the purported extortion perpetrator remains free and also has probably received millions of dollars in payments (and also perhaps achieved some measure of retribution by the exposure, so far limited, of Hassert's alleged misdeeds) . To the extent it has any effect on rational would-be extortionists who weigh the benefit/risk ratio, this prosecution encourages rather than deters them.
Friday, October 30, 2015
Guest Blogger - Steven H. Levin
White-collar laws are written broadly in order to permit federal prosecutors to combat the increasingly creative, technologically complex efforts of enterprising criminals. Most, but certainly not all, prosecutors make rational decisions based upon the best possible expenditure of resources, the assessment of the jury appeal of a particular case, and the desire to maintain a good reputation with the bench, if not the bar. In bringing a case, prosecutors also must consider the deterrent effect of a particular prosecution.
In the case involving Dennis Hastert, it has been reported that he was paying “hush money” to cover up alleged misconduct that occurred several decades ago. Mr. Hastert’s structuring fell squarely within the broadly worded federal statute. In his piece (“Should Hastert Have Been Prosecuted?”) Lawrence Goldman is correct to question the purpose such a prosecution serves. The answer is found in the concept of deterrence. Mr. Hastert’s prosecution has potential deterrent effect, both in terms of deterring those engaged in structuring (to cover up crimes) and those engaged in blackmail (threatening to expose crimes).
Once the investigation became known, the public learned that Mr. Hastert had been accused of taking money out of a bank account in order to pay an extortionist. Both would-be structurers and would-be extortionists were put on notice by the federal government: blackmailing may not be successful in the future, because the victim of the extortion may be better off going to law enforcement rather than a bank. Further, it might deter an individual from engaging in the initial misconduct in the first place, knowing that such actions may ultimately see the light of day, even decades later.
Still, as Mr. Goldman writes, Mr. Hastert is, at least in part, a victim. And the decision to prosecute is different than a demand for jail time, which, under the plea agreement, is what prosecutors may seek. Mr. Hastert’s conduct does not warrant jail time, as the collateral consequences of the prosecution itself are significant enough to deter at least some future would-be extortionists from engaging in blackmail and their victims from submitting to it. This fact is all-too-often overlooked by prosecutors.
Monday, September 28, 2015
Just over a year ago, Stewart Parnell, the former CEO of Peanut Corporation of America (PCA), was convicted by a jury in the Middle District of Georgia of charges related to a deadly nationwide salmonella outbreak. The matter came to the government’s attention in late 2008 when people began falling ill across the country. The illnesses were eventually linked back to PCA’s peanut processing plant in Georgia. As investigators continued to examine the salmonella outbreak, they discovered that the case involved potential criminal misconduct by Parnell and others who allegedly knew about the contamination, attempted to cover it up, and continued to ship contaminated and potentially contaminated product. In one now infamous email from 2007, after being informed that batch test results were not back from the lab, Parnell wrote, “Just ship it.” The outbreak killed nine people and injured thousands more. Eventually, Parnell and others were charged in a 76-count indictment that alleged mail and wire fraud, introducing adulterated and misbranded food into interstate commerce, conspiracy, and obstruction of justice. A jury found Parnell guilty of 67 of the 68 charges against him on September 19, 2014.
On Monday of last week, U.S. District Court Judge W. Louis Sands sentenced Parnell to 28 years in federal prison. One interesting aspect of the sentencing is that because authorities charged this case as a “white collar” matter involving fraud, rather than a homicide case, the most significant factor driving the guideline sentencing range was not the deaths of nine people, but the loss of over $100 million by the various food companies that were forced to recall their products because of Parnell’s actions.
According to last week’s DOJ press release:
Judge Sands took into account the fraud loss of PCA’s corporate victims when imposing today’s sentence. The court found that Stewart Parnell and Mary Wilkerson should be held accountable for more than $100 million but less than $200 million in losses, and Michael Parnell should be held accountable for more than $20 million but less than $50 million in losses. The court also found the government established evidence that Stewart Parnell and Mary Wilkerson should be accountable for harming more than 250 victims, and Michael Parnell should be accountable under federal sentencing guidelines for harming more than 50 victims. The court additionally found that the Parnells should have known that their actions presented a reckless risk of death or serious bodily injury.
Looking at the applicable 2009 Federal Sentencing Guidelines (the Guidelines in place at the time of the offense conduct), one finds the following point allocations:
- Base Offense – 7 points
- Loss of more than $100 million – 26 points
- 250 or more victims – 6 points
- Risk of death – 2 points
- TOTAL: 41 points
While there were likely other applicable sentencing points, such as obstruction of justice and role in the offense, the above point allocations alone result in 41 total points. This translates into a guideline sentencing range of 324-405 months (27.00 – 33.75 years) for a defendant with no criminal history. Steward received 336 months (28 years).
To highlight the importance of the loss amount in the Guideline’s calculation, note that if this case had involved nine deaths, but no financial loss to food companies, the sentencing range under section 2B1.1 of the Federal Sentencing Guidelines would have dropped to 18-24 months in the above calculation. Obviously, this would have been a grossly unreasonable sentence given the devastating harm caused by Parnell.
I don’t know why this case was charged as a fraud and not a homicide. Perhaps it was to send a clearer message about national food safety by bringing federal charges, including charges directly related to the introduction of adulterated and misbranded food into interstate commerce. One additional item to note, however, as we think about the way this case proceeded, is that federal white collar sentences in high loss cases can often dwarf sentences for other crimes, including homicide. Consider that involuntary manslaughter in Georgia carries a maximum sentence of ten years in prison. Georgia also has automatic parole eligibility for most inmates. By comparison, Parnell received 28 years in prison using federal fraud statutes and their applicable sentencing guidelines. Further, there is no parole in the federal system.
Federal fraud offenses are often attractive to prosecutors because they are broad enough to apply in all manner of situations and carry potentially significant sentences. It should be no surprise, therefore, that we continue to see these statutes used in many cases that do not fit neatly into our traditional definitions of “white collar crime.” For a further discussion of the way “white collar offenses” are used in a vast array of cases, many of which do not involve traditional white collar criminal activity, see “White Collar Crime”: Still Hazy After All These Years, 50 Georgia Law Review Issue 3 (Lead Article) (forthcoming).
Monday, September 14, 2015
I have just released a new article discussing the sentencing of Jordan Belfort, better known as the "Wolf of Wall Street." I use this case as a mechanism for considering how white collar sentencing has evolved from the 1980s until today. In particular, the article examines the growth in uncertainty and inconsistency in sentences received by major white collar offenders over this period of time and considers some of the reasons for this trend. The article also examines the impact of recent amendments adopted by the U.S. Sentencing Commission on white collar sentences.
Lucian E. Dervan, Sentencing the Wolf of Wall Street: From Leniency to Uncertainty, 61 Wayne Law Review -- (2015).
This Symposium Article, based on a presentation given by Professor Dervan at the 2014 Wayne Law Review Symposium entitled "Sentencing White Collar Defendants: How Much is Enough," examines the Jordan Belfort (“Wolf of Wall Street”) prosecution as a vehicle for analyzing sentencing in major white-collar criminal cases from the 1980s until today. In Part II, the Article examines the Belfort case and his relatively lenient prison sentence for engaging in a major fraud. This section goes on to examine additional cases from the 1980s, 1990s, and 2000s to consider the results of reforms aimed at “getting tough” on white-collar offenders. In concluding this initial examination, the Article discusses three observed trends. First, today, as might be expected, it appears there are much longer sentences for major white-collar offenders as compared to the 1980s and 1990s. Second, today, there also appears to be greater uncertainty and inconsistency regarding the sentences received by major white-collar offenders when compared with sentences from the 1980s and 1990s. Third, there appear to have been much smaller sentencing increases for less significant and more common white-collar offenders over this same period of time. In Part III, the Article examines some of the possible reasons for these observed trends, including amendments to the Federal Sentencing Guidelines, increased statutory maximums, and judicial discretion. In concluding, the Article offers some observations regarding what the perceived uncertainty and inconsistency in sentencing major white-collar offenders today might indicate about white-collar sentencing more broadly. In considering this issue, the Article also briefly examines recent amendments adopted by the U.S. Sentencing Commission and proposed reforms to white-collar sentencing offered by the American Bar Association.
Tuesday, July 21, 2015
The Seventh Circuit has overturned five of 18 counts against former Illinois Governor Rod Blagojevich. While the government could pursue a third trial on the overturned counts, it is more likely that the former Governor will simply be re-sentenced on the remaining convictions. It is unclear whether the ruling will result in a different sentence for Blagojevich, who was sentenced to 168 months in prison after his conviction in 2011. Judge Frank Easterbrook, writing for a unanimous three judge panel, wrote, "It is not possible to call the 168 months unlawfully high for Blagojevich's crimes, but the district judge should consider on remand whether it is the most appropriate sentence." Blogojevich will not be released awaiting his re-sentencing on the counts. The Appellate Court stated, "Because we have affirmed the convictions on most counts and concluded that the advisory sentencing range lies above 168 months, Blagojevich is not entitled to be released pending these further proceedings."
Tuesday, June 30, 2015
Walt Pavlo (500 Pearl Street) and Jack Donson (former BOP Case Manager) developed a unique interactive website to educate lawyers on what a client needs to know about the prison experience. Check it out here. They state, "[p]risonology's intuitive website provides an easy to read narrative, a video interview with an expert on the topic, links to BOP and US Probation policies, tips, and written experiences from those who have gone through the process. It has everything a client needs to be informed and prepared." It is wonderful to see technology being used to educate lawyers so that they can be in a better position to advise and inform their clients.
Tuesday, March 31, 2015
Practice Notes: First Circuit Cases Yield White Collar Rulings on Materiality and Upward Variance/Departure
Two white collar decisions emerged last week from the First Circuit, both related to the Rwandan genocide.
United States v. Kantengwa reinforces an old truth for white collar practitioners. If you don't win on materiality at trial, you are totally screwed on appeal. According to the First Circuit, the appellant was "a member of a prominent political family allegedly involved in the Rwandan genocide." Katengwa was indicted for perjury under 18 U.S. Code 1621 (1) for false statements she told under oath in an asylum application and subsequent removal proceedings. Katengwa argued, among other things, that the government was precluded from bringing perjury charges against her because an immigration judge had already ruled that her false statements did not "go to the heart" of her asylum claim. Assuming, without deciding, that an administrative finding of fact can preclude later criminal charges, the First Circuit rejected Katengwa's collateral estoppel claim, because "materiality" under 1621 (1) and the "heart of the matter rule" in immigration law involve two distinct standards. "The heart of the matter rule from immigration law prohibits basing an adverse credibility determination on inconsistencies in an applicant's testimony that do not go to the heart of [her] claim." (Internal quotes and citations omitted.) But, "a statement is material in a criminal prosecution for perjury under § 1621(1) if it is 'material to any proper matter of the [decisionmaker's] inquiry.' United States v. Scivola, 766 F.2d 37, 44 (1st Cir. 1985) (emphasis added)." The First Circuit made clear, through a litany of examples, that this test can cover a multitude of subsidiary matters to the decisionmaker's overall inquiry. Translation: In all but the rarest cases, materiality is an argument you make to the jury. It can serve as a nice hook for jury nullification. Don't expect it to lead to victory on appeal.
In United States v. Munyenyezi, Katengwa's sister was indicted on "two counts of procuring citizenship illegally by making false statements to the government. See 18 U.S.C. §§ 1425(a) and (b)." The jury hung in her first trial, but the second trial produced convictions. She raised several issues on appeal, but the one that concerns me here is the sentence of 120 months, the statutory maximum. Munyenyezi's Guidelines Range was 0-6 months, and she attacked the sentence on appeal as substantively unreasonable. The First Circuit called this, "a tough sell," reiterating its abuse of discretion standard of review and precedent that "as long as we see 'a plausible sentencing rationale' that reaches 'a defensible result,' the sentence stands. United States v. Martin, 520 F.3d 87, 96 (1st Cir. 2008)." The trial judge imposed the 120 month sentence under alternative theories. He granted an upward departure under Guidelines Section 5K2.0 for an aggravating circumstance of a kind or degree not adequately taken into accoount by the Guidelines. He also upwardly departed under 18 U.S.C. Section 3553 (a). As every schoolboy knows, and as the First Circuit reminds us, "Section 3553(a) lets a judge vary upward based on factors listed there, like the defendant's background (including her criminal history), the circumstances of the offense, the seriousness of the offense, the need to protect and deter others, the need to promote respect for the law and to provide a just punishment, and the need to eliminate unjustified sentencing disparities." And the First Circuit also reminds us, albeit in a footnote, that "[u]nder certain circumstances a judge can also vary downward using section 3553(a)." You don't say!
Interestingly, the trial judge did not upwardly depart/vary because of Munyenyezi's alleged "participation in genocidal conduct." He sentenced her to the statutory maximum because, "'lying about participation in genocide when specifically asked,' the judge explained, knowing full well 'that such conduct is automatically disqualifying with respect to immigration and citizenship seriously undermines the integrity of this country's immigration standards in the most offensive way' imaginable." The judge later noted that if he had sentenced Munyenyezi for her alleged genocidal conduct, he would not have imposed concurrent sentences.
There are often silver linings in decisional clouds. An appellate court that uphold a 3553 (a) upward variance of ten years can also uphold a 10 year downward variance. The precedent cuts both ways.
Saturday, March 28, 2015
Christine Wright-Darrisaw was found guilty of threatening the President under 18 U.S. Code Section 871(a). Ms. Wright-Darrisaw experienced a negative result in her local Family Court. She called the White House switchboard and, after two and one-half minutes of incoherent barnyard gibbersih, threatened to fornicate and kill President Obama. She was entitled to a four point reduction in her offense level under Guidelines Section 2A6.1(b)(6) if the sentencing court found that "the offense involved a single instance evidencing little or no deliberation." The trial judge refused to grant the reduction, noting that the very act of contacting the White House involved deliberation. According to the Second Circuit, "the explanation provided by the district court suggests that the court may have been too sweeping in its consideration of what constitutes deliberation cognizable under U.S.S.G. § 2A6.1(b)(6)." The "deliberation" to be considered under 2A6.1(b)6) "is deliberation related to the communication of the threat itself. Only if a defendant's course of conduct leading up to and following the time the threat was made is closely tied to the communication of the threat, or if the defendant makes any effort to carry out the threat, may the conduct then provide a basis for inferring deliberation sufficient to reject the four-level reduction." Although the call here was deliberate, the threat may not have been. Since it appears that the district court conflated the two concepts, the Second Circuit remanded for re-analysis of the deliberation issue. Examining holdings in sister circuits, the Second Circuit focused on two critical factors in determining whether deliberation is present: "(1) whether, and under what circumstances, the threat itself has been repeated and (2) whether there is evidence of planning or some effort to carry out the threat." In Wright-Darrisaw's case, it is undisputed that the threat against President Obama was not repeated. (However, there were abundant past threats against neighbors, strangers, President Bush, and other officials.) Thus, the only question on remand is whether "there is sufficient evidence of planning or some effort to carry out the threat." The case is United States v. Wright-Darrisaw.
Wright-Darrisaw's challenge to the sufficiency of the evidence against her was deferred pending the U.S. Supreme Court's decision in United States v. Elonis, 730 F.3d 321 (3d. Cir. 2013), cert. granted, 134 S.Ct. 2819 (2014).
Monday, February 2, 2015
Judge Rakoff has authored an interesting article in the New York Review of Books examining Professor Brandon L. Garrett’s book entitled “Too Big to Jail: How Prosecutors Compromise with Corporations.” Professor Garrett’s book looks closely at the use of deferred prosecution agreements by the government and includes a wealth of information and data. While Professor Garrett concludes that deferred prosecution agreements have been “ineffective,” he also proposes a number of steps that might make them more efficient in the future. Along with conducting a nice discussion of Professor Garrett’s book, Judge Rakoff offers his own perspective on these agreements in his review. For those interested in deferred prosecution agreements, both Judge Rakoff’s article and Professor Garrett’s book are must reads.
Wednesday, January 28, 2015
There has been much talk recently regarding Section 2B1.1 of the Federal Sentencing Guidelines, commonly referred to as the Fraud Guidelines. Earlier this year, I noted in a post that the American Bar Association had issued a report calling on the Sentencing Commission to revise Section 2B1.1. Specifically, this report contained a number of suggestions regarding loss calculations and the impact of the current loss table. Earlier this month, Ellen Podgor posted regarding the release of the Proposed Amendments to the Sentencing Guidelines (Preliminary), which included proposed amendments to Section 2B1.1.
As readers begin to digest the proposed amendments from the Sentencing Commission and the Commission’s determination that they “have not seen a basis for finding the guideline to be broken for most forms of fraud…,” I wanted to provide a link to some additional information. The first is a video presentation by Commission staff regarding a detailed examination of economic crime data. The presentation was given at a January 9, 2015 public meeting and offers some extremely interesting analysis of data collected regarding sentencing under Section 2B1.1. The second is a copy of the PowerPoint presentation from the January 9, 2015 presentation. In particular, I direct readers to Figure 1, showing the growth in below range sentences since 2003, and Figure 5, showing the number of cases within range decreasing sharply as the loss figure in the case grows. For those who enjoy statistics, there is a wealth of information for consideration in these materials.
Monday, January 19, 2015
The case is United States v. Dibe. Claudio Dibe pled guilty, without a plea agreement, to wire fraud and received a below Guidelines sentence. He complained on appeal that his sentence would have been lower if the sentencing court had considered his counsel's ineffective assistance in failing to adequately explain the benefits of the government's initial plea offer. The Ninth Circuit held that ineffective assistance of counsel cannot be considered as a mitigating under 18 U.S.C. Section 3553(a). Distinguishing the U.S. Supreme Court's opinion in Pepper v. United States, 131 S.Ct. 1229 (2011), the Ninth Circuit noted that counsel's alleged ineffective assistance "has nothing to do with [Dibe's] own conduct."
Tuesday, January 13, 2015
In United States v. Coppenger, the defendant pled guilty to conspiracy to commit bank (mortgage) fraud and a Klein conspiracy. Coppenger, a developer, led and initiated the scheme, which involved two Panama City land parcels, 33 straw buyers and three corrupt mortgage company officers. The Government requested a downward departure based on Coppenger's substantial assistance, and the parties agreed that a sentence within the 78-97 month Guidelines range found at level 28, criminal history category 1, was appropriate. Instead, the sentencing court upwardly varied to a 120 month sentence, based on Coppenger's victimization of the straw buyers, many of whom pled guilty and saw their lives ruined. The judge relied heavily on sealed information contained in the straw buyers' presentence reports. Coppenger's trial attorney failed to object.
Coppenger attacked the sentence on appeal as procedurally and substantively unreasonable. He argued that it was procedurally unreasonable under Fed.R.Crim.Proc. 32(i)(1)(B), because the court relied on information excluded from the presentence report without giving the defendant a written or in camera summary of said information, thereby surprising and prejudicing Coppenger. Coppenger argued that the sentence was substantively unreasonable because the court characterized his co-conspirators as victims.
The Sixth Circuit vacated the sentence, holding that the court's procedural error was plain, both surprising and prejudicing Coppenger. The Sixth Circuit distinguished Coppenger's case from Irizarry v. United States, 553 U.S. 708 (2008), because in Irizarry the Supreme Court interpreted Fed.R.Crim.Proc. 32(h), which requires advance notice to the parties only when a sentencing court is contemplating an upward departure. Although the court in Coppenger's case upwardly varied, rather than departed, it did so after reviewing approximately 30 straw buyer presentence reports, in order for the judge to "go back and refresh my recollection about their history, their background, and how it was that they came to be involved in all this." None of this information was contained in Coppenger's presentence report and it remains under seal to this day. The Sixth Circuit held that Coppenger and his attorney should have been given a meaningful opportunity to understand and respond to this information: "Here the district court's sua sponte reliance on extraneous information both surprised and prejudiced Coppenger and denied him a meaningful opportunity to respond, in violation of Rule 32(i)(1)(B). The court’s explicit consideration of the offense conduct’s impact on the co-conspirator straw buyers was not only novel, but was neither signaled in the presentence report nor otherwise reasonably foreseeable."
The Sixth Circuit rejected Coppenger's substantive unreasonableness argument, holding that the court on remand could consider the impact of Coppenger's offense conduct on his co-conspirators.
Congratulations to Evan Smith of the Appalachian Citizens' Law Center, who argued and briefed the case on appeal.
Monday, January 12, 2015
In United States v. Norman, the defendant was convicted of wire fraud conspiracy after a jury trial in which he testified in his own behalf. The sentencing court assessed two points against Norman for obstruction, based on the defendant's allegedly perjurious trial testimony. But the judge also determined amount of loss and number of victims based on Norman's testimonial admissions. On appeal, Norman objected to this as inconsistent and procedurally unreasonable. The Second Circuit unsurprisingly disagreed, noting that the trial judge was free to accept some and reject some of Norman's testimony. Moreover, even though the trial judge found that appellant's admissions regarding amount of loss and number of victims were corroborated by other evidence, the Second Circuit said that this was not necessary. There is no need for a sentencing court to corroborate the defendant's in-court admissions before using them to determine sentencing factors.
Saturday, January 10, 2015
2B1.1, the fraud sentencing guideline, has been controversial. The controversay has centered on several points including its complexity, its focus on fraud loss, its failure to sufficiently focus on offender culpability, and the problems that accrue in determining fraud loss. The U.S. Sentencing Commission recognized some of these problems and held a conference at John Jay College to consider the issues and possible solutions.
The Commission now seeks comment on a proposed amendment to revise this guideline "by clarifying the definition of 'intended loss,' which contributes to the degree of punishment, and the enhancement for the use of sophisticated means in a fraud offense." The Commission also states that "[t]he proposed amendment also revises the guideline to better consider the degree of harm to victims, rather than just the number of victims, and includes a modified, simpler approach to 'fraud on the market' offenses which involve manipulation of the value of stocks." (see here) The Commission stated that they "have not seen a basis for finding the guideline to be broken for most forms of fraud, like identity theft, mortgage fraud, or healthcare fraud." You can find the proposal here (last 17 pages).