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).
Wednesday, January 7, 2015
As we start off the year, I thought I would mention an issue that will likely be widely discussed in 2015 – collateral consequences.
As I mentioned in this 2014 post, I moderated a panel discussion regarding collateral consequences at the 2014 ABA CJS White Collar Crime Institute in London last October. That discussion raised a number of interesting issues and made clear that this is a topic that is growing in prominence internationally. As we move into 2015, the ABA continues to work on the ABA National Inventory of Collateral Consequences of Conviction, a database with which every attorney should be familiar. Later this year, the ABA will also convene a National Summit on Collateral Consequences, which will bring together a host of experts from around the country to discuss important issues related to this topic.
The NACDL has also been working hard on the issue of collateral consequences. According to the organization, over 70 million Americans have some form of criminal record and there are over 50,000 known collateral consequences of conviction. In May of last year, the NACDL launched a major new report entitled Collateral Damage: America’s Failure to Forgive or Forget in the War on Crime – A Roadmap to Restore Rights and Status After Arrest and Conviction. According to the NACDL website, “The report is a comprehensive exploration of the stigma and policies relegating tens of millions of people in America to second-class status because of an arrest or conviction. In addition, the report lays out ten recommendations to ensure that the values of life, liberty and the pursuit of happiness are within reach of all, regardless of past mistakes.” It is certainly worth a read.
As 2015 gets underway, this is one topic to keep an eye on, and the above resources from the ABA and NACDL are a great way to get up to speed.
Monday, November 17, 2014
The American Bar Association Criminal Justice Section Task Force on the Reform of Federal Sentencing for Economic Crimes has released its final report. The report contains significant proposed amendments to the existing federal sentencing guidelines for economic offenses. As to the general structure, the proposed guidelines fit on a single page and contain only three sections for specific offense characteristics, compared with the nineteen sections currently contained in USSG section 2B1.1. The three sections in the proposal are “loss,” “culpability,” and “victim impact.”
The loss section contains only six levels of loss, from more than $20,000 to more than $50,000,000. As currently drafted, a loss of more than $50,000,000 would result in a 14 point increase in the defendant’s offense level. This is a significant amendment from USSG section 2B1.1, which contain 16 levels of loss, the most significant of which increases a defendant’s base offense level by 30 points. It is important to note, however, that the Task Force makes clear in its commentary that it is most focused on the proposed structure of the economic crimes guidelines. The report states, “First, we feel more strongly about the structure of the proposal than we do the specific offense levels we have assigned. We assigned offense levels in the draft because we think it is helpful in understanding the structure, but the levels have been placed in brackets to indicate their tentative nature.”
The remaining two specific offense characteristics – Culpability and Victim Impact – are presented in a manner that allows for consideration of various factors before determining where a defendant falls on a range from low to high. For example, culpability is either “Lowest Culpability,” “Low Culpability,” “Moderate Culpability,” “High Culpability,” or “Highest Culpability.” According to the commentary, a defendant’s culpability level will depend on an “array of factors,” including the correlation between loss and gain. In many ways, this portion of the proposal looks similar to the recently adopted Sentencing Council for England and Wales “Fraud, Bribery and Money Laundering Offences – Definitive Guidelines.” As described in my previous post, these guidelines for England and Wales utilized a “High Culpability,” “Medium Culpability,” and “Low Culpability” model.
Finally, the proposal contains an interesting offense cap for non-serious first time offenders. The proposed guidelines state, “If the defendant has zero criminal history points under Chapter 4 and the offense was not ‘otherwise serious’ within the meaning of 28 U.S.C. section 994(j), the offense level shall be no greater than 10 and a sentence other than imprisonment is generally appropriate.” According to the commentary, in making such a decision, the court should consider (1) the offense as a whole, and (2) the defendant’s individual contribution to the offense.
As the U.S. Sentencing Commission has stated, addressing federal sentences for economic crimes is one of the Commission’s policy priorities for the 2014-2015 guidelines amendment cycle. It will be interesting to watch the Commission’s response to the ABA CJS Task Force proposal.
Friday, October 3, 2014
In May, the Sentencing Council for England and Wales issued their "Fraud, Bribery and Money Laundering Offences - Definitive Guidelines." The Guidelines apply to "all individual offenders aged 18 and older and to organisations who are sentenced on or after 1 October 2014, regardless of the date of the offence."
Bret Campbell, Adam Lurie, Joseph Monreno, and Karen Woody of Cadwalader, Wickersham & Taft have a nice piece examining the new Guidelines in the Westlaw Journal of White-Collar Crime entitled UK Issues Sentencing Guideline for Individuals Convicted of White-Collar Offenses (28 No. 11, Westlaw Journal White-Collar Crime 1 (July 25, 2014)).
In reviewing the new Guidelines, it is fascinating to see the difference in approach when compared to the U.S. Sentencing Guidelines. To take just one example, the fraud guidelines for England and Wales focus on "culpability" and "harm." For culpability, the guidelines consider a number of factors indicating whether the person had "High Culpability," "Medium Culpability," or "Low Culpability." The factors include entries such as the role in group activities, the sophistication of the offense, and the motivation behind the actions. In examining harm, there are just five categories of loss, the highest of which is £500,000 or more. Finally, when determining the sentence, there are a limited number of categories and the highest range is 5-8 years in custody.
For anyone who works with the U.S. guidelines, the guidelines for England and Wales are a fascinating read for comparison, and I highly recommend you give them a look.
Wednesday, September 3, 2014
Last month Prof. Douglas Berman reported in his indispensable Sentencing Law and Policy blog about a ten-year prison sentence imposed by SDNY judge Richard Berman upon defendant Rudy Kurniawan, who had sold counterfeit wine to the very rich, including billionaire William Koch (one of the less political Koch brothers), and allegedly profited by over $28 million (see here by scrolling down to August 10, "Can wine fraudster reasonably whine that his sentence was not reduced given wealth of victims?" See also here). Some of the ersatz wine sold for as much as $30,000 per bottle.
Having a somewhat perverse sense of humor, I found it somewhat amusing that the 1% paid astronomical sums for and presumably sometimes drank the same wine that the other 99% of us drink. However, neither the judge nor the prosecutor (nor certainly the defendant and his lawyer) viewed the sentencing proceeding as a laughing matter.
To be sure, a $28 million fraud is a serious matter deserving serious punishment. Additionally, the judge seemed to view the crime in part as a public safety violation, declaring "The public at large needs to know our food and drinks are safe, -- and not some potentially unsafe homemade witch's brew," even though this was hardly a contaminated baby food case.
At the sentencing hearing, Kurniawan's attorney argued, reasonably I believe, that his client should be treated somewhat less severely since the victims were exceedingly wealthy. That argument provoked the prosecutor to the Captain Renault-like response that it was "quite shocking" for a lawyer to argue for a different standard for theft from the rich than from the poor.
That retort reminded me of Anatole France's immortal line (although not directly on point), "The law, in its majestic equality, forbids rich and poor alike to sleep under bridges, beg in the streets or steal bread." In my view, a sentencing judge should certainly consider in sentencing the extent of damage to the victim(s). A fraudster who steals a million dollars from a billionaire, notwithstanding the Sentencing Guidelines' overemphasis on absolute figures, should (all things being equal) not deserve as harsh a sentence as one who steals the same amount if it were the entire life savings of a senior citizen.
Prosecutors, when fraud victims are pensioners and widows, argue, I believe reasonably, that the judge should consider the degree of suffering of the victims. Indeed, every seasoned white-collar trial lawyer knows that in a multi-victim fraud case the government is likely to call as "representative" witnesses those most sympathetic victims for whom the monetary loss was most damaging.
I assume that the prosecutor will get over his "shock" when he prosecutes a fraud case where a less than affluent victim's life savings are stolen. I further assume he will not argue that the judge should impose the same sentence she would if the victim were a billionaire for whom the loss figure might be pocket change.
Tuesday, August 12, 2014
As I mentioned in my post last week, I moderated a roundtable discussion at this year's ABA annual meeting entitled Navigating the White Collar Crime Landscape in China. While the discussion included many unique and interesting insights into current trends and challenges in the field of white collar crime in China, I thought I might share just a few of the themes we heard from participants.
First, according to our participants, we should expect to see a continued focus on anti-corruption enforcement actions by both the United States and China. Second, it is important to note that China has begun focusing on the prosecution of high-level corporate employees, not just low-level employees and the corporation. Third, we should anticipate that China will continue to expand its anti-corruption mission, including directing more attention towards U.S. entities. In this regarding, it was also predicted that China may soon explore the adoption of an anti-corruption statute with extraterritorial jurisdiction to assist it in undertaking a broader anti-corruption mission similar to the U.S. This might mean we will soon see a Chinese version of the FCPA. Finally, several of our panelists noted that China is increasing its focus on data privacy and state secrets laws, including enforcing such laws against foreigners more vigorously.
Regarding this last theme from the discussion, I'll note that on the morning of our program two corporate investigators in China, one from the UK and the other from the U.S., were found guilty of purchasing private information regarding Chinese citizens. The pair, who are married, were well known in the internal investigation community in China and regularly performed work for large U.S. corporations, including GlaxoSmithKline. According to the charges, the pair violated Chinese law by illegally acquiring personal information on Chinese citizens and then selling that information to their clients. The first defendant, Peter Humphrey, was sentenced to two and a half years in prison. The second defendant, Yu Yingzeng, was sentenced to two years in prison. Those who perform due diligence and internal investigation work in China are keeping a close eye on this and related matters. You can read more about the prosecution in The Wall Street Journal.
Friday, August 1, 2014
New Article by Professor Lucian Dervan - White Collar Over-Criminalization: Deterrence, Plea Bargaining, and the Loss of Innocence published in 101 Kentucky Law Journal. The abstract states:
Overcriminalization takes many forms and impacts the American criminal justice system in varying ways. This article focuses on a select portion of this phenomenon by examining two types of overcriminalization prevalent in white collar criminal law. The first type of over criminalization discussed in this article is Congress’s propensity for increasing the maximum criminal penalties for white collar offenses in an effort to punish financial criminals more harshly while simultaneously deterring others. The second type of overcriminalization addressed is Congress’s tendency to create vague and overlapping criminal provisions in areas already criminalized in an effort to expand the tools available to prosecutors, increase the number of financial criminals prosecuted each year, and deter potential offenders. While these new provisions are not the most egregious examples of the overcriminalization phenomenon, they are important to consider due to their impact on significant statutes. In fact, they typically represent some of the most commonly charged offenses in the federal system.
Through examination of the Sarbanes-Oxley Act of 2002 and examples of these two types of over criminalization within that law, this article seeks to understand whether new crimes and punishments really achieve their intended goals and, if not, what this tells us about and means for the over criminalization debate and the criminal justice system as a whole.