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.

(wisenberg)

March 31, 2015 in Judicial Opinions, Sentencing | Permalink | Comments (0) | TrackBack (0)

Saturday, March 28, 2015

Second Circuit Clarifies Nature of Deliberation Under Guidelines Section 2A6.1(b)(6)

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).

(wisenberg)

March 28, 2015 in Judicial Opinions, Sentencing | Permalink | Comments (0) | TrackBack (0)

Monday, February 2, 2015

Judge Rakoff and Professor Garrett on Deferred Prosecution Agreements

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.

(LED)

February 2, 2015 in Books, Deferred Prosecution Agreements, Scholarship, Sentencing, Settlement | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 28, 2015

More Information Regarding the Proposed Amendments to the Fraud Guidelines

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.

(LED)

January 28, 2015 in Fraud, Government Reports, Sentencing | Permalink | Comments (0) | TrackBack (0)

Monday, January 19, 2015

Ninth Circuit Rules That Ineffective Assistance of Counsel is Not a Mitigating Sentencing Factor

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."

(wisenberg)

January 19, 2015 in Judicial Opinions, Sentencing | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 13, 2015

It's A Long Long Way From Irizarry. But It's Still Plain Error.

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.

(wisenberg)

 

January 13, 2015 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Monday, January 12, 2015

Heads I Win, Tails You Lose: Using the Defendant's Trial Testimony to Determine the Guideline Range

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.

(wisenberg)

January 12, 2015 in Sentencing | Permalink | Comments (0) | TrackBack (0)

Saturday, January 10, 2015

U.S. Sentencing Commission Seeks Comment on Revisions to Fraud Guideline

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).

(esp)

January 10, 2015 in Sentencing | Permalink | Comments (1) | TrackBack (0)

Wednesday, January 7, 2015

Collateral Consequences in 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. 

(LED)

January 7, 2015 in International, Prosecutions, Sentencing | Permalink | Comments (0) | TrackBack (0)

Monday, November 17, 2014

ABA CJS Task Force Releases Proposed Reforms for Federal Sentencing of Economic Crimes

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.  

(LED)

November 17, 2014 in Fraud, Sentencing | Permalink | Comments (0) | TrackBack (0)

Friday, October 3, 2014

New Sentencing Guidelines in England and Wales for Fraud, Bribery and Money Laundering Offences

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. 

(LED)

October 3, 2014 in Fraud, International, Sentencing | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 3, 2014

Wine Fraudster Gets Ten-Year Sentence

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.

(goldman)

September 3, 2014 in Defense Counsel, Food and Drink, Fraud, News, Prosecutors, Sentencing | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 12, 2014

Future Trends Regarding White Collar Crime and China

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

(LED)

August 12, 2014 in Conferences, Corruption, FCPA, International, Investigations, Prosecutions, Sentencing | Permalink | Comments (0) | TrackBack (0)

Friday, August 1, 2014

White Collar Over-Criminalization: Deterrence, Plea Bargaining, and the Loss of Innocence

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.

(esp)

August 1, 2014 in Scholarship, Sentencing | Permalink | Comments (0) | TrackBack (0)

Sunday, July 20, 2014

Practice Notes: Sauce For The Goose

I enjoy studying upward variance opinions, as they usually contain language and rules that can be used by the defense to support downward variances in other cases. This is true because, whatever specific factors are discussed, federal appeals courts typically speak of what justifies such variances in general terms, not distinguishing between upward and downward excursions.  United States v. Ransom, decided earlier this month by the D.C. Circuit in an opinion by Judge David Sentelle, is no exception. Chester Ransom and Bryan Talbott each pled guilty to a fraud scheme and stipulated to a non-binding Guideline range of 46-57 months. The sentencing court calculated Ransom's range at 46-57 months but upwardly varied to a 72 month sentence. The court calculated Talbott's range at 63-78 months but upwardly varied to a 120 month sentence.

The Court initially held that Ransom's upward variance for lack of remorse was not inconsistent with the three point downward adjustment he received for acceptance of responsibility under Section 3E1.1(a) and (b). The Court in essence stated that one can plead guilty early and cooperate with the government without showing any remorse.

Next the Court 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.

As anyone who does federal sentencing work knows, those broader 3553(a) factors are often the key to obtaining a downward variance if the court is otherwise inclined to do so. To take one example, in the Mandatory Guidelines era it was almost impossible to obtain a downward departure based on family circumstances, but they can, and must, at least be "considered" by the sentencing court under the current regime.  Believe it or not, not every district judge comprehends this simple rule. Ergo, it is nice to have additional case law on one's side.

(wisenberg)

 

July 20, 2014 in Fraud, Judicial Opinions, Sentencing | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 20, 2014

Former Wellcare Individuals Sentenced

The sentencing of three former Wellcare individuals demonstrates the importance of having the guidelines as advisory, and the importance of an independent judicary that can recognize that sentences should be about individuals and not about arithmetic. (see here) Hats off to Hon. James S. Moody for being a judge that went beyond the math in sentencing the individuals and for his recognition that the stigma and collateral consequences of a conviction for a white collar offender are huge.  With little chance of recidivism, strict guideline sentences were unwarranted here. (see here)

 The court gave Todd Farha three years (significantly below the number asked for by the government).  Paul Behrens received a sentence of 24 months; William Kale a year and a day, and Peter Clay 60 months of Probation.  The attorneys representing these individuals were: 

Todd Farha: Barry Boss, Stephen Miller, Rebecca Brodey, Seth Waxman, Peter Neiman, Alan Schoenfeld, Robert Stauffer, Laura Vaughan

Paul Behrens: John Lauro; Jeffrey Lamken; Michael Matthews, Michael Califano

William Kale: Stan Reed, Patrick Donahue, Lauri Cleary, Larry Nathans

Peter Clay: Bill Jung, Larry Robbins, Donald Burke.

(esp)

May 20, 2014 in Defense Counsel, Fraud, Sentencing | Permalink | Comments (0) | TrackBack (0)

Thursday, May 15, 2014

White Collar Sentencing is Not All About Loss

An amici brief was filed by a group of law professors and practitioners in support of  three defendants in United States v. Farha.  It's unusual to see amici coming in at the trial level, but this esteemed group offers some important reasons for allowing this brief. 

They note "that this case highlights a serious problem facing federal sentencing judges today - namely, that the federal sentencing guidelines as currently written place too much emphasis on economic 'loss' and too little emphasis on other factors that traditionally have been important factors in determining a fair and just sentence that takes full account of the factors set forth in 18 U.S.C. s 3553(a)." In addition to discussing the distortion caused by the loss guidelines, the authors of this brief also note how other judges have recognized that focusing on loss under the guidelines presents problems. As aptly noted by Hon. Jed Rakoff, the guidelines "tend to place great weight on putatively measurable quantities, such as .....the amount of financial loss in fraud cases, without however, explaining why it is appropriate to accord such huge weight to such factors."  (United States v. Adelson).

Hopefully the court will note the growing number of judges that reject strict adherence to a sentence that is ascertained solely by examining numbers and will remember that we sentence people, not numbers.

 See Amici- Download AmiciBrief 

(esp)

May 15, 2014 in Defense Counsel, Fraud, Sentencing | Permalink | Comments (0) | TrackBack (0)

Wednesday, February 26, 2014

Unwarranted Sentencing Disparities Among Defendants With Similar Records Who Have Been Found Guilty Of Similar Conduct

Juan Prado was a mildly corrupt Chicago cop who pled guilty to taking bribes from tow truck operators in order to funnel business their way. At sentencing he argued for a downward variance based on several factors, including the downward variance received by James Wodnicki, an allegedly similarly situated Chicago cop who was sentenced in a related case. The sentencing court ruled, incorrectly, that Seventh Circuit precedent only allowed it to consider nationwide sentencing disparities under 18 U.S.C. Section 3553 (a)(6). It refused to consider any arguments, from either the prosecution or defense, based on Wodnicki's downward variance, and sentenced Prado to a within-Guidelines prison term of 42 months. Last week, in United States v. Prado, the Seventh Circuit reversed, since the sentencing court was unaware that it could consider Wodnicki's sentence in applying 3553 (a)(6), and since the Seventh Circuit thought this may have affected Prado's sentence. The opinion reaffirms two important points, to wit--that sentencing disparities can be considered on both individual and global levels, and that within-Guidelines sentences can be reversed when based on erroneous assumptions. Interestingly, Prado did not raise this specific ground of error until the case reached the appellate court, but the government failed to argue Prado's waiver on appeal. Ergo, the waived waiver doctrine applied.

(wisenberg)

February 26, 2014 in Judicial Opinions, Sentencing | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 11, 2014

Why Didn't Martoma Cooperate? And Is It Too Late?

To the surprise of nobody I know, Mathew Martoma, the former SAC Capital portfolio manager, was convicted of insider trading last Thursday by a Southern District of New York jury.  The evidence at trial was very strong.  It demonstrated that Martoma had befriended two doctors advising two drug companies on the trial of an experimental drug, received confidential information from them about the disappointing result of the drug trial prior to the public announcement, and then had a 20-minute telephone conversation with Steven A. Cohen, the SAC chair, a day or so before Cohen ordered that SAC's positions in these companies be sold off.  The purported monetary benefit to SAC, in gains and avoidance of loss, of the trades resulting from the inside information is about $275 million, suggesting that Martoma receive a sentence of over 15 years under the primarily amount-driven Sentencing Guidelines (although I expect the actual sentence will be considerably less).

Cohen is white-collar Public Enemy No. 1 to the Department of Justice, at least in its most productive white-collar office, the U.S. Attorney's Office for the Southern District.  That office has already brought monumental parallel criminal and civil cases against SAC, receiving a settlement of $1.8 billion, about a fifth of Cohen's reported personal net worth, but it has apparently not garnered sufficient evidence against Cohen to give it confidence that an indictment will lead to his conviction.  It had granted a total "walk" -- a non-prosecution agreement -- to the two doctors whose testimony it felt it needed to convict Martoma, unusually lenient concessions by an office that almost always requires substantial (and often insubstantial) white-collar wrongdoers seeking a cooperation deal to plead to a felony.  As an FBI agent told one of the doctor/co-conspirators, the doctors and Martoma were "grains of sand;" the government was after Cohen.

In an article in the New York Times last Friday, James B. Stewart, an excellent writer whose analyses I almost always agree with, asked a question many lawyers, including myself, have asked:  why didn't Martoma cooperate with the government and give up Cohen in exchange for leniency?  Mr. Stewart's answer was essentially that Martoma was unmarketable to the government because he would have been destroyed on cross-examination by revelation of his years-ago doctoring his Harvard Law School grades to attempt to secure a federal judicial clerkship and covering up that falsification by other document tampering and lying.  Mr. Stewart quotes one lawyer as saying Martoma would be made "mincemeat" after defense cross-examination, another as saying he would be "toast," and a third as saying that without solid corroborating evidence, "his testimony would be of little use."  See here

I strongly disagree with Mr. Stewart and his three sources.  The prosecution, I believe, would have welcomed Mr. Martoma to the government team in a New York minute -- assuming Martoma would have been able to provide believable testimony that Mr. Cohen was made aware of the inside information in that 20-minute conversation.  When one is really hungry -- and the Department of Justice is really hungry for Steven A. Cohen -- one will eat the only food available, even if it's "mincemeat" and "toast."  And there is certainly no moral question here; the government gave Sammy "the Bull" Gravano, a multiple murderer, a virtual pass to induce him to testify against John Gotti.  Given the seemingly irrefutable direct, circumstantial and background evidence (including, specifically, the phone call, the fact that Cohen ordered the trades and reaped the benefit, and generally, whatever evidence from the civil and criminal cases against SAC is admissible against Cohen), testimony by Martoma to the effect he told Cohen, even indirectly or unspecifically, about the information he received from the doctors would, I believe, have most likely led to Cohen's indictment.

I have no idea why Martoma did not choose to cooperate, if, as I believe, he had the opportunity.  "Cooperation," as it is euphemistically called, would require from Martoma a plea of guilty and, very likely in view of the amount of money involved, a not insubstantial prison term (although many years less than he will likely receive after his conviction by trial).  Perhaps Martoma, who put on a spirited if unconvincing defense after being caught altering his law school transcript, is just a fighter who does not easily surrender or, some would say, "face reality," even if the result of such surrender would be a comparatively short jail sentence.  (In a way, that choice is refreshing, reminding me of the days defense lawyers defended more than pleaded and/or cooperated.)  Perhaps Martoma felt cooperation, a condition of which is generally full admission of all prior crimes and bad acts, would reveal other wrongs and lead to financial losses by him and his family beyond those he faces in this case.  Perhaps he felt loyalty -- which it has been demonstrated is a somewhat uncommon trait among those charged with insider trading -- to Cohen, who has reportedly paid his legal fees and treated him well financially (and perhaps Martoma hopes will continue to do so), or perhaps to others he would have to implicate.

And perhaps -- perhaps -- the truth is that in his conversation with Cohen, he did not tell Cohen either because of caution while talking on a telephone, a deliberate effort to conceal  from Cohen direct inside information, or another reason, and he is honest enough not to fudge the truth to please the eager prosecutors, as some cooperators do.  In such a case his truthful testimony would have been unhelpful to prosecutors bent on charging Cohen.  That neutral testimony or information, if proffered, which the skeptical prosecutors would find difficult to believe, would at best get him ice in this very cold wintertime.  Lastly, however unlikely, perhaps Martoma believed or still believes he is, or conceivably actually is, innocent.

In any case, it is not necessarily too late for Martoma to change his mind and get a benefit from cooperation.  The government would, I believe, be willing to alter favorably its sentencing recommendation if Martoma provides information or testimony leading to or supporting the prosecution of Cohen.  Indeed, I believe the government would ordinarily jump at a trade of evidence against Cohen for a recommendation of leniency (or less harshness), even if Martoma is now even less attractive as a witness than before he was convicted (although far more attractive than if he had testified as to his innocence).  However, the five-year statute of limitations for the July 2008 criminal activity in this matter has apparently run, and an indictment for substantive insider trading against Cohen for these trades is very probably time-barred. 

To be sure, federal prosecutors have attempted -- not always successfully (see United States v. Grimm; see here) -- imaginative solutions to statute of limitations problems.  And, if the government can prove that Cohen had committed even a minor insider trading conspiratorial act within the past five years (and there are other potential cooperators, like recently-convicted SAC manager Michael Steinberg, out there), the broad conspiracy statutes might well allow Martoma's potential testimony, however dated, to support a far-ranging conspiracy charge (since the statute of limitations for conspiracy is satisfied by a single overt act within the statutory period).  In such a case, Martoma may yet get some considerable benefit from cooperating, however belatedly it came about.

 (goldman)

February 11, 2014 in Current Affairs, Defense Counsel, Fraud, Insider Trading, News, Prosecutions, Prosecutors, Securities, Sentencing | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 28, 2014

Supreme Court Narrowly Defines Term "Result From"

The degree of causation necessary to impose legal blame is an interesting philosophical, policy and, of course, legal issue.  It is an issue that probably arises more often in tort than criminal cases, but is nonetheless important in criminal law in several areas, including sentencing considerations.

In Burrage v. United States, ___ U.S. ___ (12-7515, January 27, 2014), the Supreme Court considered the meaning of the term "result from" in a case where the district court imposed a 20-year mandatory minimum sentence upon a defendant for the sale of one gram of heroin since a buyer's death had "result[ed] from" the use of the heroin as one of several drugs he consumed that contributed to the death.

Burrage was convicted of distribution of narcotics to Banka, who died after imbibing the heroin and several other drugs.  Medical experts at trial could not rule out that Banka might have died from using the other drugs even if he had not taken the heroin, but opined that the heroin use was a contributing factor to his death.

The district court declined to accept the defense contention that the statutory term "result from" required a "but-for" standard.  Instead, it construed the phrase to mean that the drug sold had only to be a "contributing cause" of the death and so charged the jury.  The Eighth Circuit affirmed.

In a unanimous opinion, written by Justice Scalia (who has authored some of the most innovative and pro-defense decisions by the Court in recent years), the Court reversed, ruling that the term "result from" should be construed in its "ordinary meaning" to require a "but-for" standard of causation -- that the harm would not have resulted "but for" the defendant's conduct.  It was, therefore, the Court found, not enough for the trier of fact to find that the drug transfer was merely a "contributing factor" to the death.  The opinion discussed the Model Penal Code, the Restatement of Torts, baseball, and the rule of lenity, as well as the Court's recent restrictive reading of the term "because of" in discrimination cases, a discussion which triggered a special concurrence by Justice Ginsberg (which she apparently would not have felt the need to write "but for" that discussion).

The government, not untypically, made a doomsday argument that defining "result from" as the Court did would "unduly limit criminal liability" and "cannot be reconciled with sound policy."  The Court disagreed, doubting that the opinion would prove to be a "policy disaster."

Although very unlikely to be a "disaster," the opinion may have ramifications beyond drug cases.  The issue of what consequences resulted from the defendant's conduct arises frequently in homicide and assault cases, and also occasionally in white-collar cases, for instance in determining the amount of loss or harm for sentencing purposes.  At the least, it appears that in federal criminal law the term "result from" now will have a more narrow meaning than previously.

 (goldman)

January 28, 2014 in Judicial Opinions, Sentencing | Permalink | Comments (0) | TrackBack (0)