White Collar Crime Prof Blog

Fumo Sentenced

After a 5 1/2 month trial (that had to have been a significant punishment in itself), Former State Senator (Pa.) Vincent J. Fumo was convicted.  An issue previously discussed relative to this trial pertained to posting on Facebook and Twitter during trial (see here).  He has now been sentenced to  55 months with the judge setting the loss figure at $1.2 million.  The prosecution appears not to be happy with this sentence (see here).

Representing Fumo were Samuel Buffone (Ropes & Gray, Washington DC - he recently won the Yeager case in the United States Supreme Court see here); Dennis Cogan (Philadelphia) and Peter Goldberger (Ardmore, PA).

See Doug Berman's Sentencing Law & Policy Blog here, Legal Intelligencer Blog, Fumo’s Daughter, Fiance, Beg for Mercy; Emilie Lounsberry and Craig R. McCoy ,Philadelphia Inquirer, Fumo Gets 55 Months

(esp)(blogging from The Hague, Netherlands)

Dreier - Twenty Years

Benjamin Weiser, NYTimes, Lawyer Gets 20 Years in $700 Million Fraud

(esp)(blogging from the Hague, Netherlands) 

Madoff's Sentence - "Symbolic" of What?

Clearly Madoff's sentence is "symbolic."  It symbolizes an incredibly long sentence being given to a white collar offender, something that has happened in the past but is not common, and hardly ever to this extent for a white collar individual.  (see here) 

But should a sentence be for a "symbolic" purpose? Clearly Madoff cannot serve 150 years in prison.  And there are many others in the system who have likewise received sentences beyond their lifetimes - usually, however, we see such cases in the drug or violent crime realms. 

But one wonders if sentences that exceed a person's lifetime are realistic and add credibility to our sentencing system.  When the system allows and sometimes encourages a judge to issue a sentence that can never be served, does it defeat the validity of the sentencing structure?  General deterrence is a valid punishment theory and sending a message to the community that criminal conduct will not be tolerated is likewise admirable.  Some may see denunciation as an important aspect of correcting future criminal conduct.   And clearly 18 USC 3553 provides that the sentence should "reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense." But all that said, should an individual - no matter how guilty and how extraordinarily evil - be given a sentence that is beyond the person's lifetime for "symbolic" purposes? 

I keep thinking about the initial purposes of the sentencing guidelines where it states that " [t]he Act's basic objective was to enhance the ability of the criminal justice system to combat crime through an effective, fair sentencing system.  To achieve this end, Congress first sought honesty in sentencing." (emphasis added). It states later, "[h]onesty is easy to achieve: the abolition of parole makes the sentence imposed by the court the sentence the offender will serve less approximately fifteen percent for good behavior."  But in the back of my mind I keep wondering if Congress really achieves "honesty in sentencing" when it allows an individual to receive a sentence that exceeds the person's lifetime.

See Mike Pesca, NPR, Judge Sentences Madoff to 150 Years;  Andrew Cohen, Courtwatch CBS News Blog, 150-Year Madoff Sentence Is "Symbolic"

(esp)

Commentary on Madoff Sentence

150 years (see here) - more than a lifetime is the sentence given to Bernie Madoff by Hon. Denny Chin.  It was clear that the 12 years requested by defense counsel would never be a reality, and it was also clear that Madoff would likely spend the rest of his life in prison. But a sentence of 150 years sends a forceful message that white collar offenders can and will be punished harshly for fraud. Some interesting points about the sentencing -

• The NYTimes reports (here) that "Judge Chin pointed out that no friends, family or other supporters had submitted any letters on Mr. Madoff's behalf, attesting to the strength of his character or good deeds he had done." - Some white collar cases will have numerous letters showing the good qualities, charity work, and other deeds of the offender.  But the usual letter-writers were the victims in this case.  It is therefore not surprising that there would be none to present to the court.
• Madoff was given no credit for his remorse and no credit for pleading. He saved the taxpayers the cost of a trial, and clearly spared everyone the pain and time of making the government prove the case against him. The penalty of going to trial was imposed in this case, despite the fact that a trial did not happen.
• Giving Madoff the maximum sentence is not a punishment based upon rehabilitation or specific deterrence. Being 71 years  and being given a prison sentence of 150 years leaves little chance that he will ever exit prison a free man.  This is clearly a punishment grounded in retribution. From a general deterrence standpoint, a much lesser punishment could have been used for sending the message that this conduct will not be tolerated. 
• Madoff was different from the usual white collar offender (see here), and that needed to be factored into the sentence, as Judge Chin did. 
• But the remaining question still stands - how could this fraud have gone on unnoticed for so long, and why did it take government authorities 20 years to finally do something about it.

(esp)

Madoff - Sentenced to More Than A Lifetime

The Hon. Denny Chin gave a sentence of 150 years to Bernie Madoff, a number a far cry from the 12 years asked for by defense counsel. (see here) 

Jack Healy, NYTimes, Madoff Sentenced to 150 Years in Prison for Ponzi Scheme

Chad Bray, WSJ, Madoff Sentenced to 150 Years

Washington Post, Madoff Sentenced To Maximum 150 Years In Jail

Aaron Smith, CNN,Madoff sentenced to 150 years -Federal judge gives maximum sentence to Ponzi mastermind following his apology and victims' request for life sentence.

Doug Berman, Sentencing Law & Policy Blog, Madoff gets sentenced to max of 150 years in federal prison!

Commentary to follow.

(esp)

Addendum, Doug Berman,A new white-collar benchmark: the main reason the number 150 matters in Madoff

Madoff

The talk of the town is Madoff, assuming one is limited to discussions in the white collar area.  With some comparisons and non-comparisons to Stanford, (see here) and others looking at Skilling's case. (See Business Week here). The sentencing is set for Monday, and the latest is that Bernie Madoff will be allowed to appear in civilian garb. (See here)

Not surprisingly, defense counsel for Madoff filed a sentencing memo asking for 12 years, a number that some victims are not happy with. Will the sentence be higher because cooperation has not reached a level of assisting the government in providing information (if it exists) on others close to him? See David Glovin & Thom Weidlich, Madoff’s Failure to Name Accomplices Cripples His Leniency Bid

Or maybe it will be higher than the amount requested by defense counsel, for the reason that the fraud involved here is not what is seen in many white collar cases. In white collar cases, especially ones coming from the corporate sector, we often see the accused arguing that he or she did not know the conduct was illegal.  Some will argue that admitting the wrongdoing and accepting responsibility should be credited as the Sentencing Guidelines advise.  Others, however, may wonder if this is the perfect example of a case that demonstrates why one should not be penalized for going to trial. Maybe it is easy to say one is guilty when they are the sole person who committed the crime.  But when the acts of others are involved, or the crime involves ambiguous business conduct, it becomes more questionable. So, the real question here is not whether Bermie Madoff should receive 12 years, but whether this sentence is proportionate to others who went to prison for longer amounts of time for conduct they believed was not illegal or for which they should not be held accountable.  It is normally the government that argues that the lesser sentence should go to the one who pleads and cooperates.  But will the government really take that position when the case involves Bernie Madoff? 

Madoff''s Sentencing Memo - Download US_v_Madoff_Sentencing_Letter_June_23_2009 ( w/ a hat tip to Peter Henning)

(esp) (blogging from Tuscon, Arizona)

Former General Re Exec Gets Probation

A former General Re executive received a sentence of community service, a fine, and probation. A factor here is likely the cooperation provided to the government.   See Matt Scroggins,Ex-Gen Re exec gets probation for finite fraud; Dave Collins, Houston Chronicle (AP), Former General Re executive given probation For background on other sentences coming from this investigation, see here. 

(esp) 

Pictures of Different Fraudsters

Melanie Linder, Forbes, has an article titled, How to Foil a Corporate Fraudster.  What is particularly unique about this piece is that it is coupled with pictures of seven different types of fraudsters.  The different types (e.g., The Wannabe, The Survivor) really capture the sociology behind different types of individuals who commit white collar crimes. This article, with its pictures, presents an interesting perspective in deciding where along the spectrum a corporate fraudster belongs when it comes to sentencing. I highly recommend this piece in thinking about a sentencing hearing.

(esp)

Sentencing Article

Paul N. Monnin & R. Jospeh Burby have an article titled, "Off the Chart: The U.S. Sentencing Guidelines Become Increasingly Irrelevant in the Wake of the Market Meltdown." The article can be found here -

2009 byThe Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com Reproduced with permission from White Collar Crime Report, 4 WCR 298, 04/24/2009. Copyright

Download Off the Chart (BNA WCCR 4-24-09)

(esp)

Sentencing - Tomko

Guest Blogger Peter D. Hardy, of Post & Schell -

Only one day after a panel of the Third Circuit reversed a sentence as substantively unreasonable in  US v. Olhovsky, No. 07-1642 (3d Cir. April 16, 2009) (a holding in favor of the defendant), the Third Circuit issued today its en banc opinion in US v. Tomko, No. 05-4997 (3d Cir. April 17, 2009), in which it upheld a sentence which the government had described as substantively unreasonable.  In Tomko, a divided three-judge panel originally reversed, as substantively unreasonable, a  sentence of probation in a tax evasion case.  The defendant had pleaded guilty to tax evasion and stipulated to a tax loss of $228,557 resulting from his use of false invoices to disguise work done on his home as being expenses of his company.  The Sentencing Guideline range was 12 to 18 months of incarceration, but the district court imposed a sentence of probation, with a special condition of one year of house arrest; however, the court ordered an above-Sentencing Guideline range fine of $250,000.  The government appealed, and the divided panel reversed the sentence as unreasonable.  One interesting fact about the case was that the defendant's year of house arrest was to be spent in the defendant's luxurious home, built in part through his tax evasion scheme.  The defendant obtained his downward variance by arguing that his incarceration could lead his employees to lose their jobs; he had performed exceptional charitable acts and good works; and he had demonstrated an extraordinary degree of acceptance of responsibility.

 

 

In a lengthy and detailed opinion, the Tomkoen banc court vacated the panel decision and upheld the sentence on the basis of Gall.  The government had argued strongly that the sentencing court had made a procedural and substantive error by failing to properly address or give weight to the sentencing factor of deterrence:  a critical consideration for the government in criminal tax cases, because such cases are rare and the national tax gap -- the amount of taxes collected vs. the amount of taxes truly due -- is enormous.  The court, after noting that most of the appellate judges personally disagreed with the sentence imposed, rejected that concern by observing in part that the typicality or uniqueness of a case does not alter the deferential standard of review.  The court also observed that a concern relating to sentencing disparities "is not new," and that the Supreme Court recognized and accepted that sentencing disparities would increase when it rendered the Sentencing Guidelines advisory in Booker.  Ultimately, and in light of Gall, the grounds provided for the downward variance reflected that the district court did not abuse its broad discretion, in part because the difference between the actual sentence and the low end of the Guidelines range was only 12 months.

 

In contrast, the five-judge dissent found the sentence of probation quantitatively unreasonable, as well as qualitatively unreasonable when compared to the advisory Guideline range.  The dissent wrote that Gall still envisioned appellate courts as having a meaningful role in reviewing for substantive unreasonableness, that the Guidelines continue to be a "vital force" in sentencing, and that the Guidelines "serve a particularly important purpose in the area of white-collar crime."  According to the dissent, the defendant did not distinguish himself sufficiently from other tax evaders, and the sentence imposed sends the wrong message regarding tax evasion, which generally should receive sentences of imprisonment in order to create sufficient deterrence.

 

 

Both the majority and the dissent opinions in Tomko contain additional and very interesting discussions of the sometimes competing values of sentencing court discretion, the current role of the Sentencing Guidelines, and the government's desire for deterrence in tax and other white collar crime cases.  The above is just a summary of some of the highlights.

 

U.S. v. Tomko - Download Tomko

 

(PDH)

Former Finance Exec at General Re Gets 18 Months

The first sentence given to a former General Re executive was for two years (see here).  The second individual, AIGs former VP of reinsurance, was given four years (see here).  The third person was sentenced to one year and a day (see here).  And now a fourth person may be added to the prison system, this time with a sentence of 18 months.  Colleen McCarthy of  Business Insurance Magazine provides a detailed accounting of the sentencing hearing of a former finance exec at General Re. (see here).  Some comments:

• Considering that the judge had previously looked at a significant loss figure, the sentence could have been extreme. (see here) One also had to be concerned about the effect of recent happenings at AIG and the public reaction -- which fortunately did not, as it should not, have come into play here. 
• The judge in each of these cases appears to be sentencing the individual and not limiting the decision to arithmetic - and this is important. What is particularly noteworthy here is that the court credited the fact that "Ms. Monrad was not motivated by personal gain."
• The government needs to stop arguing that a convicted defendant is refusing to take responsibility for his or her actions. If a person is appealing a case - claiming innocence, and arguing that the conviction should not stand - how can you ask that person to take responsibility?  To accept the government's argument would be to place the individual in a "Catch-22" position of maintaining innocence but also saying they are sorry for committing the act.  It would render moot innocence claims in appellate arguments. We have an appellate system for a reason, and it should be respected.  
• Even though the defendant was fortunate that the sentence was lower than the guidelines, it is still a sentence to prison for someone who had no prior criminal record. This is yet another indication that the days of probation for those convicted of white collar crimes has passed. 
• Every time someone is given a prison sentence it is important to recognize that the sentence not only affects them, but all the family and friends that will suffer the ramifications of that sentence.

(esp)

Addendum - Jane Mills & David Voreacos,Gen Re's Monrad Gets 18 Months in AIG Investor Fraud

Check Section 1028 Sentences

A letter from the Administrative Office of the U.S. Courts informs the courts, defenders, and probation officers that "defendants who have been convicted of possessing false, stolen, or unlawfully produced identification documents, in violation of 18 U.S.C.§ 1028 (a)(4) or (6), may have been incorrectly sentenced under that statute's felony provisions, instead of the misdemeanor penalty provisions." 

See Letter here -Download DOJ_Errors_in_1028_Prosecutions_-_DIR9-010

(esp)

30 and 25 Year Sentences in White Collar Case

For those who might be thinking that white collar offenders will not face heavy sentences in a post Gall and Rita world -  today's sentences prove otherwise. A DOJ Press Release tells that "[t]wo former National Century Financial Enterprises (NCFE) executives were sentenced today for their roles in a scheme to deceive investors about the financial health of NCFE," with one receiving a sentence of 30 years and 3 years of supervised release following the prison term, and the other being sentenced to 25 years in prison and 3 years of supervised release following the prison term. The first individual, age 65, who served as the "president, owner and chief executive officer of NCFE," also was sentenced to a concurrent sentence of 10 years in prison.  The former "chair[ ], secretary, treasurer, director and owner of NCFE, age 60, who received the 25 year sentence was convicted of conspiracy, securities fraud, wire fraud and money laundering. The press release states that she "fled after the conviction and remains at large."  In addition to the prison sentences, the court also ordered the two "to forfeit $1.7 billion of property representing the proceeds of the conspiracy and to pay restitution of $2.3 billion, jointly and severally with other defendants."  The joint and several part may be an issue with one party still at large.  The press release notes that "NCFE, formerly based in Dublin, Ohio, was one of the largest healthcare finance companies in the United States until it filed for bankruptcy in November 2002."

(esp)

Third Former General Re Executive Sentenced

See Dave Collins, (AP) Houston Chronicle, Ex-Gen Re executive gets 1 year in prison (w/ a hat tip to Bill Olis). See also Colleen McCarthy, Business Insurance Magazine, Former Gen Re finite exec gets one-year sentence

For a discussion of the two individuals previously sentenced see here and here.

(esp)(blogging from the Atlanta airport)

Vrdolyak Gets Probation

Former Chicago Alderman Edward Vrdolyak received a sentence of five years probation.  See Chicago Tribune, No jail for Vrdolyak; Carol Marin, Chicago Sun Times, Fast Eddie and justice -- hard to reconcile.  Vrdolyak plead guilty to a conspiracy to commit mail/wire fraud.  See Martha Nell, ABA Jrl Law News Now, Chicago Attorney and Ex-Alderman Ed Vrdolyak Pleads in Kickback Case; Huffington Post (AP), Vrdolyak to Plead Guilty: Judge.  He was represented by Attorney Michael Monico.

(esp)

Yes, People Really Do Go to Prison

The January 2009 Report - Alternative Sentencing in the Federal Criminal Justice System sends a clear message that people really do go to prison in the U.S.  The report states that "[d]espite the availability of alternative sentencing options for nearly one-fourth of federal offenders, federal courts most often impose prison for offenders in each of the sentencing table zones." 

And for those who believe that white collar offenders seldom face prison, the study shows that "[o]ffenders convicted of fraud and other white collar offenses, while still primarily sentenced to prison, also more often are sentenced to alternatives; approximately one-third of fraud and white collar offenders are sentenced to prison alternatives."  That means that about 2/3 must be going to prison. What is not stated here, however, is how white collar is defined.  Does it include RICO and money laundering offenses?

See also Doug Berman, Sentencing Law & Policy Blog here

(esp)

Second Sentence in AIG- General Re

The first sentence given to a former General Re executive was for two years (see here).  The court now sentenced a second individual, AIG's former vp of reinsurance.  This time the sentence is four years. See Colleen McCarthy, Business Insurance, Milton Sentenced to 4 Years for General Re Fraud; Doug Berman, Sentencing Law & Policy Blog, Another former AIG executive gets serious prison time, but also a serious variance.  Commentary to follow.

(esp) 

What Others Are Saying About the Skilling Decision

Doug Berman, Sentencing Law & Policy here (note that Professor Frank Bowman has a comment on the possible sentence)

Dan Slater, WSJ Blog, Skilling Conviction Upheld, Resentencing Ordered

Tom KIrkendall, Houston Clearthinkers, The Fifth Circuit rules in the Skilling appeal

Juan A. Lozano,Washington Post (AP), U.S. Court Orders Skilling Resentenced

Jef Feeley and Thom Weidlich, Bloomberg.com,  Skilling’s Conviction Upheld, Resentencing Ordered

(esp) (blogging from San Diego)

Skilling - Commentary on the Decision

The Fifth Circuit issued a 106 page opinion in the Skilling case (see here or here) - here are some thoughts on it -

• Many courts have struggled with the scope and definition of the honest services fraud statute.  Since its passage, section 1346 has caused several opinions that have attempted to provide a definition to "honest services" - a term that is undefined in the statute.  The Fifth Circuit, in a prior case - Brown had placed some restraints on prosecutions using this statute.  The Skilling decision narrows these restraints and allows more prosecutorial power in bringing an honest services fraud case. The court states:

"Therefore, it is not a matter of Skilling setting the corporation’s policy himself. Instead, the question is whether anyone who supervised Skilling specifically directed his actions—such as how Fastow sanctioned the scheme in Brown. Skilling never alleged that he engaged in his conduct at the explicit direction of anyone, and therefore he cannot avail himself of the exception from Brown."

Simplistically - will this mean that if you can blame someone else for your conduct (such as a higher-up in the corporation), this will mean the Brown exception applies, but if you are the person at the top you may be out of luck in trying to make this claim?

• The court finds - at best- harmless error in the giving of a deliberate ignorance instruction.
• The court rejects each of the claims regarding improper jury instructions.
• The court also rejects the venue claims of Skilling saying -

"It would not have been imprudent for the court to have granted Skilling’s transfer motion. The issue before us, however, is whether the court committed reversible error. It did not."

• The court rejects Skilling's claims of prosecutorial misconduct, and also rejects the Brady violation claims of the defendant.  But the court does let Skilling know that he can raise some of the Brady issues in the trial court.  So this issue may have a future. The court explicitly states:

"We find the omission of this statement from the 302s troubling. Perhaps even more troubling is that the government never disclosed the page of interview notes containing this statement to the district court. However, because the district court never had the opportunity to consider this page of interview notes, we cannot address this Brady claim for the first time on appeal. The district court did not assess the materiality of this statement or determine whether its suppression violated Brady. Thus, there is nothing for us to review. Skilling must bring this claim to the district court before we can address it."

Basically, this means that this case is far from over.

• The sentencing aspect is the biggest win for Skilling. Although the court states that it was proper to use the SEC testimony, it does reject the "four-level enhancement for substantially jeopardizing the safety and soundness of a 'financial institution.'"  What is  the definition of a "financial institution" is the question here, and the court uses the rule of lenity and sides with the defense. I await Professor Doug Berman's calculations from the Sentencing Blog, as to exactly the amount of time that this could reduce his sentence.

(esp)(blogging from San Diego)

Skilling- Sentencing Reversal and Remand; Conviction Stands

Opinion here - Download 06-20885-CR0.pdf

Commentary to follow.

(esp) (from San Diego)