Tuesday, October 8, 2013
The statute of limitations, I used to think, was designed to allow a wrongdoer who is not arrested for a period of years to have a certain sense of repose to be able to go on with his life without fear of arrest for that wrongdoing. Recent legislative and prosecutorial activity in extending statutes of limitations in areas such as child sex crimes and sex crimes where DNA of the otherwise-unidentified perpetrator has been preserved has undermined this rationale. Further, the use of conspiracy statutes in federal prosecutions also allows prosecutors to effectively punish defendants for acts committed beyond the ordinary statute of limitations as part of a conspiracy that continues into a period within the statutory limit.
White-collar prosecutors often view the statute of limitations, generally five years from the date of occurrence of the crime, as the period which they have to prepare a case to secure an indictment. Courts rarely, if ever, dismiss a case for a delay in indictment if the indictment is returned within the statutory period even if the defendant can demonstrate that the delay was due solely to prosecutorial lassitude and that the defendant has been prejudiced by loss of witnesses, dimming of witnesses' memories, and other factors that hamper her right to present a defense. And arguments at sentencing that the defendant has led a blameless but fearful life for the many years the prosecution took to indict him generally fall on deaf ears.
Occasionally, prosecutors find they are unable to prepare to their satisfaction cases within the statute of limitations period and ask defense counsel to agree to extend the limit. Unless there is a possibility that additional time would afford a defense lawyer a realistic possibility of dissuading the prosecutor from indicting or of securing a favorable pre-indictment plea disposition, there is rarely a good reason for a defense lawyer to agree to such an extension. Yet, defense lawyers frequently acquiesce to the prosecutor's request.
Some years ago, in a matter involving a series of allegedly false billings to the government, a federal prosecutor asked me to agree on behalf of my client to extend the statute of limitations. In response to my question why he sought an extension, the prosecutor said, quite frankly, that he had been too busy with other matters to bring the matter before a grand jury and that some (but not all) of the charges would soon be time-barred. I asked him why I, on behalf of the defendant, should therefore consent to a waiver of the statute. He responded that if I did not consent to the extension, he would charge my client as part of a massive conspiracy to defraud the United States in order to include the false billings on the expired dates (but not as separate charges). I told him that I would not agree.
A few days later, I received a letter from the prosecutor, thanking me for agreeing to an extension of the statute of limitations and including a waiver form to be signed by my client and me. Concerned that a failure to protest might be construed at a later time by a judge as an acquiescence to the prosecutor's request for an extension, especially if the prosecutor (or a successor) contended that I had agreed orally, I fired off a letter expressing my surprise at the letter and reiterating that I did not and would not consent to an extension. (I do not know whether the prosecutor's letter was prepared prior to our conversation in the expectation that I would consent and then sent in error, or was sent in the hope that I would change my mind or execute it without paying attention.) The client was never indicted.
As this case illustrates, it is my belief that defense lawyers too readily consent to prosecutors' requests to extend the statute of limitations. Although I personally am generally agreeable to consenting to an extension of time because an adversary is busy and needs more time to prepare papers, when such consideration clearly is to the detriment of a client, I believe a lawyer should not extend such professional courtesy, even if she fears she would be marked by the prosecutor's office as an attorney who deserves no personal consideration. Effective advocacy should generally trump civility.
I therefore note with interest that Reed Brodsky, the defense lawyer for Paul J. Konigsberg, a targeted long-time accountant for and close associate of Bernard Madoff, reportedly had refused to consent to an extension of the limitations period on behalf of his client. See here. I do not know what reasons, if any, the prosecution gave for its request and what reasons Brodsky had to refuse the request. I do know that a trial of some of Mr. Madoff's former employees, which is expected to go beyond the statute of limitations cutoff date, began this week. Of course, in the event any or all of those employees are convicted (or even not convicted), they might well then agree to cooperate with the authorities against Mr. Konigsberg.
If any of those defendants are available to testify against Mr. Konigsberg, the prosecutor will certainly be able to use them as witnesses. The prosecutor should not, however, properly be able to use the grand jury subpoena power or the grand jury itself to obtain their testimony or other additional evidence to prosecute Mr. Konigsberg for the crimes for which he was charged since a grand jury cannot be used to gain evidence for already-indicted cases or for additional Madoff-related crimes since they are time-barred. To be sure, at times prosecutors do secure additional evidence for use in a pending case when they conduct a grand jury investigation with a view toward indicting additional defendants or prosecuting not-yet-charged crimes against an already-indicted defendant. That is unlikely here.
Friday, September 20, 2013
The U.S. Sentencing Commission held a conference that examined 2B1.1 - the Fraud Guideline. A proposal offered from the ABA Task Force on the Reform of Federal Sentencing for Economic Crimes was one topic of discussion. (See ABA Task Force Report Download USSC Presentation 9-17-13). This proposal, presented by James E. Felman, came with several caveats, most importantly that the existing statutory structural framework would remain in effect, although their "Prinicples of Consensus" presented weaknesses to this framework.
The ABA Proposal focuses on three key specific offense characteristics - loss, culpability, and victim impact. But unlike the existing 2B1.1 guideline, levels of culpability would play a significant role in determining the sentence. Although loss continued to remain a component in determining a sentence under this proposal, the sentence would not be a function of a mathematical computation that was basically driven by the amount of loss. The proposal appeared to be a framework for discussion, as opposed to an in-depth description as to exactly how it would operate. And although it left open many questions, it offered a strong base for starting a conversation that would move the sentencing guidelines away from being predominantly loss-focused and also away from including "intended loss." The proposal also appeared to provide the judiciary with more influence in the sentence received, something that might not be as appealing to the government.
Wednesday, August 28, 2013
United States v. Orthofix, Inc was an important decision for several reasons. First, the Memorandum Opinion issued by Judge Young (D. Mass), on July 26, 2013, takes a turn in what typically happens when there is a corporate plea arrangement. Second, the judge explains at length policy considerations for sentencing corporations. The case also raises questions for the future of corporate plea agreements.
This decision involves two cases involving corporate pleas where the court rejected the pleas. The court notes the importance of considering the "public interest" in accepting pleas. Hon. Young states:
"Just as the Court must take account of the public interest when it exercises its discretion to fashion its own sentence, so too the Court must take account of the public interest when called upon to review a sentencing recommendation attached to a plea bargain."
The court considers the history behind plea bargains and contract law and notes the problem of considering it as a prosecution-defense relationship as opposed to a triadic relationship. Hon. Young states, that "this Court makes no attempt to question the policy choices of executive administrative agencies; it merely seeks to ensure that the sentence imposed upon Orthofix fosters (1) the protection of the public, (2) specific and general deterence, and (3) respect for the law."
The court states that "[o]rganizational criminals pose greater concerns than natural persons for two important reasons." One of the concerns raised in the case of Orthofix, by the court, was that the plea of five years failed to impose the Corporate Integrity Agreement as part of the probation.
This Memorandum decision raises other interesting questions that were not discussed here, and perhaps not relevant to these matters. But one has to wonder whether courts should also be examining plea agreements that place undue pressure on corporations and individuals to plea because the risk of going to trial is too severe? In a post-Arthur Andersen world do corporations have the choice of risking a trial or is the necessity of entering a plea too great to avoid the repercussions of an indictment and possible conviction? Should oversight of pleas go beyond the sentencing aspect to also scrutinze the bargaining position of the parties and the fairness of the general bargain?
See also Doug Berman's Sentencing Law & Policy Blog here, Jef Feeley & Janelle Lawrence, Bloomberg's, Orthofix’s Settlement of Medicare Probe Rejected by Judge
Thursday, August 15, 2013
The BLT Blog provides background here.
The government asked for 4 years and the defense wanted a much lower amount for Jesse Jackson Jr. The court entered a sentence of 2 1/2 years (30 months) for Jesse Jackson Jr. and 1 year (12 months) for his wife, Sandi Jackson. See Ann E. Marimow and Rachel Weiner, Washington Post, Jesse L. Jackson Jr. sentenced to 30 months in prison
The Chicago Tribune reports (here) that Jesse Jackson Jr. will serve his sentence first, followed by Sandi Jackson.
It is good to see courts accommodating the sentences of a husband and wife to account for what may be best for their children. We have seen this done in the past, for example in the case of Lea and Andy Fastow (see here).
Friday, June 21, 2013
Judge Lake effectively ratified the deal struck months ago by federal prosecutors and the former Enron CEO. The agreement called for a sentence of from 14 to 17.5 years. Skilling agreed to stop fighting his conviction and to hand over restitution funds to the victims. He obviously gets credit for time already served. WSJ has the story here.
Tuesday, January 8, 2013
One of the many things that has bothered me about the criminal justice system is that there are no "grays." Everything is either criminal or non-criminal. Conduct that on one day is legally acceptable, even if perhaps sharp and unwholesome, on the next day will, if a penal statute goes into effect, be criminal and punishable by years in prison.
This fair-to-foul scenario is particularly troublesome in certain areas of white-collar law. On day one, for instance, conduct which exploits "loopholes" in the tax law may go from widely-practiced and legally-tolerated "tax avoidance" to now-prohibited and severely punishable "tax evasion." When this change from acceptable to criminal occurs by statute, there at least is some public notice and warning to potential wrongdoers, although such notice obviously never reaches many persons. When, however, the law, or potential law, changes overnight by an unpredictable or unexpected court decision or an indictment based on a novel theory of prosecution, the sudden changes to what is considered prosecutable is even more problematical.
I do not have any easy solution to this problem. We cannot expect the government to send out a hundred million notices that new criminal laws have been enacted (although we do, for instance, require financial institutions to notify all of their credit card customers of interest rate changes). Nor, of course, if such notices were sent, can we reasonably expect a hundred million people to read or understand them. Additionally, we do not want to prohibit prosecutors from imaginative use of legally permissible tactics to prosecute what is apparently morally wrong and harmful.
We should, however, in the sentencing area recognize that it is essentially unfair to punish a defendant as seriously for conduct that had previously been generally accepted or tolerated than for conduct clearly known at the time of the offense to be criminal. Under this theory, for instance, Michael Milken could reasonably be prosecuted, as he was in the late '80s, for essentially "parking" stock, an arguably "civil" violation never before prosecuted criminally, but could not reasonably be sentenced, as he was initially, to ten years in jail (later reduced upon a Rule 35 motion).
I have on a few occasions argued to a sentencing judge that she should give a less severe sentence because the defendant's conduct was at the time he committed it not widely known to be criminal or generally was not prosecuted. I have never been successful, at least to the extent a judge explicitly agreed (of course, judges often do not explicate their reasoning). I am aware of no case in which a court explicitly granted a departure or variance on these grounds (although there may well be some). Nor am I aware of any Sentencing Guidelines consideration of this issue.
The decision by arbitrator Paul Tagliabue in the National Football League's New Orleans Saints "bounty" case (In the Matter of New Orleans Saints Pay-for-Performance/Bounty, December 11, 2012) is interesting and relevant. See here. See also here. Tagliabue, the former National Football League commissioner and a lawyer, affirmed the findings of misconduct made by Commissioner Roger Goodell but vacated the disciplinary sanction for the four players involved, suspensions of from four games to one year. Tagliabue based his vacation on sanctions essentially on two grounds: first, that the players' actions were encouraged by the coaches and other officials of the Saints, and, second, that professional football had previously treated such conduct gently, if not tolerating it. Tagliabue strongly suggested that when an existing "negative culture" is addressed by strict prohibitions, the penalties for violations should be phased in.
I do not expect federal sentences to be "phased in" so that, for instance, a violation of a new law within two years of enactment be punishable by a sentence of up to two years, and thereafter by up to five, although I do not think such an idea is entirely far-fetched. I do hope, however, that in appropriate cases judges consider adjusting sentences downward when the conviction is based on new law or a new application of existing law, especially when the change caused a sudden prohibition of generally acceptable behavior in the prevailing culture, even a negative culture. Mr. Tagliabue's opinion will not, of course, be considered precedential in the criminal law, but application of its reasoning in certain criminal cases may be appropriate.
Related Article - Tagliabue tosses out player penalties in bounty case
Friday, October 26, 2012
This panel was moderated by James Felman (Kynes, Markman & Felman, P.A.). The opening panelist, Hon. Ketanji Brown Jackson, Vice-Chair, U.S. Sentencing Commission, spoke about the 2012 Guideline Amendments which go into effect soon if Congress does not modify the changes. Some of these changes are in the white collar crime arena. Specifically, there are modifications to certain frauds – insider trading, mortgage fraud, securities fraud, and financial institution fraud. Many of these changes regard the determinations of loss. In some instances the commission changed the application notes.The speaker also noted that the Sentencing Commission is in a multi-year study of economic crimes. (proposed amendments can be found here)
Providing a congressional perspective was Bobby Vassar (Chief Minority Counsel, Subcommittee Crime, Terrorism, and Homeland Security, U.S. House of Representatives) who reminded us that no one gets defeated in an election by being tough on crime. Providing an executive perspective was Michael Rotker, Criminal Appellate Division, U.S. Department of Justice. From the defense side was Amy Baron Evans, Federal Defenders Sentencing Resource Counsel.
Two individuals provided international perspectives: Clarisse Moreno (Kynes, Markman & Felman, P.A.) and Stephan Terblanche (University of South Africa, Pretoria, South Africa). Ms Moreno noted that in France if you get two years or less, very rarely will you serve prison time. Absent it being a human rights violation, in Norway the maximum penalty is 21 years. Ms. Moreno also noted that the recidivism rate is low in Norway. Stephan Terblanche noted that where movies and other items from the U.S. are looked at elsewhere, the sentencing guidelines do not export very well. Having the international perspective offered by these speakers was particularly fascinating and offered a welcomed dimension to this sentencing discussion.
Wednesday, October 24, 2012
The sentencing is today at 2:00 PM Southern District of New York Time. (And is there really any other time in the Universe?)
As I noted on Monday, Gupta's Guidelines Range, according to the Government and the Probation Office, is 97-121 months.That's a Level 30. Gupta's attorneys put Gupta's Guidelines Range at 41-51 months. That's a Level 22. The different calculations are based on different views of the gain and/or loss realized and/or caused by Gupta. Gupta's attorneys are seeking a downward variance and asking for probation, with rigorous community service in Rwanda. Serving a sentence in Rwanda is not as strange as it may sound on first hearing. After all, criminal defendants in Louisiana regularly do time in Angola.
But seriously, lawyers and germs, there is a practice pointer in here somewhere. Practitioners naturally strive to obtain the lowest possible Guidelines Range as a jumping off point for the downward variance. It is psychologically easier for a judge to impose a probationary sentence when the Guidelines Range is low to begin with. It is legally easier as well, because the greater the variance from the Guidelines, the greater the judicially articulated justification must be.
But too many lawyers push the envelope in their Guidelines arguments, thereby risking appellate reversal on procedural grounds. This is a particular danger when the judge is already favorably disposed toward the defendant and looking for ways to help him. Failure to correctly calculate the Guidelines is a clear procedural error. (Some of the federal circuits try to get around Booker, Gall, and Kimbrough by setting up rigorous procedural tests. The Fourth Circuit is the most notorious outlier in this regard.) Lawyers must be on guard against the possibly pyrrhic and costly victory of an incorrectly calculated Guideline range, followed by probation. One solution is to have the court rule on alternative theories. "This is the Guidelines Range. These are my reasons for downward variance. Even if the Guidelines Range was really at X, as the Government argues, I would still depart to Y for the same and/or these additional reasons." If the judge already likes your client, getting him or her to do this is often an easy task.
Of course, Judge Rakoff needs no instructions in this regard. One of our ablest and sharpest jurists, and a leading Guidelines critic, he will attempt to correctly calculate the Guidelines Range in an intellectually honest manner and will downwardly (or upwardly) vary as he damn well sees fit, with ample articulation.
Monday, October 22, 2012
As my colleague Solomon Wisenberg wrote, see here, former Goldman Sachs director Rajat K. Gupta is scheduled to be sentenced this Wednesday, October 24, by Judge Jed S. Rakoff of the Southern District of New York upon his conviction of insider trading and conspiracy.
The sentencing decision in this case is a particularly difficult one. On the one hand, Gupta is (or was) a man of exceedingly high repute who has done extraordinary good works, as attested to in sentencing letters by Bill Gates and Kofi Annan, and, if sentencing were based on an evaluation of the defendant's entire life, even considering the serious blemish of this case, Gupta might well deserve commendation and not punishment.
On the other hand, the crime for which Gupta was convicted, albeit arguably aberrational, was a brazen and egregious breach of the faith which was placed in him precisely because of his outstanding reputation. Indeed, while Gupta's motivation appears not to have been greed or personal gain, a factor that ordinarily would suggest leniency, one may conclude that his crimes resulted from an arrogance of power and privilege and the belief that as a "master of the universe" he was above the law.
Gupta, having gone to trial and expected to appeal (challenging the same wiretap that is a subject of the appeal by Raj Rajaratnam discussed by my other colleague, Ellen S. Podgor, see here), is at somewhat of a disadvantage. Since any statements he may make discussing his motivation or showing remorse could probably be used as admissions in a potential new trial, he did not admit wrongdoing or demonstrate remorse, factors viewed favorably by most sentencing judges. Although I strongly doubt that Judge Rakoff will "punish" Gupta for going to trial, as some judges do, the judge will be unable to consider any understandable and perhaps sympathetic motivation or any remorse, if either exists, as a mitigating circumstance.
As often happens, both sides have made extreme sentencing requests. The government asks for a sentence of 97 to 121 months, what it claims is the appropriate sentencing guidelines range. The defense is seeking probation with community service in Rwanda, supported by a request from a Rwandan governmental official, or alternatively New York. At first blush, the request for community service in Rwanda struck me as either a "Hail Mary" hope, an accommodation to a client or family who are unwilling to accept reality, or a deliberately lowball request in the expectation of a middle ground sentence. On further consideration, however, I believe that a sentence of, say, two years performing "community service" in Rwanda while living in spartan conditions (a modest one-room apartment, cooking his own meals, not having servants, etc.), might not be inappropriate. Rather than wasting Gupta's enormous talents and intellect in prison, such a sentence would enable him to provide considerable benefit to society. Indeed, such a sentence would probably be much more onerous for Gupta than confinement in a federal minimum security camp. To be sure, there is a serious question whether such community service could be suitably monitored.
Of course, Judge Rakoff, however independent, fearless and innovative as he is, will not sentence Gupta in a vacuum. He will no doubt consider sentences that he and other judges have meted out to lesser-known defendants in other insider trading cases and how his sentence will appear to the public in terms of deterrence and equal justice. Gupta should not buy his plane ticket yet.
Rajat Gupta is scheduled to be sentenced by Judge Jed Rakoff on Wednesday. The Rajat Gupta Sentencing Memo filed last week by his attorneys is an outstanding work of its kind, and the Government's Sentencing Memo in U.S. v. Gupta is also quite good.
Gupta's Guidelines Range, according to the Government and the Probation Office, is 97-121 months. Gupta's attorneys, led by Gary Naftalis, put Gupta's Guidelines Range at 41-51 months. The different calculations appear to be based entirely on different views of the gain and/or loss realized and/or caused by Gupta. Key issues are whether Judge Rakoff should include the acquitted conduct in the loss calculations (which he is allowed but not required to do) and whether the gain should be confined to Gupta and his co-conspirators, as opposed to other investors. Gupta's attorneys are arguing for probation, with a condition of rigorous community service in New York or Rwanda.
My guess is that, however he gets there, Judge Rakoff will impose a prison sentence of 3 to 6 years. The judge is a well-known critic of the Guidelines and Gupta has apparently led a life of extraordinary kindness and good works. On the other hand, Gupta is an enormously wealthy member of the financial elite to whom much has been given. He stands convicted of insider trading, which everybody on Wall Street knows is illegal. This was not a case in which ambiguous admitted conduct did or did not violate the outer edges of the insider trading laws. This was a case in which Gupta either tipped clearly confidential, proprietary inside information or he didn't. The jury has ruled that he did, at least with respect to four of the six charged counts. Judge Rakoff must and will accept that verdict. I believe that Judge Rakoff will see it as his judicial duty to send, through Gupta's sentence, a message of general deterrence.
Tuesday, August 28, 2012
In an editorial published July 16, 2012 entitled "Trial Judge To Appeals Court: Review Me" (see here), the New York Times, in the wake of Judge John Kane's opinion discussed here last week (see here), rightly criticized standard plea waivers in federal court, especially those that preclude appeals based on attorney ineffectiveness or prosecutorial misconduct. The editorial, however, in alleging that in order to induce pleas "[p]rosecutors regularly overcharge defendants with a more serious crime than what actually occurred" was largely off-the-mark, as Paul J. Fishman, the respected United States Attorney for the District of New Jersey, claimed in a letter to the Times published on July 26, 2012 (see here).
Federal prosecutors do not, in my view, "regularly" overcharge defendants "with a more serious crime than what actually occurred," at least in white-collar cases (although they often pile on unnecessary if legally justifiable multiple charges). As Mr. Fishman noted, DOJ has directed prosecutors to charge only provable crimes, and in my experience that directive is generally followed. In many districts, notably with respect to white collar cases the Southern District of New York, guilty pleas are to the indicted charges or top count, and rarely only to less serious counts. Since defendants are unlikely to plead guilty to unprovable charges, that practice indicates that the charging decisions are consistent with the law and the facts.
Indeed, there is little incentive for prosecutors to overcharge in order to induce pleas since defense lawyers are aware that the Sentencing Guidelines suggest that the sentencing judge should in any case consider all relevant conduct committed by the defendant, no matter to what crime the defendant has pleaded, and prevailing statutes (and often a conviction of multiple charges) virtually always provide the courts more than ample sentencing leeway. Unlike many state statutory schemes, most federal statutes in the white collar area -- mail and wire fraud, for instance -- are generic and not scaled by degrees according to the amounts of money involved, such as state statutes concerning grand larceny in different degrees. The Sentencing Guidelines levels, but not the statutory crimes, are determined primarily by the dollar loss figure.
This is not to say that most defendants do not face considerable institutional pressure to plead guilty (and, if possible, "cooperate" with the prosecution). Defendants, depending on from which direction one looks, are either "punished" for going to trial or "rewarded" for pleading guilty by the Guidelines provisions for a near-automatic two or three level decrease for pleading (acceptance of responsibility, U.S.S.G. 3E1.1) and a near-automatic two level increase for a convicted defendant who has testified in her defense (obstruction of justice, U.S.S.G. 3C1.1). Additionally, a defendant who pleads guilty usually receives a more generous interpretation of the Guidelines by the prosecutor, probation officer and the court, and a lessened fervor from the prosecution and more lenient attitude by the judge. And, of course, the sweet carrot of a U.S.S.G. 5K1.1 letter for those who cooperate with the government is often, perhaps too often, the difference between a severe sentence and a lenient one.
Thursday, August 23, 2012
Professor Douglas Berman, in his excellent blog, Sentencing Law and Policy, quoting a Denver Post article, writes that after a federal judge rejected a plea agreement urged by both parties because it included a standard appellate waiver, the prosecutor came back with a harsher offer, albeit one without an appellate waiver, which the defendant accepted. See here and here.
Senior District Judge John Kane of Colorado refused to accept a deal involving Timothy Vanderwerff, a defendant accused of child pornography, because of the waiver provision. That deal provided that the government would seek no more than 12 years in prison and the defendant seek no less than five. The judge said that "indiscriminate acceptance of appellate waivers undermines the ability of appellate courts to ensure the constitutional validity of convictions and to maintain consistency and reasonableness in sentencing decisions."
In court papers Vanderwerff's attorney, federal public defender Edward Harris (who worked with me years ago) wrote that the prosecutors refused to agree to the same sentencing position deal without the appeal waiver and instead took a much harsher position.
One possible lesson from this case is that well-meaning judges, reacting to the government's increasing efforts to expand the terms of plea agreements to limit a defendant's ability to appeal and appellate courts' ability to review, might actually do harm to the individual defendant before them in rejecting a bargained-for agreement. Another possible lesson is that the government does not take kindly to judges interfering with its de facto power to set plea bargaining parameters and may demonstrate its displeasure by treating even acquiescent defendants more harshly when the judge rejects a plea deal it has offered.
Whether the defendant will ultimately suffer is unclear, because the court now, presumably subject to appeal by either side (as well as any applicable mandatory minimums), has the ultimate power to set the defendant's sentence and may well choose to sentence him under the posture both sides agreed upon in the original plea bargain.
Thursday, July 19, 2012
The Supreme Court, in Southern Union Co. held that "where a fine is so insubstantial that the underlying offense is considered 'petty' the Sixth Amendment right of jury trial is not triggered and no Apprendi issue arises." But the Court then went on to say that "not all fines are insubstantial, and not all offenses punishable by fines are petty." The final ruling was that "Apprendi applies to the imposition of criminal fines." (see here)
Today a district court interpreted that decision with the Hon. Beryl A. Howell penning the decision in United States v. Sanford LTD & James Pogue. The court looked at whether "evidence of monetary proceeds is either permitted or required to be presented to the jury." So the court needed to examine Southern Union and also the Alternative Fines Act, 18 U.S.C. s 3571(d) and determine whether gross revenues offered by the government should be admitted under the Fed. R. Evid. Rules 402 and 403.
The district court starts by noting that motive is admissible evidence and that the "relevance is not substantially outweighed by a danger of unfair prejudice." That said, the court goes a step further holding "that the government's proposed specific measure of monetary proceeds ($24,045,930.79 in gross revenues) may not be admitted, standing alone, to establish the 'gross gain' that Sanford 'derive[d]...from' the charged offenses under 18 U.S.C. s 3571(d)." The court stated, "[t]he government may not admit that specific monetary figure except to the extent, and only if, necessary for the jury to establish or calculate the appropriate measure of 'gross gain' 'derive[d] ...from' the charged offense, which the Court defines" later in its opinion.
It is here that things get particularly interesting. Hon. Howell notes the ambiguity in the term "gross" monetary amount. Being a master of the sentencing guidelines, Hon. Howell points out how the guidelines provide guidance on the meaning of "gross gain." She provides a wonderful lesson on the legislative history, even referencing the Model Penal Code. She notes how there are conflicting opinions on what constitutes gross gains. (nice law review topic for a student looking for the jurisdictional split for his or her student note). In the end she defines "gross gain" to mean "any additional before-tax profit to the defendant that derives from the relevant conduct of the offense."
But she also notes the importance of the term "derived from" and "concludes that the term ...requires that the government prove that a given monetary amount (either a gain or a loss) was proximately caused by the conduct of the charged offense in order to qualify as a 'gross gain' under s 3571(d)."
The court noted that it "requires additional information before deciding whether allowing the government to seek a fine under s 3571(d) would 'unduly complicate or prolong' the trial."
Hats off here to Attorney Greg Linsin of Blank Rome who raised this issue.
(esp) (w/ a hat tip to Irwin Schwartz).
The First Circuit affirmed the sentences of Robert Prosperi and Gregory Stevenson. The government appealed the sentences following their convictions for mail fraud, highway project fraud and conspiracy to defraud the government. "Both appellees were employees of Aggregate Industries NE, Inc. ('Aggregate'), a subcontractor that provided concrete for Boston's Central Artery/Tunnel project, popularly known as the 'Big Dig.'" The judge calculated the sentence under the guidelines as 87-108 months and then gave the defendants 6 months of home monitoring, 3 years probation, and 1,000 hours of community service.
The appellate court found the sentences met the reasonableness standard. The First Circuit stated:
Although the degree to which the sentences vary from the GSR gives us pause, the district court's explanation ultimately supports the reasonableness of the sentences imposed. The district court emphasized that its finding on the loss amount caused by the crimes, the most significant factor in determining the GSR, was imprecise and did not fairly reflect the defendants' culpability. Hence it would not permit the loss estimate to unduly drive its sentencing decision. Relatedly, it found that there was insufficient evidence to conclude that the defendants' conduct made the Big Dig unsafe in any way or that the defendants profited from the offenses. The court then supplemented these critical findings with consideration of the individual circumstances of the defendants and concluded that probationary sentences were appropriate. We cannot say that it abused its discretion in doing so.
The judges ended this thoughtful opinion with:
In this case, the district court carefully explained its sentencing decisions. Most significantly, the court explained why the estimated loss amount was an unfair proxy for culpability, and why it should not drive the sentencing process. Importantly, it also found that there was insufficient evidence to conclude that the defendants' conduct compromised the structural integrity of the Big Dig, or that they sought to enrich themselves. Coupled with the individual circumstances of the defendants, these findings provided a "plausible explanation [for the sentences], and the overall result is defensible." Innarelli, 524 F.3d at 292.
It is nice to see judges looking at the individuals and not sentencing by the numbers.
See also Doug Bermans, Sentencing Law & Policy here
Thursday, June 28, 2012
Today's New York Times was a virtual treasure trove of white collar crime stories. Among them were the following:
"South Carolina House Panel to Hear Ethics Complaints Against Governor" (see here) - South Carolina Governor Nikki Haley is facing a legislative hearing on whether she acted unethically during her term in the legislature when she was paid $110,000 annually as a fundraiser for a hospital whose legislative goals she advocated. Knowing nothing about South Carolina legislative ethics rules or criminal law, I do not venture to opine whether the Governor did anything improper. However, the broad facts here are strikingly close to a series of cases in New York in which a hospital CEO, a state senator and a state assemblyman all were convicted and went to prison. See here. It seems to me there should be a restriction against a legislator working for an entity, at least in a loosely-defined job such as consultant or fundraiser, and advocating or supporting favorable legislation for that entity.
* * *
"Madoff's Brother Sets Plea Deal in Ponzi Case" (see here) - Peter B. Madoff, the brother of Bernard Madoff and the No. 2 man at Bernard L. Madoff Investment Securities, will reportedly plead guilty tomorrow to falsifying documents, lying to regulators and filing false tax returns. Peter Madoff reportedly served as the nominal compliance officer of his brother's wholly-owned securities firm and apparently exercised little or no oversight of the firm's operations, thereby providing his brother the freedom to steal billions.
Placing an investment firm's proprietor's brother as compliance officer is akin to asking the fox to guard the henhouse. It seems there should be, if there is not, a law, rule or regulation prohibiting a close relative, like a spouse, parent, child or sibling, from being the responsible compliance officer in a substantial investment firm owned entirely (as here) or largely by one's relative.
* * *
"JP Morgan Trading Loss May Reach $9 Billion" (see here) - The amount of JP Morgan's trading losses from its London office could be as much as $9 billion -- four and one-half times as much as the company announced originally. While JP Morgan has in view of its considerable profits downplayed the magnitude of the loss, which its chief executive officer Jamie Dimon estimated in May could possibly be as much as $4 billion, obviously a $9 billion loss takes a much greater bite out of the firm's profitability, and conceivably may even raise some questions as to the firm's viability.
We now know, in the wake of bailouts and government support, that the federal government is both the de facto and de jure insurer of major banking institutions. One might ask whether a government insurer, like a private insurance company, should not be able to set specific rules to curb risky activities which might trigger the insurer's support. To update Congressman Barney Frank, there are now nine billion more reasons for increased governmental regulation.
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Like many other white collar defense lawyers, I am strongly against overcriminalization. On the other hand, I am equally strongly against underregulation. One of the principal reasons I favor greater and clearer rules and regulations is to give potential white-collar offenders reasonable notice of what is criminal and what is not, and not leave that decision, as frequently happens now, to a federal prosecutor's interpretation of the amorphous fraud laws.
A significant portion of the white-collar defendants I have represented in the last forty years, including many of those who were convicted, have actually believed that their actions were not criminal. In some cases, this was simply because they lacked a moral compass. In the financial world, where the primary, and often sole, goal is to take other people's money away from them, many people do not consider whether what they do is morally right or wrong, or are so amoral that they are incapable of making that distinction. Tighter regulation will at least tell them what is prohibited and what is not.
Thursday, June 21, 2012
The Supreme Court issued an opinion in Southern Union Co. v. United States. The company was convicted of a RCRA violation, which carries a penalty of a fine of not more than $50,000 for each day that there is a violation. Justice Sotomayor, writing the opinion for the Court, considered whether juries need to decide the fine given, in order to comply with the Court's prior decisions in Apprendi and Blakely that "reserves to juries the determination of any fact, other than the fact of a prior conviction, that increases a criminal defendant's maximum potential sentence."
The Court held that "where a fine is so insubstantial that the underlying offense is considered 'petty' the Sixth Amendment right of jury trial is not triggered and no Apprendi issue arises." But the Court then went on to say that "not all fines are insubstantial, and not all offenses punishable by fines are petty." The final ruling was that "Apprendi applies to the imposition of criminal fines." And it applied here.
A dissent by Justice Breyer, that was joined by Justices Kennedy and Alito, argued that "the Sixth Amendment permits a sentencing judge to determine sentencing facts - facts that are not elements of the crime but are relevant only to the amount of the fine the judge will impose." They believed that the Court's position would "lead to increased problems of unfairness in the administration of our criminal justice system." They discuss the existing high rate of plea agreements in the case.
The real question here is whether this decision will matter. As noted by the dissent, 97% of federal convictions result from guilty plea. But what went unnoticed is that very few companies - the object of many fines - go to trial. Often these cases are resolved with non-prosecution and deferred prosecution agreements. So will it really make any difference that juries can determine these fines, when the corporation in a post Arthur Andersen LLP world will seldom be going to trial.
Sunday, June 3, 2012
The recent federal sentencing guideline conference had a panel moderated by Professor Doug Berman (Ohio State) on fraud/theft - it was part two for this conference on the topic of the fraud/theft sentencing guidelines. The panelists were: Harry Chernoff (AUSA Southern District of NY); Lisa Mathewson (Law Offices of Lisa A. Mathewson); Tracy A. Miner (Mintz Levin Cohn Ferris Glovsky & Popeo).
Harry Chernoff emphasized his belief that who the judge is can make a difference in the sentence received in a fraud/theft case. Lisa Mathewson noted how "loss is an imperfect" statement of culpability. Tracy A. Miner suggested that one needs to "look at the motivation of the particular individual." In this regard there was discussion how a corporation may be getting a pass because of a deferred prosecution. Looking at 2B1.1 and how to assess "gain or loss," Lisa Mathewson reminded listeners that when the loss is "0" that is a number that can and should be used. Tracy Miner noted that prosecutors are trained to increase the loss figure. In this regard it was noted that loss in some cases can end up as 360 to life, because there are so many potential aggravators. It was noted that is important to look at lack of gain as a mitigating factor that warrants a move downward.
Harry Chernoff emphasized his belief that who the judge is can make a difference in the sentence received in a fraud/theft case. Lisa Mathewson noted how "loss is an imperfect" statement of culpability. Tracy A. Miner suggested that one needs to "look at the motivation of the particular individual." In this regard there was discussion how a corporation may be getting a pass because of a deferred prosecution.
Looking at 2B1.1 and how to assess "gain or loss," Lisa Mathewson reminded listeners that when the loss is "0" that is a number that can and should be used. Tracy Miner noted that prosecutors are trained to increase the loss figure. In this regard it was noted that loss in some cases can end up as 360 to life, because there are so many potential aggravators. It was noted that is important to look at lack of gain as a mitigating factor that warrants a move downward.
It was noted how courts set the bar extremely low in what will be considered "sophisticated means." Tracy Miner noted that computers being used should not make the conduct sophisticated, as even kindergarten students use computers these days.
Some panelists noted that one needs to look at what was the real conduct and whether it being increased just because this was conduct highlighted in recent days. Tracy Miner reminded listeners to try and convince the government of the benefits of the defendant’s conduct. For example, there may be good collateral consequences such as did special education kids benefit and will there be severe consequences if the loss is placed very high.
The end of the panel discussion looked at commission considerations on the horizon and one position taken by some was that the commission should look at the whole guideline as opposed to just tweaking parts.
Wednesday, May 23, 2012
A Blue-Ribbon Report calls for changes to sentencing guidelines implementation. They advocate for "more consistent promotion and recognition of compliance and ethics programs by the U.S. enforcement community" as this "would incentivize businesses to invest more fully in self policing efforts against corporate crime." The Advisory Group on this report is most impressive with folks like Mancy Higgins (VP and Chief Ethics & Compliance Officer for Bechtel), Michael E. Horowitz who served on the group prior to being appointed Justice Department's (DOJ) Inspector General; former Deputy Attorney General Paul NcNulty who joined Baker & McKenzie LLP in 2007; Hon. Diana E. Murphy of the United States Court of Appeals for the Eighth Circuit; Michael Oxley, former Congressman and Chairman of the House Financial Services Committee; and Former Deputy Attorney General Larry Thompson, who retired as senior vice president of government affairs, general counsel, and secretary for PepsiCo. Others who are part of this independent advisory group are equally as impressive.
Thursday, May 10, 2012
The white collar crime blog, for two years (see here and here), has given the collar for the case most needing review to the case of Sholom Rubashkin. The case has an incredible gathering now from a spectrum of individuals and groups across political and ideological views. The Petition for Cert is here and background on the case is here. Here are some of the interesting updates on this case -
Washington Legal Foundation - Urges High Court to Review Unreasonably Harsh Sentence for Small-Business Owner
Amici Brief for Justice Fellowship & Criminal Law & Sentencing Professors and Lawyers - Download 11-1203 amici brief (a wonderful brief authored by David Deitch and Alain Jeff Ifrah that points out the jurisdiction split among Circuits and why it is important for Appellate "judges to state on the record that they have considered each non-frivolous argument for variance under the factors listed in Section 3553(a)" and how and why each such argument affected the sentence imposed.
Amicus Brief of the Association of Professional Responsibility Lawyers (APRL) - Download APRL Amicus Brief in Rubashkin (a strong brief written by W. William Hodes that provides the importance of this case from the perspective of "an independent national organization of lawyers and legal scholars whose practices and areas of academic inquiry are concentrated in all aspects of the law of lawyering." The brief focuses on the jurisdiction split regarding Rule 33 of the Federal Rules of Criminal procedure. The brief also points out important ethics issues that warrant review in this case.)
Hopefully, someone is listening.
Monday, April 30, 2012
In United States v. VandeBrake, (opinion- Download 111390P) the Eighth Circuit in a 2-1 opinion affirmed a 48-month sentence in an anti-trust case. The trial court had "varied upward from the advisory guidelines range based primarily upon VandeBrake's lack of remorse and the court's policy disagreement with United States Sentencing Guidelines Manual (U.S.S.G.) § 2R1.1." The trial court rejected, after giving notice to the parties, a binding plea agreement which called for a sentence of 19 months. Defendant-appellant argued that imposing "the longest sentence ever imposed in an antitrust case" was unwarranted here in comparison to the other case that received this same high sentence. The Appellate court affirmed the decision, but there's a concurring opinion and also a dissent.
The concurring opinion "disassociate[s itself] from the district court's comments about economic success and status, race, heritage, and religion." Chief Judge Riley writes - "I consider those comments inappropriate and not a proper reason for supporting any sentence."
The dissent by Circuit Judge Beam states in the opening paragraph - "even a multi-millionaire businessman has the right to be sentenced under the rule of law, especially rules recently put in place by the Supreme Court. Rich persons, poor persons and persons at all other economic strata should expect no less." The dissent states "the sentencing court's bald assumption that it has deferential discretion to substantially vary from all guidelines on policy grounds is reversible error." Judge Beam states:
"My research reveals that there were only a few hundred offenders sentenced for committing antitrust violations between FYs 1996 and 2011. The statistics also demonstrate that, over a period of 15 years, VandeBrake was the only antitrust offender sentenced above the guidelines range. Indeed, out of some 230 offenders The preliminary data for FY 2011 indicates that one antitrust offender was sentenced above the guidelines via an upward variance. Since VandeBrake was sentenced under § 2R1.1 since FY 1997, 83 were sentenced within the guidelines range and 146 were sentenced below the guidelines range. Similarly, since FY 1996, of the 288 offenders sentenced with an antitrust violation being the "primary offense," 95 were sentenced within the guidelines range and 192 were sentenced below the guidelines range." (Footnotes omitted)
Will DOJ join defense counsel on the same side in sending this case higher? They should. As noted here, Professor Berman looks at another white collar case with a high sentence. He states "I would bet a whole lot of money that on appeal federal prosecutors will defend this extremely long white-collar sentence as reasonable even though it surely does appear out of line with the sentences given to similar defendants convicted of similar crimes." As "ministers of justice" DOJ should support the defense if they are to continue their argument that sentences in white collar cases should remain within the guidelines.