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.
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"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.
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"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.
Sunday, April 29, 2012
Saturday, March 3, 2012
The opening session of the ABA Annual White Collar Crime program was a back to basics sentencing program. This program was moderated by Jodi L. Avergun (Cadwalader) who did a wonderful job walking the panel participants through the basics of white collar sentencing. She noted that many feel the sentences in white collar cases have no relation to the actual crime charged and in this regard she noted that Congress, this year, directed the Commission to review some of the white collar crime sentences.
Eric A. Tirschwell (Kramer, Levin, Naftalis & Frankel LLP) provided a historical background on the development of the sentencing guidelines, from mandatory to advisory guidelines, with a specific focus on the fraud guidelines. He covered key cases like Booker, Gall, Kimbrough, and Rita and also the 3553 factors that play a focal part of the sentencing framework. Moving specifically to white collar cases, he explained the basics of the fraud table found in 2B1.1 of the guidelines and talked about several recent white collar cases like two of my favorites, Parris and Adelson. Tischwell noted that it is important to calculate the guidelines range as low as possible, argue for a variance, and maybe for a departure as well, explain why the sentence is "sufficient but not greater than necessary" (SBNGN) to satisfy sentencing purposes.
For anyone who has never heard a presentation by Hon. Beryl A. Howell, (U.S. District Court, District of Columbia) it’s a must do. She always comes with incredible statistics and information. This time was no different. Hon. Howell looked at what the Sentencing Commission is doing and what are the trends that we are seeing. She focused on three areas: 1) what is actually happening with white collar crime defendants around the country 2) why statistics are important 3) what is coming next.
She started by doing something that most folks providing statistics on white collar crime fail to do – she defined what would be included within this term. Then she presented some fascinating statistics. Of particular note is that white collar sentences are going up (average in 2007 was18 months; pre-2011 shows 24 months). This is not surprising since the average guideline minimum has also increased (average in 2007 was 23 months; pre-2011 shows 31 months). Yes, the number of white collar cases being sentenced within the guidelines has decreased (68.2% in 2007 and pre-2011 it’s 47.7%), but it is also important to note that the government sponsored below guidelines range has increased (13.7 in 2007 and pre-2011 it’s 22.9%). Judges sentencing above the guidelines went up slightly (2.2% in 2007 and pre-2011 it’s 2.4%) Some statistics on the plea to trial numbers were also provided by Hon. Howell. The preliminary 2011 cases showed that 93.5 % of the cases had a plea and 6.5 % went to trial. The average sentence for pleas in white collar cases was 21 months and those that went to trial had an average sentence of 62 months. But it should be noted that the average guideline minimum for plea cases was 29 months and it was 111 months for the cases that went to trial.
Andrew C. Lourie (Kobre & Kim) offered tips for sentencing. He stressed the importance of putting important points in on sentencing memo.
Edward C. Nucci (U.S. Attorneys' Office, Southern District of Florida) presented the prosecution perspective (of course not speaking on behalf of the government). He stressed the importance of post-Booker variances. He noted how a prosecutor can want to work out as much as possible prior to the actual hearing.
Karen A. Popp (Sidley Austin), the final speaker spoke about chapter eight of the guidelines -organizations. She stressed the importance of having an effective compliance program, and not just a paper program.
This was an incredible opening to the white collar crime conference. More blog posts will follow.
(esp)(blogging from Miami, Florida)
Friday, January 13, 2012
Former Denver hedge-fund operator Drew "Bo" Brownstein, about whose case we wrote (see here), was sentenced Wednesday to a prison term of one year and one day following his plea of guilty to insider trading charges. Brownstein had received confidential information from his friend Drew Peterson concerning a pending purchase of Mariner Energy by Apache Corp. and used that information to reap about $2.5 million in profits for himself and his asset management firm. Drew Peterson, who has pleaded guilty but has not yet been sentenced, received the information from his father, H. Clayton Peterson, a Mariner director, and personally netted about $150,000 from it. The older Peterson also pleaded guilty, and received a probationary sentence.
The sentence of 366 days was between the 46-month high under the applicable Sentencing Guidelines range and the probationary sentence requested by defense counsel and above the six-month sentence suggested by the probation officer. The one-year and one-day sentence will allow Brownstein to earn "good time" of 47 days. Under federal law, good time is permitted only for a sentence of more than one year. 18 U.S.C. 3624(b).
Wednesday, December 7, 2011
As noted by co-blogger Solomon Wisenberg here, former Illinois Governor Rod Blagojevich received a sentence of 14 years.(see also FBI Press Release here). He is not the first governor from Illinois to be convicted and sentenced. History includes Otto Kerner (sentenced to three years), Dan Walker (sentenced to seven years - crimes unrelated to his office), and George Ryan (sentenced to 6 1/2 years). (see here) Two questions to ask here: 1) Are white collar sentences really getting lower? 2) Would his sentence be so high if he had quietly plead?
Tuesday, November 29, 2011
The U.S. Supreme Court accepted cert in the case of Southern Union Co. v. United States. The question presented is "whether the Fifth and Sixth Amendment principles that this Court established in Apprendi v. New Jersey, 530 U.S. 466 (2000), and its progeny, apply to the imposition of criminal fines."
Southern Union was convicted under RCRA following a jury trial. The First Circuit Court of Appeals examined whether under Apprendi it was proper that a judge, and not a jury, "determined the facts as to the number of days of violation under a schedule of fines," and held that "Apprendi does not apply to the imposition of statutorily prescribed fines."
With huge fines being levied in white collar cases, this issue is an important one not only in the environmental context, but also in other areas. In the Southern Unioncase, the "district court imposed a $6 million fine and a $12 million 'community service obligation.'" The government argued that Apprendi does not apply to criminal fines citing to the Supreme Court's decision in Oregon v. Ice. But with white collar fines becoming exorbitant numbers, it raises an interesting issue that will likely be an important case to follow in the Court.
Friday, November 18, 2011
The Fourth Circuit issued an unpublished opinion affirming Defendant Okun’s convictions and 100 year sentence. U.S. Attorney, Neil H. MacBride, states regarding this opinion:
"Financial fraudsters make calculated, rational decisions, and the threat of spending as much as 100 years in prison can begin to change corporate culture and behavior. Today’s opinion confirms that it is just for fraudsters who rob the life savings of their victims to spend the rest of their lives – or at least a big chunk of it – behind bars."
Interestingly the court notes in its opinion that the defendant operated a "Ponziesque" scheme, resulting in losses in excess of $125 million dollars." The court notes that the defendant's conviction on twenty-three counts resulted in a sentence of "1200 months' imprisonment, a sentence 3600 months below the advisory Guidelines sentence."
Some may argue that judges are issuing below guidelines sentences in white collar cases. But this case demonstrates the absurdity of issuing guideline sentences. Do you know anyone who has lived 400 years? Is that reasonable?
(esp)(blogging from Washington, D.C.)
Wednesday, November 16, 2011
Assistant Attorney General Lanny A. Breuer, in a recent speech to the American Lawyer/National Law Journal Summit spoke about what he considers disparities in sentencing. He stated:
"One area – though by no means the only one – in which we have seen significant disparities in sentencing in the last several years is financial fraud. With increasing frequency, federal judges have been sentencing fraud offenders – especially offenders involved in high-loss fraud cases – inconsistently. For example, a defendant in one district may be sentenced to one or two years in prison for causing hundreds of millions of dollars in losses, while a defendant in another district is sentenced to ten or 20 years in prison for causing much smaller losses."
Of course there are differences. Sentences should not be based solely on the crime or amount of loss involved.And yes, there are disaparities - there are disparities in the charging practices of prosecutors. Lest us forget - we sentence people, not numbers, and people are different.
See also Mike Scarcella, BLT Blog, DOJ's Lanny Breuer Addresses Sentencing Disparities
Thursday, October 27, 2011
A few months ago I wrote that "the widespread prosecutorial (and judicial) practice of giving favorable treatment . . . to those who cooperate with the government by informing, taping and/or testifying has had in many ways a pernicious effect on the criminal justice system, particularly in the white-collar area." See here.
The case of Kevin Ring, discussed last month by blog editor Ellen S. Podgor, see here, illustrates at least two detrimental effects: the harsh sentences sought by the government (and sometimes imposed by judges) against those who choose not to cooperate, especially those who exercise their right to trial, and the great pressure on potential cooperators to falsely implicate others in order to lessen their own sentences. Ms. Podgor briefly addressed the first in her blog. In this blog, I discuss the second.
Ring was the sole defendant to go to trial of the twenty indicted in the Abramoff lobbying scandal. He did so after he had thirteen proffer sessions with the government, but could not reach an acceptable plea and/or cooperation agreement. After a hung jury, at a retrial he was convicted of conspiracy, honest services wire fraud, and paying an illegal gratuity by providing meals and sports and concert tickets for political favors. He was sentenced by D.C. District Judge Ellen Segal Huvelle to twenty months yesterday, October 26.
In a sentencing letter, Ring (the editor of a book entitled Scalia Dissents, Writings of the Supreme Court's Wittiest) claimed that the government position on sentencing, which initially was for a sentence in the Guideline range of 17 to 22 years, and in other areas was retaliation for his failure to falsely implicate his friend and mentor, former Congressman John Doolittle, whose wife had been employed by Abramoff in an allegedly do-little job. He wrote, "[T]he prosecutors made it clear what I needed to say to get a deal. The prosecutors wanted me to say that Congressman Doolittle took official acts to help my clients because I gave him a stream of things of value, and if I had stopped giving him some things, he would have stopped taking official acts (or, at least, taken fewer acts). Saying these things would be a flat-out lie."
Further, he said, "It became clear at a certain point that since I was not willing to incriminate Congressman Doolittle and others that I was going to pay a heavy price. Despite my consistent statements about my relationship with Congressman Doolittle's office, the government eventually asked me to say things that were totally at odds with what I had told them." (Doolittle, interestingly, submitted a letter to Judge Huvelle seeking leniency for Ring.)
The government, as expected, denied Ring's accusation "categorically and unequivocally." "Ring's insinuation that the government was pressuring him to lie in order to implicate Congressman Doolittle seems particularly far-fetched," the prosecutors wrote. "To be clear, the government did no such thing."
I do not venture to assert who is now telling the truth -- Ring or the prosecutors. I do not know whether the prosecutors asked Ring to testify to a version of the facts they knew to be untrue, or even to a version they believed to be true which in fact was not. I do believe, however, that Ring's accusation is not as "far-fetched" as the government claims.
Prosecutors and agents not infrequently are married to the most sinister version of the facts. As Edward Bennett Williams once noted, when prosecutors look at windows, they do not see the view outside, but the dirt on the windowpanes. Although there are a few "rotten apples" among federal and state prosecutors who actually suborn perjury by urging cooperators (or other witnesses) to testify to facts the prosecutors know to be false, most prosecutors who put pressure on cooperators (or other witnesses) to implicate others are earnest, honorable lawyers acting in the good faith belief that the cooperator is holding back and that the version the prosecutors are pushing is what they believe actually happened. In effect, they intend to "suborn truth," that is, put heavy pressure on the cooperator to relate what the prosecutors actually believe is the truth.
To be sure, often the prosecutors are right: the cooperators are indeed protecting a colleague or friend or are minimizing the scope of their own wrongdoing. Often, however, the prosecutors are wrong: the witness is telling the truth and the whole truth.
The pressure on a potential cooperator who cannot truthfully testify as the prosecutors want (as Ring claims he was) is enormous. The potential cooperator is aware that unless the cooperator changes the story to conform with the prosecutors' version, the cooperator will be denied the coveted 5k1.1 "cooperation" letter which will very likely reduce (or perhaps even eliminate) a prison sentence. Some succumb to the prosecutors' importuning and falsely accuse another, and eventually testify perjuriously at trial (but, of course, are not prosecuted) and help convict innocent, or perhaps not so innocent, people. Some refuse to lie and the prosecutors, sometimes grudgingly, accept their story. Some refuse to lie (as Ring alleges he did) and suffer the consequences of not receiving a 5k1.1 letter, a favorable plea agreement and a lenient government posture on sentencing and other issues, and perhaps, as Ring has alleged, vindictive and harsh prosecutorial contentions.
It is unusual that a defendant in sentencing papers accuses the government of urging him to lie. Many defendants in the position Ring alleges he was choose at sentencing not to aggressively criticize the prosecutors out of fear of antagonizing them or the sentencing judges, who frequently tend to be hostile to allegations of prosecutorial overreaching, or perhaps because it has little direct relevance to sentencing. Indeed, Ring's able lawyers, Andrew T. Wise and Timothy P. O'Toole of Miller and Chevalier, apparently did not highlight this argument.
The issue of decent prosecutors pressuring cooperators to change their stories so as to provide testimony which falsely implicates innocent people, which Ring claims would have happened had he not resisted the prosecutorial pressure, is an important one, especially in white-collar cases.
It is an issue that has not had much exposure, primarily since white-collar defense lawyers who represent cooperators in their dealings with prosecutorial agencies (as almost every white-collar defense lawyer does) are hesitant personally or ethically to publicize it. It demands serious attention.
Friday, October 21, 2011
In an otherwise unremarkable bank and mail fraud affirmance, the Fifth Circuit reminds us that losses cannot be included as relevant conduct unless they are bottomed on criminal and/or fraudulent behavior. The appellant in U.S. v. Bernegger (loss must be criminally derived to count as relevant conduct), obtained two grants of $250K each from the State of Mississippi, which secured a first lien on the underlying collateral. Appellant later pledged the same collateral to other entities, but there was literally no evidence indicating that the original grants were procured through fraud. Nevertheless, the probation officer included the grants in the PSR's loss calculation and the trial court accepted the figure. The Fifth Circut also reiterates that "bare assertions" in a PSR are not, standing alone, evidence. This particular error did not affect appellant's Guidelines range, but did result in a reduced restitution award. The panel consisted of Judges Wiener. Clement, and Elrod. Opinion by the Dutchman.
Thursday, October 13, 2011
Hedge fund billionaire Raj Rajaratnam was sentenced today to an 11-year prison sentence, reportedly the longest sentence ever for insider trading, by Southern District of New York Judge Richard J. Holwell. The sentence was below the approximately 19- to 24-year sentence requested by the government and above the approximately six to eight years requested by the defense.
The Southern District United States Attorney's Office has focused its guns on insider trading offenses, bringing 52 cases in the last two years, 49 of which have resulted in convictions. U.S. Attorney Preet Bharara, who has called insider trading on Wall Street "rampant," has claimed that harsh insider trading sentences are a deterrent because they "convince rational business people that the risk is not worth it." Indeed, since an individual's decision whether to cross the line to trade on confidential information is often based on the individual's benefit v. risk analysis, insider trading may well be one of the relatively few areas of criminality where harsh sentences do actually serve as a deterrent. The Rajaratnam case, which involved a pattern of seeking inside information from tipsters and trading on it for millions of dollars in profits, and cases like it, should be distinguished from those cases which involve a single instance of insider trading based on a casual tip where the decision to trade is not so deliberate and therefore not so deterrable.
The 11-year sentence given to Rajaratnam is the second double-digit insider trading sentence imposed in the Southern District in the past few weeks. A few weeks ago, Judge Richard Sullivan sentenced Zvi Goffer, a former trader at Rajaratnam's firm, Galleon Group, to a 10-year term. While Rajaratnam's criminal involvement was of far greater magnitude than Goffer's, Rajaratnam had serious medical problems and a considerable history of good works, which may well have led to a lesser sentence than he would have received otherwise. Of course, some judges sentence more severely, or more leniently, than others.
Tuesday, September 20, 2011
Hon. Ellen Segal Huvelle issued a 42 page memorandum opinion regarding the sentencing of Kevin Ring. It was accompanied by a two page chart that includes what were the government recommendations in other related cases (here). The court notes the sharp difference in recommendationbetween the government and defense in this case - a 17 year difference. The case comes from the Jack Abramoff lobbying scandal that caused several Greenberg Traurig lobbyists to "pled guilty to participating in an influence peddling and bribery scheme."
A key issue raised by the defense is "that the government is retaliating against him for exercising his Sixth Amendment right to trial." The court notes that "the government cannot retaliate against defendant for exercising his rights." The detailed sentencing methodology follows with the court's conclusion of a guidelines range of 46-57 months.
See also Doug Berman, Sentencing Law & Policy Blog here; Mary Jacoby, Main Justice, Judge Rejects Recommended Sentence for Ex-Abramoff Lobbyist
Saturday, September 17, 2011
One of the 2010 White Collar Crime Blog Awards went to the Sholom Rubashkin case. (see here). It gave it a "collar for the Case Most Needing Review - Sholom Rubashkin’s 27 year sentence."
The Eighth Circuit has now reviewed that case, but unfortunately for Rubashkin, with a result that does not change its prior outcome. The court held that "Rubashkin did not make a timely recusal motion . . " and that "[a]fter studying the lengthy record we find no evidence that the district court's decision to remain on the case prejudiced Rubashkin's verdict." The court also concluded "that Rubashkin's money laundering convictions were lawful and did not merge with any other of his crimes." Finally, the court upheld the sentence, saying that "the district court's loss calculation" was not error. The Eighth Circuit states, "[s]entences within the guideline range are presumed to be substantively reasonable."
And so for now, Rubashkin's 27 year sentence remains. Top law professors who are key sentencing experts wrote an amici brief in this case, in support of Rubashkin. Hopefully, the Supreme Court will re-examine this case.
See Linda Friedman Ramirez, International Criminal, Extradition and Immigration Defense News, White Collar Crime: 8th Circuit Affirms Rubashkin's Conviction and Sentence (Agriprocessor Fraud Offenses)
See also Doug Berman, Sentencing Law & Policy, Eighth Circuit panel unanimously affirms Rubashkin federal convictions and lengthy prison sentence
Wednesday, August 24, 2011
In United Staets v. Singletary, the Eleventh Circuit looked at issues of loss amount in a mortgage fraud decision. The Federal Defender's Office for the Middle District of Florida (with special thanks to Steven Kruer, chief paralegal) writes:
"Anyone with a mortgage fraud case presenting issues of loss amount or restitution payable should read this published decision from Monday, August 15, 2001, in which the Eleventh Circuit vacated the judgment and remanded for re-sentencing.
"In reversing, the Court noted that the government had the burden of proving, with respect to each of the mortgages for which it sought restitution, that the mortgage was the product of a fraudulent misrepresentation, and that it had not met this burden. The district court’s statement in the restitution order that “restitution of at least $1,000,000 has been established by the Government” did not identify the mortgages that had been fraudulently obtained and caused losses totaling that sum. To enable meaningful appellate review, the Court wrote, a district court’s calculation of restitution must be supported by specific factual findings. The district court failed to carry out this task, the Court held, and thus vacated the restitution provisions of the Singletarys’ judgments and remanded the case so that the court could perform this task.
In remanding, the Court wrote:
We do so with this caveat: the Government is not receiving another bite of the apple. The district court shall render the necessary findings of fact and conclusions of law with respect to each of the 56 mortgages at issue on the basis of the evidentiary record as it now exists.
(esp)(reprinted with permission of the PD's Office MD Fl.)
Monday, August 1, 2011