Thursday, November 29, 2007

Getting Ready for the Sentencing in US v. Black

Both sides filed their objections to the presentence report (PSR) in the prosecution of Lord Conrad Black and three other former Hollinger International executives -- Peter Atkinson, John Boultbee, and Mark Kipnis -- mail fraud charges in connection with non-compete payments.  Lord Black was also convicted for obstruction of justice related to his removal of boxes of documents from his Toronto office while the SEC was investigating the company, a conviction that may have a significant effect on the final sentence imposed.  While the PSR is not made public, the objections filed by both sides are, and we can get a pretty good idea of what the Probation Office is recommending, and where U.S. District Court Judge Amy St. Eve may end up in the sentencing.  Each of the filings is available below.

Two key points in the calculation under the Federal Sentencing Guidelines is the amount of the loss and which version of the Guidelines will be applied.  The former is the primary driver of the sentence, and the choice of which edition will be used can effectively increase the sentence by up to three times.  For Atkinson, Boultbee, and Kipnis, the PSR recommends the 2000 version (here) in effect at the time of the primary transaction for which they were convicted.  For Black, the recommendation is to use the current version of the Guidelines (here) because his obstruction of justice took place in 2005, and so the more recent version should apply -- there is no significant difference between the 2005 and 2007 editions, so the current one works just as well.  Black objects to the use of the more recent version, while the government objects to applying the 2000 version to the other three defendants, arguing that all should be subject to sentencing under the 2007 Guidelines. 

On the loss issue, the PSR calculates the amount at $5.5 million, based on the dollar figures involved in the transaction that formed the basis for the convictions of all four defendants.  Needless to say, each side objects to the loss calculation.  The defendants argue that the amount should be limited to their individual gain from the diversion of funds through the non-compete agreement, not the total, and even seek a lower figure, such as Atkinson's recommendation of $15,000 as the loss to Hollinger.  Meanwhile, the government has proposed a $32.15 million figure based on relevant, i.e. acquitted, conduct connected to other diversions charged in the case.  While Judge St. Eve could opt to use the higher or lower amounts, I suspect she will adopt the PSR calculation because it reflects the total amount in the transaction on which the jury convicted and does not give the defendants a discount for what they didn't take directly. 

Using the $5.5 million figure illustrates the difference between the potential sentence depending on which version of the Guidelines applies.  Under the 2000 version, the loss amount would increase the sentence by 14 offense levels, on top of the base offense level of 6.  Adding in potential enhancements for more than minimal planning and abuse of a position of trust brings the offense level to 24.  The sentence under the Guidelines would be 51-63 months, a bit over four years, and if the Judge grants a minor role adjustment to a defendant then the sentence could drop into the 37-46 months range.  Using the 2007 Guidelines, on the other hand, starts with a base offense level of 7, then the increase for a $5.5 million loss would be 18.  Under the Sarbanes-Oxley Act, the conviction of a corporate executive, such as the CEO, triggers an additional four-level enhancement, and add to that Black's obstruction of justice which can add another two levels.  He would be looking at a sentence of 108-135 months, and it could easily jump to 151-188 months if other enhancements are applied -- more than ten years

The selection of the applicable version of the Guidelines probably will be among the first issues Judge St. Eve decides at the sentencing, and the year chosen will give an early indication about whether she will impose a substantial term of imprisonment on the defendants.  Each of the defendants argues that the Guidelines calculation overstates the severity of the offense, a position I doubt the Judge will accept.  They also argue for a below-Guidelines sentence based on personal factors related to the defendants.  As we've come to expect in corporate executive cases, the defendants -- especially Black -- have had a number of letters written on their behalf urging Judge St. Eve to go lightly on the sentence.  Black's brief also devotes a lot of space to recounting his personal background to show what a good individual he is.  That argument might not strike a cord with the court, given that at one point during the trial the Judge told Black's counsel to rein in his client because of Black's somewhat intemperate comments to the press. 

Of course, the sentencing is just the final stop in the district court before the case leaves for the Seventh Circuit.  It will be interesting to see what issues each defendant advances in their briefs, and the oral argument is sure to be grueling given the number of lawyers who will be addressing the court. (ph)

Download us_v_black_atkinson_sentencing_memorandum_nov_27_2007.pdf

Download us_v_black_boultbee_sentencing_memorandum_nov_27_2007.pdf

Download us_v_black_kipnis_sentencing_memorandum_nov_27_2007.pdf

Download us_v_black_sentencing_memorandum_nov_27_2007.pdf

Download us_v_black_government_objections_to_psr_nov_27_2007.pdf

Fraud, Securities, Sentencing | Permalink

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I wish the government put as much effort into telling me why milk is $5 a gallon and gas is going to $4 a gallon as they do trying get get these ridicules sentences.

The US is falling apart we have foreclosures all over the place people are starving prices are out of control and we hear nothing about it. But we see the effort they put behind this.

They think the American people have no intelligence what so ever the way they do things will come back at them in the long run. What this President has done will cost his party the White House.

How can we ask him what he thinks about some of these sentences? Then maybe he can tell us why 30 months for his friend was to harsh but his department of justice wants to put non violent offenders away for 30 years.

Posted by: Tony | Nov 29, 2007 8:19:47 AM