Wednesday, January 28, 2015
There has been much talk recently regarding Section 2B1.1 of the Federal Sentencing Guidelines, commonly referred to as the Fraud Guidelines. Earlier this year, I noted in a post that the American Bar Association had issued a report calling on the Sentencing Commission to revise Section 2B1.1. Specifically, this report contained a number of suggestions regarding loss calculations and the impact of the current loss table. Earlier this month, Ellen Podgor posted regarding the release of the Proposed Amendments to the Sentencing Guidelines (Preliminary), which included proposed amendments to Section 2B1.1.
As readers begin to digest the proposed amendments from the Sentencing Commission and the Commission’s determination that they “have not seen a basis for finding the guideline to be broken for most forms of fraud…,” I wanted to provide a link to some additional information. The first is a video presentation by Commission staff regarding a detailed examination of economic crime data. The presentation was given at a January 9, 2015 public meeting and offers some extremely interesting analysis of data collected regarding sentencing under Section 2B1.1. The second is a copy of the PowerPoint presentation from the January 9, 2015 presentation. In particular, I direct readers to Figure 1, showing the growth in below range sentences since 2003, and Figure 5, showing the number of cases within range decreasing sharply as the loss figure in the case grows. For those who enjoy statistics, there is a wealth of information for consideration in these materials.
Monday, January 26, 2015
Earlier this month, my colleague Lucien E. Dervan highlighted the issue of collateral consequences as one of the criminal justice hot topics of the year ("Collateral Consequences in 2015, " Jan. 7,2015). Prof. Dervan mentioned the work of both the ABA and the NACDL, specifically the NACDL report "Collateral Damage: America's Failure to Forgive or Forget in the War on Crime." I was a member of the NACDL task force which held hearings in six cities and wrote the report.
Collateral consequences of a criminal conviction, or even an arrest, often dwarf the actual punishment meted out by the judge presiding over the case. Such consequences include, but are far from limited to, serious immigation consequences, denial of fair consideration for employment, inability to secure professional and other licenses, ineligibility for government housing and education aid, denial of the right to vote, serve as a juror, or hold office, and the inability to possess weapons.
Broadly speaking, there are two types of collateral consequences - mandatory and discretionary. The NACDL report recommends that mandatory collateral consequences be disfavored and only occur when substantially justified for public safety reasons by the specific underlying criminal conduct. Discretionary collateral consequences should be imposed only when the offense conduct is directly related to the benefit or opportunity sought. "Benefits and opportunities should never be denied based upon a criminal record that did not result in a conviction."
The indefinite suspension of Baltimore Ravens halfback Ray Rice by NFL commissioner Roger Goodell for punching and knocking down his then girl friend (now wife) went against the grain of these salutory recommendations. Rice's actions, however deplorable, did not affect his ability to carry a football. Rice posed no more or less a threat to his fellow players, or anyone else, after his arrest than before. Additionally, Rice was never convicted of any crime; his case was diverted and eventually dismissed. (Here, the criminal justice system perhaps treated him too gently; organized football treated him too harshly). And his suspension by the commissioner was justifiably overturned by an impartial arbitrator, former federal judge Barbara Jones, although not (at least explicitly) for the reasons discussed above.
To be sure, Rice's employer, the Ravens' owner, who cut him shortly after the revelation of the incident, might have, arguably reasonably, made a determination that his presence on the team would have led to decreased attendance (although the football fans I know would likely not have been been deterred) or revenues or bad public relations. Even so, some other owner should have had the opportunity to hire Rice to bolster his team's backfield and give him an opportunity to earn a living. When Michael Vick, after a felony conviction and prison sentence for animal abuse, returned to the Philadelphia Eagles, he made the team better - and his rehiring was praised by President Obama.
Collateral consequences should not be imposed unless the acts for which an individual has been convicted make it at least more likely than otherwise that he would pose a safety risk to those for whom he works or others with whom he is in contact. That salutary policy should cover all crimes -- including murder, sex crimes, animal abuse - and domestic violence.
Thursday, January 22, 2015
The New York Times has the story, with a link to the criminal complaint, here. U.S. Attorney Preet Bharara followed his longstanding tradition of holding a press conference in order to make inflammatory, prejudicial, and improper public comments about the case.
Wednesday, January 21, 2015
For more than a year now, the Australian Securities and Investments Commission has been investigating a number of large Australian banks regarding allegations of collusion in the setting of the Bank Bill Swap Rate (BBSR). The BBSR is an interest rate benchmark that is used when banks lend to one another. This rate also impacts business and home loan rates. As details regarding the investigation begin to trickle out, one Australian commentator in the Sydney Morning Herald has said that this “could well prove to be the largest corporate scandal of 2015.” According to the commentator’s article, one bank, ANZ, has suspended seven BBSR traders, including the suspension of the head of the bank’s balance sheet trading earlier this month (see here). The article further states that ANZ has launched an internal investigation into the matter. While the article notes that other Australian banks may have also launched internal investigations, the banks have made no public statements regarding any such inquiries.
As readers of this blog will recall, in 2012 an investigation began into allegations that several large banks had been manipulating the London Interbank Offered Rate (Libor). The scandal received significant international attention. Eventually, the US, UK, and EU fined the banks involved more than $6 billion. Further, several traders were prosecuted for their roles in the manipulation. For more on the Libor Scandal, see the Council on Foreign Relations Backgrounder available here.
Based on recent reports from Australia, it sounds like the Australian BBSR investigation might be the next big international white collar case to watch in 2015.
Monday, January 19, 2015
The case is United States v. Dibe. Claudio Dibe pled guilty, without a plea agreement, to wire fraud and received a below Guidelines sentence. He complained on appeal that his sentence would have been lower if the sentencing court had considered his counsel's ineffective assistance in failing to adequately explain the benefits of the government's initial plea offer. The Ninth Circuit held that ineffective assistance of counsel cannot be considered as a mitigating under 18 U.S.C. Section 3553(a). Distinguishing the U.S. Supreme Court's opinion in Pepper v. United States, 131 S.Ct. 1229 (2011), the Ninth Circuit noted that counsel's alleged ineffective assistance "has nothing to do with [Dibe's] own conduct."
Wednesday, January 14, 2015
Tuesday, January 13, 2015
In United States v. Coppenger, the defendant pled guilty to conspiracy to commit bank (mortgage) fraud and a Klein conspiracy. Coppenger, a developer, led and initiated the scheme, which involved two Panama City land parcels, 33 straw buyers and three corrupt mortgage company officers. The Government requested a downward departure based on Coppenger's substantial assistance, and the parties agreed that a sentence within the 78-97 month Guidelines range found at level 28, criminal history category 1, was appropriate. Instead, the sentencing court upwardly varied to a 120 month sentence, based on Coppenger's victimization of the straw buyers, many of whom pled guilty and saw their lives ruined. The judge relied heavily on sealed information contained in the straw buyers' presentence reports. Coppenger's trial attorney failed to object.
Coppenger attacked the sentence on appeal as procedurally and substantively unreasonable. He argued that it was procedurally unreasonable under Fed.R.Crim.Proc. 32(i)(1)(B), because the court relied on information excluded from the presentence report without giving the defendant a written or in camera summary of said information, thereby surprising and prejudicing Coppenger. Coppenger argued that the sentence was substantively unreasonable because the court characterized his co-conspirators as victims.
The Sixth Circuit vacated the sentence, holding that the court's procedural error was plain, both surprising and prejudicing Coppenger. The Sixth Circuit distinguished Coppenger's case from Irizarry v. United States, 553 U.S. 708 (2008), because in Irizarry the Supreme Court interpreted Fed.R.Crim.Proc. 32(h), which requires advance notice to the parties only when a sentencing court is contemplating an upward departure. Although the court in Coppenger's case upwardly varied, rather than departed, it did so after reviewing approximately 30 straw buyer presentence reports, in order for the judge to "go back and refresh my recollection about their history, their background, and how it was that they came to be involved in all this." None of this information was contained in Coppenger's presentence report and it remains under seal to this day. The Sixth Circuit held that Coppenger and his attorney should have been given a meaningful opportunity to understand and respond to this information: "Here the district court's sua sponte reliance on extraneous information both surprised and prejudiced Coppenger and denied him a meaningful opportunity to respond, in violation of Rule 32(i)(1)(B). The court’s explicit consideration of the offense conduct’s impact on the co-conspirator straw buyers was not only novel, but was neither signaled in the presentence report nor otherwise reasonably foreseeable."
The Sixth Circuit rejected Coppenger's substantive unreasonableness argument, holding that the court on remand could consider the impact of Coppenger's offense conduct on his co-conspirators.
Congratulations to Evan Smith of the Appalachian Citizens' Law Center, who argued and briefed the case on appeal.
Monday, January 12, 2015
A former Peru president is convicted "of funneling more than $40 million in public funds to tabloid newspapers that smeared his opponents during his 2000 re-election campaign." See AP, Former Peru President Convicted of Corruption
In United States v. Norman, the defendant was convicted of wire fraud conspiracy after a jury trial in which he testified in his own behalf. The sentencing court assessed two points against Norman for obstruction, based on the defendant's allegedly perjurious trial testimony. But the judge also determined amount of loss and number of victims based on Norman's testimonial admissions. On appeal, Norman objected to this as inconsistent and procedurally unreasonable. The Second Circuit unsurprisingly disagreed, noting that the trial judge was free to accept some and reject some of Norman's testimony. Moreover, even though the trial judge found that appellant's admissions regarding amount of loss and number of victims were corroborated by other evidence, the Second Circuit said that this was not necessary. There is no need for a sentencing court to corroborate the defendant's in-court admissions before using them to determine sentencing factors.
Saturday, January 10, 2015
2B1.1, the fraud sentencing guideline, has been controversial. The controversay has centered on several points including its complexity, its focus on fraud loss, its failure to sufficiently focus on offender culpability, and the problems that accrue in determining fraud loss. The U.S. Sentencing Commission recognized some of these problems and held a conference at John Jay College to consider the issues and possible solutions.
The Commission now seeks comment on a proposed amendment to revise this guideline "by clarifying the definition of 'intended loss,' which contributes to the degree of punishment, and the enhancement for the use of sophisticated means in a fraud offense." The Commission also states that "[t]he proposed amendment also revises the guideline to better consider the degree of harm to victims, rather than just the number of victims, and includes a modified, simpler approach to 'fraud on the market' offenses which involve manipulation of the value of stocks." (see here) The Commission stated that they "have not seen a basis for finding the guideline to be broken for most forms of fraud, like identity theft, mortgage fraud, or healthcare fraud." You can find the proposal here (last 17 pages).
Wednesday, January 7, 2015
As we start off the year, I thought I would mention an issue that will likely be widely discussed in 2015 – collateral consequences.
As I mentioned in this 2014 post, I moderated a panel discussion regarding collateral consequences at the 2014 ABA CJS White Collar Crime Institute in London last October. That discussion raised a number of interesting issues and made clear that this is a topic that is growing in prominence internationally. As we move into 2015, the ABA continues to work on the ABA National Inventory of Collateral Consequences of Conviction, a database with which every attorney should be familiar. Later this year, the ABA will also convene a National Summit on Collateral Consequences, which will bring together a host of experts from around the country to discuss important issues related to this topic.
The NACDL has also been working hard on the issue of collateral consequences. According to the organization, over 70 million Americans have some form of criminal record and there are over 50,000 known collateral consequences of conviction. In May of last year, the NACDL launched a major new report entitled Collateral Damage: America’s Failure to Forgive or Forget in the War on Crime – A Roadmap to Restore Rights and Status After Arrest and Conviction. According to the NACDL website, “The report is a comprehensive exploration of the stigma and policies relegating tens of millions of people in America to second-class status because of an arrest or conviction. In addition, the report lays out ten recommendations to ensure that the values of life, liberty and the pursuit of happiness are within reach of all, regardless of past mistakes.” It is certainly worth a read.
As 2015 gets underway, this is one topic to keep an eye on, and the above resources from the ABA and NACDL are a great way to get up to speed.
Tuesday, January 6, 2015
Monday, January 5, 2015
Many are focused on what sentence former Virginia Gov. Bob McDonnell will receive from the judge today. After all, he was convicted, and now is the time for him to be punished. But there is a second question, and an important one in this particular case, that also warrants consideration: Whether the former governor should be allowed to remain on bond pending his appeal. It should be an easy answer - he needs to remain free.
McDonnell’s case screams, ‘let’s wait before we put him behind bars.’ That’s because this is really a case about whether prosecutors stretched the law too far.
Creative federal prosecutions are not new and higher courts have been quick to strike prosecutions that exceed the boundaries of the law. Sometimes our courts have to remind prosecutors of John Adams words that we are “a government of laws, and not of men.”
We recently saw the Supreme Court strike down a prosecution that used the Chemical Weapons Convention Implementation Act to prosecute a woman for an attempted simple assault. And the Supreme Court is currently reviewing the government’s use of the Sarbanes Oxley Act to prosecute a fisherman for throwing fish overboard that a state official had asked him to bring to shore.
McDonnell prosecutors used a novel approach in bringing this case. They attempted to prosecute conduct that folks may find offensive. But merely being offensive is not enough for making something a crime. It has to be criminal under existing laws, as opposed to a new interpretation created by the government in order to bring their case to court.
This case wasn’t the typical bribery case of someone handing a person money and that individual doing a specific official act in return. When an appellate court finally gets its hands on this case, it may all come down to whether McDonnell corruptly performed or promised to perform an “official act.” But what constitutes an “official act” is not so easy to explain. Will it include any act that happens to be done by a government official? Will it make a difference in a federal prosecution that the government official happens to be elected to a state position? Will it make a difference that state ethics rules exist to oversee what may or may not be considered corrupt conduct?
So now an appellate court will need to decide whether McDonnell’s conduct fits within the language of the statute. And that is a substantial question of law, the test the court looks at in determining whether to grant bond pending appeal. Pending that decision, it seems that he should remain free.
Many convicted defendants before McDonnell have been allowed to stay out on bond pending their appeal. There’s Martha Stewart, who eventually decided to go ahead and serve her sentence; Bernie Ebbers who received a 25 year sentence; John and Timothy Rigas, who received 15 and 20 years, respectively, and actor Wesley Snipes, who was convicted in a tax case. All went to trial and were convicted. And all were offered the chance to remain free pending their appeal. One even finds former governors and congressman on the list of those who have been given an appellate bond – former Illinois Gov. George Ryan was the recipient of one and so was former representative William Jefferson.
In many instances, the trial judge is the one who grants the bond pending appeal. But in some cases, it has required a higher, appellate court to step in to order the release of the accused pending his or her appeal. That happened to former Alabama Gov. Donald Siegelman, who was initially granted bail.
The bottom line in most white collar cases comes down to whether the accused has a significant issue being raised on appeal that it is better to have resolved prior to the start of the sentence. After all, once the individual is incarcerated, you can’t take back the time they have served.
Creative federal prosecutions have cost prosecutors much time and money, with few rewards. And in some cases it takes appellate courts to step in and act – and until they do, McDonnell should remain free.