White Collar Crime Prof Blog

U.S. v. Stephen Bannon Case Materials: Willfulness and the Reliance on Advice of Counsel Defense.

We are awaiting any day now a ruling from the U.S. Court of Appeals for the District of Columbia Circuit on Steve Bannon's appeal of his conviction for violating Title 2, United States Code, Section 192 by willfully refusing to testify or provide documents to the January 6 Committee in response to its subpoena. In allowing Bannon to remain free on bond pending appeal, U.S. District Judge Carl Nichols noted that Bannon's appeal raised substantial questions of law: "In particular, as I've noted throughout this case, there is a substantial question regarding what it should mean for a defendant to willfully make default under the contempt of Congress statute and what evidence a defendant should be permitted to introduce on that question." Bannon was prevented from introducing evidence, arguing to the jury, or having the trial court instruct the jury, that his attorney had advised him not to comply with the subpoena. Under a 63-year-old D.C. Circuit precedent, Licavoli v. United States, willfulness in the context of Section 192 does not require a showing that the defendant intended to violate the law or acted with an evil motive or bad purpose. The government need only prove that the failure to comply was deliberate. It is extremely unlikely that Licavoli is still good law today, given numerous Supreme Court white collar crime opinions since 1961 requiring the government to prove an intent to violate a known legal duty in order to show willfulness. Here are some case materials from U.S. v. Stephen Bannon.

U.S. v. Stephen Bannon - Sentencing Hearing Transcript Excerpt.

U.S. v. Stephen Bannon - Declaration of Robert J. Costello.

U.S. v. Stephen Bannon - Defendant's Opposition to Government Motion in Limine on Advice of Counsel.

U.S. v. Stephen Bannon - Government's Reply re Motion in Limine on Advice of Counsel Defense 3.8.22 - FINAL.

U.S. v. Stephen Bannon - Defendant's Surreply re Government Motion in Limine on Advice of Counsel.

(wisenberg)

A Tale of Two Sentencing Memos

Peter Navarro, former Presidential Advisor to Donald J. Trump, will be sentenced tomorrow in the United States District Court for the District of Columbia. He was found guilty by the jury of two misdemeanor counts alleging violation of Title 2, U.S. Code, Section 192, which criminalizes the refusal of a witness to testify or produce documents to either House of Congress when summoned to do so. Navarro refused to appear or testify in front of the January 6 Committee, and refused to produce documents. He asserted Executive Privilege. Defendant Navarro has asked for two concurrent 6-month probationary sentences, a $100 fine on each count, and to remain free on bond during the pendency of his appeal. The government seeks a sentence of six months on each count, the Guidelines maximum, and a fine of $200,000. Here are the respective sentencing memos.

U.S. V. PETER NAVARRO-DEFENDANT'S SENTENCING MEMO.

U.S. V. PETER NAVARRO-GOVERNMENT'S SENTENCING MEMO.

(wisenberg)

More on Elizabeth Holmes

The speculation now begins about where Elizabeth Homes will serve her sentence, what her sentence will be, and how "cushy" she will find things in confinement. The Bloomberg Law story is here. Her sentence is likely to be more substantial than the three years being predicted by anonymous experts in this story. Nevertheless, as a first-time offender with no violent past and a non-violent offense of conviction, she is very likely going to a minimum security camp unless her sentence is longer than 10 years. That's the way the system works.

(wisenberg)

Theranos Founder Elizabeth Holmes Convicted On 4 Of 11 Counts. And That Will Be Enough.

Here is the CNN story.  The jury acquitted Holmes, the former CEO of blood-testing startup Theranos, on all 4 counts related to the alleged defrauding of patients. She was convicted on 4 counts related to defrauding of investors, including a conspiracy count. The jury hung on 3 additional investor fraud counts. There will be no retrial of the counts that the jury could not reach agreement on, because Holmes' ultimate sentence would not be affected by a guilty verdict on those counts. Moreover, under current Supreme Court case law, the trial court can (unfortunately) consider the government's evidence against Holmes on both the acquitted and hung counts in determining her sentence. The SEC long ago settled its case against Holmes without demanding an admission of wrongdoing on her part. Had she made such an admission there would have been no need for a criminal trial.

(wisenberg)

Be Careful What You Ask For: Third Circuit Vacates Two Sentences For Defense Breaches Of Plea Agreement

In two cases consolidated for appeal, U.S. v. Yusuf and U.S. v. Campbell, the Third Circuit reversed downward variances based on defense breaches of the plea agreement. Both cases came out of the District of New Jersey and both involved plea agreements that recognized the sentencing court's ability to downwardly vary, but forbade the defense from arguing for a departure or variance below the recommended Guidelines range. The agreements also forbade the government from arguing for a departure or variance above the recommended range. Yusuf pled guilty to aggravate identity theft and conspiracy to commit bank fraud. Campbell pled guilty to felon in possession. Both cases involved mitigating circumstances that typically garner downward variances. Both cases involved sympathetic judges who all but encouraged defense breaches based on their searching inquiries during sentencing. Both cases stand for the proposition that there is a difference between defense counsel presenting the sentencing judge with all relevant facts about the defendant and the offense, including mitigating facts, and defense counsel asking for a downward variance, either directly or through questions to the client. This distinction is critical for defense counsel to keep in mind, even in response to questions for the court. In Campbell, defense counsel had the client ask the court for no jail time. In Yusuf, a much closer case in the Third Circuit's view, defense counsel suggested a sentence below the recommended Guidelines range. The Court distinguished defense counsel's sentencing hearing arguments in Yusuf from those of counsel for Yusuf's co-defendant Adekunle. (Adekunle's case was not on appeal and he had been sentenced by a different judge.) Adekunle's lawyer had reminded the sentencing court of its duty to consider proportionality, and the sentences handed down to co-defendants, but never asked for a downward variance and reminded the court twice that she was bound by the plea agreement: "I am constrained from arguing a below guideline sentence." The government also argued in Campbell that presenting character letters to the court asking for probation violated the plea agreement. The Third Circuit declined to reach this issue, which had not been preserved at sentencing, based on its finding that counsel's arguments alone constituted a breach. The Court cautioned district court judges at sentencing, "to be particularly mindful of the strictures on counsel when plea agreement provisions like the ones here are in place."

(wisenberg)

Prohibiting Punishment of Acquitted Conduct Act of 2021

Perhaps one of the most difficult issues to explain to students is that acquitted conduct may be used by a court in sentencing someone convicted of a crime. And it should be difficult to explain this, as it goes against the grain of fundamental constitutional rights at the core of our democracy. It is therefore good to see that US Senators Dick Durbin and Chuck Grassley have "introduced the bipartisan, bicameral Prohibiting Punishment of Acquitted Conduct Act of 2021."  " This legislation would end the unjust practice of judges increasing sentences based on conduct for which a defendant has been acquitted by a jury." (see here).  Due process demands that this be passed. As noted in Senator Durbin's press release, Justice Scalia in a dissent to a petition for certiorari wrote, "not only did no jury convict these defendants of the offense the sentencing judge thought them guilty of, but a jury acquitted them of that offense." Justices Ginsburg and Thomas had joined in this dissent.  This is a strong bipartisan issue that needs correction. (proposed bill here).

See also Cara Salvatore, Law360,  Sens. Revive Push to Ban Sentencing for Acquitted Conduct

(esp) 

Materiality and the Flynn Prosecution

Title 18, United States Code, Section 1001, criminalizes certain false statements or omissions made to the federal government. The statute requires that the false statement be material to a matter within the jurisdiction of a federal agency or department. Materiality is an element of the offense that must be alleged and proved beyond a reasonable doubt. It is usually a fairly easy element for prosecutors to establish.

General Michael Flynn was charged with violating Section 1001 in a one count Criminal Information that tracked a portion of the statutory language. The Information was filed in federal court on December 1, 2017, by prosecutors in Special Counsel Robert Mueller's office. Those prosecutors charged Flynn with lying to the FBI during the course of a White House interview conducted on January 24, 2017. The January 24 interview concerned late December 2016 conversations between Flynn and Russian Ambassador Vitaly Kislyak during the post-election Presidential transition period.

A federal court cannot accept a guilty plea without a Factual Basis, sometimes referred to as a Factual Statement or Statement of the Offense. It is typically filed along with the Plea Agreement or is incorporated into the Plea Agreement itself. According to the Statement of the Offense filed in General Flynn's case:  "Flynn's false statements and omissions impeded and otherwise had a material impact on the FBI's ongoing investigation into the existence of any links or coordination between individuals associated with the Campaign and Russia's efforts to interfere with the 2016 presidential election." We now know this wasn't true. Flynn's statements, whether false or not, had no effect on the Russian Collusion investigation.

Crossfire Hurricane, launched on July 31, 2016, was the name given to the FBI’s counterintelligence investigation into possible collusion, witting or unwitting, between members of Trump’s campaign team and Russians attempting to influence the 2016 election. Crossfire Hurricane was not begun based on any allegations related to General Michael Flynn.  Instead, the Bureau authorized Crossfire Hurricane after it learned, third-hand, that Russia may have “suggested” assisting the Trump campaign by anonymously releasing dirt on Hillary Clinton. An FBI subfile was created on Flynn, not because of any allegations against him, but because of Flynn’s known contacts with Russia. Such contacts would hardly be surprising for a former Director of the Defense Intelligence Agency who was a Trump advisor rumored to be Trump’s choice for National Security Director if he won the election. The subfile investigation of Flynn was known as Crossfire Razor.

FBI officials Jim Comey, Andy McCabe, Peter Strzok, and Lisa Page each knew, well before Flynn's January 24 interview, that the General had no involvement whatsoever in any improper or illegal coordination with Russia regarding the 2016 election. Flynn had already been completely cleared in Crossfire Razor by January 4, 2017. A draft Closing Communication, documenting the complete lack of evidentiary support for Flynn's involvement in, or knowledge of, 2016 election collusion, was prepared on January 4 by the Crossfire Razor team. But the decision to close the file had been made even before January 4. Such a draft Closing Communication would never have been commenced unless the case agents had received prior approval from their FBI Supervisor, and Former FBI Director Comey testified that he authorized the closing of Crossfire Razor by December 2016. 

But none of this exculpatory information regarding materiality was shared at any time with the original defense attorneys representing Flynn, either before or after he entered his December 1, 2017 guilty plea. (Nor was it shared with Deputy Attorney General Rod Rosenstein, who was by then the Acting Attorney General for purposes of the Mueller Investigation and had final authority over Mueller's charging decisions.) The knowledge that Flynn's January 24, 2017 interview responses did not influence and were arguably incapable of influencing the Crossfire Hurricane investigation was relevant both to Flynn's guilt and punishment. While there is some uncertainty in the law as to whether Brady material must be turned over to the defense prior to a guilty plea, there is no uncertainty about Judge Emmet G. Sullivan's standing Discovery Order that he enters in every criminal case, and entered in Flynn's. It directs the government "to produce to defendant in a timely manner any evidence in its possession that is favorable to defendant and material either to defendant's guilt or punishment. This government responsibility includes producing, during plea negotiations, any exculpatory evidence in the government's possession."

Flynn had already pled guilty when his case was transferred to Sullivan's court, but he was still awaiting punishment. After the case was transferred, and Sullivan entered his Standing Order, Mueller's team produced voluminous additional documents to Flynn's team. Why did they do this when, under the terms of the Plea Agreement, Flynn was no longer allowed to request additional documents from the government? Because Mueller's prosecutors knew the significance of Sullivan's Standing Order and the additional burden it placed on them. Moreover, Sullivan had Flynn reaffirm his original plea colloquy, under oath, in December 2018. There is thus no question that the information discovered by Eastern District of Missouri U.S. Attorney Jeffrey Jensen, and publicly released for the first time last month at the direction of Bill Barr, should have been produced by Mueller's team to Flynn. What we don't know yet is whether any prosecutor on Mueller's original team, or on the post-Mueller team handling the Flynn case, knew about the recently disclosed documents. 

And one more thing. You can ignore commentators like Chuck Rosenberg, who recently listed here, in the Washington Post, all the folks (Trump, Pence, Priebus, etc.) who presumably thought Flynn's allegedly false statements were material. Chuck is relying on the general public's ignorance of federal criminal law. The only materiality at issue in U.S. v. Flynn is the materiality of the January 24, 2017 statements Flynn made to high-ranking FBI Supervisory Agents, which statements formed the basis of Michael Flynn's guilty plea and Statement of the Offense. Those post-inauguration statements about post-election conversations with Ambassador Kislyak, were clearly immaterial to an investigation of election-related collusion that had already cleared Flynn.

(wisenberg)

Four Prosecutors on Stone Case Withdraw From Case

The press is reporting that three four line prosecutors have filed to withdraw from the Roger Stone case. See Matt Zapotosky, Devlin Barrett, Ann E. Marimow & Spencer S. Hsu, Prosecutors Quit Amid Escalating Justice Dept. Fight Over Roger Stone's Prison Term)  This is highly unusual to have AUSAs withdraw after they have filed an initial Sentencing Memorandum.  It is anticipated that A new sentencing memo has now been filed  forthcoming -also unusual. 

In the initial sentencing memo the government included a 3C1.1 enhancement for obstruction of justice.The new memo is here (law.com). It excludes enhancements, including 3C1.1 for obstruction of justice. It states in part with regard to this enhancement, "it is unclear to what extent the defendant's obstructive conduct actually prejudiced the government at trial."  Yes, this is the government, not the defense, making this statement.  The initial memo was a detailed 26 page memo and it was replaced with a 5 page memo.  Whether the government should have initially asked for enhancements is something that many will question - but filing a second memo with this language is certainly unusual.  Will DOJ be filing memos in all the other cases out there with similar facts? 

 Two things to also watch here: 1) what will the probation department come in on sentencing; 2) what will the judge give as the sentence.  The final decision will be that of the judge.  

A question will also be whether there has been any political influence here.  Some of us can remember when there was an Investigation of Allegations of Politicized Hiring in the DOJ Honors Program - it didn't go well for DOJ. 

(esp)(updated)

More Varsity Blues - Privilege and Perspective

So Felicity Huffman gets 14 days (see here and here) in the college admissions scandal. But there are problems with this -

1. 14 days serves no real punishment purpose.   It is not the prison time that will deter her in the future.  The general deterrent and rehabilitation was accomplished the minute she was indicted.  The indictment in this case served that purpose because it stigmatized her and her family and brought their then-current lives to a crushing halt.  The 14 days is a token to society that only costs the taxpayer money with no benefit. It was unnecessary here.
2.  Should she have gotten more time?  Absolutely not. As stated above this public shaming was more than sufficient and one can only hope that she and her family can rise above this event and move on in a positive way to assist society. Your mother loves you - forgive her and be there for her. 
3.  Is the sentence an acknowledgement of disparity in the criminal justice system?  Definitely yes.  Accused individuals who are poor or minorities can suffer significantly greater consequences. There are too many examples of this to even mention.  This case highlights the disparity in our judicial system and for that alone, courts should go back and resentence those who received greater sentences for less activity - and reduce their sentences. The case was supposed to punish privilege but ends up acknowledging that privilege matters. This is no fault on the part of the sentencing judge - it is a problem of how society treats criminal justice. I applaud the judge for not giving a harsher sentence.
4.  This case brought forth improprieties in college admission testing and admissions. This needs serious reevaluation. In the corporate criminal sphere - a rogue employee can sometimes still hold the entity liable. Although, there is no criminality here, nor should there be, hopefully admissions testing processes will go through massive re-evaluation, not only on how they are administered, but also on the value of these exams.    
5.  Was there a better way to handle all of this?  Yes. If prosecutors had proceeded on correcting this unethical conduct by exposure - a report - and sending a message to all that privilege in national testing will not be tolerated, then stopping this unethical conduct could have been accomplished.  Using a broken criminal justice system to attempt to correct this process just ends up showing how broken the system really is.
6. The individual who brought in so many parents into this scheme deserves stiff punishment.  Giving cooperator status to the individual who promoted this unethical conduct is backwards.  The parents who were roped into this scheme, oftentimes of their free will, should be the ones testifying here. If you want to stop the criminal conduct, punish the party who made the crime possible.  
7. Bottom line - what were the parents all thinking - really?  The criminal justice system is not the answer to the problem here. 

(esp)

See also excellent op-ed -David Oscar Marcus, Felicity Huffman's 14-Day Sentence is Unjust - Because It's Too High, The Hill, here.

NACDL Trial Penalty Report and White Collar Crime

The NACDL recently released an important report detailing the impact of the trial penalty, which is the difference between the sentence a defendant receives in return for pleading guilty and the often much larger sentence he or she receives in return for exercising his or her constitutional right to trial. 

From the NACDL press release:

The ‘trial penalty’ refers to the substantial difference between the sentence offered in a plea offer prior to trial versus the sentence a defendant receives after trial. This penalty is now so severe and pervasive that it has virtually eliminated the constitutional right to a trial. To avoid the penalty, accused persons must surrender many other fundamental rights which are essential to a fair justice system

This report is the product of more than two years of careful research and deliberation. In it, NACDL examines sentencing and other data underlying the fact that, after a 50 year decline, fewer than 3% of federal criminal cases result in a trial. With more than 97% of criminal cases being resolved by plea in a constitutional system predicated upon the Sixth Amendment right to a trial, the fact of imbalance and injustice in the system is self-evident. The report identifies and exposes the underlying causes of the decline of the federal criminal trial and puts forth meaningful, achievable principles and recommendations to address this crisis. With its release, NACDL intends to launch a sustained effort to rein in the abuse of the trial penalty throughout federal and state criminal justice systems. The Trial Penalty report, and the principles and recommendations it puts forward, seeks to save the right to a trial from extinction.

The entire report is well worth reading.  For those in the white collar field, I'll note that the report contains a specific section on economic crimes.  This portion of the report focuses on Section 2B1.1 of the Federal Sentencing Guidelines.  The report discusses the role of 2B1.1 and loss calculations in creating incentives for defendants to plead guilty.  You can access the entire NACDL report here.

I found the NACDL report particularly interesting as I've engaged in much research on the issue of plea bargaining and sentencing differentials, including the impact of such incentives on innocent defendants.  In one study, we found that 56% of innocent participants were willing to falsely confess guilt and "plead guilty" in return for a bargain.  You can read more about those findings and the issue of plea bargaining's innocence issue here. 

(LED)

Court Sentences First Person from Special Counsel Mueller's Investigation

Alexander van der Zwann is the first individual to be sentenced from Special Counsel Mueller's Investigation (see here). The sentence is 30 days. (see here & here). According to the terms of the plea agreement, he faced a maximum of 5 years imprisonment. (see here).  The agreement called for a level 6 under the sentencing guidelines, with a reduction of 2 for acceptance of responsibility, finalizing at a level 4.  The details of the false statement that led to the violation of 18 U.S.C. 1001 are here.  

(esp)

Would Trump and Lochte Have Received Acceptance of Responsibility Reductions?

   Criminal defense lawyers in federal courts in this nation on an average plead 35 defendants guilty for every one they take to trial.  Accordingly, many criminal defense lawyers are not much more "trial lawyers" than the many big firm "litigators" who have never selected a jury or cross-examined a trial witness.  However, one area in which federal defense lawyers have plenty of experience is crafting the expressions of remorse made at sentencing by virtually every criminal defendant (save those who were convicted after trial and intend to appeal and do not wish to make any sort of admission because it might later be used against them).    The expression of remorse, a near uniform ritual in every federal sentencing proceeding, is made in order to ensure  that the court grant a reduction in the Sentencing Guidelines level of two or three levels for "acceptance of responsibility" (USSG Sec. 3E1.1) and to demonstrate that the defendant is truly sorry and contrite for having committed criminal acts, a factor many judges consider in the sentencing determination. 

   To be sure, the incantation of remorse is often less than fully sincere, and the defendant is actually only sorry that he was caught and is now facing punishment.  An astute defense lawyer will counsel her client that the expression of remorse should reflect his realization of and sorrow for the wrong he has done and harm he has caused to his victims and to society in general, and not only to his family and friends, and not to excuse or justify his acts, or minimize the damage.  She will counsel her client not to use weak words like "regret" or stiff ones like "remorseful."  Thus, it is difficult for a judge to distinguish the absolutely genuine shame and sorrow some defendants feel from the false impression of remorse others present.

   Some judges do suspect or realize that the expression of remorse is not genuinely sincere, but feel that the mere expression of remorse is itself a step forward.  Others, while perhaps doubtful of the defendant's sincerity, accept the expression of remorse  without comment or much consideration.   Some judges accept the apology at face value and credit it.  Some few listen carefully and skeptically, and,  if they detect a false note, sometimes comment on the defendant's lack of genuine remorse to justify, in part, a severe sentence (which they had probably decided beforehand to impose in any case).  I have not heard of a judge who denied an acceptance of responsibility reduction solely because of the defendant's presumed insincerity.   (I wonder whether such a determination would be upheld on appeal; I suspect, depending on the facts, that it might.)

   Last week, two notable men, presidential candidate Donald Trump and Olympic swimmer Ryan Lochte (neither of course criminal defendants) made widely-publicized "apologies" of sorts.  Both "apologies" would trouble a judge considering whether to credit the speakers for "acceptance of responsibility" or genuine remorse.

   Mr. Trump. who in the course of his campaign has insulted the parents of a heroic soldier who died in action, a woman Fox television commentator, a federal judge of Mexican ancestry, a U.S. Senator who was a prisoner of war for five years, a disabled reporter, and, generically, Mexicans and Muslims, chose to use the word "regret" rather than "sorry" or "apologize."   And his "regret" was for an inadvertent slip of the tongue, rather than a deliberate slur, and without any specificity of what statements he regretted or whom he may have harmed and no direct admission that they did harm anyone.  He said, "Sometimes in the heat of debate, and speaking on a multitude of issues, you don't choose the right words or say the right thing.  I have done that, and, believe it or not, I regret it, I do regret it, particularly where it may have caused personal pain."

   Mr. Lochte,  in a television interview and at least one social media post, presented a fictitious account of robbers in police uniforms pulling over a taxi he and fellow swimmers were in and robbing them at gunpoint.  This account received widespread publicity (perhaps to Mr. Lochte's surprise)and was a great international embarrassment for Brazil, a country which with its many troubles appeared to have demonstrated competence and provided adequate safety for the Olympics.  In fact, as Mr. Lochte's swim team colleagues later admitted, they were drunk, urinated on a wall, and vandalized the gas station, and that the guns were drawn by security guards who demanded they pay compensation for the damage before they left.  Faced with the contradictory statements by his colleagues, Mr. Lochte  then said, "I want to apologize for my behavior last weekend - for not being more careful and candid in how I described the events of that early morning."  He went on to excuse himself even for that minor transgression by seemingly claiming he was victimized: "It's traumatic to be out late with your friends in a foreign country - with a language barrier - and have a stranger point a gun at you and demand money to let you leave."  While Mr. Lochte did use the word "apologize," his apology minimized his misbehavior by describing it as lack of carefulness and candor rather than lying, and omitted any mention of the intoxication, urination and vandalism.

   Similar "apologies" by criminal defendants would both cause scrutiny and little impress federal sentencing judges.  Mr. Trump's was limited by the use of the wishy-washy word "regret."  Both Mr. Trump's and Mr. Lochte's  played down their own seeming misbehavior.  And, both contained defenses or excuses to justify or mitigate the limited degree of impropriety they admitted.  Defense lawyers should keep copies of these "apologies" to show their clients how not to do it.

   Were Mr. Trump or Mr. Lochte  criminal defendants  who had offered "apologies,"  a federal judge might have some difficulty finding, even if they had pleaded guilty, that they had "clearly demonstrate[d] acceptance of responsibility for the offense."  USSG Sec. 3E1.1(a).

  

 

Opinion Recognizes Mitigating Effect of Collateral Consequences on Sentencing

A few weeks ago, in United States v Nesbeth (15 CR-18, EDNY, May 24, 2016) Judge Frederic Block wrote an important opinion on the effect of post-conviction collateral consequences on one convicted of a felony, and as a result of such consequences imposed a one-year probation sentence on a woman convicted of importing cocaine.   He wrote that "sufficient attention has not been paid at sentencing by me and lawyers - both prosecutors and defense counsel - as well as by the Probation Department to the collateral consequences facing a convicted defendant."  He went on to a history of collateral consequences, efforts at reform, and the breadth of post-conviction statutory and regulatory collateral consequences.  He noted the "broad range of collateral consequences that serve no useful purpose other than to punish criminal defendants after they have completed their court-imposed sentences."

The opinion is a call for reform, for mitigation of sentences because of such additional punishment, and for increased awareness of collateral consequences by all participants in the sentencing process. Judge Block specifically called for probation officers "to assess and apprise the court, prior to sentencing, of the likely collateral consequences facing a convicted defendant."

Judge Block recognized an apparent Circuit split as to whether collateral consequences may be a mitigating factor in sentencing.  The Sixth, Seventh, Tenth and Eleventh Circuit seemingly have found that collateral consequences may not be considered, while the Second and Fourth Circuits appear to have found that they may.  I believe that under 18 USC 3553(a) they may, especially when atypical, be considered.

White-collar defendants obviously face not only the usual collateral consequences applicable to all convicted felons, but often also special ones such as loss of licenses or other professional bars.  I personally have had limited success in appealing to judges to mitigate sentences against white-collar defendants because of collateral consequences.  Many judges feel that that to consider those factors would favor the rich and well-educated over the poor and less-educated.  To be sure, as Judge Block's opinion demonstrates, the poor and less-educated too suffer from such collateral consequences. 

Defense lawyers should, as Judge Block writes, be aware of such consequences in order to set them forth as mitigating factors at sentencing.   Such knowledge is also necessary to inform defendants of these consequences so that they may make an educated decision whether to plead guilty.  As indicated by the flurry of defendants who have claimed they were unaware that their guilty pleas would subject them to deportation, lawyers historically may not have focused on collateral consequences.

 

 

 

Silver's Alleged Extramarital Affairs to be Considered at Sentencing

   Judge Valerie Caproni, the Southern District of New York judge presiding over the case of convicted former New York State Assembly Speaker Sheldon Silver, has unsealed papers submitted by United States Attorney Preet Bharara alleging that the convicted politician had affairs with two women who allegedly received favorable treatment from him in his professional capacity.   The women, whose names were redacted from court papers (but identified, with accompanying photos, by the New York Daily News) were allegedly a prominent lobbyist who dealt regularly with Silver in his official capacity and a former state official whom Silver allegedly helped get a state position.  

   The government, whose efforts to introduce evidence of the relationships at trial were rebuffed by the judge,  argued it should be able to provide such evidence at sentencing, purportedly to demonstrate that these relationships and favors provided by Silver demonstrated a pattern of abuse of power and possibly to rebut any evidence, including Silver's 50-year marriage, of Silver's good character.   The judge seemed to accept the first argument, stating that she viewed this information "as a piece with the crimes for which Mr. Silver stands convicted,"  although "not exactly  the same since no one is suggesting a quid pro quo, but of a piece of a misuse of his public office, and that's why I think it is relevant."

   Generally, a federal judge has a right to consider virtually any information on sentencing, but I am uneasy about the injection of information of extramarital affairs of a defendant into the sentencing decision.   If "no one is suggesting a quid pro quo," as Judge Caproni said, I question its relevance.  Unless there is some basis that Silver did something favorable for these women because of their alleged sexual relationships - which I would call a "quid pro quo - I wonder whether his alleged actions constitute a "misuse of public office." 

  There, of course, is a difference between allowing a party to present evidence or argument at sentencing and factoring that information into the sentencing decision, and, absent specific facts, I am hesitant to say the material should not be considered.  I am troubled, however, by the possibility that a defendant's alleged marital infidelity will become a regular part of a prosecutor's sentencing toolbox.

  I am relatively sure that my first boss, from almost fifty years ago, Frank Hogan, the legendary and exemplary longtime District Attorney of New York County, would not  have proffered such evidence, but Mr. Hogan was a man with a perhaps old-fashioned notion of fair play in a perhaps gentler age in which prosecutors rarely took aggressive (or even any) positions on sentencing (and the press did not publicize  the dalliances of public officials).

 (I note that Mr. Silver, whom I never met or spoke with, or contributed to, appointed me three times (and failed to reappoint me a fourth) to serve on the New York State Commission on Judicial Conduct).

Judge Uses ABA CJS "Shadow Guidelines" To Sentence CEO

In November 2014, the American Bar Association Criminal Justice Section Task Force on the Reform of Federal Sentencing for Economic Crimes published its final report.  The report recommended major changes to the structure of the Federal Sentencing Guidelines for economic crimes.  In particular, the report sought to reduce the current Guideline's dominant focus on loss in favor of a more balanced approach that weighed loss, culpability, and victim impact.  I discussed these proposed amendments more fully here.  Though the ABA CJS Task Force recommendations were not adopted by the Federal Sentencing Commission (see here and here), some courts have begun to use the ABA "Shadow Guidelines" when varying in economic crimes cases.  

Last week, a federal judge in New York used the ABA "Shadow Guidelines" in sentencing Mair Faibish, former CEO of Synergy Brands, Inc.  Faibish was accused of kiting checks worth in excess of $1 billion.  According to the DOJ press release in the case:

Synergy was a publicly-held food products company that traded on the NASDAQ and Over-the-Counter exchanges and manufactured and distributed various food products. As proven at trial, Faibish and his co-conspirators, on behalf of Synergy, funneled approximately $1.3 billion in checks that were not backed by sufficient funds through Signature Bank, Capital One Bank, and various Canadian bank accounts of associated food manufacturers and distributors in Canada. The Canadian companies then sent checks in corresponding amounts, which were also not backed by sufficient funds, back to Faibish-controlled shell companies. Because the banks made deposited funds immediately available for withdrawal, the scheme artificially inflated the companies’ account balances. Faibish and his co-conspirators used Synergy’s inflated bank account balances to book millions of dollars in fictitious accounts receivable and revenue.

As a result of this fraud, FDIC-insured Signature Bank lost approximately $26 million that Faibish and his co-conspirators had withdrawn before the bank uncovered the scheme. Following the scheme’s collapse, Synergy was taken into bankruptcy, and its publicly traded stock became essentially worthless, causing millions of dollars in investor losses. On November 4, 2014, the Court ordered Faibish to pay $51,166,000 in forfeiture.

The trial evidence also established that Faibish falsely inflated the values of Synergy’s sales, cost of goods sold, and pre-paid expenses in filings with the SEC for the quarter ending June 30, 2008. These material misrepresentations were breaches of the defendant’s fiduciary duties to investors.

The Federal Sentencing Guideline range in the case was life in prison, though the maximum available sentence was actually less due to applicable statutory maximums.  Despite the Federal Sentencing Guideline range and the government's request for decades in prison for Faibish, the Court rejected these arguments and sentenced him to 63 months in prison (see here and here).  According to LAW360, the judge stated at sentencing that the Federal Sentencing Guidelines for economic crimes are "almost useless" because of their reliance and focus on loss in calculating the applicable sentencing range.  Instead, the judge used the ABA "Shadow Guidelines" to determine what he considered to be a more appropriate sentence. 

This seems to be yet another indication of the growing dissatisfaction among judges with the Federal Sentencing Guidelines for economic offenses (see here and here) and should serve as yet another call for the Federal Sentencing Commission to consider more significant reforms in the future. 

(LED)

Boy-Boy Strikes Out--For Now

Today in U.S. v. Gregory Bell, aka Boy-Boy, the D.C. Circuit denied appellants' consolidated petitions for rehearing en banc, which challenged the sentencing court's use of acquitted conduct to  dramatically enhance appellants' sentences. Two separate and outstanding concurrences are worth a view. Judge Patricia Millett incisively critiques current sentencing jurisprudence which condones such horrific results. Judge Brett Kavanaugh agrees with Judge Millett and provides guidance for district courts who find by a preponderance of the evidence that acquitted conduct occurred, but do not want to enhance the sentence. What is the guidance? In a nutshell, utilize Booker to downwardly vary the sentence. Hopefully the Supreme Court will grant certiorari and end this appalling vestige of sentencing law.

(wisenberg) 

The Importance of a Record in Guidelines Variances

    Last week in U.S. v. James Wendell Brown the United States Court of Appeals for the D.C. Circuit reversed a Booker upward variance in a child pornography case. The majority found Judge Richard Leon's sentence procedurally unreasonable, even under the plain error standard. The problem? Judge Leon was too general, and generic, in explaining how the four (out of seven) 3553(a) factors that he referenced applied to the defendant and justified an upward variance. As a white collar practitioner I always get nervous when a variance of any kind is sent back. Case law supporting upward and downward variances is substantial, and generally very favorable to the defense, and any chink in the armor of broad district court sentencing discretion is worrisome. Here there should be no great cause for concern. While talismanic recitation of all Booker factors is not required in any federal circuit to justify an upward or downward variance, there has to be some specific effort to link the factors relied upon to the individual conduct or character of the defendant standing before the sentencing court. Making sure that the court performs this linkage is the practitioner's job. Here, Judge Leon was simply too vague in reciting the 3553(a) factors and explaining why they justified a significant upward variance, and no practitioner chose to fill in the details, because the variance was opposed by both the prosecution and defense. In the mine run case, where defense counsel is arguing for a downward variance, it is his or her job to convince the trier of fact and, if necessary, help the court articulate, on the record, the reasons for the variance, such that the sentence will stand up on appeal. To fail is to screw your own case up and create a bad precedent for your peers.

    Judge Edwards, writing for the majority, distinguished U.S v. Ransom. In writing about Ransom here last year, I noted that the DC Circuit "rejected appellants' argument that the sentencing court improperly relied on factors in varying upward that the Guidelines had already accounted for. Joining some sister circuits the Court held (internal quotes and citations omitted) that:

It is not error for a district court to enter sentencing variances based on factors already taken into account by the Advisory Guidelines, in a case in which the Guidelines do not fully account for those factors or when a district court applies broader [Section] 3553(a) considerations in granting the variance.

    Notice that there are two alternative prongs to this portion of Ransom. The Brown court seems to indicate that the failure of the Guidelines to fully account for certain factors will only occur when the sentencing court sees and identifies special additional factors that exist in a specific defendant's particular circumstance. Thus, in Ransom, although the Guidelines already assessed two points for committing the offense while on probation, the sentencing court stated on the record that the offense of conviction (embezzlement) and the identity of the co-defendant were identical to the violated probationary offense and that this (and other things) justified an upward variance. Contrat this with Brown, where Judge Leon failed to articulate anything about Brown's particular offense/conduct/background that was not fully accounted for in the applicable Guidelines provisions.

    The other prong of Ransom is completely undisturbed. A sentencing court can apply broader Section 3553(a) considerations, that is, broader considerations than those contained in the Guidelines, in granting an upward or downward variance. Again, there must be an explanation by the sentencing court. The sentencing court is always free to articulate its disagreement with the Guidelines' approach, and as long as that disagreement is rational and reasonable, the sentence cannot be disturbed. Two classic examples of this are family circumstances and aberrant conduct, both of which are nearly impossible to achieve as grounds for downward departure, but which regularly enter in to downward variance judgments in the post-Booker-Gall-Kimbrough world.

    Judge Sentelle, who wrote the majority opinion in Ransom, dissented in Brown, because he did not see plain error.

(wisenberg)

 

Plea Bargaining and the Trial Penalty

This morning's Wall Street Journal contains an opinion piece I wrote on the subject of the "trial penalty."  Entitled "The Injustice of the Plea-Bargaining System," the commentary examines the manner in which the trial penalty induces too many defendants to give up their constitutional right to trial.  In examining the issue, the piece includes a discussion of the tragic case of Orville (Lee) Wollard.  Wollard, who was charged with a crime after firing a warning shot in his home into the wall next to his daughter's allegedly abusive boyfriend, turned down a plea offer of five years probation and ended up receiving a sentence of twenty-years in prison after conviction at trial.  I hope you will have an opportunity to read the entire piece. 

(LED)

21-Day Insider Trading Sentence to Cooperator Considered Harsh

The New York Times reported today (Goldstein, "Witness in Insider Trading Inquiry Sentenced to 21 Days, see here) what it called a "surprising" 21-day prison sentence imposed  by Judge P. Kevin Castel upon a felony conviction broke "what has been the standard practice" in insider trading cases in the Southern District of New York.  Anyone not familiar with the customs of that court's prosecutors and judges might think that such a sentence was out-of-the-ordinary lenient.  However, as the article makes clear, that sentence, for a major cooperator, was apparently considered out-of-the-ordinary harsh.

The defendant, Richard Choo-Beng Lee, was a California hedge-fund owner who, after being approached by FBI agents with evidence that he (and his partner, Ali Far, who was later sentenced to probation by a different judge) had broken securities laws, cooperated with the government by recording 171 phone calls with 28 people, including Steven A. Cohen, DOJ's no. 1 target, who has not been indicted (although his firm, SAC Capital Advisers, was and pleaded guilty and paid a multi-billion dollar fine). 

New York City is the cooperation capital of the world.  As the Times article indicates, cooperators in white-collar (and other) cases in the Southern District of New York are given considerable benefits for cooperating (far greater than in most jurisdictions) and the default and almost uniform sentence for them is probation and not jail.  To be sure, cooperators make cases, and many of those cases and the individuals charged would go undetected without cooperators looking to provide assistance to the government to lessen their own potential sentences.

However, the cooperation culture in New York has many deleterious consequences. To the extent that deterrence is achieved by jail sentences (and I believe it is in white-collar cases, but not in many other areas), its effect has been minimized.  The clever white-collar criminal (and most but not all are intelligent) knows that he has in his pocket a "get-out-of-jail card," the ability to cooperate against others and get a non-jail sentence. The mid-level financial criminal can commit crimes, enjoy an outrageously lucrative, high-end life style, and, when and if caught, cooperate, stay out of jail and pay back what assets, if any, remain from his wrongdoing.

Knowledgeable white-collar defense attorneys are well aware of the benefits of cooperation.  It is often good lawyering to urge cooperation, at times even in marginal cases, to avoid jail sentences.  Indeed, more than a  a trifling number of those who plead guilty in white-collar cases are actually innocent, often because they lack the requisite mens rea  (a difficult, even when accurate, defense).  And sometimes, at the urging of their lawyers, they admit guilt and tailor their stories and testimony to what the prosecutors and agents (who usually see only the dark side of equivocal facts and circumstances) believe actually occurred so that others actually innocent are convicted (or also choose to plead guilty and perhaps cooperate against others).  The bar for indictment and conviction has been lowered. The adversary system has been turned sideways, if not upside-down.

To many, probably most,  lawyers, cooperation is personally easier than going to trial.  Cooperation avoids the stress of battle and the distress of  (statistically probable) defeat at trial.  No longer do lawyers walk around with "no-snitch" buttons.  The white-collar bar has become generally a non-combative bar. To the extent it ever had one, it (with notable and not-so-notable exceptions) has lost its mojo. The first (and often only) motion many lawyers make upon being retained is to hail a taxi to the prosecutor's office.

I write about the role of the bar as a lament more than a criticism.  I too represent cooperators when I think cooperation is to their benefit.  There is a great penalty (or, to put it gently, "loss of benefit") for not cooperating.  Those accused who choose not to cooperate, or those whose own scope of criminality and knowledge of wrongdoing of others is so limited that they cannot, receive (in my opinion sometimes, but far from usually, appropriate) severe jail sentences.  Those who cooperate, except for the unfortunate  Mr. Lee, almost always avoid jail.

Lawyers and professors talk about the "trial penalty," the extra, often draconian, prison time one receives for exercising his right to trial.  The principal "penalty" in white-collar cases is not the trial penalty, but the "non-cooperation penalty."  Even those who choose not to go to trial and plead guilty are punished much more severely than those who cooperate.

 

 

A Reply to Steven H. Levin's Responsive Blog on Hassert

   Last Friday attorney Steven H. Levin posted a guest blog disagreeing with my view in a blog earlier that day that Dennis Hastert should not have been prosecuted.  Hastert was charged with, and pleaded guilty to,  structuring withdrawals from financial institutions of his own apparently legitimately derived funds, purportedly to conceal payoffs to an alleged extortionist whom he had purportedly sexually victimized over 30 years ago.  Hastert, Mr. Levin said, "had to be prosecuted" because his prosecution had "potential deterrent effect" on "would-be structurers" and "would-be extortionists."

  Even if the Hastert prosecution were to  have a deterrent effect on such "would-be" criminals, I still believe, for the reasons I expressed, that this case was an appropriate one for the exercise of prosecutorial discretion.  I do recognize that deterrence is a commonly recognized goal of prosecution and sentencing, and accept that prosecutions do have a deterrent effect on some "would-be" white-collar criminals (but far less an effect on those who might commit crimes involving violence and narcotics).  Nonetheless,  I question whether this prosecution will cause a positive deterrent effect on those who are considering the commission of either structuring or extortion.

   I do accept that the publicity attendant to the prosecution will to an extent increase public awareness of the existence of a crime called structuring whose broad expanse covers acts committed by otherwise law-abiding citizens to maintain their privacy and avoid disclosure of things they prefer be confidential, and therefore may have some deterrent effect on those persons.  However, deterring people from committing essentially harmless acts even though criminalized by an overbroad statute does not appear to me to be much of a societal benefit.  And, to the extent that the attendant publicity will educate money launderers of criminal proceeds and deter them from violating the structuring statute, of which sophisticated criminals are overwhelmingly aware in any case, the positive effect is also questionable since its potential effects will be further concealment and consequent limitations on governmental discovery of criminality.

   Additionally, I doubt that many would-be extortionists would be deterred from acts of extortion by this prosecution, in which, it so far appears, the purported extortion victim has been prosecuted and the purported extortion perpetrator remains free and also has probably received millions of dollars in payments (and also perhaps achieved some measure of retribution by the exposure, so far limited, of Hassert's alleged misdeeds) .  To the extent it has any effect on rational would-be extortionists who weigh the benefit/risk ratio, this prosecution encourages rather than deters them.