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November 30, 2009

Significant Ninth Circuit ruling on guideline loss calculations in fraud sentencings

Today a Ninth Circuit panel has issued an important new ruling, and created a circuit split, concerning the calculation of loss under the federal sentencing guidelines for economic frauds.  The ruling comes in US v. Berger, No. 08-50171 (9th Cir. Nov. 30, 2009) (available here), which starts this way:

Defendant-Appellant Richard I. Berger appeals the sentence imposed by the district court following our affirmance of his conviction for twelve counts of bank and securities fraud. Berger argues that, in sentencing him on remand, the district court erred by: (1) not adhering to the civil loss causation principle in finding shareholder loss, as described by the Supreme Court in Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 342-48 (2005); and (2) applying an erroneous standard of proof in determining total loss for sentencing enhancement purposes.  While we decline to extend the Dura Pharmaceuticals principle to criminal securities fraud, we conclude that the district court’s loss calculation approach was nevertheless flawed.  Thus, although we conclude that the district court used the correct standard of proof in determining the total loss, we vacate Berger’s sentence and remand to the district court for resentencing.

As the Ninth Circuit panel notes in Berger, the Second and Fifth Circuits have both expressly adopted the civil loss causation principle of Dura Pharmaceuticals in the context of calculating loss for guideline sentencing purposes.  In light of this new Berger ruling and the potential importance of this issue in many white-collar sentencing cases, it may be only a matter of time before the Supreme Court needs to get in the mix on this guideline-calculation federal sentencing matter.

November 30, 2009 at 03:12 PM | Permalink

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Comments

Today (2-2-10) the 9th ordered the gov't to respond to appellant/def't's petition for rehearing and/or rehearing en banc in US v. Berger, which raises the issues of whether the gov't must prove "loss" by clear & convincing evidence when the adjustment under 2B1.1 drives the sentence, and whether the gov't must prove that "loss" for sentencing purposes includes only that portion of victims' losses that were proximately caused by the offense conduct, as opposed to market shifts or other unrelated factors.

Posted by: Evan A. Jenness | Feb 2, 2010 1:56:23 PM

The current issue of the National Law Journal contains an article by Jeff Ifrah and Rachel Hirsch of Ifrah Law PLLC in Washington, D.C. about the Berger case and the circuit split. See the Ifrah law firm's blog posting at http://crimeinthesuites.com/national-law-journal-article-circuits-split-over-securities-fraud-sentencing/. I am a consultant who works with the Ifrah firm.

Posted by: Jonathan Groner | Jul 22, 2010 3:36:13 PM

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