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July 23, 2013

Second Circuit finds stat max white-collar sentences procedurally unreasonable

The Second Circuit panel has today handed down a significant reasonableness ruling in US v. Juncal, No. 10-1800 (2d Cir. July 23, 2013) (available here), which should be of special interest to all white-collar sentencing practitioners. The last seven pages of the per curiam panel opinion and the entire nine pages of the concurrence by Distict Judge Underhill (sitting by designation) are must reads for sentencing fans, and the few paragraphs I will reprint here help highlight why.

The per curiam panel opinion find procedurally unreasonable 20-year sentences given to defendants who were part of a conspiracy "which involved a scheme to obtain a three billion dollar loan supposedly intended to finance construction of a pipeline across Siberia [that] resulted in no actual loss." Here is part of the panel opinion's explanation for why these sentences were procedurally unreasonable:

Here, appellants’ lawyers highlighted significant issues with the intended loss calculation both in their briefs and at sentencing. Given the low risk that any actual loss would result — what hedge fund would fall prey to a purported coalition of Buryatian nationals and Yamasee tribesmen using AOL email accounts to offer five billion dollars in collateral for a loan to build a pipeline across Siberia? — counsel argued that a 30 point mega-enhancement vastly overstated both the seriousness of the offense, and the danger of appellants to their community.  The Guidelines acknowledge that potentiality; application note 3(C) to U.S.S.G. § 2B1.1 indicates that a downward departure may be warranted where the offense level resulting from a loss calculation overstates the seriousness of an offense.  But the sentencing court never resolved appellants’ significant arguments.  At Sampson’s hearing the District Court did draw a comparison between other financial crimes and this case, but it never resolved the question raised by the appellants — whether treating intended loss like actual loss under all the circumstances of this case leads to a sentence consistent with the dictates of section 3553(a).

The concurring opinion by Judge Underhill is even more potent as it advocates for a broader ruling that the sentences here are substantively unreasonable, and here is how it gets started

In my view, the loss guideline is fundamentally flawed, and those flaws are magnified where, as here, the entire loss amount consists of intended loss.  Even if it were perfect, the loss guideline would prove valueless in this case, because the conduct underlying these convictions is more farcical than dangerous. If substantive review of sentences actually exists other than in theory, it must be undertaken at least occasionally.  This would have been an appropriate case in which to do so, because it raises so starkly the problems with the loss guideline. Until this Court weighs in on the merits of the loss guideline, sentences in high-loss cases will remain wildly divergent as some district judges apply the loss guideline unquestioningly while others essentially ignore it.  The widespread perception that the loss guideline is broken leaves district judges without meaningful guidance in high-loss cases; that void can only be filled through the common law, which requires that we reach the substantive reasonableness of these sentences.

July 23, 2013 at 10:59 AM | Permalink


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That dissent is hilariously brutal on the defendants' inept scheme. There were quite a few choice quotes, my favorite being: "The circumstances of these convictions put them very close to the boundary of mere fantasy (or perhaps the boundary of mental competence) and the sentences should have reflected that fact."

Posted by: dsfan | Jul 23, 2013 9:15:39 PM

er, I meant concurrence.

Posted by: dsfan | Jul 23, 2013 9:16:07 PM

"that void can only be filled through the common law, which requires that we reach the substantive reasonableness of these sentences."

Finally, a judge that gets it.

Posted by: Daniel | Jul 24, 2013 12:29:00 AM

I liked the Three Stooges quote better. But the concurrence doesn't even show the half of it - among other things, they claimed that their bank had assets of one quadrillion dollars (roughly equivalent to the total wealth of five Earthlike planets), presented a homemade "corporate gold certificate" that has to be seen to be believed, and in at least one phone conversation, weren't sure if Buryatia was part of Iraq.

(I was counsel for Rodney Sampson, one of the defendants.)

Posted by: Jonathan Edelstein | Jul 24, 2013 11:28:08 AM

Jonathan Edelstein --

Working on this case must have cracked you up. Maybe your next client should be that Nigerian prince who keeps wanting to send me "USD 10,000,000" if I just send him my bank account number.

Posted by: Bill Otis | Jul 24, 2013 3:13:15 PM

More seriously, in the concurrence, in addition to some really clear thinking about the problems associated with treating intended loss and actual loss and taking Guidelines too seriously in these cases in particular, also has a real buried gem of a comment about how all losses of the same dollar amount are not created equal, and that courts should look to the human harm visited on a victim due to the fraud involved. A fraud that leaves a widow or orphan homeless or hungry, even if it is just a few thousand dollars, causes more harm than a considerably larger fraud that only slightly tweaks the retained earnings of highly profitable Fortune 500 company. Recognition that the purposes of criminal law call for it to distinguish between human suffering and economic loss is a really worthwhile insight and touchstone for white collar crime cases generally.

Posted by: ohwilleke | Jul 26, 2013 5:12:39 PM

Maybe an update is in order here. I have checked the PACER docket sheet and upon re-sentencing the defendants received between 15 and 20 years for this ridiculous crime. Not mentioned in the decision is the relatively advanced age of most of the defendants, as well as the fact that at least one suffered from terminal illness.

Despite the concurring opinion trying to shake some sense into the District Judge, on re-resenting, the same defendants received between 15 and 16 year sentences. And one of the defendants died from prostate cancer in prison in January 2015. There is so much talk about over-incarceration, this has to be a poster child case. And if a concurring decision blasting the ridiculousness of the sentence is not enough to shake some sense into District Judges, nothing will.

As to substantive reasonableness, United States v. Norman, Docket No. 13-2840-CR (2nd Cir. 2015) (65 year old sentenced to 20 years imprisonment) now holds that these type of ridiculous sentences are not an abuse of discretion and are substantively reasonable.

Posted by: Anon | May 2, 2015 5:39:51 PM

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