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March 31, 2016

"A Fatally Flawed Proxy: The Role of 'Intended Loss' in the U.S. Sentencing Guidelines for Fraud"

The title of this post is the title of this notable new article authored by Daniel Guarnera now available via SSRN. Here is the abstract:

Of all federal criminal defendants, those convicted of fraud are among the most likely to receive a sentence below the term recommended by the U.S. Sentencing Guidelines.  The most important (and controversial) driver of fraud sentences under the Guidelines is the economic loss — actual or intended, whichever is greater — resulting from the crime.

This Article examines the role of the “intended loss” calculation.  The U.S. Sentencing Commission designed the intended loss enhancement to function as a rule-oriented proxy for defendant culpability.  By applying the framework of rules and standards, this Article argues that culpability, by its nature, is too multifarious a concept to be accurately represented by a single variable.  Furthermore, a recently-enacted amendment to the definition of intended loss — which restricts its scope to losses “that the defendant purposely sought to inflict” — will only exacerbate the problem by excluding a significant subset of plainly culpable conduct.

Rather than attempt to fine-tune the intended loss calculation any further, this Article contends that the purposes of sentencing in general (and the goals of the Guidelines in particular) would be better served by enabling judges to conduct a more standard-based inquiry into the wide array of facts that can bear on culpability.  It evaluates several proposals that would give judges greater discretion while, at the same time, minimizing the risk of unwarranted sentencing disparities.

March 31, 2016 at 10:57 AM | Permalink


Fraud sentences in the US are ridiculous and the US judges who impose sentences are being irresponsible. Gone are the days when they can just blame or hide behind the Guidelines, yet they still sentence like its 2002!!!! No Book, Gall, Rita etc. 150 years for Maddoff, 112 years for Stanford and so on. This is what American justice is? Come on!!! Its beyond uncivilized and would make our puritan forefathers scream "that's punitive." You know what fraudsters get in other countries? Jerome Kerviel, cost French investment bank Societe General billions, he got 5 years in prison suspended after 2 (so effectively 3 years in prison). UBS rogue trader Kweku Adoboli who cost the bank over $1 billion, got sentenced to 7 years in prison (3.5 years with good time). The executives of Parmalat in Italy, who cost the company $18 billion and drove it into bankruptcy, got suspended sentences.

Now, lets go to the 3553(a) factors, did those European guys named above all get just punishment? Yes, why? Because it was no more than necessary (parsimony). They didn't have their lives ended. Economic disaster is not the same as homicide yet we punish fraudsters as severe as, if not more severely than murderers and rapists. Restitution? Yep, they were all ordered to pay restitution. Deterrence? Yea, others were deterred. Fraudsters didn't come in spades and say "yo man, I can steal a billion and just get 3.5 years." Deterrence occurs at the moment of conviction, not through 150 year sentences where the offender is out of sight and out of mind.

Intended loss is a ridiculous measure and not only should we ditch it, but we should get rid of the MVRA while we are at it and go back to a system were judges take into account ability to pay. There is over $100 billion in outstanding restitution debt, yet only 3-8% is collectible. Tell me we haven't taken it all too far? Intended loss, foreseeability. Only thing we haven't blamed fraudster for is global warming....Wait there is probably a 2 point enhancement for that somewhere in the Guidelines too.

Posted by: Old Lawyer | Mar 31, 2016 11:56:45 AM

Sorry, but I believe that China has the right of it in having execution be an available option for fraud. Barring that my biggest gripe with Maddoff and the like is that we don't allow for a term of natural life, instead requiring a sentence of a ridiculous number of months in order to reach the same result. People snicker at a sentence of 150+ years, I don't think there would be nearly the same reaction to imprisoning someone like Maddoff until he keels over dead one day.

I believe that Europe has gone completely off the rails when it comes to criminal sentencing, both for violent and purely commercial crimes, using them as an example is not going to convince me that we should follow the same road.

Posted by: Soronel Haetir | Mar 31, 2016 2:00:24 PM

Europe has been around before America and it hasn't gone off the rails. Its survived many wars, long before the two in 20th century, and its done just fine. They are more rational to the point where its not just the politicians but the public that accept their principles of criminal justice. If you look at some research in some old issues of the FSR, maybe it was an article by Prof. Fraser, you'd see that one of the primary reasons Europeans are not as punitive is there is less politicization of crime and justice--the media is not as prone to rile up the public.

A lot of people sing the parade of horribles in the US: if we dont punish fraudsters enough, they'll have an incentive to steal more and more. The research on deterrence has shown that its not the quantity of punishment but the certainty of punishment.

Putting geriatric old fools, even the king of frauds, is a waste of resources, fails to deter anyone else, and instead of just punishment, he gets three meals a day plus healthcare at tax payer expense (let me guess now, you'd want to upgrade him to the Gulag suite?) If you can't be convinced by a system in the UK, France and Germany that works, where punishments are not ridiculously one sided, then nothing will convince you. Punitive responses have a great deal populist appeal, but like Trump, they don't work.

Posted by: Old Lawyer | Mar 31, 2016 4:08:55 PM

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