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December 4, 2016

Second Circuit hints that sentence reduction might well be justified whenever guideline range is increased "significantly by a loss enhancement"

I am grateful to Harry Sandick for alerting me to this seemingly little (and easily overlooked) opinion handed down by a unanimous Second Circuit panel late last week.  Stephanie Teplin and Harry Sandick discuss the case in this thoughtful blog posting, and here are key passages from their coverage:

In United States v. Algahaim, No. 15-2024(L), the Second Circuit (Newman, Winters, Cabranes) upheld the conviction of two defendants for misconduct involving the Supplemental Nutrition Assistance Program (“SNAP”), but remanded to the district court for consideration of a below-Guidelines sentence.  The Court, in an opinion by Judge Newman, held that the outsize effect of the loss amount enhancement on the defendant’s base offense level — a sentencing scheme for fraud that is “unknown to other sentencing systems” — required the district court to reconsider whether a non-Guidelines sentence was warranted....

Judge Newman acknowledged that it was within the Sentencing Commission’s authority to construct a sentencing scheme that “use[s] loss amount as the predominant determination of the adjusted offense level for monetary offenses.”  However, he observed that “the Commission could have approached monetary offenses quite differently.  For example, it could have started the Guidelines calculation for fraud offenses by selecting a base level that realistically reflected the seriousness of a typical fraud offense and then permitted adjustments up or down to reflect especially large or small amounts of loss.”

The “unusualness” of the Guidelines system, the Court held, can be considered by a sentencing judge under Kimbrough v. United States.  “Where the Commission has assigned a rather low base offense level to a crime and then increased it significantly by a loss enhancement, that combination of circumstances entitles a sentencing judge to consider a non-Guidelines sentence.”  The Court did not hold that the sentences were in error, but remanded for the district court’s reconsideration of the sentences....

Judge Newman has long been a skeptic of the Guidelines approach to sentencing.  In this short opinion, he cites the pre-Booker decision in United States v. Lauersen, 348 F.2d 329 (2d Cir. 2003), an opinion he authored at a time when the Guidelines were mandatory, except for downward departures.  Lauersen held that where the cumulative impact of overlapping Guidelines enhancements (in that case, for loss amount and for defrauding a financial institution of more than $1 million) resulted in an overly long sentence, the district court could downwardly depart.... 

In Algahaim, Judge Newman carries this concept forward to the more open-ended sentencing regime given to us by Booker, Gall and Kimbrough.  Many judges have stated that the Guidelines are not helpful in white-collar cases and that their emphasis on loss can lead to results that are “patently unreasonable.”  E.g., United States v. Adelson, 441 F. Supp. 2d 506, 509 (S.D.N.Y. 2006) (Rakoff, J.).  Practitioners have also advocated for shorter sentences in cases involving relatively low loss amounts or where the defendant had no prior record.  See ABA Criminal Justice Section, “A Report on Behalf of the ABA Criminal Justice Section Task Force on the Reform of Federal Sentencing for Economic Crimes” (November 10, 2014) (last visited December 1, 2016).  To the extent that district judges needed any further encouragement, Judge Newman’s decision lets district judges know that a Guidelines sentence need not be imposed where the “significant effect of the loss enhancement” leads to an unduly long sentence.

Because Judge Jon O. Newman was my very first boss as a lawyer (I served as his law clerk from 1993-94 starting just months after my graduation from law school), I am always partial to his opinions and especially as to his opinions about sentencing issues. And, as regular readers know, I am always partial to judicial opinions that thoughtfully explain whether and when the federal sentencing guidelines should or should not be followed. And so, perhaps my partiality is going to bubble over when I assert that Judge Newman is being especially astute and shrewd in his pro-discretion sentencing work in United States v. Algahaim, in part because the particulars of the loss enhancement in Algahaim are actually not all that major.

Specifically, in Algahaim, the two defendants who were appealing their convictions and sentences were subject to offense-level increases for loss of "only" 10 and 12 points  under USSG § 2B1.1(b)(1).  Though such loss enhancements certainly appear significant when added to a base offense level of 6, in many other fraud cases the loss enhancement under 2B1.1(b) can commonly add 16 or 20 or 24 or even up to 30 points.  Despite those realities, the Second Circuit in Algahaim has now called just a 10-level loss enhancement in a fraud case "significant" and also has said this enhancement is alone large enough to merit serious consideration of a below-guideline sentence.  For that reason, I would now expect lots of astute and shrewd future white-collar defendants throughout New York and elsewhere to be citing to Algahaim to bolster arguments for below-guideline sentences whenever the guideline range is moved up a lot by loss calculations.

December 4, 2016 at 12:31 PM | Permalink

Comments

That case deeply puzzled me. Can anyone who knows more about SNAP help me out? What possible motive could a shop owner have for engaging in this type of fraud? He gains nothing by it as far as I can see: he gets benefits which to him are the same as cash and the poor person gets cash. I understand that's illegal; I just don't understand why anyone would commit a fraud that does not benefit himself in any way.

Posted by: Daniel | Dec 4, 2016 4:12:24 PM

I presume, Daniel, that the store owner gets the SNAP card to get money from the feds AND then gets to help the SNAP user have $$ to spend on "contraband" in the store. I suspect the Deli run by the defendants here also sells stuff like lottery tix and alcohol and tobacco products. After converting the SNAP card into cash, the user can then buy this other stuff at the store. (Also, the store owner also presumably gets a loyal customer who will buy other stuff if he is helping with SNAP cashing.)

Posted by: Doug B. | Dec 4, 2016 5:44:13 PM

as an FPD I have defended several of these cases and the scam is always the same: the customer swipes his EBT card for $50 of "merchandise" that he hasn't bought, the merchant gives him some lesser amount, say $40, in cash, then bills USDA for $50, resulting in a $10 profit to the merchant. it is a way for customers to convert SNAP benefits to cash, and the merchant takes a cut.

Posted by: FPD | Dec 5, 2016 3:43:51 AM

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