Monday, December 15, 2014

Former Virginia Gov McDonnell facing significant (trial?) penalty in his federal guideline calculation

This recent article from the Washington Post, headlined "Early federal sentencing recommendation for McDonnell: At least 10 years in prison," spotlights the seemingly severe sentence recommended by the federal sentencing guidelines for a former Governor's corruption.  Among other notbale aspects of this high-profile sentencing story is the fact that former Virginia Gov Bob McDonnell is now facing a guideline sentencing range that is more than three to four times longer than the longest possible sentence he would have faced had he been willing to plead guilty on terms urged by federal prosecutors.  Here are the notable details at this stage of a developing high-profile sentencing story:

The guidelines recommended by the U.S. probation office are preliminary, and even if finalized, U.S. District Judge James R. Spencer is not required to follow them. But experts said that Spencer typically heeds the probation office’s advice, and judges in his district have imposed sentences within the recommendations more than 70 percent of the time in recent years. “It’s of critical importance,” said Scott Fredericksen, a white-collar criminal defense lawyer. “The fact is, the vast majority of times, courts follow those recommendations closely.”

The matter is far from settled. The probation office recommended a punishment from 10 years and a month to 12 years and 7 months. Calculating an appropriate range of sentences in the federal system is a complicated, mathematical process that takes into account a variety of factors, including the type of crime, the defendant’s role and the amount of loss. The judge has yet to see the arguments from each side.

McDonnell and his wife, Maureen, were convicted in September of lending the prestige of his office to Richmond businessman Jonnie R. Williams Sr. in exchange for $177,000 in loans, vacations and luxury items. McDonnell is scheduled to be sentenced Jan. 6. His wife’s sentencing is scheduled for Feb. 20, and her guideline range is expected to be lower than her husband’s. The probation office has not yet filed a report concerning her.

It is unclear how the probation office determined that the former governor’s crimes necessitate a minimum decade-long sentence. The initial report on the matter is sealed, and people familiar with its contents revealed only the recommended range to The Washington Post.

The range is particularly notable because last December, prosecutors offered to let McDonnell plead guilty to just one count of lying to a bank as part of an agreement that would have meant he could be sentenced to three years in prison at the most and probation at the least. Importantly, though, McDonnell would have been required to sign a statement acknowledging that he helped Star Scientific, Williams’s dietary-supplement company, at the same time the businessman was giving him loot, fully shouldering blame for a relationship he has insisted was not criminal and was driven largely by his wife....

White-collar criminal defense lawyer Matthew Kaiser said McDonnell’s range probably was increased because he was a high-ranking public official, because he took more than one payment from Williams and because the total value of the gifts he received was so high. Kaiser said the probation officer also probably faulted McDonnell because his testimony was contrary to the jury’s verdict.

Prosecutors and defense attorneys will still have an opportunity to argue to the probation officer about whether the range was correctly calculated — although Kaiser said the probation office often “sticks to its guns.” After that, both sides can try to persuade Spencer to modify the recommended range.

Even then, Spencer is not bound by the guideline. Defense attorneys have already begun working vigorously in their bid to sway him toward leniency. This week, they won a legal skirmish with prosecutors so they can file additional pages in their sentencing memorandum — a key document outlining the sentence they believe McDonnell should receive and why. It is unclear whether their efforts to move Spencer away from the probation office’s recommended range will be fruitful.

In the Eastern District of Virginia, where McDonnell is being sentenced, judges imposed sentences within the guideline range more than 70 percent of the time last fiscal year, according to data from the U.S. Sentencing Commission. In about 21 percent of cases, they imposed sentences below the guideline range without a request from prosecutors to do so. Nationally, judges imposed sentences within the guideline range about 51 percent of the time last fiscal year and deviated downward without a request from prosecutors to do so in about 19 percent of cases.

In the McDonnell case, prosecutors are not expected to ask for a sentence below the guideline range.... Brian Whisler, a defense lawyer who used to work as a federal prosecutor in

Richmond, said that Spencer is known to be “largely deferential to the probation office and its sentencing calculations.” Whisler — whose firm, Baker & McKenzie, represented state employees in the McDonnell case — said the judge will likely draw on other cases in the district to inform his conclusion.

The outcome of those might not be to McDonnell’s liking. In 2011, another federal judge in Richmond sentenced former Virginia delegate Phillip A. Hamilton to 9.5 years in prison in a bribery and extortion case. In 2009, a federal judge in Alexandria sentenced former congressman William J. Jefferson to 13 years in prison for accepting hundreds of thousands of dollars in bribes — though, notably, that fell well short of the recommended range of 27 to 33 years.

December 15, 2014 in Booker in district courts, Federal Sentencing Guidelines, Offense Characteristics, Procedure and Proof at Sentencing, Scope of Imprisonment, White-collar sentencing | Permalink | Comments (0) | TrackBack

Wednesday, December 10, 2014

Second Circuit panel finds evidence insufficient to support two major insider trading convictions

There is big news in the white-collar crime (and sentencing?) world this morning coming out of New York thanks to the Second Circuit's significant new opinion in US v. Newman, No. 13‐1837 (2d Cir. Dec. 10, 2014) (available here).  This New York Times article about the ruling helps spotlight why this is Newman ruling is a very a big deal:

A federal appeals court on Wednesday overturned two of the government’s signature insider trading convictions, a stunning blow to prosecutors and their campaign to root out illegal activity on Wall Street.

In a 28-­page decision that could rewrite the course of insider trading law, sharply curtailing its boundaries, the United States Court of Appeals for the Second Circuit in Manhattan tossed out the case against two former hedge fund traders, Todd Newman and Anthony Chiasson. Citing the trial judge’s “erroneous” instruction to jurors, the court not only overturned the convictions but threw out the cases altogether....

The unanimous decision – the first higher court rebuke of an insider trading case filed by Preet Bharara, the United States attorney in Manhattan – could portend a broader revisiting of Mr. Bharara’s insider trading crackdown. It will also offer a blueprint for traders to defend future insider trading cases, a development that is likely to unnerve prosecutors while delighting the defense bar.

Here are a few paragraphs from the start of the Newman opinion:

Defendants‐appellants Todd Newman and Anthony Chiasson appeal from judgments of conviction entered on May 9, 2013, and May 14, 2013, respectively in the United States District Court for the Southern District of New York (Richard J. Sullivan, J.) following a six‐week jury trial on charges of securities fraud....

The Government alleged that a cohort of analysts at various hedge funds and investment firms obtained material, nonpublic information from employees of publicly traded technology companies, shared it amongst each other, and subsequently passed this information to the portfolio managers at their respective companies.    The Government charged Newman, a portfolio manager at Diamondback Capital Management, LLC (“Diamondback”), and Chiasson, a portfolio manager at Level Global Investors, L.P. (“Level Global”), with willfully participating in this insider trading scheme by trading in securities based on the inside information illicitly obtained by this group of analysts.   On appeal, Newman and Chiasson challenge the sufficiency of the evidence as to several elements of the offense, and further argue that the district court erred in failing to instruct the jury that it must find that a tippee knew that the insider disclosed confidential information in exchange for a personal benefit.  

We agree that the jury instruction was erroneous because we conclude that, in order to sustain a conviction for insider trading, the Government must prove beyond a reasonable doubt that the tippee knew that an insider disclosed confidential information and that he did so in exchange for a personal benefit.  Moreover, we hold that the evidence was insufficient to sustain a guilty verdict against Newman and Chiasson for two reasons.    First, the Government’s evidence of any personal benefit received by the alleged insiders was insufficient to establish the tipper liability from which defendants’ purported tippee liability would derive.    Second, even assuming that the scant evidence offered on the issue of personal benefit was sufficient, which we conclude it was not, the Government presented no evidence that Newman and Chiasson knew that they were trading on information obtained from insiders in violation of those insiders’ fiduciary duties. 

 Accordingly, we reverse the convictions of Newman and Chiasson on all counts and remand with instructions to dismiss the indictment as it pertains to them with prejudice.

Though this Newman opinion does not discuss formally sentencing issue, I cannot help but think that modern white-collar sentencing realities might be playing a role (perhaps a significant role) in the review and ultimate rejection of insider-trading convictions here. Both defendants appealing in this case were sentenced to a significant number of years in prison, and appellate judges are surely aware of how high the stakes now are for white-collar defendants subject to novel and aggressive prosecutorial practices.

December 10, 2014 in Offense Characteristics, Procedure and Proof at Sentencing, White-collar sentencing | Permalink | Comments (8) | TrackBack

Tuesday, December 09, 2014

Madoff aides finally getting sentenced for their roles in massive Ponzi scheme

As reported in this new AP article, a notable set of fraud sentences are being handed out this week and next in New York federal court.  Here are the early parts of a high-profile white-collar sentencing story:

The former secretary for imprisoned financier Bernard Madoff was sentenced Tuesday to six years in prison after she apologized to victims of the multi-decade, multi-billion dollar fraud and berated herself for failing to see past her boss's influence and the riches he bestowed on her.

Annette Bongiorno, 66, was sentenced in Manhattan by U.S. District Judge Laura Taylor Swain, who said she believed Bongiorno's testimony at trial that she was largely duped by Madoff into manufacturing fake trade results for his private investment business.  She called her "a pampered, compliant and grossly overcompensated clerical worker who supervised other clerical workers with a ferocious enthusiasm."

The judge said Bongiorno "could and should have recognized that Mr. Madoff's success seemed impossible because it was impossible." Swain added: "Ms. Bongiorno chose to put her life and the life of others in the wrong hands."

One of Madoff's computer programmers was awaiting an afternoon sentencing.  Bongiorno was convicted earlier this year along with four others after a six-month trial.  Sentencing proceedings resulting from it will conclude on Monday.

On Monday, Madoff's director of operations was sentenced to a decade in prison.

Prosecutors said in court papers that Bongiorno was "at the very heart of the fraud" for decades. They had sought a prison sentence of more than 20 years. The fraud cost thousands of investors nearly $20 billion. Madoff, 76, was arrested in December 2008 and is serving a 150-year prison sentence.

Before she was sentenced, Bongiorno portrayed herself as a loyal worker who was in over her head from the time she was hired at age 19. "Not once in my 40 years there did anyone say to me, 'Annette, this is not the way it's done in the real world,'" she said. "I thought I was doing my job as I thought it should be done."...

The judge, who also ordered forfeiture of $155 billion, said she will recommend that Bongiorno serve the last year of her prison term in home confinement.

December 9, 2014 in Booker in district courts, Celebrity sentencings, Offense Characteristics, White-collar sentencing | Permalink | Comments (1) | TrackBack

Sunday, December 07, 2014

Former basketball star taking (wild?) shot at fighting loss calculation in federal fraud sentencing

TateThis notable article from Connecticut reports that a notable fraud defendant is going to be representing himself as he agrues against how loss is being calculated and used against him in his upcoming federal sentencing.  Here are some of the interesting details:

Ever since being convicted on four felony counts in a real estate scheme, former University of Connecticut basketball star Tate George has been complaining about his legal representation.  He criticized his trial attorney, saying he didn't listen to requests for calling witnesses and other strategies.

After dropping his first attorney, George briefly switched to another, who is also out of the picture.  Now George has received permission from a federal judge to represent himself at his sentencing.

A first-round NBA draft pick, George has more basketball experience than legal experience.  He is best known for hitting "The Shot" at the Meadowlands arena in New Jersey in the final second to defeat Clemson in the NCAA playoffs in 1990, one of the most stunning victories in UConn basketball history.

Before his request was granted this week, federal prosecutors warned George in court papers about "the dangers and perils of self-representation."  They quoted the saying that "he who represents himself has a fool for a client."  Prosecutors told George, "There are many complex rules in court, and that most non-lawyers, including yourself, cannot know all of these rules."

But George, 46, has gone his own way before.  After expressing dissatisfaction with his trial attorney, George began sending letters directly from his prison cell to the federal judge instead of sending them through his attorney.  In at least five letters to U.S. District Court Judge Mary L. Cooper in Trenton, George proclaimed his innocence.

"I understand that my life has no value to all those who have gone about defaming my name, but I beg to differ and will continue to fight to prove my innocence," George wrote to the judge.  "Again, for the record, even though the government refuses to want to hear or admit to the truth above their lies to make me look guilty, there are no losses to report at this time, which means there is no crime or victims.  PERIOD! AS I HAVE SAID, BUT NO ONE SEEMS TO BE LISTENING, THERE ARE MONIES OWED YES, BUT NOT LOSSED!"

As part of his legal strategy, George is saying that the $250,000 investment by former UConn basketball star and NBA player Charlie Villanueva that was never repaid should not be counted as a financial loss.  Since he has promised to repay Villaneuva, George says there is no victim and no loss....  

George has said he was upset that his attorney, David E. Schafer, a federal public defender, said that investors in his case had lost $833,000 when George maintained that the actual loss was zero.  Federal prosecutors say the investors lost more than $2.5 million. At one point, a prosecutor described George as a "baby Madoff," referring to the massive Ponzi scheme operated by now-imprisoned New York City financier Bernie Madoff in which investors lost billions of dollars in a long-running scheme.

George was convicted in September 2013 and could face as many as nine years in prison when he is sentenced. Although he was convicted more than a year ago, his sentencing has been postponed multiple times.

December 7, 2014 in Federal Sentencing Guidelines, Offense Characteristics, Procedure and Proof at Sentencing, White-collar sentencing, Who Sentences? | Permalink | Comments (2) | TrackBack

Wednesday, October 29, 2014

Federal judge (improperly?) delays imposing max sentence on fraudster to allow time to consider withdrawal of plea

This Newsday article provide an account of a seemingly unusual development as a federal district judge was about to throw the book at a high-profile white-collar defendant.  Here are the details:

Onetime New York Islanders part owner Stephen Walsh was hit with the maximum sentence of 20 years for a $50 million fraud on Wednesday, but the judge postponed imposing it to let stunned defense lawyers consider an appeal or voiding his guilty plea.

Walsh, 70, of Sands Point, an Islanders executive and co-owner from 1991 to 2000, was accused in 2009 of bilking investors in his WG Trading Company to finance a lavish lifestyle. He pleaded guilty in April, and partner Paul Greenwood pleaded guilty in 2010.

At the sentencing before U.S. District Judge Miriam Cedarbaum in Manhattan, Walsh said he was "deeply sorry," while his lawyer argued most investors were made whole and said Walsh deserved credit for charitable work, such as co-founding a Long Island Alzheimer's foundation. They asked for 18 to 24 months with community service.

But Cedarbaum was unmoved, noting that the scam went on for 13 years and Walsh fought the charges for five years before pleading guilty and taking responsibility. "The proceeds of this scheme were used for personal extravagances and high living," she said. "Lots of people lost lots of money, and some of it will trickle back to them, but that does not justify using it for your own benefit and spending it on frivolous things."

The judge said she was imposing the maximum penalty for securities fraud of 20 years. That was the sentence recommended by probation officers, called for under federal sentencing guidelines and urged by prosecutors.

Walsh, as part of his plea, had agreed to not appeal any sentence up to 240 months.  But white-collar defendants frequently get more lenient treatment -- in part because many judges feel federal guidelines overemphasize the significance of the amount of loss in calculating sentences -- and the sentence produced gasps from Walsh's friends and family in the gallery. "Oh my God!" said one woman.

Defense lawyer Michael Tremonte first asked Cedarbaum to impose 20 years and a day, so it would become appealable.  "I don't think anyone expected we would be at the outer range of the hypothetical guideline range," he said.  "There is not another case even remotely like it where a 20-year sentence has been imposed."

The judge refused, telling him that she would not circumvent a plea agreement in which Walsh gave up his right to appeal the sentence.  But she agreed to postpone imposing the sentence until Tuesday, to give Tremonte the chance to consult with Walsh and research grounds for withdrawing the plea. Tremonte and prosecutors had no comment after the hearing.

Walsh and Greenwood were charged soliciting $7.6 billion, mostly from institutional investors, to pursue a conservative investing strategy, and then misappropriating it. Walsh allegedly used investor money to finance a divorce settlement and fund businesses for his children, and Greenwood purchased expensive stallions and high-priced teddy bears.

I am inclined to be a bit sympathetic to the defense side here because I find troublesome any and all waivers of the right to appeal a sentence.  That said, I would guess that the defendant here had sound legal representation and knowingly agreed to a plea deal that included such a waiver, and thus I am not especially inclined to believe he should now be able to back out of the deal because it did not work out the way he expected.   And I am not aware of any case in which a judge defered imposition of a sentence to give the defendant a chance to try to undo a plea deal simply because that judge was going to impose a long sentence that was, as reported above, "recommended by probation officers, called for under federal sentencing guidelines and urged by prosecutors."

October 29, 2014 in Procedure and Proof at Sentencing, White-collar sentencing, Who Sentences? | Permalink | Comments (15) | TrackBack

Tuesday, October 28, 2014

Back from dead, fugitive fraudster gets 30 years in federal pen

As reported in this AP piece, a "former Georgia investment adviser was sentenced to 30 years in prison Tuesday for committing fraud that fueled a bank's collapse, cost investors millions of dollars and turned the accused banker into a fugitive who was ultimately — and mistakenly — declared dead." Here is more on this notable white-collar case:

Aubrey Lee Price, 48, returned to U.S. District Court for sentencing after he pleaded guilty in June to bank, wire and securities fraud. Price lost much of the $40 million he raised from about 115 clients at his private investment firm.  Prosecutors say he also misspent, embezzled and lost $21 million belonging to the Montgomery Bank & Trust in rural southeast Georgia, where Price served as bank director.

Price vanished in June 2012, a few weeks before the bank closed with its assets and reserves depleted, and he left rambling letters saying he planned to jump off a ferryboat.  In December 2013, a year after a Florida judge declared him dead at his wife's request, Price was captured in a routine traffic stop near Brunswick on the Georgia coast.

Price cut a plea deal with prosecutors that called for a maximum of 30 years in prison and in exchange for his guilty pleas to three fraud counts.  Price also agreed to pay tens of millions in restitution for bank and investor money that he lost, despite having convinced the court to appoint him a lawyer because he had no money to hire one.

Price gave rambling speech in front of the judge in which he acknowledged responsibility but also blamed other managers at the bank for its collapse.  Still, he pledged to help recoup money, and officials say he is cooperating with their efforts to collect restitution.  "These clients that are here today, and those who are not here, it's important for them to understand I'm trying my best to help them get their money back," Price said in court....

At his plea hearing June 5, Price told the judge he lied to clients and gave them phony financial statements to cover his tracks as he lost their money in speculative trading and other high-risk investments.  He said his flight from the financial mess left him depressed.  He said he tried smoking marijuana and methamphetamine and had tasted cocaine, but mostly self-medicated with the prescription amphetamine Adderall. Price said he also adopted at least five aliases, including Jason Rollins and Javier Martinez....

The plea agreement settled federal charges pending against Price in Georgia and New York.  Prosecutors agreed to drop 16 related bank fraud counts in Georgia plus charges in Miami related to the Coast Guard's search for Price.

October 28, 2014 in Offender Characteristics, Offense Characteristics, White-collar sentencing | Permalink | Comments (3) | TrackBack

Thursday, October 02, 2014

Up and down the east coast, notable white-collar federal sentencings

My usual review of the week's sentencing news with Google's help turned up a number of noteworthy federal while collar sentencing stories.  These three especially cuaght my eye:

From Delaware, via "Delaware multimillionaire gets prison," we learn: " Former eBay executive Christopher Saridakis of Greenville, Delaware, was sentenced to 15 months in prison for insider trading Wednesday by a U.S. District Court judge. Saridakis, 45, tipped off two family members and two friends in 2011 to the pending sale of GSIC – where he was chief executive officer – to eBay days before the sale was announced. The tip allowed those individuals to realize more than $300,000 profit, according to prosecutors."

From Florida, via "Ponzi schemer Rothstein’s former law partner sentenced to nearly three years," we hear: "The wife and children of Stuart Rosenfeldt said they have forgiven him for spending the dirty money of his former law partner, Ponzi schemer Scott Rothstein, on prostitutes and other criminal conduct. They and other supporters crowded into a Miami federal courtroom Thursday to point out Rosenfeldt’s long history of donating free legal work and personal time to charities in South Florida. But their pleas for mercy did not sway U.S. District Judge Marcia Cooke, who sentenced Rosenfeldt to almost three years in prison instead of a lesser term sought by his defense attorney. His sentencing came almost five years after the collapse of a $1.2 billion investment scheme that Rothstein ran out of their Fort Lauderdale law firm."

From New Jersey, via "RHONJ's Teresa Guidice gets 15 months; 41 for Joe," we see: "Two stars of the Real Housewives of New Jersey will be trading the drama of reality TV for prison after being sentenced on conspiracy and bankruptcy fraud charges.  After an initial delay, U.S. District Court Esther Salas sentenced Teresa Guidice to 15 months in prison Thursday afternoon.  Earlier in the day, her husband Giuseppe "Joe" Giudice was ordered to serve more than three years in prison on conspiracy and bankruptcy fraud charges. He was also ordered to pay $414,000 in restitution."

October 2, 2014 in Offense Characteristics, White-collar sentencing | Permalink | Comments (3) | TrackBack

Tuesday, September 23, 2014

High-profile commentator Dinesh D’Souza gets below-guideline probation sentence for violating federal campaign finance laws

As reported in this New York Times piece, headlined "D’Souza Is Spared Prison Time for Campaign Finance Violations," another notable white-collar defendant got a below-guideline federal sentence today thanks to judges now having broader post-Booker sentencing discretion. Here are the details:

The conservative author and documentary filmmaker Dinesh D’Souza was spared prison time on Tuesday after pleading guilty earlier this year to violating federal campaign finance laws.

Judge Richard M. Berman of Federal District Court in Manhattan handed down a probationary sentence — including eight months in a so-called community confinement center — and a $30,000 fine, bringing to a close a high-profile legal battle that started with Mr. D’Souza’s indictment in January for illegally using straw donors to contribute to a Republican Senate candidate in New York in 2012.

Mr. D’Souza, who has accused President Obama of carrying out the “anticolonial” agenda of his father, initially argued that he had been singled out for prosecution because of his politics. In April, his lawyer, Benjamin Brafman, filed court papers contending that Mr. D’Souza’s “consistently caustic and highly publicized criticism” of Mr. Obama had made him a government target.

A month later, however, on the morning he was scheduled to go on trial, Mr. D’Souza pleaded guilty. “I deeply regret my conduct,” he told the court. Even with his fate hanging in the balance, Mr. D’Souza plowed ahead with his thriving career as a right-wing provocateur. Over the summer, while awaiting his sentencing, he published the book “America: Imagine a World Without Her,” which reached No. 1 on The New York Times’s nonfiction hardcover best-seller list, and a companion documentary film that has made $14.4 million at the box office.

The government charged Mr. D’Souza, 53, with illegally arranging to have two people — an employee and a woman with whom he was romantically involved — donate $10,000 each to the campaign of an old friend from Dartmouth College, Wendy E. Long, with the understanding that he would reimburse them in cash for their contributions. Ms. Long was challenging Senator Kirsten E. Gillibrand, a Democrat.

According to prosecutors, Mr. D’Souza lied to Ms. Long about the donations, reassuring her that “they both had sufficient funds to make the contributions.” Ms. Long pressed Mr. D’Souza on the issue after the election, and he acknowledged that he had reimbursed the two people, the government said, but told Ms. Long not to worry because she had not known about it.

When Mr. D’Souza entered his guilty plea, Judge Berman said he could face up to two years in prison. The federal sentencing guidelines call for 10 to 16 months, but the final decision is up to the judge’s discretion. “Judges are all over the map on these reimbursement cases,” said Robert Kelner, a campaign-finance lawyer at Covington & Burling.

Mr. D’Souza’s lawyers asked for leniency, arguing in a court filing that their client had “unequivocally accepted responsibility” for his crime. “We are seeking a sentence that balances the crime he has regrettably committed with the extraordinary good Mr. D’Souza has accomplished as a scholar, as a community member and as a family member,” they wrote, requesting that he be sentenced to probation and community service at the Boys and Girls Clubs of Greater San Diego.

The government rebutted Mr. D’Souza’s claims, highlighting both the seriousness of his offense and what it called “the defendant’s post-plea failure to accept responsibility for his criminal conduct.” According to the government, Mr. D’Souza assumed a different posture with respect to his case when he was not before the court. It cited a television interview he gave two days after his plea in which he “repeatedly asserted that this case was about whether he was selectively prosecuted.”

This story reminds me why I am so sad Bill Otis no longer comments on this blog; I am so eager to hear from him directly whether he thinks this case is yet another example of, in his words, allowing "naïve and ideologically driven judges" to make sentencing determinations and therefore further justifies embracing mandatory sentencing schemes that would always require judges to impose prison terms on these sorts of non-violent offenders because these sorts of offenses do great harm even if they do not involve violence.

Based on my limited understanding of the crime and criminal here, I feel fairly confident asserting that a prison term for Mr. D’Souza would have achieved little more than spending extra federal taxpayer dollars without any real public safety return on that investment. But Bill and I rarely see eye-to-eye on these matters, and thus I am eager for a distinct perspective in this notable white-collar case.

September 23, 2014 in Federal Sentencing Guidelines, Offender Characteristics, Offense Characteristics, Procedure and Proof at Sentencing, White-collar sentencing | Permalink | Comments (7) | TrackBack

Monday, September 22, 2014

Sixth Circuit reverses Ponzi scheme sentence because loss calculation failed to credit monies paid out

This morning a Sixth Circuit panel has handed down a notable ruling about loss calculations in the federal sentencing of a Ponzi schemer.  Here is how the panel opinion in US v. Snelling, No. 12-4288 (6th Cir. Sept. 22, 2014) (available here) starts and concludes:

Defendant-Appellant Jasen Snelling appeals a 131-month prison sentence imposed pursuant to a plea agreement.  In the agreement, Snelling admitted to charges of conspiracy to commit mail and wire fraud, obstruction of justice, and tax evasion for his part in an investment scheme that defrauded investors of nearly $9 million.  Snelling challenges the sentence based on an allegedly faulty Guidelines-range calculation that employed a loss figure that did not take into account the sums paid back to his Ponzi scheme’s investors in the course of the fraud.

For the reasons below, we vacate the sentence of the district court and remand the case for resentencing.....

Admittedly, there is intuitive appeal to the government’s argument that Snelling should not be allowed to benefit from the payments he made “not to mitigate the losses suffered . . . but to create the means to convince new victim-investors to pay him even more money.”  We need not reflect, however, on whether it is unseemly for Snelling to benefit from the money he paid out to investors in an effort to perpetuate his Ponzi scheme. Undoubtedly, it is.  The only question we must consider is whether the district court correctly applied the Guidelines and whether it used a correct Guidelines range.

An accurately calculated Guidelines range is necessary for a procedurally reasonable sentence — any error in calculating the Guidelines range cannot survive review.  See Gall v. United States, 552 U.S. 38, 49 (2007); see also United States v. Bolds, 511 F.3d 568, 579 (6th Cir. 2007) (“[W]e must ensure that the district court correctly calculated the applicable Guidelines range which are the starting point and initial benchmark of its sentencing analysis.”) (internal alterations and quotation marks omitted).  As appealing as the government’s argument may be, it does not comport with the text of the Guidelines. Accordingly, the district court was in error when it declined to reduce the loss figure by the value of the payments made by Snelling to his investor victims in perpetuating his Ponzi scheme.

September 22, 2014 in Booker in the Circuits, Federal Sentencing Guidelines, Offense Characteristics, White-collar sentencing | Permalink | Comments (1) | TrackBack

Friday, September 19, 2014

"The Most Senior Wall Street Official: Evaluating the State of Financial Crisis Prosecutions"

The title of this post is the title of this notable new article on SSRN authored by Todd Haugh. Here is the abstract:

This September marks six years since the collapse of Lehman Brothers and the height of the financial crisis.  Recently, a growing debate has emerged over the Justice Department’s failure to criminally prosecute Wall Street executives for their role in creating the crisis.  One side of that debate contends the government has failed to bring to justice individual wrongdoers — primarily the heads of banks operating in the mortgage-backed securities market — instead preferencing enforcement decisions that target corporations, resulting in punishments that are “little more than window-dressing.”  The other side argues that cases against individuals are precluded by the realities of the federal criminal justice system, and that “corporate headhunting” will only inhibit meaningful regulatory reform.

It is difficult, however, to evaluate these competing claims without proper context.  This Article explores the recent conviction and sentencing of Wall Street executive Kareem Serageldin as a means of providing that context.  Although Serageldin has been trumpeted as the “the most senior Wall Street official” to be sentenced for conduct committed during the financial crisis, and his conviction was framed as a victory in punishing those accountable for the financial collapse, a critical look at his case reveals he committed only a mundane white collar crime marginally related to the crisis.  This disconnect creates a unique lens through which to understand and evaluate the current state of — and debate surrounding — financial crisis prosecutions.  And it ultimately highlights the merits, and shortfalls, of each camp’s arguments.  The Article concludes by offering something largely absent from the current debate: specific proposals for how we might go about prosecuting individuals so as to prevent the next crisis.

September 19, 2014 in Offense Characteristics, Procedure and Proof at Sentencing, Purposes of Punishment and Sentencing, White-collar sentencing, Who Sentences? | Permalink | Comments (8) | TrackBack

Wednesday, September 17, 2014

Seventh Circuit panel seemingly unmoved by feds appeal of probation sentence given to Beanie Babies billionaire

As detailed in this new Chicago Tribune article, "Prosecutors in Warner tax evasion case grilled by appeals court judges," federal prosecutors apparently did not get a warm reception at oral argument in the Seventh Circuit as they pressed their claims that a probation sentence given to a high-profile tax cheat was unreasonable. Here are the basics:

Federal prosecutors appealing the probation sentence of Beanie Babies founder Ty Warner faced a three-judge panel Wednesday to make the case for why the Westmont billionaire should get prison time for evading taxes.

Warner pleaded guilty last year to one count of tax evasion for failing to report more than $24 million in income and skirting $5.5 million in federal taxes on millions of dollars he hid for more than a decade at two Swiss banks.  Prosecutors had been pushing for a sentence of at least one year in prison, partly to deter others from committing the same crime. Sentencing guidelines had called for a prison sentence of up to 57 months.  His defense lawyers had argued that many tax evaders were allowed to join an amnesty program and that, even among those criminally charged and convicted, more than half who had been sentenced received probation.

Ilana Rovner, a U.S. appeals court judge for the seventh circuit, said Wednesday that she had a problem reconciling why the government was seeking to throw out Warner’s sentence when many tax evaders get probation or might not be prosecuted at all.  Also, the amount of tax he evaded was a fraction of what he has paid in taxes, she noted. Warner has already paid a civil penalty for not reporting the offshore accounts and restitution for what he owed in back taxes and interest....

Rovner also noted that prosecutors seem to be ignoring the “considerable discretion” of the district judge, Charles Kocoras, has in imposing a sentence.  He is a “veteran” judge who “obviously agonized” over the decision, she said.

Judge Michael Kanne noted that Warner’s guilty plea “saved the government some money” and that the appeals court “shouldn’t be the sentencing court.”

Judge Joel Flaum wondered why, if Warner’s conduct was so egregious, he was charged with only one count of tax evasion and why the government was seeking at minimum at least a year in prison.  Rovner chimed in, addressing Petersen: “You agreed to this.”

Judge Kanne noted that one count of tax evasion and a minimum prison sentence of a year “doesn’t sound like deterrence to me.”  Petersen responded that probation is a far more lenient sentence than the minimum of one year the government was seeking.

Anyone eager to hear the oral argument in full can access it via this mp3 link from the Seventh Circuit's website.  Notably, former US Solicitor General Paul Clement argued on behalf of the defendant (and I cannot help but wonder if he got some special Beanie Babies from the defendant in addition to the usual fees for his efforts).

Prior related posts:

September 17, 2014 in Offender Characteristics, Offense Characteristics, Procedure and Proof at Sentencing, Sentences Reconsidered, White-collar sentencing, Who Sentences? | Permalink | Comments (1) | TrackBack

Monday, September 08, 2014

Former SAC trader Mathew Martoma gets lengthy (but way-below guideline) federal prison term of nine years for insider trading

As reported in this new USA Today piece, headlined "Ex-SAC Capital trader gets 9-year sentence," a high-profile white-collar sentencing has resulted in a below-guideline (but still lengthy) prison term for an insider trader. Here are some of the interesting details from today's interesting sentencing in New York federal court:

Former SAC Capital portfolio manager Mathew Martoma was sentenced to a nine-year prison term Monday for his central role in what federal prosecutors called the most profitable insider-trading scheme in U.S. history.  Martoma, a former financial lieutenant to billionaire hedge fund founder Steven Cohen, sat silently, declining to speak before U.S. District Judge Paul Gardephe imposed the sentence during a Manhattan federal court hearing.

The judge also ordered the 40-year-old father of three to forfeit nearly $9.4 million — more than his current net worth — and surrender for imprisonment on Nov. 10.  His attorneys are expected to file an appeal of his Feb. 6 conviction.

Federal jurors found Martoma guilty of conspiracy and two counts of securities fraud after a month-long trial during which the defendant declined to testify.  The case centered on charges that Martoma illegally obtained disappointing results of clinical tests on an experimental Alzheimer's disease drug in 2008 by cultivating relationships with two doctors who were privy to details of the testing outcome.  Martoma then set in motion a $700 million sell-off of SAC Capital stock holdings in shares of Elan and Wyeth, the pharmaceutical firms that developed the drug.  The transactions generated approximately $276 million in profits and avoided losses, along with a nearly $9.4 million 2008 bonus for Martoma.

The sentence imposed by Gardephe was lower than the 188-months-to-235-months range specified in federal sentencing guidelines.  It exceeded the eight-year prison term recommended by probation officials and met prosecutors' request for a sentence higher than that recommendation.

The sentence came after defense attorney Richard Strassberg argued for leniency.... He urged Gardephe to weigh Martoma's devotion to his family and history of helping others. The defense lawyer also filed more than 100 support letters from Martoma's relatives and friends — some of whom were in the courtroom for Monday's sentencing.

The defense team also argued that Martoma was the sole source of financial support for his wife, Rosemary, and the couple's three young children.  "Mathew, as a person, is much more than the charge of insider-trading that has brought us all to this courtroom today," said Strassberg.  He argued that a "just" sentence would consider Martoma's history of charitable acts and helping others.

But federal prosecutor Arlo Devlin-Brown said "It is hard to think of a more significant and brazen instance of insider trading than the case before this court.  The sentence in this case, we submit, must reflect the seriousness of this significant breach."

Gardephe, however, said he had weighed all of the submissions from both sides and studied sentences in other insider trading convictions in New York's Southern federal district.  The judge credited Martoma's charity and other acts of generosity but he said the evidence showed that Martoma went for "one big score" that would provide lifetime security.  "His plan worked, but now he has to deal with the fallout."

Gardephe also referred to Martoma's expulsion from Harvard Law School for falsifying a grades transcript, as well as his subsequent admission to Stanford University's business school without disclosing the expulsion.  Saying "there is a darker side" to Martoma's character, Gardephe added, "I do believe there is a connection" to the insider trading episode.  "The common thread is an unwillingness to accept anything but the top grade ... and the highest bonus."

September 8, 2014 in Offender Characteristics, Offense Characteristics, Procedure and Proof at Sentencing, Purposes of Punishment and Sentencing, White-collar sentencing | Permalink | Comments (0) | TrackBack

Pregame preview of another high-profile insider-trading sentencing in NYC

This new BloombergBusinessweek article, headlined "Mathew Martoma, Convicted SAC Trader, Gets Sentenced Today," provides these basics about a not-so-basic, white-collar sentencing scheduled in federal court today:

Around 9 pm on November 8, 2011, a pair of FBI agents pulled up outside of Mathew Martoma’s home in Boca Raton, a 6,200 square-foot mansion tucked behind a circular driveway and lavish palm trees.  They were there to talk to Martoma about insider trading at SAC Capital, his former employer and one of the world’s largest hedge funds.

The SEC, the FBI and the U.S. Attorney’s Office in Manhattan were five years into a far-reaching investigation of illegal trading among hedge funds across the country, and just three weeks before, Raj Rajaratnam, the co-founder of the $7 billion fund the Galleon Group, had been sentenced to a record 11-year prison term for insider trading.

The government was fairly confident that Martoma would lead them to an even bigger prize: one of the richest men in the world and the founder of SAC, Steven A. Cohen.  From that point on, nothing proceeded quite as the government expected. Instead, Martoma is scheduled to be sentenced today in what prosecutors describe as “the most lucrative insider trading scheme ever charged.”

After an investigation, an arrest and a high-profile five-week trial in January, Martoma was convicted of insider trading in two drug stocks, Elan and Wyeth, and earning profits and avoiding losses of $275 million while working as a portfolio manager at SAC. The government alleged that he spoke with Cohen right after learning about important drug trial results, and that Cohen traded the two stocks as well. Martoma’s was the eighth conviction of a former or current SAC employee of insider trading....

From the FBI’s perspective, Martoma was an ideal candidate for cooperation. He has three young children and a beautiful, devoted wife, all of whom he would be separated from during a long prison term. He was also fired from SAC after failing to replicate his success in Elan and Wyeth and, the government believed, there was powerful evidence against him. He had no reason to be loyal to his former boss and he had a lot to lose. Still, Martoma baffled everyone by refusing to flip, insisting he was innocent and bringing the government’s determined march toward Cohen to an abrupt stop. Without a witness, any developing case against the hedge fund founder fell apart. Now it is Martoma who faces a sentence of up to 20 years, although it’s likely to be closer to 8.

Cohen was never charged with insider trading, and his life goes on relatively unchanged. Prosecutors indicted SAC in January, 2013, calling the company a “magnet for market cheaters.” The firm agreed to plead guilty and pay a $1.2 billion fine (not including $600 million already pledged to the SEC over Martoma’s trades). A civil case brought by the SEC charging Cohen with failing to supervise his employees has not been resolved. Cohen shut down his hedge fund and transformed his firm into a family office, Point72 Asset Management, which invests his personal fortune.

September 8, 2014 in Offender Characteristics, Offense Characteristics, Procedure and Proof at Sentencing, White-collar sentencing | Permalink | Comments (0) | TrackBack

Thursday, September 04, 2014

Former Virginia Gov McDonnell (and wife) now facing high-profile federal sentencing after jury convictions on multiple charges

As detailed in this FoxNews report, headlined "Ex-Virginia governor, wife found guilty on corruption charges," a high-profile federal criminal trial is now over and a high-profile federal sentencing process is about to begin. Here are the basics:

Former Virginia Gov. Bob McDonnell and his wife Maureen were convicted Thursday on a range of corruption charges in connection with gifts and loans they accepted from a wealthy businessman, marking a stunning fall for the onetime rising Republican star.

A federal jury in Richmond convicted Bob McDonnell, 60, of 11 of the 13 counts he faced; Maureen McDonnell was convicted of nine of the 13 counts she had faced. Both bowed their heads and wept as a stream of "guiltys" kept coming from the court clerk. The verdict followed three days of deliberations, after a five-week trial.

Sentencing was scheduled for Jan. 6. Each faces up to 30 years in prison. After the verdict was read, FBI agent-in-charge Adam Lee said the bureau will "engage and engage vigorously in any allegation of corruption."  Assistant Attorney General Leslie Caldwell, head of the Justice Department's criminal division, said the state's former first couple "turned public service into a money-making enterprise."

The former governor, up until his federal corruption case, was a major figure in national politics and had been considered a possible running mate for presidential candidate Mitt Romney in 2012.  The couple, though, was charged with doing favors for a wealthy vitamin executive in exchange for more than $165,000 in gifts and loans.  They also were charged with submitting fraudulent bank loan applications, and Maureen McDonnell was charged with one count of obstruction.

The former governor testified in his own defense, insisting that he provided nothing more than routine political courtesies to former Star Scientific CEO Jonnie Williams. Maureen McDonnell did not testify.  His testimony and that of others exposed embarrassing details about Maureen McDonnell's erratic behavior and the couple's marital woes as the defense suggested they could not have conspired because they were barely speaking....

Prosecutors claimed that the McDonnells turned to Williams because they were grappling with credit card debt that once topped $90,000 and annual operating shortfalls of $40,000 to $60,000 on family-owned vacation rental properties. Two of the loans totaling $70,000 were intended for the two Virginia Beach rent houses.  Williams said he wrote the first $50,000 check to Maureen McDonnell after she complained about their money troubles and said she could help his company because of her background selling nutritional supplements.

My (way-too-quick) rough review of likely applicable sentencing guidelines suggests that the McDonnells are likely facing guideline sentencing ranges of 10 years or even longer based on the offense facts described here. I presume they should be able to get some top-flight attorneys to make some top-flight arguments for below-guideline sentences. But, at least for now, I am inclined to urge former Gov McDonnell to expect to be celebrating his 65th (and maybe also his 70th) birthday in the graybar hotel.

September 4, 2014 in Celebrity sentencings, Federal Sentencing Guidelines, Offense Characteristics, Procedure and Proof at Sentencing, White-collar sentencing | Permalink | Comments (13) | TrackBack

Saturday, August 30, 2014

"The criminalisation of American business"

20140830_cna400The title of this post is the headline of this notable new Economist cover story, which carries the subheadline "Companies must be punished when they do wrong, but the legal system has become an extortion racket." Here are excerpts:

Who runs the world’s most lucrative shakedown operation? The Sicilian mafia? The People’s Liberation Army in China? The kleptocracy in the Kremlin? If you are a big business, all these are less grasping than America’s regulatory system. The formula is simple: find a large company that may (or may not) have done something wrong; threaten its managers with commercial ruin, preferably with criminal charges; force them to use their shareholders’ money to pay an enormous fine to drop the charges in a secret settlement (so nobody can check the details). Then repeat with another large company.

The amounts are mind-boggling. So far this year, Bank of America, JPMorgan Chase, Citigroup, Goldman Sachs and other banks have coughed up close to $50 billion for supposedly misleading investors in mortgage-backed bonds. BNP Paribas is paying $9 billion over breaches of American sanctions against Sudan and Iran. Credit Suisse, UBS, Barclays and others have settled for billions more, over various accusations. And that is just the financial institutions. Add BP’s $13 billion in settlements since the Deepwater Horizon oil spill, Toyota’s $1.2 billion settlement over alleged faults in some cars, and many more.

In many cases, the companies deserved some form of punishment: BNP Paribas disgustingly abetted genocide, American banks fleeced customers with toxic investments and BP despoiled the Gulf of Mexico. But justice should not be based on extortion behind closed doors. The increasing criminalisation of corporate behaviour in America is bad for the rule of law and for capitalism (see [companion] article)....

The drawbacks of America’s civil tort system are well known. What is new is the way that regulators and prosecutors are in effect conducting closed-door trials. For all the talk of public-spiritedness, the agencies that pocket the fines have become profit centres: Rhode Island’s bureaucrats have been on a spending spree courtesy of a $500m payout by Google, while New York’s governor and attorney-general have squabbled over a $613m settlement from JPMorgan. And their power far exceeds that of trial lawyers. Not only are regulators in effect judge and jury as well as plaintiff in the cases they bring; they can also use the threat of the criminal law.

Financial firms rarely survive being indicted on criminal charges. Few want to go the way of Drexel Burnham Lambert or E.F. Hutton. For their managers, the threat of personal criminal charges is career-ending ruin. Unsurprisingly, it is easier to empty their shareholders’ wallets. To anyone who asks, “Surely these big firms wouldn’t pay out if they knew they were innocent?”, the answer is: oddly enough, they might.

Perhaps the most destructive part of it all is the secrecy and opacity. The public never finds out the full facts of the case, nor discovers which specific people—with souls and bodies—were to blame. Since the cases never go to court, precedent is not established, so it is unclear what exactly is illegal. That enables future shakedowns, but hurts the rule of law and imposes enormous costs. Nor is it clear how the regulatory booty is being carved up. Andrew Cuomo, the governor of New York, who is up for re-election, reportedly intervened to increase the state coffers’ share of BNP’s settlement by $1 billion, threatening to wield his powers to withdraw the French bank’s licence to operate on Wall Street. Why a state government should get any share at all of a French firm’s fine for defying the federal government’s foreign policy is not clear....

In the longer term, two changes are needed to the legal system. The first is a much clearer division between the civil and criminal law when it comes to companies. Most cases of corporate malfeasance are to do with money and belong in civil courts. If in the course of those cases it emerges that individual managers have broken the criminal law, they can be charged.

The second is a severe pruning of the legal system. When America was founded, there were only three specified federal crimes — treason, counterfeiting and piracy. Now there are too many to count. In the most recent estimate, in the early 1990s, a law professor reckoned there were perhaps 300,000 regulatory statutes carrying criminal penalties—a number that can only have grown since then. For financial firms especially, there are now so many laws, and they are so complex (witness the thousands of pages of new rules resulting from the Dodd-Frank reforms), that enforcing them is becoming discretionary.

This undermines the predictability and clarity that serve as the foundations for the rule of law, and risks the prospect of a selective — and potentially corrupt — system of justice in which everybody is guilty of something and punishment is determined by political deals. America can hardly tut-tut at the way China’s justice system applies the law to companies in such an arbitrary manner when at times it seems almost as bad itself.

August 30, 2014 in Fines, Restitution and Other Economic Sanctions, Offense Characteristics, Procedure and Proof at Sentencing, White-collar sentencing | Permalink | Comments (9) | TrackBack

Thursday, August 21, 2014

Pennsylvania Superior Court upholds (most of) sentence requiring former state Supreme Court Justice to write apology

As reported in this local Pittsburgh Post-Gazette article, an intermediate state appellate court upheld most (but not quite all) of the notable sentencing terms imposed on former Pennsylvania Supreme Court Justice Joan Orie Melvin. Here are the basic details of a lengthy and interesting sentencing ruling:

The state Superior Court today affirmed the criminal conviction of former state Supreme Court Justice Joan Orie Melvin, as well as that of her sister, Janine Orie. The panel also affirmed the part of Melvin's sentence requiring her to send apology notes to her former staff and fellow judges in Pennsylvania, but it eliminated the requirement that she do so on a picture taken of her following sentencing in handcuffs.

"The trial court unquestionably staged the photograph for maximum effect," wrote Judge Christine Donohue. "At the time it was taken (immediately after sentencing), Orie Melvin was no longer in police custody and was otherwise free to go home to begin house arrest. She was not in restraints at that time, and the trial court directed that she be placed in handcuffs only to take the photograph.

"The trial court’s use of the handcuffs as a prop is emblematic of the intent to humiliate Orie Melvin in the eyes of her former judicial colleagues."

The Superior Court panel said it would enforce the idea of writing apology letters because, it "adresses the trial court’s intent to rehabilitate her by requiring her to acknowledge her wrongdoing."

As part of its 114-page opinion, the court also reversed the order of Common Pleas Judge Lester Nauhaus, who in November stayed Justice Melvin's criminal sentence in its entirety pending appeal.

Justice Melvin was found guilty of six of seven counts against her, including theft of services, conspiracy and misapplication of entrusted property. Judge Nauhaus ordered her to serve three years of house arrest, pay a fine, work in a soup kitchen and write the letters of apology.

Thanks to How Appealing not only for alerting me to this ruling, but making sure I knew all 100+ pages from the Superior Court of Pennsylvania is available at this link.

August 21, 2014 in Celebrity sentencings, Criminal Sentences Alternatives, White-collar sentencing, Who Sentences? | Permalink | Comments (1) | TrackBack

Saturday, August 16, 2014

Texas Gov Rick Perry facing two felony charges carrying significant mandatory minimum prison terms

I know very little about Texas criminal laws and procedures, and I know even less about the political and legal in-fighting that appears to have resulted in yesterday's remarkable indictment of Texas Gov Rick Perry on two state felony charges.  But I know enough about mandatory minimum sentencing provisions to know Gov Perry might be looking a significant prison time if he is convicted on either of these charges.  This lengthy Dallas Morning News article, headlined "Gov. Rick Perry indicted on charges of abuse of power, coercion," provides some of the political and legal backstory (as well as a link to a copy of the two-page indictment): 

Republican Rick Perry, becoming the first Texas governor indicted in almost a century, must spend the final five months of his historically long tenure fighting against felony charges and for his political future. A Travis County grand jury on Friday charged Perry with two felony counts, abuse of official capacity and coercion of a public servant, after he vetoed funding for a county office that investigates public corruption.

Special prosecutor Michael McCrum of San Antonio said he felt confident in the case against Perry and was “ready to go forward.” Perry made no statement, but his general counsel, Mary Anne Wiley, said he was exercising his rights and power as governor. She predicted he would beat the charges. “The veto in question was made in accordance with the veto authority afforded to every governor under the Texas Constitution. We will continue to aggressively defend the governor’s lawful and constitutional action, and believe we will ultimately prevail,” she said.

The charges set off a political earthquake in the capital city.  Democrats said the indictment underscores Perry’s insider dealing and he should step down.  Republicans called it a partisan ploy to derail him, especially aimed at his second presidential run that had been gathering momentum.

The case stems from Perry's erasing $7.5 million in state funding last year for the Travis County Public Integrity Unit. He did so after District Attorney Rosemary Lehmberg, a Democrat, rejected his calls to resign after her drunken driving conviction.

Perry could appear as early as next week to face arraignment on the charges. Abuse of official capacity is a first-degree felony with punishment ranging from five to 99 years in prison, and coercion of a public servant is a third-degree felony with a penalty of two to 10 years.

In announcing the indictment, McCrum said he recognized the importance of the issues at stake. “I took into account the fact that we’re talking about the governor of a state and the governor of the state of Texas, which we all love,” he said. “Obviously, that carries a level of importance. But when it gets down to it, the law is the law.”...

The allegations of criminal wrongdoing were first filed by Craig McDonald, director of the nonprofit campaign watchdog group Texans for Public Justice. McDonald has maintained that using veto threats to try to make another elected official leave was gross abuse of office. “The grand jury decided that Perry’s bullying crossed the line into lawbreaking,” he said Friday. “Any governor under felony indictment ought to consider stepping aside.”

State Republican Party chairman Steve Munisteri decried the prosecution as politically motivated. “Most people scratch their heads and wonder why we’re spending taxpayer dollars to try to put somebody in jail for saying that they didn’t feel it was appropriate to fund a unit where the person in charge was acting in a despicable way,” Munisteri said....

A judge from conservative Williamson County, a suburban area north of Austin, appointed McCrum to look into the case. The current grand jury has been studying the charges since April.  McCrum worked for 10 years as a federal prosecutor, starting during President George H.W. Bush’s administration. He’s now in private practice, specializing in white-collar crimes....

McCrum, a former federal prosecutor, said he interviewed up to 40 people as part of his investigation, reviewed hundreds of documents and read dozens of applicable law cases. He dismissed the notion that politics played any part. “That did not go into my consideration whatsoever,” he said.  Asked why he never called Perry before the grand jury, McCrum said, “That’s prosecutorial discretion that I had.”

Of course, what makes this story so very notable from a criminal justice perspective is the extraordinary power and discretion that the special prosecutor had in developing these charges and the extraordinary impact that mere an indictment seems likely to have on Gov Perry professional and personal life.

Regular readers know that former commentor Bill Otis and I often went back-and-forth in the comments concerning my concerns about (and his support for) federal prosecutors have very broad, unchecked, hidden and essentially unreviewable charging and bargaining powers. For this reason, I was especially interested to see that Bill now already has these two new posts up over at Crime and Consequences assailing the charging decision by the (former federal) prosecutor in the Perry case: The World's Most Absurd Indictment and Politics & Prosecution, a Toxic Brew.  I am hopeful (though not really optimistic) that the Perry indictment might help Bill better appreciate why I have such deep concerns about prosecutorial discretion as exercised by federal prosecutors (especially when their powers are functionally increased by severe mandatory minimum sentencing provisions).

August 16, 2014 in Celebrity sentencings, Mandatory minimum sentencing statutes, Offense Characteristics, White-collar sentencing, Who Sentences? | Permalink | Comments (30) | TrackBack

Thursday, August 14, 2014

US Sentencing Commission finalizes its policy priorities for coming year

As detailed in this official press release, the "United States Sentencing Commission today unanimously approved its list of priorities for the coming year, including consideration of federal sentences for economic crimes and continued work on addressing concerns with mandatory minimum penalties." Here is more from the release:

The Commission once again set as its top priority continuing to work with Congress to implement the recommendations in its 2011 report on federal mandatory minimum penalties, which included recommendations that Congress reduce the severity and scope of some mandatory minimum penalties and consider expanding the “safety valve” statute which exempts certain low-level non-violent offenders from mandatory minimum penalties....

The Commission also set out its intention to consider potential changes to the guidelines resulting from its multi-year review of federal sentences for economic crimes. “For the past several years, we have been reviewing data and listening to key stakeholders to try to determine whether changes are needed in the way fraud offenses are sentenced in the federal system, particularly in fraud on the market cases,” Saris said.  “We look forward to hearing more this year from judges, experts, victims, and other stakeholders on these issues and deciding whether there are ways the economic crime guidelines could work better.”

The Commission will continue to work on multi-year projects to study recidivism comprehensively, including an examination of the use of risk assessment tools in the criminal justice system.  The Commission will also consider whether any amendments to the guidelines or statutory changes are appropriate to facilitate consistent and appropriate use of key sentencing terms including “crime of violence” and “drug trafficking offense.”

The Commission is undertaking new efforts this year to study whether changes are needed in the guidelines applicable to immigration offenses and whether structural changes to make the guidelines simpler are appropriate, as well as reviewing the availability of alternatives to incarceration, among other issues.

The official list of USSC priorities is available at this link, and I found these items especially noteworthy (in addition to the ones noted above):

(4) Implementation of the directive to the Commission in section 10 of the Fair Sentencing Act of 2010, Pub. L. 111–220 (enacted August 3, 2010) (requiring the Commission, not later than 5 years after enactment, to “study and submit to Congress a report regarding the 3 impact of the changes in Federal sentencing law under this Act and the amendments made by this Act”)....

(10) Beginning a multi-year effort to simplify the operation of the guidelines, including an examination of (A) the overall structure of the guidelines post-Booker, (B) cross references in the Guidelines Manual, (C) the use of relevant conduct in offenses involving multiple participants, (D) the use of acquitted conduct in applying the guidelines, and (E) the use of departures.

August 14, 2014 in Federal Sentencing Guidelines, Mandatory minimum sentencing statutes, White-collar sentencing, Who Sentences? | Permalink | Comments (3) | TrackBack

Wednesday, August 13, 2014

Noting the push for reforming the fraud federal sentencing guidelines

This lengthy new AP article, headlined "Sentencing Changes Sought for Business Crimes," discusses the on-going push to reform the federal sentencing guidelines for fraud offenses.  Here are excerpts:

The federal panel that sets sentencing policy eased penalties this year for potentially tens of thousands of drug dealers.  Now, defense lawyers and prisoner advocates are pushing for similar treatment for an arguably less-sympathetic category of defendants: swindlers, embezzlers, insider traders and other white-collar criminals.

Lawyers who have long sought the changes say a window to act opened once the U.S. Sentencing Commission cleared a major priority from its agenda by cutting sentencing ranges for nonviolent drug dealers.  The commission, which meets Thursday to vote on priorities for the coming year, already has expressed interest in examining punishments for white-collar crime. And the Justice Department, though not advocating wholesale changes, has said it welcomes a review.

It's unclear what action the commission will take, especially given the public outrage at fraudsters who stole their clients' life savings and lingering anger over the damage inflicted by the 2008 financial crisis.

Sentencing guidelines are advisory rather than mandatory, but judges still rely heavily on them for consistency's sake.  The discussion about revamping white-collar sentences comes as some federal judges have chosen to ignore the existing guidelines as too stiff for some cases and as the Justice Department looks for ways to cut costs in an overpopulated federal prison system....

The commission's action to soften drug-crime guidelines is a signal that the time is ripe, defense lawyers say.  Just as drug sentences have historically been determined by the amount of drugs involved, white-collar punishments have been defined by the total financial loss caused by the crime.  Advocates hope the commission's decision to lower sentencing guideline ranges for drug crimes, effectively de-emphasizing the significance of drug quantity, paves the way for a new sentencing scheme that removes some of the weight attached to economic loss.

A 2013 proposal from an American Bar Association task force would do exactly that, encouraging judges to place less emphasis on how much money was lost and more on a defendant's culpability.  Under the proposal, judges would more scrupulously weigh less-quantifiable factors, including motive, the scheme's duration and sophistication, and whether the defendant actually stole money or merely intended to.  The current structure, lawyers say, means bit players in a large fraud risk getting socked with harsh sentences despite playing a minimal role....

No one is seeking leniency for imprisoned financier Bernie Madoff, who's serving a 150-year sentence for bilking thousands of people of nearly $20 billion, or fallen corporate titans whose greed drove their companies into the ground.  But defense lawyers are calling for a sentencing structure that considers the broad continuum of economic crime and that better differentiates between, for example, thieves who steal a dollar each from a million people versus $1 million from one person.

Any ambitious proposal will encounter obstacles.  It's virtually impossible to muster the same public sympathy for white-collar criminals as for crack-cocaine defendants sentenced under old guidelines now seen as excessively harsh, which took a disproportionate toll on racial minorities.  The drug-sentencing overhaul also was promoted as fiscally prudent, because drug offenders account for roughly half the federal prison population.  Tea Party conservatives and liberal groups united behind the change.

In comparison, the clamor for changing white-collar guidelines has been muted. The Justice Department, already criticized for its paucity of criminal prosecutions arising from the financial crisis, has said it's open to a review but has not championed dramatic change. "I don't think there's a political will for really cutting back or retooling the guidelines," said Columbia University law professor Daniel Richman.

August 13, 2014 in Federal Sentencing Guidelines, Offender Characteristics, White-collar sentencing, Who Sentences? | Permalink | Comments (2) | TrackBack

Tuesday, August 12, 2014

Eleventh Circuit finds probation sentence for public corruption substantively unreasonable

All federal sentencing fans and white-collar practitioners will want to be sure to check out a lengthy opinion today from the Eleventh Circuit in US v. Hayes, No. 11-13678 (11th Cir. Aug 12, 2014) (available here). This start to the majority opinion in Hayes highlights why the substance of the ruling is noteworthy:

“Corruption,” Edward Gibbon wrote more than two centuries ago, is “the most infallible symptom of constitutional liberty.” EDWARD GIBBON, THE HISTORY OF THE DECLINE AND FALL OF THE ROMAN EMPIRE, Vol. II, Ch. XXI, at 805 (David Womersley ed., Penguin Classics 1995) [1781].  And so, although unfortunate, it is perhaps not surprising that, even today, people continue to pay bribes to government officials with the expectation that they will make decisions based on how much their palms have been greased, and not what they think is best for the constituents they serve.

In this criminal appeal involving corruption in Alabama’s higher education system, we consider whether the district court abused its discretion by imposing a sentence of three years of probation (with a special condition of six to twelve months of home confinement) on a 67-year-old business owner who — over a period of four years — doled out over $600,000 in bribes to a state official in order to ensure that his company would continue to receive government contracts, and whose company reaped over $5 million in profits as a result of the corrupt payments.  For the reasons which follow, we hold that such a sentence was indeed unreasonable.

Adding to the fun and intrigue of the ruling, Judge Tjoflat has a dissent that runs almost twice as long as the extended majority opinion.  Here is how it gets started (with footnotes omitted):

I fully agree with the court that the sentence of probation Hayes received in this case of massive public corruption is shockingly low and should not have been imposed.  In appealing the sentence, the Government treats the District Court as the scapegoat, as if placing Hayes on probation was all the court’s doing.  The truth is that it was the Government’s doing.  To ensure that Hayes was given adequate credit for cooperating in its investigation, the Government deliberately led the District Court to abandon the Sentencing Guidelines, which called for a prison sentence of 135 to 168 months, and then to ignore the Supreme Court’s explicit instructions, in Gall v. United States, 552 U.S. 38, 128 S. Ct. 586, 169 L. Ed. 2d 445 (2007), on the procedure to use in fashioning an appropriate sentence.  This set the stage for the court’s adoption of a fictitious Guideline range of 41 to 51 months and its creation of a downward variance to a sentence of probation.

In appealing Hayes’s sentence to this court, the Government deliberately avoids any discussion of the District Court’s procedural error.  To the contrary, it accepts the fictitious Guideline range the court adopted.  All it complains of is the variance from that fictitious range to a sentence of probation, arguing that it is substantively unreasonable.  Because it invited the procedural error, which, in turn, led to the complained-of substantive error, the “invited error doctrine” precludes the Government from prevailing in this appeal.  Yet the court fails to acknowledge that a procedural error has occurred.  Instead, it assesses the substantive reasonableness of Hayes’s procedurally flawed sentence — something the Supreme Court prohibits — and thereby avoids the need to grapple with the Government’s invited error.  I dissent from the court’s failure to invoke the doctrine and to send the Government hence without day.

In part I of this opinion, I briefly recount the facts giving rise to Hayes’s conviction and sentencing. In part II, I describe how the Guidelines are supposed to operate and will show how the Government and the District Court misapplied the Guidelines and set the stage for the sentence at issue.  Part III outlines the role the courts of appeals play in reviewing a defendant’s sentence, pinpoints the procedural errors in this case, and explains why the invited error doctrine precludes the Government from capitalizing on its induced error and obtaining relief.  Part IV concludes.

August 12, 2014 in Federal Sentencing Guidelines, Offender Characteristics, Offense Characteristics, Procedure and Proof at Sentencing, Sentences Reconsidered, White-collar sentencing, Who Sentences? | Permalink | Comments (3) | TrackBack