Saturday, June 27, 2009

Feds seeking the max for Bernie Madoff

As detailed in pieces in the New York Times and in the New York Law Journal, federal prosecutors "recommended on Friday that Bernard L. Madoff be sentenced to 150 years in prison for conducting his enormous worldwide Ponzi scheme."

Here is more from the NYTimes piece: That term is the maximum established for his crime under nonbinding federal sentencing guidelines. Although it would be a purely symbolic sentence even for a young prisoner — and Mr. Madoff is 71 — prosecutors said it was warranted by the “extraordinary dimensions” of his crimes.

“He engaged in wholesale fraud for more than a generation,” said Marc Litt, an assistant United States attorney, in a memo sent to Federal District Judge Denny Chin, who will sentence Mr. Madoff on Monday. Although Mr. Madoff testified in March that his Ponzi scheme began about 1991, Mr. Litt said in his brief that a confidential presentencing report shows it began at least a decade earlier.

“The sheer scale of the Madoff fraud calls for severe punishment,” Mr. Litt continued. Comparing his crime with others that have come before the federal courts in New York “only underscores the enormity of Madoff’s offenses,” he added.

Anyone interesting in reviewing the entire Government sentencing memorandum can find it at this link.

June 27, 2009 in White-collar sentencing | Permalink | Comments (2) | TrackBack

Friday, June 26, 2009

Any sentencing predictions or prognostications before Monday's Madoff mania?

Infamous ponzi schemer Bernie Madoff is scheduled to be sentenced this coming Monday, and so a slow summer friday presents a great opportunity for sentencing predictions and prognostications before the Madoff mania.  Helpfully, this Bloomberg piece, headlined "Madoff’s Failure to Name Accomplices Cripples His Leniency Bid," gets the ball rolling effectively.  Here is how the lengthy piece begins:

Bernard Madoff’s bid for a 12-year sentence will probably be stymied by his failure to tell U.S. government investigators about those who may have helped him defraud investors of as much as $65 billion.  Madoff faces as many as 150 years in jail when he comes before U.S. District Judge Denny Chin in Manhattan on June 29 for sentencing. Probation officials have recommended Madoff spend the rest of his life in prison.  Instead, Madoff asked Chin last week for a sentence that’s half that meted out to the convicted chief executives of Enron Corp. and WorldCom Inc.

Since his Dec. 11 arrest, Madoff, 71, has insisted he acted alone in the largest-ever Ponzi scheme. He took sole responsibility for the fraud when U.S. agents arrested him in December and in his March 12 guilty plea.  In a letter this week to Chin, Madoff’s attorney, Ira Sorkin, argued his client has told investigators about his assets and how he duped regulators.  Sorkin said nothing about Madoff’s accomplices.

White-collar defense lawyers such as George Jackson, a former federal prosecutor now at Bryan Cave LLP in Chicago, said the judge will be deterred by Madoff’s silence on this issue as he weighs the ex-money manager’s request.  “If he did cooperate, he would open himself up to the possibility of a sentence that would give him a ray of hope of having freedom at some point,” said Jackson, who isn’t involved in the case.  If silent, said, Jackson, “The judge could say, ‘I have not heard who you operated with, and it’s clear to me that you operated with someone.’”

I share the instincts of this commentator, and that's why I have set in my own mind 25 years in prison as the over-under for Monday's festivities.  I think Judge Chin will prefer to impose a number of years rather than a life term, but the scope of the fraud and Madoff's extreme culpability leads me to assume that the number of years selected will be quite large.

Some related Madoff sentencing posts:

UPDATE:  A review of the Government's sentencing memorandum and also the thoughtful comments below have led me to revise my over-under for Madoff's sentencing term.  I am now thinking that 40 or 50 years might be a more appropriate over-under.  (I am also now wondering if there is any actually betting on this event going on in the UK.)

June 26, 2009 in White-collar sentencing | Permalink | Comments (17) | TrackBack

Thursday, June 25, 2009

Why Bernie Madoff won't get a record white-collar sentence

In this posta few weeks ago, I put forward a "bleg from a Forbes reporter seeking to "compile a list of longest federal sentences for white-collar criminals, specifically financial criminals."  The product of the reporter's efforts now appears in this effective piece, headlined "It Could Have Been Worse For Madoff : Bernie Madoff may have committed the biggest white-collar crime, but he won't get the longest white-collar sentence."  Here is how the piece starts:

Bernard Madoff may have confessed to the largest investment fraud in history, but that doesn't mean he'll get the longest white-collar sentence when he faces a federal judge on June 29.

Madoff, 71, confessed to running a $65 billion ponzi scheme that spanned decades and affected thousands of investors. He faces a statutory maximum of 150 years for the 11 counts to which he pleaded guilty in March.  If Judge Denny Chin decides to hand down all that time, it would still be only the fourth-longest sentence handed down in recent years to a white-collar defendant, according to an analysis by Forbes.

In any case, Madoff will almost certainly die in prison.  So will Sholman Weiss, currently serving the longest federal sentence for a white-collar crime.  In 2000 a Florida judge sent him away for 845 years for the $450 million collapse of National Heritage Life Insurance.  Weiss was convicted and sentenced after he fled the U.S. for Austria.  Later apprehended and returned, he's currently housed in a federal prison outside Scranton, Pa.  The Bureau of Prisons lists his release date as Nov. 23, 2754.

June 25, 2009 in White-collar sentencing | Permalink | Comments (1) | TrackBack

Wednesday, June 24, 2009

Notable upward variance for white-collar offender

This local federal sentencing story from Massachusetts, which is headlined "Judge throws the book at Cape church swindler," highlights that judges are sometimes eager to bring down the sentencing hammer on certain white-collar criminals:

A federal judge yesterday sentenced a Harwich Port man to 15 years in prison for stealing $14 million from the Natick company where he worked and more than $600,000 from the Cape Cod church where he volunteered.  Jeffrey Windle, 42, entered the courtroom wearing brown and tan prison clothes. During the sentencing he looked down.

"While this is not literally a career offender, it has some marks of it," said U.S. District Court Judge George O'Toole in explaining his decision to sentence Windle to one year more in prison than prosecutors requested and 2½ years more than the maximum called for under sentencing guidelines. O'Toole also ordered Windle to pay back all the money he had taken.

Windle was arrested more than a year ago after officials at Cambium Learning Inc. in Natick discovered he had embezzled millions of dollars from the company's accounts. Windle had worked for the previous four years as director of budget and finance at the company, which specializes in educational materials for special-needs students.

Once the FBI began an investigation, officials at the Congregational Church of South Dennis where Windle volunteered as treasurer found money missing from church accounts. Windle took $647,0000 from the church and funneled money from Cambium to his personal bank accounts through the congregation's accounts, according to prosecutors.

He used the money to buy a $1.9 million house in Harwich Port and two million-dollar homes in Florida. He also bought luxury cars and boats. In March Windle pleaded guilty to 24 counts of mail fraud, wire fraud, money laundering and tax evasion.

Windle's family, Cambium officials and church members looked on yesterday as he was sentenced. "I took from them something that probably will affect them the rest of their lives; trust, trust in a friend," Windle told the judge. At one point during his statement Windle broke into tears, saying that he hoped the people he betrayed would someday "know how truly sorry I am."

The small Cape congregation has struggled financially and emotionally since Windle's crimes were uncovered, according to victim impact statements read in court yesterday....

In pleading for leniency Windle's Boston-based attorney, John Moscardelli, said his client had repeatedly expressed shame and embarrassment. Insecurities and low self-esteem that may stem from Windle's relationship with his father could have played a role in his actions, Moscardelli said.

Windle admitted to using the stolen money to buy cars that he had never driven, the accumulation of material goods being his client's only means of proving he was successful in his own mind, Moscardelli said....

Prosecutors painted a very different picture of the man. "He was like basically a one-man crime wave," Justice Department attorney Carmen Ortiz said. Windle stole from the church the "minute he started working there," Ortiz said. "He used that money to aggrandize his life." Windle not only failed to report taxes, he filed false returns claiming donations he never made, she said.

It is stories like this one that makes me think that Bernie Madoff's request for only a 12-year prison sentence will be an awfully hard sell.  Like Madoff, this defendant Windle pleaded guilty and apparently accepted responsibility.  But, in the face of moving victim impact statements, the judge decided a long prison term was needed.  The same is likely to be true in Madoff's case.

June 24, 2009 in White-collar sentencing | Permalink | Comments (2) | TrackBack

Tuesday, June 23, 2009

Madoff asking for a 12-year prison sentence

As detailed in this new story in the New York Law Journal, which is headlined "Madoff Lawyer Asks Judge to Ignore 'Hysteria,' Impose 12-Year Sentence," the legal team for Bernie Madoff has come up with an interesting proposed sentencing number:

If you are arguing that Bernard L. Madoff should be given a break, you work with what you have. Attempting to mitigate a maximum sentence of 150 years for a client whose name has become synonymous with greed, defense attorney Ira Lee Sorkin asked a federal judge this morning to set aside the "hysteria" generated by of the largest Ponzi scheme in history and give Mr. Madoff only 12 years in prison.

In a letter to Southern District Judge Denny Chin, Mr. Sorkin argued as a fallback that a 15-to-20 year term would accomplish the goals of the sentencing laws "without disproportionately punishing" Mr. Madoff. "We seek neither mercy nor sympathy," Mr. Sorkin said, promising that at his scheduled sentencing on Monday Mr. Madoff "will speak to the shame he has felt and to the pain he has caused."

Thanks to the folks at the NYLJ, everyone can (and should) check out the sentencing letter sent from the Madoff team to Judge Chin at this link.

Some related Madoff sentencing posts:

June 23, 2009 in White-collar sentencing | Permalink | Comments (8) | TrackBack

Monday, June 22, 2009

"Will Madoff ever leave prison alive?"

The title of this post is the headline of this new piece at CNNMoney.  Here is how the piece starts:

Convicted Ponzi scammer Bernard Madoff will probably spend the rest of his life in jail.  On June 29, Judge Denny Chin of the U.S. District Court in New York sentences the 71-year-old. The maximum sentence is 150 years in a federal prison, based on Madoff's guilty plea to 11 criminal counts, including fraud, money laundering, perjury, false filing with the Securities and Exchange Commission, and other crimes.

"[The Ponzi scheme's] effect on society was widespread," said Ken Rubinstein, asset protection lawyer with the New York firm Rubinstein & Rubinstein. "Its effect on individual victims was economically and psychologically catastrophic. I can't see how any judge would sentence him for any period that would be less than his remaining lifespan."

Victims of Madoff's scheme have appealed to Judge Chin for a sentence that would insure Madoff stands no chance of getting out. Leonard Forrest of Port St. Lucie, Fla., wrote to the judge that Madoff "deserves at best to spend the rest of his life in prison just as we will spend the rest of our lives in financial ruin and emotional and physical devastation."

Given the severity of Madoff's crimes, legal experts believe his victims will probably get their wish. Thus far, federal investigators have identified 1,341 investors in Madoff's firm, with losses exceeding $13 billion, and they're not done tallying up the damage.

In other words, the smart money is betting that the answer ot the question in this title of this post is "No."

June 22, 2009 in White-collar sentencing | Permalink | Comments (3) | TrackBack

Tuesday, June 16, 2009

New York Times complains (foolishly?) about creative writing sentence

I am intrigued and a bit troubled to see that the New York Times has this new editorial that appears to be complaining about the recent sentencing decision ordering a white-collar defendant to write a book (discussed here).  Here is most of the editorial:

We have not read the little monograph that James H. Lake, a Washington lobbyist at the time, wrote in the late-1990s.... In 1998, Mr. Lake pleaded guilty to making illegal campaign contributions.  The judge in the case, Ricardo M. Urbina of the United States District Court for the District of Columbia, ordered Mr. Lake to set down in writing his description of the criminal code that covered his crime.

Soon there will be another title in what might be called the Urbina canon.  Last week, he sentenced Dr. Andrew G. Bodnar — a former pharmaceutical executive who pleaded guilty to making a false statement to the federal government about the efforts of the company that he worked for to resolve a patent dispute — to write a book about his case as a warning to other executives.

We do see the possibility of justice in this sentence — if Dr. Bodnar hates to write.  But it feels like an invitation to insincerity.  In fact, it feels a little like asking an adolescent boy to explain, in front of his friends, why telling a lie is bad, bad, bad.

Many people in professional life believe they have a book in them.  Whether it ever gets out is usually a matter of passion, persistence and chance, not court decree.  We don’t know if there is any deterrent value in Judge Urbina’s approach (beyond deterring us from reading the product).

Given the vanity in publication, it might be better if he ordered white-collar defendants not to write books about what they did.  Now that would sting.

Though this editorial is not a robust rebuke of Judge Urbina's creative sentencing approach, it is another example of the tendency of the media and others to react too negatively to forms of punishment other than imprisonment.  The NY Times likely would not have even noticed had Dr. Bodnar been given a year in prison, and this editorial never confronts the important reality that most everyone would prefer that a parent order a boy to explain why lying is bad rather than lock that boy in a closet for days or weeks.

June 16, 2009 in Criminal Sentences Alternatives, White-collar sentencing | Permalink | Comments (8) | TrackBack

Friday, June 12, 2009

"Judge Orders Former Bristol-Myers Executive to Write Book"

The title of this post is the headline of this New York Times article discussing a creative sentencing term imposed by a federal judge on a white-collar offender.  Here are a few of the details:

On Monday, Judge Ricardo M. Urbina of the United States District Court for the District of Columbia, sentenced a former senior pharmaceutical executive to write a book. Earlier this year the executive, Dr. Andrew G. Bodnar, a former senior vice president at Bristol-Myers Squibb, had pleaded guilty to making a false statement to the federal government about the company’s efforts to resolve a patent dispute over the blood thinner Plavix.

The judge sentenced Dr. Bodnar to two years of probation during which he is to write a book about his experience connected to the case. Dr. Bodnar must also pay a $5,000 fine. Elkan Abramowitz, Dr. Bodnar’s lawyer, said he had never before heard of a case in which a judge sentenced a defendant to write a book.

But this is not the first time Judge Urbina has demanded written penance. In 1998, he sentenced a prominent Washington lobbyist to write and distribute a monograph to 2,000 lobbyists at the defendant’s own expense. The lobbyist, James H. Lake, pleaded guilty to making illegal corporate campaign contributions. Judge Urbina ordered him to pay a $150,000 fine and to write a monograph describing the criminal provisions of federal laws governing corporate campaign contributions.

In the sentencing hearing on Monday, Judge Urbina said he would like to see Dr. Bodnar write a book about the Plavix case as a cautionary tale to other executives. The case concerned accusations that Bristol-Myers had made false statements to federal investigators about the company’s attempt to resolve a patent dispute with a Canadian maker of generic drugs, Apotex.

The WSJ Law Blog has this useful follow-up post on the sentence, which is titled "Go Directly to . . . Authorship? More on Judge Urbina’s Odd Sentence" and includes an interesting Q&A with Dan Markel.

June 12, 2009 in Criminal Sentences Alternatives, Race, Class, and Gender, White-collar sentencing | Permalink | Comments (4) | TrackBack

Justice Stevens refuses to grant bail for Conrad Black

In this post at SCOTUSblog, titled "Black loses bail plea — for now," Lyle Denniston reports that "Supreme Court Justice John Paul Stevens refused on Thursday to order the release on bail of Canadian media mogul Conrad M. Black, but allowed Black’s lawyers to make a new plea for his freedom from a federal judge."  Here are more details:

Stevens’ order, containing no explanation, can be found here.  The bail issue (application 08A1063) is separate from the Supreme Court’s planned review of Black’s conviction; the Justices will hear and decide that case next Term (Black, et al., v. U.S. 08-876).

Black, if he chooses to do so, can now take the bail issue back to a federal judge who earlier had concluded that Black need not be held while his case proceeded beyond his conviction in a high-profile executive compensation case involving accusations of fraud and obstruction of justice.

That judge, District Judge Amy J. St. Eve of Chicago, denied a request by the government — while Black was awaiting sentencing — to order him detained.  He was then sentenced to a 78-month sentence, and went to prison when the Seventh Circuit Court refused further bail while he pursued an appeal to the Circuit Court.

June 12, 2009 in White-collar sentencing | Permalink | Comments (2) | TrackBack

Wednesday, June 10, 2009

Should and will Conrad Black get bail from the Supreme Court?

As detailed in posts here and here at SCOTUSblog, all the briefs are now before the Supreme Court in Conrad Black's request for bail from the Supreme Court.  Here are the basics from Lyle Denniston's most recent dispatch:

Lawyers for a Canadian newspaper magnate convicted in the U.S. in a high-profile executive compensation case made their final plea Tuesday night for his release on bail.  In a reply brief (found here) to Supreme Court Justice John Paul Stevens, attorneys for Conrad M. Black completed their arguments for his freedom so he could return to Canada.

The exchanges between Black’s counsel and the Justice Department over the bail issue have come to center primarily on the fate of his conviction on charges of obstruction of justice.  Black was also convicted on fraud counts, but the Supreme Court last month agreed to rule on the validity of that part of his conviction.

Black contends that, if the fraud counts are overturned by the Supreme Court when it rules on its case in the Term starting next October, his obstruction conviction will be undermined. The Justice Department disputed that.

In their closing filing, Black’s lawyers asked Justice Stevens to grant bail while the Supreme Court case is pending, and then refer the release issue to a federal judge to impose a bond.   Justice Stevens has the authority to act on his own, or to refer the matter to the full Court.

Black is currently in prison in Florida, having served so far 18 months of his 78-month sentence.  He is the only one reamining in prison among the former colleagues in his media empire who were convicted. Others were not given prison terms, or have been released on bail pending the Supreme Court ruling.

I think the Supreme Court should grant bail, but I fear it won't.  Anyone else have thoughts about whether the Justices should or will grant Black's request for release?

June 10, 2009 in White-collar sentencing | Permalink | Comments (5) | TrackBack

Wednesday, June 03, 2009

A "bleg" for information about crazy-long prison sentences for white-collar criminals

A Forbes reporter contacted me in her effort to "compile a list of longest federal sentences for white-collar criminals, specifically financial criminals."  I told her that I was not aware of any such list, but that I was willing to ask around via this forum. So, here is how the reporter, who can be reached via this e-link, described what she is seeking:

Looking for information/stories on long federal prison sentences given those convicted of white collar crimes, specifically financial crimes. Time frame I'm looking at is 1985 to the present. And by long, I mean way beyond normal, like 330 years for a $56 million investment scam.

June 3, 2009 in White-collar sentencing | Permalink | Comments (10) | TrackBack

Sunday, May 31, 2009

"Madoff's $lick Try"

The title of this post is the headlines of this New York Post report on Bernie Madoff's hiring of a well-known sentencing consultant.  Here are the details:

Mega-fraudster Bernard Madoff has hired a leading prison consultant to help him try to weasel out of a maximum 150-year term for his $65 billion Ponzi scheme.

"Mitigation specialist" Herbert Hoelter -- who's helped celebrity jailbirds such as Martha Stewart and Michael Vick -- got court permission to visit Madoff in the Metropolitan Correctional Center, where Bernie is awaiting sentencing on June 29.

Hoelter's Baltimore-based firm, the National Center on Institutions and Alternatives -- which has worked with Stewart and Vick -- specializes in "sentencing advocacy," including "arguments for downward departure from the sentencing guidelines."

May 31, 2009 in White-collar sentencing | Permalink | Comments (4) | TrackBack

Friday, May 29, 2009

Conrad Black appeals to Justice Stevens for bail pending SCOTUS ruling

In this post last week on right after the Supreme Court granted cert on Conrad Black's criminal appeal, I asked "Should Conrad Black (and Jeff Skilling and others) be set free pending SCOTUS action?".  My query prompted a spirited debate in the comments, and now it may prompt a spirited debate in Justice Stevens' chambers.  This new AP article explains why:

Former media executive Conrad Black is seeking his release from prison, at least until the Supreme Court decides whether to uphold his fraud conviction.

Black has served nearly 15 months of a 6 1/2-year prison term following his conviction in July 2007. In early May, the high court agreed to hear an appeal from Black and two other former executives of the Hollinger International media company who were convicted in connection with payments of $5.5 million they received from a Hollinger subsidiary.

The court probably won't hear arguments until late this year and a decision is unlikely before late winter. In the meantime, the judge who presided over the trial has said one of the men, John Boultbee, can be released on bond. 

The government did not oppose Boultbee's release, said Miguel Estrada, Black's Washington-based lawyer.  But it "steadfastly refuses to consent to bail for Mr. Black," Estrada said in a court filing he directed to Justice John Paul Stevens.  Stevens handles matters that come to the court from Illinois.

May 29, 2009 in White-collar sentencing | Permalink | Comments (2) | TrackBack

Tuesday, May 19, 2009

Should Conrad Black (and Jeff Skilling and others) be set free pending SCOTUS action?

Though the Supreme Court's cert grant yesterday in the criminal appeal of media mogul Conrad Black raises mostly white-collar substantive criminal law issues (as noted by bloggers here and here), I am wondering if and how this should impact the quasi-sentencing issue of bail pending appeal. 

As noted here, Black was denied bail pending appeal by the Seventh Circuit last year and has now served more that a year in prison.  Though the SCOTUS cert grant does not ensure Black's convictions will be reversed, it does greatly increase the chances he could be freed eventually.  However, given the standard (slow) pace of SCOTUS action, Black's case won't be argued to SCOTUS until the fall and a ruling seems unlikely before 2010.  In light of the cert grant, it seem to me that Conrad Black now has a much stronger argument that he should be able to be free rather than locked up while his (suspect?) convictions are reviewed.

Moreover, as detailed in this Houston Chronicle article, the fate of at least one other high-profile white-collar defendant also could be impacted by the now-pending Black SCOTUS case:

The U.S. Supreme Court’s decision today to hear the appeal of former media mogul Conrad Black could bode well for imprisoned former Enron CEO Jeff Skilling. “Skilling’s crossing his fingers,” said Wayne State University Law School professor Peter Henning, who is familiar with both cases. “This is Skilling’s best hope.”

Last week Skilling appealed to the high court clear up questions about a prosecution theory of guilt that backfired in other Enron-related cases, but was embraced by appellate judges in his case. The Black case ... involves the same theory, so the outcome of his appeal likely means the 5th U.S. Circuit Court of Appeals panel that affirmed Skilling’s 19 convictions will have to take another look....

“In effect, he’s in a bit of limbo now,” Henning said. “Regardless of what happens in Black, his case will get remanded for reconsideration to the 5th Circuit.” Skilling’s case still has a chance to be heard by the Supreme Court, but Henning said it’s unlikely after a case involving such similar issues has been accepted.

Daniel Petrocelli, Skilling’s lead lawyer, today called the Black case’s acceptance for review “a very significant development, and not just for Jeff Skilling’s case, but frankly for our entire justice system.”

Does Skilling likewise now have a much stronger argument for release pending appeal, especially given that it could likely be a full two years before SCOTUS decides Black and then the Fifth Circuit decides what the Black ruling might mean for Skilling's case?  And are there lots of other similarly situated white-collar defendants serving time for honest services fraud that should now be going back to lower courts citing the Black cert grant to try to get back home while appeals are on-going?

May 19, 2009 in White-collar sentencing | Permalink | Comments (13) | TrackBack

Monday, May 11, 2009

Bail and sentencing issues take center stage in Dreier case

This New York Law Journal article, headlined "Guilty Plea Expected, but Dreier Seeks to Stay Free a Little Longer," details how another high-profile white-collar prosecution is about to become a case about bail and sentencing.  Here are the details:

Disgraced attorney Marc S. Dreier will journey this afternoon from midtown Manhattan to a downtown federal courthouse, where he is expected to plead guilty to peddling fictitious notes to investors.

It is uncertain whether Dreier will be allowed to return to his penthouse apartment at 151 E. 58th St. before imposition of what will surely be a lengthy prison term.  But the principal job of defense lawyer Gerald Shargel will be to keep his client out of jail for as long as possible.

Starting with the December arrest of the former head of now-defunct, 250-attorney Dreier LLP, Shargel waged an extended battle with Assistant U.S. Attorney Jonathan Streeter to have his client released from pretrial detention, eventually prevailing when Southern District of New York Judge Jed S. Rakoff ruled Feb. 5 that Dreier could be confined to his apartment under guard pending resolution of the case. 

"We're going to have an issue about bail pending sentencing because the government is seeking to have him remanded and I'm trying to keep him out," Shargel said Friday.  The problem for Shargel, who met with his client at his apartment on Thursday to prepare for today's hearing, is that, once Dreier pleads guilty, the burden shifts to the defense on the question of remand....

At the hearing scheduled for 5 pm today before Rakoff, Dreier is expected to admit to every count in an indictment charging him with selling fictitious notes to at least 13 different funds and three individuals between 2004 and 2008: money laundering, conspiracy to commit securities and wire fraud, one substantive count of securities fraud and five substantive counts of wire fraud.

Dreier, 58, faces a sentence of 20 years in prison on each of the most serious charges against him, but Shargel's hope is for a sentence that leaves open the possibility that he will get out of prison before the end of his life.   In a recent proceeding, Shargel stressed to Judge Rakoff that his client was prepared to accept full responsibility for his actions, a fact that could be considered in his favor at sentencing.

Shargel would not comment on sentencing issues Friday. But with a client who was caught red-handed, the veteran defense attorney has indicated from the outset that the case would be resolved short of trial with a guilty plea.  "Given the facts and circumstances of the case, I thought both the public and the people involved in the matter had every right to know what our position was," Shargel said Friday.

May 11, 2009 in White-collar sentencing | Permalink | Comments (0) | TrackBack

Friday, May 01, 2009

Former GC for Gen Re gets relatively short prison sentence

This article from The National Law Journal, which is headlined "Former Assistant GC Sentenced in General Re Fraud Case," reports on a notable white-collar sentencing that took place yesterday.  Here are excerpts:

The former assistant general counsel of General Re Corp., Robert Graham, was sentenced Thursday to one year and one day in federal prison in a financial fraud case closely watched by in-house counsel nationwide.

Graham, 61, was found guilty last year of conspiracy, securities fraud, mail fraud and making false statements to the U.S. Securities and Exchange Commission. As part of his sentence, he was ordered to pay a $100,000 fine. He had faced a maximum sentence of up to 210 years in prison.

"Certainly, that kind of sentence seems more in line with a liability for a corporate failure than hundreds of years in prison," said Susan Hackett, general counsel for the Association of Corporate Counsel, of the sentence that Graham actually received.

Graham, who was senior vice president and assistant GC at Stamford, Conn.-based General Re from 1986 to 2005, will remain free on bond pending his appeal of his convictions. His lawyer, Alan Vinegrad, had sought a period of home confinement and community service....

The charges against Graham, who was senior vice president and assistant general counsel of Gen Re, were part of a 16-count indictment involving four other defendants at Gen Re and American International Group Inc.

This ABA Journal piece indicates that prosecutors were asking for a sentence of 230 years for Graham, but that does not sound quite right.  Still, I do think the prosecutors were seeking a much longer term and that Graham was the beneficiary of a significant downward variance.

May 1, 2009 in White-collar sentencing | Permalink | Comments (3) | TrackBack

Tuesday, April 28, 2009

What kind of plea deal might be in the works for Dreier?

This new article from the New York Law Journal, headlined "Dreier to Plead Guilty to All Charges, Attorney Says," reports on a high-profile white-collar prosecution that now appears headed toward a high-profile white-collar sentencing.  Here are details from the article:

Marc S. Dreier intends to plead guilty on May 11 to every count in the indictment charging him with stealing hundreds of millions of dollars from hedge funds and individuals, his attorney said Monday.

Defense attorney Gerald L. Shargel told Southern District of New York Judge Jed S. Rakoff that his client will plead to one count of conspiracy to commit securities fraud and wire fraud, one count of securities fraud, five counts of wire fraud and one count of money laundering.  Each count carries a potential sentence of 20 years in prison except for the conspiracy count, which carries a five-year term....

Dreier, the founder and sole equity partner of the now defunct 250-attorney Dreier LLP, had been widely expected to plead guilty to some or all of the charges he faces in connection with a scheme in which he peddled more than $700 million in phony real estate and pension fund notes. To keep his scheme going, he paid back approximately $300 million to people who bought the bogus notes.  He is charged with selling notes to at least 13 different funds and three individuals between 2004 and 2008, with the purchase price wired to an attorney trust fund maintained by his firm....

Dreier, who was present at Monday's hearing, is effectively asking for the mercy of the court in deciding to plead guilty.  Asked after the hearing why Dreier wanted to plead guilty instead of going to trial, Shargel said,  "He wants to end it because he accepts responsibility for what he did."  Shargel also said Dreier has accomplished much in his life, but he "simply went off the tracks ... . I'm sure no one will ever know why he did what he did."

In addition to accepting responsibility, Dreier surely would also like to avoid spending the rest of his life in federal prison and a plea deal was likely the only way to minimize his risk of never being a free man again.  The question now, however, is how good a deal has he managed to secure.  Judge Rakoff has a sentencing history that should make the defense team hopeful, but Dreier's crimes may make it hard for either prosecutors or the sentencing judge to show him too much mercy come sentencing.

April 28, 2009 in White-collar sentencing | Permalink | Comments (1) | TrackBack

Thursday, April 23, 2009

Flawed HLR note on federal white-collar sentencing

The April 2009 issue of the Harvard Law Review includes this student Note focused on federal white-collar sentencing, titled "Go Directly to Jail: White Collar Sentencing After the Sarbanes-Oxley Act."  Here is how the note's conclusion starts:

If the purpose of the WCCPA was to deter white collar crime, the statute’s harsh penalties have not achieved their goal.  Moreover, by introducing the potential for enormously disparate sentences for precisely the same crime, the WCCPA detracts from just punishment.  This Note has proposed merely one way of reforming the sentencing process, in hopes that sentencing will become more consistent and predictable across judges and jurisdictions.

Though the note does a reasonable job of documenting some of the challenges and problems with modern white-collar federal sentencing, there is a telling lack of sophistication in much of the analysis.  This lack of sophistication is most clear from a fundamental flaw in the Note's call for reform: "Congress or the United States Sentencing Commission must take steps to stabilize and rationalize the white collar sentencing system [and this] Note proposes that the best way to achieve this goal would be to tie Guidelines sentencing levels to actual loss, rather than intended loss...." 

As all informed white-collar practitioners know, the federal guidelines have always tied "sentencing levels to actual loss" though USSG 2B1.1, and "intended loss" enters the picture only if and when the intended loss is greater than actual loss.  Moreover, most modern white-collar sentencing decisions that have garnered lots of attention (e.g., Olis and Adelson and Parris) involve cases in which the the actual loss calculation produced a sentencing range that seemed much too high in light of the defendant's true culpability.

Anyone eager for a much more accurate and more sophisticated examination of federal white-collar sentencing must get the Federal Sentencing Reporter's February 2008 issue on this topic (available here, described in detail here and here).  On the precise topic of loss, the FSR issue includes these terrific articles:

The fact that the Harvard Law Review could publish a note that incorporates such a fundamental flaw provides yet another sobering reminder of the extraordinarily poor instruction at at least one elite law school concerning the basics of federal sentencing law.

April 23, 2009 in White-collar sentencing | Permalink | Comments (26) | TrackBack

Monday, April 13, 2009

Split Tenth Circuit panel denies denies Nacchio bail pending cert.

Howard Bashman has linked here the news reports and the short opinion coming from the Tenth Circuit on the issue of whether the former Qwest CEO Joseph Nacchio should get bail pending his attempt to get cert to review his white-collar conviction.  Here is the line that jumps out from the Tenth Circuit's disposition: "Mr. Nacchio has not shown that there is a reasonable chance that the Supreme Court will grant his petition." 

I suppose, as this request for bail goes up to the Justices (see AP report here and SCOTUSblog report here), the Court itself will have an opportunity to confirm or rebuff this significant cert prediction from the Tenth Circuit panel.

Some related posts:

April 13, 2009 in White-collar sentencing | Permalink | Comments (4) | TrackBack

Thursday, April 02, 2009

Good timing for a message-sending tax fraud sentence!?!

As detailed in this AP article, a federal district judge "saying he wanted to send a message to "quick-buck artists," handed down stiff sentences Wednesday to two former executives and a lawyer with accounting firm KPMG for helping rich people evade more than a billion dollars in taxes."  Here are more details:

U.S. District Judge Lewis Kaplan sentenced former KPMG executive John Larson to more than 10 years in prison; a fellow executive, Robert Pfaff, received more than eight years. 

The judge said Larson, 57, and Pfaff, 58, were "centrally involved" in the brazen tax shelter scheme "that didn't pass the smell test from Day 1." He gave lawyer Raymond Ruble, 63, a term of 6 1/2 years in prison.  The judge said he hoped the sentences "will say to quick-buck artists, 'Not so fast.'"

The men were convicted in December of multiple counts of tax evasion.  The government alleged they used tax shelters marketed by KPMG LLP to help wealthy clients make it appear they sustained large tax-deductible losses by getting loans for business ventures when they had not.

I do not know if this sentencing was consciously scheduled to come only two weeks before federal income taxes are due, but it does seem like an especially good time to send a message to would-be tax cheats.

April 2, 2009 in White-collar sentencing | Permalink | Comments (1) | TrackBack

Monday, March 23, 2009

"Disparities Seen in Federal Securities Fraud Sentences"

The title of this post is the title of this piece from last Friday's New York Law Journal by Steven Feldman discussing federal sentencing developments in a notable white-collar setting.  Here are snippets:

Greater uncertainty reigns now that the guidelines are advisory. Because anecdotal evidence indicates that district courts are now more frequently imposing sentences below the guidelines range, it falls to practitioners to look for patterns in what appears to be a fairly random imposition of below-guidelines sentences. Recognizing these patterns is critical because having a sense of a likely sentence plays an important role in the decision of whether to go to trial or plead guilty. Several trends appear in recent securities fraud cases:

• Defendants convicted after trial are more likely to receive sentences within the guidelines range.

• Defendants who plead guilty well before trial are more often receiving sentences below the guidelines range, meaning that they receive much greater "credit" for accepting responsibility than the three-level reduction provided by U.S.S.G. §3E1.1.

• The disparities between the sentences for those who go to trial and are convicted, and those who plead guilty to the same conduct, have increased.

• The X-factor is the judge. Because the assignment wheel is random, one cannot control what judge will be assigned to a case. But knowing the court and its tendencies helps in prognosticating what sentence awaits post-trial or post-plea.

March 23, 2009 in White-collar sentencing | Permalink | Comments (0) | TrackBack

Wednesday, March 11, 2009

"Where's the Bone for Bernie Madoff?"

The title of this post is the title of this query by Jeralyn at TalkLeft.  The question reflects my own reaction when I hear that Madoff will be pleading guilty without the benefit of a plea agreement.  Here is part of Jeralyn's analysis:

[Madoff's lawyers have indicated he will plead] straight up to all 11 counts against him and receives no sentencing concession, no promises about non-prosecution of family members and no agreement that the Government's continuing investigation won't affect his wife and other family members' assets.

He's 70 years old. Even if he gets a 25 year sentence with good time, he's likely to die in prison. He's not going to a minimum security camp. So why is he pleading guilty? Are there secret agreements we don't know about?...

[W]ho agrees to start a life sentence at 70, when you can have another year or two at your luxurious Park Avenue abode in the company of your spouse and family, while awaiting trial?

It's not like the Government could give him any more time if he went to trial and lost.  What was he afraid of?  That he'd be sentenced to life plus cancer?

I don't get it.  I know he has smart, expensive, white collar lawyers, but who pleads a client to life in prison without a plea agreement, without concessions to family regarding their retention of assets or an agreement not to prosecute them?

I've uploaded the documents for those who want to read them:

There's got to be a bone for Bernie in here somewhere, but right now, I'm not seeing it.

Among the comments at TalkLeft are suggestions that, had Madoff done to trial or even forced the prosecution to start going forward more formally, more details of the fraud would have emerged to show that family and others were deeply involved in his fraudulent actions.  That theory makes sense to me, though I still find the lack of any kind of formal plea agreement to be surprising and notable in this case.

Some related Madoff posts:

March 11, 2009 in White-collar sentencing | Permalink | Comments (6) | TrackBack

Tuesday, March 10, 2009

Basic Madoff plea details emerging

As now reported by all the major media outlets, the specifics of the charges and expected plea in the financial frauds committed by Bernie Madoff are coming into focus.  This Bloomberg story has many of the latest particulars:

Bernard Madoff, the New York money manager accused of leading the largest Ponzi scheme in U.S. history, will plead guilty later this week to 11 criminal charges, his lawyer told a federal judge.

Madoff, 70, will admit he directed a fraud that prosecutors alleged began in the 1980s. By last November, Madoff told 4,800 investors their accounts held $64.8 billion, according to court papers filed in Manhattan federal court. Prosecutors will seek forfeiture from Madoff of as much as $170 billion. Madoff, free on $10 million bail, faces 150 years in prison.

“There is no plea agreement,” Assistant U.S. Attorney Marc Litt said at hearing today before U.S. District Judge Denny Chin.... “The filing of these charges does not end the matter,” said Acting Manhattan U.S. Attorney Lev Dassin. “Our investigation is continuing.”...

“The charges reflect an extraordinary array of crimes committed by Bernard Madoff for over 20 years,” Dassin said in a statement. “The size and scope of Mr. Madoff’s fraud are unprecedented.”

Over at TalkLeft, Jeralyn in this post has an effective assessment of all the latest news.  Here is her summary take-away: 

My prediction: Madoff will go to jail Thursday, never to be released again.  And, no matter how much money the government forfeits, not every victim will be made whole.

March 10, 2009 in White-collar sentencing | Permalink | Comments (2) | TrackBack

Running the federal sentencing guideline numbers for Bernie Madoff

MadoffGraphic031009 The recent legal developments in the prosecution of Bernie Madoff (details here) have lots of folks buzzing about not just his expected guilty plea, but also his possible federal sentence.  Helpfully, today's Boston Herald has this new article that, as this graphic shows, runs through the basic guideline calculations for Bernie Madoff based on what we all think we know about his big-time financial fraud.  Here are excerpts from the article:

It’s the one “big score” that Bernard Madoff probably wishes he wasn’t about to make. Experts say Madoff, who’s expected to plead guilty Thursday to running a $50 billion Ponzi scheme, rates about 52 points on a scale federal judges use when setting sentences. The bad news for Madoff: Anything over 42 usually translates into life behind bars.

“This guy is going to jail for the rest of his life - the only question is whether he goes in now or goes in later,” Boston white-collar defense lawyer Tom Hoopes said.... Even if Madoff helps investigators unravel the case and go after any accomplices, Hoopes believes a judge won’t cut the man’s score by more than 25 percent. That would still leave 39 points, or enough for the 70-year-old Madoff to get at least 22 years behind bars....

Defense lawyer Willis Riccio thinks Madoff will get about 15 years, but “that’s a life sentence in the sense that Madoff might not live out his term.” However, alleged victim George Christin fears Madoff will serve as little as five years. “He probably set things up so the SEC can’t figure anything out without his input,” said the Bedford man, whose family lost $2.5 million. “Madoff will use that as leverage to get way less than life in prison.”

Besides, Christin, a 60-year-old special-education teacher who’s scrapped plans to retire at 65, doesn’t even see a life sentence as punishment enough. “There’s no way the scales will ever be balanced,” he said. “For justice to be done, they’d have to make that man live in the slums of Calcutta and eat garbage for the rest of his life.”

Some related Madoff posts:

March 10, 2009 in White-collar sentencing | Permalink | Comments (4) | TrackBack

Saturday, March 07, 2009

A victim's perspective on a possible plea deal for Bernie Madoff

This ABC News article provide an effective victim-centered perspective on the developing new that Bernie Madoff may be nearing a plea deal in his prosecution for his record-setting frauds.  The piece is headlined " Calling All Victims: Madoff Expected to Plead Guilty; Criminal Case of the $50 Billion Fraudster Nearing Conclusion," and here are some notable excerpts:

In the government's clearest statement yet that a deal in the criminal case of Bernard Madoff is close to being made, a victims' rights motion was filed Friday evening by the U.S. attorney in the case that indicates Madoff will appear next Thursday in a plea proceeding.

U.S. District Court Judge Denny Chin signed an order granting a request that the thousands of victims of the alleged Ponzi scheme will receive online notification of the court proceedings. They will have to periodically check a special web site set up for the criminal case proceedings.

Any victim who wishes to be heard in Thursday's proceeding will need to notify the government by Wednesday March 11th at 10:00 a.m. The internet address for victims to contact is: usanys.madoff@usdoj.gov....

It was reveleaed Friday that federal prosecutors have apparently reached a plea deal with the accused con man, in which he will admit to his role in the biggest financial crime in American history. The deal does not specify how much time Madoff would spend in prison, nor does it exclude the prosecution of Madoff's family or former associates, lawyers familiar with case said.

One former federal prosecutor says he doubts the deal will go easy on Madoff and that the disgraced financier will be spending a long time behind bars. "I doubt very seriously whether there would be any concession by the government as to jail time or diminished jail time for Mr. Madoff," said Sean O'Shea. "Given the sentencing guidelines in a fraud of this type, I think you're looking at a man who is 70 years old, I think you're looking at the rest of his natural life."...

Madoff's investors are not happy to hear the he may cut a deal. 92-year old Zsa Zsa Gabor is one of them. Her husband Prince Frederick Von Anhalt said the couple lost their $10 million life savings to Madoff.

"It's not enough" for Madoff to just plead guilty and go to jail, Von Anhalt told ABC News. "That's what he wants, he wants to go to jail, his life is over. He wants to protect his family, his wife, his children." Von Anhalt also wants to see Madoff's wife, Ruth, and his sons arrested and put in jail. "What nerve she has, to say that she wants to keep all that money. That's our money! Screw her!"

For more details on the possible plea deal, Mark Hamblett at the New York Law Journal has this article, headlined "Madoff Waives Indictment, Set to Plead Guilty."

March 7, 2009 in Celebrity sentencings, Victims' Rights At Sentencing, White-collar sentencing | Permalink | Comments (2) | TrackBack

Thursday, March 05, 2009

Should Joe Nacchio remain free on bail pending SCOTUS appeal?

This Denver Post article details that former Qwest CEO has been ordered to start serving his prison sentence later this month:

Former Qwest chief executive Joe Nacchio has been ordered to report to a Pennsylvania correctional facility on March 23 to begin serving a six-year prison term for illegal insider trading.

Nacchio has been assigned to a minimum-security satellite camp at Schuylkill Federal Correctional Institution in Minersville, Pa., 46 miles north of Harrisburg. Nacchio, a New Jersey resident, has to report to the warden by noon on March 23, according to an order entered today in Denver federal court by U.S. District Judge Marcia Krieger. "Travel will be at his own expense," the order states.

Last week, the 10th Circuit Court of Appeals reinstated Nacchio's conviction and revoked his bail in a 5-4 decision. A three-judge appeals panel had reversed the conviction, ruling that the trial judge wrongly excluded expert testimony from a defense witness.

Though I am not an expert on bail pending appeal issues, the fact that a Tenth Circuit panel originally reversed his conviction leads me to think Nacchio could make a solid case for remaining out while he pursues his claims in the Supreme Court.  But, since the en banc Tenth Circuit ruling seemed to demand that Nacchio get started with his prison term, it apparently is going to be up to the Justices to decide whether this notable white-collar defendant will be in prison or still on bail in a few weeks.

UPDATE:  At this post, How Appealing has coverage of, and links to, Joe Nacchio's bail application to the Tenth Circuit.

March 5, 2009 in White-collar sentencing | Permalink | Comments (4) | TrackBack

Wednesday, February 25, 2009

En banc Tenth Circuit reinstates insider trading conviction of former Qwest CEO Nacchio

Though not technically a sentencing ruling, the white-collar sentencing world should surely take note of the Tenth Circuit's decision today, via a 5-4 en banc ruling, to reinstate Joe Nacchio's federal criminal insider trading conviction.  This post from the WSJ Law Blog provides some details (noting some sentencing realities) and useful links:

In a squeaker of a decision, the full Tenth Circuit earlier today upheld former Qwest CEO Joseph Nacchio insider trading conviction, offering another setback to the former telecom high flyer’s attempt to reverse a jury’s decision in 2007.  The court also revoked his bail, so Nacchio is likely headed to prison in the near future. Click here for the ruling; here for the Denver Post’s account.

Nacchio was convicted nearly two years ago of 19 counts of insider trading for selling off Qwest’s stock even as he knew the Denver-based telecom company’s finances were heading south.  Since then he’s been fighting the conviction, with the help of his high-profile attorney, Latham & Watkins’s Maureen Mahoney.  Nacchio has been free on a $2 million bond since then, and has spent toggling between his New Jersey and Florida homes.

In a 5-4 vote, the appeals court overturned an initial three-judge panel’s decision to grant Nacchio a new trial....  Former U.S. Attorney Troy Eid, who oversaw the case but recently left to become partner at Greenberg Traurig, was ebullient about the decision. “It’s a tremendous day for the United States government,” he said. “I couldn’t be happier.”

Maureen Mahoney [has now said]: “We are profoundly disappointed by the Court of Appeals’ closely divided en banc decision. . . . We are optimistic that the Supreme Court of the United States will review the case, not just to resolve the conflicts but to correct what the chief judge of the Court of Appeals described as a ‘draconian decision’ to deprive Nacchio of his fundamental right to a defense. . . ”

February 25, 2009 in White-collar sentencing | Permalink | Comments (3) | TrackBack

Friday, February 13, 2009

State judges plead guilty to sending juves to jail for moolah

A number of readers have sent me various links to an incredible story from Pennsylvania.  The New York Times coverage in this article is headlined "Judges Plead Guilty in Scheme to Jail Youths for Profit"; a local paper has this article headlined "Pa. judges accused of jailing kids for cash." Here is the basic story from the NYTimes:

Mark A. Ciavarella Jr., and a colleague, Michael T. Conahan, appeared in federal court in Scranton, Pa., to plead guilty to wire fraud and income tax fraud for taking more than $2.6 million in kickbacks to send teenagers to two privately run youth detention centers run by PA Child Care and a sister company, Western PA Child Care.

While prosecutors say that Judge Conahan, 56, secured contracts for the two centers to house juvenile offenders, Judge Ciavarella, 58, was the one who carried out the sentencing to keep the centers filled.

“In my entire career, I’ve never heard of anything remotely approaching this,” said Senior Judge Arthur E. Grim, who was appointed by the State Supreme Court this week to determine what should be done with the estimated 5,000 juveniles who have been sentenced by Judge Ciavarella since the scheme started in 2003.  Many of them were first-time offenders and some remain in detention....

If the court agrees to the plea agreement, both judges will serve 87 months in federal prison and resign from the bench and bar.  They are expected to be sentenced in the next several months. Lawyers for both men declined to comment.

Though I do not know the particulars of the plea agreement or all the facts surrounding the defendants' crimes, I think both offenders should consider themselves very lucky that federal prosecutors were willing to agree to a sentence of only about seven years of imprisonment.  Based on the apparent nature and scope and consequences of the judges' crimes here, I certainly could make a strong argument based in the 3553(a) factors that these defendants should be serving a MUCH longer sentence than the average low-level drug dealer or downloader of child porn.

This case, in my view, presents a particularly interesting set of issues with respect to the federal Crime Victims Rights Act.  I think all of the 5,000 juveniles sentenced by Judge Ciavarella (and perhaps also their parents) could reasonably seek to assert rights under the CVRA.  I wonder how many will seek to address the district court at sentencing.

February 13, 2009 in White-collar sentencing | Permalink | Comments (9) | TrackBack

Thursday, February 05, 2009

Fascinating "personal prison" offer considered in prominent white-collar case

The New York Law Journal has this fascinating new piece headlined, "Bid to Create 'Private Prison' at Issue in Dreier Bail Determination."  Here is the first part of a long article:

For two months, attorney Marc S. Dreier has been jailed without bail at the Metropolitan Correctional Center. But if he gets his way, he soon will be released to less spartan accommodations -- his own midtown luxury apartment. First, however, Dreier has to convince Southern District Judge Jed S. Rakoff it would be fair to allow the lawyer to create his own "private prison" with financial resources available to him.

According to his attorney, Gerald Shargel, Dreier's sister and brother-in-law have offered to pay $70,000 a month for round-the-clock security guards to ensure that Dreier does not flee before charges that he bilked investors of $400 million are adjudicated.

Judge Rakoff is expected to rule today or tomorrow on the bid of Dreier, the founder and sole equity partner of Dreier LLC, to be released on bail.

At a bail hearing before Rakoff on Monday, Shargel argued that his client was "penniless" after being stripped of all his assets in the wake of his Dec. 2 arrest in Toronto and his Dec. 7 arrest in New York City and does not pose a flight risk.

At the Metropolitan Correctional Center, Dreier lives in a small cell with a bunk mate, and has limited contact with the outside world. He is permitted to meet once a week with his ex-wife and teenage daughter and his 19-year-old son, Spencer Dreier. He receives an allotment of 320 minutes per month for phone calls, which includes calls to his lawyer. He can see Shargel every day.

Shargel contends the 1984 federal Bail Reform Act, 18 U.S.C. §3142(c)(1)(B), requires the court to release Dreier, provided a set of conditions exist that will "reasonably assure" his appearance and the safety of the community. House arrest with armed guards stationed inside Dreier's apartment would meet those requirements, Shargel said Monday night at the bail hearing.

UPDATE:  I just learned, via this New York Law Journal piece, that Judge Rakoff has issued this eight-page decision in the case.  Here is how that opinion starts:

How glorious to be an American citizen.  In so many countries, the rights of citizens are not worth the paper they are printed on.  But here, any citizen – good, bad, indifferent, famous, infamous, or obscure – may call upon the courts to vindicate his constitutional rights and expect that call to be honored.

Here, citizen Marc Dreier, whom the Government accuses of colossal criminality, calls upon the Court to fulfill the pledge of the Eighth Amendment to the Constitution that “Excessive bail shall not be required.”  He argues that the bail set by Magistrate Judge Eaton, which required, among much else, that he post $10 million in cash to secure his release, is excessive, because all his funds have already been frozen by orders previously obtained by the Securities & Exchange Commission and by the U.S. Attorney’s Office.  The Government, for its part, argues that no conditions of bail can reasonably assure against what it considers to be a high risk of flight, and accordingly urges that bail be denied altogether.  Following substantial briefing and a lengthy hearing, this Court, reviewing the matter de novo, see United States v. Leon, 766 F.2d 77, 80 (2d Cir. 1985), concludes that such risk of flight as exists can be so minimized by the by the imposition of conditions that Dreier may likely meet as to warrant his release.

February 5, 2009 in White-collar sentencing | Permalink | Comments (3) | TrackBack

Thursday, January 29, 2009

Dutch white-collar sentencing in accounting fraud show continental contrast

In China, corrupt executives can get the death penalty, and decades of prison time were handed out to CEOs convicted of fruad like Bernie Ebbers and Jeff Skilling.  But, as this Reuters story indicates, sentencing outcomes are much different on the continent:

The Amsterdam appeals court sentenced three former executives of Dutch supermarket group Ahold on Wednesday to suspended sentences and fines over an accountancy fraud revealed by the company in 2003. In the Netherlands' biggest ever corporate accountancy fraud, Ahold had revealed massive bookkeeping irregularities at its U.S. Foodservice business and other foreign subsidiaries, overstating profits by almost 1 billion euros ($1.3 billion).

Former Chief Executive Cees van der Hoeven was sentenced by an Amsterdam appeals court to pay a fine of 30,000 euros, while former Chief Financial Officer Michiel Meurs was given 240 hours of community labour, a fine of 100,000 euros and a six-month suspended sentence. Former management board member Jan Andreae was given a three-month suspended sentence and a fine of 50,000 euros.

As this AP account explains, the appeals court ruling here involved cutting the (slightly) more onerous sentence that had been handed out by the trial court.

January 29, 2009 in Sentencing around the world, White-collar sentencing | Permalink | Comments (4) | TrackBack

Tuesday, January 27, 2009

Another former AIG executive gets serious prison time, but also a serious variance

This Rueters piece provides the basics on a notable white-collar sentence handed down today:

A former executive at American International Group Inc was sentenced to four years in prison on Tuesday for his role in a reinsurance deal that prosecutors said misled AIG investors. Christian Milton, a former AIG vice president of reinsurance, and four former executives at Berkshire Hathaway Inc's General Re Corp business were found guilty last February of conspiracy and fraud....

According to sentencing guidelines, Judge Christopher Droney of U.S. District Court in Hartford, Connecticut, could have sentenced Milton, of Wynnewood, Pennsylvania, to as much as 210 years in prison.

Ronald Ferguson, General Re's former chief executive, was sentenced to two years in prison last month in the same case.

Additional details about the case and the sentencing can be found from the AP and Bloomberg.  None of the media accounts effectively detail exactly how the guidelines and the 3553(a) factors were utilized, but I think I am on solid ground when I conclude that the defendant here got the benefit of a big-time variance.

January 27, 2009 in White-collar sentencing | Permalink | Comments (2) | TrackBack

Wednesday, January 14, 2009

A Philippino priest, an angry jury and a state judge meet at a white-collar sentencing

Though the title of this post might make a good opening line to some kind of bizarre joke, it actually provides the backstory for this interesting local story about a state judge imposing a sentence way below what a state jury had recommended.  Here are the details:

Former Catholic priest Rodney L. Rodis was sentenced yesterday to serve a prison sentence much shorter than the 200 years that a Louisa County jury recommended.  Yesterday, Judge Timothy K. Sanner, suspended 187 of the 200 years the jury wanted after it found the 52-year-old Rodis guilty of 10 counts of embezzlement from two Louisa churches.  The suspended sentence is contingent on Rodis paying back more than $400,000 in restitution to the Catholic Diocese of Richmond.

But Sanner said in court yesterday, that he never actually expects Rodis to repay the money he took because the former priest will be deported to the Philippines, his home country, after his release from prison. Sanner said this was the first time he reduced a jury’s recommendation.  The 200-year sentence was the maximum the jury could have recommended on the 10 convictions.

Rodis’ 13-year active sentence for the Louisa convictions will start after he finishes his current sentence in federal prison. Last spring, Rodis pleaded guilty in federal court to charges of money laundering and wire fraud in connection to the long-term theft of money from St. Jude and Immaculate Conception churches in Louisa. He was sentenced to serve five years on those charges.

Louisa Deputy Commonwealth’s Attorney Rusty McGuire said yesterday that authorities still believe Rodis stole as much as $1 million in the 13 years he served as the leader for the two churches.  After yesterday’s formal sentencing, McGuire said he never expected Sanner to uphold the jury’s recommendation because it was so extreme. In court, Sanner said he felt the jury was persuaded to sentence Rodis to such a large amount of time after members of the church spoke out against their former pastor at his October hearing.

January 14, 2009 in White-collar sentencing | Permalink | Comments (0) | TrackBack

Madoff mania continues as government presses bail issue

This new Reuters piece provides the latest news in the still on-going saga of Bernard Madoff's bail situation. Here are the basics:

Accused swindler Bernard Madoff will be back in court on Wednesday as U.S. prosecutors again try to persuade a judge to end his house arrest at his luxury apartment and toss him in jail.  A hearing is scheduled for 2:30 p.m. in Manhattan federal court....

The government wants Madoff jailed pending trial or a guilty plea, saying he had sent at least $1 million in valuables, including diamond watches, to family and friends in violation of a court order....

A judge on Monday rejected the government's request to jail Madoff, but prosecutors have appealed that ruling. The appeal will be heard by a different judge, U.S. District Judge Lawrence McKenna. Madoff "should not be trusted with a second chance to dissipate assets," Assistant U.S. Attorneys Marc Litt and Lisa Baroni wrote in appeal papers filed late on Tuesday....

Madoff investors are fuming that he remains on bail and holed up in his luxurious home. But legal experts say white-collar defendants typically are granted bail pending trial as long as they are not risks of flight or dangers to the community.

Whatever ruling comes from Judge McKenna, I suspect that the losing party might take this issue all the way up to the Second Circuit.

January 14, 2009 in White-collar sentencing | Permalink | Comments (3) | TrackBack

Thursday, January 08, 2009

"Death penalty for white-collar criminals?"

The title of this post is the title of this newspaper commentary, which is an (unsurprising?) response to the Madoff mess.  Here are snippets:

We rationalize capital punishment by claiming that the fear of death is an excellent deterrent and a fitting punishment for cases of extreme harm to an individual (murder) or a community (sex offenders).  Rarely has the fear of the death penalty deterred a single crime of passion or the flawed anti-social criminal.  To be a deterrent, potential criminals need time to weigh the crime against the penalty and some level of native intelligence to understand that death by lethal injection or the electric chair is very likely if they commit the crime.

Ethical and religious considerations aside, perhaps the death penalty should not be reserved only for violent physical crime but as punishment for extreme economic harm, to white-collar crime such as embezzlement, fraud, or the conspiracies of silence that made so many accessories to Madoff’s Ponzi scheme, and the corporate collapses that have cost us nearly a trillion dollars so far.  I tend to think that Madoff would never have stolen so much money from so many people if the penalty was death.

As internationally minded readers likely know, the Chinese use the death penalty this way.  Though I doubt the US will be following China's lead here anytime soon, this commentary provides a useful reminder of how easy and common it is for persons to want to respond to one extreme crime with a proposal for more extreme punishment schemes.

January 8, 2009 in Death Penalty Reforms, White-collar sentencing | Permalink | Comments (8) | TrackBack

Tuesday, January 06, 2009

Madoff mess raises interesting white-collar bail issues

The money mess created by Bernard Madoff continues to raise interesting legal issues for white-collar crime fans.  Specifically, as detailed in this new New York Law Journal piece, the standards for pre-trial bail are now being tested through the Madoff case:

The decision by Bernard Madoff and his wife to ship jewelry and other valuables to family and friends may land him behind bars sooner rather than later.  Assistant U.S. Attorney Marc Litt told a magistrate judge yesterday that Mr. Madoff and his wife Ruth mailed in excess of $1 million in valuables late last month despite a court order in a related civil case requiring the accused mastermind of a multi-billion dollar Ponzi scheme not to dissipate assets....

Defense attorney Ira Sorkin of Dickstein Shapiro said the mailing of the valuables, which included watches, a pair of cuff links and even a $200 pair of mittens, had nothing to do with allowing Mr. Madoff to remain free on bail.

At issue was the Bail Reform Act, 18 U.S.C. §§3141-3150.  Mr. Sorkin said the act contemplates only the risk of flight and potential danger to the community as factors in deciding whether a defendant should be allowed to stay at liberty pending trial.  The public, he said, is in no danger if his client stays out of jail until the case is resolved....

On Dec. 18. Mr. Madoff was ordered by Southern District Judge Louis Stanton not to dissipate assets in an action brought against him and his firm by the Securities and Exchange Commission.  Mr. Litt said the shipment amounts to obstruction of justice.

But Mr. Sorkin said Mr. Litt's position on the Bail Reform Act would gut the statute. "If you buy into his argument, then every defendant brought before this court should be incarcerated," he said, adding that the Bail Reform Act "does not cover dissipation" of assets.

Mr. Litt countered by citing legislative history - that the Senate Judiciary Committee intended to adopt a "broader definition" of community safety in shaping the reform act.... He also said Mr. Madoff remains a flight risk and that is it "simply impractical for the government to go around and collect anything of value." "The most significant thing is, in the face of a direct and clear order of which the defendant was aware, he violated that order," Mr. Litt said.

Some recent related Madoff posts:

January 6, 2009 in White-collar sentencing | Permalink | Comments (1) | TrackBack

Thursday, December 18, 2008

"Madoff Mercy: How long should the Ponzi schemer go to prison for?"

The title of this post is the title of this Slate commentary by Harlan Protass, who uses all the ugly Wall Street news to spotlight the the over-emphasis of loss in how the federal sentencing guidelines deal with white-collar fraud.  Here are lengthy excerpts from an effective piece:

[W]hen it comes to large-scale frauds involving public companies and their millions of shares, the guidelines' grounding in mathematics sometimes results in sentences that are, quite literally, off the chart.  They fall within the realm of prison terms usually reserved for mafia bosses, major international drug lords, cop killers, child molesters, and terrorists.

Remember Jeffrey Skilling — losses to Enron shareholders of more than $1 billion largely determined his 24-year-plus sentence.  Or consider WorldCom's former chief, Bernie Ebbers.  He got 25 years based principally on the $2.2 billion loss suffered by his company's shareholders. Sure, these men destroyed enormous shareholder value, just as the targets of today's criminal cases allegedly did.  But it's hard to contend that they deserved prison terms longer than the average sentence for murder (22 years), kidnapping (14), and sexual abuse (eight).

Tying jail terms to the amount of money lost also puts way too much power in the hands of prosecutors. It gives them the muscle to threaten long prison stretches in order to coerce guilty pleas. If it weren't for the risk of lengthy sentences if convicted, many defendants might opt to test the government's evidence before a jury.

Linking jail time to dollars lost also severs many of the ties to factors courts are supposed to consider when determining and imposing sentences.  For example, a relatively short prison term — years, not decades — can be enough to deter prospective financial fraudsters. And economic offenders pose little future threat because they're generally stripped of powers that would permit continued criminal conduct.  Also, aren't there more fitting and useful ways to punish the titan fraudsters of Wall Street?  Strip them of their wealth.  Make them work to pay back those they ripped off or to serve the public good.

The Supreme Court's landmark decision in United States v. Bookerallowed judges to use good, old-fashioned common sense to reduce radically long sentences produced by the guidelines. And some judges have done that.  In 2006, Richard Adelson, former president of Impath Inc., a laboratory services company that collapsed as a result of an accounting fraud, was convicted of securities fraud and filing false documents. The guidelines recommended a life sentence. Instead, a judge sentenced Adelson to 42 months in prison. (A federal appeals court in New York approved that call last week.)  Lennox Parris and Lester Parris, co-directors of a New York-based water company, were convicted of securities fraud in connection with a scheme to boost the value of their company's stock with a series of press releases misrepresenting its success in scoring distribution contracts.  They were each sentenced earlier this year to five years imprisonment, even though they faced 30 years to life under the guidelines. And this week, the former CEO of reinsurer General Re, Ronald Ferguson, who faced life imprisonment for his role in a rotten deal to artificially inflate the balance sheet of insurance giant AIG, was sentenced to two years in jail.

But honestly, that kind of largesse is rare.  Most judges still stick close to the guidelines and the huge sentence recommendations they make for causing huge financial loss.  Given that hundreds of billions, if not trillions, were lost on Wall Street this year, we could be talking about a parade of defendants swapping cuff links for handcuffs and facing not years behind bars but decades.  That's more punishment than even Bernard Madoff deserves.

Regular readers know that I agree with a lot of what Harlan has to say, and his point about the power federal prosecutors wield in this context is especially important and often overlooked.  That all said, Madoff's alleged crimes seem, at least from the early press reports, to be of a different character and magnitude than some of the other cases noted by Harlan. 

For me the core problem with an obsessive concern with loss amounts is that, in many settings, the quantifiable amount of "loss" under the guidelines often has little or no connection to offenders' culpable mental states and subjective culpability.  There are suggestions, however, that Bernie Madoff was in fact very culpable (perhaps for a very long time), and that the high loss levels in his case may have a direct relationship to his subjective culpability.  Like all good law professors, I am troubled by severe punishments based on strict liability sentencing factor, but it is not clear this is a major concern in the Madoff case.

Moreover, Harlan's effective commentary still effectively ducks in the hardest question: exactly what punishment levels should be the norm in large-scale frauds involving public companies.  He suggests that years and not decades may be the right ballpark, but there is a huge gulf between say three and thirty years imprisonment.  These cases are so hard — and the current guidelines are so inadequate — because we do not have a ready metric or shared moral sense of how best to assess these kinds of crimes.  But, as suggested above, I do think subjective culpability should be more important and that "loss" concepts are too important in the current federal sentencing scheme.

Some recent related posts:

UPDATE:  This postat ChattahBox provides something of a counter to Harlan's commentary.  It is titled "Bernard Madoff Deserves The Life Sentence He’s Likely To Get."

December 18, 2008 in White-collar sentencing | Permalink | Comments (7) | TrackBack

Wednesday, December 17, 2008

White-collar fraud meets technocorrections for Bernie Madoff

There are already too many notable stories surrounding the Bernie Madoff fraud for me to cover them well, and the MSM is covering a lot of the bases already.  But, thanks to WSJ Law Blog post, I see that we have now got a technocorrections angle worth covering:

[T]he terms for Madoff’s bail have tightened up. He may not have been much of a flight risk before, but he sure isn’t going to be one now: A bail hearing scheduled Wednesday for Madoff was canceled after he agreed to terms requested by the government, including home detention in his Manhattan apartment and a curfew of 7 p.m.  He will also be required to wear a monitored ankle bracelet. Here’s the government’s press release.

Madoff’s wife, Ruth, will surrender her passport and pledged properties she owns in Manhattan, Montauk, and Palm Beach to help secure the $10 million bond.  A federal judge gave Madoff until Wednesday to find a total of four co-signers for his bail package.  After his arrest last week, he was released on a personal recognizance bond secured by his apartment in Manhattan, which is worth about $7 million.  But as of Wednesday, only two people — Ruth Madoff, and Madoff’s brother, Peter — had signed the bond, meaning they are on the hook financially if Madoff flees. Hence, it seems, the need for the ankle bracelet and curfew measures.

I likely won't blog much about the Madoff case unless/until sentencing approaches.  But readers are certainly welcome to use the comments to this post to discuss any aspects of the Madoff matter that is of interest.

December 17, 2008 in White-collar sentencing | Permalink | Comments (0) | TrackBack

Tuesday, December 16, 2008

Another prominent white-collar defendant gets a big variance

As detailed in this early Bloomberg report, "Ronald Ferguson, the former chief executive officer of General Reinsurance Corp., was sentenced to two years in prison for helping American International Group Inc. deceive shareholders." Here are more details of what sounds like an interesting sentencing hearing:

Ferguson, 66, was the highest-ranking of five executives convicted for using a sham transaction in 2000 to help AIG improve its balance sheet. U.S. District Judge Christopher Droney in Hartford, Connecticut, also gave Ferguson two years of supervised release and ordered him to pay a $200,000 fine.

Droney, who ruled the fraud cost AIG shareholders as much as $597 million, could have sentenced Ferguson to life in prison.  “We will never know why such a good man did such a bad thing,” Droney said.  While Ferguson’s criminal conduct was “substantial,” he deserved leniency because of his history and character, the judge said. “I’ve never received such an outpouring for a defendant,” Droney said....

Ferguson deserved a “substantial” term, Assistant U.S. Attorney Eric Glover told Droney today, though he agreed that life “would not be appropriate.”...

Defense attorney Michael Horowitz asked Droney to impose “an unusually long period of supervised release or probation” that would allow Ferguson to work with the needy. Ferguson, who is studying to become an ordained minister, filed 379 letters asking for mercy and depicting him as decent, caring and honorable....

More than 30 Ferguson supporters filled the courtroom today.  Among those who spoke was Andrew Henry, general counsel of Colgate-Palmolive Co., where Ferguson was a director from 1987 to 2005; Jill Ker Conway, the former president of Smith College; and Ferguson’s wife of 46 years, Carol.  “I am begging you for mercy,” Carol Ferguson, who turned 66 yesterday, said to Droney. “I cannot imagine my life without Ron.”  She said her husband’s message for the past 50 years has been that, “you should do the right thing, even when it hurts, even when no one is looking.”

Based on the determined loss amount, the guideline range in this case must have been decades, not merely years.  (I heard one report that the PSR calculated a range for 14 to 17 years of imprisonment, and this Bloomberg report certainly suggests that the government was certainly asking for a lot more time than Judge Droney imposed.)

The prominence of the case, the amount of loss, the factors mentioned by Judge Droney, and the fact that Sentencing Commission Michael Horowitz represented Ferguson all add to the intigue and importance of this sentencing ruling for not just the defendant here, but also other prominent white-collar defendants.  And I cannot help but speculate that all the pro-discretion rulings coming from the Second Circuit recently played a role in the willingness of Judge Droney to give relatively little weight to the lengthy sentencing term urged by the guidelines.

Some recent related posts:

UPDATE:  As indicated in this comment and as now confirmed by another source, the guidelines were actually recommending a life sentence in this Ferguson case and the calculated offense level was 49, which is six levels higher than the highest recommended sentence.  Yeah, right, year those federal sentencing guidelines sure are presumptively reasonable for non-violent first offenders.  Hah!!

December 16, 2008 in White-collar sentencing | Permalink | Comments (3) | TrackBack

Friday, December 12, 2008

A thoughtful and theory-driven exploration of a parsimonious white-collar sentence

I am very pleased to conclude the week by posting a copy of a terrifically thoughtful district court sentencing opinion in a white-collar sentencing case.  The ruling comes from Judge James Gwin in US v. Cole, No. 5:08-cr-00327 (N.D. Ohio Dec. 12, 2008) (available for download below).  Among the opinion's many virtues is its extended discussion of the traditional theories of punishment that Congress set out in 18 U.S.C. § 3553.  Here is how that discussion begins:

We have long understood that sentencing serves the purposes of retribution, deterrence, incapacitation, and rehabilitation.  Deterrence, incapacitation, and rehabilitation are prospective and societal–each looks forward and asks: What amount and kind of punishment will help make society safe?  In contrast, retribution imposes punishment based upon moral culpability and asks: What penalty is needed to restore the offender to moral standing within the community?

Federal sentencing law generally tracks these purposes.  Section 3553 tells Courts to choose a sentence that reflects the seriousness of the offense (retribution), promotes respect for the law (retribution, general deterrence), provides just punishment for the offense (retribution), affords adequate deterrence to criminal conduct (general deterrence), protects the public from further crimes of the Defendant (specific deterrence, incapacitation), and provides the Defendant with needed training, care, and treatment (rehabilitation).  18 U.S.C. § 3553(a)(2).  These four goals of sentencing will be addressed in turn.

Download Cole Sentencing Memo docketed version

December 12, 2008 in White-collar sentencing | Permalink | Comments (1) | TrackBack

Thursday, December 11, 2008

Noting the Second Circuit's approval of big white-collar sentencing break

The National Law Journal noticed the Second Circuit's important (though unpublished) sentencing work earlier this week as reported in this article, headlined "In Upholding Impath Exec's Sentence, 2nd Circuit Bolsters Discretion of Trial Judges."  Here are snippets from an effective article:

In a decision important to high-dollar white-collar prosecutions, the 2nd U.S. Circuit Court of Appeals bolstered the broad discretion of trial judges to issue sentences far below, or far above, sentencing guidelines.  The court Tuesday upheld the 42-month prison sentence of former Impath Inc. chief operating officer Richard Adelson, despite an 85-year sentence recommended by the guidelines. Federal prosecutors had appealed seeking more time for Adelson.... 

Around the country, federal judges have grappled with ways to calculate reasonable sentences for corporate criminals under the guidelines that say the higher the financial losses the longer the sentence. In securities cases market gyrations in the wake of news of corporate malfeasance can cost investors millions of dollars and increase potential criminal sentences.

"The Supreme Court has spoken several times on this issue but the courts of appeal never really got it, until now," said Mark S. Arisohn, of Labaton Sucharow in New York and Adelson's attorney. "The 2nd Circuit now recognizes that district courts have discretion to deviate from the guidelines, way up or way down, so long as the district court judge justifies that decision," he said....

U.S. District Judge Jed S. Rakoff called that a virtual life sentence and "patently unreasonable," of the sort reserved for Mafia dons and drug kingpins.  In 2006, the same year Adelson was sentenced, the circuit upheld the 25-year sentence for ex-WorldCom Inc. chief Bernard J. Ebbers, based on an $11 billion fraud that sent WorldCom into bankruptcy.

"I don't know of any other cases out there where the difference between guidelines and actual sentence were so big," Arisohn said....  The ruling further bolsters the authority of federal judges to be guided by individual circumstances in white-collar cases involving large market losses, and set was is reasonable, rather than adhering strictly to a guidelines formula, according to Arisohn.

Some related posts:

December 11, 2008 in White-collar sentencing | Permalink | Comments (0) | TrackBack

Wednesday, December 10, 2008

Second Circuit affirms (in unpublished opinion) greatly reduced white-collar sentence

Regular readers and white-collar sentencing fans likely remember the memorable 2006 sentencing decision in Adelson (basics here, comments here right after the sentence was rendered).  In Adelson,  SDNY District Judge Jed Rakoff's granted an huge variance to a corporate president who faced a life sentence under the federal sentencing guidelines after a fraud conviction that resulted in $260 million in losses. 

I just learned from a helpful reader that yesterday the Second Circuit rejected the government's appeal of this sentence (in this summary order), based largely on the strength of the Circuit's work last week in its en banc Cavera decision (basics here, comments here on Cavera).  Here is the heart (indeed, virtually all) of the Second Circuit panel's explanation for why the way-below-guideline sentence in Adelson was reasonable:

 In Cavera, we stated that, “we will continue to patrol the boundaries of reasonableness, while heeding the Supreme Court’s renewed message that responsibility for sentencing is placed largely in the precincts of the district courts.”  Slip op. at 17.  We further noted that for certain kinds of crimes, including — as relevant to the present case — various financial offenses, “a district court may find that . . . there is a wide variety of culpability amongst defendants and, as a result, impose different sentences based on the factors identified in § 3553(a).”  Id.  We explained that “[s]uch district court decisions, if adequately explained, should be reviewed especially deferentially.”  Id.

This is just such a case. After adopting many of the calculations in the Presentence Report, the able district judge properly calculated Adelson’s total offense level and gave due consideration to the Section 3553(a) factors, including the nature, circumstances, and seriousness of the offense; the goal of deterring other potential offenders; and the history and characteristics of the defendant. After carefully considering those factors, the District Court sentenced Adelson principally to 42 months’ imprisonment, a sentence substantially below the applicable Guidelines range of life in prison, and also imposed an order of restitution of $50 million, payable to the company’s shareholders, and directed Adelson to forfeit $1.2 million in criminal proceeds.  The Government argues that in doing so the District Court “discarded the Guidelines in favor of the District Court’s personal view of the seriousness of the offense,” resulting in “fail[ure] to give proper weight to the sentencing factors.” But the record demonstrates that the District Court’s decision to impose a below Guidelines sentence was not a failure or refusal to recognize the Guidelines, but rather a carefully considered reliance on the Section 3553(a) factors.  In doing so, the District Court satisfied the requirements we described in Cavera, and we therefore affirm the sentence.

December 10, 2008 in White-collar sentencing | Permalink | Comments (0) | TrackBack

Tuesday, November 18, 2008

A birthday update for a high-profile federal defendant

As detailed in this CNN political post, today "may not be the happiest of birthday's for Ted Stevens. As the longtime Republican Senator from Alaska marks his 85th birthday, he's fighting for his political life."  Here's more from this new AP articleabout Stevens' current status and his trials and tribulations:

Convicted Sen. Ted Stevens clung Tuesday to the hope that a climactic vote count in Alaska would buttress his argument to remain in Congress and fellow Republicans accommodated him by putting off a decision on his expulsion.

It was just another in a series of topsy-turvy days for the 84-year-old, six-term senator who has been straddling coast-to-coast challenges to his power. Notwithstanding all that turmoil, Stevens revealed that he will not ask President Bush to give him a pardon for his seven felony convictions....

"I wouldn't wish what I'm going through on anyone, my worst enemy," he lamented to reporters at one point. "I haven't had a night's sleep for almost four months, all right."

It was possible he'd know a lot more about the electoral fight back home in Alaska before the day was done. Election officials there resumed counting some 24,000 absentee and contested votes....

Many of Stevens GOP colleagues have called on him to resign, but Stevens plans to appeal his convictions.

Some recent related Stevens posts:

UPDATE:  CNN provides this update election report: "Alaska Sen. Ted Stevens, the Republican lawmaker convicted on felony corruption charges in October, was defeated in his bid for re-election by Democrat Mark Begich, according to a release from Begich's campaign and unofficial results from state officials."

November 18, 2008 in White-collar sentencing | Permalink | Comments (0) | TrackBack

Monday, November 03, 2008

Insider trading leads to former UBS executive being inside prison for 78 months

As detailed in this Reuters story, a former UBS executive is going to have to deal with a whole different kind of insider trading for more than six years in federal prison:

A U.S. judge sentenced a former UBS AG executive to 6-1/2 years in prison on Monday for his role in what prosecutors called the most pervasive insider trading ring since the 1980s. Mitchel Guttenberg, a former institutional client manager in UBS' equity research department, admitted in a guilty plea in February to selling nonpublic information about the bank's stock recommendations.

In handing down the sentence, which includes three years of supervision after his release, Judge Deborah Batts of U.S. District Court in Manhattan said, "from the moment he joined the (UBS) investment review committee he planned to give that information to others to use illegally."

Batts did not fine Guttenberg, who expressed his remorse to his family, the court and his former employer. His lawyer Sean O'Shea described Guttenberg as "a broken man" whose wife had left him, and he was living in his sister's apartment.

Guttenberg was among 13 people, including former employees of Wall Street firms such as Bank of America Corp, Morgan Stanley and Bear Stearns Co Inc, who were criminally charged last year in an insider trading ring....

Guttenberg had pleaded guilty to two counts of conspiracy and four counts of securities fraud. He had faced 78 months to 97 months in prison under sentencing guidelines.

Ah... remember the '80s?  Perhaps the decade is making a comeback...

November 3, 2008 in White-collar sentencing | Permalink | Comments (2) | TrackBack

Notable rulings on loss and other sentencing issues in AIG/Gen Re case

Thanks to a helpful reporter, I now have a copy of a notable sentencing ruling in a notable white-collar case out of Connecticut.  This AP story provides the background:

A federal judge has ruled that shareholders of American International Group Inc. lost more than $500 million as a result of a scheme to manipulate the financial statements of the world's largest insurance company.  The ruling Friday by Judge Christopher Droney means five former insurance executives convicted of the scheme could face up to life in prison under advisory sentencing guidelines.

Four former executives of General Re Corp. and a former executive of AIG were convicted in February of conspiracy, securities fraud, mail fraud and making false statements to the Securities and Exchange Commission. Prosecutors filed court papers citing a study by its expert, concluding the fraud-related losses to AIG shareholders totaled $1.2 billion to $1.4 billion.  They cited another methodology by the expert that put the losses at $544 million to $597 million, but said either method is reasonable.

Droney rejected the higher estimate, but said the lower range was reasonable.  That finding and a determination that the fraud affected more than 250 victims will increase the advisory guideline sentence range. The guideline range and a sentencing date have not been set yet.

The defendants challenged the estimate, saying there was no loss to investors....

A report by the probation department recommended sentences of 14 years to more than 17 years for each defendant.

The 21-page ruling in US v. Ferguson et al., No. 3:06CR137 (CFD) (D. Conn. Oct. 31, 2008), can be downloaded below:

Download Gen_Re_ruling.pdf

November 3, 2008 in White-collar sentencing | Permalink | Comments (3) | TrackBack

Sunday, October 19, 2008

One criminal justice echo in the midst of the economic crisis

Various bloggers focused on crime and justice have been pondering how the recent economic crisis could impact criminal justice issues. Today's New York Times looks into some of these realities in this article, headlined "F.B.I. Struggles to Handle Financial Fraud Cases." Here is the lead:

The Federal Bureau of Investigation is struggling to find enough agents and resources to investigate criminal wrongdoing tied to the country’s economic crisis, according to current and former bureau officials.

The bureau slashed its criminal investigative work force to expand its national security role after the Sept. 11 attacks, shifting more than 1,800 agents, or nearly one-third of all agents in criminal programs, to terrorism and intelligence duties.  Current and former officials say the cutbacks have left the bureau seriously exposed in investigating areas like white-collar crime, which has taken on urgent importance in recent weeks because of the nation’s economic woes.

Some recent related posts:

October 19, 2008 in White-collar sentencing | Permalink | Comments (1) | TrackBack

Friday, October 10, 2008

A first sentencing echo from the economic meltdown?

This new article from Corporate Counsel may reveal a first sentencing echo from some of the ugly doings on Wall Street.  The piece is headlined, "Former Gen Re Lawyer Could Face Life in Prison: Federal prosecutors want Robert Graham to be sentenced to 230 years in jail for his role in a sham insurance deal with AIG," and here are excerpts:

Robert Graham, a former senior lawyer at General Re Corp., faces life in prison for doing what his defense attorney calls a "few hours work" on a fraudulent deal.  Prosecutors want to sentence Graham to a "substantial" term -- up to 230 years behind bars -- for his role in a sham insurance deal with American International Group Inc.  The government also wants Graham, who is 60, to pay millions of dollars in fines and restitution.

In February a U.S. district court jury in Hartford convicted Graham -- Gen Re's former assistant general counsel -- and four other executives of multiple counts of securities fraud.  At a Sept. 25 sentencing hearing before Judge Christopher Droney, prosecutors argued that Graham should face a stiff penalty because he abused a position of trust and used his special skills and knowledge as a lawyer to further the fraud. The government is also asking for similarly harsh prison terms for three of Graham's co-defendants -- Ronald Ferguson, Gen Re's former CEO; Elizabeth Monrad, the company's ex-CFO; and Christian Milton, the former vice president of reinsurance at AIG.

The government arrived at the severe prison terms by using a formula in the federal sentencing guidelines which provides for steeper penalties as the amount of loss and number of victims rises. Prosecutors argue that the defendants deserve heavy sentences because more than 250 AIG investors lost at least $544 million from the fake deal with Gen Re.  The defendants have countered with an expert who maintains that there was zero loss and no victims....

Graham's attorney, Alan Vinegrad, a New York-based partner with Covington & Burling, wouldn't comment for this story.  But in a September court filing, Vinegrad argued that his client is the "least culpable" of the defendants, and that prosecutors are overstating the seriousness of his misconduct. Graham didn't initiate the scheme, didn't have control over the amount of loss, and didn't personally benefit from it, according to Vinegrad.  Even without jail, the conviction will "wreak havoc with the remainder of Graham's professional and economic life," Vinegrad says in his 71-page reply....

White-collar defense attorney Michael Cornacchia, who is not involved in the case, says harsh sentences are due to "post-Enron hysteria," which led to sentencing guidelines based on factors like the amount of loss and number of victims. The proposed sentence for Graham "sounds draconian to me," says Cornacchia, a former Assistant U.S. Attorney and senior litigation counsel in the business and securities fraud section of the U.S. Department of Justice. If you take a life, Cornacchia adds, a life sentence is appropriate. "This is serious conduct, but it's not taking a life. This is stealing money," he says of Graham's conviction....

Given AIG's recent collapse, Graham's timing is nothing if not lousy.  Because of the sham deal, AIG's longtime CEO Hank Greenberg was forced to resign in 2005.  Prosecutors said in court that Greenberg initiated the deal, though he was never charged. After AIG agreed to pay $1.6 billion to settle state and federal investigations into the fake deal, the company's stock plummeted. Now, amid the financial crisis, U.S. taxpayers have had to bail out AIG with $122.8 billion in loans while AIG execs are being grilled in congressional hearings.

October 10, 2008 in White-collar sentencing | Permalink | Comments (3) | TrackBack

Thursday, October 09, 2008

One area in which bad times are good for business

Last week I asked in this post, "When will the latest economic crisis become a criminal justice story?".  Today, the New York Law Journal is on this story with this new piece, headlined "Criminal Prosecutions Predicted to Surge Over Financial Crisis."  Here is how the effective piece begins:

With public anger reaching a boiling point over plunging stock prices and Wall Street "greed," white-collar defense attorneys are preparing for an inevitable surge in criminal prosecutions.

Stanley S. Arkin, for one, said he expects that the anger, hysteria and economic dislocation fueled by "imprudent credit policies" will "inspire" indictments that would not have been brought in a "calmer and more dispassionate time." There is "an underlying popular sensibility in this country that someone has to pay for all the jobs lost and the savings extinguished," said Arkin, a partner at Arkin Kaplan Rice.  "There's a lynching quality that arises in circumstances of extreme dislocation like this."

As I said before, this all suggests it may be an especially good time to "buy stock" in any law firm specializing in white-collar defense, and law students might want to sign-up ASAP for courses in White-Collar Crime and/or Federal Criminal Law and Sentencing. 

In addition, all corporate attorneys with old business clients now fearing different kinds of legal problems ought to quickly study up on federal sentencing realities.  As regular readers know well, the first executives to run to prosecutors and offer up information are likely the ones (and perhaps the only ones) who will escape severe consequences when indictments start rolling in.

October 9, 2008 in White-collar sentencing | Permalink | Comments (3) | TrackBack

Tuesday, September 30, 2008

When will the latest economic crisis become a criminal justice story?

Traditional economic markets rarely play a direct role in the criminal justice arena (though I believe punishment systems would be much improved if subject to rigorous cost/benefit analysis).  But dramatic economic realities always become a criminal justice story in some indirect way, sometimes through crime-and-justice budget cuts in tough times (or excessive spending in good times), sometimes through increases in certain types of crimes because of market realities. 

Consequently, I have little doubt that the current credit crunch will become a criminal justice story at some point; the real question is just when and how.  On this basic topic, David Zaring over at the Conglomerate asks a fitting question in this new post, "Who Is Going to Jail for All of This?".  Here is a snippet:

One of the rules of financial crises is that some business executives end up doing time after they happen. You can ask yourself if the punished executives are chosen through a fair process, whether other executives avoid prosecution for essentially the same conduct, and so on, but... but ex-post white collar tends to be part of the bureaucratic response....

Who is going to be the villain of this crisis, and who should lawyer up? It's pure speculation, but I think AIG is more likely to get Enronized than Lehman, and I suspect that Congress, quite hypocritically, will be baying for a little blood from Fannie and Freddie.

Put another way, this is probably a good time to "buy stock" in any law firm specializing in white-collar defense.  Indeed, law students concerned about what the economic crisis could mean for large firm employment might want to sign-up ASAP for any courses offered in White-Collar Crime and/or Federal Criminal Law and Sentencing.

September 30, 2008 in White-collar sentencing | Permalink | Comments (0) | TrackBack

Tuesday, September 09, 2008

District judge rejects plea deal calling for only probation for billionaire

As detailed in this Los Angeles Times article, headlined "Judge rejects plea deal for Broadcom co-founder Henry Samueli," a federal district judge yesterday refused to accept the government's suggestion that a term of probation was sufficient in a high-profile white-collar case.  Here are details from the LATimes article:

Suggesting that Broadcom Corp. co-founder Henry Samueli deserves to go to prison, a federal judge Monday rejected a deal with prosecutors that would have given the Orange County billionaire probation for lying to regulators about his role in an alleged $2.2-billion stock-option scam.

The government's allegations against Samueli, "if true, warrant a significant prison sentence," U.S. District Judge Cormac J. Carney wrote in an order delivered to Samueli, his attorneys and prosecutors at a hearing in Carney's Santa Ana courtroom. Under the terms of the plea agreement, Carney could only accept or reject the recommended sentence, not modify it.

The judge took aim in particular at an unusual provision in the plea accord calling for Samueli to pay $12 million to the government.  The maximum fine under the charge to which Samueli agreed to plead guilty is only $250,000. "The court cannot accept a plea agreement that gives the impression that justice is for sale," Carney wrote.  Accepting the agreement, he added, would "erode the public's trust in the fundamental fairness of our justice system."

Judge Carney wrote a thoughtful and detailed 22-page opinion explaining his decision, which can be accessed at this link.  Fascinating stuff.

September 9, 2008 in White-collar sentencing | Permalink | Comments (7) | TrackBack

Wednesday, August 20, 2008

Tenth Circuit discusses loss, restitution and other white-collar issues of note

In a long opinion (108 pages!) covering lots of ground, the Tenth Circuit today in US v. Gallant, No. 07-1344 (10th Cir. Aug. 20, 2008) (available here), discusses a host of notable and important white-collar crime and sentencing issues.  The sentencing discussion starts on page 58 of the slip opinion, and here is the court's summary of issues covered:

The government and all four defendants appeal aspects of the district court’s sentencing procedures and conclusions. The government’s primary argument is that the district court erred in calculating the amount of loss attributable to the defendants’ conduct for purposes of imposing an enhancement under § 2F1.1 of the Sentencing Guidelines. The defendants and the government also argue that the district court erred in imposing various other enhancements under the Guidelines. In addition, the government challenges the sentencing procedures employed by the district court and argues that the district court erred in failing to order restitution.

August 20, 2008 in White-collar sentencing | Permalink | Comments (1) | TrackBack