Tuesday, October 25, 2011

"Five years later, Skilling's sentence is still up in the air"

I just came across this notable recent piece from the Houston Chronicle, which was authored by lawyers Jeff Ifrah and Jeffrey Hamlin, and which shares a headline with the title of this post.  Here is how the piece starts:

Oct. 23, 2011, will mark the five-year anniversary of Jeffrey Skilling's sentencing and, remarkably, no one yet knows what the former Enron CEO's final sentence will be.

In May 2006, Skilling was convicted in the wake of Enron's collapse on one count of conspiracy, 12 counts of securities fraud, five counts of making false statements to auditors and one count of insider trading.  Five months later, U.S. District Judge Sim Lake sentenced Skilling to 292 months — more than 24 years — in prison and assessed $45 million to be paid in restitution.

But given the vagaries of the federal sentencing system, Skilling, who is now serving time in a prison in Englewood, Colo., could end up serving that same 24 years, or significantly more time, or even significantly less time, for the crimes that he committed as leader of Enron.  Skilling is currently scheduled for release on Feb. 21, 2028, when he will be 74 years old.  He could, however, end up getting out of prison well before that and still in the prime of life — or he might serve what amounts to a life sentence.

Since the sentencing, Skilling's legal team has achieved some victories.  In January 2009, the U.S. Court of Appeals for the 5th Circuit vacated Skilling's sentence on the grounds that the district court misapplied the federal sentencing guidelines.  The next year, however, the U.S. Supreme Court held that the trial record didn't support a conviction on one of the prosecution's key theories — conspiracy to commit "honest services" wire fraud. But Skilling suffered a defeat last April, when the 5th Circuit upheld his conspiracy conviction and found this "honest services" error to be harmless.

With all that, though, Skilling still needs to be resentenced, and Judge Lake has not yet set a date for the resentencing.

October 25, 2011 in Enron sentencing, Federal Sentencing Guidelines, Procedure and Proof at Sentencing, Sentences Reconsidered, White-collar sentencing | Permalink | Comments (2) | TrackBack

Monday, October 24, 2011

Interesting comments from two very high-profile, white-collar offenders

I have been meaning to blog about this recent story, headlined "'Like a Mafia Don': Bernie Madoff's Boastful Letter to Angry Daughter-in-Law," which resulted from a new 20/20 interview of Madoff's daughter-in-law, Stephanie Madoff Mack."  But even before I had the chance to consume that new chapter in an older high-profile white-collar story, along comes this new piece from Newsweek reporting on an exclusive interview with Raj Rajaratnam as he prepares to start his 11-year federal prison term.  Because Raj's conviction and sentence is newer news, I will excerpt an interesting section from the Newsweek piece here:

“There are two types of plea bargains. One is, you cooperate with the government. You finger 10 other people.  The other is a plea bargain without cooperation.” The white defendants all pleaded without cooperating; they did not wear a wire. “The South Asians all did the plea bargain with fingering,” [Rajaratnam] notes sourly. “The Americans stood their ground. Every bloody Indian cooperated — Goel, Khan, Kumar.” He puts it down to “the insecurity of being an immigrant, lawyers bullying them into that position.”

As late as two weeks before the sentencing, Rajaratnam was still being asked by the government to turn on Gupta. But he wouldn’t wear a wire, he says, so he could sleep at night. “Anil Kumar’s son worked at Galleon one su mmer. I used to vacation with Rajiv Goel’s family. Their families knew my family. You don’t think this is going to haunt these guys? They wanted me to plea-bargain. They want to get Rajat. I am not going to do what people did to me. Rajat has four daughters.”

The Rajaratnam case can be seen as a metaphor of the difference between immigrants from South Asia, who have a more elastic view of rules and a more keenly developed art of networking, and their children, the first generation, schooled to play by American rules. Preet Bharara came to the U.S. when he was an infant. Yet for all his complaints about unfairness, Rajaratnam, surprisingly, still believes in American justice. “In Sri Lanka I would have given the judge 50,000 rupees and he’d be sitting having dinner at my house. Here, I got my shot. The American justice system is by and large fair.”

“In your case too?” I ask. “I said by and large.”

October 24, 2011 in Offense Characteristics, Procedure and Proof at Sentencing, White-collar sentencing | Permalink | Comments (14) | TrackBack

Is taking money less harmful to victims than a "punch in the face" or selling crack?

The question in the title of this post is prompted by a sentencing argument being made in a notable white-collar case from California.  The back story appears in this interesting article, headlined "Former MoFo Partner Pleads Guilty to Bilking Insurers, San Francisco Schools," which first caught my eye because I happened to be law school classmates with one of the defendants. But the passages in the penultimate paragraph below generated today's sentencing question:

Jonathan Dickstein, a former Morrison & Foerster partner in San Francisco, could wind up in prison after pleading guilty Tuesday to 31 felony counts stemming from a $400,000 scam he and his wife concocted based on their autistic son's education and medical treatment.

Dickstein is scheduled to be sentenced November 15 following his conviction on charges including grand theft, forgery, insurance fraud, and conspiracy, a spokesman for the San Francisco District Attorney's office confirmed Friday.

Dickstein and his wife, Barclay Lynn, were arrested in August 2010 and charged with creating a fictitious in-home care and education provider for their autistic son. The couple used the fake company, Puzzle Pieces, to double bill their medical insurance providers, Anthem Blue Cross and MoFo's own self-insurance arm, and the San Francisco Unified School District. School district lawyers alerted authorities to the scam.

Dickstein — a Stanford University and Harvard Law School graduate and former cochair of MoFo's life sciences practice — resigned from the firm to launch a solo practice five months before he and his wife were arrested....

Lynn, who also pleaded guilty to 31 counts, was sentenced last month to one day in jail and received credit for time served, her lawyer, Douglas Rappaport, said Friday.  She was also sentenced to five years probation, and, along with Dickstein, must repay the stolen money, Rappaport said.

Dickstein and Lynn pleaded "open to the court," according to a district attorney's office spokesman, meaning they rejected a plea bargain offer — which the spokesman would only say included prison time — and left sentencing to the judge's discretion....

San Francisco Unified School District general counsel Maribel Medina said Friday that Dickstein and Lynn have so far repaid $110,000 of the roughly $238,000 stolen from the schools. Medina said she hopes the couple's punishment doesn't end with restitution and that Dickstein winds up incarcerated.   A harsher sentence, Medina says, would help deter other potential scam artists.  "If you're thinking of stealing from the children of SFUSD, you better think twice," she says.  "We're going to catch you and work hard to prosecute you."

Rappaport argues that jail time would be too harsh a sentence.  "Even though, currently, we all love to punish white-collar criminals — it's the same reason why people are occupying Wall Street... the fact is, Jonathan has hurt nobody physically," Rappaport says. "When you take money from people, you hurt them indirectly.  It's different if you punch somebody in the face and it's different if you sell crack."

Rappaport says the public shaming the couple has been forced to undergo and the damage that Dickstein has suffered to his career is punishment enough.  Rappaport argues that, in a way, the school district reaped a windfall because under normal circumstances it would have had to cover at least part of the cost of educating Dickstein and Lynn's son, but instead have received full reimbursement.

October 24, 2011 in Offense Characteristics, Procedure and Proof at Sentencing, Purposes of Punishment and Sentencing, White-collar sentencing | Permalink | Comments (4) | TrackBack

Friday, October 21, 2011

"Rajaratnam's kidney transplant could cost taxpayers $300,000"

The title of this post is the headline of this new CNNMoney story.  Here are the details:

Taxpayers could be bankrolling a kidney transplant for wealthy white-collar convict Raj Rajaratnam, who was recently sentenced to 11 years in federal prison for insider trading. The cost could exceed $300,000 if he's able to secure a kidney early in his sentence, including the price of the transplant and a decade's worth of post-operative therapy.

At Rajaratnam's sentencing on Oct. 13 in New York, federal Judge Richard Holwell described the former hedge fund manager as a diabetic with "imminent kidney failure" who needs a transplant. The judge also said he will ask the Federal Bureau of Prisons to place Rajaratnam in the Butner Federal Correctional Complex in North Carolina, which has a medical facility.  Incidentally, Butner is home to Ponzi schemer Bernard Madoff, who is serving a 150-year sentence.

All federal prisons have some level of medical care, according to Federal Bureau of Prisons spokesman Edmond Ross, but some prisons specialize in it.  Butner is one of six federal prisons that are considered medical centers, meaning that their mission is to deliver more enhanced medical care than what would normally be expected from a prison hospital.

Rajaratnam will probably get sent to Federal Medical Center Devens in Massachusetts, not Butner, because Devens specializes in kidney treatment, including dialysis, according to Ross....   But none of the hospitals in the prison system conduct transplants, said Ross. That work would be outsourced to a non-prison hospital....

[The costs all] fall on the taxpayers. Not that the former hedge fund manager and Galleon Group founder has a choice. Rajaratnam does not have the option of paying for his own treatment once his sentence begins on Nov. 28.

"No, he cannot pay for it himself," said Alan Ellis, an attorney, prison consultant and author of the Federal Prison Guidebook.  "No way. There's no such thing as rich man's medicine versus poor man's medicine in the Bureau of Prisons."

Ross would not say how much the bureau specifically spends on health care, but the U.S. Government Accountability Office estimates that the cost is growing, in tandem with the aging prison population.   "I don't know what the 2012 health care costs are going to be, but it wouldn't surprise me if it's approaching a billion dollars," said David Maurer, director of the Homeland Security and Justice Team of the GAO, which analyzes the federal prison budget.

October 21, 2011 in Prisons and prisoners, White-collar sentencing | Permalink | Comments (20) | TrackBack

Thursday, October 20, 2011

Soft-drink CEO gets 20 years of federal hard-time for $685 million fraud

As detailed in this local article, which is headlined "Podlucky sentenced to 20 years in prison," a corporate criminal was not so lucky today at his federal sentencing.  Here are the basics:

Having already shaved 35 years off his prison sentence through a plea agreement, a Ligonier businessman who masterminded a $685 million fraud didn't deserve any further leniency, a federal judge ruled today.

U.S. District Judge Alan Bloch sentenced Gregory Podlucky, 51, to 20 years in prison and five years of probation. Podlucky pleaded guilty in June to bank, wire and mail fraud for bilking investors and lending institutions out of about $856 million they thought he was investing in bottling company LeNature's Inc.

Bloch ruled that the loss was $685 million, but said he would set the amount of restitution that Podlucky owes at a later date after considering defense and government arguments for how much actual loss Podlucky's victims suffered.

A sobbing Podlucky asked the judge to reduce his sentence further. "I am nothing but a filthy rag," he told the judge. "The things that I did are abominable."  Podlucky said he has asked God for forgiveness and regrets his actions. "I feel so bad about what I did to the victims — the pain and suffering," he said.

Bloch said the federal sentencing guidelines recommended a sentence of 55 years and Podlucky's arguments for further leniency "have no merit whatsoever."

He specifically noted that Podlucky continued committing crimes, in the form of money laundering, while he was on pre-trial release for the fraud charges, and it was "frivolous" for Podlucky to argue that a "meticulously planned and executed fraud" that lasted for years represented aberrant behavior on his part.  "Breaking the law was a way of life for Podlucky for years," the judge said.

October 20, 2011 in Federal Sentencing Guidelines, Offense Characteristics, Scope of Imprisonment, White-collar sentencing | Permalink | Comments (2) | TrackBack

Wednesday, October 19, 2011

Feds want a lot more prison time for corrupt state pol Vincent Fumo

Sentencing briefs for the upcoming resentencing of former Pennsylvania State Senator Vince Fumo were filed yesterday.  Comically, as detailed below, the headlines from various news sources reporting on the filings indicate quite different sentences purportedly being sought by federal prosecutors:

From the Philadelphia Inquirer here, "Prosecutors want Fumo jailed for 15 years"

From Newsworks here, "Prosecutors: Fumo should get at least 17 years for 'astonishing' corruption"

From the Philadelphia Daily News here, "Feds: Fumo should serve up to 21 years"

From Reuters here, "Former Pa. politician should serve up to 27 years: prosecutors"

Here is how the first of these pieces gets started:

Prosecutors Tuesday urged a federal judge to resentence former State Sen. Vincent J. Fumo to at least 15 years in prison, more than triple his current penalty, to properly punish him for "detestable" crimes that cost taxpayers and charities $4 million.

But in a rival filing, Fumo's defense team urged U.S. District Judge Ronald L. Buckwalter to simply reinstate the controversial 55-month sentence he imposed two years ago.  They said Buckwalter should again grant Fumo a break for what the lawyers called his "extraordinary level" of public service, as well as for private acts of generosity.  His attorneys described the 68-year-old Fumo as in poor health, facing the "real chance" of dying in prison, yet still mentoring fellow inmates.

In August, the U.S. Court of Appeals for the Third Circuit ordered Buckwalter to resentence Fumo.  Without specifying what new sentence should be imposed, it said Buckwalter's legal reasoning had been shot through with errors, including a badly underestimated figure for the cost of Fumo's crimes.  Buckwalter is to decide after a resentencing hearing Nov. 9.

October 19, 2011 in Booker in district courts, Booker in the Circuits, Offender Characteristics, Offense Characteristics, Sentences Reconsidered, White-collar sentencing, Who Sentences? | Permalink | Comments (4) | TrackBack

Tuesday, October 18, 2011

Seeking better deterrence, should we try extensive shaming of white-collar criminals?

Ideas2The question in the title of this post is the question I raise in this new "Ideas" column I put together upon the kind invitation of the folks at Time.  In this forum, in which I thought it more important to be thought-provoking than path-breaking, I conclude my all-too-brief comments this way:

I wonder whether our legal system might better deter white-collar crime by imposing extensive shaming sanctions rather than extensive prison terms.  What if, after perhaps a couple of years in prison, Rajaratnam was required every business day to ring the opening bell at the stock exchange while wearing his prison jumpsuit?  What if Martha Stewart’s magazines and televisions shows had to include an image of Stewart eating in the federal prison’s cafeteria along with other convicted felons when she was imprisoned?  What if all people convicted of a white-collar offense were required for decades to post a large sign on their lawns that highlighted to all that the resident inside did not always play by the rules?

A variety of shaming sanctions were widely used during the 18th Century in America, in part because prisons did not then exist and in part because shaming was viewed as a humane alternative to the death penalty, banishment or brutal physical punishments.  More recently, academics have debated the potential virtues and vices of modern shaming sanctions — often after a judge has ordered a shoplifter to wear publicly a sign saying “I am a thief” or a police department has published drunk drivers’ names on billboards. Because we have never tried to make white-collar offenders “pay” for their crimes through extensive and prominent use of shaming sanctions, I cannot say with confidence that this alternative form of punishment will be more effective.  But because deterrence research suggests very long prison terms for white-collar offenders may greatly extend their suffering (and taxpayer-funded imprisonment costs) with no corresponding benefit to society, I think it is time to start considering creative alternatives.

Long-time readers know I have long been supporter of the idea of trying shaming sanctions as an alternative to long imprisonment terms, and long-time academics know that Professor Dan Kahan and some others were discussing the idea of shaming sanctions for white-collar offenders many years before I started this blog.  Still, in the wake of the record-long prison sentence given to Raj Rajaratnam for insider trading, I am grateful Time gave me a platform for putting out these shameful ideas again.

October 18, 2011 in Criminal Sentences Alternatives, Offense Characteristics, Purposes of Punishment and Sentencing, White-collar sentencing | Permalink | Comments (9) | TrackBack

Friday, October 14, 2011

Long Island's "mini-Madoff" gets 25-year prison term

As detailed in this Reuters report, a "Long Island man was sentenced to 25 years in prison Friday after admitting to stealing more than $195 million from thousands of investors in the course of a five-year, $400-million Ponzi scheme."  Here is more:

Nicholas Cosmo, 40, was ordered by U.S. District Judge Denis Hurley to repay $179 million to more than 4,000 investors who thought they were investing in short-term commercial bridge loans through Cosmo's two Long Island-based companies, Agape World Inc and Agape Merchant Advance.

Instead, prosecutors said, Cosmo used new investments to pay returns to investors, in a classic Ponzi structure.  Media accounts dubbed Cosmo a "mini-Madoff" following his arrest in January 2009, because of the similarity of his scheme to that of New York investment manager Bernard Madoff's multi-billion-dollar swindle, which had been discovered only weeks earlier.

Cosmo pleaded guilty in October 2010 to federal mail and wire fraud charges.  Under federal sentencing guidelines he faced up to 40 years in prison.  In contrast to many of Madoff's victims, who were well-off Manhattan residents, charities and companies, prosecutors said, Cosmo and Agape preyed on working-class families, U.S. soldiers and others who wound up losing all or part of their life savings....

This will be the second fraud-related prison term for Cosmo.  In 1999, he was sentenced to serve 21 months after admitting to having misled investors, commingled funds and forged documents while working at a stock brokerage firm.  He was stripped of his broker's license by the National Association of Securities Dealers in 2000 and forbidden from associating with other registered securities dealers.

October 14, 2011 in Offense Characteristics, White-collar sentencing | Permalink | Comments (0) | TrackBack

Thursday, October 13, 2011

Notable reasons district judge gave Raj Rajaratnam a below-guideline sentence

This updated New York Times account of today's sentencing of insider-trader Raj Rajaratnam provides this interesting account of the reasons articulated by U.S. District Judge Richard J. Holwell for his sentencing decision:

At 11 years, the sentence lacks the symbolic heft of the range of 19 to 24 years that the government had sought under federal sentencing guidelines. At Thursday’s hearing, Reed Brodsky, a federal prosecutor, said Mr. Rajaratnam deserved an outsize penalty because his crimes were “brazen, pervasive and egregious” and “there is no one who is Mr. Rajaratnam’s equal in terms of the breadth and scope of his insider-trading crimes.”

In imposing his sentence, Judge Holwell cited a number of mitigating factors that he said caused him to hand down a term that was substantially lower than the nonbinding federal guidelines. He said Mr. Rajaratnam’s “good works figure into the equation,” citing his financial help for victims of the tsunami in Sri Lanka, the earthquakes in Pakistan and the Sept. 11 attacks.

Judge Holwell also disclosed that Mr. Rajaratnam had advanced diabetes that was leading to kidney failure, and said that prison “is a more intense experience for people with serious health conditions.”

“Some form of forbearance, however constrained by circumstance, is fundamental to our system of justice and appropriate here,” the judge said.

Meanwhile, this new CNBC commentary by John Carney is headlined "Raj's Sentence Is Too Long," and here is a taste:

Rajaratnam received the longest prison sentence ever for insider trading.  But unlike those convicted of any other kind of fraud, Rajaratnam’s sentence is not at all linked to the harm he inflicted on his victims.  The reason why Rajaratnam’s sentence isn’t linked to any victims is because no one has found any victims.  They just don’t exist....

You’d have a better case for the actual inflicting of harm if a company were intentionally concealing information so that insiders could trade on the information while outsiders traded on ignorance.  But no one alleges the companies Raj was convicted of trading were in cahoots with him. 

Eleven years for a crime without a victim. Does that seem like justice?

Some related recent posts:

UPDATE:  Writing this new New York Times piece, Peter Henning has a terrific account of the legal and prison realities facing Raj in the wake of his sentencing Thursday.

October 13, 2011 in Offender Characteristics, Offense Characteristics, Purposes of Punishment and Sentencing, White-collar sentencing, Who Sentences? | Permalink | Comments (4) | TrackBack

"Rajaratnam Is Sentenced to 11 Years"

Somewhat surprisingly, I think, today's high-profile white-collar federal sentencing led to a sentence closer to what the defense sought than what prosecutors wanted.  The headline of this post comes from this New York Times account of today's sentencing:

The fallen hedge fund billionaire Raj Rajaratnam received on Thursday the longest-ever prison sentence for insider trading, a watershed moment in the government’s aggressive two-year campaign to root out the illegal exchange of confidential information on Wall Street.

Judge Richard J. Holwell sentenced Mr. Rajaratnam, the former head of the Galleon Group hedge fund, to 11 years in prison. A jury convicted him of securities fraud and conspiracy in May after a two-month trial....

Calling him “the modern face of illegal insider trading,” prosecutors accused Mr. Rajaratnam of using a corrupt network of well-placed tipsters – including former executives of Intel, I.B.M. and the consulting firm McKinsey & Company – to illicitly gain about $64 million.

The 11-year sentence was lower than the range of roughly 19 to 24 years requested by the government. Mr. Rajaratnam’s historic prison sentence continues a trend of ever-stiffer penalties against white-collar criminals. Legal experts say that the increased prison terms are in part a result of federal sentencing guidelines, passed in 1987, which link the length of a sentence to the dollar amount involved in the fraud....

Corporate wrongdoers have received record-long sentences in recent years. Bernard L. Madoff is serving 150 years for cheating investors in an epic Ponzi scheme. Lee B. Farkas, a former mortgage company executive, received 30 years for his role in a $2.9 billion bank-fraud scheme. Last month, Adley H. Abdulwahab, who was convicted of participating in a $100 million fraud scheme that preyed on retirees, was sentenced to 60 years in prison....

John C. Dowd, Mr. Rajaratnam’s lawyer, had asked the judge to impose a sentence closer to six to eight years, calling the government’s request “grotesquely severe.” In arguing for a lesser term, Mr. Dowd pointed out that a stiff penalty for Mr. Rajaratnam would be on par with the average sentences for violent crimes like kidnapping and sexual abuse.

Advocates of more lenient insider-trading sentences also say that the crime does not have any real identifiable victims, whereas other white-collar crimes such as Ponzi schemes or corporate accounting frauds destroy lives and livelihoods....

“One legacy of this case that Wall Street will be more careful about what they say on telephones than they used to be,” said David Siegal, a white-collar defense lawyer and former federal prosecutor at Haynes & Boone.

Mr. Rajaratnam’s lawyers are expected to focus their appeal on attacking the judge’s decision to admit the wiretapped calls as evidence. They will argue, among other things, that Congress has not authorized the use of wiretap surveillance for insider-trading cases. But most lawyers say that the odds of a reversal are low. “An appeals court will show great deference to the trial court judge on this issue,” Mr. Siegal said.

Mr. Rajaratnam must report within 60 days to the Bureau of Prisons, which will assign him to a correctional facility. Until then, he will be confined to his home, a duplex apartment on Sutton Place. With no parole in the federal prison system, he will serve out his entire sentence, though he can get a slight reduction for good behavior.

October 13, 2011 in Federal Sentencing Guidelines, Offense Characteristics, Scope of Imprisonment, White-collar sentencing, Who Sentences? | Permalink | Comments (1) | TrackBack

Any recommendations or predictions for today's Rajaratnam insider-trading sentencing?

One of the highest-profile white-collar cases in recent years finally gets to sentencing this morning, as detailed in this Bloomberg piece headlined "Rajaratnam to Be Sentenced Today."  Here are the basics:

Galleon Group LLC’s Raj Rajaratnam will be sentenced today for masterminding the biggest hedge-fund insider trading scheme in U.S. history, facing a federal judge who has broad discretion in setting his punishment.

U.S. District Judge Richard Holwell in Manhattan presided over the jury trial in which Rajaratnam was convicted of 14 counts of securities fraud and conspiracy.  He will consult federal sentencing guidelines and his own “gut feeling,” one legal expert said.  Depending on the result, Rajaratnam, 54, may spend much of the rest of his life in prison.

Holwell will consider additional factors including the sentences given to other defendants in the ring and the utility of “sending a message” to those who might be tempted to trade on illegal inside tips, according to Anthony Sabino, who teaches law at St. John’s University in New York.  “He is supposed to look at everything,” said Sabino, who predicted Rajaratnam will get almost 15 years. “It’s always a matter of discretion or gut feeling.”

Prosecutors called Rajaratnam a “serial insider trader” who illegally made $72 million by corrupting friends and business associates.  The government is asking Holwell to sentence Rajaratnam to 19 1/2 years to 24 1/2 years, which, prosecutors said, is the term suggested by the federal guidelines.

Rajaratnam’s lawyers said the government overstated the amount of money their client gained in the fraud and miscalculated other sentencing factors, resulting in a “grotesquely severe” recommendation. Rajaratnam is seeking a sentence “substantially below” the guideline range. Rajaratnam made only $7.4 million, they said.  They argued for a guideline calculation that would call for a sentence of 6 1/2 to 8 years....

Rajaratnam has also asked for leniency based on medical conditions he said would be life-threatening if he’s sent to prison. He hasn’t publicly disclosed the nature of his ailment, and Holwell has kept court papers discussing it secret....

Sabino said he would be surprised if Holwell gives Rajaratnam the sentence the government is seeking. “This is a nonviolent crime,” said Sabino. “He’s not a drug kingpin, he’s not a terrorist, he didn’t murder anybody.  And most of all, this is his first offense.”

Holwell is also unlikely to sentence Rajaratnam to eight years or less, according to Sabino. The judge will probably use the sentence to try to deter would-be Wall Street inside traders, Sabino said.   “A message needs to be sent to the Street,” Sabino said. “This was a very serious crime by Rajaratnam. It must be punished and it must be punished severely.”

In court papers, the government urged Holwell to make an example of Rajaratnam, saying he “represents the worst of illegal insider trading.”  Prosecutors compared him to Enron Corp.’s Jeffrey Skilling and WorldCom Inc.’s Bernard Ebbers, convicted in what prosecutors called “the worst of accounting frauds,” and Bernard Madoff, the man behind history’s biggest Ponzi scheme.  Skilling was sentenced to 24 years in prison, Ebbers to 25 years and Madoff to 150 years.

Judges have sentenced defendants convicted in connection with the Galleon investigation to an average of about three years.  Last month, U.S. District Judge Richard Sullivan gave Zvi Goffer 10 years for leading a Galleon-linked ring that bribed lawyers for inside tips about transactions involving their law firm’s clients....  Craig Drimal, another ex-Galleon trader, was sentenced to 5 1/2 years in prison. Danielle Chiesi, a former analyst at New Castle Funds LLC, got 2 1/2 years for passing tips to Rajaratnam and others. Drimal and Chiesi both pleaded guilty.

As of February, almost half of the 43 defendants sentenced for insider trading in the New York court from 2003 to 2010 avoided jail altogether, according to a Bloomberg analysis of court records.  Many of those defendants cooperated with the government or pleaded guilty, which often results in a lesser sentence....

Yesterday, prosecutors told Holwell that Rajaratnam shouldn’t be granted bail pending his appeal because he’s a flight risk. Rajaratnam, a naturalized U.S. citizen, has ties to Sri Lanka, where he was born, they said in court papers.

I think 15 years' imprisonment is a pretty good prediction for what Rajaratnam is likely to get.  In my view, the 10 years given to Zvi Goffer serves as a kind of floor and the roughly 20 years urged by prosecutors serves as a kind of ceiling.  I would not be surprised if the sentence ends up a little higher or a little lower than 15, perhaps in part to avoid the impression that the outcome here was just a split-the-difference choice between these poles.

Some related recent posts:

UPDATE:  Rajaratnam got "only" 11 years, as reported in this new post.

October 13, 2011 in Offense Characteristics, White-collar sentencing | Permalink | Comments (3) | TrackBack

Wednesday, October 12, 2011

"Inside-Trade Sentencing Gets Tougher"

The title of this post is the headline of this new Wall Street Journal piece, which gets started this way:

When disgraced hedge-fund titan Raj Rajaratnam, Wall Street's latest symbol of perfidy and excess, is sentenced in federal court Thursday, he will come up against a hard and unavoidable truth: Inside traders are facing considerably harsher sentences than they did in the past.  Mr. Rajaratnam is expected to receive among the longest-ever U.S. prison terms for his role in one of the biggest U.S. insider-trading cases ever, lawyers say.
 A higher percentage of those found guilty of such crimes are receiving significant time behind bars than in the past, according to a Wall Street Journal analysis. In the last two years, defendants sent to prison on insider-trading charges in New York federal courts have received a median sentence of about 2½ years, according to the Journal analysis of white-collar sentencing data from court records and archives involving 108 cases. Just Wednesday, hedge-fund trader Michael Kimelman was sentenced to 2½ years in prison for inside trading.

Those sentences compare with a median sentence of 18 months in the past decade and 11½ months from 1993 to 1999, according to the Journal analysis.  Meanwhile, a higher percentage of guilty insider-trading defendants on Wall Street and in corporate America have been incarcerated in recent years, according to the analysis.  In the past two years, 79% of defendants sentenced in New York have been sent to prison, compared with 59% in the 2000s and less than half from 1993 to 1999, the analysis shows.

October 12, 2011 in Federal Sentencing Guidelines, Offense Characteristics, White-collar sentencing | Permalink | Comments (1) | TrackBack

Sunday, October 09, 2011

New AP article perpetuates notion (myth?) that federal sentencing is still about luck of the draw

This new AP article, which provides a partial preview of an upcoming high-profile white-collar federal sentencing, has a headline and a theme that suggests that luck of the judicial draw matters more than anything else in modern federals sentencing.  The piece is headlined "Sentencing is a wildcard in busy NYC courthouse," and here are excerpts:

The prison term awaiting a one-time billionaire hedge fund founder convicted of insider trading charges is unpredictable at best in a Manhattan courthouse where judges vary considerably in their assessment of how justice should be dispersed at sentencing.

Raj Rajaratnam, 54, is scheduled to be sentenced Thursday for his conviction at trial earlier this year.  If federal prosecutors have their way, he'll get between 19½ and 24½ years in prison for what they say were more than $72 million in profits for himself and his Galleon Group of hedge funds.  If defense lawyers are persuasive, he'll face between 6½ and 9 years for what they say was about $7 million in illegal profits.

Regardless of the outcome, his fate may have been decided when Judge Richard J. Holwell was selected to hear the case after the Sri Lanka-born Rajaratnam's October 2009 arrest.

"Welcome to the Southern District of New York," said Rita Glavin, a former federal prosecutor who leads the white-collar crime unit at the Manhattan law firm of Vinson & Elkins.   "The judge you are assigned to is critical," Glavin said.  "Having been on the prosecution side, there were certain judges from a government perspective you loved being in front of whether for trial, sentencing or evidentiary issues.  Now that I've moved to the defense side, it's not necessarily the same judges."...

The tone and result in sentencings have varied widely for those charged in the case against Rajaratnam and two dozen co-defendants, all of whom have been convicted, most as a result of guilty pleas.  Most of the sentencings have resulted in prison terms ranging from a few months to a few years.  Besides the sentencing guidelines, judges are supposed to take into account various other factors, including the defendant's personal history and the need to deter others from committing similar crimes.

The longest sentence handed down — 10 years — came from a stern Judge Richard Sullivan, who last month dispensed some finger-wagging words toward Zvi Goffer immediately after telling him that he viewed Goffer's sentencing as "a tragic day," not a day "for lecturing or finger wagging or table pounding."

He told Goffer that he had a gambler's mentality after his arrest. "You decided to double down and gamble on a trial," Sullivan said, adding that Goffer acknowledged his crimes post-trial.  "Had you made that acknowledgement before trial, you might have shaved almost three years off your guideline's sentence," he said as he gave him a sentence near the lower end of the guideline's range....  He added: "I am not saying you are going to be punished for going to trial, but there are consequences that flow from that.  You don't get the benefit of people who accept responsibility."

A few hours later, Winifred Jiau, 43, of Fremont, Calif., was sentenced to four years in prison after her conviction in an insider-trading probe that focused on Wall Street consultants who matched up public company employees willing to divulge secrets about earnings and mergers with hedge fund managers. The investigation was a spinoff of the Rajaratnam-Galleon probe.

Jiau received half the prison term recommended by sentencing guidelines from Judge Jed Rakoff, who had a different view of the effects of going to trial.   "I know judges vary.  It will never be the policy of this court to make a huge difference in sentence between those who exercised their right to go to trial and those who plead guilty, because at that point I think it becomes no longer a recognition of the credit that should justly be given for acceptance of responsibility, it becomes a veiled price of going to trial," he said.  "There should be no price on going to trial."...

Annemarie McAvoy, a Fordham Law professor, said she learned as a young federal prosecutor in Brooklyn from 1989 to 1992 that the judge assigned to each case "makes a huge difference."

"There were clearly judges who were more favorable to the government.  They did longer sentences.  They didn't make it as easy for defendants," she said.  "And there were other judges always trying to do as much as they can for defendants and always trying to give them the lowest sentence they could.  That was luck of the draw."

October 9, 2011 in Booker in district courts, Federal Sentencing Guidelines, Procedure and Proof at Sentencing, White-collar sentencing, Who Sentences? | Permalink | Comments (21) | TrackBack

Wednesday, October 05, 2011

Interesting battle over guidelines and "gain" in Rajaratnam pre-sentencing hearing

This new New York Law Journal piece, headlined "Financial Gain Hotly Disputed in Galleon Presentence Hearing," provides a great review of some pre-sentencing sparring taking place in the run-up to a high-profile white-collar sentencing schedued for next week. Here are some excerpts:

Prosecutors and defense lawyers were miles apart yesterday as they argued how much financial gain should be attributed to Raj Rajaratnam when Southern District Judge Richard Holwell sends him to prison in the Galleon Group hedge fund scandal.

Special Assistant U.S. Attorney Andrew Z. Michaelson told Judge Holwell that Mr. Rajaratnam was guilty of "serial insider trading" that produced illicit gains of $72 million. That number, if accepted by the judge along with sentencing enhancements for taking a leadership role and obstructing justice, would mean a guidelines sentencing range of 19½ to 24½ years in prison.

But defense lawyer Terence J. Lynam of Akin Gump Strauss Hauer & Feld, one of a half dozen attorneys from Akin Gump who sat with Mr. Rajaratnam, said the government's number vastly exaggerated the alleged profits made by Mr. Rajaratnam and failed to acknowledge the movements in stock prices that were due to market forces or other events....

Yesterday, Mr. Rajaratnam, 54, watched impassively with Akin Gump's John M. Dowd by his side as Mr. Lynam argued against the government's math and the leadership-role enhancement, and co-counsel Samidh Guha argued Mr. Rajaratnam should not be penalized further for allegedly obstructing a probe into insider trading by the Securities and Exchange Commission.

Assistant U.S. Attorney Reed M. Brodsky, who prosecuted the case along with Mr. Michaelson and Jonathan M. Streeter, argued for both enhancements as he called Mr. Rajaratnam "by far and away the clear leader in organizing" a series of "interlocking conspiracies," in which he learned about earnings announcements and corporate transactions and then made millions from the stolen information....

But the bulk of the argument yesterday focused on the amount of the gain, as Mr. Michaelson told the judge that roughly $30 million of the $72 million in gains were racked up through trading ahead of mergers and acquisitions, and another $30 million trading ahead of earnings announcements for entities such as Google and Goldman Sachs. About $10 million came in the form of trading to avoid losses and the remainder came from trades the defense argues cannot be attributed to Mr. Rajaratnam.

Mr. Michaelson was challenged by Mr. Lynam on whether the government's method of calculating gains "sweeps up" other factors affecting stock prices. Mr. Lynam argued that the government should be forced to "back out" the other factors affecting pricing, but Mr. Michaelson said there were no "significant intervening" events that drove the stocks at issue either higher or lower after Mr. Rajaratnam had already placed his bets and the announcement of a merger earnings was made....

Mr. Rajaratnam's defense team is also seeking a break from Judge Holwell because of their client's poor health, but they have yet to publicly reveal his condition and documents relating to the issue remain under seal.

October 5, 2011 in Federal Sentencing Guidelines, Offense Characteristics, Procedure and Proof at Sentencing, White-collar sentencing | Permalink | Comments (0) | TrackBack

Thursday, September 29, 2011

Another notable example of a (seemingly massive) white-collar sentencing trial penalty

This press report on a set of federal fraud sentencings in Virgina highlights, yet again, what a steep sentencing price some federal white-collar defendants will end up paying if they exercise the right to go to trial and get convicted.  Here are the basics from this press report:

Two Houston men have been sentenced to lengthy jail terms for their part in a $100-million life settlement fraud scheme that victimized 800 victims people the U.S. and Canada.

Adley H. Abdulwahab, 36, a hedge fund manager and part owner of A&O Resource Management Ltd., was sentenced to 60 years in prison.  Co-founder and vice president of A&O, Christian Allmendinger, 40, was sentenced to 45 years in prison.  Many of the victims were looking for safe, conservative investments but lost their entire retirement savings, said U.S. Attorney for the Eastern District of Virginia Neil H. MacBride.

"These defendants used the savings of their unsuspecting, often elderly, investors to live the high life—luxury houses, fancy cars and even a 15-karat diamond ring," said Assistant U.S. Attorney General Lanny A. Breuer.  "Having wiped out the life savings of many of their victims and stolen funds marked for retirement, Mr. Abdulwahab and Mr. Allmendinger appropriately now face significant prison terms."...

Five others in the scheme, including David White, 41, the former president of A&O, who received 60 months in jail, were sentenced after pleading guilty.  Abdulwahab and Allmendinger were found guilty at trial.

The principals at A&O misrepresented such things as A&O's prior success, its size and office locations, its number of employees, the risks of its investment offerings and its safety and use of investor funds, according to court and trial records.  When regulators began looking into the investment scheme, the principals invented two sham companies to hide behind, Blue Diamond and Physician's Trust, court records say.

I do not know any details about this fraud or about the relative roles of the various defendants.  Still, the passage I have highlighted above reports that the president of the corrupt company got a sentence of only 5 years after having pleaded guilty, while the defendants who went to trial received, in essence, LWOP sentences. 

I ass assume that the defendant who pleaded guilty got lots of sentencing credit and benefits for accepting responsibility and (I assume) helping secure the convictions of the other fraudsters.  But still, the remarkable gap between a post-plea sentence of 5 years and the post-trial sentences of 60 and 45 years for (I assume) roughly the same fraudulent behavior provides yet another stark reminder of the extraordinary sentencing consequences than can flow from putting the federal government to its budern of proof at trial in a white-collar case.

September 29, 2011 in Offense Characteristics, Procedure and Proof at Sentencing, Purposes of Punishment and Sentencing, Scope of Imprisonment, White-collar sentencing, Who Sentences? | Permalink | Comments (3) | TrackBack

Tuesday, September 27, 2011

Sensible sentencing alternatives for high-profile defendant involved low-level fraud

I want to praise the district judge involved in this notable federal sentencing story, headlined "Former UCA president avoids prison time for fraud," for saving taxpayer money on wasteful prison costs.   Here are the details:

Former University of Central Arkansas president Lu Hardin said Monday that he was hooked on the slots the first time he played them more than a decade ago, and that his gambling compulsion and mounting debts led him to lie to school trustees to tap into bonus money he had been promised.

U.S. District Judge James Moody sentenced the one-time rising political star to five years of probation and 1,000 hours of community service, but no prison time.  Hardin, 60, pleaded guilty earlier this year to falsifying a document that persuaded trustees to give him early access to a $300,000 bonus so he could pay off gambling debts.

Moody said he was convinced Hardin was "genuinely remorseful and humiliated" by his own actions.  Federal sentencing guidelines suggested a sentence of nine to 12 months in prison, but Moody was not bound by that recommendation.

A major factor in Hardin's reduced sentence was his cooperation on a separate federal investigation. Hardin has spoken to the FBI and agreed to testify if the investigation, which a prosecutor would not detail, leads to any charges.  An FBI spokesman also declined to comment.

After a career as an Arkansas state senator and the state's higher education director, Hardin became president of the Conway university in 2002.  During a six-year tenure, he oversaw dramatic growth in the university's enrollment, endowment and prestige.  Trustees approved the $300,000 bonus in full public view....

Only his wife knew about the thousands of dollars of gambling debts he racked up, Hardin said. To pay them off, he made what he called a "horrendous mistake" by forging letters to persuade trustees that he could draw early on the bonus, which was supposed to have been paid to him over five years, according to federal court documents....

Hardin's attorney, Chuck Banks, said his client is a "model person" who paid back the almost $200,000 he collected from the scheme on his own.  He argued that Hardin's history of public service and his past medical problems, including a melanoma that left him blind in his right eye, merited leniency.

Moody sided with Banks.  Although Hardin's actions were criminal, he had a history of good behavior and he didn't believe Hardin would commit another crime, Moody said.  As part of his community service, Hardin will be required to continue attending Gamblers Anonymous meetings and to teach classes about fraud.

Hardin was president of UCA for six years before he resigned in 2008 after the scandal broke.  He received a much-criticized $670,000 contract buyout, and became president of Palm Beach Atlantic University in June 2009, but resigned from that job a week before pleading guilty in March....  After pleading guilty, he surrendered his law license and lost his right to vote. 

This is a great example of a low-level white-collar offense in which the direct and collateral consequences of the federal prosecution and conviction are themselves likely sufficient punishment in light of the nature of the crime and history of the offender.  I often believe a very big fine and lots of community service would be both adequate and effective punishment for low-level white-collar frauds, and I wonder if any readers have any problems with a non-prison, below-guidelines sentence in a case like this.

September 27, 2011 in Booker in district courts, Criminal Sentences Alternatives, Offense Characteristics, White-collar sentencing | Permalink | Comments (3) | TrackBack

Thursday, September 22, 2011

"NYC stock trader 'Octopussy' gets decade in prison"

The title of this post is the headline of this BusinessWeek report on the latest sentencing news from a high-profile insider trading case.   Here are the interesting details:

A stock trader dubbed the Octopussy because he reached for so much inside information was sentenced Wednesday to 10 years in prison by a judge who said a harsh punishment was necessary because insider trading is so difficult to detect.

Zvi Goffer was convicted with two others in June in a conspiracy to pay bribes to coax confidential information out of two shady lawyers at a Manhattan firm. "Insider trading is very, very hard to detect," U.S. District Judge Richard Sullivan said as he also ordered Goffer to pay more than $10 million in restitution. "Because of that, it has to be dealt with harshly."  He added: "These crimes are not going to be tolerated, certainly not in my courtroom."

The 34-year-old Goffer told the judge in a pre-sentencing letter that he now realizes he had warped perceptions of "survival of the fittest."  He said "everyone is doing it" is not a good excuse for doing wrong.  Goffer was among more than two dozen people convicted in what prosecutors called the biggest hedge fund insider trading case in history.

Given a chance to speak, Goffer apologized first to investors in the stocks in which he had an unfair advantage, saying:  "They didn't have the information I had." He began crying when he apologized to his brother, Emanuel, who was convicted at trial along with him and is awaiting sentencing.  A third defendant, Michael Kimelman, also awaits sentencing....

The sentence, one of the longest ever given to someone convicted of insider trading, caused Goffer's wife to break down in sobs. "What am I going to do?" she called out in court at one point. "It's not fair!" A woman beside her then shouted a profanity, causing Sullivan to rise from the bench and threaten to bring in U.S. marshals to make arrests. "This is a courtroom, not a street corner," he said.

Goffer was convicted by a jury that viewed evidence that he had arranged to pay two attorneys nearly $100,000 in 2007 and 2008 for inside tips on mergers and acquisitions. During the two-week trial, prosecutors introduced evidence that Goffer gave conspirators prepaid cellular telephones in an effort to reduce detection by law enforcement.

The judge said the message of the prosecution to Wall Street has to be more than a warning that prepaid telephones are not the best way to dodge prosecution.  He said Goffer had repeatedly demonstrated that he knew he was breaking the law and didn't care. "It's a game that you and others seem to find exciting," he said.

Before starting his own firm, Goffer worked for nine months for Raj Rajaratnam, a one-time billionaire who was convicted earlier this year of charges at his own insider trading trial...   Rajaratnam and Goffer were among more than two dozen people convicted in a case that utilized an unprecedented number of wiretaps for a white-collar case. U.S. Attorney Preet Bharara has said the government was responding to the increased use of techniques more commonly used by drug dealers and mobsters to cover up their crimes.

This Bloomberg piece, headlined "Galleon Insider Trading Case Scorecard: Average Prison Term Is Three Years," provides an effective review of all the sentences so far imposed in this matter. The piece starts this way:

Galleon Group LLC co-founder Raj Rajaratnam will be sentenced on Oct. 13 for insider trading after being convicted by a jury in Manhattan federal court.

Prosecutors say Rajaratnam, who was convicted in May, should serve as long as 24 1/2 years in prison, calling him the “modern face of insider trading.”  Yesterday, judges in Manhattan sentenced two other convicted insider traders -- Zvi Goffer and Winifred Jiau -- to prison terms of 10 years and four years, respectively.

Since Rajaratnam’s arrest in October 2009, judges in Manhattan federal court have sentenced 12 defendants in cases linked to Galleon.  All but two pleaded guilty. The average prison term has been 35.75 months, or almost three years behind bars.

September 22, 2011 in Federal Sentencing Guidelines, Offense Characteristics, White-collar sentencing | Permalink | Comments (2) | TrackBack

Monday, September 19, 2011

You make the (sentencing) call: does insider trading merit decades in prison?

This latest insider-trading installment of "You make the (sentencing) call" is prompted by this lengthy new piece from the New York Times, which is headlined "In Galleon Case, Prison Term Is Seen as Test." Here are excerpts:

Federal prosecutors want to send the convicted hedge fund chief Raj Rajaratnam to prison for as long as 24 years, which would be the longest insider trading sentence in history.  How a judge rules next week on Mr. Rajaratnam’s punishment is being seen in legal circles as a litmus test of whether the crime of insider trading justifies such a long prison term.

In May, a jury convicted Mr. Rajaratnam, the head of the hedge fund the Galleon Group, of 14 counts of securities fraud and conspiracy.  Prosecutors, calling him “the modern face of illegal insider trading,” placed him at the center of a vast insider trading ring, accusing him of using a global network of tipsters to gain about $64 million from illegal stock trading.

The question is whether such a sentence — longer than the average federal prison term for murder — is appropriate.     “Given the magnitude of the crimes, it’s hard to feel any pity for him,” said Harlan J. Protass, a defense lawyer who teaches a sentencing class at the Benjamin N. Cardozo School of Law.  “Still, there is a real question whether such a lengthy sentence is warranted for an insider trading offender.”...

Today, prison terms measured in decades are common for white-collar criminals. In 2005, Bernard J. Ebbers, the former chief executive of WorldCom, was sentenced to 25 years in prison for a huge accounting fraud. Earlier this year, Lee B. Farkas, a former mortgage company executive, received a 30-year term for his role in a fraud that the government says caused $2.9 billion in losses.  On Monday, a federal judge in Miami sentenced Marianella Valera, a former mental health company executive, to 35 years in prison for her role in a $205 million fraud at American Therapeutic; a 50-year sentence was earlier imposed on her co-defendant, Lawrence Duran.

For Mr. Rajaratnam, the government has requested a sentence from 19 years and seven months to 24 years and five months, based on federal sentencing guidelines. The government said he did not deserve leniency because he was a “fundamentally deceptive and dishonest person” who had lied under oath in a deposition and had tried to cover up his crimes.

If Judge Richard J. Holwell of the Federal District Court in Manhattan issues such a sentence on Sept. 27, it will be the longest prison term ever for an insider trading crime. A recent study by Bloomberg News of 43 defendants sentenced in federal court in Manhattan for insider trading in the last eight years found that the longest sentence was 10 years, to a Credit Suisse banker convicted in 2008 of leading a $7.8 million scheme.

Mr. Rajaratnam’s lawyers call the proposed sentence “grotesquely severe” and argue that “the advisory guidelines severely overstate the seriousness of the instant offenses, and would expose Mr. Rajaratnam to a sentence grossly out of proportion to the sentences imposed on other insider trading defendants.”

They point out that the sentence is not only disproportionate to the sentences imposed in other insider trading cases, but also greater than the average federal sentence for murder (23 years), kidnapping (14 years) or sexual abuse (nine years), according to the United States Sentencing Commission.

His lawyers also criticize prosecutors for comparing Mr. Rajaratnam’s crimes to the accounting fraud committed by Mr. Ebbers of WorldCom and the Ponzi scheme run by Bernard L. Madoff.  Those crimes “ruined the lives and livelihoods of scores of victims,” while Mr. Rajaratnam’s insider trading offenses victimized no one, his lawyers said.

Insider trading does not cause “the kinds of measurable losses to identifiable victims that conventional fraud causes,” Mr. Rajaratnam’s lawyers wrote in a court filing.

The government has countered that insider trading is not a victimless crime. “Rajaratnam betrayed Galleon’s investors, its employees, the counterparties to its trades, and the capital markets system upon which he built his wealth and success,” federal prosecutors said.  The government also urged Judge Holwell to impose a long sentence on Mr. Rajaratnam “to send a strong and clear message that the time for illegal insider trading to end is now.”

In July, Judge Holwell sentenced Danielle Chiesi, a co-conspirator of Mr. Rajaratnam, to two and a half years in prison, which was less than the minimum three-year sentence requested by the government.  Yet Ms. Chiesi pleaded guilty, whereas Mr. Rajaratnam fought the government’s charges and took his case to trial, a possible negative factor at sentencing.

Stuart P. Slotnick, a lawyer at Buchanan Ingersoll & Rooney in New York, predicts that Judge Holwell will impose a prison term of 12 to 15 years, which, while less than the government’s request, would still be a record insider trading sentence. That sentence, Mr. Slotnick said, in part reflects attitudes since the financial crisis.  “There is a ‘Wall Street is bad’ mentality that permeates the culture,” he said.  “It’s now in the social ether that financial crimes of whatever kind cause widespread damage and hurt everybody.”

Recent related posts:

September 19, 2011 in Federal Sentencing Guidelines, Offense Characteristics, Purposes of Punishment and Sentencing, White-collar sentencing | Permalink | Comments (2) | TrackBack

"Judge sends therapist to prison for 35 years in massive Medicare-fraud case"

The title of this post is the headline of this new piece in the Miami Herald reporting on the "other shoe" dropping in a record-setting white-collar federal sentencing.  Here are the basics from the article:

A federal judge Monday issued another astonishing prison sentence in the nation’s biggest mental-health fraud case, sending a Miami therapist to prison for 35 years. Marianella Valera, 40, a naturalized U.S. citizen from Peru who ran Miami-based American Therapeutic Corp. with her boyfriend, received less time in prison than he did.

On Friday, Lawrence Duran, 49, a New York transplant, got 50 years as the mastermind of the massive Medicare-fraud scheme — accounting for more than $200 million in bogus billing to the taxpayer-funded program. [Previous blog coverage here.]

But in both instances, U.S. District Judge James Lawrence King gave out the longest prison sentences ever for a Medicare-fraud offender.  Previously, the longest sentence was a 30-year term imposed in 2008 on a Miami physician convicted in an HIV-therapy scam. This year, Duran and Valera pleaded guilty to a variety of conspiracy, fraud and money-laundering charges after they failed to reach plea deals with the Justice Department.

Prosecutors had pushed for a 40-year sentencing, but Valera’s lawyer, Arthur Tifford, sought considerably less time. Justice Department lawyer Jennifer Saulino argued that Valera abused her “position of trust” as the licensed owner of American Therapeutic. Duran had registered the company in her name to disguise his past ownership of a similar mental-health company, which had carried a $2 million debt....

The couple’s company, with clinics stretching from Miami to Fort Lauderdale to Orlando, collected $87 million in Medicare payments after submitting $205 million in false claims. The couple paid kickbacks to recruiters to supply patients suffering from dementia, Alzheimer’s and addictions, but they could not have benefited from the company’s purported group therapy sessions....

A total of 34 people, including American Therapeutic employees, doctors, therapists, nurses and recruiters, have been charged in the ongoing fraud case, which is being investigated by the FBI and Health and Human Services-Office of Inspector General. This year, about a dozen defendants have pleaded guilty.

The underlying offense facts certainly suggest that American Therapeutic was involved in record-sized frauds.  Still given that the loss amounts involved here are far below the losses in cases of mass financial fraud in which defendants have often received sentences of 25 years or far less — I am thinking of some of the usual suspects here (e.g., Bernie Ebbers, Jeff Skilling, Marc Dreier) — I find both notable and remarkable that these defendants (who pleaded guilty, unlike say Ebbers and Skilling) are now to due to spend decades more in prison for their offenses.

Especially in light of the Eleventh Circuit's apparent willingness to sometimes find sentences substantively unreasonable as too short (as evidenced by today's Padilla ruling), I wonder if there might still be some hope for these defendants if they appeal their sentences as unreasonably long.

Recent related post:

September 19, 2011 in Federal Sentencing Guidelines, Offense Characteristics, Scope of Imprisonment, White-collar sentencing | Permalink | Comments (3) | TrackBack

Saturday, September 17, 2011

Record-long 50-year prison sentence for Medicare fraud imposed in Florida

As detailed in this Miami Herald article, late yesterday a "federal judge socked a convicted Miami healthcare executive with a 50-year prison sentence, the longest term ever imposed on a Medicare fraud offender."  Here are the notable details:

New York transplant Lawrence Duran once ran a multimillion-dollar mental health company in Miami, lobbied Congress for his industry and tooled around town in a Maserati. His next stop: federal prison — likely for the rest of his life.

On Friday, a federal judge slammed Duran, 49, with a 50-year prison sentence for orchestrating a staggering $205 million scam at his Miami-based chain of mental health clinics.   The sentence may end up being the longest prison term ever imposed on someone convicted of Medicare fraud.

Duran’s lawyer, Lawrence Metsch, had urged the judge to be realistic and give him a sentence between 20 and 25 years, arguing that 50 years means a “death sentence because he would die in prison.”  But the judge, after a three-day sentencing hearing, sided with the government’s push for the extraordinarily high sentence, saying there is a “critical need for deterrence against healthcare fraud” in South Florida, the nation’s capital of Medicare corruption.

Previously, the highest Medicare fraud sentence was 30 years — given in 2008 to a Miami physician, Ana Alvarez-Jacinto, convicted in an HIV-therapy scheme.

After the sentencing, Duran shook his lawyer’s hand and then smiled to tearful relatives, as he shuffled in shackles out of the courtroom escorted by U.S. marshals.  His ex-wife, Carmen Duran, and his only sibling, Kenia Duran Ramirez, said the judge’s sentence was not a “fair assessment” of the former executive’s life, saying his work for the mentally ill was “not all bad.”

This year, Duran and his girlfriend, Marinella Valera, co-owners of American Therapeutic Corp., pleaded guilty to a variety of conspiracy, fraud and money-laundering charges after they failed to reach plea deals with the Justice Department.  

Duran, in custody since his arrest last October, was probably his own worst enemy during the sentencing hearing. Although he showed remorse for running American Therapeutic as a criminal enterprise for eight years, he also admitted he tried to steal as much money as he could from the taxpayer-funded Medicare program.

His company collected $87 million in Medicare payments after submitting $205 million in bogus bills, which he generated by paying kickbacks to recruiters to supply patients suffering from dementia, Alzheimer’s and addictions.  He admitted they could not have benefited from his company’s purported group therapy sessions.  Justice Department attorney Jennifer Saulino called Duran a “cold, calculating man” who exploited both vulnerable patients and the government’s healthcare program for the elderly and disabled....

Duran’s girlfriend, Valera, 40, a therapist, is scheduled to be sentenced Monday. Prosecutors plan to urge the judge to give her a 40-year prison sentence.  A total of 34 people, including American Therapeutic employees, doctors, therapists, nurses and recruiters, have been charged in the massive fraud case, which is being investigated by the FBI and Health and Human Services-Office of Inspector General.

September 17, 2011 in Booker in district courts, Federal Sentencing Guidelines, Purposes of Punishment and Sentencing, Scope of Imprisonment, White-collar sentencing | Permalink | Comments (2) | TrackBack