Wednesday, April 30, 2008
The loss-culpability connection (or disconnect) in white-collar sentencing
Especially in the federal sentencing system, where the (now advisory) guidelines place so much emphasis on the concept of "loss," the relationship in white-collar sentencing cases between loss amounts and criminal culpability is an extremely important and largely under-examined topic in much of the caselaw and commentary. Fortunately, a soon-to-be-available new issue of the Federal Sentencing Reporter will be examining these issues at some length. And, even before this FSR issue becomes available, a new decision from the First Circuit, US v. Innarelli, No. 06-2400 (1st Cir. Apr. 29, 2008) (available here), addresses these matters briefly. As noted by AL&P, Innarelli covers lots of issues, but this passage struck me as especially notable:
[W]e focus our loss inquiry for purposes of determining a defendant's offense level on the objectively reasonable expectation of a person in his position at the time he perpetrated the fraud, not on his subjective intentions or hopes. Moreover, as already noted, it is immaterial that many of the victims actually incurred no loss. As the district court aptly stated, "[l]oss in a fraud case is a yardstick for moral culpability." Where, as here, the defendant reasonably should have expected that loss would result, he can and generally should be punished more severely to account for his greater level of moral culpability, even where the victim has managed to make money in spite of the fraud.
I have no quibble with enhancing a sentence because of a "greater level of moral culpability" reflected in the defendant's "objectively reasonable expectation" of what loss would result from a fraud. The problem I have is that defendants rarely get the converse sentencing discount when they completely lack a "greater level of moral culpability" but there are large actual loss amounts that were never intended or even objectively reasonable to expect as a result of a questionable and perhaps fraudulent business decision.