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

Friday, August 15, 2008

Important new white-collar opinion justifying below-guideline sentence

As effectively covered in posts from at New York Federal Criminal Practice and White Collar Crime Prof Blog, District Judge Frederic Block issued an important new sentencing opinion in the white-collar case of US v. Parris, No. 05-CR-636 (EDNY Aug. 14, 2008) (available for downloading below).  The opinion is a must-read defies easy summarization, but this starting paragraph provides the basics:

I have sentenced Lennox and Lester Parris today to a term of incarceration of 60 months in the face of an advisory guidelines range of 360 to life. This case represents another example where the guidelines in a securities-fraud prosecution “have so run amok that they are patently absurd on their face,” United States v. Adelson, 441 F. Supp. 2d 506, 515 (S.D.N.Y. 2006), due to the “kind of ‘piling-on’ of points for which the guidelines have frequently been criticized.”  Id. at 510.

Download Parris.pdf

August 15, 2008 in White-collar sentencing | Permalink | Comments (9) | TrackBack

Monday, July 21, 2008

A telling consequence of severe white-collar sentencing guidelines and the trial penalty

This intriguing new article available from law.com, headlined "Federal Judge Refuses to Accept Guilty Plea in Health Care Fraud Case," spotlights one of the many pernicious effects of severe white-collar sentencing guidelines and the extreme trial penalty that white-collar offenders routinely face if they contest their guilt.  As the article explains, a white-collar defendant was prepared to plead guilty to an offense he many not have committed, surely because federal prosecutors told him he could face decades in prison if he went to trial and lost.  Here are highlights from the start of the article:

After months of negotiations, Chi Yang agreed to plead guilty in connection with fraudulent sales made by his Dublin, Calif.-based biotech company.  Even though he would admit to making a false statement, not fraud, Yang would still have to do prison time.  He would also owe hundreds of thousands of dollars in fines and restitution.

Then the deal reached Oakland, Calif., federal Judge Saundra Armstrong.  In what observers call a highly unusual move, Armstrong refused to accept Yang's plea. She raised questions last month about whether Yang actually committed all of the elements of the crime to which he agreed to plead. "It is not my practice to accept guilty pleas from people who are not guilty," Armstrong said, according to a transcript of the June 10 hearing.

Some recent related posts:

July 21, 2008 in White-collar sentencing | Permalink | Comments (10) | TrackBack

Should all "true" first offenders now get a sentencing discount in light of Gall and Kimbrough?

In the olden days when the federal sentencing guidelines were mandatory, the Supreme Court in Koon indicated that a district court departing downward from Criminal History Category I would "abuse[] its discretion by considering [a first offender's] low likelihood of recidivism [because the Sentencing] Commission took that factor into account in formulating the criminal history category."  But now, of course, the guidelines are merely advisory.  And Kimbrough strongly suggests that courts can and should look to research reports by the Sentencing Commission when deciding whether and when and how to vary from the guidelines.  And in May 2004, in this interesting report titled "Recidivism and the 'First Offender'," the Commission highlights empirical data showing very low recidivism rates for what I would call "true" first offenders:

The analysis [of empirical data on re-offending] delineates recidivism risk for offenders with minimal prior criminal history and shows that the risk is lowest for offenders with the least experience in the criminal justice system. Offenders with zero criminal history points have lower recidivism rates than offenders with one or more criminal history points.  Even among offenders with zero criminal history points, offenders who have never been arrested have the lowest recidivism risk of all.

These issues came to mind as I read closely the Sixth Circuit thoughtful work last week in US v. Duane, No. 06-6536 (6th Cir. July 17, 2008) (available here).  At the very end of Duane, the panel had this nuanced discussion of these issues in a post-Booker world:

[T]he district court did not respond to Duane’s first argument — that he deserved a more lenient sentence because he had zero criminal history points.  This was not a particularly strong argument given that Duane’s criminal history category was taken into account in determining his Guidelines range.  But the argument was not completely frivolous.  Because Duane had zero points at age 57, he might plausibly argue that even category I — which applies when a defendant has zero or one criminal history point(s) — overstated his criminal history to some degree. Although the district court would have ideally addressed this argument, we can hardly say that this failure alone constituted error in this case. Given that the district court imposed a within-Guidelines sentence, addressed the factors it found relevant, and addressed the majority of Duane’s arguments, we conclude that the district court did not err.

Though the Duane court does not reverse a within-guideline sentence for failure to consider low likelihood of recidivism for a "true" first offender, the panel's carefully discussion of this issue suggests district courts now have an obligation to address expressly these issues whenever a true first offender defendant urges a below-guideline sentence by saying he is very unlikely to even commit a crime again. 

Indeed, defendants and defense attorneys can (and perhaps should) stress the USSC's own research to assert that proper application of 3553(a) in the case of a "true" first offender now virtually demands a below-guideline sentence.  The argument would be that the considerations set forth in 3553(a)(2)(C) and in 3553(a)(6) are only properly acknowledged if and when a "true" first offender gets a lower sentence than the advisory range suggested for all the other persons with some criminal past that are lumped into Criminal History Category I.

July 21, 2008 in Booker in district courts, Offender Characteristics, White-collar sentencing | Permalink | Comments (5) | TrackBack

Friday, June 27, 2008

Lawyer Scruggs gets smoked with five-year max prison term

As detailed in this local report, "Dickie Scruggs received the maximum 5 years in prison in $250,000 in fines for a crime Judge Neal D. Biggers Jr. called 'reprehensible'."  Here are more details:

Scruggs faced a maximum sentence of five years but argued that he should be sentenced to 30 months. He pleaded guilty in March to conspiring in 2007 to bribe Circuit Court Judge Henry L. Lackey, who cooperated with federal investigators.

Biggers entered the courtroom at 10 a.m. sharp and it was soon obvious from what he said about the findings in the pre-sentencing report, that the judge would hand down a stiff sentence. He said, "There is no question in the court's mind that Mr. Scruggs, Mr. Richard Scruggs, was a leader and a planner (in the conspiracy). He has said he came into the scheme late. Regardless, he was the leader, he was the money man."

In fact, Biggers said Scruggs had entered into the scheme so easily that it made him wonder whether Scruggs had done such a thing before and indeed evidence indicates that he may have....

Biggers also questioned why Scruggs would be paying legal settlement fees to non-lawyers.  He did not mention any names, but it was clear that he was referring to the elusive Delta businessman P.L. Blake, who expected, over the course of a settlement Scruggs reached with tobacco companies, to receive $50 million in fees.

June 27, 2008 in White-collar sentencing | Permalink | Comments (2) | TrackBack

Friday, May 16, 2008

Latest FSR issue focused on white-collar sentencing

I am pleased to report that, just in time for the start of the summer sentencing season, the latest issue of the Federal Sentencing Reporter focused on white-collar cases is now in print and also available here on-line.  The issue is titled, simply enough, "White-Collar Sentencing."

FSR's publisher has kindly made the issue's terrific opening commentary by Mark Harris and Anna Kaminska, which is entitled "Defending the White-Collar Case at Sentencing," available for download for free here.  The full contents of this latest FSR issue are listed below and can be ordered on-line here.)

EDITORS' OBSERVATIONS

ARTICLES

PRIMARY MATERIALS

May 16, 2008 in Recommended reading, White-collar sentencing | Permalink | Comments (1) | TrackBack

Thursday, May 01, 2008

A (record-setting?) long white-collar sentence

This local report from Denver has me wondering whether a new record has been set for the longest white-collar federal sentence.  Here are the basics:

U.S. District Court Judge Robert Blackburn sentenced a man to 330 years in prison Tuesday for his role in a $56 million investment scam from which proceeds were used to buy the Redstone Castle.  At 72, it's unlikely Norman Schmidt, of Denver, will ever be released.

You gotta like the foresight of the reporter here, who thinks it "unlikely" that Schmidt will live until the year 2338 to get released.  (Then again, with 15% good-time credit, Schmidt may be able to get out as early as the year 2289.)  Silly numbers aside, here is what led to this extraordinary federal sentencing term:

Investigators believe Schmidt obtained tens of millions of dollars from hundreds of investors for his own personal gain. Schmidt was found guilty of conspiracy to commit mail fraud, wire fraud and securities fraud, plus other counts and a money laundering count.  He and his wife, Jannice Schmidt, plus five others were indicted in 2004.  Jannice Schmidt was recently sentenced to nine years in prison....

Schmidt worked with the others from 1999 to 2003 to defraud investors with a purportedly high-yield investment program. The group used "corporate alter-egos" named Reserve Foundation Trust, Smitty's Investments, Capital Holdings, Monarch Capital Holdings and Fast Track.  They promised investors returns of 2 to 400 percent per month and even sent out false monthly statements, authorities believe.

This AP story indicates that a sentencing appeal is planned: "Schmidt's attorney, Thomas Hammond, said Wednesday he planned to appeal the conviction and sentence. 'To say that it is excessive is an understatement,' Hammond said."

May 1, 2008 in White-collar sentencing | Permalink | Comments (15) | TrackBack

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.

April 30, 2008 in White-collar sentencing | Permalink | Comments (4) | TrackBack