Sentencing Law and Policy

Sixth Circuit reverses one-week jail sentence for CEO as substantively unreasonable

Reversals of federal sentences on appeal as substantively unreasonable are pretty rare, which itself makes notable the Sixth Circuit's ruling today in US v. Peppel, No. 11-4327 (6th Cir. Feb. 15, 2013) (available here).  Add in that this is a white-collar case, and this reasonableness review story becomes even more noteworthy.  Here is how the Peppel opinion gets started:

Defendant-Appellee Michael Peppel, former President, CEO, and Chairman of the Board of Directors of MCSi, Inc. (“MCSi”), conspired with CFO Ira Stanley to falsify MCSi accounting records and financial statements in order to conceal the actual earnings from shareholders, while at the same time laundering proceeds from the sale of his own shares in a public stock offering.  For this conduct, the sentencing guidelines provided a sentencing range of 97–121 months’ imprisonment.  The district court, based almost solely on its estimation of Peppel as “a remarkably good man,” varied downward drastically from this advisory range, imposing a custodial sentence of only seven days — a 99.9975% reduction.  R. 224 (Sentencing Tr. at 86:10) (Page ID #2433).  Plaintiff-Appellant the government appeals the substantive reasonableness of the seven-day sentence, arguing that a seven-day sentence does not adequately reflect the seriousness of the offense, serve the goal of general deterrence, or avoid national sentencing disparities, and that the district court placed disproportionate weight on disfavored factors.  Peppel contests the government’s arguments and proffers a conditional cross-appeal, contending that the district court erred in its amount-of-loss and number-of-victims calculations that formed the basis of two sentencing enhancements.

We conclude that the district court abused its discretion by imposing an unreasonably low seven-day sentence, but did not err in calculating the amount of loss or number of victims.  We therefore VACATE Peppel’s sentence and REMAND for resentencing consistent with this opinion.

EDNY federal judge sentencing mobsters to do Sandy-storm community service

Though the title of this post might sound like a headline from The Onion, it is in fact a reasonable summary of this story out of Brooklyn as reported by the New York Daily News and sent my way by a helpful reader. Here are the details:

There’s more help on the way to Hurricane Sandy victims -- from the mob.  A reputed Gambino associate convicted of extortion was sentenced Thursday to no jail time and 200 hours of community service related to the superstorm. He faced up to two years in prison.

Thomas Frangiapane is the second reputed mobster that Brooklyn Federal Judge Dora Irizarry has ordered to help with recovery efforts as part of their sentence.

Last month the judge sentenced reputed Gambino associate, Emmanuel Garofalo, to 300 hours of community service to repairing storm damage in his beachfront community of Sea Gate, Brooklyn.  Frangiapane and Garofalo both work in the construction industry.

Irizarry did not specify where or how Frangiapane should dedicate his efforts, but Sea Gate would be off-limits because he is barred from associating with Garofalo.

In seeking a lenient sentence, Frangiapane did not raise Hurricane Sandy relief - he argued that putting him jail would jeopardize the jobs of 75 workers he supervises at DeGraw Construction Group.

Assistant U.S. Attorney Whitman Knapp objected, pointing out that Frangiapane pleaded guilty to threatening to shut down the construction of a Brooklyn condo being developed by Sitt Asset Management, which jeopardized the jobs of those workers.

Long-time readers know I am a fan of creative sentencing options, especially when I think they can serve diverse values without compromising community service.  Consequently, I am inclined to praise Judge Irizarry's creativity here.  But perhaps others might think this approach to sentencing in this setting is a bit too creative.

Are "pink-collar" crimes distinctive calling for distinct sentencing policies and practices?

The question in the title of this post is prompted by this intriguing new commentary by Kelly Richmond Pope at The Daily Beast, which previews a high-profile white-collar federal sentencing scheduled for today in Illinois. The piece is headlined, "Most Notorious ‘Pink-Collar’ Criminal to Be Sentenced for $53 Million Theft: Crundwell may be the most brazen of recent female embezzlers, but she’s not alone, as more and more women achieve positions of power, as well as access to funds."  Here are excerpts (with a few links preserved):

On Valentine’s Day, Rita Crundwell will be sentenced for her role in the largest municipal fraud in U.S. history.   Once known as one of the leading American quarter horse breeders, Crundwell embezzled more than $53 million from the town of Dixon, Illinois, which has a population of 16,000 and an annual budget between $6 and $8 million.  Crundwell, who was Dixon’s comptroller, carried on her scheme for 20 years, but it was discovered only when a Dixon city clerk opened a letter revealing that Crundwell had set up a secret bank account and was embezzling city monies to finance her lavish lifestyle.

While Dixon was cutting jobs, battling a budget deficit, and struggling to complete capital improvement projects, Crundwell was throwing epic birthday parties, building ranches and traveling the world.  According to court records, she stole an average of more than $37,000 for every day she worked for Dixon.

Some people are shocked to hear that a woman was at the center of such a vast scheme, but women in fact tend to be pretty savvy embezzlers. In fact, with more women taking on leadership positions in corporate America, an unexpected phenomenon has begun to emerge: pink-collar crime.

It’s never been a popular topic. In 1975 Rutgers criminologist Freda Adler wrote a groundbreaking yet controversial book, Sisters in Crime: The Rise of the New Female Criminal, that shed light on research analyzing the criminality of women. But in the era of the Equal Rights Amendment, Adler took a ton of heat, as critics believed her book undermined the feminist movement and distorted the facts about the female crime rate. But was Adler wrong?  I would argue she wasn’t.

Pink-collar crime is unquestionably on the ascent.  The term generally refers to the rise of women involved in white-collar crime, but it’s also a theory introduced by criminology professor Kathleen Daly during the 1980s to describe the types of embezzlement crimes typically committed by females.  Based on my research as a forensic accountant and fraud investigator, I’ve watched this trend swell over the years.

While perhaps no pink-col lar crime has been as scandalous as Crundwell’s, she is far from alone. In fact, according to the 2011 Marquet Report on Embezzlement, women are more likely to embezzle than men.  Based on a review of 473 major embezzlement cases in the United States in 2011 alone, nearly two thirds of the cases involved female perpetrators. Among the top 10 cases, five involved “pink-collar criminals” who pocketed anywhere from $4.8 to $16 million.

Before Crundwell, the largest municipal fraud was also an embezzlement case committed by a woman named Harriette Walters.  Walters was convicted of embezzling $48 million over 20 years in her role as a tax-assessment manager for the District of Columbia.  She is currently serving a 16 1/2-year sentence in a West Virginia federal prison.

So why is women’s stealing on the rise?  To help answer this question, I spoke with Kelly Paxton, a licensed private investigator and president of Denver-based Financial Caseworks LLC.  Paxton told me that the increase is due to both greater “perceived needs,” such as material goods, as well as more women being in positions where they have access to funds.

That observation is supported by my conversation with Diann Cattani, whom I interviewed for my documentary “Crossing the Line: Ordinary People Committing Extraordinary Crimes.”  Cattani, who served 18 months in prison for stealing $500,000, felt the need to provide more material possessions for her family in hopes that it would mend some personal issues within her marriage.  But the stigma of being a convicted felon ended up destroying her marriage, and continues to challenge both her personal and professional lives.

Maintaining a lavish lifestyle is a commonly cited rationale for committing white- or pink-collar crimes.  For Crundwell, it appeared to be her top priority. According to court documents, Crundwell first embezzled $181,000 in 1991, which she used to purchase a Suncruiser Pontoon boat and $3,000 worth of diamonds. The theft continued in 1992, when she pocketed $121,000, more than two thirds of which she used to pay off her credit card. In 1999 Crundwell pocketed more than $1 million, using $125,000 to purchase a horse. Even as the recession set in, Crundwell continued to use Dixon as her personal piggy bank, embezzling millions of dollars more....

In 1990 Freda Adler told the Wall Street Journal, "as more women are out in the mainstream, the more mainstream activities they are going to be involved in." We can only imagine what she would have to say about Rita Crundwell.

Recent related post on Crundwell case:

• Feds seeking upward departure for local comptroller engaged in long-time fraud

UPDATE:  The headline of this Chicago Tribune piece reports on the sentencing outcome today for Rita Crundwell: "Ex-Dixon comptroller gets 19.5 years for $54 million fraud".

District judge rejects too sweet federal plea deal for long-time fraudster in Pennsylvania

A helpful reader sent along this interesting local article from Pennsylvania, eadlined "Rosetti plea rejected by judge," reports on a case in which a federal judge took the usual step of rejecting a plea deal as too lenient. Here are the details:

In a strong rebuke calling for "just punishment," a federal judge has rejected the plea agreement made by Fred Rosetti, Ed.D., former executive director of the Northeastern Educational Intermediate Unit.   The deal, which called for 12 to 18 months in prison, is not appropriate for the "defendant's longstanding, pervasive and wide-ranging criminal activities," U.S. District Judge Robert D. Mariani wrote in his order.

Dr. Rosetti, who is accused of intentionally failing to record sick and vacation days, creating false travel vouchers and ordering employees to do personal tasks for him, now has the option of withdrawing his plea and going to trial or keeping his plea and letting the judge determine his sentence.  He could also try to negotiate a new plea agreement.

"The sentence proposed by the plea agreement, as well as the agreement's other terms, do not reflect the seriousness of the offense, do not promote respect for the law and do not provide just punishment for the offense," Judge Mariani's order states.

In October, Dr. Rosetti pleaded guilty to theft and mail fraud charges in a plea deal with prosecutors that called for 12 to 18 months of imprisonment and restitution of $120,000....  A presentence investigation report completed earlier this month and prepared by the United States Probation Office "describes a 12-year pattern of abuse of public trust and executive authority for private gain."

The report, which is not available to the public but part of which is detailed in Judge Mariani's order, describes how Dr. Rosetti intentionally failed to document time off from the NEIU, in the form of vacation, personal and sick leave.  For every day he did not record, he received a larger payout....

Other actions described in the order include ... 127 fraudulent travel vouchers, which Dr. Rosetti created or ordered employees to create, at a cost of $18,106.75.  Dr. Rosetti threatened employees with the loss of their jobs if they did not oblige....

The presentence report indicates the loss to the NEIU totals $137,944.13, but the plea agreement calls for restitution of $120,000.  The difference is significant because the amount could lead to a stricter sentence under federal sentencing guidelines that call for 27 to 33 months in prison....

The report also details the defendant's attempt to "obstruct or impede the administration of justice." Dr. Rosetti has been on home confinement since contacting witnesses this spring and subsequently spent 12 nights in jail....

When Dr. Rosetti was indicted in February 2012, prosecutors said that if convicted of the most serious charges, he could have faced 10 years in prison, a $250,000 fine and the forfeiture of $240,000, the contents of two bank accounts and his Archbald home. Dr. Rosetti originally faced 13 counts of fraud, theft and money laundering.  The plea agreement Judge Mariani rejected called for Dr. Rosetti to plead guilty on two counts: Count 1, mail fraud relating to a package delivered at NEIU expense; and Count 8, theft concerning programs receiving federal funds....

A hearing has been scheduled for Feb. 21 to inform Dr. Rosetti of his options and give him an opportunity to withdraw his plea.  If he does not withdraw his plea, a sentencing hearing is scheduled for March 5.  Judge Mariani would then determine Dr. Rosetti's punishment.

The District Court's 11-page order explaining its ruling is available at this link.

Feds seeking upward departure for local comptroller engaged in long-time fraud

As detailed in this Chicago Tribune article, federal prosecutors have found a white-collar case in which they think the federal guidelines are not tough enough. Here are the basics:

In the spring of 2010, the city of Dixon was in a financial death spiral, with a budget deficit closing in on $4 million, no working cash flow and drastic cuts needed in services and hiring to stay afloat.   Longtime Comptroller Rita Crundwell gave commissioners a familiar excuse for the crisis: Declining tax revenues in a bad economy and late state payments had drained the town's coffers.

Yet Crundwell was living it up with massive amounts of stolen taxpayer money. In 2010 alone, federal authorities say, Crundwell plundered more than $5.5 million, money that went to buy an 80-acre ranch and farmhouse outside town, expand her championship horse business, fund lavish birthday parties for herself in tony Venice Beach, Fla., and buy luxury vehicles and jewelry.

In newly filed court papers ahead of Crundwell's sentencing next week, federal prosecutors are seeking as much as 20 years in prison, laying out in the greatest detail yet how her nearly $54 million in thefts beginning in 1991 devastated the northwest Illinois town's budget as well as public confidence in its government officials....

Crundwell ordinarily would face a sentence of about 12.5 to 16 years in prison under federal sentencing guidelines. But prosecutors want U.S. District Judge Philip Reinhard in Rockford to go higher because of the decades-long scheme and staggering losses.

In a response filed Tuesday, Crundwell's attorney, Public Defender Paul Gaziano, asked for a sentence at the low end of the guidelines. Gaziano noted that a 20-year sentence would likely mean that Crundwell, 60, would spend the rest of her life in prison.  He also argued that she has cooperated with authorities once the fraud was uncovered last April and has helped the town recoup some of its losses by selling off millions of dollars in horses, real estate and other assets....

When Crundwell pleaded guilty last November to a single count of wire fraud, acting U.S. Attorney Gary Shapiro called it the largest theft of government funds in Illinois history. In her plea agreement with prosecutors, Crundwell, who served as the city's comptroller starting in 1983, admitted transferring money from city funds into a bank account bearing her name that she secretly opened in December 1990.

The thefts grew bolder over time, but it wasn't until she started spending long periods away from City Hall, traveling the country to compete in horse shows, that her scheme unraveled. In 2011, the city clerk, filling in for Crundwell, discovered the secret account and informed the mayor, who tipped off law enforcement, authorities have said.

In the early years, Crundwell annually stole a few hundred thousand dollars, but by the late 1990s, as her quarter-horse business expanded and gained national attention, the thefts exploded, growing to more than $1 million in 1999, then nearly doubling to $2 million the next year, according to prosecutors.  The town's financial straits worsened, and cuts to each annual budget multiplied.  By 2008, the shortfalls reached crisis levels.  At a special City Council meeting that March, Finance Commissioner Roy Bridgeman reported that the budget deficit approached nearly $1.2 million and warned of staff cutbacks, according to court records.

Professor Todd Haugh sent me an intriguing note about this case after the feds filed its sentencing documents, which he has graciously allowed me to post here:

The government's sentencing memorandum is pretty incredible. Not only does it ask for an upward departure from the sentencing guidelines (which are already at 210-262 months based on the dollar amount and her position of trust) to a sentence of 27-34 years (324-405 months), but it includes a five-part timeline/slideshow detailing the crime and Crundwell's personal expenditures. I've never seen anything like that in 10 years of defending white collar cases, particularly when the original guideline range is that high already.... The tone of the slideshow, not surprisingly, is greed, greed, greed, and it's filled with color pictures of all the things this women bought with the illegally-obtained funds.

To put the possible sentence in perspective, if Crundwell gets anywhere close to 34 years, she will be in the upper-echelon of white collar defendants receiving heightened sentences. Skilling got 24 years; Rajaratnum got 11; Rigas got 20; Peter Madoff got 10; etc. She would be getting close to even the big Ponzi schemers (the CEO of Peregrine just got 50 years for a $100M Ponzi)....

To me, this is classic government piling on of a white collar offender in the name of assuaging community anger (which is highly concentrated here). It does very little to further the goals of sentencing (I suppose retributivists could argue the additional 100+ months are necessary but even that seems a stretch given the already high sentence), and it's simply advancing the crime master narrative of "all white collar offenders should be given life sentences because they are greedy and evil."... But it also demonstrates how the fraud guideline becomes a little silly at the high loss levels and how 3553 can be a weapon for the prosecution, not just a shield for the defense.

Iowa CEO -- aka "Madoff of the Midwest" -- gets 50 years for major embezzlement and bank fraud

As reported in this New York Times piece, headlined "Ex-Peregrine Chief Sentenced to 50 Years in Prison," another white-collar scoundrel got another functional life sentence in federal court today. Here are the basics:

A prominent futures-industry executive was sentenced to 50 years in prison on Thursday for embezzling from his clients and defrauding banks over nearly two decades.

Russell Wasendorf Sr., the chief executive of the now-defunct brokerage firm the Peregrine Financial Group, stole more than $215 million from his customers in a remarkably crude fraud that involved doctored documents that went undetected for years.

Shackled and dressed in orange prison garb, Mr. Wasendorf sat expressionless as Judge Linda Reade of the United States District Court in Cedar Rapids, Iowa, handed down the maximum sentence recommended by the government....

“The lengthy prison sentence imposed today is just punishment for a con man who built a business on smoke and mirrors,” said Sean Berry, acting United States attorney in Cedar Rapids.

Mr. Wasendorf’s penalty is the latest in a string of stiff sentences handed down by judges for financial crimes.  Bernard L. Madoff received 150 years for perpetrating the largest Ponzi scheme ever uncovered.  Allen Stanford is serving a 110-year term after being convicted of swindling investors of nearly a $7 billion.  Thomas J. Petters got a 50-year sentence for defrauding investors of nearly $4 billion.

Given the extremely lengthy sentences and advanced age of some of the defendants, many of these terms are largely symbolic, intended to reflect the gravity of the crimes and the need for retribution.

The fraud carried out by Mr. Wasendorf, 64, did not involve any opaque financial instruments and took place more than 1,000 miles from Wall Street, in Cedar Falls, Iowa. Federal regulators discovered the crime last summer after local police found Mr. Wasendorf unconscious in his car in Peregrine’s parking lot, a hose running from the exhaust pipe into the passenger compartment.  He left a detailed suicide note explaining his crimes.

Mr. Wasendorf stole millions of dollars from his customers at Peregrine, which also did business as PFGBest, by using laser printers and software like Photoshop and Excel to make near-perfect replicas of account statements from US Bank.  He duped auditors by supplying them with a false address to sending forms to the bank, which he would then intercept and send back on forged US Bank letterhead....

Peregrine’s clients — and Mr. Wasendorf’s 13,000 victims — including speculators betting on the price of orange juice and farmers who use such contracts to protect themselves from large price fluctuations....

Judge Reade rejected any leniency for Mr. Wasendorf because of his contributions to the community. “It is easy to be generous with other people’s money,” she said.

Iowa newspapers nicknamed Mr. Wasendorf “the Madoff of the Midwest.” Though Mr. Wasendorf’s criminal proceeds were a tiny fraction of Mr. Madoff’s, the two men suggested similar reasons for why they turned to a life of crime.

Mr. Madoff has said in interviews that he began his fraud after his investment performance soured and he couldn’t admit defeat.  Similarly, Mr. Wasendorf, in his confession, said he began to steal from his clients when his business slumped and he began to run out of money.  “I guess my ego was too big to admit failure,” wrote Mr. Wasendorf. “So I cheated.”

On Thursday, Mr. Wasendorf, gaunt and diminished, expressed deep remorse.  “I feel I fully deserve whatever sentence I’m given,” he said.  “The punishment I’ve caused myself is worse than anything you can impose.”

Should status as sitting state justice be an aggravating sentencing factor under 3553(a)?

The question in the title of this post is prompted by this local report on a federal plea deal put together in a high-profile federal prosecution in Michigan. The article is headlined "Former Michigan Supreme Court Justice Diane Hathaway pleads guilty to felony bank fraud," and here is the backstory:

Retired Michigan Supreme Court Justice Diane Hathaway pleaded guilty to felony bank fraud today and is expected to be sentenced on May 28. Hathaway stood quietly at a podium in U.S District Court in Ann Arbor this morning, acknowledging she intentionally defrauded a federally insured financial institution with the short sale of her Grosse Pointe Park home.

According to an agreement negotiated with the U.S. Attorney’s Office, her punishment is limited to up to 18 months behind bars or could be as little as 4-10 months if a pre-sentence report determines there was no actual financial loss. Hathaway also could receive a sentece of 3-5 years of supervised release, be fined up to $30,000 and pay restitution of up to $90,000, according to the agreement. She waived her right to appeal the case after sentencing....

Hathaway’s only “no” response came when O’Meara asked her about using her position as a Michigan Supreme Court judge as part of the scheme. “Did you use your status as a public employee in your attempt to defraud?” O’Meara asked her. “No,” she responded.

Hathaway was charged Jan. 18 with one count of bank fraud after investigators said she moved ownership of property in Florida to relatives so she could qualify for the short sale. Hathaway allegedly told financial institution ING Direct she could no longer afford the house payments on the Michigan home. In a civil filing in November, the U.S. Justice Department accused Hathaway and her husband, attorney Michael Kingsley, of fraudulently concealing their net worth.

The short sale in Michigan allowed the couple to erase nearly $600,000 in mortgage debt on the $1.5-million Grosse Pointe Park home on Lakeview Court, which eventually sold for $850,000. The debt-free Windermere, Fla., home then went back into their names. Hathaway’s attorney, Steve Fishman, said outside the courthouse that ING Direct is claiming they lost far less than the mortgage debt erased by the short sale.

"It's important for people to know that now we're down to the actual loss as calculated by ING ... and they're saying it's between $40,000 and $90,000," Fishman said, pointing out Hathaway could have just walked away from the home altogether. "I say the loss is nothing ... because the bank netted probably in the vicinity of $150,000 more from the fact that there was a short sale than if it had been a foreclosure and a sheriff's sale. And that will be part of the discussion when we come back for sentencing."

Hathaway left the bench after announcing the decision to retire Jan. 7 after the Judicial Tenure Commission filed a complaint and sought her immediate suspension. The commission alleged she committed "blatant and brazen" misconduct violations in connection with private real estate transactions.

As federal sentencing practitioners know well, the key federal sentencing statute requires a sentencing judge to consider "the nature and circumstances of the offense and the history and characteristics of the defendant." Though it appears there may be some dispute over the details of the offense here, there is no dispute that the defendant was a sitting Michigan Supreme Court Justice at the time of her offense.

If the defendant here had used her official position to facilitate the offense, there is little doubt that her status would be an aggravating factor (and the guidelines themselves include an upward adjustment on this basis). But the question prompted by this story and the title of this post is whether her status ought to be considered an aggravating sentencing factor even though it apparently played no role in her crime.

Lots of new and notable for criminal justice fans in latest SCOTUS cert grants

This time of year, working late on a Friday can sometimes get rewarded with Supreme Court news after its usual Friday conferences: this week brings a Friday afternoon SCOTUS order list with six new cert grants. And, as Lyle Denniston detailed in this new post at SCOTUSblog, half of the grants include cases with notable criminal justice concerns:

The Supreme Court agreed on Friday to decide a major case on the right to remain silent — a case testing whether that right exists for an individual who has not been arrested but is interviewed by police, and was not given Miranda warnings, when that silence was used to help prove guilt at a trial.  That case — Salinas v. Texas (docket 12-246) — was one of six new cases accepted for review.  (The order list is here.)...

Here, in brief, are the other new cases and the issues at stake [from the criminal justice part of the SCOTUS world]:...

** Sekhar v. United States (12-357) — whether the federal anti-extortion act applies to a private individual’s use of a threat in order to get a government authority to withdraw a recommendation that would be adverse to that private individual’s interest in a pension fund.  The issue is whether such a recommendation qualifies as “property” under the Hobbs Act, which makes it a crime to obtain property by threats.

** United States v. Kebodeaux (12-418) — Congress’s authority in 2006 to make it a federal crime for an individual convicted years before of a sex crime to fail to register, after the individual had long since completed a sentence.

Based on this helpful summary, it looks like the new sex offender case, US v. Kebodeaux, should be of greatest interest to sentencing fans. But all criminal cases on the SCOTUS docket, of course, can end up having a sentencing spin or impact.

As scripted in plea deal, Peter Madoff gets 10 years for his role in Ponzi scheme

As reported in this Bloomberg News article, headlined "Peter Madoff Gets 10 Years for His Role in Brother’s Ponzi Fraud," another participant in perhaps the biggest-ever white-collar crime was sentenced yesterday.  But, as the article details, the sentencing included limited drama because the outcome had already been essentially pre-arranged by the parties via a plea deal:

Peter Madoff, who pleaded guilty to aiding Bernard Madoff’s fraud while claiming he didn’t know his older brother was running a vast, decades-long Ponzi scheme, was sentenced to 10 years in prison.

U.S. District Judge Laura Taylor Swain yesterday sentenced Peter Madoff after considering pleas from victims of the fraud that she not show him any mercy. As part of an agreement with prosecutors, Madoff agreed not to seek less than the maximum 10- year prison term allowed by law.

In a 55-minute hearing in Manhattan, Swain said the notion that Peter Madoff didn’t know about the wide-ranging fraud at firm is “frankly, not believable.”  She urged him to cooperate with investigators who are trying to unravel the Ponzi scheme at his former firm.  “I challenge you to be honest about all that you have done and all that you have seen,” Swain told Madoff before pronouncing sentence.

Peter Madoff, 67, becomes the second person sentenced in the fraud at Bernard L. Madoff Investment Securities LLC, which was exposed in December 2008.  Bernard Madoff, who admitted masterminding the scheme, is serving a 150-year sentence in a North Carolina federal prison....

Swain also sentenced Madoff to one year probation when he’s released and she approved a forfeiture order that Madoff agreed to under which he must surrender all his assets, including Social Security proceeds, up to $143.1 billion. Swain approved the arrangement, which she called “draconian,” saying it “seals Peter Madoff’s financial ruination.”...

Two victims of the Madoff fraud, Michael T. DeVita and Amy Luria Nissenbaum, addressed the court.  “I ask that you show the same degree of compassion for Peter Madoff that he showed for us -- none,” DeVita said, urging Swain to set aside Madoff’s plea agreement and sentence him to more than 10 years.  “He benefited from this scam for over 30 years and he should be in prison for the same amount of time,” Nissenbaum told Swain....

Anthony Sabino, who teaches law at St. John’s University in New York, said many victims of the Madoff fraud are unlikely to be satisfied with Peter Madoff’s sentence, particularly in comparison with the 150 years his brother received.  “Ten years -- it just seems to be on the low end of the scale,” Sabino said.

In papers filed with the court, Peter Madoff’s lawyer, John R. Wing, said his client was “a victim of his brother’s Ponzi scheme.”  Peter Madoff’s “world was shattered” when his brother disclosed the fraud to him, Wing said in the letter, which was made public this week.

Peter Madoff’s guilty plea to two criminal charges came three years to the day after his brother was sentenced to 150 years in prison.  During his plea hearing, Peter Madoff told the court he had no knowledge of Bernard Madoff’s scheme until Dec. 9, 2008, the night his brother confessed to him that the investment business was a sham.  Bernard Madoff was arrested and confessed to authorities two days later, on Dec. 11.

Peter Madoff pleaded guilty to one count of conspiracy and one count of falsifying records of an investment adviser.  Both offenses carry maximum sentences of five years in prison. Peter Madoff admitted to improperly avoiding taxes by having the firm pay many of his expenses, which he didn’t report as income.  He also said he filed false reports with regulators that helped conceal the fraud.  After learning of the Ponzi scheme, Peter Madoff said he helped his brother parcel out $300 million remaining in the firm to select friends and family members.

Peter Madoff repeatedly lied and violated the trust investors had in the firm, prosecutors said. His crimes began in about 1996 and continued until December 2008 when the firm collapsed, according to the government.  Had regulators and clients known the truth about the compliance program overseen by Peter Madoff, “it is possible that the fraud would have been detected years earlier and losses to the many victims would have been avoided,” prosecutors said in court papers Dec. 14....

Federal prosecutors have obtained guilty pleas from Madoff’s former chief financial officer, Frank DiPascali, his former accountant, David Friehling, and former employees Craig Kugel, David Kugel, Enrica Cotellessa-Pitz, Irwin Lipkin and Eric Lipkin.  They haven’t yet been sentenced.  Also facing charges are former employees Daniel Bonventre, Annette Bongiorno, Joann Crupi, Jerome O’Hara and George Perez. They have pleaded not guilty.

Fraud sentencing of National Lampoon CEO no laughing matter (though recommended sentence are funny)

A notable white-collar sentencing took place in federal court in Indiana today, as reported in this AP piece headlined "Ex-National Lampoon CEO sentenced to 50 years in jail."  Here are the details:

A financier and former chief executive of humor magazine National Lampoon convicted of swindling investors out of about $200 million was sentenced Friday to 50 years in prison.

U.S. District Judge Jane Magnus-Stinson said the case against Timothy Durham was characterized by "deceit, greed and arrogance" and that Durham had violated the trust of thousands of small investors from the American Heartland.  "We drive Chevys and Buicks and Ford, not Ducatis. That's how most of us roll," Magnus-Stinson said. "When they're defrauded, it is the most serious offense because it undermines the fabric of this country."...

Prosecutors have said [Durham and his codefendants] stripped Akron, Ohio-based Fair Finance of its assets and used the money to buy mansions, classic cars and other luxury items and to keep another of Durham's company afloat. The men were convicted of operating an elaborate Ponzi scheme to hide the company's depleted condition from regulators and investors, many of whom were elderly.

Durham's attorney, John Tompkins, argued at trial that Durham and the others were caught off-guard by the economic crisis of 2008 and bewildered when regulators placed them under more strict scrutiny and investors made a run on the company. Attorneys for all three men had asked the judge for lighter sentences than those recommended. Tompkins sought a total of five years for Durham — three years in prison and two years of home detention.

Prosecutors had wanted 225 years for Durham. Magnus-Stinson said she couldn't sentence him to that much because that number would be as "puffed up" as statements that he held $280 million in assets. But she clearly showed her displeasure with Durham, telling him he had been "raised better" and noting that though he testified that he "felt terribly" for the victims, he had shown no sincere remorse.

Barbara Lukacik, 74, an Ohio nun who said she lost $125,000 in the Fair Finance collapse, said she had forgiven Durham and the others but testified before the sentencing that a lengthy sentence was warranted. "If you receive a short sentence — a slap on the wrist, so to say — I do not think it will be enough time for your heart and your conscience to realize your sin and your greed," she said.

There is nothing funny about lives ruined by a massive fraud and by a decision to impose a 50-year prison sentence on a white-collar scoundral. But this story struck me as especially blogworthy and somewhat laughable on a Friday afternoon because of the seemingly crazy (though arguably not foolish) sentencing recommendations coming from the parties.  I know I would never in good conscious be able to seriously advocate for a sentence of 225 years in prison for anyone, and I probably also could not urge only 3 years in prison for a massive Ponzi schemer.  At both extremes, the recommendations coming from the parties here seem more fitting for the National Lampoon's pages than federal court filings.

Are criticisms of Rajat Gupta's two-year prison sentence sound or suspect?

The question in the title of this post is prompted by this AP piece headlined "Ex-Goldman Exec's 2-Year Sentence Draws Scrutiny."  Here are excerpts, which also includes some highlights from Judge Jed Rakoff's comments about the federal sentencing guidelines:

A two-year prison sentence for insider trading at the height of the 2008 economic crisis, by a man who was once one of the nation's most respected business executives, is a fifth of the 10 years requested by the government and well below sentencing guidelines.  Now, some experts are questioning whether it's a fair punishment.

Judge Jed Rakoff described the sentence and $5 million fine given to former Goldman Sachs and Procter & Gamble Co. board member Rajat Gupta, 63, on Wednesday as sufficient to deter others and properly punish the Westport, Conn., resident.  "At the same time, no one really knows how much jail time is necessary to materially deter insider trading; but common sense suggests that most business executives fear even a modest prison term to a degree that more hardened types might not.  Thus, a relatively modest prison term should be 'sufficient, but not more than necessary,' for this purpose," Rakoff said.

Some legal observers did not agree.  Chicago attorney Andrew Stoltmann said the sentence should have been closer to the 10 years prosecutors had recommended because Gupta's crimes were more serious than those committed by Raj Rajaratnam, the billionaire hedge fund founder he tipped off. Rajaratnam is serving 11 years in prison.

"Gupta intentionally betrayed his duties to Goldman Sachs as a director of the company, refused to take responsibility for his actions and put the government through a long and exhaustive trial costing taxpayers millions," Stoltmann said. "Judge Rakoff should have thrown the proverbial book at Gupta and sentenced him to the higher range of the 97 to 121 months prosecutors were requesting."...

Rakoff criticized sentencing guidelines that he said called for Gupta to serve at least 6½ years behind bars.  Citing information he received under seal, Rakoff said Gupta's crimes may have occurred because Gupta may have "longed to escape the straightjacket of overwhelming responsibility, and had begun to loosen his self-restraint in ways that clouded his judgment."...

Rejecting defense arguments that a community service sentence would be sufficient, Rakoff said a prison sentence was necessary to send a message to insider traders that "when you get caught, you will go to jail."

"While no defendant should be made a martyr to public passion, meaningful punishment is still necessary to reaffirm society's deep-seated need to see justice triumphant," the judge said. "No sentence of probation, or anything close to it, could serve this purpose."...

Rakoff said he could not spare Gupta from prison and only order him to perform community service.  "It's not a punishment. It's what he finds satisfaction doing," the judge said.... In his attack on federal sentencing guidelines that are meant to be advisory, Rakoff said "mechanical adding-up of a small set of numbers artificially assigned to a few arbitrarily-selected variables wars with common sense."

He added: "Whereas apples and oranges may have but a few salient qualities, human beings in their interactions with society are too complicated to be treated like commodities, and the attempt to do so can only lead to bizarre results."

Notably, long-time federal prosecutor and frequent commentator Bill Otis stated in the first comment to a prior Gutpa post that he has "a hard time seeing what interest would be served by giving [Gupta] a sentence longer than he got." In addition to appreciating Bill's candor, his comment spotlight the import and distorting impact of the guidelines even in a post-Booker world.  Though Bill Otis sees Gupta's two-year prison term to be "sufficient" in light of the commands of 3553(a), federal prosecutors in this case argued that a guideline sentence at least four times longer (more than eight years) was necessary to serve congressional sentencing goals. And even post-game criticism of Gupta's sentence reflected in the above-quoted article is quick to assert that the guideline range was a better benchmark for a proper sentence.

For social and psychological reasons, I continue to understand why guideline provisions and ranges has such a huge anchoring effect on federal sentencing decision-making even now eight years after the Booker ruling. But for normative and humanitarian reasons, I continue to be saddened that a big book of sentencing suggestions still dominates analysis of federal sentencing decision-making even now eight years after the Booker ruling.

Related prior posts on Gupta sentencing:

• Any early federal sentencing predictions after quick conviction in Gupta insider trading case?
• Interesting commentary on upcoming Gupta sentencing for insider trading
• Rajat Gupta hoping to get by (federal sentencing) with a little help from his friends
• Gearing up for high-profile sentencing of high-profile insider trading defendant
• Might it hurt Rajat Gupta to get sentencing support letters from the 1%?
• "Rajat Gupta Should Walk Free Wednesday"
• Gupta sentencing memos: feds seeking 97 to 121 months in prison, defense requesting probation and "rigorous community service"
• Rajat Gupta gets 24-month prison term, $5 million fine at sentencing for insider trading

Rajat Gupta gets 24-month prison term, $5 million fine at sentencing for insider trading

The early news reports from US District Court in downtown NYC indicate that former Goldman Sachs director Rajat Gupta was sentenced to two years in prison and a $5 million fine for his insider trading, and that he is scheduled to report to prison on January 8, 2013.

This sentence is between the extremes of th 8-10 years sought by prosecutors and the "rigorous community service" sought by the defense. And it should come as no surprise to regular readers based on my comment in this post after seeing the sentencing submissions: "I will (boldly?) predict that Judge Rakoff will impose a sentence somewhere between these recommendations. I will even set my current betting-line over/under at two years in prison." Though I have no actual experience as a bookie, I think the fact that my betting line hit the actual outcome on the number means that the house keeps all bets. Maybe I should look into the (federal sentencing)bookie business.

UPDATE:  This new Wall Street Journal account of the sentencing includes these excerpts and quotes of note:

"I think the record, which the government really doesn't dispute, bears out that he is a good man," said Judge Rakoff during the hearing. "But the history of this country and the history of the world, I'm afraid, is full of examples of good men who do bad things."...

Mr. Gupta, who was accompanied to court by his wife and four daughters, apologized to his friends, family and the charitable institutions that he helped to found. "The last 18 months have been the most challenging period of my life since I lost my parents as a teenager," he told the judge before sentencing. "I lost my reputation that I built over a lifetime. Much of the first year seemed surreal to me. However, since the trial I've come to accept the reality of my life going forward," he said....

Prosecutors had argued that Mr. Gupta should receive up to 10 years in prison under the federal sentencing guidelines, which in insider-trading cases are largely based on profits, or losses avoided, because of the illegal tips. But the guidelines are advisory and Judge Rakoff often sentences below them....

Manhattan U.S. Attorney Preet Bharara said in an emailed statement: "With today's sentence, Rajat Gupta now must face the grave consequences of his crime — a term of imprisonment.  His conduct has forever tarnished a once-sterling reputation that took years to cultivate.  We hope that others who might consider breaking the securities laws will take heed from this sad occasion and choose not to follow in Mr. Gupta's footsteps."

New Slate commentary on upcoming Gupta sentencing

Harlan Protass has this new commentary at Slate headlined "Rajat Gupta Could Go to Prison for 10 Years for Insider Trading: Even though he wasn’t a major player — is that fair?". Here are excerpts:

On Wednesday Rajat Gupta will appear in Manhattan federal court to be sentenced for passing secrets he learned, while serving on the board of directors of Goldman Sachs, to Raj Rajaratnam, the former chief of hedge fund giant Galleon Group. Rajaratnam himself was convicted in May 2011 of being the center of the biggest insider trading ring in decades. He’s serving 11 years for his crimes, one of the longest sentences ever for insider trading.

Like Rajaratnam, Gupta, the former head of McKinsey & Company, deserves punishment. He was convicted of a type of securities fraud, and fraud is a form of theft. He wrongly used his position of power and influence for personal advancement, corroding Main Street’s trust and confidence in Wall Street.

Still, Gupta is no Rajaratnam. Gupta tipped inside information about one company to Rajaratnam, while Rajaratnam traded on confidential information collected from many sources. So you’d expect that Gupta would be treated differently when he appears for sentencing. Federal sentencing guidelines, however, suggest a prison term for him that’s similar in length to the 11 years Rajaratnam is serving. And prosecutors want a sentence within those guidelines, just as they want for the hundreds of defendants sentenced in federal courts nationwide every day. Because what Gupta and Rajaratnam did is so different, though, sentencing Gupta to anything like the time Rajaratnam is serving undermines the whole purpose of the sentencing scheme that prosecutors say they want to uphold....

Gupta and Rajaratnam are like the kingpin and corner street dealer who do roughly the same amount of time for drug dealing, as happens to a disturbing degree in narcotics cases (which accounted for almost 30 percent of the 80,000-plus cases resolved in federal court in 2011). Because drug sentences are fixed by drug type and quantity, not role, defendants in distribution rings face the same potential penalty, whatever their actual position and conduct. That’s what happened to Jamel Dossie, a small-time, street-level drug dealer’s assistant who was an addict. In New York in March, he received a five-year mandatory minimum sentence for his role as a go-between in four hand-to-hand crack sales for a total gain to himself of $140.

Luckily for Rajat Gupta, his sentencing judge is Jed S. Rakoff, who has said that where the federal guidelines “provide reasonable guidance,” they “are of considerable help to any judge in fashioning a sentence that is fair, just and reasonable,” but also argued that when the guidelines “have run so amok that they are patently absurd on their face,” courts should rely more on general sentencing principles. Judge Rakoff faced this dilemma in the case of Richard Adelson, who was convicted of participating in a conspiracy to overstate the financial results of Impath Inc. (a laboratory services company) and artificially inflate its stock price. The guidelines recommended life imprisonment for him, even though other people had concocted and operated the scheme for years before Adelson joined it. Judge Rakoff gave him 42 months, describing the life sentence recommended by the guidelines as “patently unreasonable.”

It’s because of Judge Rakoff that Gupta is widely expected to receive a sentence considerably less than what federal guidelines recommend, no matter what the government’s lawyers say. (Gupta’s own counsel have asked for probation.) But the approach of this judge is the exception. The reality of federal sentencing means that it should be closer to the rule.

Related posts on upcoming Gupta sentencing:

• Any early federal sentencing predictions after quick conviction in Gupta insider trading case?
• Interesting commentary on upcoming Gupta sentencing for insider trading
• Rajat Gupta hoping to get by (federal sentencing) with a little help from his friends
• Gearing up for high-profile sentencing of high-profile insider trading defendant
• Might it hurt Rajat Gupta to get sentencing support letters from the 1%?
• "Rajat Gupta Should Walk Free Wednesday"
• Gupta sentencing memos: feds seeking 97 to 121 months in prison, defense requesting probation and "rigorous community service"

"Can the CEO Learn from the Condemned? The Application of Capital Mitigation Strategies to White Collar Cases"

The title of this post is the title of this interesting-looking new piece up on SSRN authored by Todd Haugh. I would be eager to read this article based solely on the first sentencing of the abstract, which is "Ted Kaczynski and Bernie Madoff share much in common." But especially with the sentencing of Rajat Gupta scheduled for next week (basics here), I now think this piece should be a weekend must-read for lots of folks. Here is the full abstract:

Ted Kaczynski and Bernie Madoff share much in common. Both are well-educated, extremely intelligent, charismatic figures. Both rose to the height of their chosen professions — mathematics and finance. And both will die in federal prison, Kaczynski for committing a twenty-year mail-bombing spree that killed three people and seriously injured dozens more, and Madoff for committing the largest Ponzi scheme in history, bilking thousands of people out of almost $65 billion. But that last similarity — Kaczynski’s and Madoff’s plight at sentencing — may not have had to be. While Kaczynski’s attorneys tirelessly investigated and argued every aspect of their client’s personal history, mental state, motivations, and sentencing options, Madoff’s attorneys offered almost nothing to mitigate his conduct, simply accepting his fate at sentencing. In the end, Kaczynski’s attorneys were able to convince the government, the court, and their client that a life sentence was appropriate despite that he committed one of the most heinous and well-publicized death penalty-eligible crimes in recent history. Madoff, on the other hand, with almost unlimited resources at his disposal, received effectively the same sentence — 150 years in prison — for a nonviolent economic offense. Why were these two ultimately given the same sentence? And what can Madoff, the financier with unimaginable wealth, learn from Kaczynski, the reclusive and remorseless killer, when it comes to federal sentencing?

The answer lies in how attorneys use sentencing mitigation strategies. This Article contends that federal white collar defendants have failed to effectively use mitigation strategies to lessen their sentences, resulting in unnecessarily long prison terms for nonviolent offenders committing financial crimes. The white collar defense bar has inexplicably ignored the mitigation techniques perfected by capital defense attorneys, and in the process has failed to effectively represent its clients. After discussing the development of the mitigation function in capital cases and paralleling it with the evolution of white collar sentencing jurisprudence, particularly post-Booker, this article will present seven key mitigation strategies currently used by capital defense teams and discuss how these strategies might be employed in federal white collar cases. The goal throughout this Article will be to highlight new strategies and techniques available in defending white collar clients and to enhance sentencing advocacy in federal criminal cases.

Gupta sentencing memos: feds seeking 97 to 121 months in prison, defense requesting probation and "rigorous community service"

This new Wall Street Journal article, headlined "Prosecutors Seek as Much as Decade in Prison for Gupta," reports on the sentencing advocacy appearing in the sentencing memoranda filed today for next week's scheduled sentencing of Rajat Gupta.  Here are the particulars:

Rajat Gupta, once part of the upper echelons of American business and a former Goldman Sachs Group Inc. director, should spend as much as the next decade of his life behind bars after he was convicted of insider trading earlier this year, prosecutors said.

However, lawyers for Mr. Gupta, the most prominent figure caught up in the government's broad crackdown on insider trading, said the 63-year-old should instead receive no time in jail and "rigorous community service." More than 70 people have been convicted or pleaded guilty in the government's probe.

A former director at Goldman and Procter & Gamble Co., Mr. Gupta was convicted of three counts of securities fraud and one count of conspiracy for allegedly passing along corporate secrets he learned in the boardroom about Goldman to hedge-fund manager Raj Rajaratnam, whose fund made millions of dollars trading on his tips. He was acquitted of two fraud charges....

"Gupta's crimes are shocking," said Assistant U.S. Attorney Richard Tarlowe in a court filing Wednesday. "Gupta had achieved extraordinary personal and professional success and was at the pinnacle of a profession built on protecting client confidences."... The government asked for a sentence between eight years and 1 month to 10 years and one month in prison....

Gary Naftalis, a lawyer for Mr. Gupta, argued in a court filing that he should face a less onerous sentence, saying the alleged conduct was an aberration and his client has been a upstanding member of the community, contributing to causes ranging from education to treating infectious diseases in the developing world....

"The convictions in this case represent an utter aberration in the life of the man before the Court — a man whose 'personal history and characteristics' are dramatically different from those routinely presented to sentencing courts in white collar cases," Mr. Naftalis said in a court filing....

Mr. Naftalis suggested the Mr. Gupta receive a sentence of probation and be ordered to engage in a full-time program of community service, ranging from working with a U.S. agency that provides emergency shelters and other services for the homeless and at-risk youth to working with Rwanda's government and an international public-health organization to help improve that country's delivery of health care.

Federal sentencing law requires judges to consider and balance a variety of factors, including guidelines for the length of prison terms, the size of the crime, the character and history of the defendant and the need to deter him or her and the public in general from crime in the future.

In Mr. Gupta's case, the judge is likely to consider the defense's arguments that Mr. Gupta has been a model member of society, participating in philanthropic endeavors around the world for years and a dedicated family-man despite his demanding career.

If/when I can find these filings available on-line, I will post them (and maybe even add a few comments). Even before giving them a read, I will (boldly?) predict that Judge Rakoff will impose a sentence somewhere between these recommendations. I will even set my current betting-line over/under at two years in prison, though that might change based on the forces of the sentencing memos.

Related posts on upcoming Gupta sentencing:

• Any early federal sentencing predictions after quick conviction in Gupta insider trading case?
• Interesting commentary on upcoming Gupta sentencing for insider trading
• Rajat Gupta hoping to get by (federal sentencing) with a little help from his friends
• Gearing up for high-profile sentencing of high-profile insider trading defendant
• Might it hurt Rajat Gupta to get sentencing support letters from the 1%?
• "Rajat Gupta Should Walk Free Wednesday"

 

UPDATE:  A wonderful reader sent me this link where both sentencing memos in US v. Gupta can be found. 

"Rajat Gupta Should Walk Free Wednesday"

The title of this post is the headline of this notable commentary by Walter Pavlo in Forbes with a notable sentencing recommendation for a high-profile federal white-collar sentencing scheduled for next week. Here are excerpts:

On October 24, former McKinsey director, former Goldman Sachs director, former Proctor & Gamble director, former American Airlines director, former Bill & Melinda Gates Foundation director, Rajat Gupta will stand before Judge Rakoff to be sentenced on criminal counts that he was part of an insider trading scheme. The operative word in describing Gupta these days is Mr. “Former” of everything. His life as a professional is over, but that doesn’t mean it should end with a prison sentence.

Gupta no longer sits as an esteemed member on various boards, nor is he sought after by universities to address students ... he is a convicted felon and now we await the crescendo of this criminal prosecution when the prison sentence is announced on Wednesday. Oh and what a spectacle it will be. There will be so much excitement as court artists will capture the moment in chalk, journalists will make a bolt for the courtroom door to fill in the blank (Prison Years) they have in the stories they wrote on Tuesday, and photographers will grab a photo of Gupta entering and leaving the courthouse. If one photographer is lucky he/she will get one of Gupta and his family crying and hugging outside the courtroom. CNBC, FOX and Bloomberg will recruit some former federal inmate to recount his prison experience so that we, the interested public, understand what the Harvard MBA Gupta will expect upon showing up at some prison. The truth is, Gupta shouldn’t be going to prison at all.

Judge Rakoff has an opportunity to give Mr. Gupta a year or two of probation. Ample punishment has already been doled out to Gupta and prison is just a poor excuse as a way to hold him up as an example to the rest of us. Gupta should be treated fairly and fairness would be sending him home to his family and not to some prison camp that would offer no benefit to society.

Such a sentence will put people on notice that there is justice and fairness in our courts. A justice that takes into account a person’s value to society and the detriment of taking that person away. Prison, in the case of Gupta, would not be a remedy, it would simply add to the misconception that prison is the panacea for all criminal cases. My hope is that Judge Rakoff uses this case and this man to make that statement.

Related posts on upcoming Gupta sentencing:

• Any early federal sentencing predictions after quick conviction in Gupta insider trading case?
• Interesting commentary on upcoming Gupta sentencing for insider trading
• Rajat Gupta hoping to get by (federal sentencing) with a little help from his friends
• Gearing up for high-profile sentencing of high-profile insider trading defendant
• Might it hurt Rajat Gupta to get sentencing support letters from the 1%?

Might it hurt Rajat Gupta to get sentencing support letters from the 1%?

The question in the title of this post is prompted by this notable new article in the Wall Street Journal headlined "Dear Judge, Gupta Is a Good Man: Bill Gates, Kofi Annan Among Those Writing in Support of Inside Tipster Ahead of His Sentencing." Here are the story basics:

Rajat Gupta, the former Goldman Sachs Group Inc. director convicted of insider trading, has lost his powerful spots on corporate boards, his reputation and likely his freedom when a judge sentences him later this month. But Mr. Gupta, 63 years old, still has plenty of powerful backers, including Bill Gates and Kofi Annan, and they are lining up to support him with letters to the judge.

Mr. Gates, co-founder of Microsoft Corp., and Mr. Annan, former secretary-general of the United Nations, are among those who have written letters to U.S. District Judge Jed Rakoff on Mr. Gupta's behalf. More than 200 letters have been sent to the judge through Mr. Gupta's lawyers ahead of the Oct. 24 sentencing, according to the submissions, which were examined by The Wall Street Journal....

Mr. Gupta was convicted in June of giving hedge-fund manager Raj Rajaratnam, his friend and business associate, inside information about Goldman's financial results and an investment by Berkshire Hathaway Inc.'s Warren Buffett during the financial crisis. Prosecutors said Mr. Rajaratnam's hedge fund made millions based on Mr. Gupta's tips, while Mr. Gupta, also a former director at Procter & Gamble Co., benefited from the leaks because of their friendship and mutual business interests.

Prosecutors are likely to argue that federal sentencing guidelines dictate a term for Mr. Gupta that could exceed 10 years, based on the illicit trading gains by Mr. Rajaratnam's fund. But the guidelines are advisory, and Judge Rakoff usually hands down less than they suggest....

Mr. Gupta, the former head of McKinsey & Co., the global corporate consulting firm, was active in the philanthropic and charitable communities in the U.S., in his native India and other countries. Letters from his supporters include those from leaders of companies, academics and Wall Street figures. His family also wrote to the judge, including his wife, four daughters and an 84-year-old aunt in India....

It is common for defendants to ask friends, family and prominent figures they may have encountered in their lives to write letters on their behalf to the court ahead of sentencing. Defense lawyers routinely cite such letters at sentencing in hopes of providing a fuller picture of a defendant beyond the crime they've been convicted of committing, particularly when it comes to a defendant's charitable works....

Mr. Gupta's submissions include letters from a class of luminaries not often seen at sentencing, but reflective of those he associated with as a top executive at McKinsey and through the philanthropic causes he supported.

In prior posts and comments, there has been an interesting and robust discussion about whether and how character letters from family, friends, and colleagues can play a role in post-Booker federal sentencing decision-making.  In this case, as the question in the title to this post suggests, I cannot help but wonder if the very high-profile nature of the folks writing on Gupta's behalf could, directly or indirectly, risk creating the impression that Gupta's extraordinary prominence and connections provide a special reason not to give him any kind of special break at his federal sentencing.

Related posts on upcoming Gupta sentencing:

• Any early federal sentencing predictions after quick conviction in Gupta insider trading case?
• Interesting commentary on upcoming Gupta sentencing for insider trading
• Rajat Gupta hoping to get by (federal sentencing) with a little help from his friends
• Gearing up for high-profile sentencing of high-profile insider trading defendant

Gearing up for high-profile sentencing of high-profile insider trading defendant

The Wall Street Journal has this notable new article, headlined "In Gupta Sentencing, a Judgment Call," about a high-profile federal sentencing of a high-profile white-collar defendant slated for later this month. Here is how the piece gets started:

Former Goldman Sachs Group Inc. director Rajat Gupta is the highest-profile of more than 70 defendants convicted of insider trading in New York federal court in the past three years.

But this month he will likely receive a more lenient sentence than the 11-year-prison term given to Raj Rajaratnam, to whom Mr. Gupta provided his illegal leaks, legal experts say.

The sentence may have reverberations beyond the 63-year-old Mr. Gupta, a former chief of consulting giant McKinsey & Co. It will be widely watched in executive suites nationwide because it will be among the first handed down to a major corporate figure in the recent insider-trading crackdown. Previous sentences have largely involved traders, lawyers, lower-rung corporate employees and others.

Mr. Gupta, who was convicted in June of three counts of securities fraud relating to tips about Goldman and one count of conspiracy, didn't trade or profit directly from his illegal tips. Before the conviction, he had a long and stellar career in corporate America and philanthropy.

All this will be balanced against the nature of the crimes and the need to discourage others from similar offenses when U.S. District Judge Jed Rakoff hands down his sentence, scheduled for Oct. 24. Judge Rakoff often imposes sentences further below federal sentencing guidelines than some other judges do, according to a Wall Street Journal analysis.

"It's tough for a judge, because on the one hand, you know you are supposed to deter others to make a statement," said Peter Zeidenberg, a former prosecutor and now a white-collar defense attorney in Washington. "On the other hand, you should be looking at individuals as individuals and not as a poster board."

Federal guidelines could dictate a sentencing range for Mr. Gupta of up to 10 years, if Judge Rakoff agrees that the tips produced an amount approaching what prosecutors said in trial exhibits were at least $10 million in illicit profits earned and losses avoided by the Galleon Group, Mr. Rajaratnam's hedge fund. That would include extra time if Judge Rakoff found Mr. Gupta abused a position of trust as a corporate board member.

The range also could be less if the judge determines the illegal gains were less than $7 million, or based on other factors the defense might put forward. Judges must calculate and consider the guidelines at sentencing but needn't impose them. Judge Rakoff in the past has criticized them as "a mirage of something that can be measured."

Since 2010, Judge Rakoff has imposed an average sentence of 21 months on insider-trading defendants who didn't cooperate with prosecutors—about 38% below the guideline minimum, according to the Journal analysis.

By comparison, U.S. District Judge Richard Sullivan issued seven sentences in that period averaging 6.3% below the guideline minimum. U.S. District Judge Paul Crotty issued three sentences at 20.3% less than the minimum.

And former U.S. District Judge Richard Holwell issued three at 39% under the minimum. Mr. Holwell's 11-year sentence for Mr. Rajaratnam was 100 months below the minimum; he gave 30 months to Danielle Chiesi, Mr. Rajaratnam's co-conspirator, seven months under her range.

Has the First Circuit blessed disregarding loss in some white-collar sentencings?

The question in the title of this post is prompted by this lengthy new piece in the New York Law Journal by attorney Laura Grossfield Birger, which is headlined "The Impact of First Circuit's 'Prosperi' Decision: Does appellate review constrain district courts to follow Sentencing Guidelines?". Here are a few excerpts from the piece:

The recent decision by the U.S. Court of Appeals for the First Circuit in United States v. Prosperi, 686 F.3d 32 (1st Cir. 2012), affords great discretion to sentencing courts to deviate from the Sentencing Guidelines, despite expressing palpable discomfort with the extent of deviation at issue in this particular case.  For this reason, the opinion is likely to be cited often in the First Circuit and elsewhere, and its analysis and approach warrants examination....

[I]n reviewing the substantive reasonableness of the sentences, the First Circuit initially focused on whether the district court had offered a plausible explanation for minimizing the impact of the loss amount.  The court reviewed the reasons articulated by the district court in detail ... [and] found that the[] findings and conclusions constituted "plausible" explanations for the district court's refusal to give significant weight to the loss amount it calculated pursuant to the Sentencing Guidelines.

The relaxed review applied by the First Circuit to this aspect of the district court's rationale is significant.  As the court recognized, the strength of the justification required to support a variance from a Sentencing Guidelines range fluctuates with the degree of that variance; the greater the deviance from the applicable Sentencing Guidelines range, the more significant the justification required to support it.  Here, the government's principal complaint boiled down to the huge extent of the variance — from a more than seven-year sentence to probation.  By accepting the district court's decision not to give the loss amount much weight, the First Circuit essentially approved a reduction in the spread; once the loss amount is removed as the pivotal factor driving the sentence, the government's argument that the breadth of the variance between zero and 87 months is unjustifiable loses traction.

The balance of the First Circuit's analysis of the district court's rationale reflects its acceptance of its key tenet — the disregard of the loss amount as the determinative factor.  The court reviewed the government's other objections to the district court's proffered justification ... and swiftly rejected them....

Like most sentencing decisions, Prosperi is highly dependent on its facts, yet the opinion is likely to reverberate in white-collar sentencing jurisprudence.  The willingness of the district court not just to mitigate the impact of the loss amount on the sentence, but essentially to disregard its effect entirely, will be an attractive precedent to defendants facing staggering sentences driven largely by loss amounts.  And while the government will surely strive to limit Prosperi to its facts, it will not be difficult for defense lawyers to analogize other fraud cases to at least some of the factors present in Prosperi. Fundamentally, the Prosperi opinion also signals to district courts that, at least in the First Circuit, there are few restraints on their discretion to impose sentences far below the applicable Guidelines range in fraud cases; as long as they explain why they did so, citing lawful considerations, the sentences will not be disturbed on appeal even when the Court of Appeals plainly disagrees with the result.  If embraced by district courts, this may galvanize a trend away from the uniformity that the Guidelines seek to impose, particularly in white-collar cases, and toward a return to the flexibility and discrepancy in sentencing often associated with the pre-Guidelines era.

Related prior post:

• First Circuit affirms (way-)below-guideline sentence for Big Dig white-collar offenders

Not much for sentencing fans (or Rubashkin supporters) in latest SCOTUS cert grants

As reported here by SCOTUSblog, the "Supreme Court, preparing to open a new Term next Monday, on Tuesday granted review of six new cases." Disappointingly, though the Court did take up a Fourth Amendment blood testing issue concerning drunk drivers in Missouri v. McNeely, none of the other cases I noted in this recent post are on the grant list.  There is also an notable IFP grant in Millbrook v. US concerning the federal government's immunity in lawsuit by a federal prisonder subject to sexual assault by three guards.

A long list of cases in which cert was denied will not be released until next Monday. In all likelihood, the Rubashkin case will be on that list. If so, any and everyone aggrieved by the prosecution and sentencing in Rubashkin will need to turn their attention and energies toward a 2255 petition (or, I suppose, a clemency application).

Related posts on the Rubashkin case:

• "More Former AGs Question Sentence Sought in Bank Fraud Case"
• Can and should religious considerations influence bail decisions?
• Federal prosecutors now seeking 25-year prison term for Rubashkin
• Kosher plant chief Sholom Rubashkin sentenced to 27 years imprisonment
• An appellate amicus brief in the Rubashkin case on sentencing issues
• Rubashkin appeal raising more questions about high-profile federal fraud case
• Eighth Circuit panel unanimously affirms Rubashkin federal convictions and lengthy prison sentence
• "High court should hear Rubashkin to consider overzealous DOJ and judge who was essentially on prosecution team"
• Making a full-throated pitch for SCOTUS to again address reasonableness review
• What are the odds SCOTUS grants cert in the (in)famous Rubashkin case?
• Can a documentary impact odds of a cert grant in the (in)famous Rubashkin case?