Tuesday, July 31, 2012
High-profile Cleveland corruption case culminates with 28-year prison term for Jimmy Dimora
As reported in this local article, headlined "Jimmy Dimora sentenced to 28 years in prison, defense attorney calls it a 'death sentence'," a very high-profile federal criminal corruption case involving Cleveland politicians concluded with a very long sentence handed down this afternoon. Here is how the local article begins:
U.S. District Judge Sara Lioi handed down a 28-year sentence to former county Commissioner Jimmy Dimora, who was convicted in March of racketeering and 32 other bribery- and corruption-related crimes.
Afterward, Stephen D. Anthony, Special Agent in Charge of the Cleveland FBI said: "There are lots of reasons to be positive and optimistic going forward. It is our hope this case will give pause to any individual who considers violating the public trust."
Dimora, 57, gave an emotional brief statement in court today, denying any wrongdoing or that he bilked Cuyahoga County taxpayers. Wiping tears from his face, Dimora also asked Judge Sara Lioi to not separate him from his family because of his health.
His attorney, William Whitaker, said Dimora's statement to the court was true and accurate -- that he never traded his votes for anything. He said his defense has raised a number of issues, including Dimora's ability to get a fair trial. They will appeal those issues, as well as the 28-year sentence, which he called "grossly unfair." Whitaker called Lioi's ruling a "death sentence."
Dimora would be 85 years old if he were to complete the 28-year prison sentence. His attorneys requested he be sentenced to prison in Buckner, N.C., because of its health facilities for prisoners. Lioi said she would recommend it.
While using his walker as he was escorted from the courtroom, Dimora said to prosecutors, "I hope you guys are happy."
Before she handed down the sentence, Lioi said Dimora abused his power as a politician. “The reach of his corruption was far and wide,” Lioi said. "The destruction left in its wake is incalculable."
The conduct was part of daily workings in Cuyahoga County, a pervasive pattern of corruption, she said. "In the world of Cuyahoga County corruption, they had somewhat of a symbiotic relationship," she said.
Lioi said that while Dimora did good things as mayor of Bedford Heights, his behavior become less about helping others and more about helping Jimmy Dimora. "Somewhere along the way he began using his power and authority for his own benefit."
This just-before-final-sentencing local article about the Dimora case reveals how guideline calculations and lawyer advocacy might have played a role in this sentencing judgment:
U.S. District Judge Sara Lioi said [based on her] federal sentencing guideline [calculations] that Dimora could be looking at between 292 to 365 months in prison....
Federal prosecutors have asked Lioi to put Dimora behind bars for at least 22 years for racketeering and 31 other corruption-related charges. Federal probation department officials recommended Dimora be sentenced to life in prison, while defense lawyers had asked for a much lighter, although unspecified, sentence....
Dimora's attorneys argu[ed] he should get less time due to physical condition and age. Andrea Whitaker, one of Dimora’s attorney, asked for the court to consider less of a prison sentence due to what she described as his “ailing health” conditions.
“Prison is a more severe experience for people with health conditions,” Whitaker said. "Mr. Dimora's health issues are real, they aren't imagined." Whitaker said mass behind his lungs and also suffered from an aneurysm. She also said he had other health related conditions.
Assistant U.S. Attorney Antoinette Bacon, however, said Dimora had the same health issues when he committed the crimes. “He’s only 57 years old,” Bacon said. “He is a relatively young man who has a long life ahead of him.”
Dimora is going to need to have a long life ahead of him if he will even be free again (unless he can get some kind of relief on appeal). Even if he gets full credit for good behavior, the lengthy prison term given to Dimora today means he cannot be free until at least 2036 and is in his 80s.
As an interesting point of reference, I think it is notable that Dimora's sentence is fully twice as long as the sentence given to former Illinois Governor Rod Blagojevich (basic here). Indeed, I cannot recall and am unaware of any sentence for political corruption longer than even 20 years, and thus Dimora may well have today received the longest sentence for political corruption in modern history.
Monday, July 30, 2012
Huge Iranian fraud results in death sentences
As reported in this New York Times piece, which is headlined "Iran Sentences Four to Death Over $2.6 Billion Bank Fraud," Iran has imposed a notable set of sentences in a notable fraud case. Here are the details:
In the first sentences to be handed down in a $2.6 billion embezzlement case, an Iranian court ordered the death penalty for four people in the fraud that was uncovered in a network of Iranian banks last year, Iranian state media reported on Monday.
The four, who were not named in the report by the Fars news agency, were among 39 suspects who were convicted in what the Iranian authorities have described as the biggest financial swindle in the country’s history. The top prosecutor, Gholam Hossein Mohseni-Ejei, told reporters that two of the defendants had been given life sentences, while the others were given sentences of up to 25 years....
The other suspects were not named, but have been said to include managers of bank branches, and a number of clerks who were accused of accepting bribes. Fars quoted Mr. Mohseni-Ejei as saying that the other sentences that were handed down included prison terms of 10 and 20 years, as well as lighter sentences.
Saturday, July 28, 2012
George Will assails "abuse of criminal law for capricious bullying" in whale of federal tale
George Will has this notable new commentary in the Washington Post , headlined "Blowing the whistle on the federal Leviathan," about one extreme federal prosecution. Here are excerpts:
The huge humpback whale whose friendliness precipitated a surreal seven-year — so far — federal hunt for criminality surely did not feel put upon. Nevertheless, our unhinged government, with an obsession like that of Melville’s Ahab, has crippled Nancy Black’s scientific career, cost her more than $100,000 in legal fees — so far — and might sentence her to 20 years in prison. This Kafkaesque burlesque of law enforcement began when someone whistled.
Black, 50, a marine biologist who also captains a whale-watching ship, was with some watchers in Monterey Bay in 2005 when a member of her crew whistled at the humpback that had approached her boat, hoping to entice the whale to linger. Back on land, another of her employees called the National Oceanic and Atmospheric Administration (NOAA) to ask if the whistling constituted “harassment” of a marine mammal, which is an “environmental crime.” NOAA requested a video of the episode, which Black sent after editing it slightly to highlight the whistling. NOAA found no harassment — but got her indicted for editing the tape, calling this a “material false statement” to federal investigators, which is a felony under the 1863 False Claims Act, intended to punish suppliers defrauding the government during the Civil War.
A year after this bizarre charge — that she lied about the interaction with the humpback that produced no charges — more than a dozen federal agents, led by one from NOAA, raided her home. They removed her scientific photos, business files and computers. Call this a fishing expedition. She has also been charged with the crime of feeding killer whales when she and two aides were in a dinghy observing them feeding on strips of blubber torn from their prey — a gray whale....
Never mind. This pursuit of Black seems to have become a matter of institutional momentum, an agent-driven case. Perhaps NOAA, or the Justice Department’s Environmental Crimes Section, has its version of Victor Hugo’s obsessed Inspector Javert. In any event, some of the federal government’s crime-busters seem to know little about whales — hence the “whistle-as-harassment” nonsense.
Six years ago, NOAA agents, who evidently consider the First Amendment a dispensable nuisance, told Black’s scientific colleagues not to talk to her and to inform them if they were contacted by her or her lawyers. Since then she has not spoken with one of her best friends. To finance her defense she has cashed out her life’s savings, which otherwise might have purchased a bigger boat. The government probably has spent millions. It delivered an administrative subpoena to her accountant, although no charge against her has anything to do with finances.
In 1980, federal statutes specified 3,000 criminal offenses; by 2007, 4,450. They continue to multiply. Often, as in Black’s case, they are untethered from the common-law tradition of mens rea, which holds that a crime must involve a criminal intent — a guilty mind. Legions of government lawyers inundate targets like Black with discovery demands, producing financial burdens that compel the innocent to surrender in order to survive.
The protracted and pointless tormenting of Black illustrates the thesis of Harvey Silverglate’s invaluable 2009 book, “Three Felonies a Day: How the Feds Target the Innocent.” Silverglate, a civil liberties lawyer in Boston, chillingly demonstrates how the mad proliferation of federal criminal laws — which often are too vague to give fair notice of what behavior is proscribed or prescribed — means that “our normal daily activities expose us to potential prosecution at the whim of a government official.” Such laws, which enable government zealots to accuse almost anyone of committing three felonies in a day, do not just enable government misconduct, they incite prosecutors to intimidate decent people who never had culpable intentions. And to inflict punishments without crimes.
By showing that Kafka was a realist, Black’s misfortune may improve the nation: The more Americans learn about their government’s abuse of criminal law for capricious bullying, the more likely they are to recoil in a libertarian direction and put Leviathan on a short leash.
Friday, July 20, 2012
"Insider Traders Face Longer Sentences as Judges Get Tough" (except for cooperators)
The title of this post is drawn from the headline of this Bloomberg article, which my editorial addition in parenthesis. Here are excerpts:
Inside traders have more to fear when they stand before Manhattan federal judges for sentencing. Since Jan. 1, 2011, the judges have sent the average violator to prison for more than 22 months, according to an analysis of sentencing data by Bloomberg News. That was a 20 percent increase from the average term of 18.4 months during the previous eight years.
The harsher sentences come three years into a federal crackdown on insider trading on Wall Street. Since August 2009, federal prosecutors in Manhattan have charged 71 people with insider trading and won 65 convictions, with six cases still pending. Some of those convicted, including former Goldman Sachs Group Inc. director Rajat Gupta, are awaiting sentencing.
“There are different insider-trading cases now,” Ellen Podgor, a professor at Stetson University College of Law in Gulfport, Florida, said. “You look at the individuals they’re going after now -- it’s a higher level.”
Judges in Manhattan federal court are also slightly more likely to send offenders to prison. Twenty-one of 36 defendants sentenced for insider trading since the start of 2011 -- or 58 percent -- were jailed. By comparison, 24 of the 43 defendants sentenced from 2003 through 2010, or 56 percent, lost their freedom. Of late, most of those who avoided prison cooperated with the government.
The longer terms for insider trading are consistent with lengthier terms nationally for all forms of fraud. According to U.S. Sentencing Commission statistics, the average sentence in fraud cases in fiscal 2011 rose to 23 months from 14.4 months eight years earlier, a 60 percent increase. “White-collar sentences all across the U.S. are going up,” Podgor said in a phone interview....
Cooperating with the government has kept some of those convicted out of jail. Since the start of 2011, judges have sentenced 12 defendants who admitted their guilt and agreed to provide evidence for prosecutors. Cooperators have secretly recorded their friends and colleagues, interpreted documents and worked in other ways with federal agents. Eleven of the cooperators avoided prison altogether, according to the data. One got six months.
“It’s important that cooperating witnesses do get lower sentences,” said Christopher Garcia, former chief of the securities fraud unit in the U.S. Attorney’s Office in Manhattan. “The hope of reduced sentences is a powerful tool for prosecutors in persuading and encouraging people to make cases against others.”
Anil Kumar, a former McKinsey & Co. director who testified against both Rajaratnam and Gupta, was sentenced yesterday to probation. U.S. Circuit Judge Denny Chin cited Kumar’s “extraordinary cooperation” and his effort to “make amends for what he did.”
Judges in most insider cases imposed terms less than those recommended by the Sentencing Commission’s guidelines, according to court records. Rajaratnam, facing from 19 years to 24 1/2 years under the guidelines, got 11 years behind bars. Holwell explained at sentencing that Rajaratnam was sick and had a history of doing charitable works. In another case, James Fleishman, a Primary Global executive convicted of leaking tips, got 30 months when the guidelines called for a term of 87 to 108 months. U.S. District Judge Jed Rakoff, who has been critical of the sentencing guidelines, handed down the sentence.
James Felman, a lawyer in Tampa, Florida, who serves as the American Bar Association’s liaison to the Sentencing Commission, said many judges are willing to undercut the harsh terms urged by the guidelines in white-collar cases. The U.S. Supreme Court ruled in 2005 that the guidelines were no longer mandatory. “All guideline sentences have been increasing,” Felman said in a phone interview. Of the recommended white-collar sentences, he said that “even the government is aware they’re frequently too high.”
Still, a conviction for insider trading almost always means prison time for non-cooperating defendants. Of 24 non-cooperators who pleaded guilty or were convicted at a trial during the period measured here, 20 were ordered imprisoned for an average of 33 months. The four spared played minor roles in the schemes, judges said.
Thursday, July 19, 2012
Effective review of Southern Union's impact and potential import
For various understandable reasons, the Supreme Court significant Sixth Amendment ruling in Southern Union has not gotten all that much attention. But this effective Indiana Lawyer article, headlined "US Supreme Court: Criminal fines require jury finding," provides a nice reminder of the significance of the ruling. Here are excerpts from this piece:
An end-of-term U.S. Supreme Court decision did far more than reduce a penalty in a federal criminal environmental judgment from $18 million to $50,000. It created a new reality for how the government will have to pursue such prosecutions in the future, experts say.
A rare coalition of conservative and liberal justices ruled 6-3 in Southern Union Co. v. United States, 11–94, that the Sixth Amendment right to a jury trial requires a jury to determine facts to support a sentence imposed after a guilty verdict....
“This is definitely a win for the defendants,” [Indiana University law professor Ryan] Scott told the Indiana Lawyer. “That said, the history of Apprendi is one of the Supreme Court recognizing more and more expansive jury rights and the government responding with great resilience.”
In essence, experts said, juries will have to determine factors such as lengths of violations for sentences involving fines on a “per day/per violation” basis, or losses and potential penalties in federal fraud cases. A simple guilty verdict such as that in Southern Union no longer is sufficient to allow a judge to use his or her discretion in levying criminal fines....
Southern Union seems to suggest that Apprendi may apply to any penalties inflicted by the government for the commission of offenses.... Also left for future consideration: “When does an offense rise beyond the level of ‘non-petty’ and become substantial enough to invoke the Apprendi rule?”
Scott also sees more Apprendi questions arising. The jury trial right could be a matter for the courts to decide in cases involving restitution determinations and in matters where asset forfeiture is ordered, he said.
Wednesday, July 18, 2012
Rajat Gupta hoping to get by (federal sentencing) with a little help from his friends
This new sentencing story from Fox Business, which is headlined "Gupta Seeks Help From Friends for Lenient Sentence," has me in a Beatles mood today. (This mood may also be the product of my being at Oxford in the UK and thinking about making a sojourn to Liverpool. Folks reading this post in the US can think about Joe Cocker (and check out this classic live performance) for an American version of the same musical spirit.) The story concerns a request made by a very high-profile white-collar defendant in preparation for his federal sentencing scheduled for this fall. Here are the details:
Rajat Gupta, the former Goldman Sachs board member recently convicted for providing illegal trading tips to former Galleon chief Raj Rajaratnam, has made an unusual request to former business associates and prominent acquaintances urging them to write letters of support to the judge in the case so he can receive the most lenient sentence for his crimes, the FOX Business Network has learned.
A copy of the request, obtained by FBN, even goes so far as to suggest that U.S. District Judge Jed Rakoff “would like to receive letters of support from friends and family” so the judge can “understand me as a person. This gives the judge a full idea of who I am and significantly influences the decision.”...
“I look forward to hearing from you with a positive response,” Gupta added in the request sent earlier in the month, “and thank you very much in advance.”
Gupta is scheduled to be sentenced on Oct. 18, and faces as many as 20 years in jail for securities fraud. So-called support letters of this kind have been known to prod judges to hand out more lenient sentences, though Gupta may have overplayed his hand in suggesting that Rakoff is personally requesting the letters.
The Fox Business Network has learned that Gupta sent the request to numerous people without his attorney reviewing the content. A press official for Rakoff said there has been “no active solicitation of letters” from the judge. FBN has also learned that after being alerted to the language in the request, Gupta’s attorney Gary Neftalis, reissued the correspondence removing the line implying the judge’s advocacy for the letters and simply pointing out that such letters of support delivered to the sentencing judge are “customary.”...
Columbia University law professor John Coffee said Rakoff is known to take letters of support seriously in doling out sentences, though he said Gupta’s aggressive pitch to friends and colleagues “is not going to help” in gaining leniency.
The aggressive tone of the letter underscores the difficult spot that Gupta finds himself in following the guilty verdict. The former Goldman board member, and head of the giant McKinsey & Co., was cleared of two counts during his trial last month. Yet he was convicted of several more, and is widely regarded as the most prominent business executive snared in the government crackdown on insider trading. Among the most sensation counts Gupta was convicted on involved leaking to Rajaratnam details of a Goldman Sachs board meeting involving Warren Buffett’s infusion of cash into the firm at the height of the financial crisis.
Prosecutors showed phone records in which Gupta called Rajaratnam shortly after the board meeting and Rajaratnam purchased shares of Goldman before Buffett’s move was made public. Rajaratnam himself was convicted of multiple counts of securities fraud and insider trading violations and is serving an 11-year sentence. Most legal experts don’t expect Gupta to receive as lengthy of a jail term as Rajaratnam; prosecutors are likely to ask for a decade of jail time based on sentencing guidelines, but Gupta himself never traded on the inside information. The best prosecutors could do was portray Gupta as using his inside knowledge and tips to curry favor and do business with Rajaratnam, once a billionaire fund manager and one of Wall Street top traders.
In Gupta’s favor is Rakoff’s reputation for handing less jail time than what prosecutors often recommend, which is why Gupta’s request for letters from prominent people -- many of them in fields outside of Wall Street -- is so important. Friends of Gupta say both he and his family were hit hard by the guilty verdict, and the likelihood of jail time and the letter suggests as much....
One additional reason for the aggressive pitch may be that Gupta believes Rakoff will be less likely to cut such a prominent person a break on sentencing. A former prosecutor who has argued cases before Rakoff says the judge is known to come down hard on white collar defendants who “should have known better.” Rakoff sentenced attorney Marc Drier to 20 years in prison for stealing $400 million from his clients.
“Let’s face it, Gupta is a board member of Goldman and the former head of McKinsey,” the former prosecutor said. “He knows that he’s isn’t supposed to be telling people about what goes on during board meetings, and that may force Rakoff to come down harder on him than he would otherwise.”
Fox Business has made available at this link the letter referenced in its article. I do not view the tone or wording of this letter as such a big deal; but the way in which Fox Business covers this seemingly minor pre-sentencing development confirms my sense that Gupta's sentencing will be one of the highest profile and most interesting federal sentencing cases of 2012.
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
Monday, July 16, 2012
First Circuit affirms (way-)below-guideline sentence for Big Dig white-collar offenders
Because I am on the road throughout July, I fear I may miss some notable circuit sentencing opinions. Thus, I am especially grateful that a helpful reader alerted me to the especially noteworthy opinion handed down by the First Circuit late last week in US v. Prosperi, No. 10-1739 (1st Cir. July 13, 2012) (available here). Here is how the lengthy Prosperi opinion starts:
The United States challenges the sentences imposed on appellees Robert Prosperi and Gregory Stevenson after their conviction of mail fraud, highway project fraud, and conspiracy to defraud the government. Both appellees were employees of Aggregate Industries NE, Inc. ("Aggregate"), a subcontractor that provided concrete for Boston's Central Artery/Tunnel project, popularly known as the "Big Dig." The government charged that over the course of nine years Aggregate knowingly provided concrete that failed to meet project specifications and concealed that failure by creating false documentation purporting to show that the concrete provided complied with the relevant specifications. Several employees of Aggregate, including Prosperi and Stevenson, were convicted of criminal offenses for their roles in the scheme.
At sentencing, the district court calculated the guidelines sentencing range ("GSR") for Prosperi and Stevenson as 87- to 108-months incarceration. Then, explaining fully its rationale for a below-guidelines sentence, the court sentenced Prosperi and Stevenson to six months of home monitoring, three years of probation, and 1,000 hours of community service. The government now appeals, arguing that under Gall v. United States, 552 U.S. 38 (2007), the sentences imposed by the district court were substantively unreasonable and that the appellees' crimes warrant incarceration.
We affirm. Although the degree to which the sentences vary from the GSR gives us pause, the district court's explanation ultimately supports the reasonableness of the sentences imposed. The district court emphasized that its finding on the loss amount caused by the crimes, the most significant factor in determining the GSR, was imprecise and did not fairly reflect the defendants' culpability. Hence it would not permit the loss estimate to unduly drive its sentencing decision. Relatedly, it found that there was insufficient evidence to conclude that the defendants' conduct made the Big Dig unsafe in any way or that the defendants profited from the offenses. The court then supplemented these critical findings with consideration of the individual circumstances of the defendants and concluded that probationary sentences were appropriate. We cannot say that it abused its discretion in doing so.
As this introduction suggests, the (unanimous) Prosperi opinion discusses lots of loss issues and ultimately affirms the district court's desire and decision to give little weight to what it saw as an inflated loss calculation. For this reason and others, Prosperi is a must-read not just for white-collar federal sentencing practitioners, but for all those still unsure about the scope of sentencing discretion in the post-Booker world.
July 16, 2012 in Booker in district courts, Booker in the Circuits, Federal Sentencing Guidelines, Offender Characteristics, Offense Characteristics, White-collar sentencing, Who Sentences? | Permalink | Comments (0) | TrackBack
Tuesday, July 10, 2012
Another corrupt former governor gets another light federal sentence
The title of this post is meant to be (harmfully?) sensational, because the local story here about the former Missouri Gov. Roger Wilson being sentenced to probation in federal court reveals that he was not really very corrupt, that his misdeed was committed after he left office, and and he did not really get an unduly lenient sentence given that he was convicted only of a misdemeanor and his probation term was a within-guideline sentence. Here are the white-collar crime and punishment specifics in this case:
U.S. Magistrate Judge Mary Ann Medler's sentence was expected. Wilson faced probation to six months in prison under federal sentencing guidelines. His lawyer, Robert Haar, had asked for probation, citing his long public service record.
After a lengthy investigation, Wilson was indicted in April on a misdemeanor insurance charge for laundering a total $8,000 in campaign contributions from Missouri Employers Mutual Co., a state-created workers' compensation company based in Columbia, to the Missouri Democratic Party through a St. Louis law firm, Herzog Crebs. Former Herzog Crebs partner Ed Griesedieck III was also indicted. Wilson was president and CEO of MEM at the time.
Medler sentenced Wilson to two years of probation and ordered him to pay a $5,000 fine and $5,000 in restitution. He will also complete 100 hours of community service. Griesedieck received one year of probation. The other aspects of his sentence were the same.
In court Wilson read a short statement in which he thanked his family and friends. He apologized and said he looks forward to a future in community service. "There are no excuses," he said. "I made a mistake." He read a similar statement outside the courthouse. He also said that he had already paid the fine and half of the restitution. Griesedieck presumably has or will pay the rest....
Wilson served two terms as lieutenant governor and nearly 14 years in the state senate. He also formerly chaired the Missouri Tourism Commission and the Missouri Rural Economic Development Council. Wilson was sworn in as Missouri's 52nd governor following the death of Gov. Mel Carnahan in 2000 in a plane crash. After leaving office, Wilson worked for a money management firm and served as the Missouri Democratic Party's chairman from 2004 to 2007.
Monday, July 02, 2012
Record big criminal fine for big drug company involved in big fraud
This new AP article, headlined "GlaxoSmithKline to pay largest health care fraud fine in U.S. history," reports on a notable financial punishment for a corporate criminal. Here are the details:
GlaxoSmithKline will pay $3 billion and plead guilty to promoting two popular drugs for unapproved uses and to failing to disclose important safety information on a third in the largest health care fraud settlement in U.S. history, the Justice Department said Monday.
The $3 billion fine also will be the largest penalty ever paid by a drug company, Deputy Attorney General James M. Cole said. The corporation also agreed to be monitored by government officials for five years to attempt to ensure the company's compliance, Cole said....
"For far too long, we have heard that the pharmaceutical industry views these settlements merely as the cost of doing business," Acting Assistant Attorney General Stuart F. Delery, head of Justice's civil division, said at the news conference. "That is why this administration is committed to using every available tool to defeat health care fraud."...
Prosecutors said GlaxoSmithKline illegally promoted the drug Paxil for treating depression in children from April 1998 to August 2003, even though the FDA never approved it for anyone under age 18. The corporation also promoted the drug Wellbutrin from January 1999 to December 2003 for weight loss, the treatment of sexual dysfunction, substance addictions and attention deficit hyperactivity disorder, although it was only approved for treatment of major depressive disorder.
Justice Department officials also said that between 2001 and 2007 GlaxoSmithKline failed to report to the FDA on safety data from certain post-marketing studies and from two studies of the cardiovascular safety of the diabetes drug Avandia. Since 2007, the FDA has added warnings to the Avandia label to alert doctors about potential increased risk of congestive heart failure and heart attack.
The drug corporation also agreed to resolve civil liability for promoting the drugs Paxil, Wellbutrin, Advair, Lamictal and Zofran for off-label, non-covered uses. The company also resolved accusations that it paid kickbacks to doctors to prescribe those drugs as well as the drugs Imitrex, Lotronex, Flovent and Valtrex....
Of the penalties, $1 billion covers criminal fines and forfeitures and $2 billion is for civil settlements with the federal government and the state governments of Massachusetts and Colorado.
Saturday, June 30, 2012
Did (white-collar?) arsonist poison himself in courtroom right after hearing verdict and sentence?
The main question in thie title of this post present the interesting mystery in reported in this Huffington Post piece, which is headlined "Michael Marin, Ex-Wall Street Trader, Dies In Courtroom After Conviction." Here are the details:
An ex-Wall Street trader collapsed and died in a Phoenix-area courtroom Thursday, shortly after being found guilty of setting his mansion on fire in a ploy to escape his mortgage debt.
Police are now investigating whether the man, Michael Marin, purposefully killed himself. Shortly after the jury read its verdict and sentenced him to 16 years in prison, Marin appeared to place something in his mouth several times and drink from a bottle he brought with him into the courtroom. Minutes later, he suffered from a seizure and died. Police can't yet confirm whether Marin’s death was a suicide.
Marin’s mansion in a ritzy Phoenix neighborhood caught fire in 2009, the Arizona Republic reports. Marin claimed he had to escape from the house wearing a scuba tank and mask to protect himself from the smoke, but investigators found evidence that he set the fire himself. Though he had grown accustomed to a lifestyle that reportedly included owning Picasso sketches and $800 climbing boots, Marin’s financial situation grew dire the year before the fire. His bank account balance fell to only $50 from $900,000 even while he had a monthly mortgage payment of more than $17,000, according to the Arizona Republic.
In addition to the interesting possibility that the defendant here decided to sentence himself to death rather than go to state prison, I have also flagged this story because I wonder just how we ought to characterized Marin's crime of arson. Is this crime properly called vioent or non-violent? Is it a white-collar offense? A property offense or a fraud offense? One of the many challenges of studying crime and sentencing data is trying to fully understand what gets placed into which data catergories, and this kind of case reinforces my persistent concern than many crimes defy easy categorization.
Thursday, June 28, 2012
Second Circuit panel now affirms Lynne Stewart's (way below guideline) 10-year prison sentence
One of many noteworthy legal developments today sure to be overshadowed by the Supreme Court's health care ruling is today's Second Circuit panel opinion upholding the 10-year prison sentence of (in)famous defense lawyer Lynne Stewart. The lengthy unanimous opinion in US v. Stewart, No. 10-3185 (2d Cir. June 28, 2012) (available here), covers a lot of interesting sentencing ground, though the most extensive discussion concerns Stewart's claim that enhancement of her sentence due to her initial post-sentencing public comments violated the First Amendment. Here are a few paragraphs from the start and end of the panel ruling:
Appellant Lynne Stewart appeals from a judgment of the United States District Court for the Southern District of New York (John G. Koeltl, Judge) sentencing her principally to 120 months' imprisonment following our vacatur on grounds of procedural error of her previous sentence of 28 months and remand of the district court's previous judgment insofar as it imposed that sentence. The details of this case were recounted at length in our prior opinion, United States v. Stewart, 590 F.3d 93, 100-08 (2d Cir. 2009) ("Stewart I"). We repeat them here only insofar as we think it necessary to explain our judgment [of affirmance]....
Finally, Stewart argues that her sentence is substantively unreasonable, principally because of the more than fourfold increase from her original sentence of 28 months' incarceration to the currently imposed sentence of 120 months. She asserts that aside from her public statements, "no change in circumstances or information available to the sentencing court . . . supported increasing Ms. Stewart's sentence by this magnitude." Def.'s Br. at 101. She also contends that the district court was not permitted to increase the sentence in response to suggestions that it do so in the dissent from our panel opinion, and in the dissents accompanying the denial of rehearing en banc. Def.'s Br. at 103. And she urges that in light of her personal characteristics, the sentence imposed on her was so "shockingly high" as to render it substantively unreasonable....
It is the "rare case" in which we will find a sentence substantively unreasonable, and we place "great trust" in a sentencing court. Rigas, 583 F.3d at 123. In Stewart I, we expressly recognized and were "impressed by the factors that figured in Stewart's modest sentence -- particularly her admirable history of providing, at no little personal cost to herself, proficient legal services in difficult cases to those who could not otherwise afford them." Stewart I, 590 F.3d at 147-48. But, nonetheless, she engaged in severe criminal conduct in aid of a terrorism conspiracy, and she did so by abusing the trust that the government had placed in her as a member of the bar. When confronted with these transgressions, she lied repeatedly under oath.
From the moment she committed the first act for which she was convicted, through her trial, sentencing, and appeals, Stewart has persisted in exhibiting what seems to be a stark inability to understand the seriousness of her crimes, the breadth and depth of the danger in which they placed the lives and safety of unknown innocents, and the extent to which they constituted an abuse of her trust and privilege as a member of the bar. We cannot agree with her that the sentence imposed on her was "shockingly high" so as to warrant a finding of substantive unreasonableness.
June 28, 2012 in Booker in the Circuits, Celebrity sentencings, Offender Characteristics, Offense Characteristics, Procedure and Proof at Sentencing, Sentences Reconsidered, White-collar sentencing | Permalink | Comments (6) | TrackBack
Wednesday, June 27, 2012
"Madoff's Brother to Plead Guilty to Criminal Charges"
The title of this post is the headline of this breaking Wall Street Journal story, which gets started this way:
The brother of convicted Ponzi scheme operator Bernard Madoff will plead guilty to criminal charges Friday, marking the first time a family member has admitted guilt aside from Mr. Madoff himself since the fraud came to light 3½ years ago.
Peter Madoff, who worked as the Madoff firm's chief compliance officer and senior managing director, is expected to plead guilty to two charges at a hearing Friday, including falsifying the records of an investment adviser and conspiracy to commit securities fraud and other crimes.
As part of an agreement with prosecutors, Peter Madoff has agreed to a sentence of 10 years in prison, prosecutors said in a letter to U.S. District Judge Laura Taylor Swain, which was filed on Wednesday. He also has agreed to forfeit about $143.1 billion, prosecutors said.
I trust I will not be the only one who wonders about and sees the irony in a mega-fraudster like Peter Madoff, thanks to the exercise of prosecutorial charging/sentencing discretion, is now apparently going be serving just 10 years in federal prison (actually, probably less than 9 years given good-time credits) while many low-level federal crack offenders are still serving their second or third decade of federal prison time because a federal judge lacked any sentencing discretion to impose a lower sentence deacdes ago under then-applicable mandatory minimums and/or then-binding mandatory guidelines.
Wednesday, June 20, 2012
Interesting commentary on upcoming Gupta sentencing for insider trading
Writing at Forbes, Richard Levick has this interesting new commentary headlined "The Sentencing of Rajat Gupta: Why It Matters." Here is how it begins:
Here’s a quaint news item from 1987 about how a certain Ivan F. Boesky, one of the world’s most powerful speculators and symbol de jour of Wall Street greed, was sentenced to three years in prison for insider trading-related violations. It was one of the longest jail terms ever imposed in such a case and, apparently, a source of satisfaction to then-U.S. Attorney Rudolph Giuliani.
Twenty-five years later, we have hedge fund bigwig Raj Rajaratnam setting a new record as he serves an 11-year sentence for similar misdeeds. Maybe the lesson is that you’re better off getting caught committing financial crimes in prosperous times. Maybe it’s that persistent violations over decades wear down public patience, accelerating demand for ever more severe punishments that, it’s fancied, will better deter future wrongdoers.
In any event, last week’s conviction of Rajat Gupta for leaking insider information to Rajaratnam has naturally generated much discussion about how the retired head of McKinsey & Company and former Goldman Sachs board member will fare when Judge Jed Rakoff of the Federal District Court in Manhattan passes sentence in October. (Gupta was convicted on one count of conspiracy and three counts of securities fraud.)
Yet the discussion is more than just an odds-maker’s game. Gupta’s ultimate fate raises substantive issues that speak to public perception as well as the narrower considerations that drive judges, influence the future actions of enforcement officials, and impact markets.
Sunday, June 17, 2012
"Valuable" cooperation gets con man's sentence recommendation reduced from LWOP to 5+ years
Federal sentencing practioners know that defendants involved in very serious federal crimes, even those with very long and very serious criminal histories, can escape very long prison terms by making nice with the government and helping the feds go after others. The latest notable example of this reality is reported in this new Chicago Tribune article, which is headlined "Prosecutors: Levine among 'most valuable' witnesses in 3 decades." Here are the details:
Prosecutors called their key witness against former Gov. Rod Blagojevich and two top advisers "one of the most valuable cooperators" in three decades of public-corruption prosecutions in a late-Friday filing arguing for a light sentence.
Stuart Levine could have faced life in prison under federal sentencing guidelines but prosecutors agreed to recommend a sentence of 5 years and 7 months in exchange for Levine's cooperation. Friday's filing comes after U.S. District Judge Amy St. Eve, during a hearing in April, asked for a "lengthy recitation of Levine's cooperation."...
"The government not only used information provided initially by Levine in the case against Blagojevich, it was Levine's decision to cooperate that set in motion the series of events that led directly to the government obtaining the evidence and witnesses it needed to prosecute Blagojevich," prosecutors wrote.Friday's filing, in advance of Levine's June 28 sentencing, recognizes both Levine's cooperation and his extensive criminal history.
More background on the man getting this (justified?) sentencing break from federal prosecutors comes from this local article from a few month ago headlined "How Stuart Levine — a thief and con man — became star witness." Here is a snippet from that article:
On a recent day in federal court, a quiet settled over the courtroom as Stuart Levine answered questions about his past. It wasn’t just the drug-binge parties and snorting 10 lines of animal tranquilizer mixed with crystal meth at the Purple Hotel that stunned the courtroom. It was an interminable list of scams that one man was able to pull off for decades.
Did he steal $6 million from one charity, keep half and never pay it back? “Yes,” he said plainly. Levine, wearing an ill-fitting suit and glasses, was asked if he rewarded a dying friend who entrusted him with his estate by stealing $2 million from the dead man’s children. “Yes,” he said.
He’d answer “yes” to handing out bribes to politicians, to school board members, to a postal union worker and to using his position on state boards to work kickback deals amounting to millions of dollars. Levine even admitted that once the FBI caught him and he swore to tell the truth, he initially lied about Vrdolyak. Was that because, even while under FBI scrutiny, he still wanted to secretly take part in a $1.5 million kickback scheme with Vrdolyak? Levine answered predictably: “Yes.”
June 17, 2012 in Federal Sentencing Guidelines, Offender Characteristics, Procedure and Proof at Sentencing, Purposes of Punishment and Sentencing, White-collar sentencing, Who Sentences? | Permalink | Comments (8) | TrackBack
Saturday, June 16, 2012
Any early federal sentencing predictions after quick conviction in Gupta insider trading case?
As reported here by CNN, "Rajat Gupta, the consummate corporate insider and former director at Goldman Sachs, was found guilty of insider trading on Friday," and it took the "federal jury in New York ... just over a day of deliberation [to find] Gupta guilty of four of six criminal counts." In this New York Times piece, Professor Peter Henning provides a great preview of some sentencing basics now facing Gupta:
The jury convicted Mr. Gupta on tips he made to Mr. Rajaratnam in September and October 2008, about developments at Goldman. Prosecutors had wiretaps of Mr. Rajaratnam describing his source on Goldman’s board, which pointed a finger directly at Mr. Gupta. With sentencing scheduled for Oct. 16, the focus of the case will now shift to his punishment as well as the potential issues his defense lawyers may introduce on appeal.
In recommending prison terms for insider trading, the federal sentencing guidelines for insiders focus primarily on the financial gains made by a defendant. Mr. Gupta did not personally trade in Goldman Sachs or Procter & Gamble shares based on the inside information he received. But by tipping off Mr. Rajaratnam, he is responsible for the transactions conducted through Galleon Group based on the information he provided.
By convicting Mr. Gupta of conspiracy, prosecutors will most likely argue that he is responsible for all trading cited in the indictment — which was estimated at trial to have generated for Galleon over $16 million in gains or in losses avoided. Prosecutors will also seek to add on to the sentence by arguing that Mr. Gupta “abused a position of trust” by leaking information while serving as a director of Goldman and P&G. Based on these two issues, the sentencing guidelines recommend a sentence of 8 to 10 years.
Mr. Gupta will argue for a much lower sentence, claiming that the acquittal on two counts should mean that any trading gains from transactions related to those charges should be excluded from the sentencing calculation. He is also likely to argue that Mr. Rajaratnam himself made the decision on how much to invest, and so the amount of the gain overstates the harm from the insider tips.
But even based solely on the 2008 Goldman trades in which he was convicted of tipping Mr. Rajaratnam, the sentencing guidelines range would still dictate 6 to 8 years in prison. Mr. Gupta is likely to claim that other factors should be taken into consideration — his strong reputation in the business world and extensive charitable efforts — to argue for a much lower sentence, perhaps even home confinement.
Judge Jed S. Rakoff of the Federal District Court in Manhattan will determine the sentence, and he has shown some hostility toward the sentencing guidelines in a previous securities fraud case. So he may be persuaded to impose a lower prison term than the government wants.
In United States v. Adelson, an accounting fraud case, the guidelines calculation called for a life sentence for a company’s former president who had helped cover up an accounting fraud. But Judge Rakoff rejected such a severe punishment, describing “the utter travesty of justice that sometimes results from the guidelines’ fetish with abstract arithmetic, as well as the harm that guideline calculations can visit on human beings if not cabined by common sense.”
You can be sure that Mr. Gupta’s defense team will include the Adelson opinion prominently in its sentencing arguments. And prosecutors naturally will do their best to explain why insider trading is different.
In 2009, Judge Rakoff sentenced the lawyer Marc Dreier to 20 years in prison for leading a scheme that defrauded investors of nearly $700 million, rejecting the government’s recommendation of a 145-year prison sentence. At the sentencing, Judge Rakoff said that “Mr. Dreier is not going to get much sympathy from this court, but he is not Mr. Madoff from any analysis, and that’s why I can’t understand why the government is asking for 145 years.” As a result, prosecutors are likely to temper their sentencing recommendation, and will have to defend their interpretation if they want the court to impose a stiff sentence.
Based on Henning's guideline calculations and my expectation that Gupta's lawyers will put together a strong set of sentencing materials, I would place the over/under betting line for Gupta's sentencing at around 5 years' imprisonment.
My instinct is that Rajaratnam's 11-year prison term providing a functional ceiling on Gupta's sentencing exposure, and that Judge Rakoff is going to be strongly inclined to impose some term of imprisonment. Splitting the difference within those basic parameters, and given Judge Rakoff's historic inclination to resist rigid application of the fraud guidelines, Gupta can reasonably hope for a sentence of only a few years imprisonment. But, especially in this political climate and in the wake of a jury conviction, I am sure prosecutors will be advocating forcefully for a prison term closer to a decade.
UPDATE: This new Bloomberg piece provides lots of background on Judge Rakoff's recent sentencing history in white-collar cases. It notes, inter alia, that last year Judge Rakoff "entenced Winifred Jiau, a Stanford University-educated consultant convicted of corrupting friends and selling confidential information, to four years in prison, less than half of the maximum 10 years sought by federal prosecutors." That datum makes me inclined to move the over/under betting line for Gupta's sentencing down to 4 years' imprisonment.
June 16, 2012 in Federal Sentencing Guidelines, Offender Characteristics, Offense Characteristics, Procedure and Proof at Sentencing, Purposes of Punishment and Sentencing, White-collar sentencing, Who Sentences? | Permalink | Comments (0) | TrackBack
Thursday, June 14, 2012
Will feds seek to (cross)appeal Stanford's sentence of "only" 110 years in prison?
The question in the title of this post is my tongue-in-cheek response to this news (via this article) that " R. Allen Stanford, the Texas financier convicted of fleecing 30,000 investors from 113 countries in a $7 billion Ponzi scheme, was sentenced on Thursday to 110 years in jail." Here is more on the sentencing:
A defiant Mr. Stanford, in a rambling statement to the court before the sentencing, intermittently fought back tears and shuffled papers, and said, “I’m not up here to ask for sympathy or forgiveness. I’m up here to tell you from my heart I didn’t run a Ponzi scheme.” He blamed the government for the collapse of his businesses and asserted that “we could have paid off every depositor and still have substantial assets remaining.”
In response, federal prosecutor, William J. Stellmach, called Mr. Stanford’s version of events “obscene.”
“This is a man utterly without remorse,” Mr. Stellmach said. “From beginning to end, he treated all of his victims as roadkill. He went after the middle class, including people who didn’t have money to lose. People have lost their homes. They have come out of retirement.”
A federal jury in March convicted Mr. Stanford of 13 out of 14 counts of fraud in connection with a worldwide scheme over more than two decades in which he offered fraudulent high-interest certificates of deposit at the Stanford International Bank, which was based on the Caribbean island of Antigua.
Prosecutors argued that Mr. Stanford had consistently lied to investors, promoting safe investments for money that he channeled into a luxurious lifestyle, a Swiss bank account and various business deals that almost never succeeded.
Mr. Stanford’s defense lawyers pleaded for a sentence effectively of time served because of the three years he spent in prison waiting for his trial. Prosecutors recommended 230 years....
As regularreaders know, the feds are not usually too pleased when a district judges imposes a sentence less than half of what prosecutors have sought. In this case, though, I predict confidently that only Mr. Stanford will be appealing. I also predict the Fifth Circuit is unlikely to be moved by any sentencing appeal.
June 14, 2012 in Offense Characteristics, Procedure and Proof at Sentencing, Purposes of Punishment and Sentencing, Scope of Imprisonment, White-collar sentencing, Who Sentences? | Permalink | Comments (9) | TrackBack
You be the sentencing judge: what should "putrescent" Ponzi scheme R. Allen Stanford get?
The latest greatest notorious Ponzi schemer, R. Allen Stanford, is due to be sentenced in federal court in Houston today. Here are the basics and some sentencing predictions from this Bloomberg piece:
R. Allen Stanford, found guilty of leading a $7 billion international fraud scheme by a U.S. jury, will spend the rest of his life in prison if a federal judge grants prosecutors’ request.
Stanford, 62, will be sentenced today by U.S. District Judge David Hittner in Houston. Jurors in March convicted the Stanford Financial Group principal of 13 charges, including five counts of mail fraud and four of wire fraud, each punishable by as long as 20 years in prison.
Prosecutors asked for a 230-year term, the maximum under federal sentencing guidelines. Ali Fazel, one of Stanford’s lawyers, said the defense asked for a sentence of 31 to 44 months, based on a different, much-lower calculation of investors’ losses. Prosecutors contended that such a sentence was tantamount to “time served” for Stanford, who has been in custody since June 2009.
A sentence of about 30 years is more likely, according to Douglas Burns, a New York criminal defense lawyer. “This isn’t the Madoff case,” Burns said, referring to Bernard Madoff, the New York financier who received a 150-year term for a Ponzi scheme that bilked investors of more than twice as much money as Stanford’s victims. “This doesn’t seem to be at the same level.”
Stanford’s jury found he lied to buyers of certificates of deposit issued by his Antigua-based Stanford International Bank Ltd. and sold in the U.S. by his Houston-based securities firm, Stanford Group Co.... “Robert Allen Stanford is a ruthless predator responsible for one of the most egregious frauds in history,” the Justice Department said in its 34-page filing on June 6....
Barry Pollack, Washington criminal defense lawyer, said the government’s recommendation is inappropriate for a symbolic sentence. Stanford would be 77 if he served 15 years and would be unlikely to commit crimes after being released, Pollack said. “It’s hard to take a request for a 230-year sentence seriously,” Pollack said yesterday in a telephone interview.
Burns, a former federal prosecutor, agreed. “The government, I think, is not looking for this 230-year sentence,” he said. Given Stanford’s age, “a life sentence approximates 25 years.”
U.S. District Judge Denny Chin was under “unbelievable pressure” when he sentenced Madoff in 2009, Burns said, adding he doubted Hittner would mete out a comparable punishment. “I don’t think he’s going to give him a Bernie Madoff-like sentence because I don’t think the case is viewed like the Madoff case,” he said. A 12 1/2-year sentence would fairly and severely punish the financier, he said.
Thomas Petters, 54, a Minnesota businessman found guilty of orchestrating a $3.5 billion fraud in Dec. 2009, received a 50- year prison term. Galleon Group LLC co-founder Raj Rajaratnam last year was sentenced to 11 years for insider trading. He will be 55 tomorrow. Enron Corp. Chief Executive Officer Jeffrey Skilling, found guilty of both fraud and insider trading at the world’s biggest energy trading company, got a 24-year term in 2006. He is now 58....
More than 300 victims’ letters have been received by the court. Two fraud victims will address the judge before the financier is punished, according to court papers. “Madoff may go down in history for operating the world’s biggest Ponzi scheme, but I hope Judge David Hittner gives Allen Stanford the ‘bragging rights’ he deserves for operating the world’s most criminal Ponzi scheme,” victims advocate Angela Shaw said in an e-mailed statement. “His actions have ruined thousands of lives, for which he has shown no remorse.”
The evocative adjective "putrescent" comes from a line in the Government's quite compelling sentencing memo (available here), which does quite a nice job painting a picture of Stanford as even worse that Bernie Madoff. That memo, as well as the fact that Stanford went to trial and seems to have lived even more lavishly than Madoff with his ill-gotten gains, leads me to think Stanford may ultimately get a sentence closer to the 230 years recommended by the feds than the merely 30+ months sought by the defense (which seems almost as kooky and silly as the prosecutors' recommendation).
If I were the judge, I would probably would be going into today sentencing hearing with an eye toward a prison term set somewhere between 50 and 100 years. There is no magic in that recommendation, but I do think a fraudster of Stanford's status has earned himself a sentence that leaves him with no prospect of ever leaving prison alive.
June 14, 2012 in Federal Sentencing Guidelines, Offense Characteristics, Procedure and Proof at Sentencing, Purposes of Punishment and Sentencing, Scope of Imprisonment, White-collar sentencing, Who Sentences? | Permalink | Comments (10) | TrackBack
Tuesday, June 12, 2012
Effective commentary on upcoming sentencing of Ponzi schemer Allen Stanford
As reported in this post last week, federal prosecutors have submitted a sentencing memo seeking a 230-year prison term for R. Allen Stanford. Today, via this posting on the DealBook section of the New York Times, Professor Peter Henning provides has some astute thoughts on the upcoming sentencing. The piece is headlined "Viewing Financial Crimes as Economic Homicide," and here are excerpts:
R. Allen Stanford, who was found guilty of operating a multibillion-dollar Ponzi scheme, is likely to receive a sentence later this week that will require him to spend the rest of his life behind bars. If that happens, it will continue a pattern in which white-collar defendants convicted of committing large-scale fraud have received long prison terms, far longer than what has been meted out in the past.
In March, Mr. Stanford, a Texas tycoon, was convicted on 13 counts of fraud and money laundering related to the collapse of Stanford International Bank, based in Antigua. Investors lost billions of dollars in what were billed as high-yield certificates of deposit but turned out to be largely worthless. Thousands of victims throughout the United States and the Caribbean were affected.
In a sentencing recommendation filed in the Federal District Court in Houston, prosecutors asked Judge David Hittner for 230 years in prison, the maximum permitted by federal law for the convictions. Not surprising, Mr. Stanford is seeking a much lower punishment that would effectively result in a sentence of time served since he was jailed after being charged in 2009.
I’m not really going out on a limb by predicting that the actual sentence will be somewhere in between those two recommendations. But how high is the sentence likely to be? ...
One reason prosecutors have asked for such a startlingly high amount for Mr. Stanford is that a court can only sentence a defendant to the maximum permitted under the statute. Thus, prosecutors have asked the judge to impose separate sentences for each violation, totaling 230 years in prison.
If Judge Hittner follows the government’s recommendation, the sentence would exceed the 150-year sentence imposed on Bernard L. Madoff for perpetrating the greatest Ponzi scheme in history. Such a long sentence could never be completely served, so it would be largely symbolic, intended to reflect the impact of Mr. Stanford’s crimes.
While it is unlikely that Judge Hitter will impose the statutory maximum term the government is seeking, it would not be surprising to see a sentence of at least 30 years -- and perhaps as much as 100 years. That would fit in the pattern in recent financial fraud cases in which federal prosecutors sought long prison terms and judges have agreed to punishments that put white-collar defendants in jail for the rest of their lives.
Other defendants found guilty of financial frauds have received stiff sentences. Edward Okun, who was convicted of defrauding customers of $126 million through his tax-deferral service, received a 100-year prison term in August 2009 after prosecutors recommended a sentence of 400 years. Thomas J. Petters received a 50-year prison sentence in April 2010 for defrauding investors of approximately $3.7 billion after prosecutors recommended he receive the maximum term of 335 years. Lee B. Farkas was sentenced to 30 years in June 2011 for his role as an executive at the mortgage lender Taylor, Bean & Whitaker after prosecutors urged a sentence of 385 years for a fraud that resulted in the collapse of Colonial Bank.
Mr. Stanford faces two significant hurdles in seeking a shorter sentence . First, he has not exhibited any contrition or remorse that can sway a judge. He has maintained his innocence at trial, and he plans to appeal the convictions.
A second, greater problem is the attitude of many judges after the financial crisis. Many have come to view financial frauds as crimes worthy of the type of sentences that was once reserved for violent offenders. White-collar defendants are no longer given light sentences because they were not viewed as threats to society.
Prosecutors often speak of the deterrent value that a long sentence will have on other financial executives who will be chastened to avoid defrauding investors and clients. As I discussed last year in a piece on Mr. Farkas’s sentencing, that is a message likely to be lost on other corporate executives because they do not view themselves as engaging in the type of misconduct that can lead to convictions, or life sentences.
Sentencing a white-collar defendant to a substantial prison term is really more about expressing society’s outrage at a misconduct that took advantage of investors and destroyed their financial well-being. These types of fraud are akin to economic homicide, and courts are treating them more and more as such.
Recent related post:
Thursday, June 07, 2012
"Criminal Affirmance: Going Beyond the Deterrence Paradigm to Examine the Social Meaning of Declining Prosecution of Elite Crime"
The title of this post is the title of this new article authored by Mary Kreiner Ramirez available now via SSRN. Here is the abstract:
Recent financial scandals and the relative paucity of criminal prosecutions against elite actors that benefited from the crisis in response suggest a new reality in the criminal law system: some wrongful actors appear to be above the law and immune from criminal prosecution. As such, the criminal prosecutorial system affirms much of the wrongdoing giving rise to the crisis. This leaves the same elites undisturbed at the apex of the financial sector, and creates perverse incentives for any successors. Their incumbency in power results in massive deadweight losses due to the distorted incentives they now face. Further, this undermines the legitimacy of the rule of law and encourages even more lawlessness among the entire population, as the declination of prosecution advertises the profitability of crime.
These considerations transcend deterrence as well as retribution as a traditional basis for criminal punishment. Affirmance is far more costly and dangerous with respect to the crimes of powerful elites that control large organizations than can be accounted for under traditional notions of deterrence. Few limits are placed on a prosecutor’s discretionary decision about whom to prosecute, and many factors against prosecution take hold, especially in resource-intensive white collar crime prosecutions. This article asserts that prosecutors should not decline prosecution in these circumstances without considering its potential affirmance of crime. Otherwise, the profitability of crime promises massive future losses.
Wednesday, June 06, 2012
Federal prosecutors urging 230-year sentence (!?!) for Ponzi schemer Allen Stanford
As reported in this new Bloomberg piece, headlined "Stanford Should Get 230-Year Term in Ponzi Scheme, U.S. Says," apparently federal prosecutors believe that only a sentence 10 times the remaining life expectancy of a Ponzi schemer is sufficient punishment. Here are the details:
Convicted Ponzi scheme operator R. Allen Stanford should be sentenced to the maximum allowable term of 230 years in prison, prosecutors argued in court papers. Stanford, who the government said is seeking a sentence of "time served," is to be sentenced next week in U.S. District Court in Houston.
"Robert Allen Stanford is a ruthless predator responsible for one of the most egregious frauds in history," the Justice Department said in a 34-page filing. "Displaying an audacity that only further illustrates his depravity, Stanford seeks a sentence of time served, brazenly arguing that there are no losses" and rehashing arguments rejected by the jury that convicted him in March.
Stanford, 62, was found guilty of defrauding more than 20,000 investors of $7 billion through the sale of what the government called bogus certificates of deposit at his Antigua- based Stanford International Bank Ltd. A court-appointed receiver gathering the ex-billionaire's assets has located less than $500 million in cash and assets to use to repay investors.
Stanford's own sentencing recommendation was filed under seal. Prosecutors said he asked U.S. District Judge David Hittner for leniency, in part because he is a first-time offender. Stanford also denied that investors suffered any losses while he was running Stanford Financial Group and "complains that he was stripped of all his assets," by the government, prosecutors said.
The recommended 230 years is at the top of the range of sentences for Stanford's crime under federal guidelines, the prosecutors said in the filing. "Nothing speaks more eloquently of Stanford's character than his sentencing arguments in this case," the Justice Department lawyers wrote. "After everything that he has done to so many innocent victims, Stanford does not show a hint of remorse for his misconduct, only the same arrogant, narcissistic behavior that led to it."
Stanford has been incarcerated as a flight risk since his indictment in June 2009. He was charged about three months after U.S. securities regulators seized his companies on suspicion they were a "massive" Ponzi scheme, in which late-arriving investors' funds were used to pay earlier investors.
Stanford's lawyers have requested a prison sentence of 31 to 44 months, prosecutors said.
Robert A. Scardino, one of Stanford's criminal-defense lawyers, said by phone that his side is "hoping for the best and preparing for the worst" at the June 14 sentencing. Scardino declined to comment further, citing a court order not to speak publicly about the case.
I understand completely why federal prosecutors are eager to huff and puff and demand a sentence in this high-profile case that can be measured in decades, not just in months. But to request a sentence of 230 years for a man in his 60s is not just silly, it is truly preposterous in light of the mandate in federal law for judges to impose sentences that are "sufficient but not greater than necessary" to achieve congressional punishment purposes.
I would love for the sentencing judge in this case to request that federal prosecutors explain in writing just just why they believe that a sentence of, say, 75 years would be insufficient under these circumstances and why they think only a sentence more than three times that length is needed in this case.
Monday, June 04, 2012
Tipping lawyer gets record long insider trading sentence
As reported in this AP article, federal prosecutors notched another record white-collar sentence today in federal court in New Jersey. Here are some of the notable sentencing details:
A former attorney who admitted feeding privileged information to two confederates over the course of a 17-year insider stock trading scheme was sentenced Monday to 12 years in prison, the longest sentence ever handed out for insider trading, and the trader who reaped more than $20 million in profits from the tips received a nine-year sentence, authorities said.
U.S. Attorney Paul Fishman said former attorney Matthew Kluger's sentence is the longest handed out for that crime. The scheme was carried out from 1994 to 2011 and is believed to be the longest ever uncovered by law enforcement, though the crimes charged dated only to 2005....
The 51-year-old Kluger, of Oakton, Va., and former trader Garrett Bauer, 44, of New York, admitted last year they conspired with a third man, New York mortgage broker Kenneth Robinson, who acted as the middleman. Robinson was arrested in 2011 and secretly recorded conversations with the other men, including one in which Bauer discussed lighting $175,000 on fire to erase his fingerprints, according to court documents. Robinson, who pleaded guilty to his role in the scheme, is scheduled to be sentenced Tuesday.
Kluger admitted passing advance information on company mergers to Robinson, who would give it to Bauer. The trio was estimated to have made $11 million on tech company Oracle's acquisition of Sun Microsystems.
Assistant U.S. Attorney Judith Germano told the judge that Kluger was the mastermind. "He had wealth, intelligence and family support," she said. "He abused it all. Why? Because he could." Defense Attorney Alan Zegas argued for a shorter sentence for Kluger and said that Bauer realized the lion's share of the profits while Kluger took only a small fraction of the total and was not aware of many trades that Bauer made on his own.
U.S. District Judge Katharine Hayden rejected Zegas' argument and said that every one of more than 30 insider trades made by Bauer was based on information provided by Kluger, whom she characterized as "amoral" and "thuggish." She compared the trio to drug dealers for the way they used throwaway cellphones and multiple ATM accounts to withdraw cash and exchange it in envelopes or bags.
Zegas said he would appeal the sentence. Kluger, who said in remarks to the court that he was "deeply, deeply sorry," insisted afterward that the sentence was too harsh. Hedge fund billionaire Raj Rajaratnam was sentenced to 11 years in October after being convicted in the biggest insider trading case in U.S. history. "I guess it's better to take $68 million and go to trial and be unwilling to accept responsibility for what you did," Kluger said, referring to Rajaratnam, who maintained that he traded only on publicly available information.
Defense attorney Michael Bachner attempted to persuade the judge to reduce Bauer's sentence by mentioning the numerous public speaking appearances Bauer has made since his arrest at business schools and law schools and the extensive work he has done with children's charities.
Intriguingly, based on other press reports, it appears that both of these sentences were imposed within the calculated applicable guideline ranges.
Tuesday, May 22, 2012
Two interesting Politico reports on high-profile federal (not-yet-sentencing) cases
One professional vice made worse by this blog is my tendency to root for interesting and high-profile criminal defendants to get convicted so that I have interesting and high-profile sentencings to discuss. This spring, there are two on-going federal trials that fit this bill. And today, as reported in these two posts at Josh Gerstein's Under the Radar column at Politico, it seems are notable developments in both trials:
Anyone eager to start the predictions game in the comments either as to likely verdicts or possible sentences?
Tuesday, May 15, 2012
Fascinating DOJ report on number of prosecuted Wall Street executives
Yesterday's Wall Street Journal had this notable report on an exchange of letters between Senator Charles Grassley and the US Department of Justice concerning how many Wall Street executives have been prosecuted and convicted for financial crisis misdeeds. The article is headlined "Missing: Stats on Crisis Convictions," and here are excerpts:
It is a question that has been asked time and again since the financial crisis: How many executives have been convicted of criminal wrongdoing related to the tumultuous events of 2008-2009? The Justice Department doesn't know the answer.
That is because the department doesn't keep count of the numbers of board-level prosecutions. In a response earlier this month to a March request from Sen. Charles Grassley (R.,Iowa), the Justice Department said it doesn't hold information on defendants' business titles. "Consequently, we are unable to generate the [requested] comprehensive list" of Wall Street convictions stemming from the 2008 meltdown, the letter from the Department of Justice to Mr. Grassley said.
The explanation raises eyebrows among legal experts. Adding up the numbers of financial chief executives and chief financial officers put behind bars for their role in the crisis shouldn't be too difficult, they say.
"It's not a big number to count, that's for sure," said Chris Swecker, who ran the Federal Bureau of Investigation's criminal division from 2004 to 2006. William Black, a former bank regulator, said the government used to keep these figures....
The Securities and Exchange Commission highlights on its website its civil crisis-related enforcement actions against senior corporate officers -- a total of 55 so far. Mr. Black, an associate professor of economics and law at the University of Missouri-Kansas City, said it seems "smart" of the Justice Department to no longer keep score of boardroom prosecutions. "I can tell you why you wouldn't keep the data," he said. "Because it would be really embarrassing."
A spokeswoman for the Justice Department said the numbers of financial-fraud cases being brought has increased since the crisis. "When we find sufficient evidence of criminal conduct, we will not hesitate to bring charges," she added....
In the three years since the crisis peaked in October 2008, the Justice Department has filed financial-fraud cases against 14,843 defendants, according to the letter to Mr. Grassley. Over that time, it said, more than 1,100 people have been sentenced to prison for mortgage fraud.
The letter names 17 CEOs and other senior corporate officers convicted of significant financial crimes. Most of the 17 committed frauds that weren't directly related to the financial crisis. They include Allen Stanford, convicted in March of running a Ponzi scheme; Raj Rajaratnam, jailed last year for insider trading; and Zevi Wolmark, who pleaded guilty this year to bid-rigging in the municipal-finance market. Courtney Dupree, convicted last year of a $21 million bank fraud, makes the Justice Department's list.
But only one of the cases mentioned by the Justice Department in the letter to Mr. Grassley concerns alleged wrongdoing by a Wall Street firm directly related to the financial crisis: the criminal charges filed this year against three former Credit Suisse Group AG CSGN.VX +0.16% employees for allegedly inflating mortgage-bond values.
Mr. Grassley said the letter "substantiates my suspicion" the government "isn't going after the big banks, big financial institutions or their executives." The Justice Department is instead "hiding behind a bunch of mortgage fraud prosecutions," Mr. Grassley said in a statement.
But officials said the scarcity of crisis-related prosecutions might reflect a lack of criminal behavior, rather than any failure of law enforcement.... The only criminal trial against Wall Street executives for alleged wrongdoing related to the crisis involved two former Bear Stearns hedge-fund managers. Their acquittal on all charges in 2009 was a significant setback for federal prosecutors.
The WSJ has provided links to Senator Grassley's letter and DOJ's response, both of which are interesting reading, though I think one needs an on-line subscription to get this access.
Wednesday, May 02, 2012
DOJ conducts "nationwide takedown" of 100+ persons involved in Medicare fraud
I just received a whole bunch of e-mails from the US Justice Department concerning what it is calling a "nationwide takedown" of lots and lots of persons involved in Medicare fraud. This primary (and very lengthy) official press release provides the basics:
Attorney General Eric Holder and Health and Human Services (HHS) Secretary Kathleen Sebelius announced today that a nationwide takedown by Medicare Fraud Strike Force operations in seven cities has resulted in charges against 107 individuals, including doctors, nurses and other licensed medical professionals, for their alleged participation in Medicare fraud schemes involving approximately $452 million in false billing....
This coordinated takedown involved the highest amount of false Medicare billings in a single takedown in strike force history.
HHS also suspended or took other administrative action against 52 providers following a data-driven analysis and credible allegations of fraud. The new health care law, the Affordable Care Act, significantly increased HHS’s ability to suspend payments until an investigation is complete.
The joint Department of Justice and HHS Medicare Fraud Strike Force is a multi-agency team of federal, state and local investigators designed to combat Medicare fraud through the use of Medicare data analysis techniques. More than 500 law enforcement agents from the FBI, HHS-Office of Inspector General (HHS-OIG), multiple Medicaid Fraud Control Units, and other state and local law enforcement agencies participated in the takedown. In addition to making arrests, agents also executed 20 search warrants in connection with ongoing strike force investigations....
The defendants charged are accused of various health care fraud-related crimes, including conspiracy to commit health care fraud, health care fraud, violations of the anti-kickback statutes and money laundering. The charges are based on a variety of alleged fraud schemes involving various medical treatments and services such as home health care, mental health services, psychotherapy, physical and occupational therapy, durable medical equipment (DME) and ambulance services.
According to court documents, the defendants allegedly participated in schemes to submit claims to Medicare for treatments that were medically unnecessary and oftentimes never provided. In many cases, court documents allege that patient recruiters, Medicare beneficiaries and other co-conspirators were paid cash kickbacks in return for supplying beneficiary information to providers, so that the providers could submit fraudulent billing to Medicare for services that were medically unnecessary or never provided. Collectively, the doctors, nurses, licensed medical professionals, health care company owners and others charged are accused of conspiring to submit a total of approximately $452 million in fraudulent billing....
In Miami, a total of 59 defendants, including three nurses and two therapists, were charged today and yesterday for their participation in various fraud schemes involving a total of $137 million in false billings for home health care, mental health services, occupational and physical therapy, DME and HIV infusion....
Seven individuals were charged today in Baton Rouge, La., for participating in a fraud scheme involving $225 million in false claims for CMHC services....
In Houston, nine individuals, including one doctor and one nurse, were charged today with fraud schemes involving a total of $16.4 million in false billings for home health care and ambulance services....
Eight defendants, including two doctors, were charged in Los Angeles for their roles in schemes to defraud Medicare of approximately $14 million. In one case, two individuals allegedly billed Medicare for more than $8 million in fraudulent billing for DME.
In Detroit, 22 defendants, including four licensed social workers, were charged for their roles in fraud schemes involving approximately $58 million in false claims for medically unnecessary services, including home health, psychotherapy and infusion therapy.
In Tampa, Fla., a pharmacist was charged with illegal diversion of controlled substances. One defendant was charged last week in Chicago for his alleged role in a scheme to submit approximately $1 million in false billing to Medicare for psychotherapy services.
Monday, April 30, 2012
Florida cases support(?) DOJ's expressed concerns about white-collar sentencing disparities
In a speech last month (reported here), AAG Lanny Breuer continued the Justice Department's tendency to lament what it sees as growing post-Booker sentencing disparities, especially in white-collar sentencing. Specifically, in this speech, Breuer complained that "with increasing frequency, federal district courts have been sentencing fraud offenders -- especially offenders involved in high-loss fraud cases -- inconsistently." Assuming DOJ is keeping a file with examples of this disparity, this new sentencing story from Florida, headlined "Marian Morgan sentenced to 35 years in prison," provides seemingly strong support for these concerns. Here is how the local story gets started:
Convicted in September for running a multimillion-dollar Ponzi scheme from her Sarasota mansion, Marian Morgan on Friday was sentenced to 35 years in federal prison.
That's more than twice as long as the sentences for two other notorious Sarasota-based fraud perpetrators — Arthur Nadel and Beau Diamond — even though Morgan's scheme involved fewer victims and less money overall....
Defense attorney Todd Foster argued that Morgan, 57, would be unlikely to turn to crime again if released after 15 to 20 years. The judge countered that recidivism would not be an issue because of the length of the sentence.
A federal pre-sentencing report recommended Morgan's prison time be based on the size of the fraud; the number of victims; and the sophistication of the crime, among other criteria. Morgan and her husband, John, stole roughly $28 million from 87 victims, prosecutors said during trial.
Of course, what looks on the surface to be an ugly example of so-called sentencing disparity might upon closer examination really turn out to be more of an ugly example of the so-called trial penalty. Consider these additional details:
Morgan and her husband were indicted last summer on 22 felony counts that included wire and mail fraud, money laundering and conspiracy. Their Ponzi scheme came to light shortly after two others that were also hatched in Sarasota — Nadel's Scoop Management and Beau Diamond's Diamond Ventures scams.
Diamond was convicted at trial of stealing more money than the Morgans and from more investors. He is currently serving a 15-year sentence in federal prison in Miami. Nadel robbed more than 400 investors of $162 million, prosecutors determined. Instead of going to trial, Nadel plead guilty to 15 felony fraud counts and was sentenced to 14 years in prison in October 2010. He died earlier this month in North Carolina at age 79.
In contrast to his wife, John Morgan received a 10-year sentence after pleading guilty to a pair of felony counts. He also agreed to co-operate with prosecutors — which included providing information against his wife....
Marian Morgan, who as managing director of Morgan European Holdings had the most interaction with investors, was defiant to the end. She turned down a plea deal last fall that would have limited her sentence to 18 years, choosing instead to go to trial....
[Morgan's] victims were lured by the promise of monthly double digit returns, with payoffs as short as three months in some cases. Instead, investors received only frequent emails from Marian Morgan, which promised payments were to arrive soon. She also offered detailed explanations concerning delays, and later in the scheme threatened that investors would never see their principal again if they contacted authorities....
Morgan plans to appeal her sentence through Tampa defense attorney Barry Cohen. Long and other victims have alleged the money to pay both Cohen and Foster may have come from investors in the Ponzi scheme. Morgan will likely be imprisoned well into her eighties, even with time already served in Pinellas and time off for good behavior.
Based on this article, it would seem that the "going rate" at sentencing for a significant Ponzi scheme in south Florida is somewhere around 15-years in federal prison. With this number in mind, the 10-year prison term given to the cooperating Mr. Morgan seems roughly in line with local norms with a five-year discount for cooperation. And the plea offer capping Ms. Morgan's sentencing exposure at 18 years coming from the feds also seems reasonable under the circumstances.
And yet Ms. Morgan gets with a 35-year prison term (and I suspect that the recommended guidelines range may have been even higher). If DOJ is truly concerned about unwarranted sentencing disparity in financial fraud cases — rather than, as I fear, really just concerned about the post-Booker potential for unwarranted sentencing leniency or about some defendants who have the temerity to exercise their trial rights not having to pay an extra heavy sentencing price — then federal prosecutors ought to consider supporting Ms. Morgan's sentencing appeal to the Eleventh Circuit. But I would bet a whole lot of money that on appeal federal prosecutors will defend this extremely long white-collar sentence as reasonable even though it surely does appear out of line with the sentences given to similar defendants convicted of similar crimes.
Saturday, April 28, 2012
Unusual (but justified) three-strikes 25-to-life sentence for repeat California fraudster
This Los Angeles Times article, headlined "Housing scam brings up to life sentence under three-strikes law," reports on an unusual (but arguably justified) long state prison term for a repeat fraudster. Here are the details:
An Orange County man who swindled elderly people out of their homes after promising to help them avoid foreclosure was sentenced to 25 years to life in prison under California's tough three-strikes law. Defense lawyers and prosecutors across the state could not recall any other case in which a white-collar offender received such a lengthy sentence under a statute typically applied in violent crime cases.
The sentencing of Timothy Barnett was unusual because his entire criminal record involved fraud. The 49-year-old was convicted last month of 17 felonies for tricking five people into unknowingly granting him title to their homes. He had been convicted of similar charges in the 1990s.
"The worst thing you can do is take somebody's home," Los Angeles County Superior Court Judge Stephen A. Marcus said Friday in explaining the lengthy sentence. "Instead of helping people, he stripped the equity from their homes and left five people homeless," the judge said. "Even Bernie Madoff didn't take people's homes from them."
Defense attorney Amy Konstantelos had urged the judge to impose a lesser sentence, noting that Barnett had never been convicted of a violent crime. "Three strikes should never be used in a case like this," she said after the sentencing in Los Angeles. "It's another reason the law should be amended." Konstantelos said she intended to file an appeal.
Barnett's latest crimes occurred between 2005 and 2007. The victims were older residents of poor South Los Angeles communities who had used the explosion of real estate values to borrow against their equity, only to fall behind on the payments. That's when Barnett appeared. Victims testified that he went to their homes and prayed with them, saying he could help keep their homes, bring loans current and reduce monthly payments. What Barnett didn't make clear enough was that he would end up owning the homes, Marcus said. Along with their homes, the victims cumulatively lost nearly $900,000 of equity to Barnett....
Many people across the country have been accused of victimizing desperate homeowners since the real estate market collapsed in 2008, without facing a potential life sentence. What set Barnett's case apart was two prior "strikes" he received after pleading guilty to two burglary charges in the 1990s. That made him eligible for a life sentence if convicted of a new felony, as he was in March....
[Deputy Dist. Atty. Robert] Knowles, the prosecutor, said he was pleased with the sentence. "I think it's appropriate, given the facts of the case and the purpose of the three-strikes law, which is to protect citizens from recidivist offenders," Knowles said.
Thursday, April 26, 2012
Significant (but below-guideline) prison term for corrupt NY state pol
This New York Times article, headlined "Kruger Sentenced to Seven Years in Corruption Case," reports on a notable white-collar federal sentencing today. Here are a few details:
Carl Kruger, the once-powerful state senator from Brooklyn who resigned his office in disgrace and pleaded guilty to corruption charges in December, was sentenced to seven years in prison on Thursday by a federal judge in Manhattan. Mr. Kruger, 62, was the first defendant to be sentenced in a widespread bribery conspiracy case that originally ensnared eight people, and was seen as offering yet more evidence of the apparent unending wave of corruption in Albany.
Prosecutors had asked the judge, Jed S. Rakoff of Federal District Court, to impose 9 to 11 and a quarter years, as recommended under the advisory federal sentencing guidelines. The judge issued the lesser sentence to Mr. Kruger, citing his "many good deeds." But he made it clear that such credit was outweighed by the fact that Mr. Kruger had entered into "extensive, long-lasting, substantial bribery schemes that frankly were like daggers in the heart of honest government."...
Mr. Kruger, who was elected to the State Senate in 1994 and rose to become the chairman of the Senate Finance Committee, had been accused by the authorities of accepting over $1 million in bribes from two hospital executives, a prominent lobbyist and a health care consultant. In return, he agreed to take official action to benefit them or their clients, prosecutors said. As part of his plea deal, Mr. Kruger agreed to forfeit $450,000....
Mr. Kruger was convicted of two counts of conspiracy to commit honest services fraud, and two counts of conspiracy to commit bribery. He faced up to 50 years in prison, Judge Rakoff had told him in December.
Dr. Turano, 50, who also pleaded guilty, to one count of conspiracy to commit bribery, was sentenced to two years in prison by Judge Rakoff, who again chose a more lenient sentence than the federal guidelines had called for.
Preet Bharara, the United States attorney in Manhattan, said the sentencing of Mr. Kruger and Mr. Turano “takes us one step closer to closing this sorry chapter in the continuing story of public corruption in New York State and City government.”...
Mr. Kruger’s lawyer, Benjamin Brafman, had asked the judge to impose only “a short period of incarceration,” and in a letter, described Mr. Kruger as “a true friend” for whom “the shame is forever, and a brilliant career has been destroyed beyond redemption.”
Wednesday, April 18, 2012
Intriguing Second Circuit ruling on restitution awards and plain error
Today the Second Circuit handed down an interesting little white-collar crime ruling in US v. Zangari, 10-4546 (2d Cir. Apr. 18, 2012) (available here), which gets started this way:
In this appeal, we consider, as a matter of first impression in this Circuit, the propriety of substituting a defendant’s gain for his victims’ losses in calculating restitution under the Mandatory Victim’s Restitution Act (“MVRA”), 18 U.S.C. §§ 3663A–3664. Although we join several of our sister circuits in concluding that such a substitution is error, we decline to exercise our discretion under Federal Rule of Criminal Procedure 52(b) to notice the error in this case because the defendant failed to object to the restitution calculation before the District Court and has not satisfied his burden of persuading us that the erroneous restitution order both “affected [his] substantial rights” and “seriously affect[s] the fairness, integrity or public reputation of judicial proceedings.” Puckett v. United States, 556 U.S. 129, 135 (2009) (internal citation and quotation marks omitted). The judgment of the District Court is therefore affirmed.
April 18, 2012 in Criminal Sentences Alternatives, Procedure and Proof at Sentencing, Sentences Reconsidered, Victims' Rights At Sentencing, White-collar sentencing | Permalink | Comments (1) | TrackBack
Monday, April 16, 2012
Eleven lawyers — five funded by taxpayers — now involved in Clemens perjury trial
As reported in this new AP piece, which Fox News has given the fitting and lovely headline "Feds bulk up for Roger Clemens perjury retrial," a whole lot of lawyers are now involved in the trial fight over whether the Rocket lied to Congress about his steroid use. Here are the pricey details:
The Justice Department, embarrassed by blundering into a mistrial of Roger Clemens last year, has added more prosecutors as it tries again to convict the famed pitcher of lying to Congress when he said he never used performance-enhancing drugs. Jury selection in the new trial begins Monday.
The legendary former pitcher, who famously reveled in staring down hitters, will face a prosecution lineup of five lawyers -- more than double the two from the first trial.
Last July, U.S. District Judge Reggie Walton declared a mistrial on only the second day of testimony, after prosecutors showed jurors evidence that had been ruled inadmissible. Walton also will preside over the new trial, which is expected to last four weeks to six weeks.
The Clemens team won't be outgunned. It has six lawyers working on the case, led by Houston lawyer Rusty Hardin, whose Rusty Hardin & Associates has represented sports stars such as quarterback Warren Moon, baseball star Wade Boggs and NBA great Scottie Pippen, each a Hall of Famer....
Michael McCann, a law professor and director of the sports law institute at Vermont Law School, said it was unusual to have so many prosecutors "for a perjury case that isn't terribly complicated."... McCann said the department has extra motivation to convict Clemens, given the amount of money spent on the case and the underwhelming outcome of its more-than-seven-year investigation of Barry Bonds over steroids.
Bonds, baseball's career home run leader, was found guilty last year on just one count, obstruction of justice, for giving an evasive answer to a grand jury when asked about drug use. He received a sentence of 30 days confinement at his estate in Beverly Hills. Prosecutors dropped three other counts charging Bonds with making false statements after the jury deadlocked on those charges. Bonds has appealed his conviction.
"For the government to lose this case after obtaining a very mild victory against Bonds," McCann said, "would invite a lot of questions about the appropriateness of these prosecutions."...
If convicted on all six charges, Clemens faces a maximum sentence of up to 30 years in prison and a $1.5 million fine. Maximum penalties are unlikely because Clemens doesn't have a criminal record, but Walton made plain at the first trial that Clemens was at risk of going to jail. Under U.S. sentencing guidelines, Clemens probably would face up to 15 months to 21 months in prison.
As I have explained in some prior post, I think the prosecution of Clemens is MUCH more justifiable than some other "lying about steroids" cases. In the wake of being named in the Mitchell report on steroid use in baseball, Clemens essentially requested a chance to "clear" his name through high-profile televised testimony to Congress. Though I have limited sympathy for any high-profile liars and cheats, I am especially unsympathetic toward those like Clemens who, in essence, actively promote their lies. In addition, I personally view lying under oath to Congress as an even more serious offense than lying to government officials in other settings.
That all said, I would love to see some kind of reasonable accounting of what the lengthy Clemens prosecution has already cost federal taxpayers. I would not be at all surprised if the final "bill" for this single case may end up making all the monies recently wasted by the GSA during its conference boodoggles look like chump change.
Friday, April 13, 2012
US Sentencing Commission promulgates new guideline amendments
As reported in this official press release, earlier today "the United States Sentencing Commission promulgated amendments to the federal sentencing guidelines responding to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) regarding securities fraud, mortgage fraud, human rights offenses, drug offenses, and other offenses." Here are some of the specifics via this press release:
The Dodd-Frank Act contained directives to the Commission to review the fraud guideline with respect to securities fraud, fraud on financial institutions, and mortgage fraud. Judge Patti B. Saris, chair of the Commission, noted “Fraud offenses represent almost ten percent of the federal criminal docket annually, and have been the focus of congressional attention as evidenced by the directives to the Commission.” Judge Saris explained, “The Commission’s action today increases penalties for insider trading cases and ensures that no defendant will receive a reduced penalty because of a federal intervention, such as a bailout. The Commission also adopted presumptive rules governing the calculation of loss in mortgage and securities fraud cases.”
“This is the first step in a multi-year review of the fraud guideline,” stated Judge Saris. “We have received feedback from a number of stakeholders that broader review of the operation of the fraud guideline should be undertaken. Specifically, we have heard from the courts, defense attorneys, and prosecutors that the interaction of the loss attributed to an offense and the number of victims in an offense (the loss and victims tables in the guidelines), particularly in high-loss fraud cases, may result in disproportionate or disparate sentences. This is an area of the guidelines that the Commission must continue to review in a comprehensive manner.”...
The Commission also promulgated an amendment to the federal sentencing guidelines to cover substantive human rights violations.... The Commission also promulgated an amendment to the federal sentencing guidelines to address the growing number of federal drug cases involving the stimulant “BZP.”... The Commission also promulgated an amendment that provides a sentence reduction under the guidelines for certain low-level, non-violent offenders convicted of offenses involving precursor chemicals, which parallels provisions already in the federal sentencing guidelines for low-level, non-violent drug offenders who meet certain criteria.
The Commission also resolved a circuit conflict by confirming that for purposes of calculating a defendant’s criminal history under the federal sentencing guidelines, driving while intoxicated, driving under the influence and similar offenses are, without exception, always counted. The Commission’s actions today also resulted in amendments to the guidelines covering contraband cell phones in prison, cigarette offenses, trafficking in fake Indian goods, and animal crush videos.
The Commission must submit its 2011-2012 amendment package to Congress by May 1, 2012. Congress has 180-days to review the amendments submitted by the Commission. The amendments have a designated effective date of November 1, 2012, unless Congress affirmatively acts to modify or disapprove them.
An "unofficial" version of the new proposed amendments can be accessed at this link. They run 62 (fun-loving) pages, and I hope to find time this weekend to try to figure out the biggest story within.
Friday, April 06, 2012
Russian arms dealer gets below-guideline federal sentence of 25 years
As reported in this Bloomberg article, which is headlined "Viktor Bout Gets Minimum Prison Term of 25 Years for Weapon Plot," a notorious arms dealer actually got preety nice treatment at his federal sentencing yesterday. Here are the sentencing specifics:
Viktor Bout, the international arms dealer convicted of conspiracy for plotting to sell weapons to a Colombian terrorist group, was sentenced to 25 years in prison, the minimum term he faced.
A former officer in the Soviet Union, Bout, 45, was also sentenced yesterday to five years’ probation and ordered to forfeit $15 million by U.S. District Judge Shira Scheindlin in Manhattan.... Scheindlin rejected prosecutors’ arguments that Bout be jailed for life, saying he responded to the deal presented in the sting operation and otherwise wouldn’t have sought out an opportunity to sell weapons to be used against Americans....
Scheindlin said that while Bout “has sold weapons to some of the most vicious and violent regimes in the world,” it was unfair to impose an increased sentence applicable to terrorists. The judge said she would recommend that Bout serve his sentence near his lawyers in New York. She also said she would ask the Bureau of Prisons not to put Bout in solitary confinement.
Bout’s lawyer, Albert Y. Dayan, had urged the judge in a letter to refuse to punish Bout and not to become “an unwilling party in his wrongful prosecution.” In the hearing yesterday, he asked Scheindlin to give his client the minimum 25-year term. Federal sentencing guidelines, which are not binding, called for a life sentence, prosecutors said....
At Bout’s trial, Andrew Smulian, an associate who pleaded guilty and cooperated with the government, and two undercover agents testified that Bout offered to sell them millions of dollars in weapons, including surface-to-air missiles, armor- piercing rocket launchers and AK-47 rifles. Prosecutors said Bout, who also worked as an arms dealer in East Africa in the 1990s, controlled a fleet of as many as 50 cargo planes capable of transporting weapons and military equipment to Africa, South America and the Middle East.
During his address to the judge, which was translated by an interpreter, Bout thanked his lawyers and court officers who had shown him respect. He pointed to government agents in the courtroom and said, “Let God forgive you, and you will answer to him, not to me.”
Friday, March 30, 2012
Interesting appeal by federal prosecutors of interesting white-collar sentence
This local press report, headlined "U.S. appeals sentence of Michael Peppel, former MCSi executive," reports on federal prosecutors' decision to appeal an interest white-collar sentence that gave a maximum fine but minimum jail time to a corporate criminal. Here are the basic details:
Federal prosecutors are challenging the seven-day jail sentence given last year to Michael E. Peppel, former top executive of MCSi Inc., for his guilty pleas to felony crimes related to the company’s 2003 collapse and insolvency.
Peppel’s sentence failed to reflect the seriousness of his offenses, provide just punishment, promote respect for the law or send a message of deterrence for those who would commit similar crimes, U.S. Attorney Carter Stewart argued in his written arguments filed with the 6th U.S. Circuit Court of Appeals on Tuesday.
Stewart asked the Cincinnati-based appeals court to throw out the seven-day punishment and order resentencing by U.S. District Judge Sandra Beckwith, who sentenced Peppel on Oct. 24.... Peppel was also fined the legal maximum of $5 million, must disclose his criminal record to all employers, must submit to random drug testing and must do community service, according to his sentencing terms. He has already served his seven days behind bars.
His lawyer, Ralph Kohnen, said the defense will fight efforts to impose a longer term of incarceration on Peppel, who was MCSi’s president and chief executive officer. “The government’s decision was unfortunate,” Kohnen said Thursday. “Judge Beckwith’s sentence was thoughtful and appropriate. Her sentence was just, proper and fair.”
Under a court-approved agreement that took effect this month, Peppel has committed to pay $3,000 per month toward his $5 million fine. At that rate, it would take him 50 years to pay $1.8 million of the fine and 100 years to have paid $3.6 million of it.
Peppel, 44, avoided trial in August 2010 by pleading guilty to willful false certification of a financial report by a corporate officer; money laundering, and conspiracy to commit securities fraud. He could have faced up to 50 years in prison. The government said his crimes helped sink MCSi, a Kettering-based computer and audiovisual equipment company. Its failure cost 1,300 employees their jobs, benefits and retirement income and left investors holding worthless stock.
Beckwith initially determined that, under federal sentencing guidelines, a prison term for Peppel of eight to 10 years would be appropriate. But after the defense presented 113 letters of support from Peppel’s family and friends, and argued that he had already been publicly humiliated and agreed to a lifetime ban on his ever serving again as a corporate chief executive, the judge imposed the seven-day jail term. Beckwith said she does not believe Peppel is likely to repeat his crimes and does not represent a threat to the public.
For a variety of reasons, in cases like this in which there appears to be no threat to public safety, I see as quite reasonable a judge's decision to impose a huge fine (which makes a defendant essentially an indentured servant to federal taxpayers for life) rather than requiring a lengthy prison term (which requires federal taxpayers to pay for a defendant's room-and-board while he catches up on reading at Club Fed). But, obviously, federal prosecutors have a different view and I will be very interested to see how this appeal ends up playing out in the Sixth Circuit.
March 30, 2012 in Booker in district courts, Booker in the Circuits, Criminal Sentences Alternatives, Offense Characteristics, Scope of Imprisonment, Sentences Reconsidered, White-collar sentencing, Who Sentences? | Permalink | Comments (7) | TrackBack
Wednesday, March 14, 2012
"60-year sentence reinstated for Hurricane Katrina housing scam"
The title of this post is the headline of this local news report, which gets started this way:
The Louisiana Supreme Court on Tuesday reinstated a 60-year prison sentence for a former Alabama lawmaker who bilked a half-dozen New Orleanians out of $250,000 with the promise of new modular homes after Hurricane Katrina. The court found that Orleans Parish Criminal District Judge Darryl Derbigny didn't abuse his discretion on Feb. 12, 2010, when he sentenced John Colvin to six consecutive 10-year sentences.
Colvin, 65, a former state legislator and water board member in Rainbow, Ala., pleaded guilty in 2009 to six counts of theft.
From the end of 2007 through the spring of 2008, Colvin held himself out as a licensed contractor, though he never registered as one in Louisiana. Colvin invoked God, his mother and children to secure contracts with mostly older residents put out by the storm.
He took from $39,400 to $63,500 from each victim, much of it Road Home money, and did little or none of the promised work. In some cases, his victims said, he left some holes dug or a few stakes in the ground.
A panel of the Fourth Circuit Court of Appeal overturned Derbigny's sentence, citing a 1979 Louisiana Supreme Court decision that states: "For an offender without prior felony record, ordinarily concurrent rather than consecutive sentences should be imposed ..."
Judge Roland Belsome also cited those who spoke on Colvin's behalf -- Alabama Lt. Gov. Jim Folsom sent a letter of support -- along with his lack of a criminal record and his attempt to return $5,000 to one victim before his arrest. But in an odd twist, the appeals panel also said it didn't think a 10-year sentence -- with each count running concurrently -- was enough, considering the "economic and emotional harm" to the victims.
The Supreme Court rendered that opinion moot Tuesday, finding in its 10-page reversal that the 60-year sentence wasn't disproportionate to the offense. Colvin engaged in "a pattern of conduct that clearly reflected more than business ineptitude and was fraudulent from the outset, " the court found.
The court also didn't buy Colvin's expression of remorse and contrition at his sentencing hearing, noting that only a month earlier he had blamed another contractor for botching the jobs and sapping the money. Colvin's attorney, Craig Mordock, didn't immediately return a call for comment.
The 10-page opinion for the Supreme Court of Louisiana is available at this link.
Interesting fraud testimony submitted to US Sentencing Commission for amendment hearing
Today, as detailed in this official agenda, the US Sentencing Commission is in the midst of a full-day public hearing concerning possible guideline amendments. That agenda includes links to all the submitted written witness testimony, and the discussion of the fraud guidelines and how loss should be calculated in a variety of context should be of extra interest to any and all white-collar practitioners.
Not surprisingly, the Justice Department's testimony on these fronts seems (based on my too-quick scan) to support additional or revised guideline enhancements on a variety of fronts while also apparently opposing the potential adoption of any loss calculation provisions that might favor defendants. Meanwhile, private and public defense attorneys seem to be saying in their testimony (here and here and here) that the fraud guidelines are already too severe. And, providing a distinct (and somewhat parochial) perspective, the testimony from the Probation Officers Advisory Group appears to be (perhaps justifiably) much more concerned with how the guidelines can ensure already complicated loss calculations do not get even more complicated.
For a whole host of reasons, I do not envy the challenges facing the USSC in trying to sort out a clear and sensible path forward in this arena. I strongly feel that the loss rules are a mess and the source of considerable problems, but I fear that sensible reform requires a broad (and difficult) reassessment of just when and how loss should be a key factor in the sentencing of white-collar offenders and also requires much greater attention to mens rea factors that, problematically, rarely get enough attention at sentencing because these factors are impossible to readily quantify.
Tuesday, March 06, 2012
Time to start gearing up for another high-profile mega Ponzi scheme sentencing
This New York Times article, headlined "Jury Convicts Stanford in $7 Billion Ponzi Fraud," reports on a high-profile federal conviction that creates the foundation for a future high-profile federal sentencing. Here are the basics:
A federal jury on Tuesday convicted R. Allen Stanford, a Texas financier, on 13 out of 14 counts of fraud in connection with a worldwide fraud that lasted more than two decades and involved more than $7 billion in investments.
The ruling came after jurors on Monday sent the judge a note, one of several since deliberations began Feb. 29, saying they were unable to reach a unanimous verdict on all 14 counts. The judge ordered them to continue deliberating.
The jury decision came three years after Mr. Stanford was accused of defrauding nearly 30,000 investors in 113 countries in a Ponzi scheme involving $7 billion in fraudulent high-interest certificates of deposit at the Stanford International Bank, which was based on the Caribbean island of Antigua. Prosecutors argued that Mr. Stanford had lied for more than two decades, promoting safe investments for money that he channeled into an unimaginably luxurious lifestyle, a secret Swiss bank account and half-baked business deals that consistently lost money.
The prosecutors heavily relied on James M. Davis, Mr. Stanford’s old roommate from Baylor University, who served as his chief financial officer. Mr. Davis testified that the Stanford business empire was a fraud complete with bribes for Antiguan regulators and schemes to cover up operations from federal investigators. He described how Mr. Stanford had sent him to London to send a fax to a prospective client from a bogus insurance company office to reassure him that his investment would be safe.
“There really is no dispute that Allen Stanford lied,” a federal prosecutor, William J. Stellmach, told the jurors in his closing argument, “lining his pockets with billions of dollars of other people’s money.” Another prosecutor, Gregg Costa, compared Mr. Stanford to Bernard L. Madoff, who is in a federal penitentiary for orchestrating an even larger Ponzi scheme until his empire collapsed four years ago.
The defense denied those charges, basing their case on the fact that Mr. Stanford’s clients were paid on schedule until the Securities and Exchange Commission made the first allegations three years ago, destroying the value of his businesses. His lawyers repeatedly pointed out that his investment literature said a loss of principal was possible and that Mr. Stanford’s assets still had value when his businesses were shut down by the federal government. In their opening arguments, they suggested that Mr. Stanford would testify in his own defense, but after days of preparing him, the defense decided to rest its case without putting Mr. Stanford on the stand....
Mr. Stanford is no longer the swaggering financier who only three years ago had an estimated fortune of more than $2 billion, a knighthood awarded by Antigua and a collection of yachts, jets and mansions. He even owned his own professional cricket team and stadium and, according to prosecutors, he treated Antigua like his personal business haven, with politicians and regulators in tow, through bribes and political campaign contributions....
It took three years to bring Mr. Stanford to trial because he was severely beaten in a 2010 brawl with another federal inmate in a prison outside Houston and then became addicted to prescription anti-stress drugs. He underwent a year of therapy before Judge David Hittner of United States District Court ruled that he was fit to stand trial. The defense had said he could not properly defend himself because he had lost much of his memory.
I predict that the feds will eventually seek a sentence in this case on par or even more severe than what Bernie Madoff received (because Stanford put the government up to its proof burden, while Madoff pleaded guilty). I further predict that Stanford's lawyers will request a sentence limited enough to at least give Stanford a chance at eventual relief. And, to complete the prediction, I expect the judge will ultimately impose a sentence that ensures Stanford, like Madoff, will die in federal prison.
Monday, January 30, 2012
Lengthy (but below-guideline) federal prison terms for corrupt local PA politicians
This local story, headlined "11 years behind bars for Cordaro, seven years for Munchak," provides a good high-profile example of how severe even below-guideline federal sentences can often be for white-collar offenders. Here are the basics:
Robert C. Cordaro was sentenced today to 11 years in prison while A.J. Munchak got seven years for extorting kickbacks and other crimes while running Lackawanna County as majority commissioners.
Senior U.S. District Judge A. Richard Caputo ordered Mr. Cordaro jailed immediately. Mr. Cordaro hugged and patted the backs of tearful family members and friends before U.S. Marshals led him out of the courtroom. The judge gave Mr. Munchak until 2 p.m. April 3 to report so he can deal with undisclosed health problems that cropped up last Wednesday and required him to spend days in the hospital....
Judge Caputo gave both men shorter sentences than the sentencing guidelines he outlined. Under the guidelines, Mr. Cordaro could have received between 15 years and eight months and 19 years and seven months. Sentencing guidelines for Mr. Munchak called for between eight years and one month to 10 years and one month.
Prosecutors sought a 15-year prison sentence for Mr. Munchak and 20 years for Mr. Cordaro. Mr. Munchak's attorneys asked for no more than three years for him, Mr. Cordaro's lawyers wanted no more than four years for him.
Before the judges sentenced the men, witnesses testified that Mr. Munchak and Mr. Cordaro deserved leniency and mercy. "Please don't let my dad spend the rest of his life in jail. That is not where he belongs," said Anthony Munchak Jr., Mr. Munchak's son.
The former commissioner said listening to his son's testimony was like listening to his euology. "I am begging for mercy," A.J. Munchak said during his 25 minutes of testimony. "I brought shame to my friends. I stained the office of county commissioners." He also spoke about his illness, noting that doctors told him he could have died. Mr. Munchak, who was hospitalized late last week for dizziness and shortness of breath, did not elaborate on his condition during the hearing or afterward in a brief meeting with reporters....
Facing multiple corruption charges, Mr. Cordaro said he has no one to blame but himself, while lamenting financial losses and the effect the scandal has had on his family. "I understand I am here today and have no one to blame (but) myself," Mr. Cordaro said.
Mr. Cordaro asked for the court's mercy for his family and that the court delay his sentencing until the end of March so he can see his son perform in a play. Noting he was a person "of some means," Mr. Cordaro said he has "lost every material possession and asset I own."...
Mr. Cordaro and Mr. Munchak took office as majority commissioners in 2004. Mr. Cordaro lost his bid for re-election in 2007, and Mr. Munchak resigned in June the day after he was convicted on eight of 21 charges at a federal trial. At the same trial, Mr. Cordaro was found guilty of 18 of the 33 counts against him, including extortion, racketeering and money laundering. Both say they're innocent and will appeal.
At the trial, jurors heard from witnesses who testified about paying tens of thousands of dollars in kickbacks to Mr. Cordaro and Mr. Munchak in exchange for lucrative country contracts. Additionally, prosecutors have said both men were implicated in a scheme involving about $1 million in fraud connected to a federal project to build a bus and rail terminal on Lackawanna Avenue in downtown Scranton.
I have not followed this case at all, so I cannot speak to the specifics of the crimes and sentences. I do still, however, find notable the report that the feds here were apparently seeking an above-guideline sentence of 20 years for Cordaro (who is age 50) and of 15 years for Munchak (who is age 65). I cannot help but wonder why the feds thought the lengthy guideline ranges were insufficiently severe for these offenders, and I cannot help but note that the sentencing judge apparently concluded that even the guideline ranges were greater than necessary to achieve congressional sentencing purposes.
Friday, January 27, 2012
"Big Law's Sixth Amendment: The Rise of Corporate White-Collar Practices in Large U.S. Law Firms"
The title of this post is the title of this new paper available on SSRN from Charles Weisselberg and Su Li. I have long thought the relationship between defense representation and the development of criminal justice jurisprudence is a rich topic that rarely gets examined sufficiently. Consequently, I am looking forward to reading this paper and also am eager to hear others' thoughts on this paper and the topic more generally. Here is the paper's abstract:
Over the last three decades, corporate white-collar criminal defense and investigations practices have become established within the nation’s largest law firms. It did not used to be this way. White-collar work was not considered a legal specialty. And, historically, lawyers in the leading civil firms avoided criminal matters. But several developments occurred at once: firms grew dramatically, the norms within the firms changed, and new federal crimes and prosecution policies created enormous business opportunities for the large firms.
Using a unique data set, this Article profiles the Big Law partners now in the white-collar practice area, most of whom are male former federal prosecutors. With additional data and a case study, the Article explores the movement of partners from government and from other firms, the profitability of corporate white-collar work, and the prosecution policies that facilitate and are in turn affected by the growth of this lucrative practice within Big Law. These developments have important implications for the prosecution function, the wider criminal defense bar, the law firms, and women in public and private white-collar practices.
Wednesday, January 25, 2012
Ex-HealthSouth Chief Scrushy gets a year off prior sentence at resentencing
As detailed in this local report, a notable white-collar resentencing finished up in federal court in Alabama today. Here are the particulars from the start of the report:
U.S. District Judge Mark Fuller granted a request from Richard Scrushy for a reduced sentence Wednesday, taking a year off the time he was sentenced to serve after being convicted on bribery and corruption charges.
Fuller reduced Scrushy's sentence from 82 months to 70 months, saying he was moved by the former HealthSouth CEO's account of his life in prison -- especially the difficulty of being separated from his wife and children -- while noting his work in prison ministries. "You are a different person today than the one I met in 2005 (at the start of the case)," Fuller told Scrushy just prior to sentencing. "You have paid a tremendous debt to society."
Scrushy's original release date was June 2013. His attorney, Arthur Leach, said that Scrushy now qualifies for a halfway house, and could be released from federal prison in Beaumont, Texas within the next 30 to 60 days, depending on the availability of a bed. Scrushy would serve out his remaining time at a halfway house in the Houston area, about 84 miles west of Beaumont. "What I really can't wait for is for him to be on the front porch of our house and watch our kids ride their bikes home from school," said Scrushy's wife, Leslie, after the hearing. "That's what I can't wait for."
Scrushy and former Alabama Gov. Don Siegelman were convicted in 2006 on bribery and corruption charges related to donations Scrushy made to Siegelman's 1999 campaign for a state lottery. Scrushy gave the campaign a $500,000 donation, split into two $250,000 checks. Following the donations, Scrushy was appointed to the Certificate of Need board, which oversees hospital improvements.
Both men have appealed the ruling. Siegelman, who was sentenced to just over seven years in prison, was released on an appeal bond in 2008. Scrushy has been incarcerated since being sentenced by Fuller in June 2007.
Sunday, January 22, 2012
By serving federal prosecutors, Galleon trader avoids serving prison time
This Bloomberg article, headlined "Ex-Galleon Trader Slaine Who Led U.S. to Probe Rajaratnam Gets Probation," provides a great example of the sentencing reality that cooperating with federal prosecutors can often provide the most effective means for serious criminals to avoid spending time in federal prison. Here are some of the details of the latest sentencing from a high-profile white-collar case:
Ex-Galleon Group LLC trader David Slaine, who helped lead U.S. authorities to investigate the hedge fund firm’s co-founder, Raj Rajaratnam, was sentenced to three years probation for securities fraud.
Slaine wore a wire to record dozens of conversations with suspects including ex-Galleon trader Zvi Goffer who were later charged with insider trading. He provided help that prosecutors from the office of Manhattan U.S. Attorney Preet Bharara called “nothing short of extraordinary.”
U.S. District Judge Richard Sullivan, who sentenced Slaine yesterday in Manhattan federal court, also ordered him to perform 300 hours of community service and pay a $500,000 fine. Sullivan praised Slaine’s cooperation, which began in 2007. “Mr. Slaine, you have your life back,” Sullivan said at the end of the sentencing hearing. “I think you’ve earned it, by virtue of the work you’ve done over the last five years.”
Slaine’s evidence helped spur what became the biggest probe of insider trading at hedge funds, prosecutors said in a letter to Sullivan this month. His lawyer, Stephen Kaufman, said Slaine already has paid $836,000 in criminal forfeitures and to the U.S. Securities and Exchange Commission.
Slaine is now an investor at Spot, a Manhattan-based chain that provides training, grooming and daycare for dogs, according to Kaufman. Slaine also works there, Kaufman said....
Slaine, who pleaded guilty to conspiracy and securities fraud in December 2009, testified at the trial of Goffer, his brother Emanuel Goffer and Michael Kimelman, that he cooperated with federal agents for about 2 1/2 years to try to avoid prison. He faced a sentence of as long as 25 years in prison. Slaine testified that he became friends in the late 1980s or early 1990s with Craig Drimal, another former trader who pleaded guilty....
The SEC claimed Slaine used illegal inside information to trade for his own account and for Chelsey Capital. He made more than 20 trades in his own account based on illegal tips, personally profiting by more than $500,000. Both sides agreed for sentencing purposes that the total illegal gain attributable to Slaine was $2.5 million to $7 million.
Slaine was approached by the government in July 2007, according to the letter. He told investigators about possible insider trading by Drimal, then agreed to wear a wire and record conversations with him. The conversations with Drimal led to the Goffers and Kimelman, whom Slaine also recorded at the direction of the Federal Bureau of Investigation, prosecutors said.
Wednesday, January 18, 2012
US Sentencing Commission publishes (lengthy) set of proposed guideline amendments and issues for comment
Via a posting on its website, the US Sentencing Commission has now released this document which serves as its "Federal Register Notice of Proposed Amendments to Federal Sentencing Guidelines, Policy Statements, and Commentary," as well as a "Request for Public Comment" (which is due no later than March 19, 2012). The document runs 94 pages, and here is a summary (with my edits and emphasis added) of its coverage from the initial pages:
The proposed amendments and issues for comment in this notice are as follows:
(1) a proposed amendment on fraud and related offenses, including (A) an issue for comment in response to the issue of harm to the public and financial markets, as raised by each of two [congressional] directives to the Commission... ; (B) a proposed change to 2B1.4 (Insider Trading) to implement [another such] directive ..., and related issues for comment on insider trading, securities fraud, and similar offenses; (C) proposed changes to 2B1.1 (Theft, Property Destruction, and Fraud) regarding mortgage fraud offenses to implement [another such] directive ..., and a related issue for comment on mortgage fraud and financial institution fraud; and (D) issues for comment on the impact of the loss table in 2B1.1(b)(1) and the victims table in 2B1.1(b)(2) in cases involving relatively large loss amounts;
(2) a proposed amendment on offenses involving controlled substances and chemical precursors...
(3) a proposed amendment on human rights offenses....
(4) a proposed amendment to 2L1.2 (Unlawfully Entering or Remaining in the United States) to respond to a circuit conflict over application of the term "sentence imposed" in that guideline when the defendant's original "sentence imposed" was lengthened after the defendant was deported;
(5) a proposed amendment presenting options for specifying the types of documents that may be considered in determining whether a particular prior conviction fits within a particular category of crimes for purposes of specific guideline provisions, and related issues for comment;
(6) a proposed amendment to 4A1.2 (Definitions and Instructions for Computing Criminal History) to respond to an application issue regarding when a defendant's prior sentence for driving while intoxicated or driving under the influence (and similar offenses by whatever name they are known) is counted toward the defendant's criminal history score;
(7) a proposed amendment to 4B1.2 (Definitions of Terms Used in Section 4B1.1) to respond to differences among the circuits on when, if at all, burglary of a non-dwelling qualifies as a crime of violence for purposes of the guidelines, and related issues for comment;
(8) a proposed amendment to 5G1.2 (Sentencing on Multiple Counts of Conviction) to respond to an application issue regarding the applicable guideline range in a case in which the defendant is sentenced on multiple counts of conviction, at least one of which involves a mandatory minimum sentence that is greater than the minimum of the otherwise applicable guideline range;
(9) a proposed amendment to 5K2.19 (Post-Sentencing Rehabilitative Efforts) to respond to Pepper v. United States, 131 S.Ct. 1229 (2011), which held, among other things, that a defendant's post-sentencing rehabilitative efforts may be considered when the defendant is resentenced after appeal; and
(10) a proposed amendment in response to miscellaneous issues arising from legislation recently enacted....
Much of this stuff, at least based on my first too-quick scan, appears to involve status quo tweaking rather than any big-ticket proposed guideline changes. However, the issue for comment that I have highlighted above might be a first foray into a significant and important aspect of the current fraud guidelines that (I hope) the USSC may eventually be willing to rework significantly.
UPDATE: The USSC also posted has this "Reader Friendly" compilation of its proposed 2012 amendments to the federal sentencing guidelines.
Should donating lots and lots of blood justify a below-guideline federal sentence?
The question in the title of this post is prompted by this article discussing federal filings in the run-up to the sentencing of a local Pennsylvania politician convicted of multiple corruption charges. Here are the details:
Federal prosecutors asked a federal judge Tuesday to reject pleas for leniency from former Lackawanna County Commissioner A.J. Munchak, who claims his years of donating blood and other charitable acts should spare him from what could be a life prison sentence.
Mr. Munchak and his fellow former majority county Commissioner Robert C. Cordaro are scheduled to be sentenced Jan. 30 for their conviction on bribery and extortion charges stemming from kickback schemes and illegal cash payments they pocketed while in office.
Mr. Munchak's lawyer, Chris Powell of Scranton, had argued Mr. Munchak deserved a break from a possible sentence of decades in prison based on his "extraordinary charitable, civil and community service" to various organizations, notably the Red Cross, and clubs over the years.
Federal prosecutors disagreed, saying Mr. Munchak "does not elaborate what, if anything, he did for those organizations." The prosecutors added, "his assertion that he has 'given a total of 236 years in services to his community, church and charitable organizations' is unsupported and incomprehensible."...
In an eight-page brief, the prosecutors also seized on Mr. Munchak's references to his "years long practice of donating blood at regular intervals."
"He notes that he has donated approximately 180 pints of blood to the American Red Cross," the prosecutors said. Years of regular blood donation is exceptional to the Red Cross, the prosecutors stated in court papers, summarizing testimony from a Red Cross representative at a court hearing.
The prosecutors described Mr. Munchak's "exceptional" Red Cross blood donations as the legal equivalent of mixing apples and oranges. "What is extraordinary to the Red Cross and what is extraordinary under the U.S. Sentencing Guidelines are entirely different concepts," the prosecutors said. "... the act of donating blood is a relatively brief, non-interactive event and does not constitute a good work of such magnitude to warrant a downward departure," the prosecutors said, adding, "..the regular donation of blood is an impersonal and detached act ..."
Friday, January 13, 2012
Do all agree that "priest deserves to be treated like any other criminal"?
The question in the title of this post is prompted by this local commentary discussing today's upcoming federal sentencing for a priest whose gambling habit turned him into a federal felon. The commentary by Jane Ann Morrison is headlined "Thieving priest deserves to be treated like any other criminal," and here are excerpts which providing background on the case and the sentencing debate:
The thieving, gambling monsignor who stole $650,000, mostly from his church's votive candle fund, has his supporters who want him to receive probation Friday. I'm not one of them.
Nor is the U.S. Department of Probation, which recommends he spend 33 months in prison, which is the low end of the federal sentencing guidelines. The high end would be 41 months. U.S. District Judge James Mahan won't be bound by the probation recommendation when he sentences Monsignor Kevin McAuliffe at 10 a.m. Friday. He can show leniency. Or not.
McAuliffe's attorney, Margaret Stanish, has an uphill battle when she argues his gambling addiction and his mental disorders and depression are reason to give him clemency. She's arguing for probation, so he can stay an active priest and help other gambling addicts. Why should an addicted priest get a pass from prison when other gambling addicts don't? That's unfair.
Nevada federal judges haven't been forgiving with others who steal because they want to gamble with money that's not theirs, partly because sentencing guidelines say gambling addiction is no reason for a judge to reduce a sentence.
Elizabeth "Becki" Simmons, a paralegal in the U.S. attorney's office with a fondness for gambling was sentenced to 30 months in prison by U.S. District Judge Johnnie Rawlinson in 1999. Simmons creating a scheme in which she was able to steal more than $1 million from the U.S. Marshals Service witness fund between 1988 and 1998 by creating fake witnesses. She did the time but never paid restitution. The prosecution noted the divorced mother of two had a pattern of gambling four hours a night, four times a week.
In May, U.S. District Judge Kent Dawson sentenced Ely City Councilman Stephen Marich, a cashier at the First National Bank of Ely, to 78 months in prison. Marich admitted to stealing at least $3.7 million over 12 years. (Auditors estimated it was actually about $5.9 million.) Dawson rejected the "compulsive gambling disorder" defense, noting that Marich was gambling using the bank's money and not his own.
McAuliffe was doing the same. He wasn't gambling his savings, he was gambling money mostly meant for St. Elizabeth Ann Seton Catholic Church in Summerlin, where he was the pastor. Most of the theft was from looting the votive candle fund. He also created false financial records so that St. Elizabeth was underreporting its financial condition and shortchanging the Las Vegas Diocese about $84,500. That's why he pleaded guilty to three counts of mail fraud; he mailed fraudulent documents.
Despite his theft, McAuliffe "left the parish and school debt-free and in excellent financial health," his attorney wrote. A more deceitful image of McAuliffe emerged from Assistant U.S. Attorney Christina Brown's sentencing memo. She noted the priest lied to the FBI when first asked why his income hasn't matched his expenses since 2002....
Should the monsignor be treated different than the thieving Las Vegas paralegal and the thieving Ely bank cashier? Absolutely not.
Though the Catholic Church teaches forgiveness, McAuliffe should be treated like any other criminal, because that's what he is. In court, McAuliffe shouldn't be held to a higher standard because he is a priest. But the priest doesn't deserve a pass from prison.
Without knowing more of the facts, I am disinclined to assert that either probation or nearly three years in prison is a fitting sentence in this case. That said, though I agree that a priest does not "deserve a pass from prison" in all settings, I also resist the notion that a priest "should be treated like any other criminal."
For a wide variety of reasons, I do not think that a priest really is similarly situated to all other federal criminals. In this setting, I would be especially interested to know about, and be responsive to, the "victims" of his crimes: if this priest's parishioners are among his supporters urging a probation sentence (presumably because they genuinely feel he can do more good for them on probation than in prison), my commitment to victim interests at sentencing pushes me toward thinking this man of the cloth ought to get at sentencing some of the very forgiveness that the church preaches and that his parishioners may be eager to demonstrate. (But, then again, maybe my sympathetic sentencing judgment in this case is being unduly influenced by my deep (tongue-in-cheek) concerns about the enduring "War on Christmas" and the "War on Religion" that I hear is being waged in the US.)
UPDATE: This AP story, headlined "Gambling Priest Gets 3 Years Prison in Vegas Case," suggests that the federal district judge sentencing Monsignor Kevin McAuliffe might have considered the occupation of the man he was sentencing an aggravating factor. Here are the interesting details:
Muffled sobs erupted Friday in a courtroom packed with supporters of a Roman Catholic priest who was sentenced to more than three years in federal prison and ordered to repay $650,000 he acknowledged embezzling from his northwest Las Vegas parish to support his gambling habit.
Monsignor Kevin McAuliffe, 59, stood straight and offered no reaction as U.S. District Judge James Mahan credited him for accepting responsibility for looting parish votive candle, prayer and gift shop funds for eight years, but faulted him for "hedging his bet" by blaming it on a gambling addiction....
Defense attorney Margaret Stanish asked the judge for probation so McAuliffe could continue getting counseling for his gambling addiction, keep practicing as a priest and pay restitution to St. Elizabeth Ann Seton Church in Summerlin. He won't get treatment in federal prison, Stanish said. "Is it all about retribution?" she asked the judge. "This court has the ability to fashion a punishment that takes into account not only the offense but the individual. He would not be here but for a gambling addiction."...
But Assistant U.S. Attorney Christina Brown characterized McAuliffe as an opportunist and thief who didn't exhaust his own savings before taking church cash to fund gambling, cars and travel. She accused him of grasping at gambling addiction as "a hollow excuse offered now, when he's desperate for leniency from the court."...
The judge referred to a parish rift over McAuliffe's crime when he said he received approximately 100 letters of support through the priest's defense attorney. Mahan also made part of the court record a stack of letters parishioners sent straight to the court saying McAuliffe should be punished. "I expect the church to forgive him, and the parishioners by and large to forgive him," Mahan said from the bench. "That's different than the justice system."...
Mahan handed down a 37-month sentence — midway between the 33-month minimum and 41-month maximum recommended by federal probation officials — along with the restitution order. The judge also sentenced McAuliffe to three years of supervised release following prison and banned him from gambling. McAuliffe was ordered to begin serving his sentence April 13.
Outside court, longtime parishioner Regina Hauck, 80, called the judge fair but the sentence unfair. She said she wanted forgiveness. "I know him. He's a wonderful priest," Hauck said of McAuliffe. "But I think he's a sick man, and everyone makes a mistake."
January 13, 2012 in Federal Sentencing Guidelines, Offender Characteristics, Purposes of Punishment and Sentencing, Victims' Rights At Sentencing, White-collar sentencing | Permalink | Comments (17) | TrackBack
Interesting extended review of FCPA prosecutions and sentencing outcomes
Bloomberg's Businessweek has this effective and lengthy review of prosecution and sentencing developments in a "hot" new area of federal corporate crime. The piece is headlined "Foreign Bribery Defendants May Fight More as Cases Falter," and here are excerpts:
Executives facing trial in U.S. courts over accusations of bribing foreign officials may be encouraged to fight charges as prosecutors regroup after two courtroom setbacks and await a verdict in their largest overseas corruption probe targeting individuals.
One of two cases hailed by the government as milestones in its enforcement of the Foreign Corrupt Practices Act was dismissed last year by a judge who said the jury verdict convicting two men at an electricity tower company of bribing Mexican officials was tainted by prosecutor misconduct in “a sloppy, incomplete and notably over-zealous investigation.”
In the first prosecution under the FCPA based on a sting operation, a judge declared a mistrial for four of 22 defendants accused of participating in a fake $15 million weapons deal involving Gabon. A separate trial is under way for a second group of defendants.
The 2011 outcomes will make individual defendants in FCPA cases more confident in contesting charges, in particular because they may face long prison terms under the plea deals the Justice Department offers, even as corporations continue to self-report and settle, said Philip Urofsky, a former FCPA prosecutor who now defends cases at Shearman & Sterling LLP. “If a defendant is able to finance a significant defense, they can really put the government to the test,” Urofsky said in a phone interview.
In a crackdown on overseas bribery that started during the Bush administration, the government settled 57 cases against companies from 2005 through 2011 without trial, reaping $4.1 billion for the U.S. treasury, according to Justice Department data. A push to prosecute more individual defendants during the same period has produced mixed results, with some beating charges outright and others getting less punishment than prosecutors sought.
Of the 93 people charged over the past seven years, including 43 in 2009 alone, 41 pleaded guilty and six were convicted at trial, according to Shearman & Sterling data. Four defendants are fugitives, one was exonerated and three had their cases dismissed. Of the remainder, 38 either have a trial date scheduled or are awaiting one. The 31 defendants who’ve been sentenced got an average of 2 years and 2 months in prison.
Laura Sweeney, a spokeswoman for the Justice Department, said the government has had “great success” against individuals since increasing its enforcement actions in 2009. “Our record speaks for itself, with numerous guilty pleas and trial convictions, and substantial sentences imposed, including a 15-year prison sentence just three months ago on FCPA charges,” she said in an e-mailed statement. “These many successful prosecutions of individuals are in addition to our numerous corporate prosecutions.”...
The 1977 law bars companies or individuals regulated or based in the U.S. from paying bribes to foreign officials to win business. Foreign companies and nationals also can be prosecuted if their corrupt acts were committed in the U.S. Corporations started to approach the Justice Department about possible FCPA violations and to negotiate settlements beginning about 2003, when, as part of the Sarbanes-Oxley Act, top executives were required to certify that they weren’t aware of any fraud at their companies, Urofsky said.
The multimillion-dollar settlements the Justice Department reached with public companies led to more resources, including prosecutors and FBI agents, getting assigned to FCPA cases, Urofsky said. That in turn brought about more investigations of smaller, closely held companies and individuals and an uptick in FCPA trials the past two years, he said. “Corporations will look at it as part of business management and settle as long as the costs are reasonable and don’t break the bank,” Urofsky said. “An individual can go to jail -- they have a lot more tangible skin in the game.”...
Even when the government secures a conviction, some judges have been disinclined, over the objections of prosecutors, to impose significant sentences for foreign bribery crimes. The U.S. sought 10-year prison terms for a Hollywood couple convicted in 2009 of bribing a Thai government official to get a contract to run a Bangkok film festival.
In August 2010, U.S. District Judge George Wu in Los Angeles said while sentencing Gerald Green and his wife, Patricia, to six months behind bars that their crimes weren’t as serious as other foreign bribery cases. That was after a Justice Department lawyer argued that it defied logic for the couple to get a more lenient sentence than other defendants in foreign bribery cases who pleaded guilty and cooperated.
Federal prosecutors in New York sought the maximum 10-year prison term after winning a conviction against Frederic Bourke for conspiring to pay bribes to leaders in Azerbaijan in what they called one of the most corrupt investment schemes in the former Soviet Union. Instead, Bourke, the co-founder of handbag maker Dooney & Bourke, got one year and one day in prison.
At Bourke’s sentencing in November 2010, U.S. District Judge Shira Scheindlin cited Bourke’s “lifetime of good works” for a sentence that was far less than the 57 months to 71 months recommended by U.S. sentencing guidelines. The judge said that while she agreed with prosecutors that Bourke helped promote a deal he knew was corrupt, there was “slim proof” that bribes were ever paid.
Two executives charged under the FCPA didn’t fare as well when they fought back. The former president of Miami-based Terra Telecommunications Corp., Joel Esquenazi, was sentenced in October to 15 years in prison after he was found guilty at trial of bribing officials at a state-owned Haiti company. The sentence was the longest ever in an FCPA case. A co-defendant received a seven-year sentence.
Many individual defendants still choose to settle, rather than fight, and avoid the risk of a trial. In September, the former chief executive officer of Latin Node Inc., a Miami-based telecommunications company, was sentenced to 46 months in prison after pleading guilty to bribing Honduran government officials, and last month, a United Arab Emirates man, who was extradited to the U.S., got 30 months after pleading guilty to bribing Iraqi officials and paying kickbacks under the UN oil for food program.
“They probably have had more successes than failures,” Davis, the Miller & Chevalier attorney, said of the Justice Department’s FCPA unit. “They’re still very committed to charging individuals because of the deterrent effect.”
Friday, December 16, 2011
Barry Bonds sentenced to two years of probation and is grounded for a month
Somewhat fittingly, Barry Bonds today got a kind of sentence that is more like what teenagers face when they misbehave than what most federal felons receive. This local story, which is headlined "Barry Bonds sentenced to two years probation, 30 days home confinement," provides the specifics:
Home run king Barry Bonds was sentenced Friday to two years probation and 30 days home confinement for obstructing justice during his December 2003 testimony before a federal grand jury probing the Balco steroids scandal. But U.S. District Judge Susan Illston immediately stayed her sentence while Bonds appeals his conviction. Prosecutors objected to the stay.
During a hearing that lasted less than an hour in San Francisco, Illston imposed the sentence on the 47-year-old Bonds, who was convicted in April by a jury that was torn over allegations he repeatedly lied about his own steroid use under oath, deadlocking on three other perjury counts against him. The sentenced also includes 250 hours of community service.
Bonds did not take the opportunity to address the judge before the sentencing. Afterward, he hugged supporters outside the courtroom and then left amid a crush of reporters without saying a word publicly. The jury concluded Bonds obstructed justice by providing a rambling, evasive answer to a question about whether he'd ever been supplied with steroids or injected by his former personal trainer, Greg Anderson.
Federal prosecutors sought to imprison Bonds for at least 15 months, which would be one of the harshest punishments meted out against a defendant convicted in the Balco case. Defense lawyers pushed for probation, arguing that Bonds had a clean criminal record and a quiet pattern of doing charitable work in the community during his long career in Major League Baseball.
Federal probation officials recommended that Bonds be put on probation, although with some period of "location monitoring," which in other Balco cases resulted in home detention. Tammy Thomas, a former world class cyclist convicted of perjury, received probation and a home confinement sentence, as did former track coach Trevor Graham, convicted of lying to federal agents.
But Bonds was always the most high-profile name linked to Balco, a now-defunct Peninsula laboratory that sprouted the largest doping scandal in sports history. The former San Francisco Giant was hauled in front of the grand jury probing the lab in 2003 as he chased baseball's all-time home run records, asked to explain records that appeared to link him to steroid use, Balco, Anderson and Balco founder Victor Conte. Bonds repeatedly denied knowingly using performance enhancing drugs, prompting years of further investigation that led to his indictment on perjury and obstruction charges nearly five years ago.
To critics, including Conte, the government's case was a waste of taxpayer money to go after a superstar whose legacy was already tarnished by strong evidence he used performance enhancing drugs in the latter stages of a surefire Hall of Fame career. But to the government, it was a case designed to show that no one can undermine the grand jury process by lying under oath, regardless of their fame.
I am very glad that no federal tax dollars are going to be wasted on keeping Bonds imprisoned for an offense that was, in my opinion, perhaps the most mitigated federal felony that I can even imagine. That said, I think this case provides yet another example of the failure of American justice system to hit white-collar offenders in the pocketbook at sentencing.
Suppose, instead of grounding Barry Bonds for a month through home confinement, what if his sentence were set to be an amount equivalent to one-month of his salary in 2003 when he committed his offense of conviction. In that year, he earned over $15 million, so his "month fine" would be in the neighborhood of a cool $1.25 million. That probably would not even cover the costs of his prosecution, but it would send an interestingly distinct signal to other well-to-do white-collar offenders, perhaps.
Tuesday, December 13, 2011
"The Limits of Bigger Penalties in Fighting Financial Crime"
The title of this post is the headline of this new entry in the Dealbook section of the New York Times. The piece is authored by Professor Peter Henning, and here are excerpts:
President Obama, in a speech last week, called for strengthened oversight and accountability of financial firms by increasing the punishments that can be imposed for criminal violations. This comes on top of a recent proposal by Mary L. Schapiro, the chairwoman of the Securities and Exchange Commission, to ratchet up the available civil penalties for violating the securities laws.
Seeking greater punishments for white-collar offenders gives the impression the government is taking steps to prevent crime, but there is a substantial question whether these proposals will have any appreciable impact on deterring future violations. The problem is not so much the penalty that can be imposed but proving a violation so that the punishment can be meted out. The paucity of criminal prosecutions from the financial crisis shows that the real difficulty lies in gathering evidence to prove a crime took place....
Before any punishment for financial misconduct can be imposed, the government must prove an intentional violation, which in a criminal case requires proof beyond a reasonable doubt. That is often the rub, because the perceived financial “crimes” committed by Wall Street firms and others believed responsible for the financial crisis would involve showing intent to defraud, a difficult standard to meet....
Substantial prison terms have been imposed for violations of the antifraud laws in the last few years. The hedge fund manager Raj Rajaratnam received 11 years for insider trading, the longest sentence for that violation ever given, and Zvi Goffer, a former trader at Mr. Rajaratnam’s Galleon Group, received 10 years for the offense. In the most prominent mortgage fraud prosecution to date, Lee B. Farkas, the former chairman of Taylor, Bean & Whitaker, received a 30-year prison term for causing losses the government estimated at $2.9 billion.
Along the same lines, in a $205 million health care fraud case, in September a federal judge in Miami gave a 50-year sentence to a former executive of a mental health company. And Bernard L. Madoff received perhaps the highest sentence ever for fraud: 150 years.
It is difficult to conclude the penalties available under the law for committing financial crimes are somehow lacking. Most financial frauds involve multiple violations that can be charged as separate crimes, so the potential punishment is often quite high, even for corporations that can only be subjected to fines. But corporate cases rarely even get to court because prosecutors are willing to allow companies to enter into deferred or nonprosecution agreements in which the punishment is agreed to in advance.
Congress has already pushed for higher sentences through Section 1079A of the Dodd-Frank Act, which directed the United States Sentencing Commission to review the sentencing guidelines for securities and financial crimes to ensure they reflect the impact of the offenses. So there is already pressure to ratchet up the recommended punishment for corporate fraud.
Higher recommended sentences may not result in great punishments because not all federal judges are willing to impose significant prison terms on white-collar offenders who often have otherwise sterling reputations and present little threat of future violations. The sentencing guidelines are not mandatory, so judges are largely free to draft sentences they consider appropriate.
Just increasing potential prison terms or fines may not have any appreciable impact in deterring fraud, given the difficulties of proving a financial crime and the differing views of judges on the appropriate punishment for a white-collar offender. That is especially true in cases like insider trading where it is hard to identify any individual victims and the defendant may be an executive with a record of charitable contributions.
Although President Obama asserted that Wall Street firms have violated “major antifraud laws,” the assumption that crimes occurred is easy to make but much more difficult for prosecutors to prove. And even if a crime can be established, it is not clear that just authorizing even greater punishments will have any real effect in deterring wrongdoing.
December 13, 2011 in Federal Sentencing Guidelines, Offense Characteristics, Procedure and Proof at Sentencing, Purposes of Punishment and Sentencing, White-collar sentencing | Permalink | Comments (1) | TrackBack
Friday, December 09, 2011
Another super-sized federal prison term for super-sized Medicare fraud
As reported in this Reuters piece, another record setting white-collar sentence was handed down in Florida today. Here are the details:
A former Miami health care executive was sentenced to 35 years in prison for her role in a $205 million healthcare fraud scheme, authorities said on Friday.
Judith Negron, the owner of American Therapeutic Corp, a chain of mental health care centers shut down after a raid on its Miami headquarters in October 2010, was convicted in August on charges that she helped mastermind what prosecutors described in court documents as "one of the largest and most brazen healthcare fraud conspiracies" in U.S. history.
Her sentencing in federal court on Thursday by U.S. District Judge James Lawrence King followed the sentencing in September of her co-defendants and co-owners. Lawrence Duran received a 50-year sentence and Marianella Valera received a 35-year sentence.
The prison sentences have been described by prosecutors as the harshest ever for defrauding Medicare, the federal insurance plan for the elderly and disabled....
Before Judge King's sentencing of the American Therapeutic trio, the highest Medicare fraud sentence was 30 years. It was handed out in 2008 to a Miami physician, Ana Alvarez-Jacinto, convicted in an HIV-therapy scheme.
I certainly understand concerns with the costs and consequences of Medicare fraud, but I always worry that a prison sentence of multiple decades for a non-violent white-collar offense is going ultimately produce more (correction) costs than (crime-control) benefits.
Tuesday, December 06, 2011
What should (and what will) be the applicable guideline range for Blago?
What is expected to be a two-day sentencing hearing for former Gov. Rod Blagojevich has now gotten started in a federal district court in Chicago. The action can be followed via live tweets at this link being authored by Chicago Tribune reporter Annie Sweeney in the courthouse for the Blagojevich sentencing hearing. According to her early postings, a few folks were in line at the federal courthouse at 3am this morning to be able to see all the action.
I assume that 99.9% of folks are only interested in the final sentencing term to be imposed by Judge James Zagel on Blago (which is expected to be announced on Wednesday). But, for reasons partially explained in prior posts here and here, I am perhaps most interested from the outset to see how Judge Zagel calculates the guideline range. My guess, without having given any serious attention to any of the guideline calculation disputes, is that he will end up largely splitting the difference in some manner between the extreme ranges calculated by the parties. (A calculation winding up in the neighborhood of 10 to 15 years would be my bet, and then an ultimate sentence imposed somewhere slightly above or below the calculated range.)
As the title of this post suggests, I am eager to hear from any and all hard-core federal sentencing fans about just what they think the "right" guideline calculation is. Importantly, guideline calculations are not supposed to be matters of discretion: the applicable guidelines law and findings of fact should completely script the guideline calculation outcome. In reality, though, these calcultions in contested cases always involve judgment calls by judges as fact-finders that often seem a lot more like the exercise of discretion and a lot less like the application of sentencing law.
Some recent and older related posts on the Blagojevich case:
- You make the sentencing call: What sentence should Blago get?
- Early buzz that feds think Rod Blagojevich's guideline range is 30 years to life in prison
- Feds asking for prison term of 15 to 20 years for Rod Blagojevich
- Insightful commentary questions why Blago is getting huge break from federal prosecutors
- "Prison is too good for Blago"
- Bold (and misguided?) prediction of 20-25 years in the federal pen for Blago
- Do would-be white-collar offenders actually "get the message" from long sentences?
- Blagojevich sentencing and the failings (and limits?) of the federal sentencing guidelines
Monday, December 05, 2011
Blagojevich sentencing and the failings (and limits?) of the federal sentencing guidelines
Though I mentioned this point in this post with links to the latest sentencing filings in US v. Blagojevich, on the eve of the high profile sentencing of former Gov. Rod Blagojevich, I want to highlight again the profound failings of the federal sentencing guidelines in this matter. While much has and will be said about just what might be a fair and effective sentence for Rod Blagojevich, my point in this post is to highlight the abject failure (and perhaps the inevitable failure) of the federal sentencing guidelines to really help resolve this issues.
As all readers of this blog likely know, the primary reason and goal of modern federal guideline sentencing reform was to develop a set of detailed sentencing rules that would facilitate greater certainty and consistency in federal sentencing. This legal reform project has been controversial and contested for decades now, and the Supreme Court's landmark ruling in Booker only added to the controversial and contested nature of modern debates over federal sentencing processes and outcomes. The focal point of much of this debate has been the soundness of the substantive sentencing rules set forth in the guidelines and the authority of both federal prosecutors and federal judges to decide whether and when sentences would be imposed outside the guideline rules.
But in the Blagojevich case, a case in which all significant facts have been (thoroughly?) developed in the course of two trials and through an extraordinarily extensive and high-profile investigation, we are presented in full relief the inability of just the guidelines themselves to effectively narrow the legally viable sentencing possibilities. When the federal prosecutors "run the numbers" under the guidelines, they believe the law calls for a (now advisory) guideline range of 30 years to life; when defense attorneys run the same legal numbers, the come to the view that the law advises a guideline range of 41 to 51 monthsin prison. The Probation Office prepared a presentence report that has yet a different calculation between these extremes, and it is possible (perhaps probable) that the sentencing judge at tomorrow's sentencing will arrivae at yet another distinct understanding of what the applicable guideline law formally advises as a sentencing range.
All legal rules, especially in hotly contested cases like US v. Blagojevich, will have some variation in their application based on partisan perspectives. But when the sides can and do run the numbers in such extremely disparate ways (from a recommendation of just over three years to life in prison!), and when neutral adjudicators are seeing the law in still other different ways, seeking greater certainty and consistency from "sentencing law" is really shown to be just a pipe dream. And though one might assert that "better" sentencing guideline could and would produce more certainty and consistency, I want to suggest here that there may be limits on what sentencing law can every reasonably expect to achieve in these sorts of settings.
My point here is not to assail the entire reform project of sentencing guidelines, but rather to highlight that the Blago sentencing showcases that the current federal guidelines are problematic regardless of whether they are "mandatory" or "advisory." In this case, and perhaps in far too many others, the legal rules themselves fail to really provide real guidance (let alone true wisdom) concerning what a fair and effective sentence might actually be.
Some recent and older related posts on the Blagojevich case:
- You make the sentencing call: What sentence shouldBlago get?
- Early buzz that feds think Rod Blagojevich's guideline range is 30 years to life in prison
- Feds asking for prison term of 15 to 20 years for Rod Blagojevich
- Insightful commentary questions why Blago is getting huge break from federal prosecutors
- "Prison is too good for Blago"
- Bold (and misguided?) prediction of 20-25 years in the federal pen for Blago
- Do would-be white-collar offenders actually "get the message" from long sentences?
December 5, 2011 in Celebrity sentencings, Federal Sentencing Guidelines, Offender Characteristics, Offense Characteristics, White-collar sentencing, Who Sentences? | Permalink | Comments (14) | TrackBack
Sunday, December 04, 2011
Insightful commentary questions why Blago is getting huge break from federal prosecutors
Alison Siegler, who directs the Federal Criminal Justice Clinic at the University of Chicago Law School (and who once honored me with an invite to her class there), has this fantastic new op-ed in the Chicago Tribune, which is headlined "The advantage of being Blago." Here is the text, every line of which merits emphasis:
Rod Blagojevich is a lucky man. He is lucky that the U.S. attorney's office is asking U.S. District Judge James Zagel to send him to prison for only 15 to 20 years. He is lucky that the prosecution is not asking for him to do 30 years to life in prison, which is the amount of time called for by federal sentencing guidelines — the laws that set punishment in federal cases based on the severity of the crime.
Blagojevich is especially lucky that he is not my recent client, a drug-addicted man who grew up on the South Side and pleaded guilty to selling two ounces of drugs to a government informant for $200. I represented this man, and the same U.S. attorney's office asked Zagel to follow the sentencing guidelines strictly and send him to prison for up to 27 years. Luckily for Blagojevich, the prosecutors filed a motion asking for a far lighter sentence for the former governor who, they themselves contend, deeply damaged the integrity of the political system by trying to hand over a U.S. Senate seat in exchange for $1.5 million in donations and then blatantly lied about his conduct on the stand.
The U.S. attorney's office is treating Blagojevich shockingly differently than it treats poor, minority defendants charged with less serious crimes. I have been representing indigent defendants in Chicago for nearly a decade, and in almost every one of the hundreds of cases I have litigated, the U.S. attorney's office has asked for the guidelines sentence, which is usually quite harsh. But in Blagojevich's case, the prosecution has asked the judge to chop the guidelines sentence in half.
It might be different if the prosecution's request for a sentence below the guidelines were supported by facts about Blagojevich or his offense that merit leniency. But the prosecution argues strenuously that Blagojevich's personal circumstances do not warrant mercy and that his crimes were heinous and driven by greed. They wax rhapsodic about his "extensive corruption of high office." And then they inexplicably request a sentence that is fully 10 to 15 years lower than the sentence they would request if this were an ordinary case.
Perhaps the prosecution's request in the Blagojevich case is driven by a sense that the guidelines sentence is not always the just sentence. If so, the prosecutors should also take a hard look at their practice of requesting guidelines sentences for indigent defendants, and should question whether it is fair to demand that a man spend up to 27 years in prison for selling a small amount of drugs to their own informant.
Otherwise, the prosecution's sentencing request is not fair. The inescapable message the request sends is that the lives of privileged defendants who have been given every opportunity and have nevertheless flagrantly violated the public's trust are worth more than the lives of impoverished defendants who have caused far less societal harm. This message undermines the public's faith in the fairness of the system and reinforces the perception that there are two very different kinds of justice, one for the haves and the other for the have-nots.
Before sentencing day(s) this coming week, I will have a series of addition posts that will discuss some of the additional insights we can and should take away from the run up to Blago judgment day.
Thursday, December 01, 2011
"Rajaratnam Asks Circuit to Allow Him to Stay Free Pending His Appeal"
The title of this post is the headline of this article from today's New York Law Journal, which gets started this way:
Counsel for Raj Rajaratnam made a plea to keep him out of prison yesterday, arguing he should remain free on bail because he has a real shot of having his insider trading convictions vacated by the U.S. Court of Appeals for the Second Circuit.
Five days before the Galleon Group hedge fund founder is set to begin serving an 11-year prison sentence, attorney Patricia A. Millett told the Second Circuit that the prosecution should pay the price for omitting from its wiretap warrant application in 2008 that it had been interviewing witnesses, obtained millions of documents and had even deposed Mr. Rajaratnam himself while trying to build its case.
UPDATE: This Reuters piece updates this story. It is headlined "Rajaratnam loses bid to avoid prison during appeal."