Are the federal guidelines too tough on white-collar offenders?

UPDATE at 1:30pm:  The Houston Chronicle reports in this article that this morning former Merrill Lynch executive Daniel Bayly received a sentence of 30-months imprisonment for his role in the Enron Nigerian barge fiasco.  Here are some very interesting snippets from that article:

U.S. District Judge Ewing Werlein told Bayley he had never sentenced such a defendant with such a sterling reputation.... Werlein said he found the loss caused by Bayly's crimes to be $1.4 million. [N.B. This judicial loss determination is much less than the jury's loss determination in November].

During this morning's hearing, Werlein said Bayly deserved a less harsh sentence than the 4 to 5 years in prison sentencing guidelines would suggest.  The judge said many letters submitted to the court in support of Bayly convinced him of Bayly's good character and reputation. He also said lighter sentences can deter white collar defendants more than other criminals.

In sentencing Bayly, Werlein said he considered the sentences the government has given in plea deals with other Enron defendants. The judge also characterized the barge fraud as relatively benign in the big Enron picture.

ANOTHER UPDATE:  I have also posted, in a separate entry, More news on the Enron Nigerian Barge sentencing.

-------

A few weeks ago, I queried in this post whether we are seeing a pattern of leniency in white collar cases post-Booker.  Professor Weinstein in the comments and others suggested that such a pattern (if it exists) might reflect the fact that, under the federal guidelines, "sentences, keyed to illusory loss numbers, had grown too harsh."

Today sentencing is scheduled for the defendants in the Enron Nigerian barge case (which I discussed at length pre-Booker because the district judge had convened a sentencing jury, details here and here).   This AP story provides background on the sentencing and notes that the PSRs in the case have recommended prison terms of 14 years for one defendant and 33 years for another. 

Interestingly, as detailed in this Wall Street Journal article, the Chamber of Commerce has filed an amicus brief in this case to challenge the way losses are calculated under the guidelines.  Here are a few excerpts from the WSJ article:

The Chamber's brief is an example, observers say, of a feeling within the business community that the government's crackdown on corporate behavior may have gone too far in the wake of the scandals at Enron and other big companies.  With the passage of time, "perhaps the business community feels the climate is a bit better for them to push back" against some of those initiatives, says Robert Litt, a former senior Justice Department official and now a partner at the Washington law firm Arnold & Porter....

In the Nigerian barge case, the Chamber is attacking the Justice Department's method for calculating the financial damage of the fraud.... Under federal sentencing guidelines, which have long been used to determine prison sentences, an important factor in a fraud case is the size of the financial loss that investors suffered as a result of the deceit.  A prison sentence can be altered by years, depending on the results of that calculation.

In the barge case, the math is trickier because questions about the transaction didn't surface publicly until after Enron had collapsed into bankruptcy court in December 2001 and its stock price had fallen to near zero.  The government argues that the bogus profits produced by the 1999 barge transaction artificially inflated Enron's stock price at the time by at least $43.8 million and that this amount should be considered the loss to investors.  In their court filings, the defendants argue that the calculated loss to Enron shareholders should be zero, based partly on the fact that the alleged barge fraud wasn't revealed until after the company's stock price had already crashed.

The Chamber of Commerce's brief supporting the defendants' position argues that the "artificial inflation" of a stock price shouldn't be used to determine loss. A "loss" comes only when disclosure of the alleged fraud causes a drop in the price of the company's stock, the brief says -- adding that the government embraced this definition in a civil securities case that was decided this week by the Supreme Court.  In that opinion, the High Court agreed that investors need to show a link between the alleged fraud and a decline in the company's stock price to proceed with civil suits.