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July 23, 2011

Assailing "out-of-control" federal sentencing guidelines for fraud offenses

Federal sentencing superstars James Felman and Mary Price have this effective new opinion piece in The National Law Journal headlined "Out-of-control fraud guidelines: Four reforms would restore common sense to sentences that have become draconian, disproportionate to the crimes." Here are excerpts:

Not long ago, first-time perpetrators of economic crimes frequently received sentences of probation with special conditions for compensating their victims.  Lengthy prison sentences for nonviolent financially motivated offenders were correctly deemed unnecessary.  The purposes of sentencing could be accomplished without removing them from society for extended periods of time.  These offenders suffer a multitude of unique collateral consequences, including the all-but-certain end to their careers, and the social stigma of a steep and public fall from grace....

Between 1987 and 2001 the Sentencing Commission repeatedly amended the guidelines, adding sentence-inflating enhancements.  In 2001, it overhauled the guidelines and voted to increase sentences based on the amount of loss.  The ink was barely dry when, just two years later, Congress reacted to public anger over corporate scandals, directing the commission to up them again.  It did so with a slew of amendments that increased fraud sentences across the board and enhanced sanctions based on factors that are present in nearly every major fraud....

The result?  According to Judge Fred­eric Block of the Eastern District of New York, "we now have an advisory guidelines regime where…any officer or director of virtually any public corporation who has committed securities fraud will be confronted with a guidelines calculation either calling for or approaching lifetime imprisonment."  U.S. v. Parris, 573 F. Supp. 2d 744 (E.D.N.Y. 2008).  Put another way, economic crime offenders today can easily face a prison term once reserved for murderers, terrorists and serial rapists.

Judges have made their distaste for such sentences clear by not imposing them. In response, the Sentencing Commission has announced a comprehensive review of the fraud guideline.  We welcome the review and have put together a working group of former policymakers, legal experts and attorneys to promote four reforms to restore common sense to the fraud guideline.

First, reduce the current excessive emphasis on actual or intended monetary loss.  Second, better account for whether and to what extent the defendant received a monetary gain from the offense.  Third, ensure that greater weight is put on the defendant's personal responsibility for the offense conduct, intent and other individual circumstances that should bear on punishment.  Finally, eliminate double-counting aspects of the offense by striking redundant enhancements.

These reforms will help ensure that fraud sentences are proportional to the severity of the offense and to individual culpability and circumstances.  Greedy perpetrators of fraud should receive stiff sentences.  Society, however, can avoid the costs of subjecting less blameworthy offenders to punishments that are excessive, inefficient and counterproductive.

July 23, 2011 at 08:24 AM | Permalink


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"According to Judge Fred­eric Block of the Eastern District of New York, "we now have an advisory guidelines regime where…any officer or director of virtually any public corporation who has committed securities fraud will be confronted with a guidelines calculation either calling for or approaching lifetime imprisonment."

Might also help explain why so many companies now operate OUTSIDE the united states

Posted by: rodsmith | Jul 23, 2011 3:27:46 PM

As some have argued here that the DP should be retained to punish the worst of the worst murderers, life with or without parole should be available to punish the worst of the worst fraudsters.

Posted by: Fred | Jul 24, 2011 11:52:41 PM

The article hits the nail on the head. First time non violent offenders are receiving asinine sentences where they primarily are educated and could help better serve society by performing community service and forfeiture of illegal gains. In many cases the federal sentencing guidelines for first time fraud offenders are not far off from recidivist guidelines. Ironically if you are a large firm or banking institution in most cases they just pay a large fine because they can afford to do so and they have the networking connections. Also in many documented SEC cases there are recidivists who because the SEC is just a civil regulatory body just impose a fine even if the capital that was obtained illegally was overly excessive with no jail time whereas if you are criminally prosecuted by the DOJ for example, you receive a fine and a sentence. I suppose its the luck of the draw but how can some people who commit securities fraud in the hundreds of millions receive no jail time due to being prosecuted by the SEC and someone who may have a $1 million dollar securities fraud action brought against them by the various District Attorneys receive up to 5 years or more? In placing people in prisons as well as the resources used to prosecute first time securities fraud offenders far exceeds the amount of money that is received from ill gotten gains. As discussed in the article is it not punishment enough besides forfeiture and community service that these peoples names are tarnished and can never receive any licenses in the future due to many states disallowing expungement. The obstacles these people have to bare throughout life are severe enough in many cases. Not all but many.

Posted by: todd | Dec 28, 2011 8:56:59 AM

I am a 1st time offender recently convicted of wire fraud in a scheme which netted me $1.3M. The Government stripped me of all assets, leaving me with an IRS tax bill of $300K, soon to balloon much higher w/interest/penalties. Being sentenced to a net of 33 months, 3 years of supervised probation, 200 hours of community service, AND a $1.7M fine is beyond ludicrous. I was not & am not a rich person. As my career prospects are now severely limited, which I acknowledge to be my own fault, how in the world will I ever pay this money back? With sentencing like this, criminal recidivism becomes almost mandatory as the future outlook w/this type of sentence is bleak at best.

Posted by: Frank M. | Jan 22, 2014 7:08:48 AM

Please I need help!! my son is serving 7 years for $6000 bank fraud! everybody deserve punishment for crime they choose to commit, but 7 years? He has never been in problem with the law. Please where do I go from here. the case has been appeal unfavorably. Please help

Posted by: felicia | Jul 30, 2014 11:57:09 AM

Back in 1993, my son, who was 23 at the time, met Andrew Bogdanoff. Andy was a well-established businessman in the Philadelphia community. He took my son under his wing and taught him the real estate broker business. Together they established Remington Financial Group and worked together for a few years in Philadelphia before Andy moved to Arizona. At the time of Andy’s move, my son continued to run Remington in Philadelphia and did very well, closing billions of dollars worth of deals. However, Andy began a fraudulent version of Remington in Arizona. He hired a large group of very young men and taught them to accept upfront fees and yet to never attempt to or close a deal. In other words he ran a scam until the FBI raided his office and closed the fraudulent company down. Andy was ordered never to conduct that sort of business again. Matt’s company was not raided, nor was he ordered to stop doing business. However, Andy continued his business using an assumed name. He did so until the FBI found him doing this and at that point, he was jailed. Andy was also guilty of income tax evasion.
In August of 2014, Andy and his 5 co-conspirators in Arizona all pled guilty and accepted a plea deal from the prosecutor. Andy as the perpetrator of the scam, and for his other offenses received a sentence of 18 years. The 5 co-conspirators received sentences of probation, 6 months, 10 months, 1 year, and 2 years.

However my son maintained his innocence. While the scam netted approximately 26 million dollars, everyone, including the prosecutor agreed that the lion’s share of the money stayed in Arizona. Because my son had a few Arizona employees working in his office in PA, indubitably he received some of the money resulting from the scam. While the exact figures are murky, during the trial, my son was accused of accepting just under $100,000 from the Arizona office – which controlled all the Remington finances. My son believed that because he had such a good reputation in the Philadelphia area, it would be impossible to convince a jury that he was involved in a scam that operated by not closing deals. However, my son was wrong. In spite of testimony given by many people who had done business with my son over the years and who were willing to corroborate his upstanding business practices, he was found guilty and sentenced to 16 years in federal prison. This sentence came only after he made a deal giving up all his rights to appeal, forfeiting his vacation home, and agreeing to pay retribution of $17 million. Had he not made the deal, the judge commented that he would have sentenced my son to 30 years to life in prison. My son was a first time offender. To his family and all who know him, the sentence seems extreme – especially in light of the sentences given to those who actively pursued the scam in Arizona.

We are hoping that through sentencing guideline reform, my son's draconian sentence can either be reduced, or time-off for good behavior can be increased.

Posted by: Theresa McManus | May 14, 2015 6:47:45 PM

most frauds are false acquisitions. and people are getting incarcerated every day because of that.

Posted by: the inmate search | Sep 14, 2019 4:26:42 AM

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