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October 29, 2014
Federal judge (improperly?) delays imposing max sentence on fraudster to allow time to consider withdrawal of plea
This Newsday article provide an account of a seemingly unusual development as a federal district judge was about to throw the book at a high-profile white-collar defendant. Here are the details:
Onetime New York Islanders part owner Stephen Walsh was hit with the maximum sentence of 20 years for a $50 million fraud on Wednesday, but the judge postponed imposing it to let stunned defense lawyers consider an appeal or voiding his guilty plea.
Walsh, 70, of Sands Point, an Islanders executive and co-owner from 1991 to 2000, was accused in 2009 of bilking investors in his WG Trading Company to finance a lavish lifestyle. He pleaded guilty in April, and partner Paul Greenwood pleaded guilty in 2010.
At the sentencing before U.S. District Judge Miriam Cedarbaum in Manhattan, Walsh said he was "deeply sorry," while his lawyer argued most investors were made whole and said Walsh deserved credit for charitable work, such as co-founding a Long Island Alzheimer's foundation. They asked for 18 to 24 months with community service.
But Cedarbaum was unmoved, noting that the scam went on for 13 years and Walsh fought the charges for five years before pleading guilty and taking responsibility. "The proceeds of this scheme were used for personal extravagances and high living," she said. "Lots of people lost lots of money, and some of it will trickle back to them, but that does not justify using it for your own benefit and spending it on frivolous things."
The judge said she was imposing the maximum penalty for securities fraud of 20 years. That was the sentence recommended by probation officers, called for under federal sentencing guidelines and urged by prosecutors.
Walsh, as part of his plea, had agreed to not appeal any sentence up to 240 months. But white-collar defendants frequently get more lenient treatment -- in part because many judges feel federal guidelines overemphasize the significance of the amount of loss in calculating sentences -- and the sentence produced gasps from Walsh's friends and family in the gallery. "Oh my God!" said one woman.
Defense lawyer Michael Tremonte first asked Cedarbaum to impose 20 years and a day, so it would become appealable. "I don't think anyone expected we would be at the outer range of the hypothetical guideline range," he said. "There is not another case even remotely like it where a 20-year sentence has been imposed."
The judge refused, telling him that she would not circumvent a plea agreement in which Walsh gave up his right to appeal the sentence. But she agreed to postpone imposing the sentence until Tuesday, to give Tremonte the chance to consult with Walsh and research grounds for withdrawing the plea. Tremonte and prosecutors had no comment after the hearing.
Walsh and Greenwood were charged soliciting $7.6 billion, mostly from institutional investors, to pursue a conservative investing strategy, and then misappropriating it. Walsh allegedly used investor money to finance a divorce settlement and fund businesses for his children, and Greenwood purchased expensive stallions and high-priced teddy bears.
I am inclined to be a bit sympathetic to the defense side here because I find troublesome any and all waivers of the right to appeal a sentence. That said, I would guess that the defendant here had sound legal representation and knowingly agreed to a plea deal that included such a waiver, and thus I am not especially inclined to believe he should now be able to back out of the deal because it did not work out the way he expected. And I am not aware of any case in which a judge defered imposition of a sentence to give the defendant a chance to try to undo a plea deal simply because that judge was going to impose a long sentence that was, as reported above, "recommended by probation officers, called for under federal sentencing guidelines and urged by prosecutors."
October 29, 2014 at 06:00 PM | Permalink
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I am not sure this sentence is inappropriate, given the amount of money stolen and the length of time the crime continued. On Tuesday of this week, a former investment adviser in Statesboro, Georgia, Aubrey Lee Price, was sentenced (following a guilty plea) to 30 years in Federal prison in a case where he had misappropriated $40 million from his clients and $21 million from Montgomery Bank and Trust, where he had been a Director.
In the 2000 M.D.Fla. case of Sholam Weiss, he was convicted (at trial) of dozens of financial crimes related to the looting of a life insurance company, where the losses were about $40 million and more than 3,200 investors lost their money. He absconded a few days before the trial ended, and was sentenced in abstentia to 845 years in Federal prison (the longest white-collar sentence in American legal history). Even after his Section 2241 Habeas Corpus case, which was based upon lies and deception by the U.S. Dept. of Justice in representations made to the Austrian Minister of Justice to secure his extradition from Austria (which initially denied extradition) Weiss's sentence was reduced by just 10 years, to 835 years. The Eleventh Circuit affirmed the result and the U.S. Supreme court denied Certiorari.
So, the proposed 20 years sentence in this case doesn't seem so out of line with similar cases. Mr. Walsh's problem is that he is already 70 years old, so he will probably die in prison. As Tony Baretta used to say, "Don't Do the Crime if you Can't Do the Time".
Posted by: Jim Gormley | Oct 29, 2014 9:01:31 PM
Let's assume the value of a human life is $6 million by the market valuation of risk method. I prefer the lifetime salary method and a $3 million value. Assume the value is $6 million to be generous.
This defendant made 10 economic persons disappear. Because there is no exception to the idea that all value comes from human labor, an economic person is the value of the person to the public. Even if you find a diamond strolling on the beach during vacation, you need to see it, value it highly, pick it up, keep it secure, and sell it, all labor using effort, knowledge and skill.
Any financial crime losing $6 million should result in a mandatory death penalty. The benefits of the crime if any, should be subtracted from the damages, as they should be in all verdicts. I cannot think of any benefit here, except to give his victims a period of hope of prosperity, but that was fraudulent and short lived.
In an unrelated case, a teacher had sex acts with a girl who committed suicide years later. His lawyer should have argued that attention may have kept her from committing suicide, since she did that after the end of the relationship. Aiding the alleged victim, the pseudo-victim in this case, is among the few lawyer factors which I agree should mitigate a sentence.
Posted by: Supremacy Claus | Oct 29, 2014 9:31:14 PM
He took a gamble, and he lost. If he wanted to ensure his right to appeal the sentence, he should not have agreed to the appellate waiver provision which clearly said he could not appeal the sentence unless it exceeded 240 months. He was banking on a sympathetic judge, and he didn't get one. Appellate waiver provisions are often sources of negotiation. And, he is certainly a smart guy who had high quality legal counsel.
Finally, I don't understand those who think appellate waivers are improper across the board. The right to appeal is a statutory right, not a constitutional right. And, defendants can waive their constitutional rights (indeed, all guilty pleas involve such waivers). So, if a defendant can waive his constitutional trial rights then certainly he can waive his less weighty statutory right to appeal. I agree, however, that IAC claims should not be precluded by an appellate waiver. In other words, a defendant should be able to argue on appeal or in a collateral proceeding that his lawyer performed deficiently during the plea negotiation process that produced the appellate waiver.
Posted by: Anon | Oct 30, 2014 7:50:10 AM
You takes your chances, and you pays the price. No one said that dude had to accept an appeal waiver. He did. He doesn't get a do-over now that things didn't work out. If take-backsies are allowed, I should have a talk with the Bellagio about the money I lost on the roulette wheel.
Posted by: Res ipsa | Oct 30, 2014 9:12:12 AM
In a utopia -- with leaders lacking sissy complexes, hyper-ambitious impulses or vengeance issues compelling them to show "toughness" via stupid-long, stupid-costly prison terms -- a wise punishment might have been imposed.
But here society will pay for up to 20 years to house, feed and care for medically a 70-year-old con man who arguably no longer poses a threat to anyone.
Posted by: John K | Oct 30, 2014 11:15:25 AM
horse shit! sorry but any plea deal that does NOT include the amount of time to be served it all the poof you need to both tell the DA to fuck off but bring your own lawyer up on criminal charges. Sorry but if I was being tried the ONLY DAMN thing i'm going to want to know is HOW LONG!
As for this ass of the Judge she'd find out they had not found ALL my money when someone removed her ass. since as far as i'm concerned she's went off the reservation and I have the right to punish her for it since it was done to ME.
Posted by: rodsmith | Oct 30, 2014 1:12:33 PM
i'm sorry but he basically is getting the same sentence he would have gotten if he went to trial and LOST? so where's his consideration for agreeing to not take it to trial? sorry every contract has to have some consideration for BOTH sides.
Posted by: rodsmith | Oct 30, 2014 1:14:36 PM
Anybody who doesn't understand why defendants almost always end up signing waivers of this sort and worse doesn't know much about how the federal-prosecutor system works.
Rod, have you ever seen a plea agreement that specified the prison sentence to be imposed? I haven't.
Posted by: John K | Oct 30, 2014 2:04:42 PM
I don't have a problem with this one. They could have negotiated a better deal for an appeal waiver if they had wanted to. They chose not to, presumably because there was some advantage (I'm guessing, although I don't know for certain, that federal law allowed him to plead straight up and preserve his right to appeal his sentence).
As an aside, supposing the court had followed the defenses recommendation of 20 years and 1 day (to allow an appeal once more). Would the court's sentence really be reversible error in that case, since he would have done it upon defense request. I'd suspect the defendant would have very limited options anyway.
Posted by: Erik M | Oct 30, 2014 2:16:43 PM
Erik M, what you are describing is called "invited error" by Federal courts of Appeal. Defendants cannot generally benefit from invited errors.
One commentator above got it right: this defendant did not have to enter into a Plea Agreement with the Government that contained an appeal waiver. The defendant could have made a straight plea, directly to the court,without any agreement with the Government. This might have left things open for the Government to have argued for stacking the sentences to more than 20 years, to achieve "total punishment"; but, as a practical matter, those arguments don't matter to a 70 year old defendant. Any sentence of 20 years or longer is effectively a life sentence for him in the Federal system.
Posted by: Jim Gormley | Oct 30, 2014 6:19:09 PM
well John k. I would consider that the fault of the criminals who call themselves defense attorneys. Sorry my response would be "if we're not here to talk bout the amount of time my client is being faced with. We're OUT of here! See you at court!"
if 10% did that. Of course the entire court system would go BOOM!
Posted by: rodsmith | Oct 31, 2014 6:20:39 PM
Rod,
Which is why most offenders get a vast reduction off the sentence they could possibly be facing. It might only take a few going to trial instead of pleading but the incentive to plead out is high enough and the disadvantage for insisting on going to trial when the evidence is present for conviction is so great that you simply are not going to convince enough to go along. Especially so given that the vast majority of defendants have no personal connection and thus no basis to trust that the others won't defect first.
Nearly a classic example of the prisoner's dilemma game theory case except that since there are many unconnected pools of prisoners there are many more chances for defection, and not even the repeat player (in terms of the same people being on trial together at the same time multiple times) basis for trying non-defection first. Under such circumstances I would figure you will pretty much always get enough defections to keep the system working, even more-so since the prosecution can always offer better and better deals until someone cracks.
Posted by: Soronel Haetir | Nov 1, 2014 1:33:12 AM
that is true to an extent Soronel but modern tech is slowly killing it. In today's information age. Too many now know just how well the gov't is fucking over anyone dragged into the former justice system. That it no longer really pays to play. If they are going to steal all you property and money and then sentence you as if you had been convicted of everything even the stuff THEY DIDN'T BOTHER TO CHARGE YOU WITH. Why not make them prove it all in open court. Waste all those months and 100's of thousands of dollars. At least get a little revenge.
Posted by: rodsmith | Nov 1, 2014 2:36:22 AM
How much did these "high-priced teddy bears" cost? Like more than at Build-A-Bear?
Seriously, what I think would really be appropriate in cases like this would be a couple of years in prison coupled with basically complete financial penury for a longer period. Like he goes to prison for 2 years, but they take *all* his assets and distribute them to victims, and then for 18 more years anything he earns or acquires beyond poverty level goes to the victims as well. Basically, for a fraud on this scale, he shouldn't get to do a couple years and then go back to living like a semi-one-percenter with exempt/hidden assets, or some new high-paying consultancy, or assets he successfully transferred to family members, etc. In my system, after his 2 or 3 years he can go back to enjoying freedom (and the State can stop paying to house and care for him); he just can't have his creature comforts. I'm picturing a guy living in a trailer or a one-room apartment and cutting coupons to scrape by on social security.
Unfortunately, I'm not sure this is enforceable. Seems like these guys can always figure out how to sock some assets away somewhere, or have some super-rich buddy (who may be grateful to have been kept out of the indictments) to bankroll them, let them stay in the vacation home, or whatever. And that stuff becomes hard to police -- you run into due process limitations on how far you can trace/claw back the tainted assets, how much you can limit other people's generosity, etc.
So, given the potential barriers to a more proportionate/tailored sentence, maybe these longer terms-of-years are appropriate. But at some basic level it does seem obtuse to incarcerate a retirement-age person for decades for a non-violent crime (and to pay for it).
Posted by: anon2 | Nov 3, 2014 12:01:01 PM
I have followed this since day 1 (my alma mater was a victim and I am an auditing professor and fraud expert). I have read several thousand pages of court and receivership materials.
After getting more than 5 years of undeserved freedom and powder puff treatment from the Court Walsh doesn't want to take his sentence. Geez, too bad.
Walsh and Greenwood stole/co-mingled more than 1/2 billion dollars over a 13 year period. Not quite Madoff scale, but more than a lot of poor kids who are doing major time for smaller crimes.
Update: as of today Walsh is not withdrawing his plea, but wants another beg-for-mercy session.
Posted by: Tom | Nov 5, 2014 3:16:59 PM
