Sentencing Law and Policy

For executive connected to FTX collapse (and Sam Bankman-Fried's girlfriend), federal guidelines call for LWOP, but probation office recommends time served

If anyone wants a good example of the federal sentencing guidelines not doing an effective job of guiding a federal sentencing judge, consider the specifics of the upcoming high-profile sentencing of Caroline Ellison.  This CNBC story about a sentencing filing provides some of the background, as well as helpful links to some key court documents:

Lawyers for Caroline Ellison, the star witness in the prosecution of FTX founder Sam Bankman-Fried, are recommending no prison time for their client’s role in the implosion of the crypto empire that was run by her former boss and ex-boyfriend.

In a court filing Tuesday night, the attorneys said that, at most, Ellison should be sentenced to time served and supervised release because of her swift return to the U.S. from FTX’s Bahamas headquarters in 2022 and her choice to voluntarily cooperate with the U.S. attorney’s office and financial regulators in helping them understand what went wrong at FTX and sister hedge fund Alameda Research. 

Judge Lewis Kaplan, who presided over Bankman-Fried’s case, cited Ellison’s testimony when he decided in March to sentence the FTX founder to 25 years behind bars.  Ellison, who ran Alameda Research, agreed to a plea deal in December 2022, a month after FTX spiraled into bankruptcy. Unlike Bankman-Fried, who was convicted of all seven criminal fraud charges against him, Ellison pleaded guilty to conspiracy and financial fraud charges, rather than go to trial.

The Tuesday filing also refers to the recommendation of the court’s Probation Department that Ellison be given a sentence of “time served with three years of supervised release” as a credit to her “extraordinary cooperation with the government” and “her otherwise unblemished record.”  Lawyers added that the department’s presentence report, which referenced numerous character testimonials speaking to Ellison’s ethics and integrity, also recommended that she not be fined.  “Caroline poses no risk of recidivism and presents no threat to public safety,” the filing says. “It would therefore promote respect for the law to grant leniency in recognition of Caroline’s early disclosure of the crimes, her unmitigated acceptance of responsibility for them, and — most importantly — her extensive cooperation with the government.”

In the filing, FTX CEO John Ray, who has been guiding the crypto firm through bankruptcy proceedings, describes Ellison’s cooperation as “valuable” in helping his team protect and preserve “hundreds of millions of dollars” in assets.  He added that she has worked with his advisors to provide information regarding private keys to cryptocurrency wallets that contain “estate assets, DeFi positions, FTX exchange internal account information, the use of third-party exchanges for pre-petition trading, and pre-petition auditing practices.”

The 67-page document describe large swaths of Ellison’s life, starting from her earliest days in Boston and stretching into her protracted and troubled romance with Bankman-Fried. In that time, she “moved around the globe at his direction, first to Hong Kong and later the Bahamas,” and “worked long, stressful, Adderall-fueled hours,” the filing says.  Bankman-Fried forced Ellison into a sort-of isolation, culminating in her moral compass being “warped,” the lawyers say. At his direction, Ellison helped “steal billions,” all while living “in dread, knowing that a disastrous collapse was likely, but fearing that disentangling herself would only hasten that collapse.”

“Bankman-Fried convinced her to stay, telling her she was essential to the survival of the business, and that he loved her,” all “while also perversely demonstrating that he considered her not good enough to be seen in public with him at high-profile events,” the filing says.

Though I have only had a chance to briefly scan Ellison's sentencing memorandum, I noticed it included no objection to the calculated guideline range, which produced "the Guidelines sentence of life imprisonment, reduced to the statutory maximum of 1,320 months" (110 years).  As guideline mavens know, the massive "loss" in this case drove Ellison’s guideline calculation to produce a recommended LWOP sentence; as federal sentencing mavens know, pleading guilty and providing "extraordinary cooperation with the government" is one critical way a defendant can seek to get a judge to ignore the guidelines at sentencing.

It will be interesting to see if the feds ask for any prison time here, but I am quite sure they will not be urging Judge Kaplan to follow the guidelines.  After all, the feds urged a sentence well below LWOP even for Sam Bankman-Fried even though his guideline calculation was literally "off the grid" and had the highest calculated offense level I had ever seen.  White-collar prosecutors and defense attorneys have long known, of course, that guideline calculations in high-dollar, white-collar cases often amount to a kind of Kabuki theater amounting to little of real substance.  That reality is surely on display, yet again, in the FTX sentencings.

Some prior related posts about SBF's sentencing

• You be the judge: what federal sentence for Sam Bankman-Fried after guilty verdict on seven criminal fraud counts? 
• Should a bounce in crypto markets mean a much lower federal sentence for Sam Bankman-Fried? 
• Lawyers for Sam Bankman-Fried in lengthy memo request "a sentence that returns Sam promptly to a productive role in society"
• Feds argue in sentencing memo that "legitimate purposes of punishment require a sentence of 40 to 50 years’ imprisonment" for Sam Bankman-Fried
• Sam Bankman-Fried sentenced to 25 years in federal prison for his FTX frauds

"Recidivist Organizational Offenders and the Organizational Sentencing Guidelines"

The title of this post is the title of this new article now available via SSRN authored by Kaleb Byars. Here is its abstract:

Despite recent Congressional hearings and public attention, the question of how to fairly and efficiently punish recidivist organizational offenders remains unresolved.  Any discussion regarding the most optimal legal response to recidivist organizational crime is incomplete without a solution accounting for the use of organizational deferred prosecution agreements ("DPAs") and non-prosecution agreements ("NPAs").  These tools allow criminal defendants to resolve charges without sustaining convictions that attach to the defendants' criminal records, and they are used often in the organizational context.

This Article is the first to recognize that the federal sentencing scheme fails to promote deterrence and fairness in the context of organizational sentencing and is the first to offer a practical solution to this problem.  The federal sentencing scheme currently does not require an increase in an organizational defendant's sentence when the defendant previously executed DPAs or NPAs before its subsequent criminal conduct.  Yet the federal sentencing guidelines do require an increase in an individual defendant's sentence if the individual previously executed a DPA. Meanwhile, the existence of prior DPAs and NPAs is a hallmark of organizational recidivism that demonstrates an organization is more culpable than other organizational defendants.  Accordingly, this Article recommends that the Sentencing Commission amend the federal sentencing guidelines to require sentencing courts to increase organizations’ sentences based on prior DPAs and NPAs.  This Article offers specific amendments for consideration. Finally, until the sentencing guidelines are amended, sentencing courts can use tools already in place to begin imposing more fair organizational sentences.

On morning of scheduled federal trial, Hunter Biden attempts to enter an Alford plea

As reported here in the Washington Post, "President Joe Biden’s son Hunter tried to resolve his federal tax case Thursday as jury selection was about to begin, offering an Alford plea in which he maintains he is innocent but acknowledges that the prosecution’s evidence would likely result in a guilty verdict." Here is more:

Prosecutors objected to the proposal, which they had not been told of in advance.  U.S. District Judge Mark Scarsi is expected to decide this afternoon whether to adjourn the proceedings until Friday or give the two sides more time to come to agreement.

“I want to make crystal clear: the U.S. opposes an Alford plea ... Hunter Biden is not innocent, he is guilty," Leo Wise, an attorney working for special counsel David Weiss, told the judge. "We came to court to try this case.”

Biden’s attorney, Abbe Lowell, noted that Alford pleas are an option available to all criminal defendants — even though such plea agreements are relatively rare. “All over the U.S. people do this,” Lowell said.  "It’s not that [Hunter Biden] seeks special treatment, but that he gets the same rights as everyone who is charged.”

Weiss charged Biden last year on nine tax-related counts, accusing him of failing to pay at least $1.4 million in federal taxes from 2016 through 2019.  Three charges were felonies and six were misdemeanors.  They include failing to file and pay taxes, tax evasion and filing false tax returns. Weiss separately charged Biden last year with three felony gun counts in Delaware.  A jury convicted Biden on all three charges in June, and he is scheduled for sentencing in November.

The indictments came after a lengthy investigation into Biden’s business dealings while his father was vice president, which Republican lawmakers and former president Donald Trump have tried to use as evidence of corruption within the Biden family. No evidence has surfaced publicly to suggest any wrongdoing by Joe Biden.

The younger Biden has said he has undergone treatment for addiction and is no longer using drugs. While his addiction to crack cocaine was a central theme of his gun trial, the Los Angeles case is expected to delve into Biden’s lavish spending and sex life during that period — much of which he chronicled in his 2021 memoir. Among the accusations laid out in the nine-count indictment is that Biden wrote off money he paid sex workers as business expenses on his tax forms.

An Alford plea, named after a case North Carolina v. Alford, is a way for a defendant to register a formal admission of guilt toward charges they are facing while simultaneously maintaining their innocence. United States attorneys are only able to consent to Alford pleas “in the most unusual of circumstances” and consult with top officials at the Department of Justice before doing so, according to federal prosecution guidelines....

The president, who has made clear he thinks the criminal charges against his son are politically motivated, has said emphatically that he does not plan to pardon Hunter Biden’s criminal convictions. Some of Hunter Biden’s allies hope he will change his mind, however, and issue a pardon after the November election.

Just as Hunter Biden was beginning the day in court, the president was leaving the White House to travel to La Crosse, Wis., for an event touting his administration’s economic policies. From Air Force One, White House press secretary Karine Jean-Pierre reiterated that the president would not pardon or commute Hunter Biden’s sentence. “No," she told reporters on Air Force One. "It is still very much a no.”

UPDATE: This Politico article reports that Hunter Biden's guilty plea was entered this afternoon, though it appears it was just a standard open plea to the charges rather than an Alford plea:

Hunter Biden pleaded guilty Thursday to tax evasion and other tax crimes in an 11th-hour about-face that surprised prosecutors as a trial was about to begin....

The only remaining question now is how much prison time, if any, Biden will face. Shortly after Biden entered his guilty plea, U.S. District Judge Mark Scarsi scheduled his sentencing on the tax charges for Dec. 16. Biden is scheduled to be sentenced in the gun case in November.

Biden faces up to 17 years in prison for the tax charges, though experts say lighter sentences in similar cases are more common. Scarsi will consider Biden’s admission of guilt when he sentences him....

The plea was not part of a plea deal, meaning prosecutors did not promise to recommend a reduced prison sentence....  After Scarsi questioned the Alford arrangement and signaled he might seek further legal arguments on whether he should accept it, Biden conferred with his lawyers and entered a straightforward guilty plea.

<P>As Scarsi questioned Biden about the plea in open court, the judge stressed that he still had the authority to hand down a hefty sentence.  “With regard to sentencing, there’s no guarantees. You understand that?” Scarsi, an appointee of Donald Trump, asked....

Biden is scheduled to be sentenced on Nov. 13 in the gun case, where federal sentencing guidelines recommend up to 21 months in prison, though Biden could receive much less or even no prison time at all.  In the tax case, prosecutors alleged that Biden earned more than $7 million during the years in question and later plotted to fraudulently lower the taxes he owed on that income by falsely labeling trips and other luxury purchases as business expenses. They said he used the money to fund a lavish lifestyle filled with drugs, strippers and sports cars.

US Sentencing Commission releases more updated "Quick Facts" publications on more economic offenses

The US Sentencing Commission is continuing to release new sets of its "Quick Facts" publications with updates drawing on the USSC's full fiscal year 2023 data. I have flagged these new updated Quick Facts in recent posts  here and here, and the USSC just this week released these additional "Quick Facts"  on additional economic offenses:

• NEW Tax Fraud (August 2024)
• NEW Health Care Fraud (August 2024)
• NEW Government Benefits Fraud (August 2024)
• NEW Credit Card and Other Financial Instrument Fraud (August 2024)

Lots of notable front page sentencing issues in next week's sentencing of Backpage

I have not closely followed the legal sagas that have surrounded the website Backpage, which was the huge classified advertising website shut down and seized by federal law enforcement in April 2018.  But next week the Backpage saga has a federal sentencing stage, and this Law360 piece provides a flavor for just some of the issues raised:

Prosecutors asked an Arizona federal judge Monday to sentence two former executives of the defunct classifieds service Backpage.com and the site's co-founder to 20 years in prison after they were found guilty of several counts over an alleged $500 million prostitution scheme.

In a sentencing memorandum, prosecutors said the crimes former executives Scott Spear and John Brunst and Backpage co-founder Michael Lacey were convicted of caused extraordinary harm and amounted to "one of the internet's largest and longest-running criminal empires."

Prosecutors say the website facilitated prostitution through ads. Spear and Brunst were convicted of multiple counts after a 28-day trial in November while two other executives were acquitted. Lacey was found guilty of one count of money laundering; the jury was deadlocked on dozens of other charges against him. The mixed verdict ended a sprawling case that saw its first trial end in a mistrial in 2021....

In April, U.S. District Judge Diane J. Humetewa rejected some of the jury's findings, tossing nearly three dozen transactional money laundering charges, as well as Travel Act charges against Lacey, but kept the rest of the verdict intact. Sentencing is scheduled for Aug. 27 and 28. Prosecutors said Monday they were "unaware of any mitigating circumstances" for the purposes of sentencing. Spear, Brunst and Lacey showed no remorse following their convictions, prosecutors said.... The prosecutors argued that victim impact statements submitted to the court don't fully encapsulate the harm Backpage inflicted, saying some trafficking victims were killed by perpetrators who found them on the site.

Lacey, Spear and Brunst all requested probation in their own sentencing memorandums filed Monday, arguing that they never intentionally broke the law. Lacey claimed that his only felony conviction was for a "financial crime that he purportedly committed upon the idea and advice of two credentialed lawyers, wherein all reporting rules were followed."....

Spear similarly said in his memorandum that his actions were in line with a law-abiding life.... Brunst said he was never employed by Backpage, but rather worked for Village Voice Media Holdings starting in 1992 and later at Medalist Holdings, a successor entity after VVMH sold its newspapers.

Over at Reason, the arguments surrounding one defendant get extra attention in a piece here headlined "Feds Seek 20-Year Sentence for Backpage Co-Founder Michael Lacey; It's an insane ask for someone convicted of just one nonviolent offense." Here is an excerpt:

Lacey was charged — along with other former Backpage executives — of using Backpage to knowingly facilitate prostitution, in violation of the U.S. Travel Act.  Two of the defendants were acquitted of all such offenses and two of the defendants were found guilty of some of them. But the jury could not reach a conclusion when it came to Lacey. U.S. District Judge Diane Humetewa found there was insufficient evidence to sustain most of the remaining 84 counts against him.

Now, prosecutors want the judge to simply act, for sentencing purposes, as if those charges are all true. Federal prosecutors are also putting Lacey on trial for these charges again — which means that if he is eventually convicted, he could wind up being sentenced twice for the same conduct.

This case and these defendants have many more notable elements, and I found reviewing some of the sentencing memoranda fascinating — eg, the government's memo reports that the PSR recommended 1080 months (90 years) for Spear, who is 73 years old.  Here, thanks to Law360, are the sentencing submissions:

•  US Memo
•  Spear Memo
•  Lacey Memo
•  Brunst Memo

You be the federal judge: what sentence for former US Rep George Santos after his plea to fraud and identity theft?

The remearkable saga of former US Congressman George Santos closed one chapter in the same manner as many federal criminal prosecutions, namely with a guilty plea to a few of many charged counts.  But what sentence should shape the next chapter of the Santos saga?  This press release from the U.S. Attorney's Office in the Eastern District of New York, headed "Former Congressman George Santos Pleads Guilty to Wire Fraud and Aggravated Identity Theft," provides all sorts of details about Santos's misdeeds and starts with these basics:

Santos Admits He Filed Fraudulent FEC Reports, Embezzled Funds from Campaign Donors, Charged Credit Cards Without Authorization, Stole Identities, Obtained Unemployment Benefits Through Fraud, and Lied in Report to the House of Representatives

Earlier today, in federal court in Central Islip, former Congressman George Anthony Devolder Santos pleaded guilty to committing wire fraud and aggravated identity theft.  The proceeding was held before United States District Judge Joanna Seybert.   When sentenced, Santos faces a minimum sentence of two years’ imprisonment and a maximum sentence of 22 years’ imprisonment. As part of the plea Santos will pay restitution of $373,749.97 and forfeiture of $205,002.97.  Santos was initially charged in May 2023, and a superseding indictment charging Santos with additional crimes was returned in October 2023.

This USA Today article provides some context and more sentencing details:

Former Rep. George Santos, R-N.Y., who was expelled from the House of Representatives after being indicted on 23 federal counts including fraud and misusing campaign funds, pleaded guilty Monday in federal court to two of the charges.

The Long Island Republican faces a mandatory two-year minimum sentence after pleading guilty to wire fraud and aggravated identity theft.  But Judge Joanna Seybert estimated the term could range from six to eight years behind bars when he is sentenced on Feb. 7, 2025.  Santos also agreed to pay nearly $374,000 in restitution and to forfeit $205,000.

Santos had faced trial in September on charges including laundering campaign funds to pay for his personal expenses, charging donors' credit cards without their consent, and receiving unemployment benefits while he was employed. "I deeply regret my conduct and the harm it has caused and accept full responsibility for my actions," Santos said in a shaky voice in court.

Prosecutors said Santos told the truth about his criminal schemes for what seemed like the first time since campaigning for Congress. “He admitted to lying, stealing and conning people,” U.S. Attorney Breon Peace said in a statement. “His flagrant and disgraceful conduct has been exposed and will be punished."...

"Moving forward, I am dedicated to making amends for the wrongs I have committed," Santos told reporters outside the courthouse. "This plea is not just an admission of guilt, it is an acknowledgment that I need to be held accountable, like any other American that breaks the law."

So, dear readers, Santos himself says he needs "to be held accountable." How would you punish him to hold him accountable?

Is Senator Bob Menendez now facing a de facto life sentence after being convicted by a jury on all 16 federal corruption counts?

The question in the title of this post is prompted by this news via Bloomberg Law: " US Senator Bob Menendez, the powerful New Jersey Democrat, was found guilty of corruption charges related to the FBI seizure of 13 gold bars, nearly $500,000 in cash and a Mercedes-Benz at his home.  Menendez was convicted on all 16 counts Tuesday after a two-month trial in New York, where prosecutors argued the lawmaker had sold his influence to protect businessmen and to promote Egypt’s interests."  Here is more: 

The government alleged Menendez’s wife, Nadine, was a go-between who collected bribes and set up meetings with the businessmen and Egyptian officials. She was also charged, but will face a later trial.

After the verdict was read out, one of Menendez’s lawyers patted the senator on the shoulder. The judge set a sentencing date for Oct. 29 for Menendez and his two co-defendants. Menendez is certain to appeal.

The three-term senator was the first member of Congress charged with being a public official acting as a foreign agent. In all, Menendez was convicted of charges including bribery, extortion, conspiracy, honest services wire fraud and obstruction of justice.

Menendez, the senior Hispanic lawmaker in Congress, saw his political support evaporate in Washington and New Jersey amid the publicity of the cash, gold and convertible seized by agents from his home in 2022. After his indictment, he resigned as chairman of the Senate Foreign Relations Committee. He could face expulsion from the Senate, where Democrats hold a 52-48 advantage.

The bribes began when Menendez, 70, started dating Nadine Arslanian in 2018, just after an earlier corruption trial against him ended in a hung jury, prosecutors said. They wed in 2020.  During the latest criminal trial, jurors held gold bars stashed in the Menendez house, heard about their tumultuous relationship, and watched a secret FBI video of the couple dining at a Morton’s steakhouse with an Egyptian intelligence official.

Menendez was tried with Fred Daibes, a real estate developer in Edgewater, New Jersey, and Wael Hana, who secured an Egyptian monopoly to certify US meat bound for Egypt as compliant with halal standards. Daibes and Hana also were convicted of bribery and wire fraud charges.  A third businessman, former insurance broker Jose Uribe, pleaded guilty and testified he bribed Arslanian with a Mercedes.

Prosecutors said Menendez corruptly helped Egypt secure US military aid and sensitive information; urged a US agriculture undersecretary to stop questioning Hana’s halal monopoly; weighed appointing a US attorney in New Jersey who would influence a 2018 fraud indictment of Daibes; contacted the New Jersey attorney general to disrupt New Jersey criminal probes of two people close to Uribe; and helped Daibes arrange financing from Qatari investment fund for a real estate project.

Menendez didn’t testify but denied wrongdoing. His lawyers said he took no bribes or official actions to advance any quid-pro-quo schemes. His attorney Adam Fee derided the US case as “painfully thin,” woven from “fantasy” speculation and misguided inferences.  “The prosecutors are going to continue to tell you, in excited tones, that Senator Menendez is a crook, is corrupt, took a bunch of bribes,” Fee said in his summation. “His actions were lawful, normal, and good for his constituents, and this country.”

Defense lawyers sought to defuse the explosive heart of the case — gold bars and cash stuffed in closets, boots, jackets, a safe and a shopping bag. Using fingerprints and DNA evidence, prosecutors traced $82,500 of cash-stuffed envelopes to Daibes.  Serial numbers on two one-kilogram gold bars, valued at about $60,000 each, matched those on a list Daibes kept. Daibes, who grew up in a Palestinian refugee camp, gave other kilogram bars to Nadine Menendez, who sold all but two before the FBI raid, the US said. Defense lawyers said she inherited gold bars from her Lebanese family, and there’s no proof the gold she sold came from Daibes.

Fee said Menendez’s Cuban immigrant parents hoarded cash, and that the senator routinely withdrew $400 for decades from a bank account. He also argued Daibes had been friends with Menendez for 30 years, and he gave gifts out of friendship, not corrupt intent.

Because I am not familiar with all the offense details, I am disinclined to guess the precise guideline range that Senator Menendez will be facing. But the basics suggest to me he might easily be looking at an offense level over 35, meaning a guideline range of perhaps at least 15-18 years. It will be quite interesting to see how this sentencing unfolds and whether the Senator gets bail pending the inevitable appeal.

SCOTUS grants cert to address fraudulent inducement theory of federal criminal fraud

As explained here at SCOTUSblog, the Justice via a new order list has filled in a bit more of its still light docket for next Term:

The justices on Monday morning added four new cases to their docket for the 2024-25 term. In a list of orders from the justices’ private conference last week, the court agreed to tackle issues ranging from the burden of proof for an employer hoping to rely on an exemption from the Fair Labor Standards Act to the pleading standards for cases under the Private Securities Litigation Reform Act.

One of the four cases taken up by SCOTUS today is a criminal fraud case: Kousisis v. US.  Here is how the cert petition in this case presented  the questions to the Court:

The circuits are split 6-5 on the validity of the fraudulent inducement theory of mail and wire fraud. The Questions Presented are:

Whether deception to induce a commercial exchange can constitute mail or wire fraud, even if inflicting economic harm on the alleged victim was not the object of the scheme.

Whether a sovereign’s statutory, regulatory, or policy interest is a property interest when compliance is a material term of payment for goods or services.

Whether all contract rights are “property.”

Some sentencing basics after former President Donald Trump's convictions on 34 felony New York counts

I am not an expert on New York sentencing law and practice, though I expect a whole lot of folks will soon be opining on these topics now that former President Donald Trump has been convicted by a jury on 34 New York felony counts.  This CBS News piece seems to review some sentencing basics pretty well:

Trump was convicted by the jury Thursday on 34 felony counts for falsifying business records to conceal a $130,000 payment to adult film star Stormy Daniels to buy her silence before the 2016 presidential election.  The jury in Manhattan returned a guilty verdict after a trial that stretched six weeks and featured more than 20 witnesses.

Each of the 34 felony charges carries up to a $5,000 fine and four-year prison sentence.  But whether Trump will go to prison is another question — one that's up to the judge at sentencing.  The judge set a July 11 date for sentencing following the jury's verdict on Thursday.

The timing is in line with similar white-collar felony cases, where sentencing often takes place anywhere from three to eight weeks after conviction, according to Dan Horwitz, a defense lawyer who formerly prosecuted white-collar cases for the Manhattan District Attorney's office.  The sentencing will happen four days before the start of the Republican National Convention.

The minimum sentence for falsifying business records in the first degree is zero, so Trump could receive probation or conditional discharge, a sentence of no jail or up to four years for each offense.  Trump would likely be ordered to serve the prison time concurrently for each count, so up to four years, total.

"The judge could sentence him to anything between zero and the max," Horwitz said. "So he could sentence him to a period of months in jail, he could sentence him to a period of weeks in jail, he could sentence him to a sentence where he is required, for example, to go to jail every weekend for a period of time and then serve the rest of the sentence on probation."

In an analysis of comparable cases brought by the Manhattan district attorney's office, Norm Eisen, who has written a book about Trump's 2020 election-related federal indictment and served as special counsel in the first impeachment of the former president, found that about 10% resulted in imprisonment.  But the circumstances surrounding the case make any across-the-board comparison difficult.

Trump could also be sentenced to home detention, where he would wear an ankle bracelet and be monitored rather than going to jail.  Horwitz suggested that a home detention sentence, which walks a middle ground between no punishment and a stint in state prison, might be the most likely outcome.  It would also satisfy Trump's unusual security and political situation.

A home detention sentence would also make it possible for Trump to continue campaigning — albeit virtually — with the ability to hold news conferences and remain active on social media....

There are a number of factors that the court can take into consideration for sentencing, including the nature and extent of the conduct, who was hurt, whether there are victims, and acceptance of responsibility, Horwitz said.  Trump has repeatedly denied any guilt in the case....

A defendant's conduct during the trial may also play a role, so Trump's repeated violation of Merchan's gag order may be a significant factor in his sentencing. During the trial, Trump was accused over a dozen times of violating a gag order preventing him from making public comments about likely witnesses, jurors, attorneys and court staff involved in the case.

Whatever Trump's formal sentence, he is certain to endure any number of formal and informal collateral consequences as a result of his convictions.  This Politico article flags an interesting one in its headline: "There’s a real possibility Trump can’t vote in November."

Though I suspect lots of folks may be eager to discuss lots of issues beyond the specifics of Trump's upcoming NY sentencing, I would be eager to hear as much discussion of sentencing law and practice as possible in the comments.  I say that in part because there are so many interesting and intricate sentencing issues that arise in this historic and controversial case.  For example, should state prosecutors assert that, and should Merchan consider, Trump's other alleged criminal behaviors as detailed in three other pending criminal indictments are aggravating factors calling for a more severe sentence?    

"Regressive White-Collar Crime"

The title of this post is the title of this new article authored by Stephanie Holmes Didwania available via SSRN. Here is its abstract:

Fraud is one of the most prosecuted crimes in the United States, yet scholarly and journalistic discourse about fraud and other financial crimes tends to focus on the absence of so-called “white-collar” prosecutions against wealthy executives.  This Article complicates that familiar narrative. It contains the first nationwide account of how the United States actually prosecutes financial crime.  It shows — contrary to dominant academic and public discourse — that the government prosecutes an enormous number of people for financial crimes and that these prosecutions disproportionately involve the least advantaged U.S. residents accused of low-level offenses.  This empirical account directly contradicts the aspiration advanced by the FBI and Department of Justice that federal prosecution ought to be reserved for only the most egregious and sophisticated financial crimes.  This Articles argues, in other words, that the term “white-collar crime” is a misnomer.

To build this empirical foundation, the Article uses comprehensive data of the roughly two million federal criminal cases prosecuted over the last three decades matched to county-level population data from the U.S. Census.  It demonstrates the history, geography, and inequality that characterize federal financial crime cases, which include myriad crimes such as identity theft, mail and wire fraud, public benefits fraud, and tax fraud, to name just a few.  It shows that financial crime defendants are disproportionately low-income and Black, and that this overrepresentation is not only a nationwide pattern, but also a pattern in nearly every federal district in the United States.  What’s more, the financial crimes prosecuted against these overrepresented defendants are on average the least serious.  This Article ends by exploring how formal law and policy, structural incentives, and individual biases could easily create a prosecutorial regime for financial crime that reinforces inequality based on race, gender, and wealth.

A much different federal sentence for a different crypto criminal

The trial and sentencing of Sam Bankman-Fried to 25 years in federal prison for his crypto criminality garnered a whole lot of attention earlier this years.  The plea and sentencing of another crypto criminal got a whole lot less attention, perhaps in part because his crimes and sentence were different in kind.  This press article, headlined "Binance founder Changpeng ‘CZ’ Zhao sentenced to 4 months, will enter prison as country’s richest inmate," provides some of the interestingly different details (with links from the original):

Changpeng “CZ” Zhao once sat atop the crypto industry as the founder and CEO of Binance, the world’s leading crypto exchange.  On Tuesday, a judge in Seattle federal court sentenced Zhao to four months in prison as part of a plea deal — but the multibillionaire will still retain most of his wealth.

After two years marked by the stunning collapse of crypto companies including Sam Bankman-Fried’s FTX, the Justice Department brought criminal charges against Binance and its CEO in November, though the exchange remained operational.  Unlike the DOJ’s case against Bankman-Fried, or other alleged crypto criminals such as Terraform Labs’ Do Kwon, Zhao and Binance reached a settlement with prosecutors, along with a slew federal agencies including the Treasury Department and Commodity Futures Trading Commission.

Zhao’s sentencing marks the conclusion of the process, with Judge Richard Jones ruling that the crypto entrepreneur — estimated to be worth around $43 billion, making him the richest inmate to serve time in the U.S. — must pay a $50 million personal fine in addition to his time behind bars.  In court, Zhao expressed contrition for his “mistakes” as CEO, though he noted that Binance implemented a compliance program. “In my mind, I wanted to do everything possible before stepping down as CEO,” he said before Jones.

The judge argued that Zhao’s “better to ask forgiveness than permission” philosophy was troubling, but ultimately decided on a lesser sentence than the 36 months requested by prosecutors. “Everything I see about your history and characteristics are of a mitigating nature and a positive nature,” Jones said, citing Zhao’s dedication to Binance and low likelihood to re-offend.

Zhao founded Binance in 2017, and it became the largest crypto exchange in just six months. Amid its meteoric growth, however, Binance struggled to implement effective “know your customer” and anti–money-laundering regimes — an embarrassing reality laid bare in complaints filed by the CFTC and Securities and Exchange Commission in 2023, including internal messages revealing that executives were aware of widespread compliance violations.  Despite — or perhaps owing to — Binance’s wildcat approach, Zhao became a global icon for the crypto industry, appearing at conferences from Portugal to the United Arab Emirates, which he made his de facto headquarters.  Still, as U.S. authorities circled around the world’s leading crypto companies, reports emerged that the DOJ was building a case against Binance....

In November, Attorney General Merrick Garland announced that the DOJ, along with the CFTC and Treasury Department, had reached a settlement with Binance and Zhao on charges related to money-laundering violations at the exchange.  The company agreed to pay $4.3 billion in fines spread among the agencies, which represented the largest enforcement action in Treasury Department history.  Notably, the settlement did not include fraud charges, and the SEC did not participate in the joint action. The agency continues to litigate its case against Binance in the U.S. District Court for the District of Columbia, where a judge recently held a hearing on Binance’s motion to dismiss the lawsuit.  The lack of more serious charges, along with the relatively light slap on the wrist for Zhao, led watchdog groups such as Better Markets to argue the settlement represented a “miscarriage of justice.”...

While Zhao’s plea deal laid out a potential sentence of 18 months in prison, prosecutors filed a memo last week requesting he serve 36 months, citing the “magnitude of Zhao’s willful violation of U.S. law and its consequences” and arguing that it would “not just send a message to Zhao but also to the world.”  In a concurrent filing, Zhao’s lawyers wrote that he “deeply regrets his offense” and asked for no time in prison, suggesting instead he be sentenced to house arrest. The request included letters from more than 160 friends and business associates, including members of the ruling families in the UAE and former U.S. ambassador to China Max Baucus, a former U.S. senator who serves on Binance’s advisory board.  Ultimately, Jones sided in part with Zhao’s team during Tuesday’s hearing, arguing against the prosecution’s proposed extended sentence given the lack of evidence that Zhao knew of illegal activity.

Sam Bankman-Fried sentenced to 25 years in federal prison for his FTX frauds

As reported in this Wall Street Journal piece, "FTX founder Sam Bankman-Fried was sentenced Thursday to 25 years in prison for fraud tied to the collapse of his digital exchange, capping his meteoric rise and fall." Here is more:

Less than two years ago, Bankman-Fried was the crypto king. The moptop millennial hobnobbed with heads of state, soaked up Caribbean views from his $30 million penthouse and vowed to use his wealth to better humanity.

Last year, a jury found the 32-year-old guilty of stealing billions of dollars from FTX customers and defrauding investors and lenders to his crypto investment firm Alameda Research.

Bankman-Fried, standing with his hands clasped, told the judge before sentencing Thursday that he was haunted every day by what he had thrown away. “I was responsible for FTX, and its collapse is on me,” he said during a 20-minute statement. A lot of people were let down, he said, adding, “I’m sorry about that.”

Federal prosecutors said Bankman-Fried committed one of the greatest financial frauds in U.S. history. Fueled by greed and hubris, he used other people’s money to fund his lavish lifestyle, make risky investments and pursue his political agenda, according to prosecutors. Prosecutors asked U.S. District Judge Lewis Kaplan to sentence Bankman-Fried to 40 to 50 years in prison. Without a lengthy sentence, Bankman-Fried could commit more crimes, Assistant U.S. Attorney Nicolas Roos told the court. “If Mr. Bankman-Fried thought that mathematics would justify it, he would do it again,” Roos said.

Bankman-Fried’s lawyers argued a sentence of no more than six years in prison was more appropriate, saying he still had much to offer to society. They pointed to his autism, his deep remorse and his charitable works as reasons for a lenient sentence. Marc Mukasey, his lawyer, told the judge that Bankman-Fried wasn’t a “ruthless financial serial killer” who sought to hurt people. “Sam Bankman-Fried does not make decisions with malice in his heart,” said Mukasey. “He makes decisions with math in his head.”...

During a monthlong trial in the fall, jurors heard testimony from three of Bankman-Fried’s top lieutenants, including his ex-girlfriend, who said the FTX founder directed them to commit crimes alongside him. Bankman-Fried took the unusual step of testifying in his own defense. He told jurors that he never committed fraud, yet he struggled under cross examination, saying dozens of times that he didn’t recall specifics.

Kaplan said Thursday that Bankman-Fried committed perjury during his testimony, including when he told jurors that until fall 2022, he had no knowledge that Alameda had spent FTX customer deposits.

In the weeks before the sentencing, Bankman-Fried’s supporters wrote letters to the judge, saying that his struggles with depression, autism and anhedonia — the inability to feel happiness — weigh in favor of a lighter sentence....

Kaplan said Thursday that in determining the sentence, he wasn’t weighing whether customers would get their money back. “A thief who takes his loot to Las Vegas and successfully bets the stolen money is not entitled to a discount on the sentence,” the judge said.

Prior related posts (in some of which I set the over/under at 25 years):

• You be the judge: what federal sentence for Sam Bankman-Fried after guilty verdict on seven criminal fraud counts? 
• Some early chatter and speculation about Sam Bankman-Fried's coming federal sentencing 
• Should a bounce in crypto markets mean a much lower federal sentence for Sam Bankman-Fried? 
• Lawyers for Sam Bankman-Fried in lengthy memo request "a sentence that returns Sam promptly to a productive role in society"
• Some notable developments and commentary on Sam Bankman-Fried's coming sentencing
• Feds argue in sentencing memo that "legitimate purposes of punishment require a sentence of 40 to 50 years’ imprisonment" for Sam Bankman-Fried
• Rounding up a few sentencing speculations a few days before Sam Bankman-Fried's sentencing

Texas justice?: how should deal cut by special prosecutors to end felony charges against Texas AG be described?

I have not followed closely any of the legal cases and dramas surrounding Texas Attorney General Ken Paxton, but the news of a deal to end long-running state criminal charges against him caught my eye in part because I am not quite sure how to describe it.  As detailed in this local article, headlined "Ken Paxton agrees to community service, paying restitution to avoid trial in securities fraud case," the resolution is not a plea deal because AG Paxton is not pleading guilty to anything.  And yet, AG Paxton is agreeing to serve a kind of sentence functionally and to being under the yoke of prosecutors for an extended period:

Prosecutors on Tuesday agreed to drop the securities fraud charges facing Attorney General Ken Paxton if he performs 100 hours of community service and fulfills other conditions of a pretrial agreement, bringing an abrupt end to the nearly nine-year-old felony case that has loomed over the embattled Republican since his early days in office.

The deal, which landed three weeks before Paxton is set to face trial, also requires him to take 15 hours of legal ethics courses and pay restitution to those he is accused of defrauding more than a decade ago when he allegedly solicited investors in a McKinney technology company without disclosing that the firm was paying him to promote its stock. The amount of restitution totals about $271,000, prosecutor Brian Wice said.

Paxton, who will not have to enter a plea under the terms of the agreement, faced the prospect of decades in prison if he had been convicted of fraud. His status as a felon, based in part on an opinion he issued himself, would have likely barred him from running for office in the future. Paxton attorney Dan Cogdell said the prosecutors “approached us” and Paxton was “happy to agree to the terms of the dismissal.”

“But let me be clear, at no time was he going to enter any plea bargain agreement or admit to conduct that simply did not occur,” Cogdell said in a statement. “There is no admission of any wrongdoing on Ken’s part in the agreement because there was no wrongdoing on his part.”

The deal is the second major win for Paxton in roughly the last six months, after the Republican-controlled Texas Senate acquitted him last fall of 16 impeachment charges centered on allegations that he accepted bribes and abused the authority of his office to help a wealthy friend and campaign donor....

Two of the charges — first-degree felonies — stemmed from allegations that Paxton persuaded investors, including a then-GOP state lawmaker, to buy at least $100,000 worth of stock in a tech startup, Servergy, without disclosing that he would be compensated for it. Paxton will have 18 months, the length of the pretrial deal period, to pay restitution to the former lawmaker, Byron Cook, and the estate of Joel Hochberg, a Florida businessman who died last year. Wice said he is “not necessarily opposed" to dropping the charges before the 18 months are up if Paxton makes the payments sooner. He said Paxton cannot use campaign funds to pay restitution....

Wice said he had been “besieged by a torrent of phone calls” from people who have “expressed their monumental displeasure with the fact that these cases are being resolved with a pretrial intervention.” Touting the restitution Paxton now owes to his alleged victims, Wice said it was more important to secure justice for them than to pursue prison time for Paxton, which he said should only be a priority if the defendant poses a threat to public safety....

Paxton will perform community service in Collin County, where he resides, with an "entity or organization" agreed upon by both sides, Wice said — likely a "food pantry or soup kitchen." He will also be required to check in with prosecutors every 60 days to ensure he is fulfilling the terms of the deal. The case could still resume and head to trial if Paxton fails to comply.

I think it would be fair to label this resolution a deferred prosecution agreement or maybe a non-prosecution agreement, though it appears the special prosecutor calls this a "pretrial intervention."  Whatever the right label, I wonder if this arrangement is unusual in Texas criminal justice arenas.  I also wonder whether folks view this resolution as true Texas justice or a kind of special Texas justice.

Rounding up a few sentencing speculations a few days before Sam Bankman-Fried's sentencing

Though we are still a few days from the high-profile sentencing of former FTX CEO Sam Bankman-Fried, I have already seen some lengthy press pieces discussing the sentencing filings and speculating about how US District Judge Lewis Kaplan with weigh competiting arguments.  Here is a round up:

From Business Insider, "FTX's victims may get all their money back. The judge sentencing Sam Bankman-Fried might not care."

From CoinDesk, "U.S. Government's Legal Precedents Don't Support Lengthy Prison Term, Bankman-Fried's Defense Argues"

From Inc., "Is Sam Bankman-Fried a 'Super-Villain' or Just a Bad Trader?"

From Unchained, "SBF’s Prison Sentencing Is Coming Up. How Many Years Will He Get?"

I remain inclined to put the over/under for an imprisonment term here at 25 years, in part because I ccan readily imagine the sentence being somewhat shorter or somewhat longer. 

Prior related posts:

• You be the judge: what federal sentence for Sam Bankman-Fried after guilty verdict on seven criminal fraud counts? 
• Some early chatter and speculation about Sam Bankman-Fried's coming federal sentencing 
• Should a bounce in crypto markets mean a much lower federal sentence for Sam Bankman-Fried? 
• Lawyers for Sam Bankman-Fried in lengthy memo request "a sentence that returns Sam promptly to a productive role in society"
• Some notable developments and commentary on Sam Bankman-Fried's coming sentencing
• Feds argue in sentencing memo that "legitimate purposes of punishment require a sentence of 40 to 50 years’ imprisonment" for Sam Bankman-Fried

Feds argue in sentencing memo that "legitimate purposes of punishment require a sentence of 40 to 50 years’ imprisonment" for Sam Bankman-Fried

The federal court in the Southern District of New York is scheduled, in less than two week, to sentence Sam Bankman-Fried following his trial conviction on multiple fraud charnges.  A few weeks ago, as noted here, SBF's lawyers submitted a lengthy sentencing memo arguing that his advisory guideline range is 63-78 months that that "a sentence that returns Sam promptly to a productive role in society would be sufficient, but not greater than necessary, to comply with the purposes of sentencing."  

Unsurprisingly, federal prosecutors have a different sentencing perspective.  And, in the run-up to the March 28 sentencing, it has not filled this even longer sentencing memorandum.  The argue that SBF's guideline range is literally off the charts:

Based on the foregoing, the adjusted offense subtotal is 60.  Because any offense level in excess of 43 is treated as an offense level of 43, 43 is the total applicable offense level. (PSR ¶ 89).  The defendant’s criminal history score is zero, which puts him in Criminal History Category I. (PSR ¶ 92).  Based upon these calculations, Bankman-Fried’s advisory Guidelines imprisonment range is life. (PSR ¶ 129).  However, because the statutorily authorized maximum sentence is 110 years’ imprisonment, which is less than life imprisonment, the applicable Guidelines sentence is 110 years’ (1,320 months) imprisonment. U.S.S.G. §§ 5G1.1(a), 5G1.2(d)

Notably, though, federal prosecutors do not ultimately advocate for a sentence of imprisonment for 110 years for SBF.  As explained at the end of its preliminary statement, the feds think that less than half of this term will do the trick:

The scope, duration, nature, and sheer number of Bankman-Fried’s crimes, the resulting harm they have caused, the willful disregard of the rule of law, and the absence of countervailing mitigating circumstances render him exceptionally deserving of a sentence that is sufficiently severe to provide justice for the defendant’s crimes and to dissuade others from committing similar crimes, and that will permit the defendant to return to liberty only after society can be assured that he will not have the opportunity to turn back to fraud and deceit.  Although it is unlikely (but not impossible) that the defendant will work in finance again, and will likely forfeit all of his ill-gotten gains, justice requires that he receive a prison sentence commensurate with the extraordinary dimensions of his crimes.  For these reasons, the legitimate purposes of punishment require a sentence of 40 to 50 years’ imprisonment.

Because a "split the difference" approach often serves as a reasonable first guess for a contested sentencing outcome, I am tempted to put the over/under for an imprisonment term here at 25 years.  I am not familiar enough with Judge Lewis Kaplan's sentencing history to make a bolder prediction; folks in the comments are certainly welcome to do so.

Prior related posts:

• You be the judge: what federal sentence for Sam Bankman-Fried after guilty verdict on seven criminal fraud counts? 
• Some early chatter and speculation about Sam Bankman-Fried's coming federal sentencing 
• Should a bounce in crypto markets mean a much lower federal sentence for Sam Bankman-Fried? 
• Lawyers for Sam Bankman-Fried in lengthy memo request "a sentence that returns Sam promptly to a productive role in society"
• Some notable developments and commentary on Sam Bankman-Fried's coming sentencing

Some notable developments and commentary on Sam Bankman-Fried's coming sentencing

Sam Bankman-Fried is scheduled to be sentenced three weeks from today, and his sentencing memo filed last week has already generated considerable comments (some covered here).  As we await the government's filing next week, I have seen a few recent notable developments and commentary that seemed worth flagging here (with links from the original):

From CoinPedia, "Sam Bankman-Fried Fights for Leniency: Will He Face 100 Years in Prison?".  An excerpt:

In an unexpected turn, a compelling letter has been submitted, urging Judge Kaplan to take a firm stance against leniency for Sam Bankman-Fried (SBF), co-founder of FTX. Emotions run high as the letter passionately argues against what it sees as “intellectual dishonesty” in pleas for leniency, especially regarding possible reimbursements for account holders.  The letter, written by a CBOE member on behalf of a market maker firm, sharply criticizes SBF’s alleged financial misconduct, describing a situation where funds are claimed to be stolen, gambled, and only partially recovered.

From Puck, "S.B.F.’s Sentencing Game Theory: Bankman-Fried’s lawyers appear to be setting the stage to appeal his sentence—and potentially redefine the definition of fraud, itself."  An excerpt:

Even if the six-year bid doesn’t sway Kaplan himself, its real purpose is likely to set the appellate stage — where Bankman-Fried will argue he was denied a fair trial when Kaplan prevented him from presenting his honest intentions with FTX.  As a fallback, he’ll attempt to convince the higher-ups to take a “textualist” approach to criminal sentencing.

From Slate, "The FTX Saga Twist That Might Save SBF in Sentencing: He could still get up to a century in prison."

So, to recap: In Bankman-Fried’s favor, it looks like his crimes may not wind up wiping out thousands of investors. But working against him is a long pattern of behavior that seems designed in a lab to infuriate a judge, who may also choose to lean on a presentencing report that says to throw the book at Bankman-Fried. “I think it’s hard to predict, but I’d be surprised if it weren’t a significant sentence,” [former AUSA Rachel] Maimin said.  Bankman-Fried is in danger of learning that there isn’t exactly a good way to come up for sentencing on seven federal felonies."

Prior related posts:

• You be the judge: what federal sentence for Sam Bankman-Fried after guilty verdict on seven criminal fraud counts? 
• Some early chatter and speculation about Sam Bankman-Fried's coming federal sentencing 
• Should a bounce in crypto markets mean a much lower federal sentence for Sam Bankman-Fried? 
• Lawyers for Sam Bankman-Fried in lengthy memo request "a sentence that returns Sam promptly to a productive role in society"

Lawyers for Sam Bankman-Fried in lengthy memo request "a sentence that returns Sam promptly to a productive role in society"

For a number of reasons, I always find white-collar sentencings to be fasciniating, and the scheduled sentencing next month of Sam Bankman-Fried is already fitting that characterization.  The latest development in the run-up to the March 28 sentencing comes in the form of SBF's lawyers submitting late yesterday this 90-page sentencing memo.  This document assails many aspects of how the probation office calculated the applicable guideline range and makes an array of arguments based on all the 3553(a) sentencing factors.  This lengthy document concludes with this paragraph that is titled "Sam Bankman-Fried's Sentencing Request":

Sam Bankman-Fried respectfully submits that, for the reasons set forth above, an appropriate method of arriving at a just sentence would be to consider the Adjusted Offense Level (Subtotal) of 56, reduced by 30 levels based on zero loss, which yields an advisory Guidelines range of 63-78 months.  When the § 3553(a) factors are considered, including Sam’s charitable works and demonstrated commitment to others, a sentence that returns Sam promptly to a productive role in society would be sufficient, but not greater than necessary, to comply with the purposes of sentencing.

Here are a variety of press accounts of this sentencing filing and some related SBF activity:

From Business Insider, "Sam Bankman-Fried's lawyer says sentencing the FTX founder to a 100-year prison term would be 'grotesque' and 'barbaric'"

From CoinPedia, "SBF Fights for Crypto Fraud Leniency: 6 Years vs. 110?"

From the New York Times, "Sam Bankman-Fried Makes His Last Stand: Since the disgraced crypto mogul was convicted of fraud, his supporters have maneuvered to secure a lenient sentence, with his lawyers recommending he serve no longer than 6.5 years in prison"

From the Wall Street Journal, "Sam Bankman-Fried Calls for Shorter Prison Sentence, Citing Autism: Lawyers for the FTX founder say he wasn’t motivated by greed but by a desire to better the world through philanthropic giving"

Prior related posts:

• You be the judge: what federal sentence for Sam Bankman-Fried after guilty verdict on seven criminal fraud counts? 
• Some early chatter and speculation about Sam Bankman-Fried's coming federal sentencing 
• Should a bounce in crypto markets mean a much lower federal sentence for Sam Bankman-Fried? 

Should a bounce in crypto markets mean a much lower federal sentence for Sam Bankman-Fried?

The question in the title of this post is prompted by this new CoinDesk article headlined "Sam Bankman-Fried's Sentence Might Be Lighter Than You'd Expect."  Here are excerpts:

Former FTX boss Sam Bankman-Fried (SBF) may be handed a lighter sentence than otherwise when he faces District Judge Lewis A. Kaplan next month because customers of the bankrupt exchange will probably be made whole thanks to a bounce in crypto markets and the buoyancy of certain investments held by the estate.

Bankman-Fried was found guilty of fraud in November 2023, about a year after his crypto trading empire collapsed. During the bankruptcy process, the crypto market has risen sharply -- CoinDesk Indices' CD20 gauge has gained more than 130% -- meaning many thousands of hapless creditors are going to receive all the funds they had locked in, albeit at November 2022 prices.  In July last year, the bankruptcy team said customers were owed $8.7 billion.

The jump in crypto markets matters because restitution can be taken into account for sentencing.  For example, for low losses, the guidelines suggest a range of 24-30 months.  A high-loss amount, in contrast, could lead to a draconian range of upwards of 20 years’ imprisonment, or even life, according to Jordan Estes, a partner at the New York City office of law firm Kramer Levin. “I would expect the loss amount to be hotly contested at sentencing,” said Estes, a former assistant U.S. attorney who co-led the general crimes unit in the Southern District of New York, where the trial took place.  “In particular, the defense may argue for a substantially lower loss amount, or even a loss amount of $0, if all customers and creditors will be made whole,” she told CoinDesk via email.

That said, the U.S. sentencing guidelines that give defendants credit for amounts returned to victims apply only when the return took place before the offense was detected.  In this case, it’s clearly not SBF who is giving the money back, and the payments come well after discovery of the offense.  A possible parallel is the case of fraudulent financier Bernie Madoff, who died in prison at the age of 82 while serving a series of consecutive sentences that ran to 150 years. In Madoff's case, the bankruptcy trustee also recovered large sums of stolen money, but he didn't receive any credit for that.

Prior related post:

• You be the judge: what federal sentence for Sam Bankman-Fried after guilty verdict on seven criminal fraud counts? 
• Some early chatter and speculation about Sam Bankman-Fried's coming federal sentencing 

UPDATE: In the comments, Professor Todd Haugh flagged his recent LinedIn posting discussing these issues.  Here is how his discussion concludes:

In the federal system, the sentencing range applicable to an economic offender like SBF is heavily determined by the loss amount. The higher the loss, the higher the sentencing range, and the higher the eventual sentence (even though judges don't have to follow the range they are anchored by it).

You might ask (as DealBook does), if customers are made whole and there is no loss, doesn't that help SBF at sentencing?  You would think, except sentencing loss isn't loss like we think of it -- it's actual or intended loss according to the Sentencing Guidelines and most caselaw.  So even though Ray found all the money and there may be very little actual loss, SBF's fraud caused an intended loss of about $8B.  That's the number that will set the loss amount regardless of how much is recovered for customers (subject to a lot-and I mean a lot-of argument between prosecutors and SBF).

But what about the "sort of" part?  Even though the intended loss is what it is, because the guideline range is only advisory, Judge Kaplan can ignore it and impose a lower sentence. That almost always happens in high loss white collar cases because the loss amounts push the sentencing ranges to outlandish heights.  And when the judge is considering how low to go, he's going to be considering that "actual loss" amount, which may be $0 here.

It's not a get out of jail free card, but it matters.

Federal judge criticizes ex-IRS tax leaker (and DOJ) when imposing five-year sentence

I flagged today's notable DC sentencing in this post last night, and this lengthy CBS News accounting of the sentencing highlights that there were some notable comments from the judge.  Here are snippets from the press report:

The Internal Revenue Service contractor who pleaded guilty to leaking the federal tax records of former President Donald Trump and some of the nation's wealthiest individuals was sentenced Monday to 5 years in prison, 3 years supervised release and a $5,000 fine. The sentence brings an end to a criminal case that exposed the source of a number of high-profile tax information leaks in recent years.

Charles Littlejohn, 38, pleaded guilty to one count of unauthorized disclosure of tax returns and return information in October and faced a maximum sentence of 5 years in prison. Investigators said he used his position as a contractor with the nation's tax collector to illegally obtain and then disperse the financial records of the former president, which resulted in "numerous articles" based on the information.

Before sentencing Littlejohn on Monday, federal District Judge Ana Reyes called his conduct "an attack on our constitutional democracy." "He targeted the sitting president of the United States of America, and that is exceptional by any measure," Judge Reyes said. "It cannot be open season on our elected officials."...

Littlejohn's explanations did not appear to sway the court's sentencing decision. Reyes said courts must be an "unbreakable bulwark" for American democracy in the face of increased threats. The court's job, the judge said, was to make sure that others never viewed "this type of conduct as acceptable or justifiable or worth the trade-off…We are a nation of laws."...

The Justice Department's court filing revealed that the other tax returns Littlejohn admitted to acquiring dated as far back as 15 years, and they belonged to thousands of the nation's wealthiest Americans. Investigators alleged he mailed a storage device containing the information to another unnamed news organization, identified by CBS News as ProPublica....

The judge appeared frustrated at times with prosecutors as she wrestled with a guideline sentencing range of just 18 months and a crime that she said warranted serious punishment and deterrence.  Reyes asked prosecutor Jonathan Jacobson for information on any additional charges Littlejohn may have faced if he had opted not to enter the guilty plea, but the government attorney did not provide further detail.  "The fact that he did what he did and he is facing one felony count, I have no words for," the judge said, with exasperation in her voice.

Especially in light of some recent blog comment discussions about plea deals and DOJ transparency, I find it interesting that the DOJ apparently rebuffed the sentencing judge's efforts here to find out any more information about DOJ's notable charging and bargaining decisons in this case. I guess what happens inside DOJ, stays inside DOJ.

UPDATE: The comment thread here started a discussion of the terms of plea deal in this case.  Attorney Webb Wassmer kindly sent me a copy of the (public) plea agreement agreement (which was filed back in October 2023), and other case documents accessed from the court website.  I have posted the plea agreement below, and here is a snippet of his helpful summary:

[The agreement calculated] him at total offense level 11, CH I, for a range of 8-14 months with a further reduction possible, [but] there was no agreement as to actual sentence, with the Government stating that it would seek an upward departure and/or variance.

[T]here is a limited appeal waiver. Most significantly, defendant reserved the right to appeal if the Court granted an upward departure or variance above the advisory guideline range identified at sentencing. Thus, he can appeal the five year sentence. As others have noted, that type of appeal almost never succeeds.

Download Littlejohn Plea Agreeement 10-12-23

Federal judge sentences Peter Navarro to 4 months of imprisonment for contempt of Congress

As reported in this Fox News piece, "Peter Navarro, who served in the White House under former President Donald Trump, was sentenced Thursday for flouting a House Jan. 6 committee subpoena. U.S. District Judge Amit Mehta sentenced Navarro to four months in prison and ordered him to pay a fine of $9,500." Here is more:

That's two months shorter than the six prosecutors had sought, but Mehta drastically reduced the whopping $200,000 fine sought by the Justice Department.   

A former adviser to the president on trade and manufacturing policies, Navarro was convicted in September of two counts of contempt of Congress for defying a subpoena for documents and a deposition from the House select committee investigating the Jan. 6, 2021, riot at the U.S. Capitol. The subpoena required Navarro to appear and produce documents in February 2022, and sit for a deposition in March 2022, but Navarro refused to provide the materials and testify. As a private citizen, he was indicted on June 2, 2022....

Mehta on Thursday had gone through a tedious recounting of the sentencing guidelines and came to the conclusion that there is a "zero to six months range," of imprisonment in this case, as well as a fine range of $500 to $9,500. Sentencing guidelines are only a suggestion, and the judge could have sentenced Navarro to a longer sentence if he saw fit.

At the sentencing hearing, Navarro spoke in his own defense, saying he defied the subpoena because he believed in "good faith" that Trump had invoked executive privilege. "When I received that congressional subpoena, the second, I had an honest belief that the privilege had been invoked, and I was torn. Nobody in my position should be put in conflict between the legislative branch and the executive branch. Is that the lesson of this entire proceeding? Get a letter and a lawyer? I think in a way it is," Navarro said. "I am disappointed with a process where a jury convicted me, and I was unable to provide a defense, one of the most important elements of our justice system."

Navarro's defense attorney said the court of appeal will determine if executive privilege applies. The judge noted how in citing executive privilege, another White House adviser, Kellyanne Conway "had an (DOJ Office of Legal Counsel) OLC opinion she could rely on," but Navarro had no such opinion and didn't hire representation.

"I have a great deal of respect for your client and what he accomplished and that makes it more disappointing," Mehta said, also noting that Mark Meadows, who also faced a Jan. 6 committee subpoena, "produced documents, produced texts, he didn’t testify, but at least he did something." ...

Prosecutors had asked the judge to sentence Navarro to six months behind bars and impose a $200,000 fine. The Justice Department has previously noted that each count of contempt of Congress carries a minimum of 30 days and a maximum of one year in jail, as well as a fine of up to $100,000....

Navarro was the second Trump aide to face contempt of Congress charges. Former White House adviser Steve Bannon was convicted of two counts and was sentenced to four months behind bars, though he has been free while appealing his conviction.

Unsurprisingly, federal prosecutors content to focus on sentencing rather than a second trial for Sam Bankman-Fried

As reported in this CNBC piece, headlined "Prosecutors say they will not pursue second Sam Bankman-Fried trial," the feds have officially decided it will not seek a second criminal trial for high-profile fraudster Sam Bankman-Fried.  Here are excerpts from a lengthy piece that also previews the upcoming sentencing: 

Prosecutors have decided not to pursue a second trial against disgraced FTX founder Sam Bankman-Fried.  In a note to Judge Lewis Kaplan on Friday, the U.S. government explained that the decision to forego a second set of proceedings had to do with the fact that much of the evidence that would have been presented in a second trial had already been submitted to the Court during Bankman-Fried’s first criminal trial.

In November, following a month’s worth of testimony from nearly 20 witnesses, a jury found the former FTX chief executive guilty of all seven criminal counts against him following a few hours of deliberation.  Prosecutors added that the Court could consider the hundreds of exhibits already entered into evidence during these proceedings when he is sentenced next year.  “Given that practical reality, and the strong public interest in a prompt resolution of this matter, the Government intends to proceed to sentencing on the counts for which the defendant was convicted at trial,” continued the letter to Judge Kaplan.

Bankman-Fried, the 31-year old son of two Stanford legal scholars and graduate of the Massachusetts Institute of Technology, was convicted of wire fraud and conspiracy to commit wire fraud against FTX customers and against Alameda Research lenders, conspiracy to commit securities fraud and conspiracy to commit commodities fraud against FTX investors, and conspiracy to commit money laundering.  He had pleaded not guilty to the charges, which were all tied to the collapse of FTX and its sister hedge fund Alameda late last year.

The second trial, which had been slated to start in March, addressed an additional set of criminal counts, including conspiracy to bribe foreign officials, conspiracy to commit bank fraud, conspiracy to operate an unlicensed money transmitting business and substantive securities fraud and commodities fraud.

Damian Williams, the U.S. attorney for the Southern District of New York, wrote in the letter to the Court that “a second trial would not affect the United States Sentencing Guidelines range for the defendant, because the Court can already consider all of this conduct as relevant conduct when sentencing him for the counts that he was found guilty of at the initial trial.”

So now, the question of prison time goes to Judge Kaplan.  The sentencing date is March 28 at 9:30 a.m. ET. The FTX founder faces more than 100 years in prison....

In this case, the statutory maximum sentence is around 115 years, but there is a sliding scale for sentencing according to recommended guidelines given the scale of the crimes and the criminal history of the defendant. “I wouldn’t be surprised if SBF spends the next 20 or 25 years of his life in prison,” Renato Mariotti, a former prosecutor in the U.S. Justice Department’s Securities and Commodities Fraud Section, told CNBC.

“The sheer scale of his fraud was immense, he was defiant and lied on the witness stand, and Judge Kaplan had very little patience for his antics while out on bond. He will have more sympathy for the victims than he has for Bankman-Fried,” added Mariotti....  “The federal sentencing guidelines will likely be sky high, but they are just that — guidelines — and the judge is required to consider all of the circumstances surrounding SBF and his offense,” said Mariotti....

Former Assistant U.S. Attorney Kevin J. O’Brien, who specializes in white-collar criminal defense in NYC, thinks Bankman-Fried has the chance at a shorter sentence, telling CNBC, “Since judges have discretion even under the Guidelines, I believe his sentence will be in the 15 to 20 year range.” O’Brien added that given Bankman Fried’s age, he thinks the judge will be inclined to give him a chance to live a full life after his prison term.

Bankman-Fried’s case has been compared with that of Elizabeth Holmes, founder of medical device company Theranos, which ceased operations in 2018. Holmes, 39, was convicted in early 2022 on four counts of defrauding investors in Theranos after testifying in her own defense. She was sentenced to more than 11 years in prison, and began serving her punishment in May at a minimum-security facility in Bryan, Texas.

But former federal prosecutor Paul Tuchmann tells CNBC that he expects harsher terms for the former FTX CEO, because “the amount of losses that were suffered is simply staggering.” Tuchmann compared Bankman-Fried’s case to that of Bernie Madoff, who was sentenced to 150 years in prison. “Like Madoff, a lot of the losses in this case were small investors. They weren’t all large institutions, which really tends to create a greater pressure for a significant sentence,” said Tuchmann.

In this setting, it seems worth noting, yet again, how federal sentencing rules function to sometimes make jury trials and constitutional jury trial rights inconsequential.  Here, the US Attorney accurately notes that the federal sentencing guideline range will be calculated to produce the exact same recommended sentence with or without a trial and guilty verdict on additional charges. (Indeed, under current federal sentencing rules, even if SBF were acquitted on all counts in a second trial, the guideline calculation could be the same.)  Why bother with a second jury trial if the government can seek and secure punishment, under a lower standard of proof, at sentencing for the first convictions?

Prior related post:

• You be the judge: what federal sentence for Sam Bankman-Fried after guilty verdict on seven criminal fraud counts?

Hunter Biden indicted on nine new federal tax charges

As reported in this AP piece, "Hunter Biden was indicted on nine tax charges in California on Thursday as a special counsel investigation into the business dealings of the president’s son intensifies against the backdrop of the looming 2024 election." Here's more:

The new charges — three felonies and six misdemeanors — come in addition to federal firearms charges in Delaware alleging Hunter Biden broke a law against drug users having guns in 2018.

Hunter Biden “spent millions of dollars on an extravagant lifestyle rather than paying his tax bills,” special counsel David Weiss said in a statement. The charges are focused on at least $1.4 million in taxes he owed during between 2016 and 2019, a period where he has acknowledged struggling with addiction.

If convicted, Hunter Biden could face up to 17 years in prison. The special counsel probe remains open, Weiss said. Hunter Biden had been previously expected to plead guilty to misdemeanor tax charges as part of a plea deal with prosecutors. Defense attorneys have signaled they plan to fight any new charges, though they did not immediately return messages seeking comment Thursday....

The criminal investigation led by Delaware U.S. Attorney David Weiss has been open since 2018, and was expected to wind down with the plea deal that Hunter Biden had planned to strike with prosecutors over the summer. He would have pleaded guilty to two misdemeanor tax evasion charges and would have entered a separate agreement on the gun charge. He would have served two years of probation rather than get jail time.

The agreement also contained immunity provisions, and defense attorneys have argued that they remain in force since that part of the agreement was signed by a prosecutor before the deal was scrapped. Prosecutors disagree, pointing out the documents weren’t signed by a judge and are invalid.

After the deal fell apart, prosecutors filed three federal gun charges alleging that Hunter Biden had lied about his drug use to buy a gun that he kept for 11 days in 2018. Federal law bans gun possession by “habitual drug users,” though the measure is seldom seen as a stand-alone charge and has been called into question by a federal appeals court.

Prior related posts:

• Hunter Biden agrees to plea deal seeking to avoid prison time on tax and gun charges
• A "sweetheart deal"?: Minor (mostly uninformed) musings about Hunter Biden's prosecution and plea deal
• Some reflections in headlines on Hunter Biden's "sweetheart" plea deal 
• On eve of plea hearing for Hunter Biden, House Committee Chair urges district court to consider "improper conduct" surrounding prosecution
• Not a done deal: Hunter Biden ends up pleading not guilty to federal charges after district judge raises concerns about plea deal particulars 

Some early chatter and speculation about Sam Bankman-Fried's coming federal sentencing

A lot of folks had a lot of interesting comments in response to my first post about the future sentencing of Sam Bankman-Fried following his conviction on all seven federal criminal counts brought against him at his first trial.  Since that post, I have seen a number of press pieces with various early takes on his sentencing (which is scheduled for March 2024 and, I would guess, will take place even later).  Here is a partial round up:

From CNBC, "Sam Bankman-Fried faces over 100 years in prison at sentencing. Experts weigh in on how much time he’ll actually get"

From CryptoSlate, "SBF will likely serve 25 years rather than max sentence, former DOJ prosecutor says"

From the Daily Mail, "Sam Bankman Fried, 31, likely faces 50 YEARS behind bars, legal expert believes: $10bn FTX crypto fraudster's crimes carry maximum of 115 years behind bars"

From Forbes, "Sam Bankman-Fried Faces 110-Year Max Sentence After FTX Trial — Here’s How Long Experts Think He’ll Be Behind Bars"

From the New York Times, "Sam Bankman-Fried Could Get 100 Years in Prison. What Is Fair?"

Because I do not trust my money in crypto, I am not sure I want to trust my sentencing predictions to CryptoSlate.  That said, and though I am never inclined to place any actual bets on any actual legal proceedings, I do think 25 years may serve as a reasonable over/under for Judge Lewis Kaplan's coming sentencing decision.  

Prior related post:

• You be the judge: what federal sentence for Sam Bankman-Fried after guilty verdict on seven criminal fraud counts? 

Continuing coverage of DOJ efforts to continue prosecuting recipient of commutation by Prez Trump

Back in June of this year, I had the honor of serving as a witness at a congressional hearing to discuss federal clemency.  Specifically, the House Judiciary Subcommittee on Crime and Federal Government Surveillance conducted a hearing titled "The Examination of Clemency at the Department of Justice," and the hearing page noted that one goal of the hearing was to "examine the Department of Justice's unprecedented re-prosecution of Philip Esformes, whose prison sentence was originally commuted by President Donald Trump."   I explained in my written testimony why,  though I was "only somewhat familiar with the intricacies of the Esformes case," I found "deeply troubling any Justice Department efforts to re-prosecute any clemency recipient for conduct related to a clemency grant."

Perhaps unsurprisingly, the Esformes case and related issues continue to garner attention.  Indeed, in recent weeks, I have now seen a number of new press pieces on these matters:

From Mother Jones, "Donald Trump Freed a Convicted Medicare Fraudster. The Justice Department Wants Him Back."

From Salon, "Ex-prosecutor: DOJ targeting freed fraudster a 'reminder of Trump's gross abuse of pardon power'"

From the Washington Post, "Fraudster freed from prison by Trump faces prosecution under Biden"

Looking at these issues beyond the specifics of the Esformes case, there is quite an interesting forward-looking political component to these matters given that former Prez Trump is a leading candidate for President in the 2024 election.  Because the Supreme Court has ruled there are few formal legal limits on the clemency power set forth in the US Constitution, political accountability serves as the only significant functional restraint on this executive power. 

If "the people" were truly troubled by how Trump used his pardon power as president, voters can hold him accountable at the ballot box in the upcoming election.  But I have not yet heard any of former Prez Trump's political rivals directly assailing his past clemency record nor his stated promise to pardon a "large portion" of those convicted of federal offenses for involvement with January 6 riot.  It seems, at least within the GOP primary field, that there is little expectation that Trump's clemency record or promised would be a real political vulnerability. 

Notably, this Fox News piece from June quoted a former staffer for former VP Mike Pence stating that "we have to have a real conversation of what would people actually do with the power of the pardon ... [and] when you look at Donald Trump's record when it came to pardons, it was indefensible."  But VP Pence has already dropped out as a candidate for 2024, and I have yet to see on the political trail any high-profile efforts to have a "real conversation" about federal clemency past, present or future.  I doubt the Esformes case alone will prompt such a political conversation, but I do think possible clemency discussions could still be worth watching in the 12 months ahead.

You be the judge: what federal sentence for Sam Bankman-Fried after guilty verdict on seven criminal fraud counts?

This CNBC article reports on the high-profile federal jury convictions handed down this evening.  Here are the highlights with an eye on sentencing prospects:

A jury has found Sam Bankman-Fried guilty of all seven criminal counts against him. The FTX founder faces a maximum sentence of 115 years in prison.

Bankman-Fried, the 31-year old son of two Stanford legal scholars and graduate of Massachusetts Institute of Technology, was convicted of wire fraud and conspiracy to commit wire fraud against FTX customers and against Alameda Research lenders, conspiracy to commit securities fraud and conspiracy to commit commodities fraud against FTX investors, and conspiracy to commit money laundering.

He had pleaded not guilty to the charges, which were all tied to the collapse late last year of FTX and sister hedge fund Alameda. “Sam Bankman-Fried perpetrated one of the biggest financial frauds in American history,” Damian Williams, U.S. attorney for the Southern District of New York, said in a briefing after the verdicts were read. “The cryptocurrency industry might be new. The players like Sam Bankman-Fried, Fried might be new. But this kind of fraud, this kind of corruption, is as old as time and we have no patience for it.”

The trial, which began in early October, pitted the testimony of Bankman-Fried’s former close friends and top lieutenants against the sworn statements of their former boss and ex-roommate. The jury returned a swift verdict after receiving the case at around 3:15 p.m. on Thursday....

Judge Kaplan thanked the jurors for their service, and they were escorted out. Kaplan then asked about the second trial Bankman-Fried is facing on March 11. The government has until Feb. 1 to to let the court know if it it plans to still proceed. The sentencing date is March 28 at 9:30 a.m....

The monthlong trial was highlighted by testimony from the government’s key witnesses, including Caroline Ellison, Bankman-Fried’s ex-girlfriend and the former head of Alameda, and FTX co-founder Gary Wang, who was Bankman-Fried’s childhood friend from math camp. Both pleaded guilty in December to multiple charges and cooperated as witnesses for the prosecution. Most of the defense’s case was built on the testimony of Bankman-Fried himself, who told the court that he didn’t commit fraud or steal customer money, but just made some business mistakes.

The central question for jurors to consider was whether Bankman-Fried acted with criminal intent in taking customer funds from FTX and using that money to pay for real estate, venture investments, corporate sponsorships, political donations and to cover losses at Alameda after crypto prices plunged last year....

Bankman-Fried now awaits sentencing. His case has been compared to that of Elizabeth Holmes, the founder of medical device company Theranos, which ceased operations in 2018. Holmes, 39, was convicted in early 2022 on four counts of defrauding investors in Theranos after testifying in her own defense. She was sentenced to more than 11 years in prison, and began serving her punishment in May at a minimum-security facility in Bryan, Texas.

For sentencing purposes, I do not think Elizabeth Holmes is a perfect comparison for Sam Bankman-Fried.  But I expect SBF's lawyers are going to be eager to argue that Holmes and her sentence provide a proper benchmark for SBF's sentencing.  But I also expect the guideline range calculated for SBF to be higher than Holmes' calculated guideline range; in fact, it seem likely that the guidelines will recommend a life sentence for SBF.

But, of course, because the guidelines are only advisory, Judge Lewis Kaplan will have to assess all the 3553(a) factors to decide what sentence for SBF is "sufficient, but not greater than necessary, to comply with the purposes set forth" by Congress in 3553(a)(2). Though sentencing is not scheduled to take place for nearly five months, it is surely not too early for folks to use the comments to share their own views on a "sufficient, but not greater than necessary," sentence for SBF.

Notable coverage of Third Circuit's latest jolt to loss calculation in federal fraud guidelines

In this post more than 30 months ago, I asked "Did a Sixth Circuit panel largely decimate the federal sentencing fraud guidelines (and perhaps many others)?"  That post was focused on US v. Riccardi, No. 19-4232 (6th Cir. Mar. 3, 2021) (available here), where the panel ruled that a quirky part of the commentary to the 2B1.1 fraud guideline improperly expanded the guideline term "loss."  I thought that ruling could further undermine the key 2B1.1 guideline commentary stating that "loss is the greater of actual loss or intended loss."  Notably, last year in US v. Banks, No. 19-3812 (3d Cir. Nov. 30, 2022) (available here), a Third Circuit penal embraced that thinking when holding that "the loss enhancement in the Guideline’s application notes impermissibly expands the word 'loss' to include both intended loss and actual loss." 

Savvy administrative law folks (or regular readers) likely know that this jurisprudence flows from the Supreme Court's work in Kisor v. Wilkie, 139 S. Ct. 2400 (2019), which recast  "the deference [courts] give to agencies ... in construing agency regulations."  (Of course, the Kisor case had nothing to do with the federal sentencing guidelines, but lower courts have since grappled with whether and when Kisor means that the commentary to the guidelines no longer should always be followed.)  And savvy white-collar practitioners  likely know that this jurisprudence can be an especially big deal in high-profile fraud cases.  And this week, Bloomberg News has this lengthy discussion of some of the fall-out of the Banks ruling under the headline "Wall Street Fraudsters Rush to Cut Prison Terms With New Ruling."  I recommend the piece in full, and here are extended excerpts:

In the case of [Gary] Frank, who pleaded guilty in 2019 to inflating the revenue of his legal benefits company to borrow millions, there was a big difference between the amount he intended to cheat his victims (as much as $150 million) and their actual losses (as much as $34 million).  And that just may help him get out of prison early.

The fallout started last year after the 3rd Circuit US Court of Appeals ruled that Frederick Banks, a Pennsylvania man convicted of attempting to dupe Gain Capital Group LLC out of $246,000, should be resentenced.  The online trading company, the court found, suffered no actual losses given that it never sent him the funds.  The Banks decision is significant since the gap between actual and intended losses in fraud cases can be vast, greatly skewing the amount of prison time from barely any to more than a decade.

“The No. 1 variable that moves the needle in sentencings for white collar cases is the loss amount,” said Andrew Boutros, a white-collar defense attorney at Dechert. “The loss amount has a huge impact on the ultimate advisory sentencing range that the court calculates.”...

The ruling has sparked a debate on how much deference to give the US Sentencing Commission’s interpretation of its own guidelines, which includes a scale for federal judges across the country to follow for ratcheting up prison time based on losses to victims.  The commission suggests in its commentary using the greater of actual or intended loss when determining sentences.  But the appellate panel in Banks used a Supreme Court decision to challenge the commission’s authority to interpret its own rules in finding that only actual loss should be used to calculate sentences.

Prosecutors have tried to persuade judges that the sentencing commission’s interpretation deserves deference.  The Justice Department has warned that relying only on actual losses would let certain defendants off the hook who are unsuccessful in pulling off a scheme.  Defense attorneys for years have argued that relying on intended loss under the commission’s guidelines leads to overly harsh sentences that don’t reflect the criminal conduct. “We are getting these absurd results where nonviolent criminals are getting extraordinary sentences,” said defense attorney Tama Kudman.

Kudman successfully used the Banks ruling in Florida to persuade a judge that actual losses should only be taken into account when sentencing a lab owner found guilty of billing Medicare for unnecessary genetic tests.  Minal Patel billed Medicare for more than $463 million in tests but the actual loss to taxpayers was $187 million.

The Banks decision could significantly reduce prison time for defendants in securities and commodities cases since it is difficult to figure out actual losses in those situations.  “Prosecutors often rely upon intended loss as a proxy for actual loss in securities and commodities fraud cases,” wrote Paul Hastings attorneys in a client alert.  “This practice has allowed the government to calculate large loss amounts and seek high guidelines sentences where actual loss is incalculable or impractical to determine.”  It could also impact charging decisions, especially in 3rd Circuit territory, where prosecutors may think twice about devoting resources to cases with small actual losses.

In the year since the Banks ruling, defense attorneys have had limited success using the decision outside of the 3rd Circuit, which covers Pennsylvania, New Jersey, Delaware and the Virgin Islands.  In December, a federal judge in Michigan sided with the Banks ruling in a case involving a defendant who pleaded guilty to fraud against JPMorgan.  The judge reasoned that she didn’t have to defer to the sentencing commission because the definition of loss isn’t “genuinely ambiguous.”

In June, a North Carolina federal judge also agreed with the 3rd Circuit decision in supporting a lower sentencing guideline for a man who pleaded guilty to bank fraud against several financial giants, including JPMorgan, Wells Fargo and crypto exchange Coinbase Global Inc.  But the following month, a 6th Circuit panel shot down an attempt by a chemical engineer to rely on the ruling after she was convicted of stealing trade secrets from her former employers.  The panel criticized the 3rd Circuit for imposing a “one-size-fits-all definition” for loss that could “lead to vastly different sentences for similarly culpable defendants.”

In other cases, the 1st and 4th Circuits declined to take a position. “This is a new and fast-developing area of the law, and as of now, we do not have the kind of robust consensus in other circuits,” the 4th Circuit panel wrote.  That’s why some legal experts believe the Supreme Court will need to decide even though it has so far refused to take up the issue.

Judges, prosecutors and defendants have all urged the sentencing commission to make changes.  One defendant who is serving 95 years in prison for a cyber financial fraud scheme argued in an email to the commission to get rid of the intended loss interpretation since “it’s not based on fact, but rather off of subjective interpretation or ‘guess work.’”

Sydney Powell, legal adviser to former Prez Trump, cuts plea deal to avoid incarceration in Georgia election prosecution

As reported in this new AP piece, "Sidney Powell pleaded guilty to reduced charges Thursday over efforts to overturn Donald Trump’s loss in the 2020 election in Georgia, becoming the second defendant in the sprawling case to reach a deal with prosecutors." Here is more:

Powell, who was charged alongside Trump and 17 others with violating the state’s anti-racketeering law, entered the plea just a day before jury selection was set to start in her trial. She pleaded guilty to six misdemeanors accusing her of conspiring to intentionally interfere with the performance of election duties.

As part of the deal, she will serve six years of probation, will be fined $6,000 and will have to write an apology letter to Georgia and its residents. She also agreed to testify truthfully against her co-defendants at future trials....

Powell, 68, was initially charged with racketeering and six other counts as part of a wide-ranging scheme to keep the Republican president in power after he lost the 2020 election to Democrat Joe Biden. Prosecutors say she also participated in an unauthorized breach of elections equipment in a rural Georgia county elections office. The acceptance of a plea deal is a remarkable about-face for a lawyer who, perhaps more than anyone else, strenuously pushed baseless conspiracy theories about a stolen election in the face of extensive evidence to the contrary....

Powell was scheduled to go on trial on Monday with lawyer Kenneth Chesebro after each filed a demand for a speedy trial. The development means that Chesebro will go on trial by himself, though prosecutors said earlier that they also planned to look into the possibility of offering him a plea deal. Jury selection was set to start Friday. Chesebro’s attorneys didn’t immediately respond to messages seeking comment Thursday on whether he would also accept a plea deal.

A lower-profile defendant in the case, bail bondsman Scott Graham Hall, last month pleaded guilty to five misdemeanor charges. He was sentenced to five years of probation and agreed to testify in further proceedings.

A couple of notable new sentencing articles from JCLC Online

I just came across a couple of interesting new sentencing pieces recently published by the Journal of Criminal Law an Criminology Online. Here are titles and links (where you can find abstracts and can download the full articles):

Sarah Turner, "White-Collar Crime, Sentencing Gender Disparities Post-Booker, and Implications for Criminal Sentencing" 

Elizabeth E. Wainstein, "The Need for Fairness and Accuracy for Women in Sentencing: Surmounting Challenges to Gender-Specific Statistical Risk Assessment Tools"

Former Ohio House speaker gets max federal prison sentence of 20 years for political corruption

In this post last week, I flagged the interesting federal sentencing memos submitted in the notable case of political corruption involving Ohio's former House Speaker Larry Householder.  Back in March, Householder and his co-defendant were convicted after trial on one count of conspiracy to participate in a racketeering enterprise involving bribery and money laundering.  In part because of Householders age (64), I thought he might get below (perhaps way below) the 16-20 years that federal prosecutors recommended.  But, as this local article details, he got the statutory max:

A federal judge on Thursday sentenced former Ohio House Speaker Larry Householder to 20 years in prison for spearheading the largest political corruption scheme in state history.  U.S. District Judge Timothy Black’s sentence punctuated the fall for Householder, once one of the most powerful politicians in Ohio, but now a federal prisoner.

Householder, 64, led a scheme to secretly receive $60 million from Akron-based FirstEnergy Corp — a bankroll that helped fund his political operation, execute a campaign to pass legislation worth more than $1 billion for the company, and pay off his personal debts.  A jury in March found him guilty of racketeering alongside FirstEnergy Solutions lobbyist Matt Borges, a former chairman of the Ohio Republican Party.  Borges is scheduled to be sentenced Friday....

In a blistering statement before delivering Householder’s sentence, Black called the former speaker a “bully with a lust for power.”  Householder was taken into custody immediately following the sentencing hearing. Showing little reaction other than a reddening of his cheeks, Householder stared straight ahead as federal marshals slapped handcuffs on his wrists and led him from the court room.

He offered no apology in his statement before the court, saying that “my life was totally and fully about making life better for those I served.”  As he was led from the courtroom, Householder turned to give a sheepish smile to family assembled in the courtroom.  “The court and the community’s patience for Mr. Householder has passed,” Black said.

Federal prosecutors argued Householder should serve 16-20 years in prison.  His defense attorneys argued for 12 to 18 months behind bars for the Glenford Republican.  But Black gave Householder the maximum sentence shortly after prosecutors evoked a who’s-who of disgraced politicians, from former Cuyahoga County Commissioner Jimmy Dimora to ex-Illinois Gov. Rod Blagojevich. “He committed perjury in this courtroom.  A sentence will show that the rule of law applies to everyone, including politicians,” assistant U.S. Attorney Emily Glatfelter said.

Householder was arrested in July 2020 and lost his speakership but hung on to his seat in the House for nearly a year. His colleagues in the House finally expelled him in June 2021.  He twice served as House Speaker, first from 2001 to 2004, when he left amid a federal pay-to-play investigation that ended without criminal charges.  He returned to the House in 2017 and to the speaker’s role in 2019, aided by secret political donations from FirstEnergy.

The Akron-based utility poured $60 million in bribes into so-called “dark money” nonprofits that allow political contributions to be shielded from the public.  That money was funneled to Householder to bankroll political advisers, polling, TV advertisements and other pieces of his political operation, and to pay for Householder’s personal legal debts and repairs on Householder’s Florida home, where his mother lived....

Householder testified in his own defense in the trial, a move that legal experts said backfired after prosecutors shredded his testimony on cross-examination. Householder’s attorneys have already said they plan to appeal.

Two others have pleaded guilty in the case — Householder’s political aide Jeff Longstreth and FirstEnergy Solutions lobbyist Juan Cespedes.  Both testified at trial and have not yet been sentenced. Neil Clark, another co-defendant in the case, died by suicide in 2021.

Borges is scheduled to be sentenced at 11 a.m. Friday. His attorneys asked for a one-year sentence, while prosecutors asked for between five and eight years.

No current or former employees of FirstEnergy have been charged.  The company agreed to cooperate with federal investigators and pay a $230 million fine as part of an agreement to avoid prosecution.  It also admitted paying a sperate $4.3 million bribe to former Public Utilities Commission of Ohio chairman Sam Randazzo. Randazzo has not been charged with any crime.

Householder’s case became synonymous with how state politicians operate — with dark money, virtually untraceable for the public.  Critics praised the conviction, but lamented little has changed in state politics.  At trial, Householder’s attorneys argued that the prosecution’s case amounted to politics as usual in Ohio.

Prior related post:

• Notable sentencing memos in high-profile Ohio political corruption case (showcasing nuttiness of guidelines) 

Some reflections in headlines on Hunter Biden's "sweetheart" plea deal

I have not had a chance to read all the commentary that Hunter Biden's plea deal has generated, but I have made tome to gather here some notable pieces I have seen that capture all sorts of stories just through their headlines:

From Bloomberg, "Hunter Biden Plea Deal Pumps Up Republican Paranoia"

From Politico, "Garland denies allegations of politics impacting Hunter Biden plea deal"

From Ipsos, "Reuters/Ipsos Poll finds half of Americans think Hunter Biden is receiving favorable treatment"

From The Nation, "A Failson Meets a Failed Justice System"

From the Wall Street Journal, "It’s the Criminality, Stupid: Why Voters See Crooks in All Corners of Politics"

From the Washington Post, "Hunter Biden might have Clarence Thomas to thank for his gun plea deal"

In addition to the above pieces, I found particularly notable (and amusing) this troika of headlined:

From Newsweek, "The Hunter Biden Sweetheart Deal Endangers Us All. Every Criminal Is Going to Ask for It."

From Reason, "Hunter Biden's Prison-Free Plea Should Be Available to Everybody"

From the Washington Times, "Va. mom of 6-year-old who shot teacher will cite Hunter Biden’s plea deal for leniency, lawyer says"

Prior related posts:

• Hunter Biden agrees to plea deal seeking to avoid prison time on tax and gun charges
• A "sweetheart deal"?: Minor (mostly uninformed) musings about Hunter Biden's prosecution and plea deal

Notable sentencing memos in high-profile Ohio political corruption case (showcasing nuttiness of guidelines)

The Buckeye State was the crime scene for a notable case of political corruption involving our House Speaker Larry Householder.  Back in March, Householder and his co-defendant were convicted after trial on one count of conspiracy to participate in a racketeering enterprise involving bribery and money laundering.  Next week brings sentencing on a single charge with a 20-year statutory maximum sentence, and these local article highlight that the prosecution and defense have very different visions of the proper sentence:

"Feds say Householder should get 16-20 years in prison: Liken him to mob boss in court filing"

"Householder asks for 12-18 month sentence as feds seek 16-20 years"

Especially with the prosecution seeking a sentence up to the statutory maximum prison term of 20 years and the defense seeking a sentence as low as just one year, one might hope that the US Sentencing Guidelines would help guide the federal sentencing judge toward an appropriate sentence.  But, highlighting what I will call the nuttiness of the guidelines, the Government's sentencing memo contends that "Householder’s guideline range recommends life imprisonment."  That would be, of course, an illegal sentence because the stat max is just 20 years. 

Moreover, as discussed in the defendant's sentencing memo, "Probation calculated the total offense level under the advisory Guidelines [to be] Offense Level 52" even though the highest possible offense level under the guidelines is 43.  In other words, for a crime committed by a 64-year old first offender, the guidelines somehow score way above the statutory maximum sentence and way above the guidelines' own defined offense seriousness ceiling.

There are various factors that contribute to the guidelines being especially nutty in this case, and the fact that the guidelines are advisory serves to soften the import and impact of their nuttiness.  I have linked the sentencing memos not only because they make for interesting reads, but also because they highlight how a discourse and debate over the application of the 3553(a) statutory sentencing factors makes far more sense than a discourse and debate over the application of the guidelines that get used in a political corruption case like this one.   

How many of the many thousands convicted of federal aggravated identity theft might now have Dubin claims?

As reported in this prior post, the US Supreme Court this morning rejected the Fifth Circuit's (and the Government's) very broad reading of aggravated identity theft under 18 U.S.C. § 1028A(a)(1). The Court explained in Dubin v. US, No. 22-10 (S. Ct. June 8, 2023) (available here), that the two-year mandatory sentence of 1028A only applies "when the defendant’s misuse of another person’s means of identification is at the crux of what makes the underlying offense criminal, rather than merely an ancillary feature."  For a variety of reasons, I hope federal prosecutors have in the past mostly used the hammer of the two-year mandatory prison term of 1028A in "crux" cases rather than "ancillary" cases (and I sense some other circuits have sometimes limited cases in this way).  But the Dubin case and others cited therein certainly suggest that more than a few persons in the past have been wrongly subject to 1028A liability in "ancillary" cases.

Helpfully, the US Sentencing Commission has one of its great "Quick Facts" publications focused specifically on "Section 1028A Aggravated Identity Theft Offenses."  This July 2022 version reports on the total number of 18 U.S.C. § 1028A offenders sentenced from Fiscal Year 2017 through 2021.  Interestingly, in the three pre-pandemic years, there were over 1000 annual total 1028A offenders sentenced in federal courts; but in FY 2020 and thereafter the yearly numbers clocked in at just over 600.  The typical sentence for most of these offenders across a number of years seems to be in the four- to five-year range.  Consequently, using very "back of the envelop" math, I would guestimate there could be as many as a couple thousand 1028A offenders who are currently imprisoned and maybe a few thousand more currently serving terms of supervised release.  I remain eager to believe and hope that most of these folks were soundly convicted in "crux" cases, but surely many may be eager to claim in court that their convictions and added prison terms were wrongly imposed in "ancillary" cases.

Offenders now looking to pursue what might be called "Dubin claims" could, of course, face procedural barriers of all sorts.  But the still open-ended sentence reduction authority of 3582 might be one ready means for at least some (over-sentenced) prisoners to secure relief.  And there are likely more than a few currently pending federal prosecutions that may get a jolt of uncertainty with Dubin now requiring crux/ancillary distinctions in the application of 18 U.S.C. § 1028A(a)(1).  (But, critically, Justice Gorsuch's concurring opinion warns that we ought not try to sort any of this out while driving to summer vacation.  As he sternly explains: "Criminal statutes are not games to be played in the car on a crosscountry road trip.") 

SCOTUS limits reach of aggravated identity theft two-year mandatory statutory add-on sentence

The Supreme Court this morning delivered yet another big win for a federal white-collar criminal defendant with 9-0 ruling limiting the reach of aggravated identity theft federal statute in Dubin v. US, No. 22-10 (S. Ct. June 8, 2023) (available here).  Justice Sotomayor authored the opinion for the Court, which starts this way:

There is no dispute that petitioner David Fox Dubin overbilled Medicaid for psychological testing.  The question is whether, in defrauding Medicaid, he also committed “[a]ggravated identity theft,” 18 U.S.C. § 1028A(a)(1), triggering a mandatory 2-year prison sentence.  The Fifth Circuit found that he did, based on a reading of the statute that covers defendants who fraudulently inflate the price of a service or good they actually provided.  On that sweeping reading, as long as a billing or payment method employs another person’s name or other identifying information, that is enough.  A lawyer who rounds up her hours from 2.9 to 3 and bills her client electronically has committed aggravated identity theft.  The same is true of a waiter who serves flank steak but charges for filet mignon using an electronic payment method.

The text and context of the statute do not support such a boundless interpretation.  Instead, § 1028A(a)(1) is violated when the defendant’s misuse of another person’s means of identification is at the crux of what makes the underlying offense criminal, rather than merely an ancillary feature of a billing method.  Here, the crux of petitioner’s overbilling was inflating the value of services actually provided, while the patient’s means of identification was an ancillary part of the Medicaid billing process.

Justice Gorsuch authored the only separate opinion, which is a notable concurring opinion starting this way:

Whoever among you is not an “aggravated identity thief,” let him cast the first stone.  The United States came to this Court with a view of 18 U.S.C. § 1028A(a)(1) that would affix that unfortunate label on almost every adult American. Every bill splitter who has overcharged a friend using a mobile-payment service like Venmo.  Every contractor who has rounded up his billed time by even a few minutes.  Every college hopeful who has overstated his involvement in the high school glee club.  All of those individuals, the United States says, engage in conduct that can invite a mandatory 2-year stint in federal prison.  The Court today rightly rejects that unserious position.  But in so holding, I worry the Court has stumbled upon a more fundamental problem with § 1028A(a)(1).  That provision is not much better than a Rorschach test. Depending on how you squint your eyes, you can stretch (or shrink) its meaning to convict (or exonerate) just about anyone.  Doubtless, creative prosecutors and receptive judges can do the same.  Truly, the statute fails to provide even rudimentary notice of what it does and does not criminalize.  We have a term for laws like that.  We call them vague.  And “[i]n our constitutional order, a vague law is no law at all.” United States v. Davis, 588 U. S. ___, ___ (2019) (slip op., at 1).

Ninth Circuit panel rules that Elizabeth Holmes cannot stay out on bail while her appeal is pending

As reported in this new AP article, "Theranos CEO Elizabeth Holmes appears to be soon bound for prison after an appeals court Tuesday rejected her bid to remain free while she tries to overturn her conviction in a blood-testing hoax that brought her fleeting fame and fortune." Here is more:

The Ninth Circuit Court of Appeals ruling comes nearly three weeks after Holmes deployed a last-minute legal maneuver to delay the start of her 11-year prison sentence.  She had been previously ordered to surrender to authorities on April 27 by U.S. District Judge Edward Davila, who sentenced her in November.

Davila will now set a new date for Holmes, 39, to leave her current home in the San Diego area and report to prison. The punishment will separate Holmes from her current partner, William “Billy” Evans, their 1-year-old son, William, and 3-month-old daughter, Invicta.  Holmes’ pregnancy with Invicta — Latin for “invincible,” or “undefeated” — began after a jury convicted her on four counts of fraud and conspiracy in January 2022.

Davila has recommended that Holmes serve her sentence at a women’s prison in Bryan, Texas.  It hasn’t been disclosed whether the federal Bureau of Prisons accepted Davila’s recommendation or assigned Holmes to another facility.

Holmes’ former lover and top lieutenant at Theranos, Ramesh “Sunny’ Balwani, began a nearly 13-year prison sentence in April after being convicted on 12 counts of fraud and conspiracy last July in a separate trial.  Balwani, 57, was incarcerated in a Southern California prison after losing a similar effort to remain free on bail while appealing his conviction....

Holmes’s lawyers have been fighting her conviction on grounds of alleged mistakes and misconduct that occurred during her trial.  They have also contended errors and abuses that biased the jury were so egregious that she should be allowed to stay out of prison while the appeal unfolds — a request that has now been rebuffed by both Davila and the Ninth Circuit Court of Appeals.

Some prior related posts:

• Elizabeth Holmes convicted on 4 of 11 fraud charges ... but now can be sentenced on all and more 
• Making the case, because "upper-class offenders ... might be even more reprehensible," for a severe sentence for Elizabeth Holmes 
• Sentencing memos paint very different pictures of Elizabeth Holmes 
• Federal judge imposes (within guideline) sentence of 135 months on Theranos founder Elizabeth Holmes 
• Sentencing judge recommended prison camp for Elizabeth Holmes to serve her sentence 
• Citing prior "attempt to flee the country," feds urging that Elizabeth Holmes start her prison sentence in April
• Federal judge denies Elizabeth Holmes motion to remain free pending her appeal of fraud convictions 

SCOTUS unanimously reverses two federal fraud convictions based on novel theories

The Supreme Court this morning handed down two notable wins for federal fraud defendants, rejecting two theories of federal prosecution endorced by lower court in Ciminelli v. US, No. 21-1170 (S. Ct. May 11, 2023) (available here) and Percoco v. US, No. 21-1158 (S. Ct. May 11, 2023) (available here). Here is how the opinion for the Court in Ciminelli authored by Justice Thomas gets started:

In this case, we must decide whether the Second Circuit’s longstanding “right to control” theory of fraud describes a valid basis for liability under the federal wire fraud statute, which criminalizes the use of interstate wires for “any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises.” 18 U.S.C. § 1343.  Under the right-to-control theory, a defendant is guilty of wire fraud if he schemes to deprive the victim of “potentially valuable economic information” “necessary to make discretionary economic decisions.” United States v. Percoco, 13 F.4th 158, 170 (CA2 2021) (internal quotation marks omitted). Petitioner Louis Ciminelli was charged with, tried for, and convicted of wire fraud under this theory. And the Second Circuit affirmed his convictions on that same basis.

We have held, however, that the federal fraud statutes criminalize only schemes to deprive people of traditional property interests. Cleveland v. United States, 531 U.S. 12, 24 (2000). Because “potentially valuable economic in-formation” “necessary to make discretionary economic decisions” is not a traditional property interest, we now hold that the right-to-control theory is not a valid basis for liability under §1343. Accordingly, we reverse the Second Circuit’s judgment.

Here is how the opinion for the Court in Percoco authored by Justice Alito gets started:

In this case, we consider whether a private citizen with influence over government decision-making can be convicted for wire fraud on the theory that he or she deprived the public of its “intangible right of honest services.” 18 U.S.C. §§ 1343, 1346. Petitioner Joseph Percoco was charged with conspiring to commit honest-services wire fraud during a period of time that included an eight-month interval between two stints as a top aide to the Governor of New York. Percoco was convicted of this offense based on instructions that required the jury to determine whether he had a “special relationship” with the government and had “dominated and controlled” government business. 2 App. 511. We conclude that this is not the proper test for determining whether a private person may be convicted of honest-services fraud, and we therefore reverse and remand for further proceedings.

Though federal criminal law and white-collar folks are going to want to review these (relatively shourt) opinions closely, everyone should take the time to check out Justice Gorsuch's concurrence in Percoco. It was joined by Justice Thomas and here are some brief highlights from its start and closing:

The Court holds that the jury instructions in this case were “too vague.” Ante, at 10.  I agree.  But to my mind, the problem runs deeper than that because no set of instructions could have made things any better.  To this day, no one knows what “honest-services fraud” encompasses.  And the Constitution’s promise of due process does not tolerate that kind of uncertainty in our laws—especially when criminal sanctions loom. “Vague laws” impermissibly “hand off the legislature’s responsibility for defining criminal behavior to unelected prosecutors and judges, and they leave people with no sure way to know what consequences will attach to their conduct.”  United States v. Davis, 588 U.S. ___, ___ (2019) (slip op., at 1)....

The difficulty here stems from the statute and the lower court decisions that inspired it.  I have no doubt that if all nine Justices put our heads together, we could rewrite § 1346 to provide fair notice and minimize the risk of uneven enforcement.  I have no doubt, too, that we could find a hook for any such rule somewhere in the morass of pre-McNally lower-court case law.  Maybe, too, that is the path we are on, effectively writing this law bit by bit in decisions spanning decades with the help of prosecutors and lower courts who present us with one option after another.  But that is not a path the Constitution tolerates.  Under our system of separated powers, the Legislative Branch must do the hard work of writing federal criminal laws.  Congress cannot give the Judiciary uncut marble with instructions to chip away all that does not resemble David.  See United States v. Reese, 92 U.S. 214, 221 (1876) (“It would certainly be dangerous if the legislature could set a net large enough to catch all possible offenders, and leave it to the courts to step inside and say who could be rightfully detained, and who should be set at large”); United States v. Wiltberger, 5 Wheat. 76, 95 (1820) (Marshall, C. J.) (“It is the legislature, not the Court, which is to define a crime, and ordain its punishment”).

Doubtless, Congress had high and worthy intentions when it enacted § 1346.  But it must do more than invoke an aspirational phrase and leave it to prosecutors and judges to make things up as they go along.  The Legislature must identify the conduct it wishes to prohibit.  And its prohibition must be knowable in advance — not a lesson to be learned by individuals only when the prosecutor comes calling or the judge debuts a novel charging instruction. Perhaps Congress will someday set things right by revising §1346 to provide the clarity it desperately needs.  Until then, this Court should decline further invitations to invent rather than interpret this law.

First Circuit panel reverses fraud convictions for two Varsity Blues defendants

As reported in this New York Times piece, "a federal appeals court overturned the fraud and conspiracy convictions on Wednesday of two parents found guilty of participating in a far-reaching bribery scheme, known as Operation Varsity Blues, which ensnared dozens of wealthy parents who falsified their children’s credentials to gain admission to prestigious universities across the country."  Here is more:

A three-judge panel of the U.S. Court of Appeals for the First Circuit in Massachusetts found that the lower court had made crucial missteps in the trial of Gamal Abdelaziz, a former casino executive, and John Wilson, a private equity financier.  The court, however, upheld Mr. Wilson’s conviction on tax fraud.

The appeals court made its decision largely on two technical legal grounds.  First, it ruled that the lower court judge wrongly instructed the jury that admissions slots constituted property.  “We do not say the defendants’ conduct is at all desirable,” the decision said.  But the appellate judges faulted the government for being too broad in its argument, to the point where “embellishments in a kindergarten application could constitute property fraud proscribed by federal law.”

The court also found that the government had failed to prove that the two men agreed to engage in a conspiracy with other parents, who were, like them, the clients of William Singer, known as Rick, a college admissions consultant to the rich, the mastermind of the admissions scheme.  The conspiracy charges allowed the government to introduce evidence related to other parents’ wrongdoing, creating the risk of bias against the defendants, the judges said in a 156-page decision....

The victory in the appellate court was striking because Mr. Wilson and Mr. Abdelaziz were the first to take their chances in front of a jury.  Dozens of other wealthy parents, including some celebrities, pleaded guilty, making it seem as if the prosecutions were ironclad.  The investigation became a symbol of how wealthy, prestige-obsessed parents had turned elite universities into brand-name commodities.

“Almost everybody pleaded guilty, so the government’s legal theories weren’t really tested until this case was decided,” Joshua Sharp, the lawyer who argued the case for Mr. Abdelaziz, said on Wednesday.

While Mr. Abdelaziz and Mr. Wilson found the weak spots in the government’s case, parents who pleaded guilty are unlikely to be able to challenge their convictions on similar grounds, legal experts said.

Mr. Abdelaziz was accused of paying $300,000 in 2018 to have his daughter admitted to the University of Southern California as a top-ranked basketball recruit even though she did not make the varsity team in high school.  Mr. Wilson was accused of paying $220,000 in 2014 to have his son admitted as a water polo recruit at U.S.C., even though prosecutors said he was not good enough to compete at the university.

Mr. Wilson was also accused of agreeing to pay $1.5 million in 2018 to have his twin daughters, who were good students, admitted to Harvard and Stanford as recruited athletes.

They were tried together in the fall of 2021; Mr. Wilson was later sentenced to 15 months in prison, and Mr. Abdelaziz to a year and a day. Their lawyers argued that the men thought they were making legitimate donations to the university. They said they trusted Mr. Singer, as their college consultant, to guide them.

The investigation ensnared more than 50 people, including the actresses Felicity Huffman and Lori Loughlin; Ms. Loughlin’s husband, Mossimo Giannulli, a fashion designer; and coaches and exam administrators, among others. Mr. Singer agreed to cooperate with the government and pleaded guilty in 2019 to conspiracy charges. He was sentenced in January to three and a half years in prison.

The full 156-page opinion of the First Circuit panel is available at this link.

In Ninth Circuit appeal, Elizabeth Holmes challenges convictions and also seeks resentencing

As reported in this new Insider piece, former Theranos CEO Elizabeth Holmes has filed an appeal of her conviction and sentence in the Ninth Circuit.  Here are the basics:

Holmes was convicted on four counts and sentenced last November to 11.25 years in prison, with three years of supervision following her release.  Holmes, 39, is due to begin her sentence on April 27 after a judge last week denied her request to remain free while she appeals her conviction.  At the time her punishment was handed down, Holmes told the court, through tears, that she was "devastated by my failings" and "felt deep pain for what people went through because I failed them."

But in the brief filed Monday with the US Court of Appeals for the 9th Circuit, Holmes's attorneys claim her original trial was flawed, producing an "unjust" conviction and a "severe" prison sentence.  They argue that she was unjustly barred from citing Balwani's testimony in her own defense....

Holmes's defense team also argued that testimony from Theranos' former lab director, Dr. Adam Rosendorff — that the company's technology was "uniquely problematic" — improperly influenced the court, citing the fact that Rosendorff was not cross-examined and questioned about failings in other labs at which he worked.

For those reasons, the court "should reverse the conviction and remand for a new trial or, alternatively, remand for resentencing," Holmes's lawyers wrote.

The full Holmes brief to the Ninth Circuit is available at this link. The last dozen or so pages of the brief develops the sentencing argument, and here is how this part of the brief begins:

At sentencing, the district court applied a 26-level Guidelines enhancement, adding more than 10 years to what otherwise would have been a 0-7 month range.  It did so by making factual findings about the number of victims and the amount of loss by a mere preponderance of the evidence, based in large part on extra-record and untested evidence such as government interview memoranda.  That was error: under this Court’s precedent, the court needed to find the facts supporting its severe enhancement by clear-and-convincing evidence.  The result of this error is an excessive 135-month term of imprisonment.  That is 27 months higher than what the Probation Office recommended, for a woman who — unlike other white-collar defendants — neither sought nor gained any profit from the purported loss and was trying to improve patient health.  At a minimum, this Court should remand for resentencing.

(FWIW: I think the first sentence means to say "a 0-6 month range.")

Some prior related posts:

• Elizabeth Holmes convicted on 4 of 11 fraud charges ... but now can be sentenced on all and more 
• Making the case, because "upper-class offenders ... might be even more reprehensible," for a severe sentence for Elizabeth Holmes 
• Sentencing memos paint very different pictures of Elizabeth Holmes 
• Federal judge imposes (within guideline) sentence of 135 months on Theranos founder Elizabeth Holmes 
• Sentencing judge recommended prison camp for Elizabeth Holmes to serve her sentence 
• Citing prior "attempt to flee the country," feds urging that Elizabeth Holmes start her prison sentence in April
• Federal judge denies Elizabeth Holmes motion to remain free pending her appeal of fraud convictions 

Federal judge denies Elizabeth Holmes motion to remain free pending her appeal of fraud convictions

As reported in this new Bloomberg piece, "Elizabeth Holmes must report to prison as scheduled later this month, a judge ruled, rejecting her request to remain free on bail as she appeals her fraud conviction."  Here is more:

The decision Monday by US District Judge Edward Davila in San Jose, California, is likely his last in the case which he’s handled since Holmes was indicted in 2018. Davila presided over the Theranos Inc. founder’s four-month trial in 2021 and sentenced her in November to serve 11 1/4 years of incarceration for deceiving investors in her blood-testing startup.

Legal experts said Holmes’s bid to remain free during an appeals process that might take two years was a long shot. She’s expected to make one final request for bail from the San Francisco-based federal appeals court, which she has also asked to overturn her conviction.

Davila ruled that even if Holmes won an appeals court ruling overturning his decisions to allow evidence challenging the accuracy and reliability of Theranos’s technology, she had deceived investors in so many different ways that such a decision isn’t likely to require a reversal or new trial on all the fraud counts she was convicted of. “Whether the jury heard more or less evidence that tended to show the accuracy and reliability of Theranos technology does not diminish the evidence the jury heard of other misrepresentations Ms. Holmes had made to investors,” he wrote.

To justify her request for bail, Holmes said she has two young children, continues to work on new inventions, and has raised “substantial questions” of law or facts in her appeal that could win her a new trial. At a hearing last month, Davila was most interested in an argument prosecutors made that there’s a risk Holmes might try to flee, based on a one-way plane ticket to Mexico that was purchased while she was on trial....

“Booking international travel plans for a criminal defendant in anticipation of a complete defense victory is a bold move, and the failure to promptly cancel those plans after a guilty verdict is a perilously careless oversight,” Davila said of the plane ticket. The incident invited “greater scrutiny” of Holmes, he wrote, adding that he concluded the purchase “while ill-advised, was not an attempt to flee the country.”...

Davila previously denied a request for bail pending appeal sought by Ramesh “Sunny” Balwani, the former president of Theranos and Holmes’s ex-boyfriend who was sentenced to 13 years in prison for his fraud conviction. The appeals court upheld Davila’s decision.

This latest ruling in US v. Holmes, which runs 11 pages, can be found at this link.

Some prior related posts:

• Elizabeth Holmes convicted on 4 of 11 fraud charges ... but now can be sentenced on all and more 
• Making the case, because "upper-class offenders ... might be even more reprehensible," for a severe sentence for Elizabeth Holmes 
• Might any victims of Theranos fraud urge leniency at sentencing for Elizabeth Holmes?
• Sentencing memos paint very different pictures of Elizabeth Holmes 
• Federal judge imposes (within guideline) sentence of 135 months on Theranos founder Elizabeth Holmes 
• Sentencing judge recommended prison camp for Elizabeth Holmes to serve her sentence 
• Citing prior "attempt to flee the country," feds urging that Elizabeth Holmes start her prison sentence in April

When are character letters NOT helpful in a fraud sentencing? When they are fraudulent.

In various posts in this space and elsewhere, one sometimes sees debates over the impact and import of submitting an array of character letters on behalf of a defendant facing sentencing.  I sense that, generally speaking, judges find these kinds of letters helpful, and they can often lead to better sentencing outcomes if well developed and effectively presented.  But, this news story from a federal sentencing this week in Pittsburgh provide a distinct view of these matters:

As far as character letters go, Randy Frasinelli submitted the best.  They came from corporate executives, nonprofit groups and an Ivy league university.  There’s one from the bishop of the Diocese of Pittsburgh.  And another from Leadership Pittsburgh.

There’s even one from former Allegheny County Executive Jim Roddey. Well, it was supposed to be from him.  But, if it was, Roddey spelled his own name wrong — twice.  According to the federal government, all of the letters are fake.

Frasinelli, 66, of Scott, pleaded guilty to bank fraud and money laundering in federal court in August after investigators said that he fraudulently obtained $3.8 million in covid-19 Paycheck Protection Program loans during the pandemic.  They said he used the money to buy artwork, luxury vehicles and firearms...

In its case, the government laid out a complex scheme through which Frasinelli applied for the loans in the names of four separate companies and then submitted falsified tax records and payroll records.  Although he was already facing federal charges — and was out on bond — prosecutors said, Frasinelli applied for another fraudulent loan a month after his arrest seeking another half-million dollars.

Now, the U.S. Attorney’s office is accusing him of falsifying his own character letters to be used to mitigate his sentence.  He is scheduled to be sentenced on Wednesday by U.S. District Judge W. Scott Hardy. Whether the sentencing will occur, however, is up in the air.  Frasinelli’s defense attorney — the third he’s had in his federal case — on Saturday filed a motion to withdraw from representing him.

The sentencing did go forward yesterday, and here is another local press piece detailing how things transpired:

A Scott businessman who bilked the government out of nearly $4 million in COVID-19 relief funds, tried to do it again while out on bond and then forged character letters praising himself to present to a judge will spend 6.5 years in federal prison, the judge ruled Wednesday.

U.S. District Judge W. Scott Hardy chastised Randy Frasinelli, 66, before he issued the sentence, which will be followed by five years of supervised release. He said Frasinelli’s forged letters had eroded the court’s trust in him....

Frasinelli, as part of his plea, took responsibility for his actions. That acceptance of responsibility lowered the sentencing range with which Judge Hardy had to work.  As part of the [pre]-sentencing report sent to the judge, Frasinelli included letters from his children and other family members, along with 14 from other non-family members praising him as a businessman and person.  The letters were signed by politicians and business leaders.

In a filing last week, the U.S. Attorney’s Office wrote they’d discovered at least 13 of the 14 letters from non-family members were forgeries.  Attorneys said Frasinelli’s forged letters should negate any special considerations in relation to his sentencing.... The forged letters, attorneys wrote, should negate any reduction Frasinelli was set to receive for accepting responsibility.  Rather than the sentence of 63 to 78 months that prosecutors agreed to recommend, they said the judge should instead consider the non-mitigated range of 78 to 97 months.

For those not great at base-12 math, the 6.5 years of imprisonment imposed here amounts to 78 months, and so the top of the original guideline range calculated in this case as well as the bottom of the new range suggested by prosecutors. I suppose only the judge knows what sentence he might have given absent the forged letters, but I know this case is a useful reminder that sentencing determinations will often reflect post-offense-conduct behaviors both bad and good.

An interesting (and dubitante) SCOTUS argument in Dubin

I flagged in this post from last November the Supreme Court's cert grant in Dubin v. United States, which concerns the reach of the federal criminal law that adds a mandatory two-year prison term for using another person’s identity in the process of committing another crime.  That statute, 18 U.S.C. § 1028A, is titled "Aggravated identity theft," but the statutory language would seem to cover a whole lot more conduct than what most think of as identify theft.  In fact, the government seem to be claiming that waiter who adds for himself an unauthorized $1 tip when swiping a patron's credit card would be guilty of credit card fraud and an additional two-year mandatory prison term under § 1028A.  

This matter was argued before the Supreme Court yesterday and the lengthy argument had all sorts of interesting elements.  (The transcript, running over 100 pages, is available here; the audio is available here.)  As detailed in the pieces linked below, it seems nearly all the Justices believe there have to be some limiting principles for application of this statute.  But while the Justices seem to generally doubt the government's broad statutory reading, it is unclear what part of the statutory text may provide real limits and on what terms.  Stay tuned:

From Bloomberg Law, "Justices Appear Ready to Limit Breadth of Identity Theft Law"

From the New York Times, "Supreme Court Seems Skeptical of Broad Sweep of Identity Theft Law"

From SCOTUSblog, "Justices lean toward narrow reading of aggravated identity theft"

From Security Boulevard, "Supreme Court: Does BIlling Fraud Violate Federal ID Theft Statutes?"

Notable 5-4 SCOTUS split in ruling to limit civil penalties of Bank Secrecy Act

Certain types of Supreme Court cases involve issues that can make it relatively easy to predict how nearly every Supreme Court Justice will vote.  But so-called "white-collar" cases are often not the predictable type, and today's Supreme Court ruling in Bittner v. United States, No. 21-1195 (Feb. 28, 2023) (available here), is a notable example of this reality.  The case involved the proper accounting for civil penalties for non-willful violations of the Bank Secrecy Act, and the individual prevails against the federal government through this notable voting pattern: 

GORSUCH, J., announced the judgment of the Court, and delivered the opinion of the Court except as to Part II–C. JACKSON, J., joined that opinion in full, and ROBERTS, C. J., and ALITO and KAVANAUGH, JJ., joined except for Part II–C. BARRETT, J., filed a dissenting opinion, in which THOMAS, SOTOMAYOR, and KAGAN, JJ., joined.

Criminal justice fans should be a bit disappointed by the decision by three Justices to not join Part II-C of Justice Gorsuch's opinion. That section has these notable things to say about the rule of lenity:

Under the rule of lenity, this Court has long held, statutes imposing penalties are to be “construed strictly” against the government and in favor of individuals.  Commissioner v. Acker, 361 U.S. 87, 91 (1959)....

The rule of lenity is not shackled to the Internal Revenue Code or any other chapter of federal statutory law. Instead, as Acker acknowledged, “[t]he law is settled that penal statutes are to be construed strictly,” and an individual “is not to be subjected to a penalty unless the words of the statute plainly impose it.” 361 U. S., at 91 (internal quotation marks omitted and emphasis added).  Notably, too, Acker cited to and relied on cases applying this same principle to penalty provisions under a wide array of statutes, including the Communications Act of 1934, a bankruptcy law, and the National Banking Act.  See ibid....

[T]he rule exists in part to protect the Due Process Clause’s promise that “a fair warning should be given to the world in language that the common world will understand, of what the law intends to do if a certain line is passed.” McBoyle v. United States, 283 U.S. 25, 27 (1931).

If this section of the Bittner opinion carried the Court, I suspect this case might end up cited in more than a few criminal statutory interpretation cases. Maybe it still will be, but I suspect this ruling will end up of more interest to bankers than to criminal lawyers.

Federal judge imposes (within guideline) sentence of 155 months on former Theranos COO Ramesh "Sunny" Balwani

Last month, as blogged here, US District Judge Edward Davila sentenced Theranos founder Elizabeth Holmes to a (within guideline) prison term of 135 months.  Today brought sentencing for former Theranos COO Ramesh “Sunny” Balwani, and this TechCrunch account provides these highlights of the process and outcome:

The former COO of disgraced blood testing startup Theranos, Ramesh “Sunny” Balwani was sentenced to 155 months, or about 13 years, in prison, and three years of probation. After a three-month trial, Balwani was found guilty on all 12 criminal charges, ranging from defrauding patients and investors to conspiring to commit fraud. Theranos CEO Elizabeth Holmes was convicted on four of these charges and was sentenced to 11.25 years in prison last month.

Despite the disparate outcomes from the two separate juries in two individual trials, Judge Ed Davila calculated Holmes’ and Balwani’s sentencing ranges to be exactly the same: 135 to 168 months, or 11.25 to 14 years. In both cases, prosecutor Jeff Schenk countered by asking for 15 years.

Balwani’s lawyers attempted to argue that he should get a more lenient sentence than Holmes, as he was not CEO. “He’s not Ms. Holmes. He did not pursue fame and fortune,” said Balwani’s attorney Jeffrey Coopersmith.

Judge Davila even noted that the court saw another side of Balwani when they were told about his charitable giving, some of which occurred after Theranos. Yet Balwani still received a severe sentence of 13 years....

Unlike the jury at Holmes’ trial, the jury at Balwani’s trial held him accountable for defrauding patients, not just investors.

Before the former COO’s sentencing hearing, Balwani’s lawyers filed 40 objections to the probation office’s pre-sentence investigation report, according to tweets from Law 360 reporter Dorothy Atkins, who was present at the hearing. Judge Davila, who also presided over Holmes’ trial, said that only four of those objections were substantive.

“Usually sentencing hearings are morbid regardless of the crime — like watching a car crash where you watch families and lives being destroyed in real time,” Atkins tweeted from the court room. “This one feels more like an accounting class.”

It would certainly not be unprecedented if Balwani decides to appeal this ruling. After Holmes’ own sentencing, the former Theranos CEO told a California federal judge that she would appeal her conviction. She then asked to stay out of custody while her appeal is under consideration, also citing that she is currently pregnant with her second child. As it stands, Holmes’ surrender date is April 27, while Balwani will report to prison on March 15.

Third Circuit panel rules federal fraud guideline enhancements for "loss" do not properly include "intended loss"

I am grateful to a whole bunch of folks who made sure I did not miss the notable ruling by a Third Circuit panel today in US v. Banks, No. 21-5762 (3d Cir. Nov. 30, 2022) (available here).  Banks is yet another case involving another circuit finding notable guideline commentary problematic and inapplicable in the wake of recent Supreme Court administrative law rulings.  Here is how the Banks opinion starts and some key passages within (footnotes omitted):

A jury convicted Frederick Banks of wire fraud, and the District Court sentenced him to 104 months’ imprisonment and three years’ supervised release. On appeal, Banks argues that the District Court erred in three ways, by (1) denying his constitutionally protected right to self-representation, (2) applying the loss enhancement to the fraud guideline in the United States Sentencing Guidelines because there was no “actual loss,” and (3) imposing certain special conditions of supervised release.  We conclude that the loss enhancement in the Guideline’s application notes impermissibly expands the word “loss” to include both intended loss and actual loss. Thus, the District Court erred when it applied the loss enhancement because Banks’s crimes caused no actual loss. We will, therefore, affirm the judgment of the District Court except on the issue of loss enhancement; we will remand this case to the District Court for it to determine loss and to resentence Banks....

Next, we turn to Banks’s argument that the District Court erroneously applied the intended-loss enhancement to his sentence when the victim suffered $0 in actual losses. The application of the intended-loss enhancement hinges on the meaning of the term “loss” as used in Guideline § 2B1.1. Because the United States Sentencing Commission has interpreted “loss” in its commentary, the weight afforded to that commentary may affect the meaning of “loss.”...

Our review of common dictionary definitions of “loss” point to an ordinary meaning of “actual loss.” None of these definitions suggest an ordinary understanding that “loss” means “intended loss.”  To be sure, in context, “loss” could mean pecuniary or non-pecuniary loss and could mean actual or intended loss.55 We need not decide, however, whether one clear meaning of the word “loss” emerges broadly, covering every application of the word.  Rather, we must decide whether, in the context of a sentence enhancement for basic economic offenses, the ordinary meaning of the word “loss” is the loss the victim actually suffered.  We conclude it is.

Because the commentary expands the definition of “loss” by explaining that generally “loss is the greater of actual loss or intended loss,” we accord the commentary no weight. Banks is thus entitled to be resentenced without the 12-point intended-loss enhancement in § 2B1.1. 

Previewing SCOTUS arguments on reach of federal public-corruption laws

The Supreme Court starts a new round of oral arguments this Monday, beginning with a pair of political corruption cases, Ciminelli v. United States and Percoco v. United States.  SCOTUSblog has these previews of the coming arguments:

"A sharp business deal or a federal crime? Justices will review what counts as fraud in government contracting."

"Former aide to Andrew Cuomo wants court to narrow scope of federal bribery law"

In addition, here are a few media previews:

From The Buffalo News, "Supreme Court to hear Ciminelli, Percoco appeals – and decide shape of federal corruption laws"

From Reuters, "U.S. Supreme Court to weigh Cuomo-era New York corruption cases"

From the Wall Street Journal, "The Supreme Court Gets a Fraud Test: The Justices hear two major cases on prosecutorial overreach."

Sentencing judge recommended prison camp for Elizabeth Holmes to serve her sentence

As reported in this new press piece, "District Judge Edward Davila has proposed sentencing Theranos founder Elizabeth Holmes to a federal prison camp in Texas, according to court filings." Here is more:

“The Court finds that family visitation enhances rehabilitation,” Davila wrote in the filing, according to Bloomberg, which summarized the terms of Holmes’ sentencing.

The prison camp is located in Bryan, Texas, and was proposed as an alternative to Holmes serving her 11-year 3-month sentence at a California prison.  There’s a few prison camps like this one across the country that typically have a low security-to-inmate ratio, dormitory housing, and a work program. “...compared to other places in the prison system, this place is heaven.  If you have to go it’s a good place to go.” Alan Ellis, a criminal defense lawyer, told Bloomberg.

Keri Axel, a criminal defense attorney told Yahoo! Finance that it is common for non-violent offenders like Holmes to serve out their time at minimum security facilities.  “Sometimes they’re called ‘Camp Fed’ because they have a little bit more amenities, and they’re a little nicer places,” she said, adding the caveat, “they’re not great places. No one wants to be there.”

Although the judge has recommended the prison camp for Holmes’ incarceration, the U.S. Bureau of Prisons will make the final decision.  Holmes was sentenced to 11 years and three months in prison on November 18 after she was found guilty of defrauding Theranos investors out of millions of dollars as part of her failed blood-testing startup.  She was also sentenced to three years of supervision after her release.

Prior related posts:

• Elizabeth Holmes convicted on 4 of 11 fraud charges ... but now can be sentenced on all and more 
• Making the case, because "upper-class offenders ... might be even more reprehensible," for a severe sentence for Elizabeth Holmes 
• Might any victims of Theranos fraud urge leniency at sentencing for Elizabeth Holmes?
• Elizabeth Holmes' federal sentencing ready to go forward after her new trial motion is denied 
• Sentencing memos paint very different pictures of Elizabeth Holmes 
• Any final thoughts on today's federal sentencing of Elizabeth Holmes?
• Federal judge imposes (within guideline) sentence of 135 months on Theranos founder Elizabeth Holmes 

Federal judge imposes (within guideline) sentence of 135 months on Theranos founder Elizabeth Holmes

After a lengthy sentencing hearing (and a favorable guideline calculation), Theranos founder Elizabeth Holmes heard US District Judge Edward Davila sentence her to 135 months in federal prison this afternoon.  (That's 11 years and three months for those not accustomed to math in base 12.) 

Why such a quirky number?  Apparently Judge Davila concluded the total loss in share value properly attributed to Holmes's fraud was $121 million, which was an integral finding to support his calculation that her guidelines range was 135-168 months. (The feds, some may recall, calculated her guideline range to be life.)

Here is the lede of the Wall Street Journal's coverage of the sentence: "Elizabeth Holmes, the founder of Theranos Inc. convicted of fraud, was sentenced to 135 months, or 11.25 years, in prison, capping the extraordinary downfall of a one-time Silicon Valley wunderkind."

Prior related posts:

• Elizabeth Holmes convicted on 4 of 11 fraud charges ... but now can be sentenced on all and more 
• Making the case, because "upper-class offenders ... might be even more reprehensible," for a severe sentence for Elizabeth Holmes 
• Might any victims of Theranos fraud urge leniency at sentencing for Elizabeth Holmes?
• Elizabeth Holmes' federal sentencing ready to go forward after her new trial motion is denied 
• Sentencing memos paint very different pictures of Elizabeth Holmes 
• Any final thoughts on today's federal sentencing of Elizabeth Holmes?

Any final thoughts on today's federal sentencing of Elizabeth Holmes?

As I write this post, the federal sentencing of the Theranos founder Elizabeth Holmes is scheduled to begin after she was found guilty of four of 11 charges of fraud at a jury trial this past January. I have to go teach my 1L Crim law class in a few minutes, so I might be slow to report the outcome if the sentencing is quick.  But I can here seek any pre- (or post-)sentencing final thoughts, aided by this New York Times lengthy preview piece (which, as I note below, has some technical errors).  Here are excerpts:

Senator Cory Booker, Democrat of New Jersey, recently praised Elizabeth Holmes’s thoughtful focus and “determination to make a difference.”  The actress Ricki Noel Lander said Ms. Holmes was “a trustworthy friend and a genuinely lovely person.”  And Channing Robertson, who was a professor of chemical engineering at Stanford University, commended Ms. Holmes for her “compassion for others.”

Their comments were part of a cache of more than 100 letters that were filed over the last week to a federal judge in San Jose, Calif., in an effort to reduce the punishment for Ms. Holmes, the founder of the failed blood testing start-up Theranos. In January, she was convicted of four counts of defrauding investors about Theranos’s technology and business dealings. She is scheduled to be sentenced for those crimes on Friday.

Ms. Holmes, 38, faces a maximum of 20 years in prison, according to federal sentencing guidelines for wire fraud. Her lawyers have requested 18 months of house arrest, while prosecutors have asked for 15 years of imprisonment.  The probation officer in Ms. Holmes’s case has recommended a sentence of nine years.

The decision lies with Judge Edward J. Davila of U.S. District Court for the Northern District of California, who oversaw Ms. Holmes’s trial last year. In addition to the letters from her supporters asking for leniency, he is set to take into account lengthy memos filed by her lawyers and prosecutors, and will consider whether Ms. Holmes has accepted responsibility for her actions.

Most notably, Judge Davila must weigh the message that Ms. Holmes’s sentence sends to the world. Her high-profile case came to symbolize the excesses and hubris of Silicon Valley companies that often play fast and loose with the law. Theranos raised $945 million from investors, valuing the company at $9 billion, on the claim that its technology could accurately run many tests on a single drop of blood. But the technology never worked as promised.

Few tech executives are ever found guilty of fraud. So a lighter sentence for Ms. Holmes could send the wrong signal to the industry, legal experts said. “This is a case with more deterrence potential than most,” said Andrew George, a white-collar defense lawyer at Baker Botts. “Judge Davila will be sensitive to any impression that this person of privilege got a slap on the wrist.”...

Since Ms. Holmes was convicted, other high profile start-up founders have also come under scrutiny, prompting further debates over start-up ethics. Trevor Milton, the founder of the electric vehicle start-up Nikola, was convicted last month on charges of lying about his company’s technology. Sam Bankman-Fried, the founder of the cryptocurrency exchange FTX, is under numerous investigations after his company suddenly collapsed into bankruptcy last week....

Prosecutors said in court filings that significant prison time for her would send a message to other entrepreneurs who stretched the truth. A long sentence would not only “deter future start-up fraud schemes” but also “rebuild the trust investors must have when funding innovators,” they wrote.

I am pretty sure that each of Holmes' four fraud convictions carry a 20-year maximum sentence, so technically she faces a maximum of 80 years in prison.  In addition, I believe "according to federal sentencing guidelines" calculations put forward by the prosecution, the guidelines actually call for a life sentence (which is not formally possible, though the 80-year max would be essentially a functional life sentence).  That all said, I am sticking to my 10-year sentence as the betting line over/under, though I am thinking I might be inclined to take the over.

Prior related posts:

• Elizabeth Holmes convicted on 4 of 11 fraud charges ... but now can be sentenced on all and more 
• Making the case, because "upper-class offenders ... might be even more reprehensible," for a severe sentence for Elizabeth Holmes 
• Might any victims of Theranos fraud urge leniency at sentencing for Elizabeth Holmes?
• Elizabeth Holmes' federal sentencing ready to go forward after her new trial motion is denied 
• Sentencing memos paint very different pictures of Elizabeth Holmes 

Sentencing memos paint very different pictures of Elizabeth Holmes

Two Reuters articles and ledes highlight the very different portraites of Elizabeth Holmes drawn in recent sentencing filings:

"Elizabeth Holmes seeks to avoid prison for Theranos fraud":

Elizabeth Holmes urged a U.S. judge not to send her to prison, as the founder of Theranos Inc prepares to be sentenced next week for defrauding investors in the blood testing startup. In a Thursday night court filing, lawyers for Holmes asked that she receive 18 months of home confinement, followed by community service, at her Nov. 18 sentencing before U.S. District Judge Edward Davila in San Jose, California.

The lawyers said prison time was unnecessary to deter future wrongdoing, calling Holmes, 38, a "singular human with much to give" and not the robotic, emotionless "caricature" seen by the public and media. "No defendant should be made a martyr to public passion," the lawyers wrote. "We ask that the court consider, as it must, the real person, the real company and the complex circumstances surrounding the offense."

"U.S. seeks 15 years for Elizabeth Holmes over Theranos fraud":

Theranos founder Elizabeth Holmes should spend 15 years in prison and pay $800 million in restitution to investors defrauded in the blood testing start-up, U.S. prosecutors recommended late on Friday.  The Department of Justice recommendation, made in a court filing, came as Holmes prepares to be sentenced next week.

"Considering the extensiveness of Holmes' fraud... the sentencing of 180 months' imprisonment would reflect the seriousness of the offenses, provide for just punishment for the offenses, and deter Holmes and others," the prosecutors said.

The sentencing filings in this high-profile case are, unsurprisingly, quite entextensive ensice.  Holmes sentencing memorandum runs 82 pages, is available at this link, and here is part of its "preminary statement":

Section 3553(a) requires the Court to fashion a sentence “sufficient, but not greater than necessary,” to serve the purposes of sentencing.  If a period of confinement is necessary, the defense suggests that a term of eighteen months or less, with a subsequent supervised release period that requires community service, will amply meet that charge. But the defense believes that home confinement with a requirement that Ms. Holmes continue her current service work is sufficient.  We acknowledge that this may seem a tall order given the public perception of this case — especially when Ms. Holmes is viewed as the caricature, not the person; when the company is viewed as a house of cards, not as the ambitious, inventive, and indisputably valuable enterprise it was; and when the media vitriol for Ms. Holmes is taken into account.  But the Court’s difficult task is to look beyond those surface-level views when it fashions its sentence.  In doing so, we ask that the Court consider, as it must, the real person, the real company and the complex circumstances surrounding the offense conduct, and the important principle that “no defendant should be made a martyr to public passion.” United States v. Gupta, 904 F. Supp. 2d 349, 355 (S.D.N.Y. 2012) (Rakoff, J.).  As discussed in more detail in the pages that follow, this is a unique case and this defendant is a singular human with much to give.

The Government's sentencing memorandum runs 46 pages, is available at this link, and here is part of its "introduction":

The Sentencing Guidelines appropriately recognize that Holmes’ crimes were extraordinarily serious, among the most substantial white collar offenses Silicon Valley or any other District has seen.  According to the Presentence Investigation Report (“PSR”), they yield a recommended custodial sentence beyond the statutory maximum.  The factors set forth in 18 U.S.C. § 3553 — notably the nature and circumstances of the offense, the need for the sentence to reflect the seriousness of the offense and promote respect for the law, and the need for both specific deterrence and general deterrence — demand a significant custodial sentence.  With these factors in mind, the government respectfully recommends a sentence of 180 months in custody.  The Court should also order Holmes to serve a three-year term of supervised release, pay full restitution to her investors (including Walgreens and Safeway), and pay the required special assessment for each count.

I think I'd put the over/under for this sentencing at around 10 years of imprisonment, but I could readily imagine a judge going much higher or much lower.

Prior related posts:

• Elizabeth Holmes convicted on 4 of 11 fraud charges ... but now can be sentenced on all and more 
• Making the case, because "upper-class offenders ... might be even more reprehensible," for a severe sentence for Elizabeth Holmes 
• Might any victims of Theranos fraud urge leniency at sentencing for Elizabeth Holmes?
• Elizabeth Holmes' federal sentencing ready to go forward after her new trial motion is denied 

Elizabeth Holmes' federal sentencing ready to go forward after her new trial motion is denied

As detailed in this AP article, headlined "Bid for new trial fails, Elizabeth Holmes awaits sentencing," a high-prfole federal sentencing is now on track for later this month.  Here are the basics:

A federal judge rejected a bid for a new trial for disgraced Theranos CEO Elizabeth Holmes after concluding a key prosecution witness’s recent remorseful attempt to contact her wasn’t enough to award her another chance to avoid a potential prison sentence for defrauding investors at her blood-testing company.

The ruling issued late Monday by U.S. District Judge Edward Davila is the latest setback for Holmes, a former Silicon Valley star who once boasted an estimated net worth of $4.5 billion but is now facing up to 20 years in prison that would separate her from her 1-year-old son.

In the latest twist in a Silicon Valley soap opera, Holmes appeared to be pregnant when she showed up for an Oct. 17 hearing about her request for a new trial....

Davila has scheduled Nov. 18 as the day he will sentence Holmes, 38, for four felony counts of investor fraud and engaging in a conspiracy with [Rawesh “Sunny”] Balwani.  Earlier Monday, Davila postponed Balwani’s sentencing for his conviction on 12 counts of investor and patient fraud from Nov. 15 to Dec. 7.

I plan to wait until we see the formal sentencing submissions from the parties before even trying to make any predictions as to what kind of prison term Holmes might get.  But I welcome others' predictions in the comments as we gear up for what should be an interesting (and unpredicatable) sentencing proceeding.  

Prior related posts:

• Elizabeth Holmes convicted on 4 of 11 fraud charges ... but now can be sentenced on all and more 
• Making the case, because "upper-class offenders ... might be even more reprehensible," for a severe sentence for Elizabeth Holmes 
• Might any victims of Theranos fraud urge leniency at sentencing for Elizabeth Holmes?

Federal judge sentences Steve Bannon to 4 months of imprisonment for contempt of Congress

As reported in this USA Today piece, "Trump White House strategist Steve Bannon was sentenced to four months in prison Friday, three months after his conviction on contempt of Congress charges for defying a subpoena from the special House committee investigating the Jan. 6, 2021 Capitol attack." Here is a bit more:

The Justice Department had sought a six month prison term for Bannon and recommended that he pay a maximum fine of $200,000 for "his sustained, bad-faith."... While Bannon initially refused to comply with the panel's summons, citing a claim of executive privilege, prosecutors said Monday that the Trump operative's actions were "aimed at undermining the Committee’s efforts to investigate an historic attack on government."

Bannon's attorneys argued that a sentence of probation was more appropriate. "The legal challenges advanced by Mr. Bannon were not meritless or frivolous and were aimed at protecting his constitutional rights," attorney Evan Corcoran argued in court documents. "For these reasons, the fact that Mr. Bannon chose to put the Government to its burden at trial should not preclude him from receiving a reduction to his offense level based on acceptance of responsibility."

Prior related posts:

• Should "pardoned conduct" be part of Steve Bannon's sentencing after his convictions for contempt of Congress? 
• Feds urging six months' imprisonment and $200,000 fined for Steve Bannon as punishment following his convictions for criminal contempt of Congress