Friday, February 16, 2024

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:

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.

February 16, 2024 in Celebrity sentencings, Offense Characteristics, Procedure and Proof at Sentencing, Purposes of Punishment and Sentencing, White-collar sentencing | Permalink | Comments (2)

Monday, January 29, 2024

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

January 29, 2024 in Offense Characteristics, Procedure and Proof at Sentencing, White-collar sentencing, Who Sentences | Permalink | Comments (39)

Thursday, January 25, 2024

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.

January 25, 2024 in Celebrity sentencings, Offender Characteristics, Offense Characteristics, Procedure and Proof at Sentencing, White-collar sentencing, Who Sentences | Permalink | Comments (30)

Saturday, December 30, 2023

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:

December 30, 2023 in Federal Sentencing Guidelines, Procedure and Proof at Sentencing, White-collar sentencing, Who Sentences | Permalink | Comments (27)

Thursday, December 07, 2023

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:

December 7, 2023 in Celebrity sentencings, White-collar sentencing, Who Sentences | Permalink | Comments (15)

Monday, November 13, 2023

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:

November 13, 2023 in Offender Characteristics, Offense Characteristics, Procedure and Proof at Sentencing, White-collar sentencing, Who Sentences | Permalink | Comments (1)

Saturday, November 11, 2023

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.

November 11, 2023 in Clemency and Pardons, Criminal justice in the Trump Administration, Sentences Reconsidered, White-collar sentencing, Who Sentences | Permalink | Comments (6)

Thursday, November 02, 2023

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.

November 2, 2023 in Federal Sentencing Guidelines, Offense Characteristics, White-collar sentencing, Who Sentences | Permalink | Comments (33)

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.’”

November 2, 2023 in Federal Sentencing Guidelines, Offense Characteristics, Procedure and Proof at Sentencing, White-collar sentencing, Who Sentences | Permalink | Comments (1)

Thursday, October 19, 2023

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.

October 19, 2023 in Celebrity sentencings, Offender Characteristics, Offense Characteristics, Procedure and Proof at Sentencing, White-collar sentencing | Permalink | Comments (12)

Sunday, August 27, 2023

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"

August 27, 2023 in Offender Characteristics, Procedure and Proof at Sentencing, Race, Class, and Gender, White-collar sentencing | Permalink | Comments (0)

Thursday, June 29, 2023

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:

June 29, 2023 in Offender Characteristics, Offense Characteristics, White-collar sentencing | Permalink | Comments (16)

Saturday, June 24, 2023

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:

June 24, 2023 in Celebrity sentencings, White-collar sentencing, Who Sentences | Permalink | Comments (46)

Friday, June 23, 2023

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.   

June 23, 2023 in Federal Sentencing Guidelines, Procedure and Proof at Sentencing, White-collar sentencing | Permalink | Comments (0)

Thursday, June 08, 2023

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.") 

June 8, 2023 in Mandatory minimum sentencing statutes, Offense Characteristics, Procedure and Proof at Sentencing, Sentences Reconsidered, White-collar sentencing, Who Sentences | Permalink | Comments (2)

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).

June 8, 2023 in Mandatory minimum sentencing statutes, Sentences Reconsidered, White-collar sentencing, Who Sentences | Permalink | Comments (0)

Tuesday, May 16, 2023

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:

May 16, 2023 in Celebrity sentencings, Procedure and Proof at Sentencing, White-collar sentencing | Permalink | Comments (9)

Thursday, May 11, 2023

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.

May 11, 2023 in Offense Characteristics, White-collar sentencing, Who Sentences | Permalink | Comments (8)

Wednesday, May 10, 2023

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.

May 10, 2023 in Offense Characteristics, Sentences Reconsidered, White-collar sentencing, Who Sentences | Permalink | Comments (6)

Tuesday, April 18, 2023

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:

April 18, 2023 in Procedure and Proof at Sentencing, Sentences Reconsidered, White-collar sentencing | Permalink | Comments (0)

Tuesday, April 11, 2023

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:

April 11, 2023 in Celebrity sentencings, Procedure and Proof at Sentencing, White-collar sentencing, Who Sentences | Permalink | Comments (14)

Thursday, March 30, 2023

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.

March 30, 2023 in Procedure and Proof at Sentencing, White-collar sentencing, Who Sentences | Permalink | Comments (2)

Wednesday, March 01, 2023

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?"

March 1, 2023 in Mandatory minimum sentencing statutes, Offense Characteristics, Sentences Reconsidered, White-collar sentencing, Who Sentences | Permalink | Comments (4)

Tuesday, February 28, 2023

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.

February 28, 2023 in Offense Characteristics, Procedure and Proof at Sentencing, White-collar sentencing, Who Sentences | Permalink | Comments (3)

Wednesday, December 07, 2022

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.

December 7, 2022 in Celebrity sentencings, Procedure and Proof at Sentencing, White-collar sentencing | Permalink | Comments (2)

Wednesday, November 30, 2022

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. 

November 30, 2022 in Federal Sentencing Guidelines, White-collar sentencing, Who Sentences | Permalink | Comments (0)

Sunday, November 27, 2022

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."

November 27, 2022 in Offense Characteristics, White-collar sentencing, Who Sentences | Permalink | Comments (0)

Wednesday, November 23, 2022

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:

November 23, 2022 in Celebrity sentencings, Prisons and prisoners, White-collar sentencing, Who Sentences | Permalink | Comments (7)

Friday, November 18, 2022

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:

November 18, 2022 in Celebrity sentencings, Federal Sentencing Guidelines, White-collar sentencing | Permalink | Comments (8)

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:

November 18, 2022 in Federal Sentencing Guidelines, Procedure and Proof at Sentencing, White-collar sentencing, Who Sentences | Permalink | Comments (5)

Sunday, November 13, 2022

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:

November 13, 2022 in Celebrity sentencings, Offender Characteristics, Offense Characteristics, White-collar sentencing, Who Sentences | Permalink | Comments (9)

Tuesday, November 08, 2022

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:

November 8, 2022 in Celebrity sentencings, Offender Characteristics, Offense Characteristics, Race, Class, and Gender, White-collar sentencing | Permalink | Comments (3)

Friday, October 21, 2022

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:

October 21, 2022 in Celebrity sentencings, Offender Characteristics, Offense Characteristics, Procedure and Proof at Sentencing, Purposes of Punishment and Sentencing, White-collar sentencing, Who Sentences | Permalink | Comments (1)

Thursday, June 30, 2022

Lots and lots of note in big SCOTUS order list at close of Term for the ages

I suspect I am not the only one fatigued from the historic Supreme Court Term that was concluded today (and I only pay really close attention to the Court's criminal docket).  But criminal justice fans may want to find some energy to review this morning's final order list, which includes lots of note.

For starters, the the order list begins with more than a few GVRs based on all the big cases of the last week including Concepcion and Ruan and Castro-Huerta.

Then, SCOTUS granted cert on three new cases, including these two criminal ones involving fraud convictions under federal law: Percoco v. US and Ciminelli v. US.

And, last but not least, the Court has a long series of statements about the denial of cert.  To cover them all, I can borrow from How Appealing's helpful posting:

In Grzegorczyk v. United States, No. 21–5967, Justice Brett M. Kavanaugh issued an opinion, in which Chief Justice John G. Roberts, Jr., and Justices Clarence Thomas, Samuel A. Alito, Jr., and Amy Coney Barrett joined, respecting the denial of certiorari. And Justice Sonia Sotomayor issued a dissent, in which Justices Stephen G. Breyer, Elena Kagan, and Neil M. Gorsuch joined, from the denial of a grant, vacate, and remand order.

In Storey v. Lumpkin, No. 21–6674, Justice Sotomayor issued an opinion respecting the denial of certiorari.

In Canales v. Lumpkin, No. 20–7065, Justice Sotomayor issued a dissent from the denial of certiorari.

In Ramirez v. Guadarrama, No. 21–778, Justice Sotomayor issued a dissent, in which Justices Breyer and Kagan joined, from the denial of certiorari.

In Cope v. Cogdill, No. 21–783, Justice Sotomayor issued a dissent from the denial of certiorari.

In Dr. A. v. Hochul, No. 21–1143, Justice Thomas issued a dissent, in which Justices Alito and Gorsuch joined, from the denial of certiorari.

And in Hill v. Shoop. No. 21–6428, Justice Sotomayor issued a dissent, in which Justices Breyer and Kagan joined, from the denial of certiorari.

I hope to find time before too long to review all of of these statement and later comment on those that strike me as particularly notable.  Readers are, of course, encouraged to flag in the comments items of particular interest.

June 30, 2022 in Procedure and Proof at Sentencing, Sentences Reconsidered, White-collar sentencing, Who Sentences | Permalink | Comments (19)

Thursday, June 09, 2022

Notable coverage of supposed "new breed" of prison consultants

I have been following the federal criminal justice system for the better part of 30 years, and throughout there have always been various types of experts who seek to help defendants with sentence mitigation and preparation for prison (especially in the white-collar universe where greater resources are available to pay for these kinds of services).  Still, every now and again, the press seems eager to make much of the phenomenon of so-called "prison consultants" as, for example, in a 2020 Town & Country  piece, "Inside the World of Prison Consultants Who Prepare White Collar Criminals to Do Time." 

The New York Times has long been keen on the prison consultant beat as evidenced by older articles like a 2009 piece headlined "Consultants Are Providing High-Profile Inmates a Game Plan for Coping" and a 2012 piece headlined "Making Crime Pay."  This week, the Gray Lady has this very long piece in this genre appearing in its magazine under this full headline "Want to Do Less Time? A Prison Consultant Might Be Able to Help. For a price, a new breed of fixer is teaching convicts how to reduce their sentence, get placed in a better facility — and make the most of their months behind bars."  Though I am not sure why prison consultants are now described as a "new breed of fixer," I am sure this lengthy article is still worth a full read.  Here are excerpts: 

After a prominent felon is sentenced, a spate of stories often appear about these backstage fixers for the wealthy, consultants who can help get a client into prisons that one might prefer — say, a prison that has superior schooling or CrossFit-level gyms or lenient furlough policies or better-paying jobs or other refined specialties.  The federal prison in Otisville, N.Y., for example, is also known as “federal Jewish heaven” because of its good kosher food (decent gefilte fish, they say, and the rugelach’s not bad).  When those Varsity Blues parents were busted for paying backdoor operatives to engineer their kids’ college admissions, it was also reported that many hired prison consultants to game out the aftermath.

[Justin] Paperny’s business is a natural market outgrowth of a continuing and profound shift in America’s judicial system.  Almost everyone facing charges is forced to plead guilty (or face an angry prosecutor who will take you to trial).  In 2021, 98.3 percent of federal cases ended up as plea bargains.  It’s arguable that in our era of procedural dramas and endless “Law & Order” reruns, speedy and public trials are more common on television than in real-life courthouses.  What people like [Hugo] Mejia have to deal with as they await sentencing is a lot of logistics.

The idea of a prison consultant might conjure an image of an insider broker or fixer, but they’re really more like an SAT tutor — someone who understands test logic and the nuances of unwritten rules. Yet prison consulting also involves dealing with a desolate human being who has lost almost everything — friends, family, money, reputation — and done it in such a way that no one gives a damn.  So they’re also a paid-for best friend, plying their clients with Tony Robbins-style motivational insights, occasionally mixed with powerful sessions about the nature of guilt and shame....

On television, the journey to prison is nearly instantaneous: a jump cut to a slamming cell door. But in the real world, it’s a set of steps, routine bureaucratic actions that involve interviews, numerous forms to complete and dates with officials. A lawyer is your legal guide to staying out of prison, but once that becomes inevitable, a prison consultant is there to chaperone you through the bureaucracies that will eventually land you in your new home, easing your entry into incarceration — and sometimes even returning you to the outside, utterly changed....

One of the first things Paperny advises a client like Mejia to do is to stop [minimizing the offense], especially before sentencing.  You pleaded guilty already.  You did it.  Own it — because the vamping will almost certainly annoy any judge or civil servant who hears it, and you’ll wind up with a much longer sentence.  That’s arguably the most crucial piece of advice that Paperny provides to his clients, for the simple reason that when you’re going to prison, you have to formally tell your story to all kinds of people.

The storytelling officially begins a few weeks after a guilty plea (or a conviction by trial) in a sit-down interview with a law-enforcement officer whose specialty is writing up a pre-sentencing report, which will be given to the presiding judge.  The descriptions of the crime come largely from the plea agreement, which is, naturally, centered on the proposition that you are a heinous criminal and a moral fugitive.  Think of a Wikipedia biography that tells the story of the worst moment of your life, with everything else about you salted away in footnotes.  This is what the sentencing judge will read before deciding precisely how long you will be confined — and it’s a story that will follow you throughout your stay with the state.

“They call the pre-sentencing report the Bible in prison, because it is one of the first things a case manager or counselor will rely upon,” Paperny said. “It will influence early release, your half-house time, your bunk, your job and so on.”

June 9, 2022 in Federal Sentencing Guidelines, Prisons and prisoners, Procedure and Proof at Sentencing, White-collar sentencing, Who Sentences | Permalink | Comments (2)

Thursday, June 02, 2022

Another federal judge gives Michael Avenatti another below-guideline sentence, as he gets now 48 months for defrauding Stormy Daniels

In what is becoming almost a summer tradition, disgraced lawyer Michael Avenatti was sentenced by a federal judge below the federal sentencing guidelines today.  Sentencing fans may recall that last July Avenetti got a way-below-guideline 30-month sentence for extorting Nike (details here).  Today was judgment day for defrauding Stormy Daniels, as Reuters reports and as excerpted here:

Michael Avenatti, the brash California lawyer who took on then-President Donald Trump, was sentenced on Thursday to four years in prison for defrauding his best-known former client, the porn actress Stormy Daniels.  A federal jury convicted Avenatti in February of wire fraud and aggravated identity theft after a two-week trial, agreeing with prosecutors that he embezzled nearly $300,000 in book proceeds intended for Daniels.

U.S. District Judge Jesse Furman imposed the sentence in federal court in Manhattan, calling Avenatti's conduct "brazen and egregious."  But he said guidelines calling for Avenatti, 51, to serve a sentence of five or six years were "unreasonable," in part due to Avenatti's prior successful legal career.

Avenatti, who appeared in court wearing prison garb and ankle shackles, recounted a string of legal victories he had secured for clients he called "underdogs," and disputed prosecutors' assertion that he took on Daniels as a client to gain a national platform for himself.  "No one else had the guts to take her case," Avenatti said before Furman handed down his sentence, speaking from the courtroom lectern with a U.S. marshal standing beside him.  "I believed we could take down a sitting U.S. president who was the biggest threat to our democracy in modern times."

Daniels, whose given name is Stephanie Clifford, is known for receiving $130,000 from Trump's former lawyer Michael Cohen, in exchange for remaining quiet before the 2016 presidential election about sexual encounters she says she had with Trump, which he has denied.

Avenatti vowed to appeal the guilty verdict in the Daniels case.... He had already been serving a 2-1/2-year sentence stemming from his 2020 federal conviction for trying to extort millions of dollars from Nike Inc. He has appealed that conviction.

Eighteen months of the Daniels sentence will run concurrent with the Nike sentence, meaning Avenatti faces a combined five years in prison. He is still charged in California with stealing millions of dollars from other clients.

Prosecutors had recommended that Avenatti receive a "substantial" prison term in the Daniels case, including a mandatory two-year term for identity theft. Avenatti, who represented himself during the trial, proposed a three-year sentence, with one year running concurrent with his Nike sentence.

June 2, 2022 in Booker in district courts, Celebrity sentencings, White-collar sentencing | Permalink | Comments (1)

Friday, May 27, 2022

Helping to spread a federal sentencing "message" for a "corruption superspreader"

I always find it is interesting when judges in relatively low-profile cases talk about "sending a message" at sentencing, and I suppose I should try to make a habit of helping judges spread the messages they hope to be sending.  To that end, here I will flag this recent sentencing story out of Chicago headlined "‘You were a corruption superspreader’: Judge sentences ex-state Rep. Luis Arroyo to 57 months in prison in bribery case involving sweepstakes machine bill."  Here are excerpts:

Saying he needed to send a message on the cost of public corruption, a federal judge on Wednesday sentenced former state Rep. Luis Arroyo to nearly five years in federal prison for trying to bribe a state senator to help with legislation expanding the shadowy world of sweepstakes gambling machines.

Rejecting a defense plea for probation, U.S. District Judge Steven Seeger railed against Arroyo’s “dirty” conduct, saying in a lengthy speech that he sold out an already corruption-weary public and committed a “frontal assault on the very idea of representative government.”

“You were a corruption superspreader,” Seeger said near the end of a nearly four-hour hearing at the Dirksen U.S. Courthouse.  “The public did not get what they deserved.  They voted for an honest representative, and what they got was a corrupt politician.”

Arroyo’s lawyers had maintained that a prison sentence for the longtime Chicago Democrat would do nothing to stop the state’s seemingly intractable corruption problem and would be akin to “draining Lake Michigan with a spoon.”

But the judge took particular umbrage with attempts to downplay what Arroyo did, and at one point asked defense attorney Michael Gillespie specifically about the spoon comment.  “What does that mean?” the judge asked.  ”What am I supposed to do with that?”  As Gillespie fumbled for an answer, Seeger interrupted in a stern voice: “Maybe judges need a bigger spoon.”

Arroyo, 67, entered a blind guilty plea in November to one count of honest services fraud, a move that came without an agreement with prosecutors on what sentencing recommendations should be made to the judge.  The 57-month term imposed by Seeger was above the four years in prison recommended by prosecutors on Wednesday....

Arroyo resigned his seat shortly after he was arrested in 2019 on the bribery charges. A superseding indictment later added new wire and mail fraud charges against Arroyo and also charged James T. Weiss with bribery, wire fraud, mail fraud and lying to the FBI....

The case centers on the largely uncharted world of sweepstakes machines, sometimes called “gray machines,” for which Arroyo was moonlighting as a lobbyist.  The machines allow customers to put in money, receive a coupon to redeem for merchandise online and then play electronic games like slot machines.... According to the 15-page indictment, Weiss paid bribes to Arroyo beginning in November 2018 in exchange for Arroyo’s promotion of legislation beneficial to Weiss’ company, Collage LLC, which specialized in the sweepstakes machines....

In his remarks, Seeger said it was clear that Arroyo was a devoted family man and “a pillar of his community,” but chastised him repeatedly for trying to downplay the severity of his corrupt acts. The judge also noted that while there was no evidence of any other crimes committed in the wiretapped conversations, Arroyo certainly knew the language of corruption and seemed to be “in familiar territory.”

“I need to make sure that the message gets out that public corruption isn’t worth it,” Seeger said. “For whatever reason, that message isn’t getting through.”

May 27, 2022 in Booker in district courts, Offense Characteristics, Purposes of Punishment and Sentencing, White-collar sentencing, Who Sentences | Permalink | Comments (1)

Monday, May 02, 2022

Seriously considering resentencing in high-profile Cleveland corruption case (while seriously enjoying rewatching puppet trial parody)

Article-2089091-115F2B80000005DC-234_468x273Though the initial federal sentencing of former Cleveland area county commissioner Jimmy Dimora took place a decade ago, I still recall that Dimora received one of the longest prison terms ever given for political corruption.  My 2012 post about his sentencing to 28 years in federal prison provides some background on the case, and it notes that his attorneys then argued Dimora should get less prison time due to his ailing physical condition and age.  Fast forward a decade, and this local story highlights that what's old is new again in federal sentencing for Dimora.  The article is headlined "Ex-Cuyahoga County Commissioner Jimmy Dimora’s health is failing; attorney asks for release from prison at re-sentencing," and here are excerpts:

Disgraced former Cuyahoga County Commissioner Jimmy Dimora’s health is failing, and his defense attorney asked a judge to consider releasing him from prison when Dimora is re-sentenced on corruption charges next month. Attorney Philip Kushner urged U.S. District Judge Sara Lioi to have leniency for Dimora, according to a court filing last week. Lioi must re-sentence Dimora after the judge overturned convictions on two of Dimora’s 32 charges in one of the largest corruption cases in Ohio history.

Dimora, who will turn 67 in June, has a long list of medical issues that Kushner said should result in Lioi giving Dimora significantly less prison time than the original 28-year sentence. He was convicted of engineering a pay-to-play scandal that led to an overhaul of county government in 2012. “During his 10 years of incarceration, his health has deteriorated,” Kushner wrote in the filing....

Dimora’s cohort and co-defendant, former county Auditor Frank Russo, died last month. His death came about two years after he was released from prison, in part, because of his failing health and the coronavirus pandemic.

Kushner argued for a significantly lesser sentence or release for Dimora based on his age, health and the steep punishment Lioi doled out in 2012. Dimora, he wrote, suffers from a heart defect, an intestinal disorder and an inner-ear equilibrium disease. He needs knee-replacement surgery. He suffered a stroke in prison, is diabetic and uses a wheelchair, according to the filing. Dimora contracted COVID-19 twice in prison, including once in which he became “very ill,” according to Kushner. Dimora is currently serving time in the Federal Medical Center Devens in Massachusetts, which houses seriously ill inmates.

Kushner also argued that similar felons typically serve far less time, somewhere between 12 and 15 years, not the 28 that Dimora is serving.

The 6th U.S. Circuit Court of Appeals ordered Lioi to re-examine the case in the wake of a 2016 U.S. Supreme Court decision in which the justices clarified the definition of an “official act” taken by a public official in a bribery case. The ruling meant that Lioi’s instructions to the jury were outdated and incorrect.  Lioi in March overturned two convictions that focused on contractor Nicholas Zavarella, who built an outdoor kitchen and retaining wall at Dimora’s home for free....

Federal prosecutors are expected to file their own sentencing memorandum with Lioi in the days before the hearing June 8.

Whether Dimora receives a significantly reduced federal sentence is a serious matter, perhaps even literally deadly serious for him.  But Dimora's name and his high-profile case reminded me of a not-quite-so-serious aspect of his trial.  Specifically, as this 2012 NBC News piece detailed, one news station's local coverage of the Dimora trial itself made national and international news:

It's courtroom drama crossed with "Sesame Street," as a television station barred from using cameras during a high-profile corruption trial covers the highlights with a nightly puppet show. It stars a talking squirrel "reporter" who provides the play-by-play in an exaggerated, "you won't believe this" tone.

"It's a satirical look at the trial and, again, I think we have it appropriately placed at the end of the newscast," WOIO news director Dan Salamone said Thursday. He said the puppets are in addition to the station's regular coverage of the Akron federal trial of ex-Cuyahoga County Commissioner Jimmy Dimora, the longtime Democratic power broker in Cleveland. "It's not intended in any way to replace any of the serious coverage of the trial," Salamone said.

Especially on a Monday afternoon when everyone could surely use a bit of levity, I highly recommend watching at least the first few segments of "The Puppet's Court":

Each of these segments is only about 90 seconds long, though I think there are at least 10 of them if you keep watching. I am so glad they are still on YouTube.

UPDATE FROM JUNE 8, 2022This local article reports on the new federal sentencing for Jimmy Dimora. Here is how it starts:

A federal judge on Wednesday shaved five years off former Cuyahoga County Commissioner Jimmy Dimora’s sentence for engineering a pay-to-play style of government that thrived for years. U.S. District Judge Sara Lioi handed down the new sentence during a two-hour hearing in federal court in Akron.  In 2012, Lioi sentenced Dimora to 28 years in prison.

The new sentence means Dimora’s release date is moved up to 2031. He was scheduled to be released in February 2036, a date that had included a four-year reduction for good behavior behind bars.

May 2, 2022 in Offender Characteristics, Offense Characteristics, Procedure and Proof at Sentencing, Sentences Reconsidered, White-collar sentencing | Permalink | Comments (1)

Thursday, April 21, 2022

Interesting example of federal judge rejecting white-collar plea deal as too lenient

A story this week out of Utah provides a reminder that federal judges can still have control over sentencing outcomes even in our plea bbargained justice system of pleas.  The headline of this local article captures the essence of the story: "Judge demands harsh sentence for ex-attorney accused of embezzling millions from Utah clients: Former Salt Lake City attorney Calvin Curtis faced about six years in prison as part of a plea agreement. The judge insisted on more prison time."  Here are some of the details:

A federal judge in Utah tossed out a sentencing proposal Tuesday for former Salt Lake City estate attorney Calvin Curtis, demanding that the man accused of defrauding his clients out of millions receive a harsher prison sentence.

The proposal of about six years in prison had been agreed upon by federal prosecutors and Curtis’ defense attorney ahead of the hearing. U.S. District Judge David Barlow was expected to take it into consideration before imposing a sentence.

Instead, rejecting the proposal altogether, Barlow said that as Curtis allegedly stole $12.7 million from 26 of his clients — all elderly, disabled or incapacitated — over about 13 years, the suspected fraud was “cold-blooded, premeditated and repeated.” Curtis “perverted” the law, Barlow continued, and “enriched himself on the backs of those who needed his help.”

Prosecutors have argued Curtis used that money to fund a “lavish lifestyle,” which included frequent travel, expensive gifts, tickets to basketball and football games, and pricey renovations and mortgage payments on his former mansion home and office on South Temple.  Assistant U.S. attorney Ruth Hackford-Peer said in Tuesday’s hearing that the proposed sentence of 73 months in prison was not a perfect resolution, “but it’s a good one.”

Several of Curtis’ victims attended the hearing, filling the courtroom along with family members and caregivers.... As the victims shared their stories of how devastating it has been to lose money that they would have used for various needs such as food, clothing, medicine and health care, a common refrain was for Barlow to impose the maximum sentence. “I don’t think Calvin is human,” one woman said quietly. “I feel that he’s the devil.”...

When it came time for Barlow to announce a decision, he said the proposed prison sentence — plus a restitution judgment of $12.7 million and supervised release for three years as part of Curtis’ plea agreement — was not harsh enough.  Since Curtis’ crimes were “so heinous,” Barlow said, he should receive a prison sentence at the higher end of the range that is customary in such a case, which is 10 years. The judge added that he is “not convinced” that Curtis — who is charged with wire fraud and money laundering — takes responsibility for his actions or feels remorse.

Barlow asked the attorneys for both sides to negotiate again and come up with a new sentencing proposal. A new hearing date was not immediately set....

Laura Milliken Gray, an attorney for a woman with Alzheimer’s disease from whom Curtis has admitted to embezzling more than $9 million, called Barlow’s decision a “surprise.”  Her client’s daughter-in-law, Sherry McConkey, said she is “excited” at the prospect of Curtis getting more time in prison than expected. But she added that it’s “hard” the case will go on longer, “because I just want it to be over and done with.”

April 21, 2022 in Procedure and Proof at Sentencing, Sentences Reconsidered, Victims' Rights At Sentencing, White-collar sentencing, Who Sentences | Permalink | Comments (44)

Monday, January 03, 2022

Elizabeth Holmes convicted on 4 of 11 fraud charges ... but now can be sentenced on all and more

The high-profile fraud trial of Theranos founder Elizabeth Holmes resulting in a mixed verdict, but her conviction on four counts each with 20-year maximums means that she now faces up to eight decades in federal prison. And, as regular readers know, her acquittal/non-conviction on various charges do not preclude the federal judge at sentencing from considering evidence associated with those charges.  This short New York Times piece, headlined "What happens next to Elizabeth Holmes," provides some details about what may lie ahead:

Elizabeth Holmes, the founder of the failed blood testing start-up Theranos, now awaits sentencing after being found guilty of four of 11 charges of fraud on Monday.

Ms. Holmes, 37, left the San Jose, Calif., courtroom through a side door after the verdict was read in the case, which was closely scrutinized as a commentary on Silicon Valley. She was found guilty of three counts of wire fraud and one count of conspiracy to commit wire fraud. She was found not guilty on four other counts. The jury was unable to reach a verdict on three counts, which were set aside for later.

After the verdict was read, defense and prosecution lawyers discussed plans for Ms. Holmes’s sentencing, the status of her probation and the fate of the three hung charges. Judge Edward J. Davila of the Northern District of California, who oversaw the case, said he planned to declare a mistrial on those charges, which the government could choose to retry. The parties agreed that Ms. Holmes would not be taken into custody on Monday.

A sentencing date is expected to be set at a hearing on the three hung charges next week. Ms. Holmes can appeal the conviction, her sentence or both. She will also be interviewed by the U.S. Probation Office as it prepares a pre-sentence report....

Each count of wire fraud carries up to 20 years in prison, though Ms. Holmes is unlikely to receive the maximum sentence because she has no prior convictions, said Neama Rahmani, the president of the West Coast Trial Lawyers and a former federal prosecutor.

But he said her sentence was likely to be on the higher end because of the amount of the money involved. Ms. Holmes raised $945 million for Theranos during the start-up’s lifetime and those investments were ultimately wiped out.

Given the amount of loss and other factors likely to lead to upward guideline adjustment, Holmes is sure to face a very high guideline sentencing range (perhaps a range as high as life imprisonment). But her lack of criminal history and other potential mitigating personal factors leads me to expect her to receive a below-guideline sentence. But exactly what that sentence might be (and what the parties will argue for) will be interesting to following in the months ahead.

January 3, 2022 in Federal Sentencing Guidelines, Offender Characteristics, Offense Characteristics, Procedure and Proof at Sentencing, White-collar sentencing | Permalink | Comments (11)

Thursday, December 30, 2021

"How the Economic Loss Guideline Lost its Way, and How to Save It"

I have been overdue in blogging about this recent article which shares the title of this post and was published earlier this year in the Ohio State Journal of Criminal Law.  This piece was authored by Barry Boss and Kara Kapp, and it is still very timely as we think about priority concerns for a new US Sentencing Commission (whenever it gets members).  In addition, the enduring issues discussed in this article could soon become a focal point of a very high-profile sentencing if a jury brings back fraud convictions against Elizabeth Holmes.  Here is this article's introduction:

This Article revisits a stubborn problem that has been explored by commentators repeatedly over the past thirty years, but which remains unresolved to this day.  The economic crimes Guideline, Section 2B1.1 of the United States Sentencing Manual, routinely recommends arbitrary, disproportionate, and often draconian sentences to first-time offenders of economic crimes.  These disproportionate sentences are driven primarily by Section 2B1.1’s current loss table, which has an outsized role in determining the length of an economic crime offender’s sentence.  Moreover, this deep flaw in the Guideline’s design has led many judges to lose confidence entirely in the Guideline’s recommended sentences, leading to a wide disparity of sentences issued to similarly situated economic crime offenders across the country.  Accordingly, this Guideline has failed to address the primary problem it was designed to solve — unwarranted disparities among similarly situated offenders.  Worse still, it not only has failed to prevent such unwarranted disparities, its underlying design actively exacerbates them.  In the wake of the United States Sentencing Commission’s recent launch of its Interactive Data Analyzer in June 2020, the authors have identified new evidence that this pernicious problem continues to persist.

In Part I, we review the history and purposes of the Sentencing Guidelines, generally, and the economic crimes Guideline specifically.  In Part II, we explain how the current version of the economic crimes Guideline operates in practice, the extraordinarily high sentences it recommends in high-loss cases, and the resulting overemphasis on loss that overstates offenders’ culpability.  In Part III, we analyze data made available through the Commission’s Interactive Data Analyzer and discuss our findings.  In Part IV, we offer a series of reforms designed to restore the judiciary’s and practitioners’ respect for this Guideline so that it may serve its animating purpose — to reduce unwarranted sentencing disparities among similarly situated offenders

December 30, 2021 in Federal Sentencing Guidelines, Offense Characteristics, Procedure and Proof at Sentencing, Purposes of Punishment and Sentencing, White-collar sentencing | Permalink | Comments (0)

Friday, October 08, 2021

With two defendants now convicted after trial, how steep might the "trial penalty" be in the Varsity Blues cases?

As reported in this Bloomberg piece, the first jury trial in the Varsity Blues prosecutions ended this afternoon: "Two parents accused of cheating to get their children into elite U.S. universities were found guilty of all charges, in the first trial stemming from a national college admissions scandal that ensnared dozens of families."  Here is more:

Former Wynn Resorts Ltd. executive Gamal Abdelaziz, 64, was convicted Friday of two counts of conspiracy by a Boston jury after prosecutors alleged he paid $300,000 in bribes to get his daughter into the University of Southern California as a purported basketball player.

Private equity investor John B. Wilson, 62, was convicted of conspiracy, bribery, fraud and filing a false tax return after prosecutors alleged he paid more than $1.2 million in bribes to get his son into the University of Southern California and his twin daughters into Stanford and Harvard as star athletes.

After a three-week trial, the jury deliberated for about 11 hours before rendering the verdict. Abdelaziz and Wilson will be sentenced in mid-February. For both men, the most serious charge carries a maximum prison sentence of 20 years.

The verdict is a victory for prosecutors who charged 57 parents, coaches and others for taking part in the alleged scheme, which involved doctoring entrance exam scores, faking athletic prowess and bribery to gain seats at universities. An FBI sting unveiled in March 2019 swept up several prominent figures, including “Desperate Housewives” star Felicity Huffman and former Pimco chief executive Douglas Hodge. The case unfolded as the nation debated questions of privilege and inequality.

Thirty-three of the parents have pleaded guilty, with prison sentences ranging from two weeks to 9 months. Former U.S. attorney for Massachusetts Andrew Lelling, who oversaw the case, said he hoped the dozens of jail sentences would deter would-be scammers. He acknowledged it wouldn’t change what he said was parents’ unhealthy obsession with colleges as brands.

During the trial, prosecutors alleged that both Abdelaziz and Wilson had worked with college counselor William “Rick” Singer, the admitted mastermind of the scheme. The U.S. said both paid Singer to guarantee a “bulletproof” way of getting their kids into elite colleges. Prosecutors called 14 witnesses and showed jurors scores of emails they said was proof both men knew and understood Singer’s plan....

The government never called Singer, who proved a problematic cooperator. He kept some of the money parents paid him, tipped some off about the investigation and erased about 1,500 text messages from his mobile phone. He made notes saying federal agents wanted him to “bend the truth” when drawing the parents out and “retrieve answers that are not accurate.” Lawyers for both defendants assailed Singer as a con man who duped them into believing their funds were legitimate donations going to schools or sports facilities....

Four more parents are due to go on trial next year. One father was pardoned by former president Donald Trump.

I have done numerous posts about some of the defendants who were among the first to plead guilty and received relatively short sentences in this high-profile college admissions scandal (some of those posts are linked below).  I have not closely followed some of the more recent sentencings, but the question in the title of this post highlights why I will have extra interest in how Abdelaziz and Wilson are treated by both the Justice Department and the sentencing judged.  Helpfully, DOJ has assembled here all the cases charged and sentenced in the Varsity Blues investigation.  From a quick scan, it does not appear that DOJ has sought a sentence in any of the plea cases of more than 18 months in prison; the longest imposed sentence has been nine months. 

I would guess that the DOJ sentencing recommendations for Abdelaziz and Wilson will longer than 18 months, but how much?  Does the high-profile nature of this case make it a bit less likely that DOJ will seek to go hard after these defendants, who seem like so many others save for their decision to test the government at a trial?  (The amount of money and number of kids involved in the Wilson case may the the reason DOJ will cite for a longer recommended term.)  In addition to wondering about DOJ recommendation, of course, it will be interesting to see how the sentencing judge decides to follow the requirement in 3553(a)(6) to consider "the need to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct."   It seems we have to wait until 2022 for final answers to these question, but I welcome speculation in the comments.

A few of many prior posts on other defendants in college admissions scandal:

October 8, 2021 in Celebrity sentencings, Federal Sentencing Guidelines, Procedure and Proof at Sentencing, White-collar sentencing, Who Sentences | Permalink | Comments (2)

Thursday, July 08, 2021

District Judge cites "severe remorse" among reasons to give Michael Avenatti (way-below-guideline) sentence of 30 months in federal prison

This NBC News piece reports that "Michael Avenatti, the brash attorney who had been a leading foe of then-President Donald Trump, was sentenced Thursday to 30 months in prison for a brazen, botched scheme to extort athletic apparel giant Nike out of up to $25 million." Here is more about this high-profile sentencing:

That sentence was much lower than the nine years that was the bottom of the sentencing range suggested by federal guidelines, and not anywhere close to “a substantial” prison term sought by federal prosecutors for the California lawyer.

“I alone have destroyed my career, my relationships and my life. And there is no doubt I need to pay,” Avenatti, 50, tearfully told Manhattan federal court Judge Paul Gardephe before he was sentenced. “I am truly sorry for all of the pain I caused to Mr. Franklin and others,” Avenatti said, referring to his former client Gary Franklin, an amateur basketball coach.

Avenatti’s sentencing came more than three years after he gained widespread fame, and infamy, for his bombastic representation of porn star Stormy Daniels, who received a $130,000 hush money payment from Trump’s then-personal lawyer Michael Cohen before the 2016 presidential election to keep her quiet about claims she had sex with Trump years before he ran for the White House.

Daniels is one of several former Avenatti clients that he is charged with swindling in two other separate federal prosecutions, one of which is due to begin next week in California.

Gardephe said that in the Nike scheme, “Mr. Avenatti’s conduct was outrageous.”  "He hijacked his client’s claims, and he used him to further his own agenda, which was to extort Nike millions of dollars for himself,” said the judge, who also sentenced Avenatti to three years of supervised release for the case, in which Avenatti was convicted at trial last year. “He outright betrayed his client,” Gardephe said....

But Gardephe added that Avenatti deserved a lighter sentence than the range recommended by federal guidelines — from nine years to 11-years and three months — because, the judge said that for the first time in the case, “Mr. Avenatti has expressed what I believe to be severe remorse today.”

The judge also cited the brutal conditions in which Avenatti was kept for several months in a Manhattan federal prison after his 2019 arrest. And Gardephe sharply noted, in justifying the lower-than-recommended sentence, how federal prosecutors did not criminally charge Geragos in spite of what they have said was his active participation with Avenatti in the shakedown.

The judge ordered Avenatti, who remains free on bond, to surrender on Sept. 15 to begin his sentence, which Gardephe recommended be served in at the federal prison camp in Sheridan, Oregon. Avenatti’s lawyers had asked for a sentence of just six months....

At his trial next week, Avenatti is accused of crimes that include defrauding clients out of millions of dollars. One of those clients was a mentally ill paraplegic. Avenatti next year is due back in Manhattan federal court to be tried on charges related to allegedly swindling Daniels, out of $300,000 in proceeds for a book she wrote.

July 8, 2021 in Federal Sentencing Guidelines, Offender Characteristics, Offense Characteristics, White-collar sentencing | Permalink | Comments (8)

AGAIN: You be the judge: what sentence for Michael Avenatti (and do the guidelines merit any respect)?

IA3T7J6NQRFSHDKM6SW26QQ5JAUP AGAIN:  I posted this discussion of a notable scheduled sentencing last month just before Michael Avenatti secured a short postponement.  This new Wall Street Journal article, headlined "Michael Avenatti Faces Sentencing for Trying to Extort Millions From Nike," provides an updated review of this high-profile federal sentencing now scheduled for today.  In addition to the prior posting, folks may want to check out the interesting comments from various folks that it generated last month.

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It has been a while since I have done a "you be the sentencing judge" post, but a high-profile fallen lawyer provides juicy grist for this mill.  Specifically, as two recent postings at Law & Crime highlight, Michael Avenatti's upcoming sentencing presents a notable set of facts and arguments for SDNY US District Judge Paul Gardephe:

Michael Avenatti Seeks Light Prison Sentence Because His ‘Epic Fall and Public Shaming’ Are Punishment Enough

Feds Seek ‘Very Substantial’ Prison Term for Disgraced Lawyer Michael Avenatti

Valuably, these two postings include the extended sentencing memoranda filed by the parties in this case, and the second posting summarizes the terms of the sentencing debate (with some of my emphasis added):

Scoffing at the one-time celebrity lawyer’s claim that his “epic fall and public shaming” should be taken into account at sentencing, federal prosecutors urged a judge to deal Michael Avenatti a “very substantial” prison sentence for attempting to extort Nike out of millions of dollars by threatening to expose their corruption scandal.

Quoting the probation office, prosecutors noted that Avenatti “often put himself forth as a champion for the Davids of the world, facing off with those Goliaths who would bully the small, the weak, the victimized.”

“And it was precisely this reputation, and the enormous influence that the defendant wielded on the national stage and across media platforms, that he weaponized,” Assistant U.S. Attorney Matthew Podolsky wrote in a 19-page sentencing brief on Wednesday night. “He used his skills as a lawyer and his power as a media figure not to benefit his client, but instead to threaten harm in an effort to extract millions of dollars from a victim, which, while sophisticated, [Avenatti] believed would be forced into acquiescing secretly to his demands.”

Once a fixture of the cable TV commentary rounds, Avenatti previously depicted his prosecution as another David-versus-Goliath fight, pitting him against the combined might of the Nike corporation and the Trump administration. Southern District of New York prosecutors rejected that, and a federal jury convicted him on all counts in February 2020.

Earlier this month, Avenatti’s defense attorneys Scott A. Srebnick and E. Danya Perry argued that a six-month maximum sentence would be enough for their client. They also said the court could take “judicial notice” that Avenatti’s well-documented “epic fall […] played out in front of the entire world.” Federal prosecutors found that sort of sentence would be far too light, and though they did not propose another number, their sentencing memorandum leaves a few clues into their thinking.

The probation office proposed an eight-year sentence, which dips below the 11.25-to-14-year guideline range.  “While the government, like the probation office, believes that a below-guidelines sentence would be sufficient but not greater than necessary to serve the legitimate purposes of sentencing, the government asks this court to impose a very substantial sentence,” prosecutors wrote....

During the trial, prosecutors played a tape for jurors that they called a picture of extortion. “I’ll go take $10 billion off your client’s market cap,” Avenatti was seen warning attorneys for Nike in the videotape, referring to capitalization. As the jury found, Avenatti had been talking about confidential information he learned about Nike from his former client Gary Franklin, an amateur basketball coach.  Avenatti threatened to expose the embarrassing information relating to the corruption scandal unless the Nike paid $15 million—”not to Franklin, but directly to the [Avenatti] himself,” prosecutors noted. According to the memo, the deal represented 10 times more than Avenatti asked Nike to pay Franklin, and it would have resolved his client’s claims against Nike....

Franklin wrote separately to the U.S. District Judge Paul Gardephe harshly criticizing Avenatti. “Mr. Avenatti quickly abused that trust when he announced on Twitter, without my knowledge and without my consent, that he would be holding a press conference to discuss a scandal at Nike that ‘involved some of the biggest names in college basketball,'” Franklin wrote in a two-page victim impact statement. “I never imagined that Mr. Avenatti would proceed to post on Twitter details of the information I had relayed to him as part of our attorney-client privileged discussions, including the names of the players I coached.

Franklin is not alone among Avenatti’s spurned former clients. Avenatti continues to face another federal prosecution in New York accusing him of defrauding Stormy Daniels in a book deal, plus a case in California alleging tax offenses and other misconduct.

There are so many elements to both the Avenatti crime and his background that may (or many not) be considered important in his upcoming sentencing.  But, as my post title and emphasis seek to highlight, there is seemingly a consensus that the federal sentencing guidelines come nowhere close to recommending a proper sentence.  It is, of course, not especially surprising when a criminal defendant requests a sentence way below the applicable guideline range.  But here, notably, both the probation office and seemingly federal prosecutors also believe a proper sentence should be many years below the bottom of the applicable guideline range.

So I sincerely wonder, dear readers, what sentence you think would be, in the words of the prosecutors, "sufficient but not greater than necessary to serve the legitimate purposes of sentencing"?  Do the guideline merit any respect in this analysis?

July 8, 2021 in Celebrity sentencings, Procedure and Proof at Sentencing, Purposes of Punishment and Sentencing, White-collar sentencing, Who Sentences | Permalink | Comments (11)

Tuesday, May 04, 2021

Notable NY politician gets furlough from BOP as he is "considered for home confinement"

When I saw the headline of this new New York Post piece, "Sheldon Silver released early on furlough after less than a year in prison," I thought the paper was misusing a term because furloughs from federal prison seem extraordinarily rare. But the story explains it has the right term:

Disgraced former New York Assembly Speaker Sheldon Silver has been sprung from federal prison early on furlough — while he awaits a decision from the agency on whether he can serve out the remainder of his term in home confinement, a report said Tuesday.

Silver — who has served less than a year of his 6 1/2-year sentence — was cut loose from Otisville Prison, in Orange County, New York, and released to his home while awaiting the decision, a source familiar with the matter told the Associated Press.

The 77-year-old crooked former pol was released under DOJ’s expanded powers to grant inmates release amid the coronavirus pandemic, according to the report. In a statement, the Bureau of Prisons said Silver is still “designated” to Otisville Prison, but added that it has the power to transfer inmates to their home on furlough.

“We can share that the Bureau of Prisons (BOP) has authority to transfer inmates to their home on furlough for periods of time while they may continue to be considered for home confinement designation,” a spokesperson said.

The BOP recently notified prosecutors in the Southern District of New York that it was considering cutting Silver loose on home confinement, a spokesperson for the district told The Post. n an email response sent yesterday, the prosecutor’s office — which secured a guilty verdict against Silver for corruption-related crimes during his run as an Albany power broker — stressed that it ardently opposes the move, the spokesperson said.

In a memo last year, former Attorney General Bill Barr gave the director of BOP expanded discretion to release vulnerable inmates from federal lockups amid the pandemic. BOP officials need to take into account a host of factors when determining if an inmate qualifies for home confinement, including “age and vulnerability of the inmate to COVID-19,” according to the memo. In addition, a BOP medical official is supposed to sign off on home confinement releases based on risk factors for a specific inmate, according to the memo....

Silver was sentenced last summer after avoiding lockup for more than five years after he was first convicted. At his sentencing, Judge Valerie Caproni admonished the crooked politician, who was convicted of illegally using his office to benefit two real estate developers in exchange for cash.

“This was corruption pure and simple,” Judge Caproni told the disgraced ex-speaker, whom she had already sentenced twice. “The time, however, has now come for Mr. Silver to pay the piper,” Caproni added.

Because there is always much mystery around the working of the BOP, I have no notion of whether any lower-profile prisoners might get similar treatment.

May 4, 2021 in Celebrity sentencings, Impact of the coronavirus on criminal justice, Prisons and prisoners, White-collar sentencing, Who Sentences | Permalink | Comments (3)

Friday, April 30, 2021

Great example of clemency leading to more compassion ... in the form of compassionate release thanks to FIRST STEP Act reforms

I am not sure if anyone is trying to make a comprehensive list of the wide array of factors that federal courts have referenced in granting sentence reductions under the (so-called compassionate release) statutory provisions of 18 U.S.C. § 3582(c)(1)(A) ever since the FIRST STEP Act allowed federal courts to directly reduce sentence without awaiting a motion by the Bureau of Prisons.  Thankfully, district and circuit court have consistently recognized that, in the word of the Second Circuit in US v. Brooker, 976 F.3d 228 (2d Cir. 2020), the "First Step Act freed district courts to consider the full slate of extraordinary and compelling reasons that an imprisoned person might bring before them in motions for compassionate release."  And, via this new Law360 article, headlined "Ex-Detroit Mayor Ally Released From Prison Years Early," I saw a new opinion with a particularly notable reason given for such a reduction.  Here  are the basics and context from the article:

A former contractor and co-defendant to ex-Detroit Mayor Kwame Kilpatrick on Thursday was granted compassionate release from prison after serving eight years of a 21-year sentence over a municipal bribery and kickback scheme, with the judge citing health problems and the fact Kilpatrick had his sentence commuted. U.S. District Judge Nancy Edmunds reduced the sentence for Bobby Ferguson, 52, to time served, noting his underlying medical conditions that place him at grave risk were he to contract COVID-19, and the fact that Kilpatrick — the much more culpable defendant in the case — in January was granted a reprieve by former President Donald Trump.

Judge Edmunds said at the time of the original sentencing there were "serious differences" between Ferguson's conduct and that of Kilpatrick — the mastermind of the pay-to-play scheme to exchange city business for bribes and kickbacks.  That Ferguson is left facing a prison term more than twice as long as Kilpatrick served constitutes an "extraordinary and compelling" reason to grant Ferguson compassionate release, she said.  "He was not the driver of the bus; that was Mr. Kilpatrick, where the power resided," Judge Edmunds said.

Michigan federal prosecutors had strongly opposed granting Ferguson compassionate release, calling Kilpatrick's commutation "wrongful" and highlighting Ferguson's earlier convictions for assault and other alleged misdeeds.  The government also disputed that Ferguson's hypertension, diminished lung capacity due to an injury and high cholesterol merited an early release.   The government further argued that Ferguson had not exhausted his administrative remedies with the Bureau of Prisons, since he had only petitioned the prison warden for compassionate release based on his health issues and not the disparity in sentence that resulted from Kilpatrick's release.

However, Judge Edmunds said she was persuaded by other court decisions in finding that so-called "issue exhaustion" is not required for compassionate release. She also noted his prior violent crimes occurred decades ago, and that Ferguson hasn't displayed any such "hotheadedness" while incarcerated.

The full 11-page ruling this case is available at this link, and here is a key passage:

Defendant now faces the prospect of a period of incarceration much longer than a more culpable co-defendant.  At the time of sentencing, the Court noted there were “serious differences” between Defendant’s conduct and that of Mr. Kilpatrick. (ECF No. 493, PgID 16285.)  More specifically, Defendant was not an elected official and had been charged with and convicted of a substantially smaller number of charges. (Id.) The Court therefore concluded that Defendant deserved a shorter sentence than Mr. Kilpatrick and ultimately sentenced Defendant to a term of imprisonment 75% as long as Mr. Kilpatrick’s sentence. That Defendant now faces a period of incarceration more than twice as long as the time Mr. Kilpatrick served is both extraordinary and compelling.  See United States v. Sapp, No. 14-cr-20520, 2020 U.S. Dist. LEXIS 16491, at *5 (E.D. Mich. Jan. 31, 2020) (defining “extraordinary as beyond what is usual, customary, regular, or common” and “a compelling reason as one so great that irreparable harm or injustice would result if the relief is not granted”) (internal quotation marks and citation omitted).

The government argues that avoiding unwarranted sentence disparities, one of the § 3553(a) factors, should not be part of this step of the analysis and that taking this into account would contravene the interest in finality of sentences.  The Sixth Circuit has held, however, consistent with all other circuit courts that have addressed this issue, that district courts have “full discretion” to define extraordinary and compelling reasons. See Jones, 980 F.3d at 1109; see also Brooker, 976 F.3d at 237 (noting that “a district court’s discretion in this area — as in all sentencing matters — is broad”). The only statutory limit on what a court may consider to be extraordinary and compelling is that rehabilitation alone is not sufficient.  See 28 U.S.C. § 994(t).  That particular circumstances may also factor into the Court’s analysis under § 3553(a) has no bearing on whether they can be considered extraordinary and compelling.  And, here, the disparity only arose recently due to the unique circumstance of a co-defendant being granted a Presidential commutation.

While the finality of sentences is an important principle, the compassionate release provision of § 3582(c) “represents Congress’s judgment that the generic interest in finality must give way in certain individual cases and authorizes judges to implement that judgment.”  See United States v. McCoy, 981 F.3d 271, 288 (4th Cir. 2020) (internal quotation marks and citation omitted).  The Court finds this to be an appropriate case in which to do so. Not only has Defendant served a slightly longer term of imprisonment than a more culpable co-defendant, but his motion comes during an unprecedented global pandemic and Defendant has an increased vulnerability to the virus.

April 30, 2021 in Clemency and Pardons, FIRST STEP Act and its implementation, Sentences Reconsidered, White-collar sentencing, Who Sentences | Permalink | Comments (1)

Saturday, April 24, 2021

Third Circuit panel explores curious loss calculations in federal fraud guidelines

A helpful reader made sure I did not miss the interesting Third Circuit panel ruling this past week in US v. Kirschner, No. 20-1304 (3d Cir. April 22, 2021) (available here), discussing loss calculations under the fraud guidelines. There are lots of element to the Kirschner opinion, but the introduction provides an effective overview:

In 2018, Jonathan Kirschner pleaded guilty to one count of impersonating an officer acting under the authority of the United States and one count of importing counterfeit coins and bars with intent to defraud.  At sentencing, the District Court applied to Kirschner’s sentence three enhancements pursuant to the U.S. Sentencing Guidelines — a 2-level enhancement because Kirschner’s fraud used sophisticated means; another 2-level enhancement because Kirschner abused a position of public trust to facilitate his crimes; and a 22-level enhancement because the “loss” attributable to his scheme was greater than $25 million but less than $65 million, even though it grossed only about one one-thousandth of that.

Kirschner appeals the District Court’s judgment of sentence and challenges the three enhancements it applied.  For the reasons that follow, we will vacate Kirschner’s sentence and remand for resentencing.  While the District Court was well within its discretion to apply the abuse-of-trust and use-of-sophisticated-means enhancements, we conclude it clearly erred in applying the 22-level enhancement for loss, and we cannot say that the error was harmless.

I have always thought the federal fraud guideline deeply misguided due to commentary basing offense severity calculations on the greater of intended or actual loss (and the guideline is also deeply problematic for placing extreme emphasis on "loss" and by only requiring proof by a preponderance).  In this case, a focus on intended loss meant a guy who netted only about $30,000 selling fake goods when caught was sentenced as if he had netted $36 million! 

Ultimately, the panel here concluded intended loss was not subject to the "deeper analysis" needed to justify the district court's calculation.  But, for those following broader debates over the basic validity of guideline commentary, the panel had this interesting aside:

Under a Guidelines comment, a court must ... identify the greater figure, the actual or intended loss, and enhance the defendant’s offense level accordingly.  Only this comment, not the Guidelines’ text, says that defendants can be sentenced based on the losses they intended.  By interpreting “loss” to mean intended loss, it is possible that the commentary “sweeps more broadly than the plain text of the Guideline.”  United States v. Nasir, 982 F.3d 144, 177 (3d Cir. 2020) (en banc) (Bibas, J., concurring).  But Kirschner assumes the comment is correct, and so we will too.

This kind of aside reinforces my sense — or perhaps I should just say my hope — that it is only a matter of time before the US Supreme Court will consider, in some context, the validity of guideline commentary that arguably “sweeps more broadly than the plain text" of the guideline.

April 24, 2021 in Federal Sentencing Guidelines, Offense Characteristics, Procedure and Proof at Sentencing, White-collar sentencing | Permalink | Comments (0)

Wednesday, April 14, 2021

Infamous Ponzi schemer Bernie Madoff dies in prison after spending his final dozen years behind bars

As reported in this Fox Business piece, headlined "Bernie Madoff, mastermind of vast Ponzi scheme, dies in federal prison at age 82," an infamous white-collar offender passed away behind bars today.  Here are the basics:

Bernie Madoff, the notorious architect of the biggest investment fraud in U.S. history, has died at age 82.

Madoff was serving a 150-year sentence at the federal medical care center in Butner, North Carolina, where his attorney said he was being treated for terminal kidney failure. Last year, Madoff's attorney filed court papers seeking the 82-year-old's release during the coronavirus pandemic, saying he suffered from end-stage renal disease. The request was denied....

A decades-long force on Wall Street, Madoff shocked the world when he pleaded guilty in 2009 to running a vast Ponzi scheme that prosecutors said swindled thousands out of their life savings. The scheme began in the early 1970s, and by the time Madoff was arrested in December 2008, had defrauded as many as 37,000 people in 136 countries out of up to $65 billion.

His victims included the famous – film director Steven Spielberg, actor Kevin Bacon and Nobel Peace Prize winner Elie Weisel – as well as ordinary investors.

Madoff said he started the fraud, in which he appeared to deliver steady returns to clients, but was actually using money from new investors to pay off existing shareholders, in the 1990s because he felt "compelled" to give investors solid returns despite the recession and weak stock market. (Prosecutors contend he started defrauding investors much earlier)....

Prior to his downfall, Madoff was viewed as a self-made and respected figure among financial professionals as the head of the seemingly successful Bernard L. Madoff Investment Securities firm. He also served as the chairman of the Nasdaq Stock Market in 1990, 1991 and 1993.

In addition to being sentenced to the maximum 150 years in prison, Madoff and his family took a major financial hit: A judge issued a $171 billion forfeiture order in June 2009 requiring the disgraced financier to give up his interests in all property, including real estate, investments, car and boats. Under the arrangement, the government also obtained his wife's interest in all property, including $80 million that she claimed belonged to her, leaving Ruth Maddoff with $2.5 million in assets.

The decline and fall of Madoff also took a toll on his family. The oldest of his two sons, Mark Madoff, died by suicide on the second anniversary of his father's arrest in 2010. His other son, Andrew, died from cancer at age 48 in 2014. Mark Madoff's suicide prompted his mother, Ruth Madoff, to cut off all communications with her husband....

Meanwhile, Madoff's younger brother, who helped run the business, was sentenced to 10 years in prison after pleading guilty to one count of falsifying false records and one count of conspiracy to commit securities fraud. He was released from federal custody last year. "You know there hasn’t been a day in prison that I haven’t felt the guilt for the pain I caused on the victims and for my family," he told The Washington Post in 2020 when his attorney asked for his compassionate release. He said his dying wish was to reconcile with his grandchildren and explain his actions.

I will be interested to see if anyone has anything especially new or interesting to say, circa 2021, about Madoff's crimes and federal punishment.  In addition to linking to some prior posts below, I will be content here to just note that Madoff's lawyer back in June 2009 requested a "prison term of 12 years — just short of an effective life sentence."  Madoff died almost exactly 12 years since the time of that request, though he had served less than 10% of the 150-year prison sentence that Judge Chin gave him back in June 2009.

Some of many prior posts about his initial sentencing:

Some prior posts about his request for compassionate release:

April 14, 2021 in Celebrity sentencings, Prisons and prisoners, White-collar sentencing | Permalink | Comments (4)

Friday, January 29, 2021

In high-profile sentencing, victim input and collateral consequences push judge away from prison term for misconduct by former FBI attorney

This lengthy Politico piece, headlined "Ex-FBI lawyer spared prison for altering Trump-Russia probe email," reports on an interesting high-profile federal sentencing today in DC.  Here are excerpts, with a bit of commentary to follow:

The only person charged in the Justice Department's investigation into the origins of the probe of former President Donald Trump's 2016 campaign and its ties to Russia was spared prison time for altering an email used to support a surveillance application.  Former FBI attorney Kevin Clinesmith, 38, received the sentence of 12 months probation and 400 hours community service from U.S. District Court Judge James Boasberg Friday during a video hearing.

Clinesmith admitted that in June 2017 he sent an altered email to an FBI agent that indicated a target of court-ordered FBI surveillance, former Trump campaign adviser Carter Page, was "not a source" for the Central Intelligence Agency. The statement, passed along as the FBI was applying for a third extension of surveillance of Page, made Page's actions seem more suspicious by downplaying his past cooperation with the CIA.

Clinesmith insisted that he thought the statement was true at the time and only altered the message to save himself the hassle of procuring another email from the CIA. Prosecutors contested that claim, arguing that the FBI lawyer intended to mislead his colleague, but Boasberg sided with the defense on that point.  "My view of the evidence is that Mr. Clinesmith likely believed that what he said about Mr. Page was true," Boasberg said. "By altering the email, he was saving himself some work and taking an inappropriate shortcut."

While Trump and his GOP allies have suggested that Clinesmith was engaged in a political vendetta against Trump, Boasberg noted that a Justice Department inspector general investigation failed to establish that political considerations played a role in Clinesmith's actions or numerous other errors and omissions that impacted filings with the Foreign Intelligence Surveillance Court....

Clinesmith pleaded guilty last August to a felony false statement charge in a plea deal with John Durham, the prosecutor then-Attorney General William Barr tapped in 2019 to investigate the origins of the Trump-Russia probe. Barr formally designated Durham as a special counsel last fall, in an apparent bid to complicate any attempt by a new administration to shut down Durham's inquiry.

Prosecutors argued that Clinesmith's misconduct was so serious that he deserved between about three and six months in prison. Clinesmith's lawyers asked that he not receive any prison time.  The maximum sentence on the false statement charge is five years in prison, although judges usually sentence in accord with federal guidelines that called for Clinesmith to serve between zero and six months in prison. "The defendant's criminal conduct tarnished and undermined the integrity of the [Foreign Intelligence Surveillance Act] program," Assistant U.S. Attorney Anthony Scarpelli told the court.  "It has lasting effects on DOJ, the FBI, the FISC, the FISA process and trust and confidence United States citizens have in their government...The resulting harm is immeasurable."

Clinesmith's lawyer Justin Shur called his client's actions "inexcusable," but said they were "aberrations" in a life of dedicated public service.  He also said they played a relatively small part in the overall surveillance process and the broader probe. "There were many people involved in these applications and many mistakes that were made," Shur said....

Clinesmith also addressed the court, expressing contrition and describing his career as essentially destroyed by his misconduct and the ensuing prosecution. "I am fully aware of the significance of my actions and the crucial error in judgment I made," the lawyer said. "I let the FBI, the Department of Justice, my colleagues, the public and my family down. I also let myself down.  I will live with the consequences and deeply-held feeling of regret, shame and loss caused by it for the rest of my life."

While prosecutors urged the judge to send Clinesmith to prison to send a message to others in government not to try something similar, Boasberg said he believed that message had already been sent. He noted that Clinesmith has lost his job, may be disbarred and may never be able to work in the national-security field again. "He went from being an obscure government lawyer to standing in the eye of a media hurricane," the judge said. "He's not someone who ever sought the limelight or invited controversy other than by his criminal action here....Anybody who's watched what Mr. Clinesmith has suffered is not someone who would readily act in that fashion."

The 90-minute sentencing hearing also featured an impassioned speech from Page, in which the energy industry analyst complained that his life was also turned upside down by the media firestorm that followed public disclosure that he was a focus of the FBI probe into potential Russian influence on the Trump campaign. "My own personal life has been severely impacted," Page said. "I was frequently harassed on the street and even under the street such as in the Washington metro beneath the courthouse....It was deadly serious. At the time I received many death threats as a 'traitor.'"

However, Page did not ask for imprisonment for Clinesmith. "I hope the defendant can get back to his family as soon as you deem appropriate," the former Trump campaign adviser told the judge. That seem to strike a chord with Boasberg, who mentioned twice during the hearing that Page wasn't seeking prison for the ex-FBI lawyer.

The politics surrounding this case account for why this matter will be covered in many newspapers, but I am drawn to this tale as a notable sentencing story.  Tellingly, while federal prosecutors argued that some prison time was needed, the person victimized by the offense (Carter Page) had the magnanimous and impactful view that the defendant need not serve any prison time.  In addition, the federal district judge here recognized, as should every sentencing judge in every case, that the defendant was already subject to a wide array of significant and persistent collateral consequences which function to punish and deter in ways that transcend a short period in prison.

January 29, 2021 in Celebrity sentencings, Procedure and Proof at Sentencing, Purposes of Punishment and Sentencing, Victims' Rights At Sentencing, White-collar sentencing | Permalink | Comments (3)

Wednesday, September 30, 2020

Heiress involved in NXIVM group gets way-above-guideline sentence

I have not really been following the NXIVM saga at all, but today brought a first federal sentencing case that caught my attention. This local article, headlined "Clare Bronfman receives more than six years for NXIVM crimes Federal judge exceeds sentence prosecutors had been seeking," provides these details:

Heiress Clare Bronfman was sentenced Wednesday to six years and nine months in federal prison for crimes related to her leadership role in NXIVM. She was taken directly into federal custody at the end of the court proceeding.

The sentence was handed down to the 41-year-old daughter of late Seagram's tycoon Edgar Bronfman in a Brooklyn courtroom after several victims related their painful experiences dealing with the well-heeled backer of Keith Raniere’s cult-like organization.

A number of former NXIVM members delivered victim impact statements to Senior U.S. District Judge Nicholas Garaufis. One of those women was Barbara Bouchey, a former girlfriend of Raniere's who faced years of retaliation by NXIVM after she left the group more than a decade ago. She called Garaufis' sentence justice served: “When I heard him say 81 months, I was speechless,” Bouchey said.

Bronfman, who has homes in Clifton Park and Manhattan, was anticipating a sentence of just 21 to 27 months in prison under sentencing guidelines for her guilty plea to conspiracy to conceal and harbor illegal aliens for financial gain, and fraudulent use of identification.

Garaufis had made it clear he was considering an "above guidelines" punishment. Her recently hired attorneys, Ronald S. Sullivan Jr. and Duncan Levin, have asked for three years of probation. Federal prosecutors in Brooklyn’s Eastern District have asked for a five-year prison sentence. Garuafis went beyond both requests. He also levied a $500,000 fine on Bronfman.

Prosecutors said Bronfman, who was in NXIVM alongside her older sister, Sara Bronfman-Igtet, used her wealth to recruit immigrants – usually women – into NXIVM-related groups under the idea that they would get a scholarship or work. But Bronfman instead got a work-force of recruits desperate to earn a living and who were dependent on her and NXIVM to stay in the country.  Prosecutors have said Bronfman helped Raniere target the company’s perceived enemies, which included members of the organization who defected....

Raniere, 60, a longtime Halfmoon resident known in NXIVM as “Vanguard,” was convicted at trial last year of all charges, which included sex trafficking, forced labor conspiracy and racketeering charges that included underlying acts that included child exploitation, possession of child pornography, identity theft, extortion, fraud and other crimes.  He faces the possibility of life in prison at his sentencing on Oct. 27.

This New York Times article reporting on the sentencing notes why this case may end up in the Second Circuit: "Ronald Sullivan, a lawyer for Ms. Bronfman, said he would appeal the sentence, calling it an 'abomination'."

September 30, 2020 in Celebrity sentencings, Federal Sentencing Guidelines, White-collar sentencing | Permalink | Comments (1)