Overly strict Federal Sentencing on White Collar Fraud cases should be Reformed

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23rd Oct 2015

As criminal defense lawyers who represent individuals accused of white collar and fraud cases, we often object to the significantly severe sentences suggested by the federal sentencing guidelines, especially for non-violent, first time offenders.  Thesentences are far too long and often unnecessary to achieve any legitimate goals of sentencing.  The length of these sentences can parallel or exceed violent offenses.

The US Sentencing Commission has issued proposed changes to the Sentencing Guidelines that begin to address some of these concerns.  Although many experienced defense attorneys would argue that they do not go nearly far enough.  The Commission meets tomorrow to vote on the proposed amendments.

U.S.  Sentencing Guideline 2B1.1 is the primary sentencing guideline used to begin the process of determining the proper sentencing range for a variety of crimes that are known as “white collar crimes.” These crimes are typically economic crimes that involve fraud, theft, embezzlement and a whole list of other crimes that involve fraud or deceit.

Defense attorneys, legal scholars, and some judges have long complained that 2B1.1 is “fundamentally broken.” These criminal justice professionals charge that the over-application of a myriad of enhancements available under the Guideline expose many first time offenders to ever-increasing, and often unnecessarily long, prison sentences.  Many of the enhancements can [arguably] involve the doubling up of aggravating factors.

In November 2014, the “American Bar Association Criminal Justice Section Task Force on the Reform of Federal Sentencing Guidelines for Economic Crimes” proposed a complete overhaul of 2B1.1.  Essentially, the Task Force strongly recommended a reduction of a defendant’s offense level based on a level of culpability and the impact the crime(s) had on the victim.  The Task Force made it clear that it believed sentences should be capped for some offenders convicted of less serious crimes.

This past January, the U.S. Sentencing Commission issued a “news release” in response to the Task Force’s report.  In that release, Commission Chairperson Judge Patti B. Saris said, “We have heard criticism from some judges and members of the bar that the fraud guideline may be fundamentally broken, particularly for fraud on the market cases.  Based on our extensive examination of data, we have not seen a basis for finding the guideline to be broken for most forms of fraud, like identity theft, mortgage fraud, or healthcare fraud, but this review has helped us to identify some problem areas where changes may be necessary … We believe our proposed amendment will help make the guideline clearer, more reflective of practical and legal realities, and more useful for courts and litigants.”

While the Commission did not embrace the broad changes recommended by the ABA Task Force, it did suggest some significant changes.  In a January 14 post on the White Collar Alert legal blog, Erin C.  Dougherty cited these suggested changes:

• A change of the ambiguous and seemingly all-inclusive definition of intended loss: the pecuniary harm “that the defendant purposely sought to inflict” as inferred from all the available facts;

• A slight reduction in the enhancements for the number of victims;

• The addition of an enhancement where the victim suffered substantial hardship;

• A revision of the enhancement for use of “sophisticated means,” such that it will only apply if the defendant’s conduct is “sophisticated,” rather than offense as a whole; and

• A special rule for determining the Guidelines range in fraud on the market cases, which will be based on the defendant’s gain from a fraud, rather than loss, which courts have had difficulty calculating.

As might be expected, the U.S.  Justice Department opposed the proposed changes.  In a letter delivered at a March 12 hearing conducted the Commission, the DOJ said any reduction of current sentencing options would be contrary to “overwhelming societal consensus that exists around these offenses.” Some Commission members were not impressed with this argument.

“I found it singularly unpersuasive,” Circuit Judge William Pryor, a commissioner from the 11th U.S.  Court of Appeals, said at the hearing.

Written testimony by University of Missouri Law School Professor Frank O. Bowman, III not only starkly contrasted to that provided by the DOJ but chided the Commission for not going far enough with its suggested changes:

“[F]or the last decade or so, the loudest complaint about §2B1.1 has been that it prescribes sentences which, at least for some defendants, are far too high.  In particular, many observers have argued that for some high-loss defendants the guidelines now are divorced both from the objectives of Section 3553(a) and, frankly, from common sense …

“Accordingly, one would have expected the proposed 2015 Amendments to §2B1.1 to concentrate on the class of high-loss offenders the Commission seems to agree are over-punished by the guidelines.  Curiously, however, the proposed amendments—though in several cases laudable for other reasons—would have virtually no material impact on the guidelines ranges for very high loss offenders, while producing [only] modest guidelines reductions for significant numbers of low-to-moderate-loss offenders.”

Most criminal defense attorneys’ share the views of Professor Bowman Congress have until November 1 to act on the Commission’s suggested changes, and if it fails to do so, the changes will take effect.  The problem inherent in these suggested changes is that they will not always produce a lower sentencing range because “loss” remains the primary consideration in identity theft, mortgage fraud and healthcare fraud cases.

We, therefore, agree with James Felman, a Florida attorney and member of the ABA Task Force, who said: “These changes don’t go nearly as far as would have liked.”