Professor Doug Berman of the esteemed Sentencing Law & Policy blog discusses a recent decision of the Second Circuit in U.S. v. Canova (available below) about how to evaluate the reasonableness of a sentencing court’s decision to grant a downward departure from the Sentencing Guidelines.  The prosecution involved Medicare fraud, and among the grounds for granting the lower sentence was the defendant’s record of community service and the fact that he paid restitution   In two sentencings, the defendant received probation each time. The question the appellate court grapples with, but ultimately avoids, is the standard to be used for assessing the size of the departure — should the analysis be in an absolute or relative sense.  The Second Circuit described the two approaches this way:

We have not set forth any particular method for assessing the extent of a departure in order to determine its reasonableness.  Several methods can plausibly be advanced, grouped within either of two categories–an absolute assessment or a relative assessment. An absolute assessment would gauge the extent of the departure, measured in levels, without regard to the starting point from which the departure was made. Such an assessment could consider only the number of levels the departure spans–in the pending case, 15. A relative assessment would gauge the extent of the departure either by the increase or decrease in the resulting prison time (from the prison time for the adjusted offense level) or by the percentage of increase or decrease of either prison time or levels. Using a relative assessment based on prison time would require noting either the tops of the original and new ranges or the bottoms of such ranges . . .

The court leaned toward the relative assessment, finding that it was likely to be more informative than looking at the departure in absolute terms.  Having set forth this analysis, the Second Circuit then sent the case back to the district court to consider the impact of the defendant’s intended loss on the reasonableness of the departure.  The appellate court was troubled by the fact that the original sentence of probation was reimposed in a second proceeding even though the intended loss from the offenses was found to be $5 million and the district court’s initial assessment was a zero loss, which caused the first remand.  The Second Circuit stated:

Transcending the numbers in this case, however, is the blunt fact that the effect of the departure and the resulting sentence was to treat Canova as though he had intended to cause no loss at all.  Canova’s sentence was probation when the District Judge understood that no actual or intended loss had occurred, and it remained probation even after this Court’s remand made clear that Canova had caused some actual loss and had intended a loss of $5 million.  Although unusual circumstances might arise in which it would be reasonable to impose the same sentence after a significant aggravating (or mitigating) factor had been taken into consideration, such an outcome would require a persuasive justification. Since the District Judge sentenced here without any consideration of the $5 million loss that Canova intended, a departure that results in the reimposition of the same sentence appears to be unreasonable.

(ph)

Download us_v_canova_opinion_may_8_2007.pdf

A press release of the DOJ reports that "[t]he former director of the U.S. Virgin Islands Department of Planning and Natural Resources (DPNR) Division of Environmental Protection has been sentenced to four years in prison for conspiring to defraud the Virgin Islands government of approximately $1.4 million."

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Carol D. Leonnig of the Washington Post reports on developer Douglas Jemal being given probation for a wire fraud conviction. This appears to be an important sentencing decision as the judge decided to give probation despite prosecution arguments for jail time.  The judge’s rationale, as provided in the Washington Post article, is that "he compared two disparate groups in reaching his decision: convicted felons-turned-cooperators for whom prosecutors urge reduced sentences, and community members who attested that Jemal’s generosity changed their lives."

It is good to see a judge recognizing that an individual who decides to go to trial should not be punished simply by making this choice. If cooperation can yield probation, then perhaps asserting one’s constitutional right to a jury trial should also allow for probation.  The judge also shows consideration of beneficial qualities that warrant a reduction in sentence. Some may argue that this is exactly why the sentencing guidelines need to be strictly enforced.  Others, however, will note that courts need this discretion to consider the individual defendant being sentenced (see my piece in the Yale PocketPart here)

(esp)(w/a hat tip to individual who alerted me to this article)

Former currency trader Martin Armstrong received the maximum five-year sentence for his plea to one count of conspiracy to commit securities and commodities fraud.  Armstrong could not receive a longer sentence because the conspiracy statute at the time of the offense limited the prison term to five years.  Armstrong was accused of defrauding a number of clients of his firm, Princeton Economics International, of hundreds of millions of dollars through the sale of so-called "Princeton Notes," promissory notes that the government described as a Ponzi scheme.  Many of the clients were Japanese corporations, and along with the five year sentence, U.S. District Judge John Keenan ordered Armstrong to pay $80 million in restitution.  A press release from the U.S. Attorney’s Office for the Southern District of New York discusses the case (here).

Armstrong has been in jail since 2000 under a civil contempt order for failure to deliver the firm’s assets to a receiver appointed in the SEC and CFTC civil cases.  His stay in the Manhattan Correctional Center is the longest ever endured by a civil contemnor. Among the missing assets are 100 gold bars and a bust of Julius Caesar — not the types of things one would bury in the backyard.  The civil contempt has been appealed four times to the Second Circuit, and each time that court refused to order Armstrong’s release.  The most recent decision, Armstrong v. Guccione, 470 F.3d 89 (2d Cir. 2006), the court summarized the issue: "It has been said that a civil contemnor who is incarcerated to compel compliance with a court order holds the key to his prison cell: Where defiance leads to the contemnor’s incarceration, compliance is his salvation. In this case, petitioner-appellant Martin A. Armstrong principally argues that the key to his freedom comes at the cost of his Fifth Amendment right against compelled self-incrimination."   The court rejected Armstrong’s claim that the civil contempt infringed his Fifth Amendment right, although the court did order that the case be reassigned from U.S. District Judge Richard Owen, who had originally jailed him for civil contempt.  The Second Circuit stated, "[W]hile we emphasize that we have never found any fault in Judge Owen skillful handling of this case, we believe that on the seventh anniversary of Armstrong’s confinement, his case deserves a fresh look by a different pair of eyes."

That different pair of eyes didn’t see things all that much differently.  Judge Keenan ordered that Armstrong’s sentence begin after he completes the civil contempt, for which there is apparently no cap on the amount of time he can be held in jail.  The distinction between civil contempt and a criminal sentence is that the former is termed "coercive" but not punitive, while the sentence after a conviction is punishment subject to the Eighth Amendment and other constitutional limitations.  To the person inside the jail cell, there’s not much difference between the two.  Armstrong is likely to appeal the district court’s refusal to give him credit for the time served on the civil contempt, but given his track record in the Second Circuit I would not place any bets on him succeeding with that argument.  Then again, the gold bars and Julius are still out there somewhere, perhaps awaiting his eventual release. (ph)

Three pieces in the latest edition of the Yale Pocket Part discuss the organizational sentencing guidelines.  All present thoughtful commentary on organizational sentencing.

The first What Booker Means for Convicted Corporations,  by Timothy A. Johnson, argues "that Booker’s logic should apply to the Organizational Sentencing Guidelines just as it does to the rest of the Sentencing Guidelines." 

In response, co-blogger Peter Henning has a piece titled "The Organizational Guidelines: R.I.P.?". Professor Henning notes that "[t]he time has come to bury the Organizational Guidelines now that prosecutors can achieve the goal of reforming corporate cultures through deferred and non-prosecution agreements."  This piece makes important points regarding the recent McNulty Memo.

Christopher A. Wray & Robert K. Hur also respond to Johnson’s piece in one titled, "The Power of the Corporate Charging Decision Over Corporate Conduct."  In their " Essay, [they] describe the Justice Department’s efforts to make prosecutors’ charging decisions more consistent, transparent, and predictable, and we suggest that the initial threat of corporate criminal charges has far broader and deeper effects on American businesses’ behavior than does the prospect of sentencing itself."

(esp)

A press release of the U.S. Attorney for the Southern District of New York states that "the former head of the commodities trading desk at Citibank NA("Citibank"), was sentenced today to 15 months’ imprisonment for conspiring to falsify bank records and to commit wire fraud."  The press release also states that that the defendant "pleaded guilty to scheming to inflate the trading profits of the Citibank commodities desk by as much as $20 million during 2003 in order to enhance his apparent job performance and his eligibility for bonuses from Citibank."  (see also Wall Street Jrl here)

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