The resentencing of former Dynegy Inc. executive Jamie Olis will take place on Jan. 5, along with new proceedings for his former bosses, Helen Sharkey and Gene Foster, who entered guilty pleas and testified against Olis.  The Fifth Circuit upheld Olis’ conviction but remanded for resentencing because it found that the district court did not properly calculate the loss when it determined that the underlying fraudulent conduct was the sole cause of a drop in Dynegy’s stock price when the accounting problems were revealed without factoring in other potential causes of the decline.  Based on the improperly high loss figure, Olis received a 24 year sentence, which would have meant serving over 20 years in prison.  U.S. District Judge Sim Lake denied a request by Olis to be released pending the resentencing, and the judge asserted at a hearing that Olis "has a number of years to serve even under the most liberal interpretation of laws," which indicates that the court is likely to find that the accounting fraud caused a significant loss.  A Houston Chronicle story (here) discusses the Olis resentencing hearing. (ph)

The Wall Street Jrl, in a superb article authored by John R. Emshwiller here, tells the story of Anthony Elgindy and the tragedy faced by his family as a result of his conviction in a white collar case. Clearly the most moving part of this story is the dilemma faced by his wife in deciding which 2 of 3 children would accompany her into the prison to see their father.  Street crime cases have faced these issues for years, often with little or no acknowledgment.  Perhaps one of the benefits of the focus on white collar offenders and the increased sentences (and in this case the sending of a convicted person to prison prior to sentencing) is that the media is now noticing the effect of these cases on third parties, and most importantly the children.

But white collar crime cases also are unique as pointed out in this article. According to the article it seems the government (article says "federal officials") is offering money (keeping some of their money) to the family if Anthony Elgindy acknowledges a loss of one million dollars, an amount that could increase his sentence.   Would a prosecutor really place a person in the position of agreeing to something that may risk them a higher sentence so that their children would have money  while they were incarcerated?   Talk about prosecutorial power – this is the ultimate power – or shall I say – abuse of power.

(esp)

The Atlanta Jrl Constitution here reports on the ten year sentence given to Charles Walker, this time referring to him as "[a] sharecropper’s son who became one of Georgia’s highest ranking lawmakers." The article details the evidence presented at his trial and the political environment during the events. But unmentioned in this article about "the other southern jury" (my comparison to the Scrushy trial) is that the Walker jury met not only on Memorial Day weekend, but also on Memorial Day.  This as well as the jury selection process should make for an interesting appeal.  For a discussion of other issues that may be issues for appeal see post here.

(esp)

A recent article on white collar sentencing in the Chicago Tribune here does an excellent job in pointing out that white collar sentences have risen as a result of the sentencing guidelines.

The article is titled, "Disparity Grows in Penalties for Execs."  Immediately under this title, however, is this subtitle, "Changes in sentencing rules spark variations in prison terms for white-collar criminals."  The article also states, "[t]he upshot: longer sentences than in the past, to be sure, but also a rise in disparities from judge to judge or jurisdiction to jurisdiction."

I agree with the statements of Professor Doug Berman, Attorney James Felman, and Professor John Coffee in this article.  And the article notes some important points regarding white collar sentencing – including the fact that white collar offenders are receiving exorbitant sentences these days. But – – –

1.  How is white collar crime being defined in this article?  Is it being defined the way the government statistics are defining it – a definition that omits all the corruption cases (despite the local USAs including corruption in their definition of white collar crime).  See post here – "Is DOJ ‘Cooking the Books’ in its Reporting of White Collar Crime?" This is an important question to ask whenever anyone is making any claim about white collar crime – How did they define it!

2. Is there really more of a sentencing disparity now?    The sentencing disparity is greater because of the "deals" the government provides to people – something that has existed since the enactment of the guidelines.  In the pre-Booker phase this was through 5K1.1 motions, and to a large extent that still exists.  Sentences people receive are not always based on their criminal culpability, but rather on whether they cooperate with the government.

3.  Sentencing disparity is also in large part a function of what the government charges the defendant with – that is, the crimes charged and the amount of loss claimed.  The mere adding of a money laundering count to a standard mail fraud charge significantly raises a sentence.  Yes, these days the government might include money laundering in a white collar case. So the sentencing disparity may be nothing more than a judge neutralizes the government charging process.

4. Is it so easy to say that there is now more disparity in sentencing?  Just because a person in one courtroom receives one sentence does not mean that a person in another courtroom receives a different sentence for the same crime.  The problem here is that one is often comparing apples and oranges.  No two cases are exactly the same.  In determining culpability it is important to recognize this, and that is exactly why judges need some discretion to modify the guidelines to suit the specific facts.  The fact remains that even after Booker they all start with the advice of the guidelines.

5. Just because there may be more departures in white collar cases (something I am not fully convinced of yet – and I define white collar crime to include corruption cases), does not mean that judicial sentencing is missing the mark.  Perhaps it is a signal to the legislature that someone needs to re-evaluate the draconian sentences being given in some of these cases.   

So if there is anyone out there who intended to take this Tribune article and say – – you see, we need more mandatory minimums, or we need a guidelines system that is mandatory because the advisory nature of the guidelines produces disparity in white collar cases — these conclusions are not so easy and miss the real questions noted above. Everyone agrees that white collar sentences have gone up under the guidelines.  Not everyone, however, agrees that this is warranted.

(esp)

For those who are afraid that the Booker case will cause white collar offenders to be placed on the streets, as opposed to being behind bars, the Eighth Circuit’s ruling in a software piracy case should put those fears to rest.  Professor Doug Berman in his superb sentencing blog here discusses the court’s recent opinion in the case of United States v. Susel.  In discussing the court’s affirming of a 51 month prison sentence of "an employee of a software manufacturer who ‘stole copyrighted software from his workplace, sold the software on eBay, and delivered the software to purchasers through the United States mail," Professor Berman states that:

"Because the defendant in Susel does not seem like a major software pirate, I cannot help but ponder whether his sentence of 51 months’ imprisonment complies with the statutory mandate in 3553(a) that the district judge ‘impose a sentence sufficient, but not greater than necessary, to comply with the purposes [of punishment] set forth in’ the Sentencing Reform Act.  Also, what of the statutory obligation, detailed in 3553(a)(6), to ‘avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct’?"

Also this week, a Manhattan man received a sentence of 37 months for "selling and distributing pirated software valued at over $1 million." (See DOJ Press release here) (see Center for Economic Crimes -Fraud Update here) Although a much lesser sentence for the same basic crime, the government is pleased with this severe sentence. Michael Garcia, the United States Attorney for the Southern District of NY, stated:

"This lengthy sentence should serve as a warning to those in the manufacture and sale of pirated  computer software, as well other forms of criminal copyright infringement.  Intellectual property theft is a serious crime that victimizes companies large and small, as well as their employees and shareholders."

(esp)

The United States Attorneys’ Offices for the Southern and Eastern Districts of New York entered into a  "non-prosecution agreement" with Bank of New York.  This "non-prosecution" agreement calls for the Bank of New York "to pay $38 million in penalties and victim compensation." (Press Release here).   Of this amount $26 million will be paid to the US and 12 million will be restitution to victims.  The press release of the US Attorney’s Office for the Eastern District of New York states that:

"The SDNY investigation uncovered a scheme, which was facilitated by a corrupt BNY vice president, involving the unlicensed transmission of billions of dollars originating in Russia through BNY accounts in the United States to third-party transferees around the world.

"The EDNY investigation uncovered a scheme involving the submission by a BNY commercial customer of fraudulent loan applications that were supported by sham escrow agreements executed by a corrupt BNY branch manager, and that resulted in millions of dollars in losses to victim banks throughout the United States."

In addition to the money that will be paid by Bank of New York as a part of the "non-prosecution agreement,"  the press release notes that "BNY also waived the attorney-client and work-product privileges to assist the investigations, adopted remedial measures, and made available numerous witnesses for government interviews."

Deferred/Non-prosecution agreements with the government seem to be containing more and more provisions providing for the waiver of attorney-client privilege and work product doctrine.  One has to wonder if any executives within a corporation or business are still talking with the corporation’s attorney.  After all, why should they –  as confidentiality seems to no longer exist.

(esp)

Professor Doug Berman’s wonderful post here on white collar sentences tells of  an "insurance analyst receiving a below-guideline sentence for his role in an insider-trading scheme."  Yes, some white collar sentences may receive below guideline preference, but that is in large part because the sentencing guidelines for many of these offenses are beyond reality.  When a white collar offender, who cannot again commit this form of crime and is no threat to society, is given a sentence that is greater than someone who has the potential to continue to hurt people in society, there needs to be a re-evaluation of the sentencing process.

(esp) 

It took a long time for the 5th Circuit to rule, but at last a decision is rendered in the case of United States v. Jamie Olis, former "Senior Director of Tax Planning and International (and later, Vice President of Finance) at Dynegy."  Olis had received a sentence of 24 years (292 months total) for convictions of "securities fraud, mail and wire fraud, and conspiracy" arising from his "work as a tax lawyer and accountant at Dynegy Corporation." (Decision)  The appellate court affirmed his conviction, but not surprisingly vacated the sentence and remanded it for a new sentence.  A superb analysis of this decision is found on Professor Doug Berman’s Sentencing Blog here.

The court easily discarded the government’s claim that the Booker issue was not preserved for appeal, and moved onto the substantive issues raised by this sentencing claim.  The court proceeded to examine a key issue that arises in white collar cases – the use of the loss calculation as a crucial factor in determining the defendant’s sentence. White collar defendants have been faced with increased sentences in cases where the government attributes losses to their conduct. Professor Doug Berman states in describing one of the court’s points:

"The Olis court then engages in a thorough discussion of loss calculations (which dictated Olis’ long sentence in the district court) to reach the conclusion that ‘the district court, faced with a "’cook the books’" fraud, overemphasized his discretion as factfinder at the expense of economic analysis.’  The Fifth Circuit thereafter suggests that ‘attributing to Olis the entire stock market decline suffered by one large or multiple small shareholders of Dynegy would greatly overstate his personal criminal culpability.’"

The appellate court in the Olis case states that "[b]ecause the district court’s approach to the loss calculation did not take into account the impact of extrinsic factors on Dynegy’s stock price decline, Olis is entitled to resentencing on this factor, subject to the principles" discussed within the opinion. 

Although the actual effect on Jamie Olis’ sentence remains to be seen, this is clearly an important sentencing decision for white collar offenders. It sends a message that total losses to a company, the market, or the outside world will not just be slapped up on a chart as the determining factor of a sentence.  Those losses can be scrutinized, and scrutinized carefully.

(esp)

                                                                                              

UPDATE: Co-blogger Ellen Podgor is quoted in the Wall Street Journal story (here) about the Fifth Circuit’s decision. (ph)