How one chooses to organize a business is usually of concern primarily for tax and regulatory purposes, and only rarely is it an issue in the criminal law.  Two areas that I can think of where the particular legal form under which a business operates will be important are for the privilege against self-incrimination (only a sole proprietorship can assert the Fifth Amendment for the act of production) and sentencing.  The Organizational Sentencing Guidelines do not apply to sole proprietorships, which are viewed merely as extensions of the individual owner, in much the same way that the sole owner can assert the Fifth Amendment on behalf of the business.  The issue was important in the sentencing context in United States v. Helmos Foods Product, Inc. (here), which was convicted along with its owner, Theodore Mantas , of improperly storing adulterated meat and poultry.  At trial, there was considerable confusion about the legal status of the business, which had been incorporated but the corporation had been dissolved by the state before the criminal conduct.  Both sides believed that it was a partnership of Mantas and his wife, but in fact it was a sole proprietorship.  Upon conviction, the judge imposed a $250,000 fine on the company, and it filed for a writ of coram nobis to lift the fine because the Organizational Sentencing Guidelines do not apply to sole proprietorships.  Unfortunately, the mistake in the initial proceeding cannot be undone in a coram nobis if the issue could have been argued in the direct appeal.  For example, a number of coram nobis writs were issued in the wake the Supreme Court’s decision in 1987 in McNally v. United States that (briefly) rejected the right of  honest services theory for mail/wire fraud convictions, former Maryland Governor Marvin Mandel being among the most famous to have their convictions vacated.  The Seventh Circuit found that the information to avoid the error was available while the case proceeded on direct appeal:

But the confusion has considerable relevance as to whether the issue that Helmos Food was a sole proprietorship could have been raised on direct appeal. At both trial and sentencing, attention was directly focused on Helmos Food’s status, and it was quite clear that Mr. Mantas was going to be responsible for the fine. Counsel should have been alerted that if there was a way to prevent the imposition of a fine—by proving that Helmos Food was a sole proprietorship, for instance—there was no time like the present. In addition, at sentencing, both parties had available Mantas’s 1997 and 1998 tax returns, specifically schedule C to form 1040, which is entitled "Profit or Loss from Business (Sole Proprietorship)." The information from which to argue that Helmos Food was not subject to guideline § 8A1.2 was available; it just was not used at trial or on direct appeal.

Those minor little technicalities, like how a business is organized legally, can have great importance. (ph)

An Eleventh Circuit opinion in United States v. Crawford (here) considers the government’s challenge to a sentence in a case involving a scheme to defraud the government of over $400,000 from illicit transactions in WIC coupons, specifically the district court’s failure to find "more than minimal planning" under 2F.1.1(the roughly equivalent provision now would be 2B1.1(8)(C) "sophisticated means") and a downward departure because the case was "outside the heartland."  Crawford operated a store called "Mr. Wick, Jr." (note the play on the government’s Women, Infants and Children assistance program), and engaged in over 100 transactions with one seller of WIC coupons over a 5-year period.  The district court sentenced Crawford to 60 months probation, plus restitution, and the government appealed the sentence.

The first step was to determine the standard of review in light of Booker making the Sentencing Guidelines advisory rather than mandatory.  The court stated that Booker did not alter the standard of review involving application of the Guidelines:

Nothing in Booker suggests that a reasonableness standard should govern review of the interpretation and application as advisory of the Guidelines by a district court. See Villegas, — F.3d at —, 2005 WL 627963 at *4. Booker did not affect 18 U.S.C. section 3742(f), which mandates remand of any case in which the sentence "was imposed as a result of an incorrect application of the sentencing guidelines . . . ." Id. at —, 2005 WL 627963 at *5. Although under Booker, the Sentencing Guidelines are an advisory rather than a mandatory regime, the district court remains obliged to "consult" and "take into account" the Guidelines in sentencing . . . This consultation requirement, at a minimum, obliges the district court to calculate correctly the sentencing range prescribed by the Guidelines."

The Eleventh Circuit overturned the district court’s finding that Crawford’s misconduct was "purely opportune" and not the product of more than minimal planning: "The district court found that each of the over 100 instances in which Crawford bought vouchers from Kelley was purely opportune. That determination was clearly erroneous. The sheer number of transactions alone makes it highly unlikely that each transaction was purely opportune. Crawford wrote 184 checks to Kelley between April 12, 1996, and March 22, 2001, totaling $434,032."

Regarding the downward departure because the case was outside the heartland, the district found that a variety of factors in combination, including extreme remorse, substantial assistance to the government (despite the absence of a prosecutor’s motion for a departure), lack of criminal sophistication, and that the loss overstated the criminality, supported the departure.  The Eleventh Circuit reversed because it could not determine how some factors which are discouraged (remorse) or prohibited (substantial assistance with no departure motion) played into the departure decision, therefore a remand was necessary. (ph)

One of the ways in which the government seeks to ensure that a plea bargain is the end of a case is to demand a broad waiver of the right to appeal the sentence so long as it meets certain criteria, one of which is that the sentence be within the Guidelines range or below the statutory maximum. The statutory maximum cap was the sole sentencing limitation in a plea agreement at issue in the Seventh Circuit’s decision in United States v. Bownes (here), a case in which the defendant entered a guilty plea to mail fraud for engaging in "land flips" involving low income property. and the defendant argued that he did not knowingly waive the right to appeal because Booker effected a "sea change" in sentencing law and therefore he should be permitted to seek a resentencing under the now-advisory Guidelines. The court, per Judge Posner, rejected that argument:

Bownes argues that Booker is special because it brought about a “sea change” in the law. The identical argument was rejected, rightly in our view, in the Bradley and Killgo cases that we cited in the preceding paragraph. It is true that Booker has had a tremendous impact because it has affected many thousands of sentences, but it is no more, and indeed less, of a “sea change” than numerous other legal innovations scattered across the volumes of the United States Reports and the Federal Reporter. And anyway a “sea change” exception to the rule that an unqualified appeal waiver is to be enforced as written would be hopelessly vague.

(ph)