Today in U.S. v. Gregory Bell, aka Boy-Boy, the D.C. Circuit denied appellants' consolidated petitions for rehearing en banc, which challenged the sentencing court's use of acquitted conduct to dramatically enhance appellants' sentences. Two separate and outstanding concurrences are worth a view. Judge Patricia Millett incisively critiques current sentencing jurisprudence which condones such horrific results. Judge Brett Kavanaugh agrees with Judge Millett and provides guidance for district courts who find by a preponderance of the evidence that acquitted conduct occurred, but do not want to enhance the sentence. What is the guidance? In a nutshell, utilize Booker to downwardly vary the sentence. Hopefully the Supreme Court will grant certiorari and end this appalling vestige of sentencing law.
Tag: Sentencing
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Last week in U.S. v. James Wendell Brown the United States Court of Appeals for the D.C. Circuit reversed a Booker upward variance in a child pornography case. The majority found Judge Richard Leon's sentence procedurally unreasonable, even under the plain error standard. The problem? Judge Leon was too general, and generic, in explaining how the four (out of seven) 3553(a) factors that he referenced applied to the defendant and justified an upward variance. As a white collar practitioner I always get nervous when a variance of any kind is sent back. Case law supporting upward and downward variances is substantial, and generally very favorable to the defense, and any chink in the armor of broad district court sentencing discretion is worrisome. Here there should be no great cause for concern. While talismanic recitation of all Booker factors is not required in any federal circuit to justify an upward or downward variance, there has to be some specific effort to link the factors relied upon to the individual conduct or character of the defendant standing before the sentencing court. Making sure that the court performs this linkage is the practitioner's job. Here, Judge Leon was simply too vague in reciting the 3553(a) factors and explaining why they justified a significant upward variance, and no practitioner chose to fill in the details, because the variance was opposed by both the prosecution and defense. In the mine run case, where defense counsel is arguing for a downward variance, it is his or her job to convince the trier of fact and, if necessary, help the court articulate, on the record, the reasons for the variance, such that the sentence will stand up on appeal. To fail is to screw your own case up and create a bad precedent for your peers.
Judge Edwards, writing for the majority, distinguished U.S v. Ransom. In writing about Ransom here last year, I noted that the DC Circuit "rejected appellants' argument that the sentencing court improperly relied on factors in varying upward that the Guidelines had already accounted for. Joining some sister circuits the Court held (internal quotes and citations omitted) that:
It is not error for a district court to enter sentencing variances based on factors already taken into account by the Advisory Guidelines, in a case in which the Guidelines do not fully account for those factors or when a district court applies broader [Section] 3553(a) considerations in granting the variance.
Notice that there are two alternative prongs to this portion of Ransom. The Brown court seems to indicate that the failure of the Guidelines to fully account for certain factors will only occur when the sentencing court sees and identifies special additional factors that exist in a specific defendant's particular circumstance. Thus, in Ransom, although the Guidelines already assessed two points for committing the offense while on probation, the sentencing court stated on the record that the offense of conviction (embezzlement) and the identity of the co-defendant were identical to the violated probationary offense and that this (and other things) justified an upward variance. Contrat this with Brown, where Judge Leon failed to articulate anything about Brown's particular offense/conduct/background that was not fully accounted for in the applicable Guidelines provisions.
The other prong of Ransom is completely undisturbed. A sentencing court can apply broader Section 3553(a) considerations, that is, broader considerations than those contained in the Guidelines, in granting an upward or downward variance. Again, there must be an explanation by the sentencing court. The sentencing court is always free to articulate its disagreement with the Guidelines' approach, and as long as that disagreement is rational and reasonable, the sentence cannot be disturbed. Two classic examples of this are family circumstances and aberrant conduct, both of which are nearly impossible to achieve as grounds for downward departure, but which regularly enter in to downward variance judgments in the post-Booker-Gall-Kimbrough world.
Judge Sentelle, who wrote the majority opinion in Ransom, dissented in Brown, because he did not see plain error.
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The case is United States v. Dibe. Claudio Dibe pled guilty, without a plea agreement, to wire fraud and received a below Guidelines sentence. He complained on appeal that his sentence would have been lower if the sentencing court had considered his counsel's ineffective assistance in failing to adequately explain the benefits of the government's initial plea offer. The Ninth Circuit held that ineffective assistance of counsel cannot be considered as a mitigating under 18 U.S.C. Section 3553(a). Distinguishing the U.S. Supreme Court's opinion in Pepper v. United States, 131 S.Ct. 1229 (2011), the Ninth Circuit noted that counsel's alleged ineffective assistance "has nothing to do with [Dibe's] own conduct."
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I enjoy studying upward variance opinions, as they usually contain language and rules that can be used by the defense to support downward variances in other cases. This is true because, whatever specific factors are discussed, federal appeals courts typically speak of what justifies such variances in general terms, not distinguishing between upward and downward excursions. United States v. Ransom, decided earlier this month by the D.C. Circuit in an opinion by Judge David Sentelle, is no exception. Chester Ransom and Bryan Talbott each pled guilty to a fraud scheme and stipulated to a non-binding Guideline range of 46-57 months. The sentencing court calculated Ransom's range at 46-57 months but upwardly varied to a 72 month sentence. The court calculated Talbott's range at 63-78 months but upwardly varied to a 120 month sentence.
The Court initially held that Ransom's upward variance for lack of remorse was not inconsistent with the three point downward adjustment he received for acceptance of responsibility under Section 3E1.1(a) and (b). The Court in essence stated that one can plead guilty early and cooperate with the government without showing any remorse.
Next the Court rejected appellants' argument that the sentencing court improperly relied on factors in varying upward that the Guidelines had already accounted for. Joining some sister circuits the Court held (internal quotes and citations omitted) that:
It is not error for a district court to enter sentencing variances based on factors already taken into account by the Advisory Guidelines, in a case in which the Guidelines do not fully account for those factors or when a district court applies broader [Section] 3553(a) considerations in granting the variance.
As anyone who does federal sentencing work knows, those broader 3553(a) factors are often the key to obtaining a downward variance if the court is otherwise inclined to do so. To take one example, in the Mandatory Guidelines era it was almost impossible to obtain a downward departure based on family circumstances, but they can, and must, at least be "considered" by the sentencing court under the current regime. Believe it or not, not every district judge comprehends this simple rule. Ergo, it is nice to have additional case law on one's side.
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Last Friday, in United States v. Brown, the Seventh Circuit upheld an upward variance from the calculated U.S. Sentencing Guidelines range of 21-27 months to 60 months. Appellant, the office manager, bookkeeper, and accountant for a small family business, embezzled several hundred thousand dollars over a twenty year period.
"Before imposing sentence the district court thoroughly
examined the sentencing factors listed in 18 U.S.C. § 3553(a),
placing special emphasis on the sophisticated nature of
Brown’s embezzlement scheme, its long duration, and the deep
breach of trust that his conduct entailed. The judge accepted
the results of the Walker family’s internal audit and explained
that the loss—more than $600,000—was significant for a small
business."Like so many appellate decisions affirming upward variances, the Brown opinion has wonderful language describing the sentencing court's broad discretion to impose sentences outside the recommended Guidelines range. The federal criminal defense bar has reaped enormous rewards from the post-Gall/Kimbrough deference to district court sentencing determinations, but with these gains come occasional losses. The Brown affirmance is a good example of the latter phenomenon.
After the sentencing hearing, in conjunction with a technical amendment to the judgment, the district court entered a written Statement of Reasons that purported to upwardly adjust the Guidelines range to 41-51 months. The 60 month sentence remained unchanged. The Seventh Circuit treated this Statement of Reasons as a nullity, since Brown had already filed a notice of appeal, stripping the district court of jurisdiction, and since the written Statement of Reasons was so clearly at odds with the district court's oral pronouncements during sentencing. This odd procedural move by the sentencing court appears to have been an after-the-fact effort to bolster its upward variance. The Seventh Circuit made clear, between the lines, that such gyrations are unnecessary.
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In what appears to be a case of nationwide first impression, the Third Circuit ruled today that federal district courts may require a defendant's sentencing allocution to be sworn, without violating Federal Rule of Criminal Procedure 32 or the U.S. Constitution. The textual Rule 32 discussion seems particularly weak as the rule itself nowhere requires the allocution to be sworn. The case is United States v. Ward. The opinion is here.
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One of the many things that has bothered me about the criminal justice system is that there are no "grays." Everything is either criminal or non-criminal. Conduct that on one day is legally acceptable, even if perhaps sharp and unwholesome, on the next day will, if a penal statute goes into effect, be criminal and punishable by years in prison.
This fair-to-foul scenario is particularly troublesome in certain areas of white-collar law. On day one, for instance, conduct which exploits "loopholes" in the tax law may go from widely-practiced and legally-tolerated "tax avoidance" to now-prohibited and severely punishable "tax evasion." When this change from acceptable to criminal occurs by statute, there at least is some public notice and warning to potential wrongdoers, although such notice obviously never reaches many persons. When, however, the law, or potential law, changes overnight by an unpredictable or unexpected court decision or an indictment based on a novel theory of prosecution, the sudden changes to what is considered prosecutable is even more problematical.
I do not have any easy solution to this problem. We cannot expect the government to send out a hundred million notices that new criminal laws have been enacted (although we do, for instance, require financial institutions to notify all of their credit card customers of interest rate changes). Nor, of course, if such notices were sent, can we reasonably expect a hundred million people to read or understand them. Additionally, we do not want to prohibit prosecutors from imaginative use of legally permissible tactics to prosecute what is apparently morally wrong and harmful.
We should, however, in the sentencing area recognize that it is essentially unfair to punish a defendant as seriously for conduct that had previously been generally accepted or tolerated than for conduct clearly known at the time of the offense to be criminal. Under this theory, for instance, Michael Milken could reasonably be prosecuted, as he was in the late '80s, for essentially "parking" stock, an arguably "civil" violation never before prosecuted criminally, but could not reasonably be sentenced, as he was initially, to ten years in jail (later reduced upon a Rule 35 motion).
I have on a few occasions argued to a sentencing judge that she should give a less severe sentence because the defendant's conduct was at the time he committed it not widely known to be criminal or generally was not prosecuted. I have never been successful, at least to the extent a judge explicitly agreed (of course, judges often do not explicate their reasoning). I am aware of no case in which a court explicitly granted a departure or variance on these grounds (although there may well be some). Nor am I aware of any Sentencing Guidelines consideration of this issue.
The decision by arbitrator Paul Tagliabue in the National Football League's New Orleans Saints "bounty" case (In the Matter of New Orleans Saints Pay-for-Performance/Bounty, December 11, 2012) is interesting and relevant. See here. See also here. Tagliabue, the former National Football League commissioner and a lawyer, affirmed the findings of misconduct made by Commissioner Roger Goodell but vacated the disciplinary sanction for the four players involved, suspensions of from four games to one year. Tagliabue based his vacation on sanctions essentially on two grounds: first, that the players' actions were encouraged by the coaches and other officials of the Saints, and, second, that professional football had previously treated such conduct gently, if not tolerating it. Tagliabue strongly suggested that when an existing "negative culture" is addressed by strict prohibitions, the penalties for violations should be phased in.
I do not expect federal sentences to be "phased in" so that, for instance, a violation of a new law within two years of enactment be punishable by a sentence of up to two years, and thereafter by up to five, although I do not think such an idea is entirely far-fetched. I do hope, however, that in appropriate cases judges consider adjusting sentences downward when the conviction is based on new law or a new application of existing law, especially when the change caused a sudden prohibition of generally acceptable behavior in the prevailing culture, even a negative culture. Mr. Tagliabue's opinion will not, of course, be considered precedential in the criminal law, but application of its reasoning in certain criminal cases may be appropriate.
Related Article – Tagliabue tosses out player penalties in bounty case
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As my colleague Solomon Wisenberg wrote, see here, former Goldman Sachs director Rajat K. Gupta is scheduled to be sentenced this Wednesday, October 24, by Judge Jed S. Rakoff of the Southern District of New York upon his conviction of insider trading and conspiracy.
The sentencing decision in this case is a particularly difficult one. On the one hand, Gupta is (or was) a man of exceedingly high repute who has done extraordinary good works, as attested to in sentencing letters by Bill Gates and Kofi Annan, and, if sentencing were based on an evaluation of the defendant's entire life, even considering the serious blemish of this case, Gupta might well deserve commendation and not punishment.
On the other hand, the crime for which Gupta was convicted, albeit arguably aberrational, was a brazen and egregious breach of the faith which was placed in him precisely because of his outstanding reputation. Indeed, while Gupta's motivation appears not to have been greed or personal gain, a factor that ordinarily would suggest leniency, one may conclude that his crimes resulted from an arrogance of power and privilege and the belief that as a "master of the universe" he was above the law.
Gupta, having gone to trial and expected to appeal (challenging the same wiretap that is a subject of the appeal by Raj Rajaratnam discussed by my other colleague, Ellen S. Podgor, see here), is at somewhat of a disadvantage. Since any statements he may make discussing his motivation or showing remorse could probably be used as admissions in a potential new trial, he did not admit wrongdoing or demonstrate remorse, factors viewed favorably by most sentencing judges. Although I strongly doubt that Judge Rakoff will "punish" Gupta for going to trial, as some judges do, the judge will be unable to consider any understandable and perhaps sympathetic motivation or any remorse, if either exists, as a mitigating circumstance.
As often happens, both sides have made extreme sentencing requests. The government asks for a sentence of 97 to 121 months, what it claims is the appropriate sentencing guidelines range. The defense is seeking probation with community service in Rwanda, supported by a request from a Rwandan governmental official, or alternatively New York. At first blush, the request for community service in Rwanda struck me as either a "Hail Mary" hope, an accommodation to a client or family who are unwilling to accept reality, or a deliberately lowball request in the expectation of a middle ground sentence. On further consideration, however, I believe that a sentence of, say, two years performing "community service" in Rwanda while living in spartan conditions (a modest one-room apartment, cooking his own meals, not having servants, etc.), might not be inappropriate. Rather than wasting Gupta's enormous talents and intellect in prison, such a sentence would enable him to provide considerable benefit to society. Indeed, such a sentence would probably be much more onerous for Gupta than confinement in a federal minimum security camp. To be sure, there is a serious question whether such community service could be suitably monitored.
Of course, Judge Rakoff, however independent, fearless and innovative as he is, will not sentence Gupta in a vacuum. He will no doubt consider sentences that he and other judges have meted out to lesser-known defendants in other insider trading cases and how his sentence will appear to the public in terms of deterrence and equal justice. Gupta should not buy his plane ticket yet.
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The Supreme Court, in Southern Union Co. held that "where a fine is so insubstantial that the underlying offense is considered 'petty' the Sixth Amendment right of jury trial is not triggered and no Apprendi issue arises." But the Court then went on to say that "not all fines are insubstantial, and not all offenses punishable by fines are petty." The final ruling was that "Apprendi applies to the imposition of criminal fines." (see here)
Today a district court interpreted that decision with the Hon. Beryl A. Howell penning the decision in United States v. Sanford LTD & James Pogue. The court looked at whether "evidence of monetary proceeds is either permitted or required to be presented to the jury." So the court needed to examine Southern Union and also the Alternative Fines Act, 18 U.S.C. s 3571(d) and determine whether gross revenues offered by the government should be admitted under the Fed. R. Evid. Rules 402 and 403.
The district court starts by noting that motive is admissible evidence and that the "relevance is not substantially outweighed by a danger of unfair prejudice." That said, the court goes a step further holding "that the government's proposed specific measure of monetary proceeds ($24,045,930.79 in gross revenues) may not be admitted, standing alone, to establish the 'gross gain' that Sanford 'derive[d]…from' the charged offenses under 18 U.S.C. s 3571(d)." The court stated, "[t]he government may not admit that specific monetary figure except to the extent, and only if, necessary for the jury to establish or calculate the appropriate measure of 'gross gain' 'derive[d] …from' the charged offense, which the Court defines" later in its opinion.
It is here that things get particularly interesting. Hon. Howell notes the ambiguity in the term "gross" monetary amount. Being a master of the sentencing guidelines, Hon. Howell points out how the guidelines provide guidance on the meaning of "gross gain." She provides a wonderful lesson on the legislative history, even referencing the Model Penal Code. She notes how there are conflicting opinions on what constitutes gross gains. (nice law review topic for a student looking for the jurisdictional split for his or her student note). In the end she defines "gross gain" to mean "any additional before-tax profit to the defendant that derives from the relevant conduct of the offense."
But she also notes the importance of the term "derived from" and "concludes that the term …requires that the government prove that a given monetary amount (either a gain or a loss) was proximately caused by the conduct of the charged offense in order to qualify as a 'gross gain' under s 3571(d)."
The court noted that it "requires additional information before deciding whether allowing the government to seek a fine under s 3571(d) would 'unduly complicate or prolong' the trial."
Hats off here to Attorney Greg Linsin of Blank Rome who raised this issue.
(esp) (w/ a hat tip to Irwin Schwartz).
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The Supreme Court issued an opinion in Southern Union Co. v. United States. The company was convicted of a RCRA violation, which carries a penalty of a fine of not more than $50,000 for each day that there is a violation. Justice Sotomayor, writing the opinion for the Court, considered whether juries need to decide the fine given, in order to comply with the Court's prior decisions in Apprendi and Blakely that "reserves to juries the determination of any fact, other than the fact of a prior conviction, that increases a criminal defendant's maximum potential sentence."
The Court held that "where a fine is so insubstantial that the underlying offense is considered 'petty' the Sixth Amendment right of jury trial is not triggered and no Apprendi issue arises." But the Court then went on to say that "not all fines are insubstantial, and not all offenses punishable by fines are petty." The final ruling was that "Apprendi applies to the imposition of criminal fines." And it applied here.
A dissent by Justice Breyer, that was joined by Justices Kennedy and Alito, argued that "the Sixth Amendment permits a sentencing judge to determine sentencing facts – facts that are not elements of the crime but are relevant only to the amount of the fine the judge will impose." They believed that the Court's position would "lead to increased problems of unfairness in the administration of our criminal justice system." They discuss the existing high rate of plea agreements in the case.
The real question here is whether this decision will matter. As noted by the dissent, 97% of federal convictions result from guilty plea. But what went unnoticed is that very few companies – the object of many fines – go to trial. Often these cases are resolved with non-prosecution and deferred prosecution agreements. So will it really make any difference that juries can determine these fines, when the corporation in a post Arthur Andersen LLP world will seldom be going to trial.
(esp)
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