New York Federal Criminal Practice Blog
August 15, 2008

EDNY Judge Block Imposes 60-month Sentences in Securities Fraud Case Instead of Guideline Sentences of 360 months to Life

Rejecting the “patently absurd” and “draconian” sentences of 360 months to life dictated by the Guidelines in a securities fraud case, and holding that sentences in white collar cases should not be “a black stain on common sense,” EDNY Judge Block imposed instead sentences of 60 months each on two brothers convicted of a classic pump and dump scheme.  Although the defendants in United States v. Parris, 05-cr-636 (FB) (E.D.N.Y. August 14, 2008), were “deserving of the punishment [he had] meted out,” Judge Block found their crimes “were not of the same character and magnitude as the securities-fraud prosecutions of those who have been responsible for wreaking unimaginable losses on major corporations and, in particular, on their companies’ employees and stockholders, many of whom lost their pensions and were financially ruined.” 

The case is remarkable not just for the extent of the variance from the applicable guideline sentence and its reasoning (essentially, that the guideline sentence was simply too much), but also because the prosecutors evidently agreed with him and assisted in a “collaborative effort” to ameliorate the Guidelines’ effect.


Convicted of securities fraud and witness tampering after trial, the Parris brothers faced an adjusted offense level of 42, as a result of a “piling on” of adjustments, including adjustments for loss, number of victims, sophisticated means, director status, managerial role and obstruction.  Finding each adjustment justified as a matter of pure Guidelines calculation, and also finding that there was no basis for a traditional downward departure, the judge nonetheless concluded that a Guidelines sentence would be “draconian” and therefore inappropriate to use as the “initial benchmark” in determining the sentences he would impose.  Accordingly, he turned to the parties for alternative means of “realistic guidance.” 

Judge Block noted that “[t]o its credit, the Government shared [the court’s] angst,” and joined the court in “a collaborative effort to search for an effective means to avoid what Judge Rakoff [in United States v. Adelson, 441 F.Supp.2d 506, 512 (S.D.N.Y. 2006))] has appropriately described as ‘the utter travesty of justice that sometimes results from the guidelines’ festish with absolute arithermetic.’”  In fact, the government helpfully provided the court with a compendium of securities fraud sentences going back to 2001, so that the court could consider the defendants’ sentences in the context of nationwide similarities.  (Interestingly, the court had sought similar information from the Sentencing Commission, but found that “it does not keep such statistics” – so much for the Commission’s raison d’être to reduce nationwide sentencing disparities.)


The court imposed sentences of 60 months on both defendants, citing two primary reasons: sentencing patterns based on the relative seriousness of similar cases, and disproportionality in the relentless accumulation of upward adjustments in securities fraud cases. 

First, while it was “realistically impossible ‘to line up similarly situated defendants on a national scale,’” the government’s compendium of cases was relevant to “the relative seriousness of the nature of the defendants’ crimes under 18 U.S.C. § 3553(a)(1).”  In particular, “there was a correlation between the losses in those cases and the periods of incarceration” – cases with enormous losses yielding sentences in double-digit terms of imprisonment (in years) and those with losses less than $100 million resulting in sentences of single-digit terms.  The 360 month to life sentence was driven by Congressional “disdain for corporate predators,” but, now free to disagree with the Guidelines as long as he stated “sufficient justifications,” Judge Block held that such a sentence would be “unreasonable as a matter of law” for the Parrris brothers, who “were simply not in the same league as the likes of Enron, Worldcom and Computer Associates defendants.”

Second, the court also disagreed with “the guidelines’ ‘one-shoe-fits-all’ approach for its number of victims, officer/director and manager/supervisor enhancements.  Thus, in all securities-fraud cases, once the threshold of 250 victims is met, the same 6 points applies for victim enhancement, whether the number of victims be in the neighborhood of 500, as apparently in this case, or in the hundreds of thousands, as in Worldcom.  The three-point leadership role enhancement attaches regardless, for example, of whether the requisite minimum of five, as here, were supervised or 500.  As for the four-level enhancement for officers and directors, there is simply no accounting for the differences their decisions may have had on destroying a major corporation affecting the lives of hundreds of thousands, compared to decisions – although inexcusable – of those jeopardizing the investments of several hundred investors in speculative penny stocks.”


Like Judge Rakoff’s decision in Adelson, Parris is as an important milestone in the post-Booker path to freedom from what Judge Block describes as “the shackles of the mandatory guidelines regime.”  Practical, reasonable and courageous, it is decisions like these that give judges and practitioners the inspiration and ammunition to reject excessive guideline sentences, and instead, search for alternative benchmarks that more readily relate to the harm caused and the extent of the defendant’s culpability.  And while the prosecutors will rarely join in that endeavor, the fact that they did so here is a remarkable and citable precedent unto itself. 

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