New York Federal Criminal Practice Blog
November 6, 2009

Second Circuit Holds that Fraud Losses May Not Be Offset by Legitimate Business Expenditures

Loss calculations in white collar cases are the critical driver of the (often huge) sentences in those cases.  In United States v. Byors, 2009 WL 3461584 (2d Cir. October 29, 2009), the Second Circuit interpreted a Guidelines comment addressing permissible offsets when calculating the losses of a fraud scheme.  The defendant argued that offsets should include expenditures he made to “capitalize” his business, which were “services rendered” to the victim-investors.  Pointing out that the plain language of the Guidelines permits offsets only for value conferred on the victim in the form of money, property or services, the Court concluded that:

Byors’s expenditures, legitimate or not, conferred nothing of value and no benefit on his victims, who were his investors and creditors. He rendered no “services” to them and failed to deliver any return on their “investment.” Accordingly, the District Court did not err in failing to treat defendant’s capitalization of his business as “services rendered” to his victims.
The case also held, as a matter of first impression in this Circuit, that obstructive conduct relating to an underlying fraud offense may be the basis of a guideline enhancement for money laundering.

Lawyers: Bradley Stetler (Stetler, Allen & Kampmann) (Defendant Byors); AUSAs  Gregory Waples, Thomas Anderson, Paul Van de Graaf

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