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.

Facts

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.)

Holding

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.”

Comment

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. 

The devil is in the details, and, when it comes to the Sentencing Guidelines, that often means in the guideline commentary.  In an important and lengthy new opinion, United States v. Handy, 07-cr-906 (JBW), 2008 WL 2965816 (E.D.N.Y. August 4, 2008), EDNY Judge Weinstein invalidated a guideline enhancement based on guideline commentary that he found to be unconstitutional, contrary to congressional mandate and irrational.  Although the same enhancement – a two-point strict liability enhancement in gun possession cases if the gun involved was stolen – had been upheld by the Second Circuit pre-Booker, the Handy court points out that the recent “sea change” in sentencing jurisprudence demanded that that precedent be reconsidered. 

While Handy deals with the gun possession guidelines, it has broader ramifications both for any guideline enhancement dictated by guideline commentary that fails to represent the Sentencing Commission’s traditional considered, statistical and rational analysis, and for guidelines that permit enhancements without scienter.  As Judge Weinstein observes, “[t]o add many months of incarceration for possession of a gun because the gun was stolen, when the defendant did not and could not know it was stolen, is to punish by lottery. Haphazard chance is not a guiding spirit of our rule of law.”

Facts

Twenty year-old Handy pled guilty to being a felon in possession of a gun, in violation of 18 U.S.C. § 922(g)(1).  His presentence report contained a two-point enhancement because the gun was stolen, under U.S.S.G. § 2K2.1(b)(4), an enhancement that applies, according to the guideline’s commentary, “regardless of whether the defendant knew or had reason to believe the firearm was stolen.”  At sentencing, defense counsel challenged the enhancement, citing “the recent revolution in sentencing,” arguing that the enhancement was an “ill-considered” provision, since it contradicted congressional intent (Congress had already criminalized possession of stolen firearm in a separate statute, with an unambiguous scienter requirement) and “ignored hundreds of years of common law . . . that knowledge and intent are . . . the touchstones of criminal liability.”  Questioned under oath at the sentencing, the defendant stated he did not know the gun was stolen. 

Holding

Agreeing with defense counsel, Judge Weinstein held that the stolen gun enhancement, “devoid of any mens rea connection, is irrational, is inconsistent with the Constitution and criminal laws of the United States, and is void.”  Noting the historical and constitutional importance of mens rea in criminal statutes, including firearms possession statutes, he gave several reasons for the invalidity of the provision.  First, the Sentencing Commission cannot ignore the congressional policy and constitutional implications behind a related, unambiguous statute criminalizing knowing possession of a stolen firearm.  Second, research shows that guns are often not in fact stolen, they are simply reported stolen by a gun dealer seeking to avoid liability for selling to an ineligible person.  Third, the Commission’s inclusion of and edits to the stolen gun enhancement were inadequately explained, and inconsistent with other guideline provisions and commentary (e.g., the guideline addressing possession of explosives provides for a two-point enhancement if the defendant knows or has reason to know that the explosives are stolen).  Finally, the enhancement did not comport with 18 U.S.C. § 3553 factors (e.g., “it does not provide deterrence since a person cannot be deterred from doing what he or she does not know is being done” and the absence of the requirement of scienter “does not reflect the seriousness of the offense, promote respect for the law or provide just punishment for the offense”). 

Comment

Handy is an important blueprint for analyzing and challenging guideline enhancements, like the stolen gun provision, that are dictated by the guideline commentary.  Commentary has the full force of guidelines, but unlike guidelines, is not presented to Congress for review, nor is it subject to the rigors of the APA.  As such, Judge Weinstein points out, quoting EDNY Judge Gleeson’s recent article in the Hofstra Law Review, amendments to the commentary can effect “important policy changes . . . by stealth, disguised as ‘clarifications.’”  In fact, as Handy details, that is precisely how the stolen gun enhancement emerged. 

Moreover, Handy contains the seeds for more far-reaching challenges to guideline enhancements (whether in actual guidelines or the commentary) on the grounds that they lack an explicit requirement of intent or, at least, reasonable foreseeability.  Examples abound, but would include the enhancement for jeopardizing the soundness of a financial institution in a fraud case, smuggling an alien who happens to be a minor, distributing an anabolic steroid to an athlete, or engaging in an offense involving fish or wildlife that is included in certain protected lists or creates a risk of infestation or disease.  As Judge Weinstein points out:  “The same due process requirement for legislative enactments that conduct without culpable mens rea cannot be criminalized except for minor strict liability crimes, is applicable to the work of the Sentencing Commission. Consistent with fundamental legal tradition that blameworthiness hinges upon a culpable state of mind, the defendant’s Guideline calculation must be predicated upon culpability.”
 
In a post-Booker/Kimbrough world, where all sentencing precedents may be revisited and guidelines challenged as ill-considered, Handy is a rallying cry to defense lawyers to subject every guideline enhancement to rigorous scrutiny for legal and factual fault-lines. 

Adding to a series of notable decisions addressing the calculation of loss under the Sentencing Guidelines, see here, here and here, the Second Circuit has ruled in United States v. Abiodun, 2008 WL 2924341 (2d Cir. July 30, 2008), that “lost time” – to the extent it can be measured in monetary terms – is “actual loss” under U.S.S.G. § 2B1.1(b)(1), and thus, individuals who have incurred lost time due to a theft or a fraud offense are “victims” under U.S.S.G. § 2B1.1(b)(2).  The decision means some significant increases in sentencing ranges calculated in theft and fraud cases, not to mention, a logistical hornet’s nest for sentencing courts trying to calculate this kind of loss for sentencing and restitution purposes.

Facts

Abiodun pled guilty to credit card fraud arising out of his purchase of between 300 and 400 stolen credit reports, and, on appeal, challenged the district court’s determination that his criminal activity involved more than 250 victims, resulting in a six level enhancement of his guideline level.  He argued that individuals whose identities were stolen but who were fully reimbursed for their financial losses cannot be deemed victims.  The district court, however, disagreed, finding that the victims affected by Abiodun’s crimes included “individuals who had spent an appreciable amount of time securing reimbursement for their financial losses from their banks or credit card companies.”

Holding

Rejecting the challenge, and adopting conclusions reached by the Sixth and Eleventh Circuits, the Court held that “individuals who are ultimately reimbursed by their banks or credit card companies can be considered ‘victims’ of a theft or fraud offense for purposes of U.S.S.G. § 2B1.1(b)(2) if – as a practical matter – they suffered (1) an adverse effect (2) as a result of the defendant’s conduct that (3) can be measured in monetary terms.”

Comment

Leaving aside the practical difficulties presented by this decision (while amounts actually stolen and not reimbursed are usually easily established and verified, “lost time” is a far more elastic and subjective concept), the Court’s holding in Abiodun could lead to increased adjusted offense levels in many fraud and theft cases – not least Abiodun’s own case.  Pointing out that the district court’s correct conclusion regarding the number of victims necessarily impacted its loss determination in that case, which did not include a calculation of lost time, the Court remanded Abiodun's case for resentencing, so that the district court could “(1) recalculate the loss amount associated with each of the defendants’ crimes to include the time lost by these potential victims or (2) determine whether, if these individuals are excluded from the count, it is still ‘more likely than not’ that Abiodun’s crimes affected ‘250-plus victims.’”

The BOP's 500-hour Residential Drug Abuse Program is the one corrections-based program in which BOP inmates can participate and receive time off their sentences (by statute, up to one year, 18 U.S.C. § 3621(e)).  The program, which has stringent eligibility criteria, is not surprisingly, widely popular.  Recent news indicates that it is so popular, there are long waiting lists, inmates are being denied admission unless they have sufficient time remaining on their sentences not just for completion of the program but also to out-last the waiting list, and inmates are receiving significantly less than the maximum one-year allowable sentence reduction.  In close cases, therefore, these developments should be cited to judges as grounds for imposing probationary sentences with non-BOP drug treatment rather than consigning a client to BOP custody for drug treatment that never materializes. 

From Richard Crane, Esq.: At a symposium in Washington last week held by the U.S. Sentencing Commission on sentencing alternatives, Beth Weinman, BOP's RDAP Coordinator, said that the average sentence reduction for inmates successfully completing the RDAP program is now 7.64 months.  She attributed this to the large numbers of inmates eligible for the program and the lack of money to expand the program. She estimates that 40% of the inmates in BOP custody have a diagnosable substance abuse problem and that there is an RDAP waiting list of 7,000 inmates.  Ms. Weinman also said that the BOP is working on a program statement to define exactly what documentations suffice to complement the Bureau's own diagnosis of an inmate's substance abuse problem. Typically, the presentence report or documentation from a treatment provider is acceptable proof, but what else might prove adequate varies from institution to institution. 

From Joel Sickler of Justice Advocacy Group, P.C.: There is also another issue emerging.  According to officials at the BOP's Designation and Sentence Computation Center (DSCC), inmates entering the system with a sentence yielding less than 24 months to serve cannot participate in RDAP. There is no published policy on this change. The DSCC claims it is a new "designation" policy not a "treatment" issue (again, unpublished) and the judiciary has been alerted to it.  Additional information is awaited.  In the meantime, if practitioners want to cite to this "policy" in sentencing letters, they should call the DSCC in Texas to confirm it.

• Sentencing court may not presume Guidelines range is reasonable.  “In short, while a sentencing court is statutorily obligated to give fair consideration to the Guidelines before imposing sentence, in the end, it must make an ‘individualized assessment’ of the sentence warranted by § 3553(a) ‘based on the facts presented.’”

• Deference to sentencing court derives from its unique ability to make individualized assessments.  “[D]istrict courts have two distinct institutional advantages over appellate courts . . .(1) [they impose scores of sentences each year, and (2) [are] in a superior position to find facts relevant to sentencing and to judge their import under § 3553(a).  In the latter respect, district courts hear all the evidence relevant to sentencing, make credibility determinations, and interact directly with the defendant. In the process, they ‘gain[ ] insights not conveyed by the record’ that are often critical to identifying a just sentence.”

• Appellate court may not presume the unreasonableness of a non-Guidelines sentence.  “The Sixth Amendment prohibits appellate courts from applying rules or standards of review that effectively place a ‘thumb on the scales’ in favor of Guidelines sentences.”   A non-Guidelines sentences is not viewed with inherent suspicion” or subject to a “higher standard of review than abuse of discretion.”

• Previous precedent requiring “extraordinary circumstances” is no longer operative.  “An appellate court may not demand ‘extraordinary’ circumstances to justify non-Guidelines sentences,” although, “a major variance from the Guidelines range ‘should be supported by a more significant justification than a minor one’”

• District courts enjoy considerable discretion in identifying the grounds that can justify a non-Guidelines sentence.  And these grounds may include ones previously rejected under pre-Booker precedent, such as “a policy disagreement with the Sentencing Commission.”  

• District courts are free to disagree with the Sentencing Commission, but such disagreements are subject to “closer review” where Commission did typical empirical and experiential study.  Supreme Court requires “closer review . . . when the sentencing judge varies from the Guidelines based solely on the judge’s view that the Guidelines range fails properly to reflect §3553(a) considerations even in a mine-run case,” but “it appeared to limit this possibility to cases involving Guidelines based on the Commission's traditional empirical and experiential study.”

• Reviewing court may not substitute its view of what is the “right” sentence.  “[Appellate court may not] reject a variance simply because the resulting sentence differs from that which the reviewing court might have imposed if it had been entrusted with that responsibility.”  “[E]ven experienced district judges may reasonably differ, not only in their findings of fact, but in the relative weight they accord competing circumstances. Such reasonable differences necessarily mean that, in the great majority of cases, a range of sentences – frequently extending well beyond the narrow ranges prescribed by the Guidelines – must be considered reasonable.”  Appellate court, therefore, will only reject “those outlier sentences that reflect actual abuse of a district court's considerable sentencing discretion.”