Asked & Answered: Examining sentencing guidelines for white-collar crimes

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A federal court in Houston  considered last month whether to reduce former Enron CEO Jeffrey Skilling’s 24-year prison sentence for his role in the company’s meltdown. Critics of the guidelines in white-collar cases say that they have come to rely too much on financial-loss calculations, which can grow dramatically when the crime involves a public company whose stock price plummets.

Depending on the situation, a public-company executive could face life in prison. David DuMouchel chairs Butzel Long’s Corporate Compliance, Internal Investigations and Criminal Defense practice. He spoke recently on sentencing guidelines with Steve Thorpe with the Legal News.

DuMouchel’s practice areas include white collar criminal defense, defense of corporations and individuals in criminal and civil antitrust matters, and SEC enforcement of corporate executives.

Thorpe: Give us a quick sketch of the latest developments in the Skilling case.

DuMouchel: Mr. Skilling’s sentence was reduced recently from 24 years to 14 years imprisonment. This was the result of an agreement between Mr. Skilling and the Department of Justice under which Mr. Skilling agreed to drop any more appeals, challenges, etc., and the Government would now be free to release some $40M of restitution it has collected with no further delay.

For all practical purposes, this ends the Skilling case and probably will allow Mr. Skilling to be eligible to serve the remainder of his sentence in a federal prison camp (i.e., a low security facility).
Under the Sentencing Guidelines, largely based upon “loss” calculations which guide the analysis in fraud cases, Mr. Skilling’s guideline range was 188-235 months imprisonment.

Then, the Court added a 4 point enhancement for jeopardizing the soundness of a financial institution (the employee retirement fund), which raised the guideline range to 292-365 months (24-30 years). Mr. Skilling went to trial, which foreclosed the applicability of certain decreases in the guideline range (acceptance of responsibility, etc). The result, following his conviction, was the 24 year sentence.

Thorpe: An increasing number of judges appear to be departing from the guidelines. Is that one of the incentives for reform?

DuMouchel: There is no question that an increasing number of judges are departing (or, more specifically, varying) from guideline range sentences.

Whether or not this is an incentive for reform of the Guidelines system, or at least ranges in certain fraud offenses, is not necessarily a cause/effect circumstance. However, because the Sentencing Commission does review and consider actual sentences being imposed for offenses, it could have that result.

Probably the most significant factor in such variances, however, is that the U. S. Supreme Court in Booker made clear that the Guidelines are “advisory”, and the sentencing courts have felt much freer to vary from the guidelines based upon more traditional sentencing concepts.

Recent figures from the courts across the country show some significant guideline variances in fraud sentences; it is not unusual for such variances to occur now in around 50% of such sentences.

Thorpe: The Justice Department says that those disparities in sentencing caused by judges straying from the guidelines hinder their battle against crime. Valid criticism?

DuMouchel: The Department of Justice has complained that variances in certain types of fraud cases hinder its law enforcement efforts in white collar cases. The rationale is that such offenses, by their nature, involve planning, usually multiple acts of dishonesty, multiple victims, etc.

The thought is that people who engage in such planning and analysis also will consider the likely long-term prison sentences-i.e., the “cost-benefit” of engaging in such behavior vis-a-vis the many years in prison that might result, etc.

Thorpe: Jed Rakoff, a New York federal judge and member of an ABA Task Force on the topic, said in a speech earlier this year that the guidelines “should be scrapped in their entirety.” Do you agree?

DuMouchel: District Judge Rakoff, and he is not alone, suggested scrapping the guidelines system, or at least the adherence to it, in fraud cases. He also expressed some of those same criticisms in Mr. Gupta’s securities fraud case.

His opinion says that the guidelines virtually ignore the “person of the defendant,” and focus only (or almost only) on the “loss” figures. A sentence is to be personal, focused on the individual, his/her life as a whole, and not just a financial loss/gain figure. In many cases, the amount of loss bears no relationship to and/or fails to adequately measure a person’s venality.

Instead, guidelines ranges are largely being determined based upon the vagaries of markets, real estate values, and the economic conditions of the times, which does not seem “fair” in sentencing decisions.

Individuals who defraud people out of a lot of money where the market variables result in less significant losses to the victims or gains to the defendants could end up with much lower sentencing guidelines than someone else whose similar conduct resulted in more severe losses solely because of those market variables.

Thorpe: The U.S. Sentencing Commission is considering revising its economic-crime rules and has scheduled a September symposium to get input on possible changes. What sorts of suggestions do you think they’ll hear, and from whom?

DuMouchel: The US Sentencing Commission regularly considers changes/amendments to the guidelines. It receives input from many sources, including the public, the Practitioners Advisory Group of which I am a voting member, and the Department of Justice.

It also will likely receive input from business groups, regulators and enforcement agencies, etc. I assume the kinds of suggestions that will be provided will include those that address the concerns discussed above.

In addition to the severity of some of these guidelines and resulting sentences, another significant concern is disparity of sentences. One of the driving forces behind the guidelines system was a concern that similarly situated persons who commit similar offenses were being sentenced in very different ways depending upon the particular judge or court imposing the sentence.

Whether the guidelines have “fixed” that disparity is certainly open to dispute. Some would argue that the way the system is now structured has transferred much of the sentencing court’s discretion over to the prosecutors who decide what charges to bring, and particularly to “reward” those who decide to assist the government in its prosecution efforts.

Making the guidelines advisory has given some of that discretion back to the courts-though the charging decisions of the Executive Branch always will have the most impact upon what happens to a person convicted (by plea or trial) of a crime.

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