White Collar Alert

As we previously noted, the U.S. Sentencing Commission has been considering changes to the Sentencing Guidelines for economic crimes. This deliberation over Section 2B1.1 stems, in part, from criticism from practitioners, judges, and scholars suggesting that “the fraud [G]uideline[s] may be fundamentally broken.” Indeed, as my colleague Lathrop Nelson noted just last week, the Section’s focus on monetary loss and the use of numerous enhancements (which are often not an appropriate measure of culpability) have resulted in ever-increasing sentences for first-time offenders.

It was these concerns that led the American Bar Association Criminal Justice Section Task Force on the Reform of Federal Sentencing for Economic Crimes to propose a fundamental rewrite of the Section in Fall 2014. The proposed modifications would reduce the impact of loss on the ultimate sentence, enhance or subtract levels based upon the defendant’s level of culpability and the impact on the victim, and cap sentences for offenders whose conduct was not otherwise serious.

Last week, the Commission responded, publishing several proposed amendments to Section 2B1.1. In the accompanying news release, the Commission stated that they “have not seen a basis for finding the guideline to be broken for most forms of fraud, like identity theft, mortgage fraud, or healthcare, but [that their] review has helped … identify some problem areas where changes may be necessary.” As a result, the Commission did not make the wide-ranging modifications suggested by the ABA Task Force, but did suggest some significant changes, including the following –

• A change of the ambiguous and seemingly all-inclusive definition of intended loss to: the pecuniary harm “that the defendant purposely sought to inflict” as inferred from all available facts;
• A slight reduction in the enhancements for the number of victims;
• The addition of an enhancement where the victim suffered substantial hardship;
• A revision of the enhancement for use of “sophisticated means,” such that it will only apply if the defendant’s conduct is “sophisticated,” rather than offense as a whole; and
• A special rule for determining the Guidelines range in fraud on the market cases, which will be based on the defendant’s gain from a fraud, rather than loss, which courts have had difficulty calculating.

The Commission has raised questions regarding, and is specifically seeking input on, several of these proposed amendments. The period in which to submit comments remains open until March 18^th. It is anticipated that ABA Task Force, among others, will weigh in. Let’s hope that the ultimate amendments to Section 2B1.1 – even if narrow in scope – help limit what are often “nonsensical,” “hocus-pocus” calculations.   See Leah McGrath Goodman, “Nonsensical Sentences for White Collar Criminals,” Newsweek (June 26, 2014).