As previously reported on this blog here and here, the United States Sentencing Commission has proposed amendments to the widely criticized federal sentencing guidelines for economic crimes. On April 9, 2015, after hearing extensive public comment on the proposed amendments, the Commission voted to adopt an amended version of the Sentencing Guidelines which will take effect November 1st absent objection by Congress.
The changes are significant but not sweeping. Commission Chair Judge Patti B. Saris described the revisions as addressing “some problem areas, particularly at the high end of the loss table.” Despite objections by the Department of Justice and others that some of the amendments will create unwarranted leniency in the guidelines, the final amendments largely parallel those first proposed by the Commission in January.
Meanwhile, members of the defense bar argued that the changes do not go far enough in departing from an abstract numerical approach (measured by dollars and number of victims) when attempting to gauge culpability. James Felman, a defense attorney who co-chairs the American Bar Association’s criminal justice section and testified before the Commission, characterized the amendments as a “very meager response” to the problems endemic in § 2B1.1 of the Sentencing Guidelines, promising that “[w]e’ll keep lobbying the commission to do more.”
Objectors hoping to stop the changes before they become permanent may now take their concerns to Congress. The final amendments make changes in the following areas:
A. § 2B1.1 cmt. 3(A)(ii): Intended Loss Defined
Appellate courts have disagreed over whether measurement of intended loss (the size of which is a factor in the Sentencing Guidelines) should be a subjective inquiry focused on the defendant’s intent or an objective inquiry focused on what harm could reasonably have been anticipated. The amended guidelines clarify that determining “intended loss” is a subjective inquiry to be measured by the harm “that the defendant purposely sought to inflict.”
B. § 2 B1.1(b)(2): Victims Table
The Sentencing Guidelines include a series of tiered sentence enhancements (the victims table) that increase in severity based on the number of victims of an economic crime. This provision has been criticized as overly focused on the number of victims, regardless of the perpetrator’s role in harming them and the degree of individual harm.
As amended, the victims table incorporates whether the offense caused substantial financial hardship to multiple victims. The 2-level enhancement will apply if the offense involved 10 or more victims or mass-marketing, or if the offense resulted in substantial financial hardship to one or more victims. The 4-level enhancement will apply if the offense resulted in substantial financial hardship to five or more victims, and the 6-level enhancement will apply if the offense resulted in substantial financial hardship to 25 or more victims. Enhancements for schemes involving theft or opening of undelivered U.S. Mail (described in Note 4(C)(ii)) will begin at 10 rather than 50 victims.
A new section (4(F)) in the comments provides factors for courts to consider in determining whether substantial financial hardship occurred, including: bankruptcy, forced relocation, damage to credit worthiness, and loss of savings.
C. § 2B1.1(b)(10)(C): Sophisticated Means Enhancement
The Sentencing Guidelines recommend an enhancement for crimes committed using “sophisticated means.” Courts have differed on whether the enhancement applies to defendants whose conduct involves high levels of planning, deception, and complexity or merely those who commit crimes that ordinarily require sophisticated means, such as complex interstate telemarketing-fraud schemes or accounting frauds.
The amendment requires consideration of the complexity of the offense or its concealment, providing examples such as the use of shell corporations and cross-border planning and execution. However, it also makes clear that only defendants whose own actions were sophisticated or caused the offense to be sophisticated should be subject to the enhancement. The Commission has rejected the position that a defendant’s co-conspirator’s sophisticated means could trigger the enhancement.
D. § 2B1.1(b)(1): Fraud-On-The-Market Enhancement
Currently, the Sentencing Guidelines provide a formula for calculating enhancements in “fraud-on-the-market” cases based on the amount of losses incurred by investors (even those unintended by the defendant) who traded inflated or deflated securities on public markets because the defendant disseminated false or misleading information. The amendment provides courts with greater discretion to measure loss by using any method appropriate and practicable under the circumstances.
E. Adjustments for Inflation
The Commission intends to adjust loss thresholds for sentencing by inflation for the first time since 1987. According to the DOJ, this could reduce fraud sentences by an average of 26 percent.