Likely to sate the public’s appetite to punish perpetrators of financial crimes, in recent years Congress and the United States Sentencing Commission (USSC) have created a scheme where individuals convicted of white collar crimes serve long sentences and, thereafter, are saddled with a lifetime of disabilities that often are out of proportion to the venality of their conduct or the legitimate goals of our criminal justice system. For years, the length of sentences in white collar cases largely has been determined by the United States Sentencing Guidelines almost-singular focus on “loss” as the key factor in economic crimes, which obscures the myriad other factors that affect a defendant’s true culpability in an individual case and often results in unduly punitive results. In some cases, relatively low-level and ministerial employees faced life sentences in prison because the guidelines did not properly account for their role in the scheme. In others, defendants faced decades-long sentences for activity that was more “farcical than dangerous” simply because the “intended loss” of their “ridiculous” scheme numbered in the billions of dollars.
White collar defendants also face long-term debilitating collateral consequences imposed as a result of their conviction. For instance, the SEC may revoke the registration of an individual convicted of a crime or place limitations on his or her ability to practice in the industry. Defendants also may be barred from obtaining federal or state government contracts or programs and may be unable to secure or maintain licenses needed to conduct business.
Legislative action is needed to address the socially regressive and excessively punitive nature of white collar sentencing. The momentum for sentencing reform steadily has been building over the past few years, as crime rates have decreased. Unfortunately, the reforms at hand do little to address the issues unique to white collar cases.
Current Proposals to Address Unduly Long Criminal Sentences
Earlier this month, Justice Department officials announced that 6,000 federal prisoners were set to be released in an effort to reduce persistent overcrowding and spiraling costs. The early releases also are a nod to three decades of unduly harsh sentences for drug offenders and follows action by the USSC retroactively reducing the potential punishment for drug offenders. The USSC estimates that the revised guidelines could have an impact on approximately 46,000 of 100,000 incarcerated drug offenders.
This move comes at a time of surprising bi-partisan agreement on the need for federal sentencing reform. On October 1, 2015, Iowa Republican Chuck Grassley and Illinois Democrat Richard Durbin combined forces to lead a bi-partisan group of Senators in introducing a “landmark” criminal justice bill that represents the first legislation to take on the mandatory drug sentencing laws adopted during the 1980s and 1990s in response to a spiked increase in drug-fueled violence. The key provisions of the Sentencing Reform and Corrections Act of 2015 reduce the enhanced penalties that apply to repeat drug offenders and eliminate the three-strike mandatory life provision. The legislation also targets violent criminals while granting judges greater discretion in sentencing lower-level drug offenders.
In announcing the bill, Senator Durbin noted that the United States incarcerates more of its citizens than any other country. “Mandatory minimum sentences were once seen as a strong deterrent. In reality they have too often been unfair, fiscally irresponsible and a threat to public safety. Given tight budgets and overcrowded prison cells, our country must reform these outdated and ineffective laws that have cost American taxpayers billions of dollars.”
The Sentencing Reform and Corrections Act comes on the heels of three unsuccessful bipartisan bills introduced last year, but commentators believe that it may be the best policy reform compromise available. At the very least, it reflects the groundswell of support for significant sentencing reform that has grown over the past decade.
What Does This Mean for White Collar Defendants?
Although the legislative proposals primarily are focused on drug crimes, the USSC also has revisited the guidelines for economic crimes. Sentencing reforms adopted by the sentencing panel in April, which will become law on November 1 barring any objection by Congress, seek to better balance the guideline’s focus on loss. The amendments give greater weight to a defendant’s personal intent to cause losses, instructing judges to consider whether a defendant purposefully sought to cause harm when measuring the “intended loss” from a crime, and encourages courts to show leniency toward those who play only a minor role in a fraudulent scheme. The amendments also reduce the focus on “victim counting,” allowing for harsher penalties for criminals who substantially harm a few people as compared to a defendant who caused relatively minor harm to thousands of victims. Finally, the commission adjusted the fraud loss guidelines tables used to calculate sentencing ranges to account for inflation for the first time in 15 years, which the Justice Department predicts will reduce fraud sentences by 26% on average.
Although the USSC’s changes should be applauded as a first and necessary step, many on the defense side do not believe they go far enough to ensure more measured sentences. The discretionary guidelines serve as a road map to federal judges in sentencing economic crime, but have lost credibility among many federal judges who find that their application can result in draconian and unnecessarily long sentences. The amendments also ignore broader changes suggested to the USSC by an American Bar Association task force report and other practitioners during the USSC’s fact-gathering meetings in 2013.
I and others in recent years have attempted to highlight the need for sentencing reform in the area of economic offenses and the devastating financial impact of the collateral consequences of conviction, which can linger for years in light of the fact that limited expungement options exist for federal convictions. Earlier this year, Eastern District of New York Judge John Gleeson commented on the “excessive and counterproductive” employment consequences of federal convictions and the federal courts seemingly automatic refusal to expunge such convictions. Issuing an expungement order in that case, Judge Gleeson called for a “fresh look at policies that shut people out from the social, economic, and educational opportunities they desperately need in order to reenter society successfully.” The Justice Department has appealed Judge Gleeson’s order.
Although the momentum for sentencing reform may signal significant changes for drug offenders, a long way is left to go in the context of economic and white collar offenses.
From The Insider Blog: White Collar Defense & Securities Enforcement.