Business-related crimes could be getting lighter sentences

8/15/2014

The federal panel that sets sentencing policy eased penalties this year for potentially tens of thousands of nonviolent drug offenders. Now, defense lawyers and prisoner advocates are pushing for similar treatment for a different category of defendants: swindlers, embezzlers, insider traders and other white-collar criminals.

Lawyers who have long sought the changes say a window to act opened once the U.S. Sentencing Commission cleared a major priority from its agenda by cutting sentencing guideline ranges for drug crimes. The commission, which meets Thursday to vote on priorities for the coming year, already has expressed interest in examining punishments for white-collar crime. And the Justice Department, though not advocating wholesale changes, has said it welcomes a review.

It's unclear what action the commission will take, especially given the public outrage at fraudsters who stole their clients' life savings and lingering anger over the damage inflicted by the 2008 financial crisis. But the discussion about tweaking sentences for economic crimes comes as some federal judges have chosen to ignore the existing guidelines as too stiff for some cases and as the Justice Department looks for ways to cut costs in an overpopulated federal prison system.

Sentencing guidelines are advisory rather than mandatory, but judges still rely heavily on them for consistency's sake. Advocates arguing that white-collar sentencing guidelines are "mixed up and crazy" could weaken support for keeping them in place, said Ohio State University law professor Douglas Berman, a sentencing law expert.

The commission's action to soften drug-crime guidelines is a signal that the time is ripe, defense lawyers say.

Just as drug sentences have historically been determined by the amount of drugs involved, white-collar punishments are typically defined by the total financial loss caused by the crime. Advocates hope the commission's decision to lower sentencing guideline ranges for drug crimes, effectively de-emphasizing the significance of drug quantity, paves the way for a new sentencing scheme that removes some of the weight attached to economic loss.

A 2013 proposal from an American Bar Association task force would do exactly that, encouraging judges to place less emphasis on how much money was lost and more on a defendant's culpability. Under the proposal, judges would more scrupulously weigh less-quantifiable factors, including motive, the scheme's duration and sophistication, and whether the defendant actually financially benefited or merely intended to.

The current structure, lawyers say, means bit players in a large fraud risk getting socked with harsh sentences despite playing a minimal role.

"It's real easy to talk about 10, 15, 20 years, but when you realize just how much time you're talking about ... it's too much," said Washington defense lawyer Barry Boss, an ABA task force member.

No one is seeking leniency for imprisoned financier Bernie Madoff, who's serving a 150-year sentence for bilking thousands of people of nearly $20 billion, or fallen corporate titans whose greed drove their companies into the ground. But defense lawyers are calling for a sentencing structure that takes into account the broad continuum of economic crime and that better differentiates between, for example, thieves who steal a dollar each from a million people versus $1 million from one person.

Any ambitious proposal will encounter obstacles.

It's virtually impossible to muster the same public sympathy for white-collar criminals as for crack-cocaine defendants sentenced under old guidelines now seen as excessively harsh, which took a disproportionate toll on racial minorities. The drug-sentencing overhaul also was promoted as fiscally prudent, because drug offenders account for roughly half the federal prison population. Tea Party conservatives and liberal groups united behind the change.

In comparison, the clamor for changing white-collar guidelines has been muted. The Justice Department, already criticized for its paucity of criminal prosecutions arising from the financial crisis, has said it's open to a review but has not championed dramatic change.

"I don't think there's a political will for really cutting back or retooling the guidelines," said Columbia University law professor Daniel Richman.

The commission's last major change to the economic crime guidelines came more than a decade ago, when it stiffened penalties. But as fraud sentences have increased, some judges have deviated from the guidelines to impose terms far more lenient than the government's recommendations. One judge, Frederic Block of the Eastern District of New York, cautioned in 2008 that the guidelines should not be a "black stain on common sense."

When some adhere to the guidelines but others don't, critics say, the result can be as haphazard as if guidelines didn't exist at all.

In Manhattan, U.S. District Judge Jed Rakoff, an outspoken critic of the guidelines, in 2012 sentenced former Goldman Sachs director Rajat Gupta to two years in prison on insider-trading changes, about one-fifth the government's recommended sentence. And in Florida, Judge James S. Moody Jr. sentenced a group of health care executives in May to sentences so lenient that he acknowledged prosecutors might think "that I've lost my mind."

A former Wall Street trader convicted of abusing a government bailout program could have received a double-digit sentence under the guidelines but got two years instead. The Connecticut judge who imposed the sentence last month, Janet C. Hall, called the guidelines unhelpful "because the loss aspect of the crime, in effect, overwhelms all the other aspects."

Washington lawyer Barry Pollack, an officer of the National Association of Criminal Defense Lawyers, said while the commission could let the guidelines stand, he hopes for some movement.

"I think the real question is will they take the lesser and easier step of simply reducing sentences across the board, or will they use this as an opportunity to revisit the entire philosophy behind the white-collar sentencing guidelines," he said. "I think only time will tell on that."

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