Posted On Monday, February 16, 2015
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Last month, the U.S. Sentencing Commission proposed amendments to the federal sentencing guidelines including several important changes which would affect white collar defendants.
“Inflationary” changes to the §2B1.1 loss amounts increase thresholds for offense level enhancement
The first change alters the amounts in the loss table under §2B1.1 – termed “monetary values” – such that they are increased to adjust for inflation. This is part of the Commission’s obligation under a Congressional mandate to consider inflationary adjustments to monetary penalties every four years. This would be an important change because the §2B1.1 loss table has not been adjusted for inflation since it was originally promulgated in 1987. The threshold amounts for enhancements to offense levels will be higher – in some case significantly higher – than current thresholds.
Although the Commission is considering two methods of adjusting for inflation, both increase the monetary values by at least 1.34, a multiplier derived from the Bureau of Labor Statistics’ Consumer Price Index, and then round up by one of two methods. One option rounds up using a statutory rounding method used to adjust civil monetary penalties while the second option rounds up to higher, “rounder” numbers at more regular intervals for loss amounts above $95,000. As a result, under either method, the new loss amounts would be the same for intervals under $95,000 but different for intervals above $95,000.
For example, a loss amount of $70,000 presently increases the offense level by 8 points; however, under both options under consideration, only a loss amount of $95,000 and higher would trigger the 8-level increase. Likewise, where a loss amount of $1 million currently increases the offense level by 16 points, only loss amounts of $1.35 million or $1.5 million, respectively, would trigger the 16-level increase under the two options.
Clearly, under either scenario, white collar defendants will benefit in comparison to the current fraud guidelines. Given that the “inflationary adjustments” are based on the technical premise of inflation and required by Congress, it’s likely that this amendment will ultimately be approved by Congress.
Revisions to §2B1.1 enhancements
The Commission is also contemplating changes to §2B1.1 including the provisions relating to the definition of “intended loss” and the enhancements for sophisticated means and victims’ financial status.
1. Intended loss redefined
Regarding intended loss, the Commission is weighing a proposal that the guidelines should be revised to better reflect a defendant’s intent when determining the loss amount. Appellate courts presently differ as to whether they require a subjective or objective analysis. The Second, Third, Fifth, and Tenth Circuits have held that a subjective inquiry is required but the First and Seventh circuits support an objective approach.
The first of the Commission’s two competing options would redefine intended loss to include the pecuniary harm that the defendant purposely sought to inflict as well as the defendant’s overall purpose, as inferred from all available facts. The second option is similar to the first but also includes the pecuniary harm that any other participant sought to inflict in instances where the defendant is accountable under relevant conduct for another participant.
2. Victim impact enhancement
The Commission is also considering an enhancement in cases where the offense resulted in “substantial financial hardship” to one or more victims. The Commission is considering a two, three, or four level enhancement under that provision. The commentary under §2B1.1 would define “substantial financial hardship” and allow the court to consider factors including whether the offense resulted in the victim become insolvent, filing for bankruptcy, relocating to a less expensive home, being erroneously arrested or denied a job, etc.
3. “Sophisticated means” curtailed
As for the “sophisticated means” enhancement under §2B1.1, the Commission is contemplating whether to limit its application to only the defendant’s conduct rather the offense as a whole. The current guidelines allow for a two-level enhancement regardless of whether the defendant’s conduct impacted the fraud’s sophistication.
The Commission is also considering whether the purportedly “sophisticated means” should be compared to only similar frauds or only frauds that fall under §2B1.1. Prevailing case law allows the offense conduct to be compared to all fraud falling under §2B1.1. The proposed amendment would increase the offense level by two levels where “the offense otherwise involved sophisticated means and the defendant engaged in or caused the conduct constituting sophisticated means.”
Changes to non-economic sentencing guidelines
The Commission’s proposed amendments also include changes to non-white collar guidelines, including those for drug offenses. This year’s amendments include a request for comment on the treatment of “flavored drugs” which are colored, packaged or flavored to appeal to children. The Commission received reports that drugs are flavored to make them taste like candy and marketed in smaller amounts such that they are cheaper and more accessible to children.
The proposed amendments also seek to incorporate new statutory penalties given that hydrocodone is now a Schedule II controlled substance. As a result of that change, the Commission’s proposed amendments would remove references to “Schedule III hydrocodone” from §2D1.2, including the drug quantity table, while also giving hydrocodone a new marijuana equivalency.
The full text of the proposed amendments – 88 pages long but ironically termed the “reader-friendly version” – can be found here.
Posted On Tuesday, February 3, 2015
Critics of what many have come to see as “draconian” mandatory minimum sentencing laws can take heart in a recent judicial trend invalidating the current mandatory minimum sentencing schemes in several jurisdictions. Following the United States Supreme Court ruling in Alleyne v. United States, ___ U.S. ___, 133 S.Ct. 215 (2013), the Supreme Court of New Jersey and the Superior Court of Pennsylvania have both ruled that state statutes requiring the application of mandatory minimum sentences based solely on judicial findings of fact were unconstitutional.
I. The United States Supreme Court Reconciles Its Sentencing Jurisprudence
The Sixth Amendment and the Due Process Clause require that every defendant is entitled to a trial by jury and that each element of the crime with which the defendant is charged be proved to the jury beyond a reasonable doubt. See, e.g., United States v. Gaudin, 515 U.S. 506, 115 S.Ct. 2310 (1995). However, traditionally, facts which could enhance the length of a sentence need only have been proven by a preponderance of the evidence. Since at least McMillian v. Pennsylvania, 477 U.S. 79, 106 S.Ct. 2411 (1986), the Supreme Court has drawn a distinction between the “elements of the offense charged” that a jury must find beyond a reasonable doubt, and “sentencing factors” that a judge could consider after the jury found the defendant guilty. Thus, a defendant convicted of a crime often faced an enhanced penalty of additional years of incarceration based on facts never submitted to, or decided by, a jury.
In Apprendi v. New Jersey, 530 U.S. 466, 120 S.Ct. 2348 (2000), the United States Supreme Court held that all facts that raise the statutory maximum sentence constitute elements of the charged crime that a prosecutor must prove to a jury beyond a reasonable doubt. Conversely, two years later, the United States Supreme Court ruled, in Harris v. United States, 536 U.S. 545, 122 S.Ct. 2406 (2002), that facts that raise the applicable mandatory minimum sentence were only “sentencing facts,” which a judge alone could find by a preponderance of the evidence. While Harris remained something of an outlier in subsequent Supreme Court rulings regarding sentencing, it remained good law for over a decade. Finally, in Alleyne v. United States, ___ U.S. ___, 133 S.Ct. 2151 (2013), the Supreme Court resolved the conflict between Apprendi and Harris, holding that any fact that increases either the floor or the ceiling of a sentence is an element of the offense that must be found by a jury beyond a reasonable doubt. Id. at 2160-62.
The effects of the Alleyne ruling immediately began to be felt. In August 2013, Attorney General Eric Holder issued a change to the Department of Justice’s charging policy based on the Alleyne ruling. Holder directed that, in certain drug cases, federal prosecutors should decline to charge the quantity necessary to trigger the mandatory minimum sentence. This came as welcome news to many critics who, for years, have decried mandatory minimum sentences in low-level, non-violent drug cases as disproportionate and discriminatory.
II. Pennsylvania and New Jersey Follow Suit
This past September, the Pennsylvania Superior Court ruled the imposition of a mandatory minimum sentence based on judicial findings of fact unconstitutional. Commonwealth v. Newman, 99 A.3d 86 (Pa. Super. Ct. 2014). In Newman, defendant was arrested after a search warrant revealed a large quantity of drugs and a gun in his apartment. Defendant was convicted of possession with intent, simple possession, possession of drug paraphernalia, dealing in proceeds of unlawful activities, possession of an instrument of crime and criminal conspiracy. Following the trial, the district attorney filed a notice seeking the mandatory sentence under 42 Pa.C.S.A. 9721.1, which enhances the minimum sentence where a firearm is found in the vicinity of illegal drugs. Defendant was then sentenced under 9721.1 to five to fifteen years in prison. Five days after the Superior Court affirmed his sentence, Alleyne was decided. Granting defendant’s request for reconsideration, the Superior Court, sitting en banc, vacated defendant’s sentence. The Court held that, in the wake of Alleyne, Section 9721.1 was unconstitutional as it permitted “the trial court, as opposed to the jury, to increase a defendant’s minimum sentence based upon a preponderance of the evidence that the defendant was dealing drugs and possessed a firearm, or that a firearm was in close proximity to the drugs.” Id. at 98. The Superior Court went on to hold that, “Under Alleyne, the possession of the firearm must be pleaded in the indictment, and must be found by the jury beyond a reasonable doubt before the defendant may be subjected to an increase in the minimum sentence.” Id.
More recently, the Supreme Court of New Jersey similarly ruled that a statute requiring the trial court to enhance a defendant’s mandatory minimum sentence based on certain factual findings made by the trial judge was unconstitutional under Alleyne. In that case, two defendants, Fuquan Cromwell and James Grate, were stopped by police on a college campus during an attempted robbery of an acquaintance. Defendants were charged with various offenses and convicted of second-degree unlawful possession of a weapon and third-degree unlawful possession of a weapon at an educational institution. During the sentencing hearing, a corporal with the sheriff’s office testified that both defendants had admitted to being members of the local chapter of the Crips street gang and that both had tattoos denoting their membership. Based on this testimony, the trial judge found, inter alia, that aggravating factor five, a substantial likelihood that defendants were involved in organized criminal activity, N.J.S.A. 2C:44-1(a)(5), applied to both defendants and, on that basis, ordered mandatory five-year parole disqualifiers under N.J.S.A. 2C:39-5(i).
On appeal, the Supreme Court of New Jersey found that under Alleyne, “any fact that increases the mandatory minimum sentence is an ‘element’ that must be submitted to the jury” to be found beyond reasonable doubt. Therefore, the imposition of a mandatory minimum sentence under N.J.S.A. 2C:39-5(i) was unconstitutional. The Court declined the state’s invitation to perform judicial surgery in order to free the statute from constitutional defect, holding that the statute’s unambiguous requirement that a judge impose a mandatory minimum sentence based on a judicial finding of fact meant that it would have to be completely re-written to pass constitutional muster in the wake of Alleyne.
These rulings are no doubt a net gain for defendants who, in the wake of Alleyne, cannot have either the floor or the ceiling of their sentence increased based solely on a judicial finding of fact. But judges still have a great deal of discretion in sentencing. For example, the United States Supreme Court has stressed that the determination of what counts as a “prior conviction” – often a critical fact in sentencing – remains in the hands of the judge, not the jury. See Apprendi, 530 U.S. at 491-92, 120 S.Ct. 2348.
In these jurisdictions at least, the state is now to be held to its burden – beyond a reasonable doubt – in most instances in which the state seeks an increased sentence.
