Posted On Tuesday, March 15, 2016
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Once a client has pled or was found guilty, much of our focus as practitioners is naturally on the client’s potential exposure to a prison term or fine. Accordingly, we may not be as familiar with computing the potential period of supervised release applicable to a particular case. This issue came up in a recent case so I thought others might find the results of my research helpful, particularly in cases where the guideline range is not significant but imprisonment is nevertheless a significant possibility. It is also helpful as a means to double-check the calculations concerning supervised release made by the federal prosecutor in a plea letter or by the probation officer in a presentence report are correct.
In white collar matters, both the term and the management of supervised release often play a significant role in the lives of individuals attempting to rehabilitate and reconstruct their business or professional careers. The risk of action by the government to revoke supervised release for failure to meet conditions, which may include the payment of restitution and fines, is very real. Unfortunately, conditions of supervised release can often present substantial impediments to a return to a productive life following terms of imprisonment. Accordingly, it is critical for counsel to advocate for the most appropriate terms of supervisory status.
Similar to probation, supervised release is a period of monitoring by the federal probation office and includes various conditions and rules that a defendant must follow. Unlike probation, however, supervised release directly follows a term of imprisonment. After federal parole was abolished in 1984 as part of the enactment of the federal sentencing guidelines effective in 1987, supervised release replaced parole as the means for supervising defendants after their release from prison. Violating a condition of release, including committing another violation of federal or state law, can return the defendant to federal prison in addition to any punishment imposed for the new federal or state law violation.
The maximum term of supervised release depends on the classification of the offense of conviction under 18 U.S.C. §3559. Federal offenses are classified by their corresponding letter grades based on the maximum prison term, Class A felony to Class E felony and Class A misdemeanor to Class C misdemeanor. For example, a false statement offense under 18 U.S.C. §1001 typically has a five-year maximum and thus is a Class D felony. Likewise, the misdemeanor offense of interference with a law enforcement agent under 18 U.S.C. §118, which has a maximum prison term of 12 month, is a Class A misdemeanor.
Based on the letter grade of the federal offense, 18 U.S.C. §3583 provides the authorized terms of supervised release: For Class A or Class B felonies, not more than five years; for a Class C or Class D felonies, not more than three years; for Class E felonies or for misdemeanors (other than a petty offenses), not more than one year. When determining whether to impose supervised release and the length of the term, trial courts are directed to consider the 18 U.S.C. §3553(a) factors in determining the length of the term of supervise release and the conditions to be imposed. Most courts have standard conditions of release but routinely create and tailor additional conditions based on the needs of the defendant and his or her offense.
Posted On Monday, March 14, 2016
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The government’s investigation of public statements about product development by Uni-Pixel, Inc., has culminated in the settlement of potential criminal charges against its former Chairman and civil charges against the company. Civil litigation against two former executives will continue. On Wednesday, the SEC filed civil charges in the U.S. District Court for the Southern District of Texas against Uni-Pixel, its former CEO, Reed Killion, and former CFO, Jeffrey Tomz. On that that same day, Uni-Pixel agreed to pay $750,000 to settle charges against the company that it mislead investors about production status and sales agreements for a key product.
In the civil complaint, the SEC alleged that Uni-Pixel, a manufacturer of engineered films used to enhance and protect electronic product touchscreens, began publicly touting sales of a touch screen sensor product supposedly in speedy high-volume commercial production. According to the SEC, however, at the time of that announcement only a few samples had been manually completed. The SEC focused its complaint on several public announcements by Uni-Pixel during 2012 and 2013, including the following:
- The announcements in 2012 and 2013 that Uni-Pixel had entered into “multi-million dollar” sales agreements, without mentioning the material conditions the company would have to meet in order to actually receive those revenues.
- The announcement in April 2013 that Uni-Pixel’s high volume production line was “qualified and production ready” and its capacity “started at 50s moving to 100s and then 1000s over the next several months,” when at the time it had yet to produce any functional sensors through the high-speed process.
- The announcement in a November 2013 press release of a “purchase order” for its sensors that expected to ship an initial “commercial run” of sensors by year end. With the announcement, Uni-Pixel concealed that the order referred to in the release was for a mere $10 worth of sensors for the customer to review as samples.
The government asserted that those misrepresentations caused Uni-Pixel’s stock price to more than double. As a result of the movement of the stock price, Killion and Tomz made more than $2 million in personal profits from selling their own shares of company stock. The complaint alleges that both Killion and Tomz knew the company’s statements were untrue and that Uni-Pixel’s manufacturing process was still incapable of mass producing commercial quantities of sensors.
In a related matter, the company’s former board chairman, Bernard T. Marren, entered into a deferred prosecution agreement. The agreement alleged that Mr. Marren became aware that the information in Uni-Pixel’s press releases was inaccurate but failed to ensure that the company corrected the releases. Under the agreement, he is required to cooperate with the SEC’s continuing case, while complying with certain undertakings in order to avoid civil charges against him.
The case against Killion and Tomz continues as a civil matter in the United States District Court for the Southern District of Texas. In settling the civil charges against it, Uni-Pixel consented to entry of a final judgment, including a permanent injunction against violations of the Securities Act of 1933 and the Securities and Exchange Act of 1934. Under the terms of the settlement, which is subject to court approval, Uni-Pixel neither admitted nor denied the SEC’s charges.
The deferred prosecution agreement with former Chairman Marren can be found here, and the complaint filed against Uni-Pixel, Killion and Tomz, can be found here.
