Revisions To White Collar Sentencing Guidelines To Take Effect On November 1st
By: John A. Schwab
The 2015 version of the sentencing guidelines will take effect on November 1, 2015. Although once again there are numerous minor revisions to the guidelines, this year’s major revisions are focused primarily on economics offenses, complementing the 2014 amendments, which focused primarily on drug trafficking offenses. The 2015 amendments incorporate the changes proposed in February 2015 by the U.S. Sentencing Commission, which voted to promulgate the amendments in April 2015. Of note, the revisions concerning economic offenses in the 2015 guidelines provide the foundation for several potentially beneficial sentencing arguments for white collar defendants.
“Inflationary” Changes to the §2B1.1 Loss Amounts Increase Thresholds for Offense Level Enhancement
Perhaps the most noteworthy of the amendments to the economics offenses guidelines is the change to the “monetary values” listed in the loss table under §2B1.1, increasing the listed amounts to adjust for inflation. This change is one of the Commission’s obligations stemming from a Congressional mandate to consider inflationary adjustments to monetary penalties every four years. This is an important change because the §2B1.1 loss table has not been adjusted for inflation since it was originally promulgated in 1987. The threshold monetary amounts for enhancements will be higher in the 2015 guidelines – in some instances, significantly higher – than in the current guidelines.
The Commission considered two methods of adjusting for inflation. Both methods considered would increase the monetary values by at least 1.34, a multiplier derived from the Bureau of Labor Statistics’ Consumer Price Index, and then would round up by applying one of two methods. One option employed a rounding methodology that has previously been used in the adjustment of civil monetary penalties. The second option rounded up to higher, “rounder” numbers at more regular intervals for loss amounts above $95,000. The Commission ultimately opted for the second, utilizing the “rounder” figures.
For example, under the 2014 guidelines, a loss amount of $70,000 would increase the offense level by 8 points. By comparison, under the 2015 guidelines, a loss amount of $95,000 and higher would be necessary to trigger the 8-level increase. Likewise, in the 2014 guidelines, a loss amount of $1 million would increase the offense level by 16 points. In the 2015 guidelines, a 16-level increase will not be triggered until the loss amount exceeds $1.5 million. This represents a meaningful change with the potential for significant impact on sentences for economic offenses.
The “inflationary adjustments” are also important because similar changes were made to other portions of the guidelines that should benefit white collar defendants in cases where §2B1.1 is not implicated. This includes the tax table in §2T4.1 and the fine tables for individuals and organizations in §5E1.2 and §8C2.4, respectively. For example, under the §2T4.1 tax table, a tax loss of $1 million would trigger a 22-level increase, while the 2015 guidelines place the tax loss threshold for a 22-level increase at $1.5 million.
Revisions to §2B1.1 Enhancements
The Commission enacted several other changes to §2B1.1, including changes to the definition of “intended loss,” as well as the enhancements for sophisticated means and victims’ financial status.
1. Intended Loss Redefined
The Commission revised the guidelines to better reflect a defendant’s intent when determining the loss amount, taking sides in a split that exists among several U.S. Courts of Appeals. The focus of the split is whether evaluating loss requires a subjective or an objective analysis when evaluating intended loss. The Second, Third, Fifth, and Tenth Circuits have held that a subjective inquiry is required, while the First and Seventh Circuits support an objective approach.
The Commission adopted the Tenth Circuit’s view by revising the commentary under Application Note 3(A)(ii) to define intended loss as the pecuniary harm that “the defendant purposely sought to inflict.” The Commission stated that “[t]he amendment reflects the Commission’s continued belief that intended loss is an important factor in economic crime offenses, but also recognizes that sentencing enhancements predicated on intended loss, rather than losses that have actually accrued, should focus more specifically on the defendant’s culpability.”
2. Victim Impact Enhancement
The Commission also revised the victims table within §2B1.1 to apply a two-, four-, or six-level enhancement where the offense resulted in “substantial financial hardship” to one or more victims, five or more victims, or 25 or more victims, respectively. The commentary under §2B1.1 was revised to provide non-exhaustive factors to determine whether a “substantial financial hardship” was caused. The factors include becoming insolvent; filing for bankruptcy; suffering substantial loss of a retirement, education, or other savings or investment fund; making substantial changes to employment; making substantial changes to living arrangements; or suffering substantial harm to the victim’s ability to obtain credit.
3. “Sophisticated Means” Curtailed
The 2015 amendments also change the “sophisticated means” enhancement under §2B1.1, by limiting its application to the defendant’s conduct rather the offense as a whole. The 2014 guidelines allow for a two-level enhancement regardless of whether the defendant’s conduct impacted the fraud’s sophistication. However, the 2015 guidelines only apply the enhancement to offenses in which the defendant intentionally engaged in or caused conduct constituting sophisticated means. The Commission stated that “basing the enhancement on the defendant’s own intentional conduct better reflects the defendant’s culpability and will appropriately minimize application of this enhancement to less culpable offenders.”
The 2015 sentencing guidelines are available here.