Sunday, November 9, 2014

Guidelines Errors Galore

Last week, two courts of appeals vacated sentences based on Guidelines errors. Here's why:

(1) United States v. Prange: from the First Circuit, but authored by Judge Baldock of the Tenth Circuit (and joined by Judges Kayatta and Selya)
This is a securities fraud case that went to trial. The Court affirmed the convictions, but found one error in the Guidelines calculations. That error centered on the loss calculations (USSG 2B1.1). The Court held that the district court erred because it did not offset the amount of loss by the value of the stocks purchased by the government (USSG 2B1.1, comment. 3(E)(I)). In doing so, the Court expressed frustration with the government's argument that the stocks were worthless. This case is a good reminder that loss amounts must be offset by the value of any property returned or services rendered.

(2) United States v. Brown: from the Ninth Circuit; written by Hurwitz (with Bea and Ikuta)
This case involves a Ponzi mail fraud scheme and bankruptcy fraud. Sentencing issues abound.
  1. The district court denied a USSG 5K1.1 motion (cooperation), and the Court affirmed the denial, holding that it is proper to deny such a motion if the court intends to vary upward based on aggravating circumstances. This case is a good reminder that a district court does not have to grant a government's 5K1.1 motion.
  2. The Court held that a two-level aggravating role increase (USSG 3B1.1(c)) was improper because the defendant did not control another participant in the scheme. This case thus stands for the proposition that an aggravating role increase is improper if the defendant did not control at least one other person.
  3. The Court also held that an increase under USSG 2B1.1(b)(15)(B)(iii) was improper. That Guideline provides for an increase if the defendant's actions threatened the solvency or financial security of at least 100 victims. The defendants conceded that there were over 100 victims, but convinced the Court that the government failed to establish that at least 100 of these victims became insolvent or financially insecure. The government only presented 27 victim impact statements. The district court "extrapolated" from these 27 to find at least 100 victims. The Ninth rejected such an approach, noting that nothing in the record suggested that these 27 victims were representative of the other victims. This is a great example of how burdens of proof matter; the government had the burden and, although it surely could have met its burden, it did not. Therefore, the increase was improper.
  4. The Court also held improper an increase under USSG 2B1.1(b)(2)(C). That increase applies if there are over 250 victims of the offense. But a victim is only a victim for this specific Guidelines increase if the victim sustained monetary loss and that loss is included in the loss calculations. So, while there were more than 250 victims, less than 250 of these victims suffered monetary loss that was included in the loss calculations. The increase was improper. An important reminder to know the definition of Guidelines terms like "victim" in all their applications.  

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