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 Loss Amounts in Sentencing Guidelines 

Michael Santos

Michael Santos

Understanding Loss Amounts in Sentencing Guidelines

What should people know about the Federal Sentencing Guidelines §2B1.1 “Loss Table if authorities charged them with a white-collar crime?”

Our team at Prison Professors believes that anyone facing a sentencing hearing should develop a thorough understanding of how to prepare—long before the sentencing hearing. Preparation can begin anywhere. We offer a series of articles that may serve as a thread. Follow any thread, and you’ll connect to a web of articles that will help you make better decisions going forward. One place to start may be an article we published about the history of sentencing laws.

In today’s article, we want to help people understand more about the Loss Table, as provided by the United States Sentencing Guidelines. The more a person understands, the better a person can prepare for a favorable outcome.

Brief History of Loss Amounts in Sentencing Guidelines under Section 2B1.1

Before Congress created the Sentencing Reform Act of 1984 (SRA), people that faced sentencing for white-collar economic crimes received sentences that seemed far more lenient than the sentences people faced for other types of crime.

First of all, we must define what authorities mean when we use the term “economic crime.”

In my eyes, I committed an ecomomic crime in 1987. By taking advantage of an arbitrage play between two markets. I bought a product for a lower price in one city, and I sold the product for a higher price in another city. Since I sold cocaine, however, rather than economic crime, authorities labeled me a drug offender, which exposed me to a different sentence scheme. My judge imposed a 45-year sentence.

Economic crimes typically involves matters of trust, deception, and fraudulent transactions. We call those transactions white-collar crimes. As an example, we can take the case of a hedge fund manager.

Let’s say that, cumulatively, customers trusted a hedge fund manager with $10 million in capital to invest. Instead of investing those funds in accordance with the wishes of his investors, we can say that he absconded with $3 million of their money. Prior to the US Sentencing Guidelines, a judge may have imposed a term that would require three years in prison.

Some people believed such sentencing disparities were unfair. That led to the U.S. Sentencing Guielines, which included the Loss Table.

By creating the §2B1.1 Loss Table in the guidelines, the US Sentencing Commission (USSC) created more severe sanctions for economic crimes. People convicted of crimes that involved higher loss levels could face far more severe sentences. Architects of the guidelines believed that more severe sentences would expose people to an additional deterrence.

Since the implementation of the guidelines, judges, defense lawyers, and others involved in the criminal justice system have called for a reassessment of §2B1.1’s “inordinate emphasis” on the amount of loss caused by an offense. In 2011 even the Justice Department called for a reassessment on the overuse of the loss guideline.

After Congress passed the Sarbanes-Oxley Act of 2002 (SOX), the USSC raised the statutory maximums for most economic crimes. In the ensuing years, the USSC made numerous additional changes to the §2B1.1 guideline.

How Judges Use the Loss Table in Sentencing Guidelines:

When judges sentence people convicted a variety of white-collar crimes, they start with the USSC guideline § 2B1.1 “Larceny, Embezzlement, and Other Forms of Theft” guideline. Then, they rely upon the Special Offense Characteristics (SOC) associated with §2B1.1. Sometimes, judges apply this variable unevenlty to different defendants.

Judges turn to §2B1.1 of the Federal Sentencing Guidelines for crimes that range from small-time thefts to multi-million-dollar Ponzi schemes. We’ve read that Justice Department officials and criminal defense attorneys object to the complexity of this provision of the guidelines. The §2B1.1 guideline has more than 16 SOCs, including cross-references. Further, the Guidelines book includes more than 19 comments and 40 amendments. According to USSC statistics, the guideline for §2B1.1 “Larceny, Embezzlement, and Other Forms of Theft” covers more than 300 federal criminal statutes.

The USSC revised the loss table numerous times since 1987. Since creating the federal sentencing guidelines, the USSC enhanced penalties for economic crimes under §2B1.1 by revising the categories and moving the loss totals.

Over-Reliance on Loss Table in Sentencing Guidelines

The loss table has 16 monetary categories, each increasing in dollar value, from more than $6,500 to more than $550,000,000. This approach does not account for other outside factors in each case. The numerous revisions to the loss table have perhaps put an over-emphasis on this enhancement. All too often, prosecutors rely too heavily on the amount of loss to the victim.

When prosecutors rely on the loss tables too much, they recommend sentences that do not relate to the severity of the offense—or the intent of the individual.

For example, we worked with the CEO of a publicly traded company. He faced charges for convictions related to an accounting issue. The criminal charge did not make any allegations of an effort for self-enrichment. Nor did the charge even include a cash charge. The accounting rule did not result in the company losing a single penny. Yet when the company’s stock went from $25 a share to less than $15 as a share as a result of “restated earnings” from the accounting error, the prosecutor argued that investors lost more than $300 million in market value. He asked for a sentence in excess of 100 years.

Fortunately, good mitigation work resulted in more sanity at sentencing. Will you develop a strong mitigation strategy to help you at every stage in the journey?

In the case U.S. v. Parris, from the Eastern District of New York, Judge Frederick Block stated this proposition succinctly: “the sentencing guidelines for white-collar crimes [can produce] a black stain on common sense.”

To prevail and get a more favorable outcome at sentencing, we have to understand the motivations of prosecutors. They want to get the longest sentence possible. They will overuse loss tables in §2B1.1 because they can make an easy argument—saying that with big dollar amounts at stake, the person committed a more severe crime.

Prosecutors will make any argument possible to get the outcome they want. Pointing to big loss amounts is easier to understanding than more subjective factors, like the defendant caused “substantial financial hardship.”

Victims of financial crimes may also focus on the dollar value of the crime against them, urging prosecutors to argue for a more severe sentence.

Several courts argue against an over-reliance on loss. Loss provides only an approximation of an individual defendant’s guilt. Unfortunately, the judiciary’s realization of the over-reliance on loss as the primary focus in determining a sentence’s length has not changed much in practice.

Structural Problems with 2B1.1 and the Loss Table in Sentencing Guidelines

Depending on each case, the loss table can overstate the actual harm suffered by the victim. The loss table in §2B1.1 has always focused on aggregate losses related to the victim. However, it does not consider other factors related to the defendant or the crime. For instance, prosecutors do not consider:

  • The nature or duration of the crime,
  • The defendant’s motivations behind the crime, and
  • Factors beyond the defendant’s control.

Further, prosecutors will strive to deflect any individual characteristics of the person that committed the crime. There may have been mitigating factors. Each person must build a strong mitigation case before sentencing.

Since 1987, the USSC has added new enhancements to §2B1.1 that have increased the penalties evaluated under the guideline without considering other factors. An analysis of prior guideline versions shows the USSC derived the new penalty levels and enhancements using past practices as a baseline. The USSC attempted to maintain proportionality between crimes while adding enhancements that matched the offense.

As the USSC added more enhancements, the Commission lost objectiveness. Sentence recommendations do not always match the proportional harm. When prosecutors rely too heavily on the loss table, they do a disservice to justice. They expose people to sentences that are far longer than necessary.

Sentencing guidelines result in people facing sentence of multiple decades, without considering the person’s intent, or whether anyone truly lost anything. For that reason, people facing sentencing hearings need to place considerable emphasis on building effective mitigation strategies.

Actual Loss v. Intended Loss in Sentencing Guidelines

Another complicating factor requires the guidelines to identify “actual” loss or “intended.”

Consider a person that engaged in a scheme to generate $1 million. Yet he failed in his scheme, and as a result, he did not cause any loss at all. Without a good mitigation strategy, he could receive the same 16-level enhancement under §2B1.1 as a person that caused $1 million in losses. The actual loss includes all harm that a person knew or reasonably should have known would result from the crime.

Prosecutors will argue that as long as a person intended to inflict a loss, the person should receive the same enhancement under the loss table as a defendant who actually caused a loss. If a defendant understands how these things will play out, the defendant should be stronger in creating a mitigation strategy in response.

Source Material on US Sentencing Guidelines:

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