Is This The Beginning Of A Sentencing Revolution?

• Published date: 13 December 2022
• Subject Matter: Antitrust/Competition Law, Criminal Law, Antitrust, EU Competition , White Collar Crime, Anti-Corruption & Fraud
• Law Firm: BakerHostetler
• Author: Ms Ann O'Brien and Lindsey Olson Collins

Third Circuit Limits Sentencing Guidelines to Actual Loss:Implications for Fraud and Possibly Antitrust Sentencing

Key Takeaways

• The Third Circuit recently decided that the loss enhancement to the fraud guideline in the U.S. Sentencing Guidelines applies only to "actual loss" and not to "intended loss."
• While the primary impact of this decision is on federal sentencing in fraud cases, the Third Circuit decision potentially has broad-reaching sentencing implications, including in criminal antitrust cases such as recent attempted monopolization prosecutions.

On Nov. 30, 2022, following the U.S. Supreme Court's 2019 decision in Keiser v. Wilkie and contrary to the guidelines' own commentary, the Third Circuit decided that the loss enhancement to the fraud guideline in the U.S. Sentencing Guidelines ("USSG") applies only to "actual loss" and not to "intended loss." This distinction, the limitation to actual loss, is enormous, particularly for criminal defendants whose conduct caused little to no actual loss, despite any intent to do so. If other circuits follow suit, if courts apply this reasoning to other sections of the USSG, or if this case makes its way to the Supreme Court, the implications could be even more significant for all federal sentencing. The Third Circuit may have begun a revolution in white collar federal sentencing.

Banks and Its Holding

The facts of the Third Circuit case, United States v. Banks,¹ provide the perfect stage to illustrate the decision's magnitude. Frederick Banks attempted a relatively straightforward scheme to steal money from clients of Capital Gain Group (d/b/a Forex.com). He planned to make fraudulent deposits from accounts with insufficient funds and then withdraw the funds before Capital Gain could detect that the money was not supported. Although Banks made $324,000 in fraudulent deposits and attempted to withdraw approximately $264,000, Capital Gain never transferred any of the money to Banks, thereby suffering no actual loss from his fraudulent conduct.

When Banks was sentenced, the District Court applied a 12-point enhancement to his offense level based on $324,000 of intended loss (the amount Banks unsuccessfully attempted to steal), consistent with USSG ' 2B1.1's own definition of loss as "not only [] actual loss, but [] intended loss . . . even if it's determined to be improbable or impossible of occurrence." The District Court then sentenced Banks to nearly nine years' imprisonment and three years of...