Sentencing Guidelines: Third Circuit Rejects Use Of "Intended" Loss In Favor Of "Actual" Loss

• Published date: 21 December 2022
• Subject Matter: Food, Drugs, Healthcare, Life Sciences, Criminal Law, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: Foley & Lardner
• Author: Matthew D. Krueger, Olivia S. Singelmann, Michelle A. Freeman and Pauline R. Wizig

Sentencing in federal fraud cases is driven by loss amounts. To seek a higher sentencing guidelines range, the government often relies on a defendant's "intended" loss," rather than the "actual" loss. That approach no longer works in the Third Circuit. In United States v. Banks, the court of appeals ruled that "loss" as stated in the U.S. Sentencing Guidelines ' 2B1.1 refers only to "actual" and not "intended" loss. Although currently limited to the Third Circuit, the ruling's implications are dramatic.

In health care fraud cases, the government frequently asserts a high "intended loss" based on amounts billed to payers, even when amounts actually paid were far less. Likewise, sentencings for attempted frauds, early-stage conspiracies, and sting operations are often based on intended loss. Moreover, the rationale of the Banks decision'not to defer to the Guidelines' commentary'could call into question other long-standing approaches to sentencing, and give defendants arguments for lower sentences, including fines.

Banks Decision

In Banks, the appellant was convicted of wire fraud and other crimes related to his attempt to defraud Gain Capital Group, a foreign currency exchange broker. Banks was convicted of making fraudulent electronic deposits into Gain accounts from other accounts that had insufficient funds. Banks then tried to withdraw the "deposited" funds before Gain realized the funds were not actually there. In all, Banks purported to deposit $324,000 in Gain accounts and attempted 70 withdrawals totaling $264,000. But Banks' attempted withdrawals were not successful, and Gain never actually transferred any funds to Banks.

At sentencing, the district court calculated an advisory Guidelines range under U.S. Sentencing Guidelines ' 2B1.1 based on Banks' intended loss. Section 2B1.1 provides for a base offense level of seven and additional increases based upon the amount of "loss." Section 2B1.1 does not itself define loss, but the Sentencing Commission's commentary states that "loss" is "the greater of actual or intended loss," with "intended loss" being "pecuniary harm that the defendant purposely sought to inflict," regardless of whether the loss "would have been impossible or unlikely to occur." Id. at cmt. 3(A); (ii). Using Banks' intended loss of greater than $250,000 and less than $550,000, the court increased the offense level by 12. See U.S.S.G. ' 2B1.1(b)(1)(G). The court ultimately sentenced Banks to 104 months in prison.

On appeal, the...