U.S. Sentencing Commission Approves Major Changes To Fraud Guidelines

Vince Farhat is a Partner and Robert Barton is an Associate in the Los Angeles office.

Timothy Belevetz is a Partner in the Washington D.C. office.

HIGHLIGHTS:

Recent changes to the federal sentencing guidelines would lead to a number of major revisions to the law, including updates to the definition of "intended loss," the victims table and the meaning of "sophisticated means." The proposed white collar amendments follow criticism from defense lawyers and some judges who maintain that the sentencing guidelines have led to unduly harsh punishments. Although the guidelines are only advisory, federal judges must consider them in sentencing white collar defendants. Assuming Congress does not block them, the proposed amendments could have important implications for those charged with white collar offenses. On April 9, 2015, the United States Sentencing Commission voted to approve changes to §2B1.1 of the sentencing guidelines.1 The changes will take effect on Nov. 1, 2015, unless Congress objects. If they go into effect, these proposed amendments could have important implications for those facing criminal fraud charges.

§2B1.1 includes "basic forms of property offenses: theft, embezzlement, fraud, forgery, counterfeiting ..., insider trading, transactions in stolen goods, and simple property damage or destruction."2

In short, these changes would:

revise the definition of "intended loss" at §2B1.1, comment (n.3(A)(ii)) to mean the pecuniary harm "that the defendant purposely sought to inflict" revise the victims table at §2B1.1(b)(2) to incorporate "substantial financial hardship" as a sentencing enhancement factor revise the meaning of the specific offense characteristic for "sophisticated means" contained in §2B1.1(b)(10)(C) to apply to the defendant's individual conduct, rather than the overall scheme revise Application Note 3(F)(ix), which sets forth a method for calculating loss in cases involving securities fraud; the revised guidelines provide that the formula set forth in the note is no longer a rebuttable presumption in calculating loss and allows the court to use any method that is appropriate and practicable under the circumstances, including the formula3 Reasons for the Proposed Changes

According to the Sentencing Commission, the proposed revisions to the sentencing guidelines are meant to address "longstanding concerns that the guidelines do not appropriately account for harm to victims, individual culpability, and the offender's intent."4 These concerns have been voiced by lawyers, judges and the commentariat. The proposed changes follow many years of criticism from the white collar defense bar and some judges who believe the guidelines have led to unduly severe punishments by over-emphasizing financial losses and under-emphasizing the offender's intent.

Notably, the U.S. Department of Justice (DOJ) has opposed the proposed changes to the Economic Crimes Guidelines nearly in their entirety.5 However, the DOJ did...