A Win For Those Accused Of Fraud: New Third Circuit Opinion Throws Out "intended Loss" For Federal Theft And Fraud Offenses.

• Jurisdiction: United States,Federal
• Law Firm: Brown, Goldstein & Levy
• Subject Matter: Criminal Law, White Collar Crime, Anti-Corruption & Fraud
• Author: Mr Kobie Flowers
• Published date: 03 January 2023

Last month in United States v. Banks, 55 F.4th 246 (3d Cir. 2022), the Third Circuit rejected enhanced sentences for federal theft and fraud offenses based on the "intended loss" to the victim. The court held that sentences for those offenses must depend on the "the loss the victim actually suffered." Importantly, the court declined to defer to the Sentencing Commission's Commentary interpreting the Federal Sentencing Guidelines ("FSG"), which defined "loss" as including "intended loss."

In addition to marking the end of "intended loss" in the Third Circuit, Banks represents a potential shift in how courts interpret the FSG. Not only will Banks likely lead to lower sentences for many people convicted of federal theft and fraud offenses, but also, it provides a framework for defending against the government's overreaching interpretations of the FSG.

THE ROLE OF "LOSS" IN SENTENCING FOR FEDERAL THEFT AND FRAUD OFFENSES

The primary factor affecting the sentence of someone convicted of a federal theft or fraud offense is the monetary "loss" involved. For example, someone convicted of wire fraud starts with a baseline recommended sentence of 0 to 6 months for a first offense under the FSG. From there, the particular Guideline increases the recommended sentence on a graduated basis depending on the amount of the "loss." Such was the case in Banks, where the sentencing judge determined the "loss" exceeded $250,000. That increased the recommended sentence from 0 to 6 months to 30 to 37 months (for a non-violent, first offense).

In Banks, however, the victim did not actually suffer any loss, as Frederick Banks's alleged scheme was unsuccessful. The sentencing judge found that the "loss" exceeded $250,000 based on the Sentencing Commission's Commentary, which defines the word "loss" in the FSG as "the greater of actual loss or intended loss." The Commentary further defines "intended loss" as "the pecuniary harm that the defendant purposely sought to inflict," including "intended pecuniary harm that would have been impossible or unlikely to occur." Mr. Banks had deposited $324,000 from accounts with insufficient funds into new accounts, and then unsuccessfully tried to withdraw funds from the new accounts. The sentencing judge found that the "loss" exceeded $250,000 based on the "intended loss" of $324,000, regardless of the "actual loss" of $0.

On appeal, the Third Circuit rejected the Commentary's addition of "intended loss" to the definition of "loss" in the FSG...