The Backyard Batting Cage

If this wasn’t a detailed and thorough court order, but a short and sweet post-it note style memo, it could read something like this:

To: The Ninth Circuit (and the district courts!)

 Subject: Lenient (NO JAIL TIME) Sentences for White-Collar Offenders Must Stop

1. It’s not fair.                                 

2. It’s not right.

3. It makes the Sentencing Guidelines useless.

4. It sends the wrong message.

5. Our court’s wrong.

From: Judges Gould, Bybee, Callahan & Bea

On September 20, 2010, Circuit Judge Gould joined by Circuit Judges Bybee, Callahan, and Bea issued an order dissenting from the denial of rehearing en banc in United States v. Edwards (08-30055, 08-30056, 08-30059) (dissent available here) and the original three-judge panel decision is available here.  The order essentially is a call to arms to get the “no jail time” sentences imposed on white-collar offenders by district courts under control and to some extent – eliminated.For the non-criminal practitioner federal court: In conjunction with the Sentencing Guidelines (link to federal sentencing guidelines manual here),  18 U.S.C.§ 3553(a) requires that federal courts “impose a sentence sufficient, but not greater than necessary.”  Additionally,  the sentence imposed on a criminal defendant needs “to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense.”   18 U.S.C.§ 3553(a)(2)(A).  Finally,  a sentence should provide an “adequate deterrence to criminal conduct” and “protect the public from further crimes of the defendant.”  18 U.S.C. § 3553(a)(2)(B) and (C).

Regarding white collar criminal defendants there can be great disparity in sentencing terms  – even with the sentencing guidelines – from district court to district court throughout the county.   See Remarks by Lanny A. Breuer, Assistant Attorney General for the Criminal Division at the American Bar Association National Institute on White Collar (delivered March 1, 2010 and available here).  Additionally, there can be great disparity with the apparent leniency afforded white collar criminal defendants not generally afforded to those other real criminals.  Judge Gould’s dissent to the denial of rehearing en banc in Edwards is highly critical of the Ninth Circuit’s (and district courts’) tendency towards unwarranted and unfair leniency when a white-collar defendant is sentenced.  The problem is rooted in the district court’s lenient sentence in the first instance followed by the Ninth Circuit’s application of the abuse of discretion standard.

Edwards: The Teachable Moment

Edwards is a fraudster, a run of the mill financial shyster.  In the early 1980’s he lied to banks in Arizona to get his hands on hundreds of thousands of dollars worth of loans.  He got caught.  And in 1991, pled no contest to felony theft and ordered to pay the FDIC over $3,000,000 along with 5-years probation. NO JAIL TIME.

He moved on from Arizona to Montana and while on probation , Edwards pretty much pulled the same stunt again.  He lied on a loan application (and low and behold) failed to disclose the $3M he owed the FDIC.  Then in 1998, he filed for bankruptcy (personally and for his company).  Again, he lied.  Edwards failed to disclose all his assets and liabilities, including the $3M (again!).  He also failed to disclose stock options owned by a corporation of which he owned 100% of the shares.  Caught, he amended the bankruptcy filing to show that the corporation owned the stock options, but valued the stock options at $0.00 (notably, on his loan application he had valued the stock options at $189,000).  Thankfully, the bankruptcy trustee was paying attention and caught that the stock price jumped with Edwards receiving net proceeds of $445,000.

In May 2004, Edwards pled guilty to one count of bankruptcy fraud and one count of making false statements to a bank.  In September 2004, the district court sentenced Edwards to five years probation, seven months served under house arrest, a $5000.00 fine, and a $100.00 special assessment. NO JAIL TIME – AGAIN.

The Government appealed the sentence as “substantively unreasonable.”  The case went back to the district court  two times and each time the district court imposed the same sentence.  In February 2010, for a third time the government appealed the “substantively unreasonably” imposition of such a “light” sentence on Edwards.  The Ninth Circuit (Circuit Judges Pregerson & Smith) held:

“[t]he district court’s sentence was not substantively unreasonable. The district court was clearly aware of the factors at play in this difficult case, and did not abuse its discretion when it sentenced Edwards.”

Judge Bea’s partial dissent included a litany of errors made the district court in arriving at Edward’s sentence that included no jail time.  Writes Judge Bea:

 ”Although we must give deference to the district court’s finding that Edwards was not likely to commit a similar crime in the future, that finding does not justify the significant deviation from the Guidelines sentencing range.”

The Edwards’ Problem & The Message

This brings us to Judge Gould’s September 20, 2010 order. 

“I write to emphasize a larger and recurrent problem: our court’s practice of uncritically affirming unreasonably lenient sentences for white-collar criminals renders the Sentencing Guidelines a nullity, makes us an outlier among the circuit courts, and impairs our ability effectively to review sentences for substantive reasonableness. Our “rubber-stamp” approach to reasonableness review permits district courts to abuse their sentencing discretion by paying lip service to appropriate sentencing considerations while paying inadequate heed to the substance of those considerations. Hence we can end up with people like Edwards who engage in fraud and other criminal activities intended to cause extremely large monetary damages, yet who spend token and inadequate time, or even not one day, in jail.”

One of the challenges facing district courts when sentencing white-collar defendants is  their “like us” ability to elicit empathy.  These non-violent, “it’s just money” offenders (aka con-artists) put forth persuasive presentations to district courts garnering “understanding” and “sympathy” and consequently significantly lower sentences.  They’re usually dressed nicely and show up with family, friends, and numerous “he’s really a good guy and shouldn’t be in jail” letters.  They look like, sound like, and typically are the people sitting next to you in church, coaching little league, attending Rotary meetings, and opening the door for you at Starbucks. They usually “sound” really really sorry and promise never to do anything like this again, if they’re just given a break (“please, don’t send me to jail”).

Writes Judge Gould:

“Such cases are precisely when we should most rigorously review a sentence’s reasonableness to ensure that the justifications relied on at sentencing are supported by objective evidence in the record. See Michael M. O’Hear, Appellate Review of Sentences: Reconsidering Deference, 51 Wm. & Mary L. Rev. 2123, 2141-49 (2010) (criticizing appellate deference to trial judge assessment of demeanor evidence at sentencing on the basis of the “emerging consensus in the legal and social science literature that people generally do a poor job in evaluating demeanor evidence,” and concluding that a defendant’s demeanor “seems about as likely to lead the trial judge astray as to facilitate good decision making”).”

Take Edwards for example: unhealthy (diabetes), aging (over 60) and repentant of past misconduct (at least he says so this time) with a result: no incarceration and only probation.  

Writes Judge Gould: “We know that often criminal defendants who commit other types of crimes will serve some hard time. White-collar offenders like Edwards should not escape the same punishment simply because they are better-positioned to make a sympathetic presentation to the district judge.”

Judge Gould highlights that Edwards’ sentence is not unique but that the Ninth Circuit has a pattern of approving unreasonably lenient sentences for serious white-collar offenses.  He catalogs several cases where the Sentencing Guidelines recommended sentences ranging from 3-5 years of incarceration, but the sentence imposed included no jail time.  Judge Gould also then asserts that this pattern by the Ninth Circuit makes it an outlier among the other circuits (citing several case examples) with respect to white-collar criminal offenders.

Writes Judge Gould:

“Statistics illustrate my point. In fiscal year 2009, the median sentence of imprisonment in the Ninth Circuit for fraud was 6 months.1 Compare that to the national median of 18 months. Or contrast it with the median sentence of imprisonment in the Ninth Circuit during the same time period for immigration offenses (21 months); for drug trafficking offenses (40 months); and for firearms offenses (48 months). I’m sure there are good explanations for some of these disparities, but we should be concerned about the substantial divergence between our treatment of white-collar criminals and other types of criminals, and between white-collar criminal sentences in our circuit and in other circuits.”

In failing to rehear this case en banc,  Judge Gould sees the court as missing the opportunity to fashion a standard – “an outer limit on sentencing discretion” – especially when a district court imposes a non-imprisonment sentence for serious offenses committed by a repeat white-collar offender.

In closing, writes Judge Gould:

“Edwards fraudulently obtained more than $3 million and got a break at sentencing. While on probation, he did it again. And again. We owe it to Edwards’s victims, and to the public, to make sure that this time he gets the message. And we can only hope that the public does not get our court’s current message of leniency for white-collar criminals but frequent harsh punishment for the poor and powerless.”

But expect that next time Judges Gould, Bybee, Callahan and Bea find themselves reviewing an Edwards-esque “no jail time” sentence, it will get sent back to the district court with encouragement to consider handing out the “Go directly to Jail – do not pass Go, do not collect $200? card.

View the original article here