Establishing uniformity: the need for a per se rule against the grouping of money laundering and fraud counts under the federal sentencing guidelines.

• Author: Tew, Eric C.

The goal of the American criminal justice system is to achieve justice and fairness for all involved, including the victim, the accused, and society as a whole.(1) Fundamental to this proposition, however, is a system without gaps: from the arrest to the punishment, the system must consistently apply policies and procedures that promote the ultimate goals of justice and fairness. With a break in the chain, these goals cannot be realized. Thus, the sentencing decision, as one necessary link in the chain, is critically important to the criminal justice system. As one commentator has stated:

The sentencing decision is the symbolic keystone of the criminal justice system: in it, the conflicts between the goals of equal justice under the law and individualized justice with punishment tailored to the offender are played out, and society's moral principles and highest values--life and liberty--are interpreted and applied.(2) Indeed, the sentencing decision is even more than a "symbolic keystone"; the decision has real consequences, not only for the accused, but also for the many other individuals directly and indirectly affected by the crime.

Congress recognized the importance of sentencing when it passed the Sentencing Reform Act of 1984.(3) Congress had become disenchanted with the wide sentencing disparity in federal courts, whereby similar crimes would garner substantially different sentences depending on which judge made the sentencing decision.(4) To remedy this problem, the Act mandated the creation of the United States Sentencing Commission, whose duty was to develop a uniform, determinant sentencing system to be applied by all federal judges.(5) The result of the Commission's work was the Federal Sentencing Guidelines,(6) which provide a relatively straightforward, quasimathematical approach to criminal sentencing.(7) Yet, despite the general clarity of the Guidelines, they are not without their interpretive problems. Nowhere is this more clearly demonstrated than with the sentencing of defendants convicted of multiple counts of money laundering and fraud.

The problem arises out of ambiguous phrasing within section 3D1.2 of the Guidelines.(8) This particular section provides for the "grouping" of closely related counts.(9) According to the Guidelines, closely related counts are those counts which involve "substantially the same harm."(10) The Guidelines provide four subsections with the express purpose of defining "substantially the same harm."(11) Nevertheless, courts have been unable to agree on the scope and meaning of this phrase, especially with regard to whether money laundering and fraud convictions should be grouped as related counts.

The issue, at last count, has split ten Federal Courts of Appeals.(12) Thus, the purpose of this Note is twofold. First, this Note attempts to define more clearly the meaning and scope of substantially the same harm" as that phrase relates to money laundering and fraud convictions. Second, the Note recommends the establishment of a per se rule for the federal courts to follow: money laundering and fraud should not, under any circumstances, be grouped as related counts. Implementation of this rule will have the immediate effect of resolving the circuit split and will best serve the intended purposes of the Guidelines, namely uniformity and proportionality in sentencing.(13)

Section I provides a more detailed explanation of the issue. Section II examines the policies underlying the Sentencing Guidelines, including an explanation of why the Guidelines initially were implemented. Section III provides a brief survey of the circuit split. Section IV is a detailed analysis of the relevant subsections of section 3D1.2. This section integrates and expands upon material from prior sections of the Note (i.e., policy considerations and the cases) and argues that money laundering and fraud should not be grouped. Finally, Section V recommends the establishment of a per se rule against the grouping of money laundering and fraud convictions. Such a rule would be applied as a matter of law, rendering moot the underlying facts of the particular case with regard to the grouping decision.(14)

MONEY LAUNDERING AND FRAUD AS RELATED COUNTS

The issue is easily stated: whether money laundering and fraud(15) should be grouped as related counts under section 3D1.2 of the Federal Sentencing Guidelines. While some may consider the issue nothing more than "a bit of sentencing esoterica,"(16) the fact remains that this is an important issue that will continue to spawn inconsistent results in the federal judiciary until definitively resolved.(17) The decision whether to group the counts can, moreover, dramatically impact the ultimate sentence that the defendant receives. To understand this potentially dramatic impact, one must first understand the procedure for determining total combined offense levels in cases of multiple count convictions and the integral role that the grouping decision plays in this determination.

Pursuant to section 3D1.1(a), there is a three-step procedure for determining offense levels in cases of multiple count convictions.(18) First, all counts should be separated into groups of closely related counts by applying the rules specified in section 3D1.2.(19) Second, the count with the highest offense level within each group of convictions is used to determine that group's offense level pursuant to section 3D1.3.(20) Third, if there is more than one group, a total combined offense level must be calculated in accordance with the rules set forth in section 3D1.4.(21) Under this section, the group with the highest offense level is assigned a value of one "Unit."(22) The other groups are then assigned a certain number of "Units" based on their level of seriousness in relation to the group with the highest offense level.(23) Finally, the Units are added together and are used to increase the offense level of the group with the highest offense level.(24)

Thus, as the critical first step, the grouping decision plays an important role in the sentence ultimately handed down. The actual effect of the grouping decision on the defendant's sentence, however, is less clear. Intuitively, grouping would appear to benefit the defendant by shortening the length of the sentence. This is not always true, however: in some cases, the defendant's sentence will actually be increased by grouping the counts.

This apparent anomaly is the subject of discussion in United States v. Napoli.(25) The court cites the example of a defendant who fraudulently obtains $1,000,000 from multiple victims but launders only $100,000 of that money.(26) If the counts are not grouped, the defendant's fraud count is assigned a total offense level of 19 based on section 2F1.1,(27) while the money laundering count is assigned a total offense level of 20 based on section 2S1.1(a)(2).(28) The total combined offense level under section 3D1.4 is 22.(29) Conversely, if the counts are grouped under section 3D1.2(d), the offense level is based on the aggregated quantity of the harm (i.e., $1,100,000) in accordance with section 3D1.3(b). Pursuant to section 2S1.1, the base offense level is 20; the base level is then increased by five because the value of the harm exceeded $1,000,000, thereby resulting in a total combined offense level of 25.(30) Thus, in this particular case, the defendant would benefit from a decision not to group the counts.

The example cited above is indicative of the primary problem created by the lack of clarity in section 3D1.2. The problem, quite simply, is uncertainty. Neither the defendant nor the prosecutor can accurately determine the probable sentence which ultimately will be handed down by the tribal judge.(31) Even in the circuits which have considered this issue, the courts' opinions were generally more fact-specific than precedent setting.(32) Indeed, none of the Federal Appeals Courts have established a per se rule either requiring or disallowing the grouping of money laundering and fraud counts.

In sum, the issue is of substantial present and future importance. Before proceeding with the discussion of the cases and the analysis of section 3D1.2, it is necessary to briefly review the background of the Sentencing Guidelines, including the underlying policy rationale for their implementation.

BACKGROUND

Prior to the implementation of the Guidelines, prison sentences in the federal system were imposed in two stages.(33) The trial judge would first determine the maximum period the offender would spend in prison.(34) The United States Parole Commission would then decide what portion of the term the offender would actually serve.(35) Widely disparate sentences for individuals who had committed similar crimes resulted due to the considerable discretion permitted at both stages of the sentencing process.(36) The length of the sentence imposed by the trial court was essentially nonreviewable on appeal.(37) Congressional discontent with this system grew to such a level that it was termed a "national scandal."(38)

Congress eventually responded to the problem by passing the Sentencing Reform Act of 1984 (SRA).(39) The SRA created the United States Sentencing Commission(40) as an independent agency in the judicial branch(41) and Charged it with the responsibility of comprehensively reforming the sentencing process through the development of guidelines.(42) After extensive hearings, deliberation, and consideration of public comment, the Guidelines went into effect in November of 1987.(43)

Through the enactment of the SRA, Congress sought to achieve three primary objectives.(44) First, Congress desired "honesty in sentencing."(45) Under the pre-Guidelines system, judges would sentence the offender to a certain number of years, only to have the Parole Commission release the offender early in many cases.(46) As a result of this practice, offenders would often serve only about one-third of the sentence...