Fifty shades of gray: sentencing trends in major white-collar cases.

AuthorHewitt, Jillian
PositionIntroduction through III. Results and Analysis: Sentencing in Major White Collar Cases in S.D.N.Y. A. The Decline of Guidelines Sentences: Trends in White Collar Cases in S.D.N.Y. and Nationally, p. 1018-1042

NOTE CONTENTS INTRODUCTION I. FROM JUDICIAL DISCRETION TO MANDATORY GUIDELINES AND BACK AGAIN: A BRIEF HISTORY OF THE SENTENCING GUIDELINES A. The Advent of the Sentencing Guidelines and the Mandatory Regime B. Booker and Its Progeny: A Return to Judicial Discretion in Sentencing C. The Economic Loss Table D. The 2015 Amendments E. Gaps in the Literature on White-Collar Sentencing II. METHODOLOGY A. The Sentencing Commission's Trend Reports B. White-Collar Crimes Dataset III. RESULTS AND ANALYSIS: SENTENCING IN MAJOR WHITE-COLLAR CASES IN S.D.N.Y. A. The Decline of Guidelines Sentences: Trends in White-Collar Cases in S.D.N.Y. and Nationally B. Departures Become More Frequent as Loss Amount Increases, Largely Due to Changes in the Rate of Government-Sponsored Departures C. Extent of Departures by Departure Type: Defendants Who Receive Below-Range Sentences Derive Significant Benefits D. The Trouble with the Guidelines Is Not Unique to the Loss Table: Comparing Major White-Collar Cases with All Cases in S.D.N.Y. IV. WHERE DO WE GO FROM HERE? A. Proposal One: Reduce the Severity of the Loss Table's Enhancements and Add an Enhancement to Section 2B1.1 Based on the Defendant's Own Pecuniary Gain B. Proposal Two: Apply Loss Table Enhancements Only to Actual Loss CONCLUSION APPENDIX INTRODUCTION

Between 2000 and 2002, Jamie Olis, his boss Gene Foster, and his colleague Helen Sharkey orchestrated an illegal transaction at Dynegy Corporation. (1) The transaction would appear to Dynegy's auditors and investors as if it produced income, but it was actually a loan in disguise. (2) All three were indicted on charges of mail fraud, wire fraud, and securities fraud, as well as conspiracy to commit those offenses. (3) Olis was convicted on all counts and sentenced to 292 months, or more than twenty-four years in prison. (4) In contrast, Foster and Sharkey cooperated with the government, testified at Olis's trial, and pleaded guilty to the conspiracy count in exchange for maximum sentences of five years. (5)

The conspiracy, titled "Project Alpha," sought to increase the value of Dynegy's stock; it was "not [meant] to defraud Dynegy or to enrich Olis," and Olis was not meaningfully enriched as a result. (6) Although Olis helped plan the conspiracy, he did not have the authority to approve the project and did not draft the key documents. (7)

So why did Olis receive such a long sentence? Prior to the Sentencing Reform Act of 1984 (SRA), judges exercised discretion in sentencing. But at the time of Olis's original sentencing, the federal Sentencing Guidelines (Guidelines) required judges to impose a sentence within a particular range. (8) To determine the Guidelines range in white-collar cases, judges considered a set of enhancements that are commonly referred to as the economic loss table, which forms part of the Guidelines for white-collar crimes. (9) The loss table increases a defendant's "Offense Level" based on the amount of economic "loss" attributed to the scheme in which he participated. The Guidelines define what constitutes "loss"-for instance, clarifying that "loss" means the greater of actual or intended loss, and that "actual loss" means "the reasonably foreseeable pecuniary harm that resulted from the offense." (10) The Guidelines then establish the sentencing range based on a combination of the offense level and the defendant's criminal history. (11)

In Olis's case, the loss table provided for a 26-level increase in Olis's offense level, which transformed a 15-21 month sentence into a sentence of 292-365 months. (12) Olis appealed his original sentence. (13) While his appeal was pending, the Supreme Court decided United States v. Booker.H The landmark case held unconstitutional the two provisions in the SRA that made the Guidelines mandatory. (15) In a remedial opinion, the Court severed and excised those two provisions, rendering the Guidelines effectively advisory. (16) On remand in Olis's case, the judge calculated a Guidelines range of 151-188 months, (17) or about twelve to sixteen years. (18) Twenty-four points of Olis's 34-point offense level derived from the "Intended Loss" to the United States Treasury of $79 million, the entirety of which was attributed to him for sentencing purposes. (19)

Were it not for the Supreme Court's decision in Booker--which returned significant discretion in sentencing to federal judges - Olis would have received a sentence of between twelve and sixteen years. But instead, the judge imposed a "non-Guidelines sentence" of seventy-two months in prison. (20) Using his newly authorized discretion, the judge took several factors into account: (1) Olis did not have the authority to approve Project Alpha, (2) Olis did not defraud Dynegy and was not enriched in any significant way by the scheme, (3) Dynegy was not forced to file for bankruptcy, and (4) Olis was born in Korea, was raised by a single mother in the United States, and had no criminal history. (21) To Olis, the discretion afforded to his sentencing judge by Booker meant the difference between a six-year sentence and a twelve-to sixteen-year sentence.

Olis's story is noteworthy for two reasons. First, his case illustrates--in dramatic fashion--how the loss table severely punishes even low-level white-collar offenders by ratcheting up defendants' offense levels based on the amount of loss attributed to them. Second, the case demonstrates how Booker freed up sentencing judges to use their discretion to consider the appropriateness of applying such severe enhancements where those enhancements do not serve as accurate proxies for culpability.

Although Booker rendered the Guidelines advisory, they remain "the starting point and the initial benchmark" in federal sentencing. (22) Judges must "begin all sentencing proceedings by correctly calculating the applicable Guidelines range." (23) So getting the Guidelines right still matters. Although judges may refuse to impose that Guidelines-range sentence, a significant body of scholarship suggests that the Guidelines act as an "anchor" for federal judges in that "[computing the advisory Guideline range so early in the sentencing process strongly anchors a judge's sentence to that range, or close to it." (24) Moreover, studies suggest that "the 'anchor' produces an effect on judgment or assessment even when the anchor is incomplete, inaccurate, irrelevant, implausible, or random." (25) Beginning the sentencing inquiry by calculating the Guidelines range "creates a land of psychological presumption from which most judges are hesitant to deviate too far."26 This presumption "operates with particular vengeance in white-collar cases because, at the behest of Congress, the Sentencing Commission (Commission) has steadily increased the severity of the white-collar Guidelines...." (27) Judge Jed Rakoff further explains why judges might still follow the Guidelines or deviate only modestly from them: "[FJirst, it is the path of least resistance: the parties come with a stipulated Guidelines range, the judge can adopt the presentence report's factual findings, and if the judge gives a Guidelines sentence, it is virtually immune from any reversal on appeal-it's the easier way to proceed." (28) Second, imposing a Guidelines sentence "permits the judge to avoid the difficult moral questions that sentencing inevitably presents." (29) Finally, there are "increasingly few judges who have ever had any sentencing experience except under a Guidelines regime. (30)

As such, if the white-collar Guidelines are arbitrary or too severe, many defendants will receive sentences that are arbitrary or too severe. The federal statute governing sentencing, 18 U.S.C. [section] 3553(a), requires district judges to "impose a sentence sufficient, but not greater than necessary, to comply with the purposes of' sentencing, which include the "nature and circumstances of the offense and the history and characteristics of the defendant" and "the need for the sentence imposed ... to reflect the seriousness of the offense," and to promote general and specific deterrence. (31) To the extent that the Guidelines counsel a sentencing judge to impose a sentence that is "greater...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT