"Loss" revisited: A defense of the centerpiece of the federal economic crime sentencing guideline.

Author:Bowman, Frank O., III

    Roughly twenty years ago, I was an Assistant U.S. Attorney detailed as Special Counsel to the U.S. Sentencing Commission. Andy Purdy, then-Deputy General Counsel to the Commission, pulled me aside and asked me to study the deficiencies of the then-separate guidelines governing theft and fraud (1) and to work with Commission staff to propose some remedies. That request began my involvement in the six-year-long process that produced, in 2001, the consolidated economic crime guideline, U.S.S.G. [section]2B1.1.

    I was, for better or worse, one of the principal architects of Section 2B1.1 in its consolidated 2001 form. (2) Over time, I have become a pointed critic both of errors we made in 2001, (3) and of some of the ways the Sentencing Commission has since amended Section 2B1.1. (4) Nonetheless, I still support the basic structure of Section 2B1.1 and its central component--scaling offense seriousness in large measure based on the economic loss caused or intended by the defendant. In particular, I remain convinced that the definition of "loss" adopted in 2001 remains fundamentally sound. Recently, the Missouri Law Review published a thoughtful article from Daniel Guarnera sharply criticizing the component of the loss definition dealing with intended loss, (5) and, in particular, a clarifying amendment to that definition adopted effective November 1, 2015. (6) The Law Review's editors asked me to respond to Mr. Guarnera. I agreed in part because Mr. Guarnera's central arguments, though vigorously expressed, seem to me unpersuasive, but primarily because the invitation provided me an opportunity to defend the conceptually sound core of a guideline that has often, and sometimes deservedly, been the subject of pointed criticism.


    1. The Federal Sentencing Guidelines in Brief

      At their core, the Federal Sentencing Guidelines are a system for assigning to each convicted federal defendant a sentencing range. (7) This sentencing range is determined by reference to a grid, the vertical axis of which measures the seriousness of the offense(s) for which the defendant is being sentenced--his or her "offense level"--and the horizontal axis, which measures the defendant's prior criminal history--his or her "criminal history category." (8) The intersection determined by these two numbers is a range of months--the defendant's "sentencing range." (9) In addition to rules for determining a sentencing range, the Guidelines have provisions concerning the conditions under which, according to the Sentencing Commission, judges ought to consider sentencing within, above, or below the calculated sentencing range. (10)

      Before the U.S. Supreme Court's 2005 decision in United States v. Booker, (11) a properly calculated sentencing range was deemed presumptively correct and was thus strongly determinative of the judge's sentence. (12) Once Booker transubstantiated the Guidelines from mandatory to advisory, the sentencing range remained, at the least, an influential starting point for a judge's sentencing determination. Critical to any discussion of the post-Booker era is the understanding that the Guidelines, theoretically advisory though they may be, retain a powerful effect on the sentences defendants actually receive. Just under half of all sentences are still imposed within the judicially calculated guideline range, (13) and most sentences imposed outside the applicable range remain fairly close to that range. (14) Therefore, the Guidelines still matter, and discussions about the strengths and weaknesses of particular guideline rules retain pressing significance for the defendants sentenced daily in federal courts.

      We are concerned here with a subset of those guideline rules that determine the "offense level" and thus determine the defendant's position on the vertical axis of the Guidelines' Sentencing Table. The vertical axis of the Sentencing Table incorporates a simple proportionality principle: all else being equal, a defendant's sentence should be proportional to the seriousness of his offense. (15) The more serious the crime, the greater the offense level, and the more stringent the recommended punishment. Of course, the Guidelines have provisions that accommodate many sentencing considerations other than offense seriousness, such as the defendant's criminal history (thought to have a bearing both on likelihood of recidivism and blameworthiness for the current offense), potential reductions in sentence based on unusual personal circumstances or cooperation with the government, the defendant's choice to plead guilty rather than go to trial, and more. (16) But this Article addresses only the place of the term "loss" in Section 2B1.1, which determines the offense level of economic crimes.

    2. The Economic Crime Guideline--U.S.S.G. [section]2B1.1: Structure and Severity

      The basic structure of Section 2B1.1 remains the same as when the consolidated economic crime guideline made its first appearance in 2001 (although the Commission has tinkered with it fairly regularly since). (17) The total offense level of an economic crime defendant is determined by beginning with a base offense level of either 6 or 7, depending on the crime of which the defendant was convicted, (18) then adding a number of offense levels determined by the amount of "loss" caused or intended by the defendant, (19) and then adding a number of offense levels determined by the applicability of other non-loss specific offense characteristics. (20)

      The most common post-2001 critiques of the economic crime guideline have been, first, that it generates excessively severe sentencing ranges for some classes of defendants, and second, that "loss" plays too large a role in sentencing federal economic offenders. (21) I agree, at least somewhat, with both criticisms, which are interrelated.

      As to severity, I have written that "for many, perhaps most, economic offenders the Guidelines do not suggest manifestly unreasonable sentences," but "for high-loss defendants the fraud guideline is... 'fundamentally broken.'" (22) Other observers believe that the Guidelines generate excessive sentences even for defendants with lower loss amounts. (23) Framed this way, it sounds as though the problem is with loss itself, but the reality is far more subtle.

      When critics of Section 2B1.1 complain that "loss" has too large an impact on sentencing outcomes, their complaint is not primarily about the definition of loss. It is instead a complaint that loss, however defined, now adds too many offense levels to defendants' final guideline calculations and thus that loss can increase sentence length by unjustifiably large amounts. (24) In 1988, a first-time offender convicted of mail fraud and sentenced under the original fraud guideline, Section 2F1.1, began with a base offense level of 6, meaning that, loss and other specific offense characteristics aside, his or her starting sentencing range would have been 0-6 months. (25) The loss table of Section 2F1.1 then contained twelve one-offense-level steps that added only a maximum of eleven levels for loss. (26) Therefore, even if a defendant received the maximum loss adjustment of eleven levels, the resultant offense level, without other specific offense characteristics, would have been 17, equating to a sentencing range of 24-30 months. (27)

      By contrast, the loss table of the November 2015 version of Section 2B1.1 has fifteen two-level steps, pursuant to which loss amount can add from two to thirty offense levels. (28) A first-time offender convicted of mail or wire fraud now begins with a base offense level of 7, (29) meaning that, loss and other specific offense characteristics aside, his or her starting sentencing range is 0-6 months. Accordingly, if loss can add two to thirty offense levels, then loss amount alone can now raise such a defendant's offense level to 37 and the guideline range all the way to 210-262 months (17.5-21.8 years). (30)

      The inflated significance of loss in the current economic crime guideline has been exacerbated by the creeping proliferation of non-loss specific offense characteristics. I have addressed this phenomenon, sometimes referred to as "factor creep," at length elsewhere, (31) and I will not repeat the entire analysis here. Stated succinctly, factor creep arises from the interaction of three features of the current guideline: (1) the large number of loss level enhancements; (2) the steady proliferation of specific offense characteristics, other than loss, that can add offense levels on top of the combination of base offense level plus loss; (32) and (3) the logarithmic structure of the 43-level Sentencing Table, which dictates that each increase in offense level has an ever-greater absolute effect on sentence length the higher one goes up the Table. (33) In practical terms, the latter point means that:

      [A]dding one offense level to the total of a first-time offender who previously had an offense level of 19... increases his minimum sentence by 3 months and his maximum by 4 months. The same one-level increase from an offense level of 30 increases the defendant's minimum sentence by 11 months and his maximum by 14. And a one-level increase for an offender with an offense level of 36 increases his minimum by 22 months and his maximum by 27. (34) In short, when one adds offense levels based on non-loss specific offense characteristics on top of an already-large offense level number generated purely by base offense level plus loss, the resultant final offense level can become unrealistically high very fast.

      The solution to this problem has very little to do with the definition of loss. Rather, the Commission should reduce the quantitative impact of loss on the final offense level and should take steps to ameliorate the factor creep problem. In testimony before the U.S. Sentencing Commission in 2015, I made...

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