'Once victim, always victim': compensated individuals under the amended sentencing guidelines on fraud.

• Author: Harrington, Jacqueline

Until recently, courts disagreed over whether individuals who were compensated by a third party such as a bank or insurance company ought to count as victims for purposes of the multiple-victim sentencing enhancement in the Federal Sentencing Guidelines on Fraud. The most recent Amendments to the Guidelines resolve this split, permitting compensated individuals to be counted as victims where their identity was used in the commission of the fraud. However, the new Guidelines do not resolve a separate split, likely to become more divisive under the new Guidelines, over whether both compensated individuals and their compensators can simultaneously be treated as victims for enhancement purposes. This Comment argues that the retributive purpose of sentencing suggests that the new Guidelines properly treat compensated individuals as victims, but that they should be further amended to clarify that treating both compensated individuals and their compensators as victims causes impermissible double counting. Resolving this issue is crucial to achieving the dominant purpose of the Guidelines: consistent and fair punishments throughout the federal courts.

TABLE OF CONTENTS INTRODUCTION I. THE NEW [section] 2B 1.1: RESOLVING ONE SPLIT, LEAVING ANOTHER UNRESOLVED II. READING THE NEW GUIDELINES TO ACHIEVE PROPER AMOUNTS OF RETRIBUTION III. FUTURE AMENDMENTS SHOULD CLARIFY THAT DOUBLE COUNTING IS NOT PERMITTED CONCLUSION INTRODUCTION

"Once victim, always victim: that's the law!" In Thomas Hardy's famous work, Tess of the D'Urbervilles, Tess laments the permanent status of victims. (1) Yet until recently, some individuals who might have been considered the victims of financial crime under the Federal Sentencing Guidelines on Fraud ("Guidelines") were stripped of the status of victimhood if they were subsequently compensated by a third party, such as a bank or insurance company. For those compensated individuals, whether the phrase "once victim, always victim" applied depended on which court heard their case. (2) The most recent Amendment to the Guidelines' enhancement at [section] 2B1.1 ends this sentencing disparity in fraud cases: compensated individuals can be victims under the new Guidelines. (3) Although the Amendment resolves the split over the proper interpretation of the [section] 2B 1.1 enhancement, it fails to address a separate, albeit subtler, dispute regarding whether compensated individuals and their compensators can simultaneously be counted as victims.

In 2001, the United States Sentencing Commission added a sentencing enhancement to [section] 2B 1.1 of the Guidelines for defendants who commit fraud against multiple victims. (4) Under the Guidelines, a sentence is imposed by determining where it falls on a grid) The point on the grid is located by finding the base-level offense and adjusting up or down (usually up) by examining the severity of the crime and the criminal history of the defendant--the enhancements. (6) The Guidelines provide that defendants receive a 2-level enhancement if there are more than 10 but fewer than 50 victims, a 4-level enhancement if there are between 50 and 250 victims, and a 6-level enhancement if there are more than 250 victims. (7) Until the 2009 Amendments, the Application Notes to the Guidelines defined a victim as "any person who sustained any part of the actual loss," (8) with actual loss further defined as the "reasonably foreseeable pecuniary harm that resulted from the offense." (9) Pecuniary harm, the Guidelines' Application Notes stated, was monetary harm or harm measurable in money. (10)

After these sentencing enhancements were enacted, a circuit split developed along two distinct lines. First, circuits disagreed over whether individuals compensated by a third party had suffered "actual harm," and so ought to be treated as victims. (11) Second, there was divergence as to whether treating both individuals and the institutions that compensated them as victims was impermissible double counting. (12)

For defendants who committed less serious crimes, involving more than 10 but fewer than 50 victims, a sentencing enhancement for multiple victims might raise their sentence by only six months. But for more serious crimes, involving greater than 250 victims, the enhancement could add years to a defendant's sentence. (13) This difference of interpretation between the circuits consequently undermined the overarching goal of the Guidelines, which was to create consistent sentences for similar crimes across the federal court system. (14)

The 2009 Guidelines address the split by adding a definition of victim that includes individuals whose identities were used in the commission of a fraud. (15) The result of this addition is that even compensated individuals may be victims under the new Guidelines. However, the Application Note is unclear regarding whether the two categories of victim are mutually exclusive or whether the entity that sustained the "actual loss," the third-party compensator, and the person whose identification was used may both be victims. In the past, some courts held that the victims who received restitution and the victims under the Guidelines' sentencing enhancement ought to be identical. (16) In fraud scenarios, this meant that these courts found that only third-party compensators, to whom defendants owed restitution, were treated as victims. Under the Amendments, this misunderstanding may perpetuate double counting. (17)

This Comment argues that while the new Guidelines properly allow courts to consider compensated individuals to be victims for purposes of the enhancement at [section] 2B 1.1, they should be further amended to eliminate the possibility of double counting that occurs when courts treat both compensated individuals and their compensators as victims. Part I provides a brief overview of the new [section] 2B1.1, concluding that the Commission addressed only one point of disagreement among the courts. Part II argues that allowing compensated individuals to be treated as victims comports with retributive goals of punishment, but that reading the Amendment to permit double counting would be inconsistent with retribution. Part III contends that the Commission should modify the Guidelines to avoid double counting by clarifying that the victims who receive restitution and the victims counted under the Guidelines' enhancement need not be identical. The Commission's failure to address double counting is likely to result in a continued circuit split, undermining the ability of the Guidelines to fulfill their primary purpose of ensuring uniform sentencing in federal courts.

1. THE NEW [section] 2B 1.1: RESOLVING ONE SPLIT, LEAVING ANOTHER UNRESOLVED

   In revising the Guidelines' provision on fraud, the Sentencing Commission sought to end one part of the circuit split that had arisen over interpretations of the word "victim." (18) The majority view under the old Guidelines was that fully compensated individuals were no longer victims, while the minority approach asserted that such compensated individuals remained victims. The Amendment to the Guidelines resolves this particular aspect of the circuit split in favor of the minority view, but leaves unaddressed the second point of disagreement regarding double counting of victims under the [section] 2B 1.1 enhancement.

   The 2009 Guidelines address the circuit split by adding a definition of victim that includes individuals whose "means of identification [were] used unlawfully." (19) "Means of identification" includes "any name or number that may be used, alone or in conjunction with any other information, to identify a specific individual." (20) By including such individuals, the Commission recognized that the victims of fraud, even if "fully reimbursed, must often spend significant time resolving credit problems and related issues, and such lost time may not be adequately accounted for in the loss calculations under the guidelines." (21)

   The majority view under the old Guidelines had been that individuals counted as victims only where they had suffered a loss beyond that for which they were compensated, and so had suffered an "actual loss." (22) Although the Guidelines rely on the assumption that individuals frequently do suffer a loss beyond the loss for which they are compensated, this new provision, which permits individuals to retain their status as victims where their identity has been used, does not require that they have suffered uncompensated loss. The Amendment, therefore, takes a position similar to that of the minority courts under the split. (23) By allowing even fully compensated individuals to be counted as victims, the revision both addresses the circuit split over the treatment of compensated individuals, and as discussed in Part II, allows the Guidelines to better comply with the goals of retribution.

   Although the new Guidelines clarify that compensated individuals can be victims, they do not offer courts guidance regarding whether double counting is permissible. Under the old Guidelines, the circuits that treated reimbursed individuals as victims where they had expended time and energy sometimes also treated their compensators as victims. (24) For example, where a bank compensated its account holders for their losses, the court might treat both the compensated account holders and the bank as victims under the enhancement. However, some courts thought this caused double counting, or holding the defendant liable twice on the basis of the same actual loss. (25) As a result, one judge argued that the role of the court "is not to decide whether there was any victim who sustained the loss, but to choose between two possible victims." (26) Courts that treated both groups as victims were in the...