In Melendez-Diaz, the Supreme Court held that crime lab reports are testimonial statements covered by the Confrontation Clause of the Sixth Amendment. For such reports to be admissible, the forensic analysts must testify as witnesses in criminal trials, both federal and state. Shortly after that decision, the Court granted cert in Briscoe, a case presenting the same issue. Justice Scalia criticized the grant of cert, asking, “Why is this case here except as an opportunity to upset Melendez-Diaz?”

He asked that question at oral argument less than one month ago. SCOTUSblog covered that oral argument thoroughly in this post. They also explained last week’s decision in the context of the changing Court in the first half of this SCOTUSblog post.

The extremely short per curium opinion is available here.

Photo courtesy of the U.S. Army.

The Armed Career Criminal Act (ACCA), drug laws, and the gun statute 18 U.S.C. § 924(c) each carry heavy mandatory minimum sentences. The ACCA and drug minimums are often longer than the minimum called for by § 924(c). § 924(c) contains a prefatory clause, called the “except” clause, that applies the subsection “[e]xcept to the extent that a greater minimum sentence is otherwise provided by this subsection or by any other provision of law.” The plain language of that clause prohibits application of § 924(c) where defendants are subject to greater minimums.

As we explained in this post last July, the rule of specialty requires countries that request extradition of a person to prosecute that person only for the offenses for which the foreign country surrenders the person. In other words, if the United States asks Spain to extradite someone for charges A, B, and C, once Spain extradites that person, the United States can’t turn around and charge the person with X, Y, or Z. Marquez argued that a superseding indictment changed the basis under which Spain agreed to extradite him.

The rule of dual criminality allows extradition only where the defendant’s actions constitute a crime in both the requesting and surrendering countries. Marquez argued that the extradition request was too vague, rendering it impossible for Spanish courts to determine whether the rule of dual criminality was satisfied.

Because the rules limit the crimes that may be prosecuted, they appear to limit the court’s subject matter jurisdiction. However, the Court held that the extradition process is a means of obtaining personal jurisdiction over a defendant, so a violation of these extradition rules raises the question of personal jurisdiction. Thus, claims of such violations must be raised in a pretrial motion pursuant to Rule 12.

Because Marquez did not assert the rules of specialty or dual criminality until nearly 2.5 years after the final deadline for submission of pretrial motions, the Court held that he “waived his right to assert the protection of the rules of specialty and dual criminality” and failed to show good cause to warrant relief from that waiver.

In U.S. v. Valencia-Trujillo last year, the Eleventh Circuit issued an opinion declining to address the rule of specialty. Our commentary on that decision is available here. We hope that the Court decides to address this important issue in future cases.

The Court’s opinion in Marquez is available here.

Earlier this month, the DOJ issued three memoranda regarding criminal discovery procedures. These memos set forth policies in an attempt to ensure that prosecutors meet their obligations in sharing information with criminal defense attorneys. They are available to read in full at the following links:

Issuance of Guidance and Summary of Actions Taken in Response to the Report of the Department of Justice Criminal Discovery and Case Management Working Group

Requirement for Office Discovery Policies in Criminal Matters

Guidance for Prosecutors Regarding Criminal Discovery

This is a step in the right direction, but other steps need to be taken. For example, as many criminal defense lawyers have been saying for far too long, it is time to amend Rule 16 by requiring the parties to exchange witness lists in federal criminal cases. This is precisely what the Advisory Committee and the Supreme Court proposed in 1974 and it should be done now.

Last month, Michael Marshall was released from prison, where he served time for a crime that he did not commit. Eyewitness identification and neglect to investigate the physical evidence led to the incarceration of an innocent man. The lawyers and interns at the Georgia Innocence Project proved Mr. Marshall’s innocence through DNA testing and will continue to help him rebuild his life after exoneration.

In 2007, an eyewitness identified Mr. Marshall ten days after the crime in a prejudicial “show-up” identification. He was charged with armed robbery, aggravated assault, possession of a firearm during a felony, and possession of a firearm by a convicted felon and he faced up to 25 years in prison. After the judge denied his motion to suppress the identification evidence, Marshall pleaded guilty to theft by taking out of fear of the lengthy potential sentence.

What Went Wrong

The principal evidence against Mr. Marshall was misidentification by a victim of the crime. After watching a man steal his mother’s truck and threaten her life, the male victim gave the Hapeville Police Department information to create a composite sketch of the man who committed the crime. Ten days after the crime, officers called the victim to Mr. Marshall’s location, where he identified Mr. Marshall. The other victim failed to pick Mr. Marshall out of a photo line-up.

Eyewitness identification is often faulty and has contributed to the wrongful convictions of more than 75% of the 247 people exonerated by Innocence Projects nationwide. The kind of identification in this case is called a “show-up” and is highly prejudicial because of the suggestive context of the situation. The suspect is surrounded by police officers, often located near the scene of the crime, and alone, rather than lined up with 5 other people.

The Hapeville Police also failed to investigate the physical evidence in the case. Although they had found a cell phone, a cell phone case, and a t-shirt belonging to the person who committed the crime, these items were never even fingerprinted, let alone tested for DNA, until the Georgia Innocence Project got involved.

Georgia Innocence Project

The Georgia Innocence Project has exonerated eight people of crimes that they did not commit. All of those convictions were based on mistaken eyewitness investigation. We are delighted that they have again helped a victim of eyewitness identification to prove his innocence.

More information on the Georgia Innocence Project is available at their website. More information on the background of Mr. Marshall’s case is here and the major issues in his case here.

Photograph used with permission from the Georgia Innocence Project.

Stock-option backdating is a practice in which an employer grants stock options to an employee, retroactively dated to increase its value. Backdating itself is not illegal, but it must be properly disclosed in financial records and filings with the SEC. This article, published at the beginning of the backdating scandal in 2006, explains the history and controversy of backdating options. The SEC began charging corporations and executives in enforcement actions relating to backdating in significant numbers in 2006, and criminal charges have resulted in a few cases. The SEC has continued to bring enforcement actions against corporations and executives for secret backdating of options.

US v. Reyes was the first, and most high-profile, of the criminal cases. Reyes’ defense was that, although he had signed off on backdated options, he had relied on Brocade’s finance department to properly account for the backdated options in the corporate books and was not responsible for false records. The government put up a witness from the finance department who testified that she and other employees in the department did not know about the backdating. However, higher-up finance department employees had told the FBI that they did know about the backdating, but those witnesses did not testify because they were subject to possible criminal prosecution and had been targets of SEC civil suits. In the prosecutor’s closing argument, he told the jury that “finance did not know anything” in direct contravention of the statements given to the FBI. The Ninth Circuit stressed the special duty of federal prosecutors not to impede the truth and remanded the case for a new trial, which is scheduled for February.

Even more egregious prosecutorial misconduct occurred in the backdating cases against former executives of Broadcom. In May 2008, the SEC charged former CEO Henry Nicholas, former CFO William Ruehle, chairman and chief technology officer Henry Samueli, and general counsel David Dull with a backdating scheme. All but Dull were charged criminally, as well. Samueli agreed to a plea deal and the prosecutions of Ruehle and Nicholas went forward.

Ruehle’s attorneys first accused the prosecutor of misconduct in October 2008, when AUSA Andrew Stolper leaked confidential communications with counsel for the defendants to reporters for the L.A. Times and the Wall Street Journal. Stolper initially denied the allegations, but has since admitted to the conduct, calling it “the stupidest thing I’ve done in my career.” However, a more complete picture of Stolper’s misconduct eventually emerged. Stolper intimidated and improperly influenced each of the necessary witnesses for the defense. We have included portions of the transcript from December 15, 2009, when Judge Carney of the Central District of California dismissed the backdating cases, explaining:

Nancy Tullos was Broadcom’s vice president of human resources. This is what Judge Carney said of Stolper’s conduct regarding Ms. Tullos:

The judge had this to say regarding the intimidation of Mr. Dull:

Judge Carney was particularly concerned with the prosecution’s disgraceful treatment of Mr. Samueli, whose guilty plea he vacated on December 9, 2009:

Judge Carney noted that, in addition to the misconduct, because the witnesses were improperly influenced, their testimony was unreliable and must be stricken, leaving insufficient evidence to convict Mr. Ruehle. For that reason, the judge dismissed the indictment with prejudice and entered a judgment of acquittal for Mr. Ruehle.

Because Nicholas needed the same three witnesses for his defense, he was also denied compulsory process and would not be able to receive a fair trial. For that reason, Judge Carney also dismissed the stock option backdating case against him with prejudice. Nicholas is also charged in a drug distribution case and will likely call the same witnesses in that case. The judge ordered the government to show cause why that case should not also be dismissed. He noted that other evidence of government misconduct will be admissible at that trial, including a threat to force Nicholas’ 13 year old son to testify before the grand jury.

In addition, Judge Carney dismissed the SEC case without prejudice and discouraged the SEC from proceeding with that case any further.

The judge concluded eloquently:

The Ninth Circuit’s opinion in Reyes is available here.
The criminal minutes from December 15, 2009 in Ruehle is available here and the full transcript is available here.

Background

For many years, federal prosecutors successfully argued that the mail fraud and wire fraud laws covered schemes to defraud the people of the “intangible right” to have affairs conducted honestly. Now referred to as “pre-McNally caselaw” this body of law was not uniform; the circuits disagreed on exactly what conduct constituted the illegal conduct at the boundaries of the law. In McNally v. U.S. in 1987, the Supreme Court held:

Rather than construe the statute in a manner that leaves its outer boundaries ambiguous and involves the Federal Government in setting standards of disclosure and good government for local and state officials, we read [the mail fraud statute] as limited in scope to the protection of property rights. If Congress desires to go further, it must speak more clearly than it has.

Congress reacted by passing 18 U.S.C. § 1346, which states: “For the purposes of this chapter, the term ‘scheme or artifice to defraud’ includes a scheme or artifice to deprive another of the intangible right of honest services.” Everyone agrees that Congress intended to overrule McNally and most seem to agree that the statute covers bribery and kickbacks, but because Congress failed to speak clearly, many issues at the borders of the law remain unresolved.

Since 1987, prosecutors have attempted to extend “honest services fraud” to many situations that would be less-than-obvious to readers of the statute. In Black, Conrad Black was convicted of honest services fraud in a private setting for use of a scheme to increase his own compensation that caused no harm to the corporation. In Skilling, Jeffrey Skilling was convicted in a private setting (Enron) in which the scheme involved no personal gain. In Weyhrauch, an Alaska legislator was convicted for failure to disclose a conflict of interest, even though Alaska law imposes no duty to disclose. When the Supreme Court denied certiorari in Sorich v. U.S. this year, Justice Scalia dissented, saying that it seemed irresponsible “to let the current chaos prevail” in this area of law. The Court will finally take on the responsibility with Black, Weyhrauch, and Skilling.

Oral Arguments in Black and Weyhrauch

At the oral argument in Black last week, the Court seemed eager to determine whether the constitutionality of § 1346 was properly before them in these two cases. Many of the Justices asked about a constitutional argument. Black’s lawyer asserted that he was presenting the constitutional question of vagueness (both notice and prosecutorial discretion) as a predicate for the logical disposition of the question presented. The government’s lawyer asserted that the constitutional question had not been posed in Black, but that Skilling, which had not yet been briefed, may present the issue. Chief Justice Roberts responded by asking, “you agree it would be very unusual if in June we announced the opinion in your case agreeing with you and then the next case announced that the statute is unconstitutional?”

The Court asked the government’s lawyer about the ins and outs of what is covered by honest services fraud, particularly what the lawyer called “undisclosed conflicts of interest by an agent or fiduciary who takes action to further that interest.” Justice Breyer worried that “perhaps there are 150 million workers in the United States. I think possibly 140 of them would flunk [the government’s] test.” The government’s explanation was that materiality and intent to defraud would exclude such employees, but Justice Scalia wasn’t satisfied with the government’s circular reasoning, asking, “I’m still waiting to hear what materiality consists. Is it just – de minimus doesn’t count?” and later remarking that nothing in the government’s brief or argument had “eliminate[d] these de minimus kind of … misrepresentations to the employer.”

The Court spent the next hour on oral arguments in Weyhrauch. Weyhrauch’s counsel argued primarily about the duties enforced by the honest serviced statute. When the government lawyer returned, however, the Justices turned back to the constitutional issues. The Court contemplated the ability of the average citizen to understand the law, with Justice Scalia asking at one point, “What is the citizen supposed to do? He is supposed to go back and read all those pre-McNally cases?” The government lawyer eventually assured the Court that vagueness is a legitimate concern that the government would not shy away from once raised in Skilling.

The Court has not asked the parties to brief the constitutional vagueness issue in Black or Weyhrauch, but the Skilling brief addresses it directly. Because oral arguments in Skilling have been pushed forward since that brief was filed, the Court will likely tackle the constitutional issue before announcing opinions in Black or Weyhrauch.

Skilling Brief

Filed on Friday, Skilling’s brief focuses on two issues: the constitutionality of honest services fraud, particularly where no private gain was intended, and whether the Government may rebut the presumption of jury prejudice. Regarding honest services fraud, Skilling set forth the following arguments.

A. To identify any meaning in § 1346, one must consult two decades of conflicting and confusing cases, so it is unconstitutionally vague.

The brief identifies five basic questions that the pre-McNally cases disagreed upon, making it “hopelessly unclear and conflicting” so as not to provide fair notice of what is criminalized by § 1346. These disagreements included: what source of law identifies the illegal conduct; whether contemplated economic harm to the employer was a necessary element; whether public and private sector standards were identical; whether duties extended beyond “official action,” and whether use of the fiduciary position was a necessary element. The brief quotes a dissenting judge from the Second Circuit as saying, “Ordinary people cannot be expected to undertake such an analysis [of the meaning of pre-McNally cases]; rare is the lawyer who could do it…”

The brief also details numerous conflicting meanings assigned to the statute by the government in the history of its prosecutions. The government has used this statute as a deus ex machina (a disgraceful literary device defined here) to proffer any meaning necessary to prosecute whichever defendant happens to be in its sights. By facilitating arbitrary prosecutions, this statute implicates “the other principle element of the vagueness doctrine.” In oral argument in Black, Justice Breyer brought up this point, joking about a criminal statute reading, “'It is a crime to do wrong.’ sometimes adding, ‘in the opinion of the Attorney General.’” He then asked, “Now do you see the problem?”

Because of the vagueness issues and the Justices’ questions and remarks during oral argument, we are hopeful that the Court will decide that § 1346 is unconstitutional, now that the issue has been presented directly. The Court may, however, simply limit its application. Skilling argues that doing so would require creation of federal common law, which is not a part of the Court’s duty. Justice Scalia addressed this point numerous times during oral argument, saying, “[Y]ou speak as though it is up to us to write the statute… but that’s not our job.”

B. If the Court decides to uphold the statute, it should limit it to covering bribes and kickbacks, the only category of conduct unambiguously prohibited in pre-McNally caselaw.

Skilling argues that, if the Court upholds the constitutionality of § 1346, it should limit its application to the bribery and kickbacks that were paradigmatic of pre-McNally caselaw, rather than including the “self-dealing” types of cases that have garnered much of the confusion regarding this law. The bribery and kickbacks cases are what an average citizen would likely find when attempting to determine the meaning of the statute and the government has stated that Congress meant to codify the paradigm cases in enacting § 1346. The rule of lenity requires such a limitation. In addition, the pre-McNally self-dealing cases were effectively money or property fraud cases that did not need to be addressed by a new statute, so this is already-covered territory and extending honest services fraud to it would be redundant.

C. If the Court reads self-dealing into the statute, it should require private gain as an element of the offense, and disqualify normal compensation incentives established by the employer as “private gains.”

Finally, Skilling argued that even if self-dealing is covered by the statute, it should only apply in cases in which the defendant gained privately. Every circuit that addressed a private gain requirement in the pre-McNally cases enforced a requirement that the government prove that the defendant personally gained some economic benefit. Even during oral argument in Weyhrauch, the government lawyer stated that the government was after “personal conflicting financial interests.” When the Chief Justice twice repeated the word “financial,” the government lawyer responded each time with “That’s right.” If the majority of the Court follows through with these comments by the Chief Justice, then it appears that private gains will be a necessary element in an honest services fraud prosecution.

Skilling then argued that normal compensation incentives for doing a good job for the employer is not a private benefit for the purpose of § 1346. No pre-McNally cases held that normal compensation incentives qualified as private gains. In addition, since people are presumed to act in their financial self-interest and employers count on that behavior in incentivizing performance, “every salaried employee can be said to work for her own interest while purporting to act in the interests of the employer,” according to Judge Jacobs of the Second Circuit, in his dissent in U.S. v. Rybicki.

We look forward to reading the government’s reply brief, which is due January 25, 2010. We hope the Court will eventually hold that this statute is unconstitutionally vague, but, as Timothy O’Toole pointed out at the White Collar Crime Prof Blog, the Court denied certiorari in another honest services fraud case on December 7th. The case is U.S. v. Kincaid-Chauncey and the Ninth Circuit opinion is available at 556 F.3d 923. Because this case dealt with more straightforward bribery charges against a public official, the denial of cert. leads us to believe the Court may consider leaving the bribery and kickback aspects of the statute intact.

Transcripts from the oral arguments are available here
(Black) and here (Weyhrauch).
Skilling’s brief is available here.
Additional reading is available at the following locations:
ScotusBlog
White Collar Crime Prof Blog
NPR’s All Things Considered

To review, the following cases dealing with fees to criminal defense attorneys have been decided in the past few months:

In U.S. v. Kaley, a wife and husband were each indicted with conspiracy, transportation of stolen property, obstruction of justice, and money laundering. The indictment included a criminal forfeiture count and the government obtained an injunction against the Kaleys encumbering the property listed in the forfeiture count. This August, the Eleventh Circuit held that under this circuit’s precedent, “a defendant whose assets are restrained pursuant to a criminal forfeiture charge in an indictment, rendering him unable to afford counsel of choice, is entitled to a pre-trial hearing only if the balancing test enunciated in Barker v. Wingo is satisfied.” The Court further held that the District Court had not correctly applied the balancing test in the Kaleys’ case and reversed, requiring the district court to re-weigh the factors and determine whether the Kaleys may have a pre-trial hearing on the matter. We discussed the case in this post.

Just last month, lawyer J. Mark Shelnutt was acquitted of money laundering charges associated with fees paid to him by a criminal defense client. Shelnutt was prosecuted under 18 U.S.C. § 1956, which required federal prosecutors to attempt to prove that ill-gotten gains were used for certain prohibited purposes, including facilitating underlying criminal activity, tax evasion, or evading money laundering statutes. The jury found that the government failed to prove its case. We discussed the verdict in this post.

U.S. v. Velez, the Ben Kuehne case, revolved around payment of legal fees to a criminal defense team. The team hired Kuehne to investigate the source of the money and verify that it was not criminally derived property. Kuehne’s trust account received wire transfers and Kuehne drafted opinion letters advising the team that he had analyzed the sources of all funds, then transferred the money to the criminal defense team. Count One of the indictment charged the defendants with money laundering in violation of 18 U.S.C. § 1957, despite § 1957(f)(1), which provides an exception for “any transaction necessary to preserve a person’s right to representation as guaranteed by the sixth amendment to the Constitution.” Because the funds were used to pay the criminal defense team, the district court judge dismissed Count One. In October, the Eleventh Circuit held that “[t]he district court was eminently correct in holding that Defendants are not subject to criminal prosecution under § 1957(a).” While criminally derived proceeds paid to defense attorneys are subject to forfeiture, they may not be the basis for a criminal prosecution. Our previous posts regarding Ben Kuehne’s case are available here and here. For more information on the case, the Southern District of Florida Blog has followed it closely.

This Monday, the Wall Street Journal Law Blog shared this invitation with its readers. Mr. Kuehne confirmed that he wished to extend the invitation “Far and Wide.” He added, “I owe the community my deepest gratitude, and hope to have a respectable turnout.”

As we discussed in this post in July, a new federal law directed at online pharmacies went into effect this April. The Ryan Haight Online Pharmacy Consumer Protection Act makes it illegal to distribute controlled substances that are prescription drugs over the Internet without a valid prescription, or to advertise for such distribution. In response to this Act, the United States Sentencing Commission made several amendments to the Sentencing Guidelines, including a new sentencing enhancement at §2D1.1, increasing the base offense levels for hydrocodone offenses, and assigning guidelines to the two new offenses created by the Act.

New Sentencing Enhancement at §2D1.1

The Commission added a new sentencing enhancement, which applies when the offense involved a Schedule III controlled substance and death or serious bodily injury resulted from the use of the drug. The enhancement provides a maximum of 15 years, or 30 years for second or subsequent offenses. Schedule III includes such drugs as anabolic steroids, morphine, hydrocodone, and ketamine.

The amendment adds two alternative base offense levels to §2D1.1 [Unlawful Manufacturing, Importing, Exporting, or Trafficking (Including Possession with Intent to Commit These Offenses); Attempt or Conspiracy]. §2D1.1(a)(4) is added to provide a base offense level of 26 for a Schedule III conviction involving death or serious bodily injury resulting from the use of the drugs. §2D1.1(a)(3) now provides for a base offense level of 30 in such a case where the defendant has one or more prior convictions for similar offenses.

Increased Base Offense Levels for Hydrocodone

The amendments modify the Drug Quantity Table in §2D1.1 to specify the base offense levels for hydrocodone as follows:

Two New Offenses

Our previous post discussed the new offenses created by the Act. 21 U.S.C. § 841(h) prohibits the distribution, delivery, or dispensing of controlled substances over the Internet without a valid prescription. The Commission has referred this offense to §2D1.1. That Guideline already includes a two-level enhancement where a controlled substance is distributed “through mass-marketing by means of an interactive computer service” i.e., the Internet.

The second new offense at 21 U.S.C. § 843(c)(2)(A) prohibits use of the Internet to advertise the sale of controlled substances. § 843(c) is already referenced to §2D3.1, but the amendment changes the title of the Guideline to "Regulatory Offenses Involving Registration Numbers; Unlawful Advertising Relating to Scheduled Substances; Attempt or Conspiracy."

Three weeks ago, the Eleventh Circuit Court of Appeals, which hears appeals from cases in Georgia, Florida, and Alabama, decided U.S. v. Velez in favor of the defendant. That case involved a money laundering charge against a criminal defense attorney under 18 U.S.C. § 1957. Shelnutt was prosecuted under 18 U.S.C. § 1956, which required federal prosecutors to attempt to prove that ill-gotten gains were used for certain prohibited purposes, including facilitating underlying criminal activity, tax evasion, or evading money laundering statutes. The prosecution was unable to prove its case.

More information in the Shelnutt case can be found here.
Our previous posts regarding U.S. v. Velez are here and here.
We discussed U.S. v. Kaley, another case involving the payment of legal fees to criminal defense lawyers, here in September.

Prior to 1999, Livesay was an assistant controller for HealthSouth who played a direct role in the accounting fraud that came to light following Sarbanes-Oxley in 2003. In 1999, however, Livesay decided that he could no longer stomach the fraud, so he transferred to the IT department, where he became CIO. Before the fraud was discovered, he was asked repeatedly to return to the accounting department, but he refused.

In 2004, Livesay pleaded guilty to conspiracy to commit wire fraud, securities fraud, and falsifying records; falsely certifying financial information filed with the SEC; and a forfeiture court. Pursuant to his plea agreement, the government agreed to recommend a reduction in his offense level for acceptance of responsibility, a sentence at the low end of the guidelines, and a downward departure in exchange for Livesay’s cooperation with the government.

And cooperate, he did. Livesay immediately assisted the government in its prosecutions relating to the fraud. He created a roadmap for how HealthSouth had manipulated its accounts and provided information, including documents, he had maintained as evidence of the fraud. He met with various governmental agencies on at least 10 occasions and testified against CEO Richard Scrushy for four days and finance exec Sonny Crumpler for two days. The judge in those cases (and his most recent sentencing hearing) was particularly impressed with his credibility as a witness.

Judge Clemon of the Northern District of Alabama sentenced Livesay to 60 months probation, including 6 months of home detention, a $10,000 fine, and forfeiture of $750,000. The government appealed the sentence and the Eleventh Circuit remanded for resentencing in Livesay I, holding that the court below had failed to state the reasons supporting the extent of its departure from the Guidelines sentence.

On remand, he was given the same sentence. The Eleventh Circuit again reversed in Livesay II, holding that the departure and the ultimate sentence were unreasonable due to Livesay’s role in the massive fraud. The Supreme Court granted certiorari, vacated Livesay II, and remanded for reconsideration in light of Gall. On remand, the Eleventh Circuit again vacated Livesay’s sentence in Livesay III, holding that the sentencing court had impermissibly considered Livesay’s repudiation of the conspiracy in its departure. Judge Clemon recused himself.

Judge Bowdre imposed the same sentence again at Livesay’s third sentencing hearing. In explaining its reasoning for the departure, the court focused on the significance and usefulness of Livesay’s assistance to the government, as well as the timeliness of that assistance. Then in its Booker analysis, the court focused on Livesay’s history and characteristics, including his inability to stomach participating in the fraud by remaining in the accounting department.

The court also focused on sentencing disparities in the case, particularly regarding Emery Harris, Kay Morgan, and Richard Botts. Livesay initially directed Harris and Morgan to make false entries, but after his move to another department, they were promoted to positions equal to or higher than his in the fraud and they remained until the end. Harris received only 5 months in custody and Morgan received 48 months of probation. Richard Botts, a senior vice president, received only 60 months probation and 6 months home confinement, like Livesay. After his resentencing for the same amount of time, the government did not appeal his sentence.

In Gall, the Supreme Court held that appellate courts must review the substantive reasonableness of sentences under an abuse-of-discretion standard and must give due deference to the district court’s decision that § 3553(a) factors justify the extent of the variance from the Guidelines range. The Court recognized that “[t]he sentencing judge is in a superior position to find facts and judge their import under § 3553(a) in the individual case” and have “an institutional advantage over appellate courts in making these sorts of determinations.” The Court also pointed out that while custodial sentences are more severe than probation, probation is a “substantial restriction of freedom” that should be given weight.

The Eleventh Circuit ignored the unique position of the sentencing judge and the weight of probation as a sentence in Livesay IV yesterday. Its opinion failed to mention any of the reasons for the sentencing court’s decision, simply holding that the probationary sentence “is patently unreasonable in light of Livesay’s role in this massive corporate fraud” and that “any sentence of probation would be unreasonable.”

Livesay’s attorney has stated his intent to request a rehearing. We hope the Eleventh Circuit reconsiders this case and prevents Livesay from enduring a fourth sentencing hearing. As of now, Livesay has already fulfilled payment of the fine and the forfeiture, as well as serving the home confinement time. He has lost his CPA license and spent 5 years with the agonizing uncertainty of the appellate process. As Judge Bowdre said at the last resentencing: “I believe it’s time for this to come to an end.”

The Eleventh Circuit's opinion in Livesay I is available here.
The Eleventh Circuit's opinion in Livesay II is available here.
The Eleventh Circuit's opinion in Livesay III is available here.
The Eleventh Circuit's opinion in Livesay IV is available here.
The Supreme Court's opinion in Gall is available here.

The Sentencing Commission has made it clear that judges now have more specific authority to impose sentencing options other than simply putting the defendant in prison. The Commission added intermittent confinement as a sentencing option, as well as adding community service as a potential mandatory condition of probation and reaffirming that community confinement is a possible condition of supervised release.

Intermittent Confinement

The most important alternative sanction addressed by the Sentencing Commission this year is the availability of intermittent confinement as an alternative to a traditional prison sentence. Before now, intermittent confinement has never been listed as a “sentencing option” in Chapter 5, Part F of the Guidelines. The Commission added a new guideline at §5F1.8 to specifically authorize such an option.

“Intermittent confinement” usually means spending only nights and weekends in custody, but judges may specify other intervals of time. The new sentencing option is available only during the first year of probation or supervised release. As a condition of supervised release, it is available only for violation of a condition of supervised release and only when facilities are available.

Criminal defense lawyers should explain to judges that the new guideline (and the Judicial Administration and Technical Amendments Act of 2008, which inspired it) show that the Commission and Congress recognize that judges should consider sentences other than traditional imprisonment.

Community Confinement

Until now, there has been considerable confusion regarding whether a judge has authority to sentence a defendant to community confinement (in a community corrections facility, such as a halfway house) as a condition of supervised release. This option can be an important part of a defense sentencing recommendation because judges often want defendants to have some restriction on their liberty, even if they have been convinced that supervised release is appropriate. The recent amendments clear up the confusion, reaffirming in the Guidelines that residency at a community corrections facility is a possible condition of supervised release.

The confusion stemmed from the Antiterrorism and Effective Death Penalty Act of 1996 (the Act). The Act renumbered 18 U.S.C. § 3563(b), which listed potential conditions of probation. Unfortunately, the Act failed to make all of the necessary changes to statutes referring to subsections of the renumbered statute. This oversight created confusion about many of the conditions that had been renumbered.

Previously, 18 U.S.C. § 3583(d), which addresses conditions of supervised release, stated that any of the conditions listed in § 3563(b) could be imposed as a condition of supervised release, except the condition listed at (b)(11). Prior to the Act, that condition was intermittent confinement. After the renumbering, however, community confinement became (b)(11). Because § 3583(d) was not amended to conform to the renumbering, community confinement was unintentionally excluded as an allowable condition of supervised release. Congress finally corrected its mistake by amending § 3583(d) to refer to (b)(10) (intermittent confinement) with the conditions discussed above.

Community Service

Another point of confusion created by the Act was whether community service was a potential mandatory condition of probation. The new amendments clarify that community service is a potential mandatory condition of probation in §§5B1.3(a)(2) and 8D1.3(b), instead of notice to victims and residential restrictions.

Prior to the renumbering by the Act, judges were usually required to include a fine, restitution, and/or community service as mandatory conditions of probation, pursuant to 18 U.S.C. § 3563(a)(2). After the Act’s renumbering fiasco, § 3563(a)(2) required judges to include restitution, notice to victims, and restrictions on the defendant’s residence. The Commission recognized the mistake, but changed the Guidelines and included a note explaining that the change may have been unintended by Congress.

Congress finally corrected this mistake, as well, by amending § 3563(a)(2) to require restitution and/or community service, unless a fine has been imposed. As a result, the Commission amended the Guidelines accordingly. The amendments change §5B1.3(a)(2) and §8D1.3(b) to require restitution and/or community service as mandatory conditions of probation for a felony, unless the court has imposed a fine or finds on the record that extraordinary circumstances would make such conditions plainly unreasonable.

Mr. Harris fled from police while driving between 70 and 80 miles per hour, eventually crashing his car into a tree and injuring his passenger. The Eleventh Circuit held that such a crime qualifies as a “crime of violence” along the same lines as burglary and arson.

As we mentioned in this post two weeks ago, the law regarding “violent felonies” under the Armed Career Criminal Act (ACCA) has been in a state of flux following the Supreme Court decisions in Chambers, Begay, and James in the past couple of years. We discussed Chambers in this post. Courts have looked to those decisions to define “crime of violence” under the Sentencing Guidelines, as well, because the definitions for both phrases are virtually identical.

In James, the Supreme Court held that federal courts should look at the elements of the predicate offense categorically to determine “whether the conduct encompassed by the elements of the offense, in the ordinary case, presents a serious potential risk of injury to another.” In Begay, the Supreme Court further enhanced the test, explaining that the predicate offense must be similar in kind and degree to the examples specifically enumerated in the ACCA: burglary, arson, and extortion. The Court in Begay held that drunk driving did not fit the bill.

Last week in Harris, the Court applied James and Begay, finding that “[f]leeing from the police at high speed or with ‘a wanton disregard for safety of persons or property’ does indeed ‘show an increased likelihood that the offender is the kind of person who might deliberately point the gun and pull the trigger.’” It held that the crime is violent, like burglary, because it displays callousness toward risk, and aggressive, like arson, because the driver “wields a weapon in a place … populated with innocent drivers and pedestrians.” For those reasons, it held that the predicate offense was a crime of violence for the purposes of the Sentencing Guidelines.

Because we see more parallels between this crime and drunk driving than with burglary or arson, we are disappointed with this decision.

The Eleventh Circuit’s opinion in Harris is available here.

Identity Theft Amendments

Congress directed the Sentencing Commission to increase the penalties under several of the identity theft statutes in Title 18. In response to that directive, the Commission added a new enhancement and a new upward departure provision, as well as expanding the definition of “victim” and the factors to be considered in calculating the amount of loss.

The new enhancement is located at §2B1.1(b)(15). It adds two levels if either of two prongs is met: (A) where the offense involved an offense under 18 U.S.C. § 1030 (fraud in connection with computers) and intent to obtain personal information, or (B) where the offense involved unauthorized public dissemination of personal information. The (A) prong was formerly a part of the computer crime enhancement, which has been redesignated as §2B1.1(b)(16).

The new upward departure is an amendment to §2H3.1 (Interception of Communications; Eavesdropping; Disclosure of Certain Private or Protected Information.) It explains that an upward departure may be warranted where an offense involved the personal information or means of identification of a substantial number of people.

The Commentary to §2B1.1 is amended to expand the definition of “victim” for purposes of the victims table at subsection (b)(2). Under the amendment, “victim” includes persons whose means of identification was taken and used, but who was fully reimbursed by a third party, such as a bank or credit card company. It only covers victims, though, whose information was actually used.

The amendments also change Application Note 3(c), regarding calculation of loss, in two ways. (1) Where property is copied, rather than taken, the estimate of loss may be calculated based upon the fair market value of the copied property. (2) In cases involving proprietary information, the estimate of loss may be calculated based upon the cost of developing the information or the reduction in value of the information resulting from the offense.

In this post in May we discussed Flores-Figueroa v. U.S., a Supreme Court case in which the Court held that aggravated identity theft requires the government to prove that the defendant knew that the means of identification that he or she used, transferred, or possessed actually belonged to another person. We discussed the case again in August in this post, when the Eleventh Circuit applied it in U.S. v. Gomez. An amendment to Application Note 1 of §2B1.1 clarifies that for information to be considered “personal information” it must involve information of an “identifiable individual.”

The amendments also clarify Application Note 2(b) of §3B1.3 (Abuse of Position of Trust or Use of Special Skill) to include defendants who exceed or abuse the authority to issue or transfer means of identification.

Counterfeiting Amendments

The Sentencing Commission resolved a split in the circuits regarding whether offenses involving “bleached notes” should be sentenced under §2B5.1 or §2B1.1. “Bleached notes” are genuine U.S. currency that has been stripped of ink and re-printed to appear as a high denomination note.

In U.S. v. Inclema in 2004, the Eleventh Circuit held that, because such notes are altered, they should be sentenced under §2B1.1. The amendments change this rule, specifically providing for bleached notes to be sentenced under §2B5.1. The Commission explained that technological advances in counterfeiting “have rendered obsolete the previous distinction in the guidelines between an instrument falsely made or manufactured in its entirety and a genuine instrument that is altered.”

Intellectual Property Amendments

In response to Congress increasing the maximum sentences for violations of 18 U.S.C. § 2320 (Trafficking in counterfeit goods or services) where the offender causes or attempts to cause serious bodily injury or death to 20 years or life, respectively, the Sentencing Commission amended the enhancement at §2B3.5(b)(5) (Criminal Infringement of Copyright or Trademark.)

The amendment brings the two-level enhancement into parallel with §2B1.1(b)(13) by clarifying that the guideline also applies when the offense involved the risk of death and increasing the minimum offense level to 14.

Housing and Economic Recovery Act Amendments

Congress created two new offenses in the Housing and Economic Recovery Act of 2008. The Commission refers 12 U.S.C. § 4636b to 2B1.1 and 12 U.S.C. § 4641 to 2J1.1 and 2J1.5. Other similar statutes were referred to the same statutes.

Section 4636B criminalizes working for regulated entities in certain capacities after the Federal Housing Finance Agency has prohibited it. The Commission explains that it is similar to an economic crime and thus best accounted for by reference to §2B1.1. This testimony by the Chair of the Federal Defender Sentencing Guidelines Committee describes the unsuitability of the chosen guidelines for these new offenses.

The U.S. Sentencing Commission has changed the federal Sentencing Guidelines in a number of ways relating to sex crimes. These changes will go into effect this Sunday, November 1, 2009. The amendments address a circuit split regarding an enhancement for undue influence of a minor, resulting in a positive change in Eleventh Circuit law, as well as changes to the child pornography and human trafficking guidelines.

Undue Influence Amendments

§2A3.2 (Criminal Sexual Abuse of a Minor Under the Age of Sixteen Years (Statutory Rape) or Attempt to Commit Such Acts) and §2G1.3 (Promoting a Commercial Sex Act of Prohibited Sexual Conduct with a Minor; Transportation of Minors to Engage in a Commercial Sex Act or Prohibited Sexual Conduct; Travel to Engage in Commercial Sex Act or Prohibited Sexual Conduct with a Minor; Sex Trafficking of Children; Use of Interstate Facilities to Transport Information about a Minor) each contain an enhancement for undue influence where “a participant otherwise unduly influences the minor to engage in prohibited sexual conduct.”

Two issues have arisen involving the undue influence enhancement. The first is whether it can apply in attempt cases. The second is whether it can apply where the only “minor” involved is a law enforcement officer. Three circuits have addressed these issues, but have decided them differently. The Eleventh Circuit held in U.S. v. Root that the enhancement does apply in both situations. The Seventh Circuit, on the other hand, held in U.S. v. Mitchell that it does not apply where the victim is an undercover officer and suggested that it would not apply in cases of attempt. The Sixth Circuit, in U.S. v. Chriswell, left the attempt issue open, but held that the enhancement does not apply where the victim is an undercover agent.

The Sentencing Commission resolved the circuit split in favor of applying the enhancement in applicable attempt cases, but not where the only “minor” involved in the offense is an undercover law enforcement office. The Commission reasoned that unlike other enhancements, the undue influence enhancement properly focuses on the effect on the minor.

The Sentencing Commission held a public meeting on September 16, 2009 with a possible vote on whether this amendment should be made retroactive to previous defendants’ sentences. The minutes from that meeting have not yet been published. We hope the amendment is made retroactive to provide relief to defendants sentenced in the Eleventh Circuit.

An analysis by the Office of Research and Data on the Impact of the Influencing a Minor Amendment is Made Retroactive is available here.

Child Pornography Amendments

§2G2.1 (Sexually Exploiting a Minor by Production of Sexually Explicit Visual or Printed Material; Custodian Permitting Minor to Engage in Sexually Explicit Conduct; Advertisement for Minors to Engage in Production) and §2G2.2 (Trafficking in Material Involving the Sexual Exploitation of a Minor; Receiving, Transporting, Shipping, Soliciting, or Advertising Material Involving the Sexual Exploitation of a Minor; Possessing Material Involving the Sexual Exploitation of a Minor with Intent to Traffic; Possessing Material Involving the Sexual Exploitation of a Minor) are amended to reflect changes in the child pornography statutes at 18 U.S.C. §§ 2251 et seq.

The child pornography statutes were amended to add streaming video to the offenses. Everywhere “producing a visual depiction” is mentioned, the Commission added “transmitting a live visual depiction” and everywhere “possessing material” is mentioned, the Commission added “accessing with intent to view the material.” These amendments ensure that viewing streaming video, whether or not the video is stored in any permanent format, will result in the same penalties as saving the material.

The Commission also amended §2G2.2 to provide for a new offense at 18 U.S.C. sec 2252A(a)(7), which makes it unlawful to knowingly produce with intent to distribute or knowingly distribute “child pornography that is an adapted or modified depiction of an identifiable minor.” This offense has no mandatory minimum and carries a maximum sentence of fifteen years. The guideline now provides for a base offense level of 18 for such an offense, which is four levels lower than other child pornography distribution offenses. The lower level accounts for the fact that creating the image does not involve actual exploitation of the child and the enhancements for distribution and use of a computer will likely apply.

Human Trafficking Amendments

The Commission amended §2L1.1 (Smuggling, Transporting, or Harboring an Unlawful Alien) to include an alternative enhancement prong at §2L1.1(b)(8)(B). If greater than the coercion enhancement at §2L1.1(b)(8)(A), this enhancement will apply where the alien harboring was for the purpose of prostitution and the defendant receives a §3B1.1 adjustment for aggravating role. In this case, a two-level increase applies, but if the alien who engaged in the prostitution was a minor, a six-level increase applies. Application Note 6 was also amended to note that §3A1.3 (Restraint of Victim) may apply.

Additional amendments were made regarding human trafficking, but because they do not involve sex crimes, we will address them in a later post.