Federal Criminal Lawyer Blog

We do lots of sentencing hearings in federal criminal cases, here in Atlanta, throughout Georgia and other parts of the country, like Florida, Alabama, New York, California and Tennessee. Whatever state they are in, all federal judge are first required to consult the Federal Sentencing Guidelines when deciding the appropriate sentence for a person who has either pled guilty to or who a jury has found is guilty of a federal crime. These Guidelines are amended all the time, and it seems for some categories of crimes the suggested range of punishment keeps getting more and more harsh. However, what we lawyers call the "Ex Post Facto" clause from the Fifth Amendment to our beloved Constitution says that it is unconstitutional to increase punishments "after the fact." Several days ago ( I was not able to get to this post as I have been in federal court all week) the United States Supreme Court held that the Ex Post Facto clause requires a new sentencing hearing for an Illinois businessman who had been convicted of bank fraud. The case is Peugh v. United States and can be accessed here.

Mr. Peugh was convicted of five counts of bank fraud in a scheme that caused more than $2.5 million in losses by the victim bank. The crimes took place around 1999 and 2000. However, when he went to court years later, the Sentencing Guidelines in effect at the time of his sentencing hearing suggested 70 to 87 months in prison. Peugh objected to use of the 2009 guidelines, insisting that the judge should use the guidelines in effect at the time of his crimes. Under those earlier Guidelines, the appropriate sentence ranged from 30 to 37 months in prison. Peugh argued that relying on higher guidelines enacted after his crimes were committed would amount to the use of an ex post facto law. The sentencing judge rejected the argument, and sentenced Peugh to 70 months in prison. A panel of the Seventh US Circuit Court of Appeals also rejected the ex post facto argument and upheld the sentence.

In reversing those decisions this past Monday, the Supreme Court said: “A retrospective increase in the Guidelines range applicable to a defendant creates a sufficient risk of a higher sentence to constitute an ex post facto violation.” Our new favorite Justice, Sonia Sotomayor, wrote the majority opinion in a 5-4 decision. She was joined by Justices Anthony Kennedy, Ruth Bader Ginsburg, Stephen Breyer, and Elena Kagan.

The majority ruled that a federal judge’s reliance on the tougher guidelines in fashioning Mr. Peugh’s sentence violated the concept of “fundamental justice.” The ban on ex post facto laws is designed to promote basic fairness by preventing the government from changing the law midway through a criminal case when the new law will result in more severe punishment.

The main issue in this case was whether the ban on ex post facto laws should apply beyond statutes (laws enacted by Congress) to include any new, tougher version of the sentencing guidelines (which are created by this hybrid body called the United States Sentencing Commission). In deciding that the ex post facto clause does apply to the Sentencing Guidelines, Justice Sotomoyor wrote, “The Ex Post Facto Clause forbids the [government] to enhance the measure of punishment by altering the substantive ‘formula’ used to calculate the applicable sentencing range.”

“That is precisely what the amended guidelines did here,” she said. “Doing so created a ‘significant risk’ of a higher sentence for Peugh, and offended one of the principal interests that the Ex Post Facto Clause was designed to serve, fundamental justice.”

Justice Thomas wrote a dissent, joined by Chief Justice John Roberts and Justices Antonin Scalia and Samuel Alito. Justice Thomas said the sentencing guidelines may influence a judge’s sentencing decision but that the final sentence is discretionary. The Constitution bars ex post facto laws that increase punishment, not the enactment of discretionary guidelines that may result in a harsher sentence, he said.

Federal Criminal Charges were announced yesterday here in Atlanta by the U.S. Attorney. The feds have indicted a well-known State legislator, Representative Tyrone Brooks. According to the indictment, Representative Brooks committed mail fraud, wire fraud, and tax crimes. The grand jury returned a 30-count indictment which charges that, from the mid-1990s through 2012, Brooks solicited contributions from individuals and corporate donors to combat illiteracy and fund other charitable causes, but then used the money to pay personal expenses for himself and his family.

It seems there are three basic sets of crimes alleged in the indictment. First, there are two separate supposed frauds, followed by allegations that Representative Brooks violated the tax laws.

The first of the two fraud schemes supposedly involves a tax-exempt charity, Universal Humanities, Inc., that Brooks established in the early 1990s. The grand jury alleges that Brooks solicited contributions from corporate and individual donors purportedly to combat illiteracy in disadvantaged communities in Georgia and across the southeastern United States, eventually raising more than $780,000. The feds claim that Representative Brooks made specific false representations about the work that Universal Humanities was doing and how the donated funds would be used. Prosecutors also contend that in reality, Brooks did not use the donations to promote and address literacy in Georgia or elsewhere. Instead, the indictment alleges that Brooks used the money to pay personal expenses for himself and members of his family.

The second fraud scheme alleged involved the organization Georgia Association of Black Elected officials (GABEO). The indictment alleges that Brooks diverted charitable donations he solicited on behalf of GABEO and used much of the money to pay personal expenses for himself and his family.

The indictment alleges that Brooks solicited contributions to GABEO from corporations, organizations and individuals. The feds contend that Brooks secretly opened a second GABEO bank account, and set himself up as the sole signatory on this account, and had the account statements sent to his address rather than the address of the GABEO Treasurer. Brooks then deposited the donations he solicited on behalf of GABEO into this undisclosed account, and used much of these funds to pay personal expenses for himself and his relatives.

Finally, the indictment charges that Brooks underreported his income to the IRS for the years 2007 through 2011. Prosecutors contend that Representative Brooks misappropriated of hundreds of thousands of dollars through the two fraud schemes concerning Universal Humanities and GABEO, yet his tax returns for the years between 2008 through 2011 falsely reported income of only approximately $35,000 annually.

This indictment is like so many we have seen when we have represented public officials who face federal criminal charges. While often the defense team can show there was no fraud, or at least some confusion as to the fraud charges, it is exceedingly difficult to defend the tax charges when they come up with specific expenditures that clearly show the Defendant had income, yet that same income never shows up on the Defendant's tax return. We have represented a number of public officials facing similar charges, and look forward to seeing how the defense responds to these allegations.

In any criminal case, whether in Federal Court or one of the State Court systems, prosecutors are supposed to "play fair". The Fifth Amendment to our dear Old Constitution enshrines this fairness obligation in what we lawyers call the "Due Process Clause." Yesterday was the 50th anniversary of the day in 1963 when the United State Supreme Court issued its landmark ruling of Brady v. Maryland. That was the case in which, for the first time, the Supreme Court said that the Due Process Clause mandates that a prosecutor play fair by telling the defense about any exculpatory evidence, or evidence that tends to show that the defendant was not guilty. However, as basic as this obligation seems to be, I often wonder if our clients are that much better off than 50 years ago.

Like defendants in many famous Supreme Court cases, John Brady was no saint. On June 27, 1958, he and Donald Boblit robbed and killed a man named William Brooks. Boblit quickly confessed that he had strangled Brooks to death, and that he acted alone. However, the prosecutors handling the case against John Brady never informed the defense attorneys about this confession and never turned over the transcript of Boblit's remarks.

Both Boblit and Brady were convicted and sentenced to death. Only after the trial did Brady's lawyers discover that prosecutors had a confession from Boblit that helped exonerate Brady. The attorneys found out by reading a transcript of Boblit's trial. So, Brady's attorneys sensibly asked for a new trial. The trial judge refused. Next, the Maryland Court of Appeals concluded that the suppression of the confession violated Brady's Due Process rights, but said he was only entitled to a new sentencing trial. Because his lawyers believed the whole trial had been tainted, they asked the United States Supreme Court to look into the matter.

The justices used Brady's case to memorialize a constitutional rule that imposed on prosecutors the affirmative duty to share with criminal defendants evidence that by its very definition would undermine the prosecution's case. The motives behind the suppression of the evidence didn't matter. However, in later years the Supreme Court greatly reduced the impact of this landmark ruling, by holding that an unfair prosecutor who hides exculpatory evidence will not cause a new trial unless that hidden evidence was "material". Evidence is material, only when "there is a reasonable probability that, had the evidence been disclosed to the defense, the result of the proceeding would have been different." This was a big victory for prosecutors and an even bigger defeat for aggrieved defendants.

As a young lawyer, I was kind of shocked about how the Brady rule is played out in a real case. I would always ask the Judge to make the prosecutor turn over the "Brady materials." The prosecutor would routinely roll his or her eyes, and intone that the government was well aware of its obligations, and that was it. The judge never made any inquiries, and I was left with the distinct impression that the Brady rule is merely an example of the fox guarding the henhouse. Why would a prosecutor ever turn over evidence that helps the Defendant if the prosecutor truly believes the Defendant is guilty? Furthermore, even if a prosecutor is not trying to hide anything, it seems ridiculous to ask that same prosecutor to figure out if a piece of evidence is potentially exculpatory, in that the prosecutor does not really know where the defense is going. Federal court is the worst of all, in that the discovery rules do not make a prosecutor turn over very much at all, and so no one really knows if there is some truly good defense evidence lurking in the files of one of the investigators.

Not only does the Brady rule seem to fall flat in real cases, it seems that when a prosecutor is caught withholding evidence, very little is done. Prosecutors who violate the obligation to disclose favorable evidence are rarely sanctioned by courts, and almost never by disciplinary bodies. I remember one case where I caught the prosecutor red-handed. Fortunately, my client was acquitted. When I complained about the prosecutor's violation, his boss shrugged, saying "Why does it matter, you walked your man didn't you?" That attitude seems to still prevail 50 years after the Brady decision was issued. Things might be better if all prosecutors would simply use an "open file" discovery system, but for some reason, they often are reluctant to do so. That is truly bizarre, since when there is a fight over money, each side has to make full disclosure to the other, but when freedom (or even the death sentence) is at issue, one side gets to hide the ball and only has to turn over exculpatory evidence when it is "material." Have we really improved since 1963?

Like our federal cases here in Atlanta and throughout the country, it is important to keep in mind how a federal sentencing hearing takes place. The various phases of the federal sentencing process require the Defendant's attorney to not only know the law, but also to know the procedure, so that "objections" are properly preserved. A decision issued today by the United States Court of Appeals for the Eleventh Circuit makes this point. In that case, the attorney properly objected, thus preserving the issue for appeal. In the Court of Appeals, the Defendant raised the same argument, and the appellate tribunal agreed. The result is a lower sentence for the Defendant. The case is United States v. Washington.

Mr. Washington was charged in a large fraud scheme involving banks and credit card customers. He pled guilty. As a result, the United States Probation Officer prepared the very important document called the "Presentence Investigation Report", which is often called the "PSR". The PSR has two major parts, one of which is sort of a miniature biography of the Defendant. The second part of the PSR is where the probation officer makes some recommendations as to how the complex Federal Sentencing Guidelines should apply.

In a federal fraud case, there is a specific enhancement under the Sentencing Guidelines that is based on the number of victims. For example, if there are more than 250 victims, then a six-level enhancement is added to the Guideline score.

Mr. Washington was one of many people charged in this particular fraud scheme. The same judge had found more than 250 victims while imposing sentence on some of the other Defendants. However, Mr. Washington's lawyer properly objected to the enhancement for more than 250 victims, because the prosecutor never produced any evidence. In response to Mr. Washington’s objections, the probation officer stated that he had been provided with “spreadsheets detailing the victims,” and that the number exceeded 250. The prosecutor said that “thousands of individuals” had their credit card numbers stolen. However, the prosecutor did not submit any evidence to support this assertion. During the sentencing hearing, the Defendant's lawyer reiterated his objection, but was interrupted by the Judge. “That’s the figure that’s been applied to other defendants." Therefore, the Judge used the enhancement for more than 250 victims.

The Court of Appeals reversed the sentence. First, they repeated what has been said in numerous previous cases: the prosecution bears the burden of producing at least some evidence to support any enhancement of the Guidelines. Mere argument is not enough. Also, it's not good enough to simply refer to evidence from a co-Defendant's case, unless the record shows that the Defendant and his attorney at least had a chance to review such evidence and contest it.

Perhaps the most important part of the case is what happens next. The Court of Appeals noted that sometimes it sends the case back so the prosecution can basically "fix" the problem. They refused to take that approach here. The government had its chance, and blew it. No "do-over", said the appellate court. As a result, they ordered that the lower court resentence Mr. Washington without using the 6-level enhancement, which will almost certainly reduce his Guideline range and probably the overall sentence.

Again, it is important to hire a lawyer who knows the law and procedure. Mr. Washington's attorney knew when to object, and likely saved his client additional time in prison.

Many public corruption investigations turn into federal criminal cases, here in Atlanta and around the country. Our firm is involved in several of these matters right now. Most of these "white collar" cases result in our clients being charged with some variety of fraud. The feds almost always resort either to the mail or wire fraud statutes. Each of these laws requires a "scheme or artifice to defraud" another out of money or property. A 1988 law says that these statutes include schemes to defraud another out of the "intangible right of honest services." A 2010 case from the United States Supreme Court restricted the "honest services" version to cases involving bribes and kickbacks, and held that these statutes cannot be used to prosecute a person merely because the Defendant violated some fiduciary duty to a governmental agency or other entity or otherwise engaged in a conflict of interest. I wrote a recent post about how the local federal court of appeals issued a recent decision upholding the conviction of a man in Jacksonville, Florida. That case was an example of how the feds try to get around the recent restrictions on the honest services theory.

The feds recently made a splash in New York, arresting a politician who allegedly was trying to buy his way into the Republican race for Mayor. This is but the latest in a string of high-profile cases in that city involving allegations of bribery, payoffs and the like. A recent article I came across notes that despite the restrictions on the honest services theory, federal prosecutors continue to use this species of fraud when going after politicians. The article quoted a former high ranking federal prosecutor as saying that the restrictions on honest services actually helped the government when making such cases.“I thought the court did us — prosecutors — a favor, because I never thought juries liked conflict-of-interest cases. ... Juries want to see bribes or kickbacks" because conflicts of interest “seem more like ethical violations than criminal.”

I thought this article was worth noting for a couple of reasons. First, it is further evidence that federal public corruption cases continue, even after the restrictions on the honest services theory. More importantly, the quote from the article explains something I have mentioned previously, namely, that decisions which seem on the surface to hurt law enforcement actually help prosecutors and policemen in the long run. The famous Miranda warnings are but one example, for once the warnings are given, there is no doubt that the Defendant's statements will be admissible. Many of these rulings at first were criticized by law enforcement, but over the years, many policemen and women have told me they end up doing a better job when complying with these restrictions. And, we all have the added benefit of protecting individual liberties!

As I noted in this post, on Tuesday the Supreme Court granted certiorari in Kaley v. United States, a case calling on the Justices to answer the question of whether the Sixth and Fifth Amendments afford a Defendant the right to a pretrial hearing to challenge the seizure of her assets under the federal forfeiture laws when that seizure basically prevents her from hiring and paying for counsel of her choice. It is more than a little ironic that they decided to review the case on the same day we were all celebrating the 50th anniversary of Gideon v. Wainwright, the landmark case ruling by the Supreme Court that everybody facing felony charges has the right to an attorney, even if he or she cannot afford to pay the lawyer. While we have made strides in the past five decades, in many ways we are worse off when a person faces the wrath of the federal government bent on a criminal prosecution.

On the one hand, we still have a long way to go when we provide counsel to people who cannot afford to pay for a lawyer. Many wonderful lawyers are public defenders who struggle to provide the best defense they can while handling massive and crushing caseloads. While Defendants have the "right" to an attorney, far too often the system is set up so that the public defender simply cannot spend much time with any one client, more or less rendering meaningless the Constitutional "right to counsel" enshrined in the Gideon case.

On the other hand, people facing federal criminal prosecutions face additional difficulties. First, as we have mentioned many times, and as I have written and spoken about on numerous occasions, there is a big difference between a State criminal case and a prosecution handled by the federal government. Federal criminal cases are often exceedingly complex, time-consuming, and beyond the abilities of many otherwise fine lawyers who simply are not equipped to handle the often arcane and weird aspects of defending a criminal case in federal court. Federal criminal defense is a speciality, and like other professions, specialists usually cost a lot more money, which makes it difficult for many people to defend themselves against charges in federal court. Second, defending a case in federal court also puts a Defendant (and his or her attorney) up against a series of very pro-prosecution laws. During the 1980's and 1990's, the U.S. Congress regularly enacted more and more "tough on crime" laws. Some of these laws increased sentences (like the horrible crack cocaine laws and mandatory minimum punishments). Other "crime prevention" legislation was aimed at people in the drug trade, and many statutes were designed to go after the money involved in the drug business. One of these laws greatly increased the scope of the federal forfeiture statutes, which are the laws that permit the feds to sometimes get money or property that was involved in or obtained from certain crimes. And, here's where it all comes back to the Kaley case accepted by the Supreme Court. That is the case where the Justices will need to answer the question of whether the feds can "restrain" a Defendant's assets even before a trial, without the need for a hearing where the Defendant can challenge the prosecutor's evidence. The expansion of forfeiture laws, which were mostly designed to go after dope dealers, is now being used against businesspeople like Mrs. Kaley, in a case that seems from the surface to be a contract dispute!

The right to counsel is important, whether or not a person has the assets to hire counsel, and regardless of whether the case is in State or federal court. We certainly hope that the Justices will recognize that Defendants in federal cases should have the right to use their assets to hire the specialists needed to defend matters in federal court, which is just as important as providing counsel for those without such assets.

Defending federal crimes is always difficult, whether the client is a "white collar" defendant charged with fraud or whether prosecutors charge other crimes, like drug violations. However, the defense is made more difficult in federal court by virtue of the prosecutor's ability to sometimes freeze and then forfeit all of the Defendant's assets. Making it more difficult still, the laws sometimes permit prosecutors to freeze the Defendant's assets even without a hearing in front of a judge! After many years of uncertainty, the Supreme Court the other day agreed to hear a case as to whether the pretrial restraint (or freezing) of a Defendant's assets is permissible if done without a hearing. The case is Kaley v. United States, and the certiorari petition is here.

Ms. Kaley was in the business of selling medical equipment. She and her husband apparently made a good living selling equipment that certain manufacturers no longer wanted. The federal authorities claimed these practices were fraudulent, and indicted the couple. Prosecutors also filed an ex parte request to restrain and freeze much of the couple's assets, claiming that the money they had in the bank and which they'd used to buy their house was obtained as proceeds of the fraudulent conduct charged in the indictment. A Federal Magistrate Judge agreed, and issued an order freezing their assets so they could not be used by the couple to defend themselves. The case has had a complex history, with two trips already to the Court of Appeals here in Atlanta before the defense team finally got the Supreme Court to agree to hear the case.

Under 18 U.S.C. §853(e), when a Defendant has already been charged in an indictment the prosector can file an ex parte motion seeking restraint of assets that are subject to forfeiture upon conviction. The law does not specifically allow for a pretrial adversarial hearing where the indicted defendant may challenge the propriety of the restraints.

Back in 1989, the Supreme Court rejected the idea that such pretrial restraint violated either the Fifth or Sixth Amendments. United States v. Monsanto, 491 U.S. 600 (1989). However, a footnote in that case explicitly left open the question as to whether the Due Process Clause requires a hearing before a pretrial restraining order can be imposed. Since that time, the courts have issued contrary rulings resulting in a firmly entrenched split among the eleven circuits that have addressed the issue.

Ms. Kaley's defense team convinced the Supreme Court to accept her case in order to answer the following question:

"When a post-indictment, ex parte restraining order freezes assets needed by a criminal defendant to retain counsel of choice, do the Fifth and Sixth Amendments require a pretrial, adversarial hearing at which the defendant may challenge the evidentiary support and legal theory of the underlying charges?"

This case has huge ramifications in situations where the feds go after Defendants with enough funds to hire good lawyers, but those attorneys cannot be paid because a judge agrees with the prosecutors to freeze the assets even without hearing from the defense. We will follow the case closely.

Here in Atlanta, the local federal Court of Appeals just affirmed a conviction in a mail fraud and bribery white collar case out of Jacksonville, Florida. The case is but the latest saga in the long-running debate over the contours of "honest services fraud", the species of fraud so often used by federal prosecutors when they go after what they perceive to be "local corruption." In a 2-1 decision, the majority held that the Defendant's convictions should be affirmed, even though one of the two judges in the majority had real problems upholding the lower court's rulings. Judge Hill issued a blistering dissent, perhaps foreshadowing a more full review by the entire court. The case is US. v. Nelson, and can be found here.

Mr. Nelson was the chairman of the board of Jaxport, the entity that basically oversaw the port authority in Jacksonville. The board members worked part-time, were not paid, and were prohibited from voting on any matter in which they had a financial interest.

Mr. Nelson lobbied on behalf of a company named SSI, received payments from SSI, and therefore did not vote on any SSI-related matters that came before the JaxPort board. He did urge staff members to help SSI on certain payment issues, but as noted by the dissent, "The evidence was that no economic harm befell JaxPort as the result of Nelson’s lobbying for SSI". At one point he got an opinion from the City's chief legal officer that he would have no problems in continuing his lobbying on behalf of SSI so long as he did not vote on anything that affected that company. His biggest problem was that he and SSI concealed the payments he received, the money was routed through a couple of other intermediary companies before it got to Nelson. The FBI got wind of the relationship between Nelson and SSI, they tapped their phones, and one morning agents showed up at Mr. Nelson's house for a "talk." He told them that once they arrived on his doorstep he then knew the payments were wrong, but did not say he previously was aware of the wrongfulness of his conduct.

Despite all this, the feds indicted Mr. Nelson for "honest services" mail fraud and federal services bribery. Many of us know the history of the honest services theory, a method of criminalizing what is basically the violation of a fiduciary duty. In the famous Skilling case, the U.S. Supreme Court restricted the honest services theory to "core" cases involving bribery and kickbacks, and seemed to hold that concealing one's financial relationship is not the sort of conduct which can be prosecuted under these laws.

The majority in Nelson used a round-about way of deciding that he was guilty. Although he could lobby on behalf of SSI, and although he did abstain from voting on SSI business, the concealment of his payments from SSI meant that he had the intention to accept a bribe. Judge Hill's dissent seems to be far more on point: "[C]oncealment alone is legally insufficient to prove Nelson had corrupt intent to be bribed. If Nelson had no duty to disclose his financial relationship with SSI, as Skilling says, and the payments were permitted, as he was told, then the jury was not permitted to infer a corrupt intent to be bribed by his concealment. The government’s theory was that – although concealment is not a crime – it was evidence of corrupt intent and this mens rea turned lawful lobbying into unlawful bribery. I disagree. Bribery requires a corrupt agreement to perform an unlawful official act – an actus reus. In this case, Nelson agreed to perform a lawful act. The lobbying was permitted. An agreement to perform a lawful act is called a contract, not bribery."

The case also involved some serious problems with the jury instructions. Again, however, the trial lawyers failed to object, letting the appellate court use the "plain error" standard way of gutting the argument. As I have noted many times before, none of us is perfect, as trial lawyers we all make mistakes, but we also all need to remember to try and object as often as possible to any potential problem with jury instructions.

I came across this story about two Defendants in New York who were appealing to the Second Circuit Court of Appeals their convictions for "insider trading", which as we all know is a rarely prosecuted federal crime arising out of a securities investigation that usually starts with the SEC. These Defendants also argued on appeal that their sentences were too long. Both issues, the insider trading question and sentencing arguments, are matters we have come across frequently, and we will be following the case closely.

The basic idea of an "insider trading" case is that someone learns about "material non-public information", such as the fact that one company might be in the process of buying another company. When companies prepare to engage in such moves, they need to hire bankers, lawyers, accountants, printers and lots of folks who work on the deal. It is illegal for anyone who learns such "material non-public" information to give a "tip" to anyone, and for the recipient of the tip (the "tippee") to make trades (such as buying the stock of the company that is about to be purchased.)

Attorneys for Zvi Goffer, a former securities trader , and Michael Kimelman, co-founder of a trading firm, recently asked the United States Court of Appeals for the Second Circuit to vacate their clients' 2011 convictions. Prosecutors claimed that Mr. Goffer (a securities trader), was the ringleader of a scheme which traded on material non-public information prior to public announcement of deals involving computer network equipment makers and drug companies. Mr. Kimelman, the other Defendant, apparently worked with Goffer's brother. Although the attorney for the securities trader claimed that his client had not breached anyone's trust, one of the judges noted that the trader apparently paid kickbacks to lawyers at a large law firm in return for information on upcoming corporate acquisitions.

Perhaps the more interesting aspect of this appeal concerns the challenges to the sentences imposed for insider trading. The trial judge imposed a 10-year sentence on Mr. Goffer, and two and one-half years for Mr. Kimmelman. The defense lawyers contrasted the treatment their clients received with the high-profile insider trading case against Rajat Gupta, the former Goldman Sachs director convicted for leaking non-public information to Galleon founder Raj Rajaratnam. Gupta got a shorter two-year prison sentence in October. The scheme involving Gupta and Rajaratnam supposedly netted $50 million, far more than what was involved here, the defense attorneys argued, yet the sentences were almost as severe.

We are very sensitive to sentencing arguments in federal court, for we handle many similar matters. Likewise, we also occassionally represent people caught up in SEC investigations, some of which turn into federal insider trading criminal cases. We had some good luck on appeal for a bank executive caught up in an insider trading case. We convinced the trial judge to impose no jail time, but the prosecutors appealed, similar to the situation described in this post. However, in our case, we convinced the Court of Appeals to reverse itself and affirm the sentence of probation. Because of that and similar cases, we look forward to seeing how the Second Circuit resolves these cases.

A decision from an Atlanta case that was issued last Friday once again demonstrates that sentencing hearings in federal criminal cases are amazingly complex, and can lead to surprises. In the case from last week, US v. Kuhlman, the Sentencing Guidelines called for a range of 57-71 months in custody. Prosecutors asked for 36 months. The Defendant paid almost $3 million in full restitution. The Judge continue the case for 6 more months, during which time the Defendant performed almost 400 hours of community service. At the next sentencing hearing, the Judge decided it made no sense to put the Defendant in prison, so he imposed a "time served" sentence. The prosecutors appealed, and the Court of Appeals agreed with them, reversing the probationary sentence and remanding for another sentencing hearing.

The Defendant was a local Atlanta area chiropractor who owned and operated a series of clinics. Beginning in January 2005, he began a five-year scheme, falsely billing health insurance companies for services he knew were not rendered to his patients. The Defendant was charged in a criminal information with one count of health care fraud in violation of 18 U.S.C. §§ 1347 and 2. He pleaded guilty pursuant to a plea agreement. At the plea hearing, the chiropractor admitted that he did not steal out of need—he was not in financial trouble and he did not have creditors breathing down his neck asking for money. Instead, he conceded that he simply pushed the envelope of billing practices.

A few days before sentencing, the doctor paid $2,944,883 in full restitution. The Judge was obviously impressed and remarked that the chiropractor was the first Defendant that the Judge could recall who made such a large restitution payment prior to sentencing.

The very experienced Judge proceeded to discuss the rising costs of incarceration, citing a recent Georgia state commission formed to explore alternatives to prison for nonviolent criminals. The Judge alluded to the fact that the chiropractor would need time to pay off his fine and support his family. The Judge also hinted that if given extra time before sentencing, perhaps the doctor should perform public service. The Judge continued to express concerns over the rising costs of prison and suggested that a continuance would save “the court . . . at least $10,000 by not incarcerating the Defendant during this period." The Judge, who has been on the bench since the early 1980's, also noted that he had ordered a similar sentencing continuance for a “budding rock star,” which had yielded positive results. The Judge explained that when given the extra six months, the “budding rock star” made “hundreds of visits to young people” and had a positive impact on the community.

Over the following six months, the doctor made good on the opportunity given to him by the Judge. The Defendant performed 391 hours of community service. He visited various medical, nursing, and chiropractic schools and gave presentations on health care insurance fraud. He also provided 18 days of free chiropractic services at homeless shelters across Atlanta and painted a gym at an elementary school. At the second sentencing hearing, the Judge commended the doctor's work during his six-month continuance. In light of the full restitution payment, the community service, and the rising costs of incarceration, the Judge sentenced the chiropractor to probation for the “time served” while awaiting his sentence.

The Court of Appeals decided that the sentence was simply too lenient. The opinion goes on for pages railing against the idea that "white collar" criminals somehow get a break by paying full restitution.

This case is highly disappointing. As kids we are taught that a person stealing something should pay back that which was taken. Then, when showing remorse, we are told that the person should say they are sorry, and demonstrate to others the wrongfulness of their conduct. Here, the three judges felt they knew better than the highly experienced Senior District Judge. These judges believed that it's better to put a productive man in prison and spend tens of thousands of taxpayer dollars, even though the chiropractor paid back every penny. We sincerely hope this case does not show a trend of appellate judges reversing what they perceive to be unduly "lenient" sentences.