Peter Paul and Money

United States v. Paul, No. 09-3191-cr (2d Cir. March 7, 2011) (Cabranes, Chin, CJJ, Crotty, DJ)

Defendant Peter Paul pled guilty to securities fraud, in connection with a stock manipulation scheme that permitted him to fraudulently obtain multi-million dollar margin loans, which he never repaid, from two brokerage houses. The district court sentenced Paul principally to 120 months’ imprisonment and more than $11.4 in restitution.

He raised three main claims on appeal, all without success.

At a pretrial conference, the district judge remarked that he had a reputation for giving a Guideline sentence after trial but for being lenient with defendants who pled guilty. The judge also remarked that the twenty-five months Paul spent fighting extradition in Brazil - he apparently fled there as his scheme was unraveling - would not be credited if he did not plead guilty. On appeal, Paul claimed that these remarks violated Fed.R.Cr.P. 11(c)(1), which forbids the district court from participating in plea discussions. The court rejected a “bright-line” rule in assessing Rule 11(c)(1) claims, noting that such issues are “highly fact-specific.” The the judge made the first remark in the context of setting a trial date - not about Paul specifically. The second remark, in context, was of even less concern to the court; it was clearly related to the court’s effort to find a way to release Paul on bail and not to coerce a plea. Moreover, any Rule 11(c)(1) violation here was harmless; Paul was not present when the remarks were made, pled guilty several months later, affirmed in the plea that he was doing so voluntarily, and neither he nor his attorney ever objected to the statements.

Paul also claimed, again for the first time on appeal, that the nearly four-year delay in his sentencing violated his right to a speedy sentencing. But the court found no plain error. Most of the delay was due to prosecutorial negligence, which “does not weigh as heavily as would an intentional delay,” and one year of the delay was attributable “solely to Paul’s request for adjournments.” In addition, Paul could identify no actual prejudice resulting from the delay other than his anxiety over the uncertainty of what would happen to him.

Finally, Paul challenged the restitution order, which required him to repay the losses to the brokerage houses that extended the margin loans. He argued that those losses were caused by the declining stock price, which left the institutions without the collateral necessary to recover the money they lent. The circuit disagreed because the losses were not caused by a decline in stock value, they were caused by “the making of the loans in the first instance,” and Paul clearly obtained the loans fraudulently.

Delay Gratification

United States v. Ray, No. 08-2795-cr (2d Cir. August 27, 2009)(Leval, Cabranes, Livingstone, CJJ)

In this decision, the court holds that an unexplained and prejudicial fifteen-year delay in imposing sentence amounted to a Fifth-Amendment due process violation, but did not violate the Sixth Amendment right to a speedy trial.

Background

In 1991, Ray pled guilty to her role in a $200,000 bank fraud. In 1992, the district court, unmoved by her family circumstances, sentenced her to twelve months’ imprisonment, the bottom of the then-mandatory range. Ray, who was free on bail, appealed. While her appeal was pending, the court of appeals decided a different case that eased somewhat the standard for family circumstances departures. As a result, with the government in agreement, Ray moved for a remand. The circuit granted the motion on January 21, 1993, but neither the district court nor the government took any further action on the case.

Ray herself caused the case to be reopened in 2007 when she applied for a city job, and needed documentation as to the resolution of her 1992 conviction. She contacted the court clerk, an action that prompted the district court to set a “re-sentence” date of March 5, 2008.

By this time, Ray had fully rehabilitated. Living openly in the Eastern District, she had been employed for the entire fifteen-year period and had never been rearrested. She raised three children, owned a home and a car and was in college, as were two of her children.

At the resentencing hearing, the court faulted both the defendant and her attorneys - but not itself or the government - for the delay. The government, on its part, raised the question of whether the delay violated Ms. Ray’s right to a “speedy sentencing.” After the parties had briefed the issue, the court found no violation and imposed sentence: one day in prison plus three years of supervised release. The court ordered six months in a halfway house as a condition of the supervision, even though counsel pointed out that the only available facility was far from both Ray’s job and her home.

The Appeal

On appeal, the court first held that the district court erred in finding that it had been Ray’s own responsibility to return to court and face resentencing. A “defendant does not bear the burden of seeking her own sentencing.” With this, the court went on to analyze the constitutional issues.

1. No Sixth Amendment Violation

Both the government and the defense took the position that the Sixth Amendment right to a speedy trial included the right to a speedy sentencing. This is significant, since under the Speedy Trial Clause, the remedy is “categorical: dismissal of the charges.”

The Supreme Court and several circuits - including this one - have assumed without deciding that the Speedy Trial Clause includes a right to a speedy sentencing. But this panel's own examination led it to hold otherwise. It began by noting a tension in the precedents - Speedy Trial Clause violations require a dismissal, but the Supreme Court has held that dismissal of the charges is an inappropriate remedy for a sentencing error. This tension evaporates if the Sixth Amendment does not cover delays in sentencings.

Next, the court considered the original meaning of the word “trial” in the Speedy Trial Clause, looking both to Blackstone and early American court decisions. It had little difficulty concluding that the American court system has always “distinguished between trial and sentencing.” Thus, “the word ‘trial,’ as understood at the time of the Founding, would not have encompassed sentencing proceedings.” Moreover, modern authorities, such as the Federal Rules of Criminal Procedure, and the Speedy Trial Act - which does not include sentencing proceedings in its time calculations - have preserved this “basic divide between trial and sentencing.”

Finally, the court looked at the interests protected by the Speedy Trial Clause - oppressive pretrial incarceration, the defendant’s anxiety, and the possibility that the defense will be impaired by the passage of time - and found that “these harms do not arise when there is a delay between conviction and sentencing.” While other harms can arise from a delayed sentencing, for example, the defendant and victim are left “in limbo concerning the consequences of conviction,” these concerns are “not the same as those that animate the Speedy Trial Clause.”

2. Fifth Amendment Violation

The court found a better fit in the Due Process Clause of the Fifth Amendment, which “has a limited role to play in protecting against oppressive delay.” The court considered two factors to determine whether Ray was deprived of her “due process right to a prompt sentencing”: (1) the reasons for the delay; and (2) the prejudice to the accused.

Here, the specific reasons for the delay were unknown, and the court treated the delay as the result of “ordinary negligence on the part of the government.” But the court held this against the government, and reiterated that it was not Ray’s duty to see that she was speedily sentenced.

The court next held that to prevail Ray had to show “substantial and demonstrable” prejudice. But the court weighed the extraordinary length of the delay in Ray’s favor, particularly since she underwent a “complete rehabilitation” in the interim. The court concluded that removing Ray “from her current life and compel[ling] her to reside for six months in a halfway house would undermine her successful rehabilitation,” since the restrictions imposed on the liberty of a halfway house resident are “substantial.”

After balancing all of the factors, the court held that, in light of Ray’s “successful and prolonged rehabilitation, and the upset that a custodial sentence would now entail,” she had successfully established a Due Process Clause violation. The remedy the court selected was to vacate the six-month halfway house portion of her sentence.