Unconditioned

United States v. Gill, No. 07-0284-cr (2d Cir. April 17, 2008) (Cabranes, Sotomayor, Wesley, CJJ) (per curiam)

Gill, who pled guilty to making false statements in a health care matter, unsuccessfully challenged two of his special conditions of supervised release. The first, which barred him from "engaging in the business of counseling," was reasonably related to the need to protect the public, since Gill had in the past falsely represented himself as qualified to provide mental health services, when in fact he was not. The other condition - a requirement that he continue making restitution payments arising from an earlier condition - was likewise proper because it was reasonably related to his history and characteristics

Cracked Up

United States v. Lee, No. 06-4933-cr (2d Cir. April 17, 2008) (Cabranes, Wesley, CJJ, Castel, DJ)

Defendant Cathy Lee received a 120-month sentence, the mandatory minimum, in a crack trafficking case. She raised on appeal a host of constitutional and statutory challenges to her sentence, claiming that it violated § 3535(a), the Eighth Amendment, and equal protection, in light of the powder-vs-crack sentencing disparities.

The court held that these claims were waived by the appellate waiver in Lee's plea agreement. Although such waivers will not be enforced when an "arguably unconstitutional" consideration influenced the sentencing, there was no such consideration here. The equal protection argument with respect to crack sentences is a claim about the statute itself, not a claim that the court considered an improper factor at sentencing. Moreover, the court rejected the equal protection statutory argument nearly fifteen years ago, and no subsequent legal development - including Kimbrough - is a basis for changing this view.

For Your Consideration

United States v. Hardwick, No. 04-1369-cr (2d Cir. April 11, 2008) (Winter, Walker, Sotomayor, CJJ)

Glen Hardwick was convicted after a jury trial of conspiracy to commit and aiding/abetting murder-for-hire in violation of 18 U.S.C. § 1958. Virtually all of the evidence of the “consideration” element of the offense came from the plea allocution of Hardwick’s brother, which was admitted into evidence over objection, although not a Confrontation Clause objection. The appellate court held that this Sixth Amendment violation was plain error, but that there was legally sufficient evidence on this element. It accordingly did not reverse the conviction; it vacated and remanded for a new trial.

Facts: Most of the action here involved Glenn Hardwick’s brother, Stacey, who had an ongoing drug and gun trafficking relationship with an undercover police officer. At one point, Stacey contacted the UC and asked him to kill someone who had pulled a gun on Glen. The UC of, course, agreed, and there followed a lot of back-and-forth about the terms of the deal. The UC, who had said that he used a gun only once when he did a hit, then would discard it, asked Stacey to supply the gun for this murder. He also asked for a second gun as “payment.” Stacey balked at this; he only wanted to give the UC one gun, although Stacey offered to sell him a second.

Eventually, the UC met with Stacey and Glen, but the brothers had brought only one gun - the one the UC was supposed to use for the job. Shortly after handing the gun over to the UC, the brothers were arrested.

Stacey pled guilty, and in his allocution admitted that there was consideration for the contemplated murder: “The payment for the intended murder was a .32 caliber pistol.” The government admitted this allocution into evidence at trial - which took place before Crawford was decided - subject to a limiting instruction that told the jury that it was free use it as evidence of Stacey’s activities, but could not infer from it that Glen was a member of the conspiracy. In its summation, the government relied on the allocution as proof of the consideration element, and during deliberations the jury had it read back.

The Confrontation Violation: On appeal, the government conceded that the admission of the allocution was error. The circuit agreed and, after a confusing and inconclusive discussion (much of which is relegated to end notes, just to make it as painful as possible) of whether ordinary plain error review or “modified” plain error review should apply, held that it was plain error under either standard.

The error was “plain” because at the time of “appellate consideration” there was an obvious Crawford violation. In addition, the admission of the allocution affected Glen’s substantial rights “because it almost surely influenced the jury’s verdict.” The evidence on the consideration element was very close, and turned entirely on Stacey’s state of mind. But the district court’s limiting instruction expressly permitted the jury to use it for that purpose, and the circuit concluded that the jury must have, in light of the government’s use of it in summation, and the readback.

The Sufficiency of the Evidence: The court went on to hold that the evidence was legally sufficient on the consideration element, however. Giving a hit man a gun as payment for his work satisfies § 1958, and Stacey’s allocution clearly indicated that this was his plan. In another confusing and inconclusive discussion of an important issue, again much of which is - maddeningly - relegated to end notes, the court went on to hold that appellate sufficiency review includes the consideration of “improperly admitted evidence.” As for those Second Circuit cases that have excluded improperly admitted evidence from sufficiency review, they did so “sub silencio,” and hence are not “binding precedent.”

Comment: This should have been the end of the story, but it is not. What follows will blow your mind. Judge Winter, writing alone - “my colleagues do not join me in the discussion” - takes it upon himself to “inform the parties of [his] views on the sufficiency issue absent the plea allocution.” His elaborate and completely unconvincing justification for this extraordinary step is - you guessed it - consigned to an end note that it itself spans two pages of text. In the opinion itself, he covers nearly four pages explaining to the government how it should retry the case, mapping out “at least one scenario [that] might reasonably be found by a jury to be sufficient to meet Section 1958's consideration requirement.”

No wonder the rest of the panel passed on this. This was a completely inappropriate thing to do. The case already has at least two prosecutors assigned to it. It does not need a third. It also seems extremely short-sighted, given the problems it is likely to cause down the road. Glen might well be retried and reconvicted, and will surely make a sufficiency argument on his second appeal. What on earth will that panel do with this part of the opinion when that happens?

Next Stop, Confusion

United States v. Hendry, No. 06-5118-cr (2d Cir. Aprl 9, 2008) (Leval, Calabresi, Wesley, CJJ) (per curiam)

In this decision the Court blows yet another opportunity to clarify the “fast-track” sentencing issue in illegal reentry cases.

The court has already held that district courts are not required to take into account the lower sentences imposed in fast track districts, but has left open the question whether a court has the authority to do so if it deems a reduced sentence warranted. This decision still seems to leave the question open. Here, although Hendry argued that the district judge erroneously believed that he could not consider the absence of a fast-track program in deciding what sentence to impose, the circuit found that the district judge believed that he could consider it - although he elected not to do so - and the opinion does not say whether the judge's belief was correct or incorrect.

The opinion does, however, hold that fast-track sentences in other jurisdictions do not “require” a lower sentence in non-fast-track districts under the parsimony clause. “[S]entences in fast-track districts cannot be compared with sentences in non-fast-track-districts in order to demonstrate that the latter are longer than necessary [because] the two are not directly comparable.”

Comment: This unfortunate decision actually creates more questions than it answers. We still do not know for sure whether a court can consider the fast-track argument. And now, because of the way this opinion is written, we also do not know for sure whether a court can consider the parsimony argument. Does this opinion mean that district courts are not “require[d]” to consider fast-track sentences under the parsimony clause, or that they cannot? It can be read either way.

SUMMARY SUMMARY

Here are three more s/o’s to chew on:

In United States v. Glum, No. 06-3099-cr (2d Cir. April 8, 2008), the court ordered a Crosby remand even though the district court, when denying the defendant’s pro se 2255 motion, had already indicated that it would impose the same sentence.

In United States v. Ogman, No. 06-0203-cr (2d Cir. April 7, 2008), the court refused to order a Regalado remand in a crack case where the defendant was sentenced as a career offender. Here, the Guideline range was “not the result of the 100-to-1 powder to crack ratio, but rather resulted from [defendant's] undisputed status as a career offender.”

In United States v. Ruiz, No. 06-5609-cr (2d Cir. April 1, 2008), the court held that the defendant's sentencing appeal was barred by the waiver contained in the plea agreement, even though it was “not entirely clear that the sentencing judge complied with the parsimony clause.”

Consecutive Privilege

United States v. Donoso, No. 07-0635-cr (2d Cir. April 3, 2008) (McLaughlin, Hall, CJJ, Sand, DJ) (per curiam)

Resolving an open question in this circuit, the court here holds that, under 18 U.S.C. § 3584(a), a district judge cannot order the federal sentence to run consecutively to another sentence that has not yet been imposed.

Facts: Richard Donoso violated his federal supervised release by committing a state offense. He pled guilty in state court, then came into federal court and admitted the supervised release violation. Judge Spatt sentenced him to 24 months’ imprisonment and ordered it to run consecutively to the state sentence. Donoso was not sentenced in the state case, however, until the next day. A few days later, Judge Spatt recalled the case, questioning whether he had the power to impose a consecutive sentence before the state sentence had been imposed. Invoking Fed.R.Cr.Proc. 35(a), and over objection, he vacated the sentence, then reimposed it, ordering it to run consecutive to the state sentence that Donoso was now actually serving.

The Appeal: On Donoso’s appeal, the circuit held that Judge Spatt was correct in his belated realization that he could not impose a consecutive federal sentence before the state sentence had been imposed. Title 18 U.S.C. § 3584(a) provides that, if a term of imprisonment is imposed on a defendant who is “already subject to an undischarged term of imprisonment,” those terms “may run concurrently or consecutively.” Under the circuit’s reading of this section, however, where, as here, sentence has not yet been imposed in the state case, the defendant is not “already subject to” that term of imprisonment, thus the statute does not apply.

Comment: This case, almost certainly incorrectly decided, gives undeservedly short shrift to very important issues regarding statutory interpretation and sentencing policy.

The first, and most important, problem here is that underlying statutory premise of this decision is wrong. The circuit concluded that § 3584(a) did not apply to Donoso when he was awaiting sentencing on his state case because he was not yet serving that sentence. But that is not what the statute says. The statute applies if the defendant is “already subject to” another a sentence; it does not say that he has to be “already serving” it. And a person can clearly be “subject to” a sentence even if he is not yet serving it. Donoso, for example, was in custody in New York State awaiting imposition of sentence on a charge that he had already been convicted of. It seems perfectly clear that he was in every respect “already subject to” that sentence, and thus that 3584(a) should apply to his situation. After all, if Congress meant had “already serving,” as opposed to "already subject to," it could easily have said so. At a minimum here there is an ambiguity that should be tested under the rule of lenity.

A second aspect of this decision that also seems wrong - or at least warrants more discussion than this brief per curiam gave it - is the premise that 3584(a) is the only authority for imposing concurrent or consecutive sentences and that, if it does not apply, all the district court can do is impose sentence and not address the question. There is a good argument that § 3553(a) itself confers concurrent/consecutive authority. That section begins with very broad language about the imposition of sentence that can easily be interpreted to include the decision about whether the sentence should be concurrent or consecutive. Also, § 3553(a)(5)(A) requires the sentencing court to consider any pertinent Guidelines policy statements, and as it happens, there is a policy statement that deals with this issue. Guidelines section 5G1.3(c), which authorizes concurrent, consecutive or partially concurrent sentences, is expressly designated a policy statement, and is broader than § 3584(a). While the statute applies only where the defendant is “already subject to” an undischarged term of imprisonment - whatever that means - the policy statement applies in any case “involving” an undischarged term of imprisonment. Donoso, as noted above, was not serving his undischarged state sentence when he was first sentenced federally. But his case certainly “involved” an undischarged term of imprisonment.

Why does the blog care about this? Because, although the court does not say so, this decision seems to compel the conclusion that a district court cannot order the federal sentence to run concurrently to a state sentence that has not yet been imposed, which is something that defendants frequently ask for. Indeed, some defendants try very hard to get sentenced in their federal case before sentencing in their state case so that they will not receive an increased criminal history score, but still want the federal judge to order a concurrent sentence. This decision spells trouble in that kind of case.

Final Comment: This case is also maddening for a completely different reason. Donoso got the statutory maximum for his supervised release violation, consecutive to his state sentence. Both of those decisions were discretionary and subject to reasonableness review. Why is there no mention of the reasonableness of the sentence on this appeal? The blog simply cannot imagine that he that he did not raise the issue.

Medicareless

United States v. Wexler, No. 06-1571-cr (2d Cir. April 3, 2008) (Miner, Raggi, CJJ, Rakoff, DJ)

David Wexler was a Manhattan dermatologist who ran a prescription mill. He would prescribe painkillers to patients whom he did not examine or treat, often with the understanding that either the prescriptions or the medications would be sold to others. The prescription mill was also the fuel for an ongoing Medicare fraud in which he would, for these same patients, bill the government for multiple procedures that he did not perform. Wexler was convicted after a jury trial of narcotics and fraud counts and was sentenced principally to 20 years’ imprisonment. On appeal, the majority of a divided panel reversed his conviction on the most serious drug count, concluding that the evidence was insufficient, and remanded the case for resentencing.

Wexler had a patient named Barry Abler, for whom he wrote numerous prescriptions for painkillers: Dilaudid, Percocet, Vicodin and Soma. Abler also introduced others to Wexler for the same purpose, and Wexler wrote them prescriptions for many of the same drugs although, according to the trial testimony, not Dilaudid. On May 19, 2001, Wexler gave Abler a prescription for Dilaudid, and Abler died nine days later of an overdose.

Count One of the indictment charged Wexler with conspiracy to distribute Dilaudid, Percocet, Vicodin and Xanax, and conspiracy to distribute Dilaudid resulting in death. Count Nine charged him with a substantive count of distributing Dilaudid resulting in death. The jury convicted him of both; with respect to Count One, it found that the conspiracy resulted in Abler’s death; with respect to Count Nine, it concluded that the distribution did not result in Abler’s death. As a result of the conviction on Count One, however, Wexler was subject to, and received, a twenty-year mandatory minimum sentence.

On appeal, the majority held that the evidence supporting the conviction of conspiracy to distribute Dilaudid causing death under Count One was legally insufficient, because there was no evidence that Wexler conspired with Abler to distribute that particular drug. Under the so-called “buyer-seller” rule, an “agreement that one member of a conspiracy supply another with a drug . . . does not comprise an agreement to distribute that drug.” The trial evidence established that Abler was the only one of the relevant patients to receive prescriptions for Dilaudid; moreover, there was no proof that “Abler agreed to, or did, distribute Dilaudid” to anyone else. Indeed, the quantities of Dilaudid that Wexler prescribed to him were consistent with personal use. Thus, Abler and Wexler were “mere buyer-and-seller” - by prescription, of course - with respect to Dilaudid. While Wexler’s illegal sale of the drug to Abler was a substantive crime, that sale agreement itself was not a conspiracy to distribute because it had “no separate criminal object.”

The court rejected the government’s theory that Abler and Wexler’s “multi-year, multi-member conspiracy” to distribute many different drugs was itself sufficient evidence. Calling this a “broad brush approach,” the majority noted that the specific charge in the indictment was to distribute “Dilaudid,” not a “variety of drugs,” causing death. “The only evidence that could bring Abler and Wexler out of the realm of buyer and seller with respect to Dilaudid was evidence suggesting an intent to redistribute Dilaudid itself.” Here, there was no such evidence.

The majority ended with bit of good old-fashioned Apprendi reasoning, noting the sentencing disparities in the drug statutes, which depend on the type of drugs involved. Where “the type of drug is a critical determinant of the length of a defendant’s sentence, the Government should be required to prove what it alleges.”

Judge Raggi, in dissent, criticized every aspect of the majority’s decision, which she deemed an “unwarranted extension of the buyer-seller rule.” To her, the evidence showed that Abler and Wexler were more than “mere” buyer and seller. She also disagreed with the majority’s insistence that the pleadings in this case required specific evidence of an agreement to distribute Dilaudid, and with its conclusion that there was insufficient evidence of a conspiratorial intent to redistribute that particular drug.

4(b) and After

United States v. Frias, No. 06-5381-cr (2d Cir. March 31, 2008) (Cardamone, Sack, Katzmann, CJJ)

The ten-day time for filing a notice of appeal in a criminal case under Fed.R.Ap.Proc. 4(b) is not jurisdictional, which means that the court can consider an untimely appeal if the government forfeits a claim of untimeliness failing to raising it.

For many years, both the Second Circuit and the Supreme Court were somewhat careless in using the term “jurisdictional” in the context of time limits and filing deadlines, collectively known as “claim processing rules.” However, a string of Supreme Court cases in the past few years has clarified the terminology: since only Congress can determine a lower federal court’s subject matter jurisdiction, only those claim processing rules that have statutory origins are truly “jurisdictional.” Thus, for example, the seven-day deadline for filing a motion for a new trial under Fed.R.Crim.P. 33(a) is not jurisdictional because it does not derive from a statute. But the thirty-day time within which to file a civil notice of appeal under Fed.R.Ap.Proc. 4(a) is jurisdictional because the rule is merely a codification of 28 U.S.C. 2107(a).

Unlike Rule 4(a), the rule at issue here, Rule 4(b), is not based on a statutory prescription, thus the untimely filing of a criminal notice of appeal does not “withdraw federal jurisdiction over criminal appeals.” Thus, if the government does not raise a Rule 4(b) claim in responding to a criminal appeal, then the appellate court can, but does not have to, consider the merits. If the government properly objects to the untimeliness of a defendant’s appeal, however, then the “mandatory and inflexible” rule must be honored and the appeal will be dismissed, even though the court has not been deprived of subject matter jurisdiction.

The decision leaves open whether a court can, in its discretion, sua sponte, dismiss an untimely appeal.

Summary Summary

It has been a slow week in Foley Square - lots of civil and immigration decisions, but not too much on the criminal front. So, here are some recent summary orders of interest:

In United States v. Williams, No. 06-5530-cr (2d Cir. March 27, 2008), the court dealt with an unusual circumstance in this circuit - an illegal reentry jury trial. The court rejected several case-specific evidentiary claims, but also touched on - without resolving - an interesting and important question: is the defendant's claim of derivative citizenship an affirmative that he bears the burden of proving, or must the government disprove the possibility of derivative citizenship beyond a reasonable doubt?

Title 18 U.S.C. § 3664(h) permits the sentencing judge to apportion restitution liability among defendants based both on their economic circumstances and level of contribution to the loss. In United States v. Rammelkamp, No. 06-4359-cr (2d Cir. March 19, 2008), the court vacated a restitution order where the district court incorrectly believed that it was required to impose full restitution, and hence did not exercise its apportionment discretion.

Finally, in United States v. Sanders, No. 06-2403-cr, the court upheld an above-Guideline supervised release violation sentence, finding that the district court's oral statement of reasons "brief though it was" was adequate to satisfy 18 U.S.C. § 3553(c). Its written statement, however, was inadequate, so the court remanded the case for the "limited purpose" of permitting the district court to record its specific reasons in writing.

About Face!

United States v. Dominguez, No. 05-7005-cr (2d Cir. February 15, 2008, amended March 20, 2008) (Miner, Sack, Hall, CJJ)

Last month, when we wrote up this case, we noted with alarm the circuit’s holding that, for cases where the defendant faced a mandatory minimum but provided substantial assistance to the government, under § 3553(e) “any reduction [in sentence] may be based only on substantial assistance to the government and on no other mitigating considerations.” We commented that this did “not really make much sense,” since it seemed to preclude application of § 3553(a) at this type of sentencing, even though that statute is supposed to apply in all sentencings. See The Government Giveth and the Government Taketh Away, posted February 24, 2008.

I guess the circuit reads this blog. In the amended version of the opinion, it has added the following sentence at the end of the paragraph that contains the worrisome language quoted above: “In arriving at a final sentence, of course, the district court may consider other factors in determining whether to grant the full extent of the departure permitted by § 3553(e).” Slip op. at 15.

That’s more like it. Although still not a model of clarity (since the first sentence of the relevant paragraph is still wrong, see slip op. p 14-15), the decision now more accurately reflects a correct sentencing procedure. The amended version can be fairly construed to hold that substantial assistance is the only thing the district court can consider in deciding whether to depart in 3553(e) cases, but other mitigating factors can be considered in determining the extent of the departure.

Out of Ammunition

United States v. Sero, No. 05-6967-cr (2d Cir. March 19, 2008) (per curiam)

Defendant Sero, who pled guilty to illegally exporting weapons to the Philippines, challenged his sentence. In doing so, he gave the court its first opportunity to consider U.S.S.G. § 2M5.2 and its “bump-down.” This particular Guideline ordinarily calls for a base offense level of 26, but this is reduced to 14 if the offense involved “only non-fully automatic small arms” and “the number of weapons did not exceed ten.” He argued that he was entitled to the lower level because his conduct was “minor,” although it included ammunition, which is not mentioned in the bump-down. He lost under the plain language of the guideline. “We find that the guideline does not permit finding an exception for including ammunition, no matter how small the quantity.” He was also disentitled to the bump-down because his shipment consisted of components that “were capable of servicing more than ten fully or non-fully automatic weapons.”

Fraud Man Out

United States v. Cutler, No. 05-2516(L) (2d Cir. March 17, 2008) (Jacobs, Kearse, Pooler, CJJ)

In this case, the government successfully appealed the exceptionally lenient sentences that Judge Preska imposed on two defendants convicted of a multi-million dollar fraud. The circuit found that the sentences were both procedurally and substantively unreasonable, and remanded the case for resentencing.

Facts

James Cutler was the CFO of a holding company that owned hotels; Sanford Freedman was its general counsel. Together, they helped the company and its principals cheat a number of banks out of more than $100 million. In very brief, the scheme worked like this:

In the 1990's, the holding company restructured its debt, and its principals executed deficiency notes that made them personally liable for those debts. Around the same time, they sold key assets of their company to another company for stock worth more than $100 million. Although they therefore had sufficient resources to meet the deficiency notes, they instead decided to invest that money in another venture, and to trick their creditors into settling for less than the balances due. They hid their assets, then approached the creditors and claimed that they did not have the resources to pay the notes. They also threatened to declare bankruptcy if the creditors did not enter into repayment agreements.

During these negotiations, defendant Freeman repeatedly made false claims about the principals’ supposed financial distress, even while completing paperwork for their new venture that indicated that each was worth more than $30 million. Freeman also assisted in creating a sham foreign investor whom he held out as willing to purchase the principals’ debts from the banks for pennies on the dollar. Cutler’s role was to appease those creditors who were unconvinced by Freeman’s representations by sending them false financial statements.

In the end, the banks capitulated, and lost $106 million, the difference between the balances on the notes and the amount they sold them for.

After a jury trial, Freedman was convicted of bank fraud and conspiracy to commit bank fraud, making false statements to banks, and perjury (for testifying falsely in a related bankruptcy proceeding). Cutler was likewise convicted of bank fraud and conspiracy, false statements, and several counts relating to a $29 million tax fraud (he helped the company’s principals hide their income).

The Sentencings

Cutler

Cutler’s Guideline range was 78-97 months. He moved for a downward departure under Application Note 10 to § 2F1.1, arguing that the loss overstated the seriousness of the offense, and under § 5H1.6, claiming extraordinary family circumstances.

The district court granted the motions, and went down by 15 levels. It knocked off 6 levels on its finding that the loss overstated the seriousness of Cutler’s role (although the court had refused to grant a role reduction under § 3B1.2), conduct and offense. The court also granted a 9-level departure for family circumstances in light of his children’s economic circumstances. These departures brought Cutler from level 28 to level 13, with a range of 12 to 18 months’ imprisonment.

Turning to the statutory considerations, the court again cited Cutler’s lower level of culpability with respect to the bank frauds (but not the tax fraud), the fact that he received “little, if any” direct compensation from the scheme, the need to provide restitution, and his family obligations. She sentenced him to one year and one day in prison. This was within the departure-generated Guideline range, but the judge also indicated that she would give the same sentence under the statute.

Freedman

Freedman did even better. His Guideline range was 103 to 135. The court found that the loss overstated his culpability, and downwardly departed. It also granted a family circumstances departure because of his relationships with his mother-in-law and elderly, mentally retarded brother, and a § 5H1.4 departure due to his age (he was 69) and physical condition. In doing so, the court rejected the BOP’s repeated assurances that it could provide Freedman with adequate care.

The court did not fix an ultimate Guideline range. Instead, it relied solely on § 3553(a). Citing the departure grounds noted above, and the “humiliation” and loss of livelihood associated with Freeman’s prosecution, Judge Preska sentenced him to 3 years of probation.

The Circuit’s Ruling

The circuit identified numerous problems with the district court’s approach, and vacated both sentences.

With respect to Cutler, the circuit first rejected the notion that the loss amount overstated his role or level of culpability. Under § 1B1.3, Cutler was properly held accountable for all of the losses caused by him and his confederates. Here, the $106 million in actual loss was not just foreseeable, it was the explicit goal of the scheme. As far as the circuit was concerned, Judge Preska “misinterpreted the Guidelines,” made “an error of law,” and “clearly erred,” all at the same time. The circuit also noted that the Application Note 10 departure applies in cases where the loss figure is driven by intended loss, not actual loss. The circuit seemed deeply offended that the Cutler's sentence was within the range that would apply to a $70,000 loss. It held that the “implicit finding that a fraud causing losses of more than $100,000,000 is no more serious than one causing losses of little more than $70,000” did not comply with § 3553(a)(2)(A)’s requirement of “just” punishment.

The court next rejected the district court’s finding that Cutler received only a small gain from the scheme. It first held that this is not a ground for a downward departure but also noted that, in any event, the $1.3 million that Cutler pocketed hardly constituted “little, if any, personal gain.”

The court next rejected the district court’s stated view that this type of fraud did not warrant a long sentence because, since imprisonment is itself a deterrent in white collar offenses, the length of the sentence is immaterial. Some of Cutler’s convictions related to tax fraud, and that there is a Guideline policy statement for tax cases that directly contradicts this view. While a court can disagree with a Guideline-based policy consideration, it has to give a sufficient reason for the disagreement, which the court here did not do.

The court was particularly skeptical of the family circumstances departure. Cutler’s children lived with his ex-wife and, while they would likely suffer hardship without his financial support, this case was not outside the “mainstream of family hardships.” More importantly, the circuit believed that there was evidence that Cutler would still be able to support his children while incarcerated if he wanted to. It turns out that he had used some of the proceeds from the scheme to purchase assets that he placed in his second wife’s name, out of reach of his ex-wife and the children: “That Cutler chose to put [assets] into his new wife’s name to provide for her, rather than leaving it in his own name to provide for his children, may be an exceptional circumstance, but it is surely not one that authorizes a downward departure.”

Finally, the court rejected the district court’s seemingly excessive reliance on the need for restitution, out of concern that this would “imply that virtually all defendants who are required to pay restitution in amounts exceeding their net worth should receive short prison terms.”

The circuit had similar qualms about Freedman’s sentence. First, it faulted the district court’s refusal to consider an obstruction of justice enhancement based on Freeman’s initial false statements to IRS investigators. Next, as with Cutler, the court disagreed with the district court’s belief that the loss amount overstated Freedman’s culpability, particularly given Freedman’s “pervasive” participation in the scheme, and his “multi-million-dollar” compensation. On this point, the circuit found a “clearly erroneous assessment of the evidence in the record as to the nature and pervasiveness of [Freedman’s] actions and his substantial financial interest in the success of the frauds.”

The appellate court also rejected the district court’s view that, given Freedman’s humiliation and disbarment, probation would be “just punishment for the offense.” Those consequences - not even “punishment,” in reality - were “hardly unusual,” and thus the district court’s reasoning risked creating unwarranted sentencing disparities.

As with Cutler, the court rejected the family circumstances departure. The disabled brother lived in an assisted living center, and they did not interact frequently in person. Moreover, there was another sibling nearby to help manage the brother’s affairs.

Lastly, the court rejected the downward departure based on Freedman’s age and health, concluding that the district judge made clearly erroneous assessments both of Freedman’s actual condition and of the BOP’s ability to care for him. “[W]e see no support in the record for the district court’s finding that the BOP could not or would not provide that care.”

In the end, for both defendants, given “the procedural errors, the clear factual errors, and the misinterpretations of the § 3553(a) factors” the lenient sentences here were “substantively unreasonable and constituted an abuse of discretion.”

In a short concurrence, Judge Pooler noted that, while she agreed that a remand was necessary, she believed that it was premature to conduct substantive reasonableness review because the lower court had not yet imposed a “procedurally adequate sentence.” Under Judge Pooler’s method, the district court should first be given an opportunity to correct the procedural errors. That sentence, if appealed, would then be subject to review for substantive reasonableness.

Comment

Is this the end of leniency in this circuit? It does not seem so. At least based on the facts as presented by the circuit, these two guys were particularly bad candidates for short sentences. Their conduct was unusually brazen, its consequences unusually serious, and their arguments for mitigation did not come close to outweighing the seriousness of the offense. Even under this decision, then, there is clearly still room for short prison sentences, or even probation, in white collar cases, where the equities genuinely support it.

Another Fine Meth

United States v. Tran, No. 05-5644-cr (2d Cir. March 10, 2008) (Sack, Sotomayor, Hall, CJJ)

Defendant Tran was stopped by customs officers while crossing the border from Canada, ostensibly to go to a casino in New York. Customs agents found several bags of pills hidden in the interior roof lining of his rented car, but Tran repeatedly denied knowing that the drugs were there.

There were more than 40,000 pills, weighing more than 10 kilograms. A chemical analysis of 29 of the pills revealed that they contained ecstasy (in concentrations ranging from 15 to 28%) and d-methamphetamine (in concentrations ranging from 5.6 to 6.9%). At trial, a DEA chemist testified that these tests accurately reflected the amount and percentage of the drugs in all of the pills.

Tran testified, and explained that he did not know that there were drugs in the car. He was convicted, and sentenced to 235 months’ imprisonment.

The Jury Charge on Knowledge

In its charge on knowledge, the district court largely followed Sand, except that it instructed that, where a defendant is the “sole occupant of an apartment,” it would be “reasonable to conclude that” he “knew about the items in [that] apartment.” It went on to explain that a defendant’s “behavior” such as “[n]ervousness in the presence of drugs[,] or flight” from the scene “may also indicate knowledge.”

On appeal, Tran challenged these instructions, claiming - inaccurately - that the court charged that the jury could reasonably infer knowledge from sole occupancy of a vehicle. The appellate court pointed out Tran’s error, then refused to review the actual instruction given, since Tran did not challenge it. In a footnote the court chided both his counsel for making “material misrepresentation[s] of the record” (on this point and another), and the government, for failing to point out the errors.

Tran did, however, challenge the language about nervousness in the presence of drugs, but the circuit affirmed. “Even where drugs are hidden and therefore not immediately visible to the occupant or others, the possibility of discovery may cause an individual with knowledge of the drugs to respond with nervousness to a law enforcement officer’s presence.” The court noted that there might be a “stronger claim of error” where a court instructs that “nervousness alone” is a sufficient basis for finding knowledge, but the charge as a whole here did not convey this message. It gave examples of indicators of knowledge, including nervousness, and said that they were “neither exhaustive nor . . . conclusive.”

Sufficiency of the Evidence

The court also held that the evidence of knowledge was legally sufficient. While agreeing that “sole occupancy of a vehicle cannot alone suffice to prove knowledge of contraband found hidden in the vehicle,” here there was more. The government introduced evidence of “nervousness," in the agents’ testimony about Tran’s conduct when stopped, and of “suspicious circumstances,” such as Tran’s traveling without directions to a place he had never been, and his doing so without toiletries or a change of clothes. Finally, by testifying, Tran forfeited his right to have the sufficiency of the evidence determined on the government’s case alone.

Tran also challenged the sufficiency of the evidence that the pills contained 500 grams or more of methamphetamine, claiming that the chemist’s sample was too small. The court disagreed, noting that “sampling is a permissible method of proof,” and that the chemist had opined that all of the pills contained the same substances in approximately the same proportions.

The “Regalado Remand”

United States v. Regalado, No. 05-5379-cr (2d Cir. March 4, 2008) (Jacobs, Pooler, Sack, CJJ) (per curiam)

At last, the circuit has told us what to do in light of Kimbrough. And the answer is, in essence, a Crosby remand.

Regalado received a 262-month crack sentence, the bottom of the Guideline range (he was not a career offender). The sentencing judge said nothing about the 100-to-1 crack/cocaine disparity and the defendant never raised it. Due to this silence, the appellate court concluded that it could not "tell whether the district court would have exercised its now clear discretion to mitigate the sentencing range produced by the 100-to-1 ratio." To solve the problem, the court decided to import the "Crosby mechanism" to crack cases.

Specifically, where a "defendant has not preserved the argument that the sentencing range for the crack cocaine offense fails to serve the [statutory] sentencing objectives . . . , we will remand to give the district court an opportunity to indicate whether it would have imposed a non-Guidelines sentence knowing that it had the discretion" to do so. "If so, the court should vacate the original sentence and resentence the defendant. If not, the court should state on the record that it is declining to [and] provide an appropriate explanation." If the defendant again appeals, that sentence will be reviewed for reasonableness.

Comment

This is a wonderful opinion, filled with great language about a sentencing court’s discretion. It also has some really helpful language about plain error in sentencing cases, that, hopefully, the court will remember in other contexts.

The only remaining puzzle is what to call this kind of remand: A "Crosby/Kimbrough" remand? How about a "Cros/Kim"? This blogger, always a fan of alliteration, votes for the "Regalado Remand."

Career Angst

United States v. Sanchez, No. 05-3812-cr (2d Cir. February 29, 2008) (Kearse, Straub, Pooler, CJJ).

In this long opinion, the court considered several challenges to recidivist sentences in a drug case. Two defendants, both “career offenders” under Guidelines section 4B1.1, got relief. A third, sentenced to an enhanced mandatory minimum, did not.

Career Offender

Title 28 U.S.C. § 994(h) directed the Sentencing Commission to develop Sentencing Guidelines for career offenders that would fix a Guideline range “at or near” the statutory maximum. Here, the district judge made statements that seemed to indicate that she believed that this section required her to sentence the defendants above the mandatory minimum, which was 120 months. She gave one defendant 235 months, and the other 188.

The court appellate court concluded that the district court’s apparent belief was incorrect. It noted that § 994(h) is a direction to the Commission, not the courts; moreover, there is no statute giving similar instructions to judges. Indeed, Congress rejected such legislation when fashioning the 1984 Sentencing Reform Act. The circuit concluded that for both defendants, the record was at least ambiguous as to whether the court would have imposed the same sentence if it correctly understood that § 994(h) did not restrict its sentencing authority.

The court remanded for clarification without vacating the sentences, and gave some interesting instructions for the remand. Since the policy considerations behind § 994(h) are relevant to several of the factors set out in 18 U.S.C. § 3553(a), this “must be taken into account” by the district court. The circuit instructed the district court to first “provide the necessary clarifications” regarding its reasons for imposing the sentences it selected, under a procedure similar to a Crosby remand. If that clarification reveals that the court would have imposed the same sentence, it need take no other action. If the clarification reveals that the district court would have imposed a different sentence on either defendant, then it should vacate that sentence and resentence him.

The Prior Felony Information

A third defendant received an enhanced mandatory minimum, 20 years instead of 10, after the government filed a prior felony information. See 21 U.S.C. § 851. The court rejected two constitutional challenges to the sentence.

First, it held that the statutory delegation to the United States Attorney of the power to raise the mandatory minimum did not violate the constitutional principle of separation of powers. Section 851 does give the government “some degree of control” over the ultimate sentence. But this is simply part of the government’s legitimate power to decide whether to prosecute at all and, if so, to decide which among the various available statutes - with different maximums and minimums - to use.

The defendant also argued that the government’s failure to explain why it had chosen to file a prior felony information against this one defendant, but not the others, was a due process violation. The court disagreed. Here, there was no evidence of an improper motive that would overcome the presumption of regularity of prosecutorial decision-making.

Summary Summary

It's been a slow month for summary orders, but at last the court has eked out three of them worth noting.

First, in United States v. Spencer, No. 06-2517-cr (2d Cir. February 26, 2008), the court reversed both defendants' conviction of conspiracy to commit bankruptcy fraud because the judge erroneously charged the jury that the defendant who testified had a "deep personal interest in the outcome of his prosecution" that created "a motive for false testimony."

The "mandate rule" prohibits relitigating on remand issues that the appellate court has already ruled on. In United States v. Argentina, No. 06-1989-cr (2d Cir. February 26, 2008), the court noted that there is an exception to the mandate rule for "cogent and compelling reasons" such as new evidence; here, however, any error in the district court's refusal to apply the exception was harmless.

Finally, in United States v. Sutton, No. 06-2522-cr (February 11, 2008), the court vacated a special condition of supervised release that was in the written judgment, but that the judge had not imposed orally.

Risky Business

United States v. Lynch, No. 05-6048-cr (2d Cir. February 27, 2008) (Calabresi, Raggi, Hall, CJJ)

David Lynch received a 15-year sentence under the Armed Career Criminal Act (ACCA) and appealed. In an opinion that covered no new ground, the circuit affirmed. It held (again) that New York State convictions for attempted burglary in the third degree (N.Y. Penal Law §§ 110/140.20) and criminal possession of a weapon in the second degree (N.Y. Penal Law § 265.03) both involve "conduct that presents a serious potential risk of physical injury to another."

For the attempted burglary, the court reaffirmed its decision in United States v. Andrello, 9 F.3d 247 (2d Cir. 1993) (per curiam), and also noted that a recent Supreme Court case, James v. United States, 127 S.Ct. 1586 (2007), held that attempted burglary is an ACCA predicate.

Similarly, in United States v. Danielson, 199 F.3d 666 (2d Cir. 1999) (per curiam), the court held that a conviction of second-degree weapon possession, after a jury verdict, was an ACCA predicate. Here, the court rejected Lynch's arguments that (1) the rule should be different after a guilty plea and (2) that, since Lynch did not expressly admit all of the elements of the offense in his state court plea, the conviction was not covered by ACCA.

Fast-Track Train Still Stalled

United States v. Ramirez-Sucar, No. 06-2909-cr (2d Cir. February 20, 2008) (per curiam)

Here is yet another case in which the circuit does not decide whether a district court can consider the lenient illegal-reentry sentences that are regularly imposed in “fast-track” districts as the basis for downward variance. Once again, all the court notes is that a district judge does not have to consider fast-track sentences. But, of course, we already knew that.

Comment: Just decide the *$&@#)$ issue already. It is not even all that controversial any more, in light of Gall and Kimbrough.

The Government Giveth and the Government Taketh Away

United States v. Dominguez, No. 05-7005-cr (2d Cir. February 15, 2008) (Miner, Sack, Hall, CJJ)

Carol Dominguez faced 240-months in prison: a ten-year crack minimum that was doubled because of her prior conviction. The government moved for a downward departure under 5K1.1 and 18 U.S.C. § 3553(e), then asked the court to sentence her somewhere within a 151 to 188 month range. At sentencing, the judge granted the government's motions, and then considered mitigating information from Dominguez’ family, friends, employers and the defendant herself. The judge indicated that he believed he had the “discretion to sentence you as to what I feel would be fair and reasonable under the circumstances.” He said that he had “reviewed and considered all the pertinent information including but not limited to the presentence investigation report, submissions by counsel the factors outlined in 18 U.S.C. Section 3553 and the sentencing guidelines” and sentenced her to time served - 464 days - a 93% reduction from the mandatory minimum.

The government appealed, and the circuit reversed, finding fault with the district court’s procedures. Here is what the court said should happen on remand. First, the district court must determine the correct Guideline range, which here is 240 months, the mandatory minimum. Then, since section 5K1.1 does not really apply here - it does not authorize departures below a mandatory minimum - the court must consider the government’s motion under § 3553(e), under which “any reduction may be based only on substantial assistance to the government and on no other mitigating considerations” (emphasis added). On this point, an open question here, the court joined the Fifth, Eighth and Ninth Circuits. The court ended by suggesting that the 5K1.1 factors would be “instructive in determining how much of a departure below the statutory minimum is appropriate,” even though that section does not itself apply.

Comment: This is a very strange opinion. The circuit now seems to believe that when sentencing cooperators who face a mandatory minimum, a court cannot apply § 3553(a); it can base its decision only on the extent of the cooperation. That does not really make much sense, since § 3553(a) obviously applies in all sentencings.

Russian Revolution

United States v. Verkhoglyad, No. 05-4210-cr (2d Cir. February 14, 2008) (Cabranes, Raggi, CJJ, Berman, DJ)

Oleg Verkhoglyad was a Russian mobster who repeatedly received lenient treatment. First, after cooperating in a 1998 extortion case, he received a 5K1.1 departure. Six months after getting out of jail, he violated his supervised release by committing a multitude of new offenses. He pled guilty to the supervised release violation and a new felon-in-possession charge, then talked his way into another cooperation agreement. After nearly four years of working with the government, he received another 5K letter. This time, he got 4 years’ probation on the gun charge and 3 years of supervised release on the supervised release violation. Within weeks of his sentencing, he violated his supervision by using marijuana and leaving the district without permission. This time, however, his luck ran out. The district judge slammed him, giving him 57 months’ imprisonment, the top of the range he originally faced on the gun charge, even though the Guidelines recommended only 5 to 11 months.

He appealed this sentence, claiming it was both procedurally and substantively unreasonable, but the circuit affirmed. On its surface, the opinion treads no new ground, since it was obvious that the district court did all that 3553(a) requires.

However, lurking below the surface of this opinion is a mini-revolution. Just last year, in United States v. Sindima, 488 F.3d 81 (2d Cir. 2007), the court reminded us all that the primary purpose of a violation of probation sentencing is to punish the breach of trust, and not the conduct itself. Here, the court partially overrules Sindima, without really saying so, by holding that a probation violation sentencing is in fact a resentencing on the underlying offense. This decision is thus clearly intended to make above-Guideline sentences easier to impose in probation violation cases, despite the seemingly opposite approach the court took in Sindima. Worse still, the court does not really deal with the tension it has created with Sindima, other than to assert that Sindima was not supposed to “ignore the fact that revocation of probation requires a defendant to be resentenced on the crime of conviction, and not simply on the breach of trust.”