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This blog used to be great. It was a useful tool for those of us in the trenches of defending people accused of crimes in federal court.

Alas – my workload has been such that the blog has slipped as a priority. (Also I’ve been writing over at Above the Law).

For that reason, and at the suggestion of a former reader, I’m asking for help.

typewriter-1-1530257.jpgIf you’re a criminal defense lawyer practicing in one of the circuits and would like to take responsibility for updating this page with the federal defense wins from one of the circuits, please send me an email.

I would imagine there are circuits where this wouldn’t be too onerous. The Fifth Circuit, for example, would not probably not be heavy lifting.

Folks who join the team will get credit and attribution on the blog and thanks. All of the glory that comes with writing a blog on federal criminal appellate law can be yours. And if you decide to write here, and happen to find yourself in Washington, D.C., I’d be willing to buy you almost an entire beer.

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The big news in this batch of opinions is not the conspiracy to import lobsters case, but, rather the Barry Bonds appeal.

Mr. Bonds was prosecuted for evading a prosecutor’s questions while testifying in a grand jury. And, now, thanks to an en banc panel of the Ninth Circuit, his conviction was reversed because giving a nonresponsive answer is not a crime. Though just about any teenager could tell you that.

To the victories:

you win.jpg1. United States v. Bengis, Second Circuit: Appellants were convicted of conspiracy to import lobsters from South African waters in violation of both South African and U.S. law. The district court imposed a restitution order, holding each of the Appellants jointly and severally liable for the market value of all of the lobsters harvested. The Second Circuit reversed the order as to one of the Appellants, who had joined the conspiracy later than the others. The court held that the Appellant was only liable for the value of lobsters taken before he joined the conspiracy if he knew, or reasonably should have known, about the conspiracy’s past imports. The court remanded for the district court to make this determination.

2. United States v. Sandidge, Seventh Circuit: After Appellant pled guilty to being a felon in possession of a firearm, the sentencing court imposed several standard and special conditions of supervised release. The Seventh Circuit vacated all of these conditions because the sentencing court offered no explanation as to their propriety, and conducted no review of the statutory sentencing factors. The court noted that several of the conditions were too vague, including requirements that Appellant meet “family responsibilities” and “not associate with any persons engaged in criminal activity.” The court also noted that several conditions were broader than necessary, such as a requirement not to “consume . . . any mood-altering substances.” The court remanded for resentencing on the issue of conditions of supervised release.

3. United States v. Thomas, Eighth Circuit: While on supervised release, Appellant was arrested on suspicion that he had been involved in a shooting. The government petitioned for revocation of supervised release, presenting the arresting officer as its sole witness. Based on the officer’s testimony, the district court concluded that the evidence was sufficient to support a “Grade A violation,” and sentenced Appellant to 33 months. The Eighth Circuit reversed and remanded for resentencing, holding that the evidence was only sufficient to support a Grade B violation, because the district court did not find that Appellant had committed a crime of violence, a controlled substance offense, or an offense involving a specific type of firearm, or that he had committed an offense punishable by a term of more than 20 years in prison.

4. United States v. Bonds, Ninth Circuit: Appellant was convicted of obstruction of justice for making a single “rambling, non-responsive answer to a simple question” during a grand jury proceeding. The Ninth Circuit reversed, holding that the rambling statement could not constitute obstruction of justice because it was not “material” to the grand jury’s decision. While Appellant’s response did not answer the question, it did not “enlighten, obfuscate, confirm, or deny anything within the scope of the question posed.” The court noted that Appellant could not be tried again on the charge, because double jeopardy applies to a reversal for insufficient evidence.

Defense Attorneys: Dennis P. Riordan, Donald M. Horgan, Ted Sampsell Jones
5. United States v. Mazzarella, Ninth Circuit: After being convicted of twelve felony counts related to a mortgage fraud scheme, Appellant moved for a new trial, arguing that the government had withheld exculpatory evidence in violation of Brady v. Maryland. Appellant pointed to the government’s failure to inform her about (1) an informal immunity agreement with one government witness, (2) another witness’s belief that she had entered into an agreement with the government, which the government denied, and (3) a comment made by yet another witness suggesting that the government might help her secure a job with the FBI after cooperating. Appellant also argued that her Fourth Amendment rights had been violated when a government witness copied documents from Appellant’s office at the government’s request. The district court refused Appellant’s request for discovery and an evidentiary hearing on both issues, and denied the motion for a new trial. The Ninth Circuit reversed, holding that discovery was necessary to determine what immunity agreements existed, and whether any of the documents copied by the government witness had, in fact, been turned over to the government. The Ninth Circuit remanded with instructions to reconsider the Brady and Fourth Amendment claims after permitting discovery and an evidentiary hearing.

Defense Attorneys: John D. Cline, Mark H. Allenbaugh
6. United States v. Washington, Tenth Circuit: Appellant was arrested after the rental car that he was driving, while accompanied by a friend, was found to contain marijuana and methamphetamine. Appellant was convicted of possession of controlled substances with intent to distribute and aiding and abetting that offense. The Tenth Circuit reversed Appellant’s conviction, and remanded with instructions to dismiss the indictment. The court held that there was insufficient evidence to infer that Appellant had knowledge of the presence of a large amount of drugs, since the drugs were not on his person or personal property within the car. The court rejected the government’s argument that the smell of marijuana was sufficient to infer this knowledge, noting that the smell would only suggest the use of marijuana, not the presence of a sufficient amount to sustain a conviction for distribution.

Defense Attorney: Neil Darin Van Dalsem
7. Dimanche v. Brown, Eleventh Circuit: Appellant, an inmate, brought a civil rights suit under 42 U.S.C. § 1983 against prison officials for spraying him with teargas in retaliation for filing grievances about prison conditions. The district court dismissed the suit for failure to exhaust administrative remedies, as well as for failure to state a claim. The Eleventh Circuit reversed on both issues, and remanded for further proceedings. The court held that Appellant’s grievance was properly directed to the head of the State Department of Corrections, as it was a retaliation claim, and that the district court had not explained how Appellant had failed to state his claims.

8. United States v. Peters, Eleventh Circuit: Appellant was convicted of several offenses related to a tax-fraud conspiracy. He was sentenced to 144 months’ imprisonment, and was ordered to pay over $5 million in restitution. While Appellant was incarcerated in California, the government sought to collect the restitution by filing an application for a writ of execution to seize Appellant’s California home. The district court with which the application was filed, the Southern District of Florida, refused Appellant’s request to transfer the application to California, and granted the application. The Eleventh Circuit concluded that the language of the Federal Debt Collection Procedures Act required the transfer of the application to the district where the defendant resides. The Eleventh Circuit vacated the order and remanded with instructions to transfer the application to California.

9. United States v. Mathis-Gardner, D.C. Circuit: Appellant filed a motion for early termination of supervised release. The district court summarily denied the motion. The D.C. Circuit reversed, holding that while the district court need not spell out its reasons for denying a motion to terminate supervised release in an order, its reasons must be apparent from something in the record, such as from a hearing on the motion, or from an order denying a previous motion. The D.C. Circuit held that the record in the case did not indicate the district court’s reasoning, vacated the order denying the motion to terminate supervised release, and remanded for reconsideration.

Defense Attorneys: A.J. Kramer, Michelle M. Peterson

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It’s a catch-up blast of short wins today following my Spring Break.

My favorite of the bunch, continuing on our recent restitution cases, is United States v. Foley. There, the district court ordered restitution that was outside the offense of conviction. The First Circuit reversed. Go First Circuit!

To the victories!

you win.jpg1. United States v. Molina-Gomez, First Circuit: The district court erred by denying Appellant’s motion to suppress statements he made to United States Customs and Border Protection officers. The questioning occurred in a small, windowless room and Appellant was not given Miranda warnings prior to being questioned, which amounted to a violation of his Fifth Amendment rights. The case was remanded so Appellant could withdraw his plea and determine how he would like to proceed.

Defense Attorneys: Leonardo M. Aldridge-Kontos, Hector E. Guzman-Silva, Jr., Hector L. Ramos-Vega, and Lisa L. Rosado-Rodriguez
2. Perry v. Roy, First Circuit: Appellant, an inmate, brought a civil rights suit challenging the medical treatment he received after a violent scuffle with prison guards, which left him with a broken jaw. The trial court dismissed the case, holding that Appellant had not presented evidence that prison medical personnel deliberately denied him care. But the First Circuit concluded that the trial court had improperly weighed the evidence, which, when viewed in a light favorable to Appellant, could support a finding that the prison medical personnel were deliberately indifferent to Appellant’s condition.

Inmate’s Attorneys: Benjamin M. McGovern, Amanda O. Amendola
3. United States v. Del Valle-Cruz.pdf, First Circuit: Appellant was convicted of failing to register as a sex offender. The sentencing court imposed special conditions of supervised release that were not imposed at the time of the underlying sex offense conviction, including a condition that prevented Appellant from having contact with, or residing with, minors. The First Circuit vacated this condition to avoid interfering with Appellant’s relationship with his son, and also remanded for reconsideration of other conditions imposed by the sentencing court, noting that the sentencing court failed to explain or justify the conditions.

Defense Attorney: Jedrick H. Burgos-Amador

4. United States v. Foley, First Circuit: Appellant was convicted of 33 counts of wire fraud for submitting false documents to lenders on behalf of buyers of condominiums. The court ordered restitution to the lenders, including a lender that had loaned Appellant funds to purchase a condominium for himself. The First Circuit held that the restitution order should not have included this loan, because it was outside of the fraudulent scheme that was the basis for the conviction. The court specifically noted that this loan was obtained for the Appellant, rather than for other buyers, and that the conduct occurred over a year before the scheme for which Appellant was convicted. The court vacated the restitution order and remanded for recalculation without the loan.

Defense Attorney: Rebecca A. Jacobstein
5. United States v. Melendez-Rivera, First Circuit: After pleading guilty to conspiracy to import and distribute cocaine, Appellant argued at sentencing that he should receive a downward adjustment for timely notifying the government of his intent to plead guilty. The sentencing court concluded that it did not have the discretion to grant this adjustment because the government did not move for it. The First Circuit reversed, holding that the sentencing court should have considered whether the government’s failure to make the motion was motivated by an improper purpose, and remanded for resentencing on this issue.

Defense Attorneys: Joshua L. Solomon, Matthew B. Arnould
6. United States v. Wright-Darrisaw, Second Circuit: Appellant was convicted of violating 18 U.S.C. §871(a) for threatening to kill the President of the United States and her sentence was based, in part, on a finding that the threat was found to involve deliberation. The court remanded because the district court can only make a finding of deliberation if the deliberation related to the communication of the threat itself.

Defense Attorneys: Jeffrey L. Ciccone and Jay S. Ovsiovitch
7. Lee v. Clarke, Fourth Circuit: Appellant’s petition for habeas corpus was dismissed by the district court. That dismissal was based on an unreasonable application of Strickland v. Washington because the court did not appreciate the prejudice inherent to Appellant from the absence of a jury instruction defining heat of passion given that the instruction was crucial to Appellant’s defense.

Defense Attorney: David Bernard Hargett
8. United States v. Lymas, Fourth Circuit: Appellants’ sentences were procedurally unreasonable because the sentencing court varied from the guidelines believing they did not reflect the §3553(a) objectives. Further, the sentencing court decided both Appellants were deserving of the same sentence, which plainly failed to consider the Guidelines principle that require proportionality in sentencing. Without a detailed explanation for the departure, Appellant’s sentences were vacated and remanded.

Defense Attorneys: Terry F. Rose, Thomas P. McNamara, and Brett Wentz
9. United States v. Sealed Juvenile, Fifth Circuit: Appellant, aged 15, was convicted of abusive sexual contact with a minor. The district court imposed a term of juvenile delinquent supervision that included several special conditions, including restriction of Appellant’s access to computers and the Internet. The Fifth Circuit ordered the district court to narrowly interpret certain restrictions that it had imposed on the Appellant’s use of the Internet, holding, for example, that requiring Appellant to secure written permission each time he used the Internet would be unreasonably restrictive.

10. Speer v. Stephens & Mendoza v. Stephens, Fifth Circuit: The Fifth Circuit was faced, in two separate cases, with an inmate seeking federal habeas review of his conviction. In both cases, the inmate sought to have new counsel appointed to review his case for claims that should have been raised in an earlier state habeas proceeding. Such claims can only be made if there is an excuse for not raising them in the state proceeding, such as ineffective assistance of counsel. The inmates, Appellants here, argued that new counsel should be appointed, because raising the issue of ineffective assistance of counsel at the state proceeding would be a conflict of interest for the attorney that represented Appellants in those proceedings. The Fifth Circuit held that, while there is no right to counsel in collateral review proceedings, federal district courts have the power to appoint additional counsel for the limited purpose of determining whether there are additional claims that ought to have been brought at an earlier state proceeding. The Fifth Circuit vacated the district courts’ denial of the petitions and remanded for the appointment of additional counsel.

11. King v. McCarty, Seventh Circuit: The district court erred in dismissing Appellant’s Eighth Amendment claim arising from the requirement that he wear a see-through jump suit when being transported from a county jail to state prison. Appellant alleged a plausible Eighth Amendment claim for cruel and unusual punishment by arguing that the jumpsuit had no legitimate correctional purpose but was instead used to humiliate and inflict psychological pain.

12. Owens v. Duncan, Seventh Circuit: Appellant was convicted of murder after a bench trial. The judge’s verdict was based on the fact that Appellant knew the victim and knew that the victim was a drug dealer and claimed that Appellant wanted to kill the victim for that reason. However, there was exactly no evidence that Appellant knew the victim or knew that the victim was a drug dealer, and because that was the only reasoning offered by the trial court for the finding of guilt, the conviction was reversed.

13. United States v. Lockett, Seventh Circuit: Appellant was convicted of being a felon in possession of a firearm and was sentenced under the mandatory minimum sentencing provisions of the Armed Career Criminal Act (ACCA). The sentencing court determined that Appellant’s previous drug convictions were predicates that subjected him to ACCA, because he was eligible to be sentenced for those convictions under a state recidivist statute. But the Seventh Circuit reversed and remanded for resentencing, holding that, to constitute a predicate conviction under ACCA, the government must show, not only that the recidivist enhancement hypothetically could have been applied, but that Appellant actually faced the possibility of the recidivist enhancement when he was sentenced. To make such a showing, the government would have to point to actual court records, such as the plea colloquy.

14. United States v. Kappes, Seventh Circuit: In three separate cases, the Seventh Circuit addressed special conditions of supervised release imposed on defendants. The Seventh Circuit remanded each of the cases for reconsideration of the imposed conditions, in light of four principles outlined by the court: (1) a defendant should receive advance notice of any conditions being considered; (2) the court should provide a statement of its reasoning when imposing conditions, tying them to statutory sentencing factors; (3) the conditions should be tailored to the defendant’s offense and personal history, and should be no greater than reasonably necessary; and (4) the conditions should be given to the defendant by the court orally, in unambiguous terms.

15. United States v. Grandison, Eighth Circuit: Convicted of conspiracy to distribute cocaine, Appellant was sentenced to 360 months in prison. The trial court applied a sentencing enhancement based on Appellant’s having held drugs in her home. But the Eighth Circuit held that the enhancement could not be applied, because it did not become effective until two years after Appellant had ceased her drug activities. The Eighth Circuit concluded that resentencing was appropriate, because the erroneous enhancement increased Appellant’s guidelines range, and the district court explicitly adopted the government’s recommendation to sentence Appellant at the bottom of the range.

16. United States v. Petruk, Eighth Circuit: Appellant was found guilty of various charges related to his theft of a pickup truck. Two of those charges–carjacking and obstruction–were reversed. The Eighth Circuit held that there was insufficient evidence for the carjacking charge because one element the government must prove is that the vehicle was taken from the person or presence of another or accomplished by force and violence or by intimidation. The evidence here showed that the taking occurred at a time separate from any assault against the owner and that the truck was unoccupied when it was taken, failing to prove this element of carjacking. There was also insufficient evidence to prove the obstruction charge because that charge requires proof beyond a reasonable doubt that Appellant contemplated a particular, foreseeable proceeding and that such a proceeding must be an “official proceeding,” but that the definition of official proceeding does not include state proceedings. Here, the conduct that allegedly amounted to obstruction was an attempt by Appellant to secure statements from false alibi witnesses while incarcerated on state charges. Appellant’s convictions for carjacking and obstruction were vacated.

17. United States v. Woodall, Eighth Circuit: Appellant was convicted and sentenced for failing to register as a sex offender. As a condition of supervised release, the sentencing court prohibited Appellant from consuming alcohol or entering bars or similar establishments. The Eighth Circuit struck this condition, noting that Appellant only lightly consumed alcohol and occasionally used marijuana. Absent evidence that Appellant was “drug dependent,” or that alcohol spurred his criminal behavior, the court held that the condition could not be justified.

18. United States v. Haischer, Ninth Circuit: Appellant was tried and convicted for wire fraud for submitting false loan documents. During her trial, Appellant raised two defenses: duress and lack of knowledge that the documents were false. After Appellant’s trial counsel abandoned the duress defense, the trial court excluded evidence that Appellant had been abused. The Ninth Circuit reversed, holding that the evidence of abuse was sufficiently probative to whether Appellant knew (or was deliberately ignorant) of the documents’ falsity.

Defense Attorney: Franny Forsman
19. United States v. Hymas, Ninth Circuit: After being convicted of wire fraud for submitting a false loan document, Appellant was sentenced to 24 months’ imprisonment. The Ninth Circuit held that the trial court improperly applied a “preponderance of the evidence” standard to the amount of loss determination required under the sentencing guidelines. A “clear and convincing evidence” standard was required, the Ninth Circuit held, because the amount of loss determination more than doubled Appellant’s sentencing range under the guidelines.

Defense Attorney: Marcus R. Mumford
20. United States v. Marcia-Acosta, Ninth Circuit: Appellant was convicted of unlawful reentry to the United States, and was sentenced to 77 months in prison. The trial court applied a sentencing enhancement based on a previous conviction for aggravated assault, determining that it was a “crime of violence.” The Ninth Circuit remanded for resentencing, holding that the trial court improperly relied on statements made by Appellant’s trial counsel at the plea hearing in making this determination. Relying on such statements, rather than only the conviction documents, is improper under the “modified categorical approach,” set forth by the Supreme Court for determining whether a crime constitutes a “crime of violence.”

Defense Attorney: Diego Rodriguez
21. United States v. Zaragoza-Moreira, Ninth Circuit: An indictment charged Appellant with importation of methamphetamine. Appellant moved to dismiss the indictment, arguing that the government had destroyed evidence that may have supported her defense of duress. The Ninth Circuit agreed, holding that Appellant had been denied due process, where a government agent knew of the potential usefulness of evidence and acted in bad faith by failing to preserve it. The Ninth Circuit directed the trial court to dismiss the indictment.

Defense Attorney: Harini P. Raghupathi
22. United States v. Simmons, Ninth Circuit: After being convicted of drug and firearm offenses, Appellant was sentenced as a “career offender” under the sentencing guidelines. The sentencing court concluded that this classification applied, in part, because of Appellant’s previous conviction for “second degree escape,” a state offense that the sentencing court concluded was a “crime of violence.” Applying the modified categorical approach, the Ninth Circuit vacated the sentence and remanded for resentencing. The Ninth Circuit determined that neither the generic crime “second degree escape,” nor the specific crime of conviction, “escape from custody,” were crimes of violence because they did not have, as an element, the use of force, and did not otherwise involve a risk similar to those offenses classified as crimes of violence in the sentencing guidelines.

Defense Attorney: Peter C. Wolff, Jr.

23. Doe v. Ayers, Ninth Circuit: Appellant filed a federal habeas petition, challenging his death sentence on the basis that his counsel was ineffective at the penalty phase of the trial. The district court held that, by failing to put on significant mitigating evidence, the trial attorney’s performance had been deficient. But the district court denied the petition, holding that Appellant had not shown a reasonable probability that, but for the deficiency, the sentence would have been different, as required by Strickland v. Washington. The Ninth Circuit disagreed, holding that there was a substantial probability that the mitigating evidence would have affected the sentence. The Ninth Circuit ordered that the case be returned to state court with instructions to either reduce the sentence to life without parole or hold a new sentencing proceeding.

Defense Attorneys: John R. Grele, David W. Fermino
24. Barnett v. Norman, Ninth Circuit: Appellant, an inmate, brought a civil rights suit against prison guards for excessive force. At trial, Appellant called three other inmates to testify, all of whom refused to give testimony. The presiding judge made no attempt to compel the witnesses to testify by, for example, informing the witnesses of the possibility of contempt. The jury found in favor of the prison guards. The Ninth Circuit reversed and remanded for a new trial, holding that the presiding judge had abused her discretion by failing to attempt to compel the witnesses to testify.

Inmate’s Attorney: Ian Samuel
25. United States v. Sahagun-Gallegos, Ninth Circuit: Appellant pled guilty to illegal reentry to the United States. The sentencing court applied a sentencing enhancement based on Appellant’s previous state conviction for aggravated assault, determining that the conviction constituted a “crime of violence.” The Ninth Circuit reversed and remanded for resentencing, holding that the sentencing court erred in making this determination by considering the defense attorney’s statements at the aggravated assault plea hearing. This, the Ninth Circuit held, was impermissible under the “modified categorical approach” set out by the Supreme Court for determining whether an offense constitutes a crime of violence.

26. United States v. Urrutia-Contreras, Ninth Circuit: While on supervised release, Appellant was convicted of illegal reentry to the United States. At a hearing to impose sentence for violating the terms of Appellant’s supervised release, the sentencing court did not ask for the government’s sentencing recommendation before imposing sentence. The Ninth Circuit reversed and remanded for resentencing, holding that the requirement that the government be permitted to make a statement on sentencing applies at proceedings to revoke supervised release.

27. United States v. Figueroa-Labrada, Tenth Circuit: Appellant was convicted of conspiracy to possess with intent to distribute methamphetamine, and was sentenced to 120 months’ imprisonment. The Tenth Circuit vacated this sentence. On remand to the trial court for resentencing, Appellant sought–for the first time–to qualify for a “safety valve” provision allowing a defendant to avoid a mandatory minimum sentence by providing the government with information and evidence. But the trial court held that the Appellant could not do so because he had not provided the information before the first sentencing hearing. On appeal, the Tenth Circuit again reversed, holding that a defendant may satisfy this provision at any time before the new sentencing hearing.

Defense Attorneys: Virginia L. Grady, O. Dean Sanderford
28. United States v. White, Tenth Circuit: After Appellant pled guilty to failing to register as a sex offender, the sentencing court classified him as a “tier III” sex offender under the Sex Offender Registration and Notification Act (SORNA). SORNA categorizes state sex offenses by comparing them to federal sex offenses, as well as by reference to the age of the victim. In determining that Appellant’s state sex offense conviction was “tier III,” the sentencing court followed a “circumstance-specific approach,” looking not merely to the elements of the state offense, but also to police reports describing the offense. The Tenth Circuit reversed and remanded for resentencing, holding that the circumstance-specific approach is proper in SORNA classification only to determine the age of the victim, not to compare the offense to federal sex offenses.

Defense Attorneys: Carl Folsom, III; Julia L. O’Connell
29. United States v. Edmond, Eleventh Circuit: Indicted for conspiracy to commit access device fraud and aggravated identity theft, Appellant entered a plea agreement with the government. But that agreement inadvertently referred to an offense for which he had not been indicted, possession of access control devices. The error went unnoticed not only by the government’s and Appellant’s attorneys, but also by the trial court, which accepted the plea and sentenced the Appellant. The error was first noted by the Eleventh Circuit, after hearing oral argument on Appellant’s unrelated arguments. The Eleventh Circuit found it was plain error to accept a plea agreement as to a charge not alleged in the indictment and therefore reversed the lower court’s acceptance of the plea agreement.

30. United States v. Symington, Eleventh Circuit: Appellant entered a plea agreement with the government which, in part, determined that the Armed Career Criminal Act (ACCA) would not apply. The PSI determined, however, that the ACCA did apply. At sentencing, the court refused to allow Appellant to withdraw his guilty plea despite the mutual misunderstanding between the government and Appellant. This was an abuse of discretion because Appellant presented a fair and just reason for withdrawing the plea–that is, the plea court had explained that a 10-year maximum sentence would apply, but the sentencing court imposed a sentence above that when it was determined that Appellant should be sentenced in line with the ACCA. The conviction and sentence were vacated and remanded.

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The Seventh Circuit’s opinion in United States v. Hawkins – written by Easterbrook – presents a fascinating legal defense. When is getting money from someone for side benefits from the government bribery and when is it fraud?

Mr. Hawkins and his co-defendant Mr. Racasi worked in Chicago for the Board of Review – the entity that hears tax assessment appeals. They took money from a cop – Haleem – who they thought was dirty and, in fact, was – he was so dirty he was acting as an undercover officer to work his time down on some other criminal conduct of his.

It is an interesting question whether a dirty cop who has turned cooperator because his dirtiness has led to its own charges is truly “undercover” but let’s elide over that for a minute.

Messrs. Hawkins and Racasi took Mr. Haleem’s money so that they could work some influence at the Board that lowers tax assessments on some property Haleem owned. One of the properties didn’t have its assessment reduced, but the rest did.

They were charged with bribery and fraud in connection with the bribery. They were also charged with conspiracy, but that’s just because these days AUSAs get made fun of at the NAC if they don’t add a conspiracy charge to every case.

The Awesomest Defense Ever

Their defense, though, was that they weren’t committing bribery, they were committing fraud. They had no intention of working illicit magic on behalf of Haleem to reduce his property tax assessments – he would have won the appeals he won regardless of the money he gave them. Much as Haleem was trying to fake them out into receiving a bribe as a cooperator, they were trying to fake him out by not doing anything in exchange for the money he gave them.

This is the white-collar version of “I couldn’t have killed him, I was robbing a train on the other side of the state” or, from the Long Black Veil, “I couldn’t have killed him, I was sleeping with my best friend’s wife.”

It’s just so beautifully human.

How many times have I heard a version of this defense? How many times have I wanted to float it? I’ve just never had the courage to argue that “my client wasn’t trying to defraud the guy in the indictment, he was trying to defraud someone else.” I suppose I don’t run this defense because whenever I’ve seen it as a truly viable option, the guidelines are higher on the actual fraud.

The tricky bit is that they were charged with both bribery and fraud. And the bribery statute is a little tricky.

brown-envelope-money-bribe-1-1384589-m.jpgThe Bribery Charge

In any event, here, the men were charged with a violation of 18 U.S.C. § 666, which

provides that any agent of a covered organization who “corruptly solicits or demands for the benefit of any person, or accepts or agrees to accept, anything of value from any person, intending to be influenced or rewarded in connection with any business, transaction, or series of transactions of such organization” commits a felony.

Note one problem with this statute – it prohibits both bribes and gratuities. A bribe, of course, is giving money to someone in the government in order to get them to do something for you. A gratuity is giving money to someone in the government because they did something for you.

So, today’s life lesson, tip your waitperson, but not the lady at the DMV.

The Seventh Circuit found that the record was sufficient to support a gratuity charge. So the verdict on the § 666 count stands. (I wonder whether there was a variance argument between the evidence and the indictment – though, based on the jury instruction argument that appears to have been preserved, I think not.)

The Fraud Charge

The fraud charge, though, fared differently.

As the Seventh Circuit explains:

The convictions under §1341 pose a different problem. The mail-­‐‑fraud statute is not as detailed as §666. It prohibits schemes to defraud that use the mails but does not elaborate. Hawkins and Racasi may have defrauded Haleem out of his money (this was their defense!), but that was not the prosecutor’s theory. The United States relied on 18 U.S.C. §1346, which defines scheme to defraud as including “a scheme or artifice to deprive another of the ntangible right of honest services.” The idea is that the employer has a right to loyalty from agents and employees, and the prosecutor contended that Hawkins and Racasi deprived Cook County of their loyal services by taking Haleem’s money secretly. But “honest services” is open-­‐‑ended, and in Skilling v. United States, 561 U.S. 358 (2010), the Justices deflected a contention that it is so open-­‐‑ended as to be unconstitutionally vague. They did this by holding that §1346 covers only bribery and kickbacks. This means that an agent’s secret receipt of a gratuity (a “reward” in the language of §666) does not violate §1341, for a payment that does not entail a plan to change how the employee or agent does his job is neither a bribe nor a kickback. Because the instructions did not take into consideration this subtlety – and allowed the “we were defrauding not bribing” defense – the fraud convictions here were reversed.

Honest services fraud is getting charged more and more in cases that are barely within the scope of Skilling, see, e.g., this case.

Here’s hoping this is a start of a trend blowing that back.

Though it doesn’t make me think I’ll try that “no, I committed a different crime” defense any time soon.

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This week’s favorite Short Win is United States v. Gray. I say this less because of the legal issue involved – a jury instruction for “malice” – than for how much fun the opinion is to read. Here’s the opening:

Words are slippery things. Take “malice,” its legal definitions alone can encompass: the intent to commit a wrongful act, reckless disregard for the law, ill will, wickedness of heart, and the intent to kill. See Black’s Law Dictionary 968-69 (7th ed. 1999). But can malice’s fifty shades of meaning include “improper motive?” Former flight attendant Nancy Gray, convicted of providing false information regarding a bomb threat on an airplane, seeks to convince us that she was denied a fundamentally fair trial when her jury was instructed that malice meant “evil purpose or improper motive.” Because we find that the district court’s definition just won’t fly, we vacate Gray’s conviction and remand this case for a new trial.

It goes on from there. And, really it’s a sad story about a flight attendant snapping. But it’s good prose.

To the victories!

Thumbnail image for Thumbnail image for you win.jpg1. United States v. Gray, First Circuit: Appellant’s conviction for giving false information regarding a bomb threat on an airplane was vacated and remanded because the trial court improperly instructed the jury on the definition of malice. By instructing he jury that malice could be “an improper purpose,” the trial court reduced the government’s burden of proof.

Defense Attorney: Inga L. Parsons
2. United States v. Medina, First Circuit: After pleading guilty to failure to register as a sex offender, Appellant was sentenced to 30 months’ imprisonment and 20 years of supervised release. This sentence was vacated and remanded for resentencing because the 20-year period of supervised release was based on the erroneous classification of Appeallant’s SORNA violation as a sex offense. In addition, two conditions of supervised release–one restricting Appellant from accessing or possessing a wide range of sexually stimulating material, and the second requiring Appellant to submit to intrusive penile plethysmograph testing–were not justified by the record.

Defense Attorney: Edward J. O’Brien
3. United States v. Moran-Caleron, First Circuit: Appellant was convicted for his role in a hotel and casino robbery. The trial court ordered restitution, but failed to set a payment schedule, instead ordering the probation office to do so. Such delegation of the court’s discretion is improper and required the judgment to be vacated and remanded.

Defense Attorney: Jorge L. Gerena-Mendez:

4. United States v. Foreste, Second Circuit: Appellant’s conviction for possession of oxycodone with intent to distribute was vacated and remanded because the district court erred in denying Appellant’s discovery request for the field performance records of the narcotics canine whose alert provided probable cause for his arrest. While such records are not required, the Second Circuit noted that they are not irrelevant and therefore found it to be an abuse of discretion to deny Appellant’s request.

Defense Attorney: Bradley Stetler
5. United States v. Flores-Alvarado, Fourth Circuit: Appellant’s sentence was vacated and remanded because the trial court failed to make the required factual findings regarding the drug quantity attributed to Flores-Alvarado. It was error for the district court to fail to resolve Appellant’s objections to the calculation.

Defense Attorney: Wayne Buchanan Eads
6. United States v. Carter, Sixth Circuit: The trial court improperly admitted evidence that Appellant had intent to distribute suboxone strips during his trial for manufacturing of methamphetamine. The Sixth Circuit determined that the probativeness of such an unrelated venture to show specific intent was outweighed by the prejudicial value of that evidence.

Defense Attorney: David L. Leonard
7. Campbell v. Reardon, Seventh Circuit: The state court unreasonably applied Strickland when they rejected Appellant’s ineffective assistance of counsel claim based on counsel’s failure to conduct an adequate pretrial investigation by not interviewing three witnesses who would have said Appellant played no role in the murder for which he was convicted. The case was remanded for a hearing to resolve factual issues of Appellant’s claims.

8. United States v. Sewell, Seventh Circuit: The conditions of Appellant’s supervised release were vacated because both standard and special conditions were overbroad. The Court held that it is improper to order Appellant to obtain his GED not only because it is impossible to order someone to comply with such a condition without allowing cheating, but also because the applicability of this condition was not apparent.

9. Rudin v. Myles, Ninth Circuit: The Ninth Circuit held that extraordinary circumstances prevented Petitioner from timely filing her application for federal habeas relief and that she was entitled to equitable tolling. Her appointed attorney had abandoned her during the period in which she was diligent in pursuing her appeal. The case was remanded for further proceedings.

Defense Attorney: Christopher Oram
10. United States v. Hicks, Tenth Circuit: Appellant’s rights under the Speedy Trial Act were violated. Although the government filed a motion to set trial, that motion did not require a hearing, and therefore only thirty days are excludable (from the 70-day Speedy Trial Act requirement) after it was under advisement. Further, the motion was under advisement at the time it was filed because it did not require a response from Appellant. That motion therefore could only toll the speedy trial clock for 30 days, and since more time had passed the Speedy Trial Act was, in fact, violated.

Defense Attorney: Mark G. Walta

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Restitution may be the most important issue that most criminal defense lawyers are uninterested in litigating. Folks who practice in the criminal space – even the white-collar space – tend to see themselves as a champion of liberty. They care about freedom and justice. They are significantly less interested in fighting over money.

usa-dollar-bills-1431130-m.jpgNonetheless, money is an important thing in many people’s lives. And, if a person is convicted of a crime, the government will try to take their money too – either through a fine, a forfeiture judgment, or restitution.

The Second Circuit, in United States v. Cuti, recently narrowed the scope of what expenses can be part of a restitution judgment.

Anthony Cuti was the CEO of Duane Reade until 2005. He was convicted of securities fraud after trial in connection with two accounting fraud schemes to inflate the company’s earnings. His conviction was upheld in a separate appeal – that’s not the issue in this case.

This case is all about the Benjamins.

Mr. Cuti is Fired

In 2004, Duane Reade was purchased by Oak Hill — a private equity firm. Mr. Cuti was terminated shortly after in 2005.

As sometimes happens, Oak Hill and Mr. Cuti did not agree on all of the details of how his termination should be sorted out. The case went to arbitration. Paul Weiss represented Duane Reade in the arbitration.

Shortly before the arbitration was started though, Duane Reade’s general counsel learned that there were some suspected shenanigans that involved Mr. Cuti.

The company hired Cooley to investigate.

It will surprise exactly no one that having Paul Weiss and Cooley do a bunch of legal work was really expensive.

The Restitution Framework

Let’s step back from the story of what happened with Mr. Cuti to look at the legal framework for these cases.

When a person – or corporation – suffers a loss because someone did something that was illegal, they generally get to recover their expenses in ferreting out that loss or illegal conduct. That said, they can only do that for expenses that are necessary to figure out what the loss is.

As the Second Circuit explained it:

necessary . . . expenses related to participation in the investigation as described in the [Victim and Witnesses Protection Act], 18 U.S.C. § 3663(b)(4), are “expenses the victim was required to incur to advance the investigation or prosecution of the offense,” This may include internal investigations undertaken in the face of evidence–or grounded suspicion–of internal misconduct which ultimately unmask fraud.

What’s a Necessary Expense?

So, the expenses that Duane Reade had to shell out for that were related to unmasking what happened were necessary. What does that mean here?

Here there were two law firms looking into these transactions — Paul Weiss was doing it in connection with an arbitration proceeding and Cooly was doing it in connection with an internal investigation. Does Cuti have to pay for both firms’ expenses?

As it happens, probably not:

while Paul, Weiss may have uncovered evidence of the real estate concession scheme in February 2007 and subsequently “educate[d]” Cooley about it, App’x at 351, it was Cooley that undertook and prepared the May 2007 report on it for the Duane Reade board. Paul, Weiss meanwhile continued to work on the arbitration and amended its counterclaims and affirmative defenses accordingly in April 2007. A corporate client such as Duane Reade is entitled to expend as much as it deems prudent on preparations for its defense in a civil case or arbitration. However, under Maynard, not all such expenses are “necessary” for restitution purposes.

The Circuit remanded the case for the district court to wade through Paul Weiss’s bills to figure out which were related to the arbitration and which went to investigate the fraud.

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The third level for acceptance of responsibility is interesting – it’s one area where some courts have held the government has pretty much unfettered discretion to decide whether or not it should apply. Basically, a person is supposed to get the third level only if she’s pled guilty early enough to keep the government from working. Though some U.S. Attorney’s offices are more or less stingy about how early is early enough.

Regardless, it can be hard to overcome an unreasonable government position on the applicability of the third-level for acceptance.

Which is why I was glad to see United States v. Castillo – which challenges the sovereignty of the government’s decisionmaking about the third level and its applicability. Good stuff there.

To the victories!

Thumbnail image for you win.jpg1. United States v. Alejandra-Montanez, First Circuit: Appellants were convicted of criminal conspiracy charges for importing cocaine. Because of recent amendments to the sentencing guidelines that retroactively reduced most drug quantity base offense levels, the case was remanded for reconsideration of Appellants’ sentences.

Defense Attorneys: David A.F. Lewis, Leslie W. O’Brien, and Joshua L. Gordon
2. United States v. Martinez-Rodriguez, First Circuit: Appellants were convicted of drug and firearms offenses. Appellant Rodriguez’s conviction for the drug offense was reversed because the evidence was insufficient to connect him to Appellant Santini’s possession of narcotics. And the evidence connecting Appellant Santini to Appellant Rodriguez’s possession of a firearm was also insufficient, so that conviction was reversed as well. The only evidence of a connection between Appellants, who are brothers-in-law, was that they had been in a car together when the car was stopped. But the lack of evidence about the full nature of their relationship, of any plan they had to carry out a drug-trafficking offense, and of their prior dealings with each other was insufficient to show that the two had the requisite knowledge of the other’s offense.

Defense Attorneys: Michael R. Hasse and Victoria M. Bonilla-Argudo
3. United States v. Castillo, Fifth Circuit: Appellant’s case was remanded for reconsideration of the sentence after the government initially refused to move for an additional one-level reduction at sentencing based on acceptance of responsibility. The court held that the government may withhold such a motion based on an interested identified in Section 3E1.1 of the sentencing guidelines, but the trial court failed to make the proper findings of fact which would allow the government to withhold the motion.

4. United States v. Fidse, Fifth Circuit: Appellant pled guilty to two obstruction offenses and his sentence was based, in part, on a substantial sentencing enhancement that applies when “the offense is a felony that involved, or was intended to promote, a federal crime of terrorism. Because Appellant’s underlying conviction was not for a federal crime of terrorism, the district court was required to identify the crime of terrorism committed by Appellant based on the evidence presented at sentencing. The district court failed to do so, and made inconsistent findings about the evidence presented. Therefore Appellant’s sentence was vacated and remanded.

5. United States v. Garcia-Perez, Fifth Circuit: Appellant’s prior conviction for manslaughter as defined by the Florida statute was not a crime of violence for purposes of a sentencing enhancement. A conviction under the Florida manslaughter statute does not qualify as a crime of violence for the sentencing enhancement because the government is not required to prove force as an element of the offense. Appellant’s sentence was vacated and remanded for resentencing.

6. Pola v. United States, Sixth Circuit: The Sixth Circuit vacated the district court’s denial of an evidentiary hearing to Appellant for potential ineffective assistance of counsel claims. First, the court held that it had jurisdiction to hear this issue despite Appellant being released from prison because he will continue to suffer the burden of a criminal conviction, including being deported. Second, the trial court erred in denying Appellant an evidentiary hearing because the record did not conclusively show that he was entitled to no relief and because the trial court only had parts of the record before it when making its determination.

Defense Attorney: Kent Wicker
7. United States v. Moslavac, Seventh Circuit: During a parole revocation hearing, the government did not call either witness to an alleged battery, but called only the father of a witness who was a minor, who testified about what his daughter told him. In addition, the court allowed the government to introduce a voicemail from the minor witness to her father under the excited utterance exception. Because the court did not explicitly balance the interests of the parties as required by the Federal Criminal Procedure Rule 32.1, the parole revocation was reversed.

8. United States v. Dunn, Tenth Circuit: The Tenth Circuit held that it is multiplicitous to sentence a person for both possession and receipt of child pornography in violation under the Double Jeopardy Clause. The court also vacated a number of special conditions of supervised release because the district court failed to find that they were minimally restrictive, and remanded for reconsideration with proper findings. Finally, ordering Appellant to pay $583,955 to one victim depicted in the child pornography was inconsistent with Paroline. The restitution order was vacated and remanded.

Defense Attorneys: Scott Wilson and Kathryn N. Nester
9. United States v. Ferdman, Tenth Circuit: The district court erred in calculating restitution under the Mandatory Victims Restitution Act. The restitution order must be based on the full amount of victim’s losses without consideration of the economic circumstances of Appellant and the restitution order cannot exceed the actual loss caused by Appellant’s conduct. Here, the court’s award exceed the actual losses by assessing the value of lost merchandise based on the retail unsubsidized price, meaning the restitution included the profit the company would have made from the sale without any evidence that there was such an actual loss.

Defense Attorney: John V. Butcher

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Entrapment is making a comeback.

As a defense I mean. It started making a comeback as a government tactic shortly after September 11 before it migrated to the non-national security law enforcement world.

And the Seventh Circuit appears to be the new home of the entrapment defense as it rises, phoenix-like, on the shores of Lake Michigan. In United States v. Barta, the Seventh Circuit again affirmed the new strength of an entrapment defense in that part of the country.

If you remember one quote from this opinion, remember this one: “The point is that the government is supposed to catch criminals, not create them.”

the-venus-flytrap-4-1234316-m.jpgMr. Barta’s Business

James Barta founded a company called Sav-Rx. Sav-Rx was a “prescription benefit management business.” I believe that means that they help businesses that offer a prescription benefit to their employees with that.

Mr. Barta Meets with the FBI (Unwittingly)

In any event, Mr. Barta came to meet with a man named Castro. Or, referred to as Castro, since he was actually an undercover FBI agent. Castro was known as a guy who could deliver contracts with people at Los Angeles County. He delivered those contracts by bribing them.

When Mr. Barta first met with Castro he told him, right off the jump, “I’m not trying to sell you anything.” He said he was merely there to tell Castro what Sav-Rx does.

Castro told Mr. Barta that he could connect Sav-Rx with the Los Angeles County government because he knew a guy and he’d need to be paid. Barta left twelve minutes after the meeting started.

Mr. Barta and the Limits of His Business

Castro met with Mr. Barta again, along with an FBI informant. They told Barta that they could set up a system where Sav-Rx would be able to do work with LA County through the guy they knew on the inside.

Mr. Barta described how he had helped Cook County’s government set up a system, but it was only because there were inefficiencies there that he knew how to correct. He said that if LA County was already efficiently handling things, he couldn’t add much value. But, he said that if LA County was doing things inefficiently then he would be happy to help.

The FBI took this to mean that he would be interested in a bribery scheme. Because, of course, most people who bribe their way into business only do that if there’s a value add for the service they provide.

The FBI Sends A Lot of Unanswered Email

After that meeting, the FBI hounded Barta, and he didn’t get back to them. Castro told Barta that their inside man was eager to close things. That went on for more than a month. Barta just ignored the emails.

Then the FBI started sweetening the deal – increasing the size of the fake contract that Barta would participate in. The FBI also pressured other folks to pressure Barta to get involved.

They had put a lot of work in. The FBI really wanted that stat.

When Barta responded to none of this, Castro started calling him. Barta let the calls go to voicemail.

The Ultimatum

Finally, Castro sent Barta an email saying if he didn’t hear by the end of the day he was moving on.

Barta didn’t get back to him. Castro didn’t move on.

The Harried Phone Call and Nebraska Meeting

Finally, Castro called Barta and Barta’s assistant put him through. Barta said he was in the middle of something else and wasn’t able to talk. Castro asked if they could move forward. Barta said “I think we’re probably ready to move . . . Yep.”

Castro reached out to Barta over the next few weeks. He enlisted a guy who later became a co-defendant to reach out to Barta. Ultimately, Castro flew to Nebraska where Barta lived. Barta said he wanted to help his friend, but didn’t really care about any deal in LA. He gave Castro a check from Sav-Rx for $6500.

He was arrested six days later and convicted after a jury trial.

The Seventh Circuit

The Seventh Circuit found this was entrapment as a matter of law and vacated his conviction. Here’s the best part of the opinion:

The FBI frequently emailed and called Barta, with no response from Barta. These were “repeated attempts at persuasion.” Id. at 435. The FBI invented false deadlines for Barta to commit to the deal and invented false problems for the Los Angeles County hospital system. These were “fraudulent representations.” Id. The FBI significantly sweetened what would have already been an attractive deal to Barta and his codefendants. Here we have “promises of reward beyond that inherent in the customary execution of the crime.” Id. And the FBI pressed Barta – both directly and through Buenrostro — to make a deal that it had reason to believe Barta would be making mainly to benefit his less fortunate friend, Buenrostro. Here we have “pleas based on need, sympathy, or friendship.” Id. The presence of all these plus factors shows that the government induced Barta to commit a crime, one that the government concedes he had no predisposition to commit. That is enough to establish entrapment as a matter of law.

The moral of the story? If someone is really pushing you to do something illegal, make sure that there’s only venue in Illinois, Indiana, or Wisconsin.

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In this set of short wins, the one that I’d like to call attention to is United States v. Cuti.

Restitution is not a sexy issue. It isn’t as fun to read about as, say, a Brady fight, or a glaring evidentiary problem at a trial. But it’s important.

Restitution judgments can be massive and, frankly, too many lawyers, judges, and prosecutors phone it in around restitution. United States v. Cuti clarifies that what counts as restitution is not just any money that any person may have spent as a result of the criminal conduct at the heart of the case. If you’ve got a restitution issue coming up, give it a read. Nice stuff.

To the victories!

you win.jpg1. United States v. Cuti.pdf, Second Circuit: Appellant was convicted of conspiracy to make false statements and securities fraud. His sentence included an award of restitution under the Victims and Witnesses Protection Act. The Second Circuit held that legal expenses incurred in connection with a civil arbitration connected to the offense are not deemed “necessary” under the VWPA because they were not undertaken or pursued in aid of the prosecution. In addition, the court held that non-victims are eligible for restitution only to the extent such payments were made on behalf of the victim, and remanded for reconsideration of the restitution order.

Defense Attorneys: Brian C. Brook and Matthew J. Peed
2. United States v. Price, Fourth Circuit: Appellant pled guilty to failing to register as a sex offender and the district court adopted Guidelines based on the fact that such an offense qualified as a ‘sex offense’. That interpretation was wrong; failing to register as a sex offender does not qualify as a sex offense. The court therefore remanded for resentencing under different sentencing guidelines.

Defense Attorneys: Kimberly Harvey Albro and John H. Hare
3. United States v. Adejumo, Eighth Circuit: After Appellant was sentenced, the government filed a motion to amend the judgment and impose restitution. Appellant’s trial counsel knew of the motion, but did not inform Appellant or respond to it. Appellant’s motion for reconsideration of that order should have been granted because the restitution order constituted a judicial deprivation of property and required due process. The specific facts of this case indicated that Appellant did not receive adequate notice.

4. United States v. Estrada, Eleventh Circuit: Appellant received a sentencing enhancement for being convicted of a crime of violence. Since his sentencing, the Eleventh Circuit issued an opinion that determined Appellant’s prior conviction could not be a crime of violence, so the case was remanded for resentencing.

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In white-collar cases, loss drives the sentencing guidelines. If a person is convicted of a federal fraud charge, probably the single biggest legal issue that will matter to that person’s sentence is what the loss amount is.

By contrast, the biggest thing about the case that will matter is what judge the person draws. It’s better to have a great sentencing judge and a high loss amount than a low loss amount with a judge who sentences more aggressively.

But I digress.

money-choise-concept-1439274-m.jpgThe government’s view of most fraud cases, in my experience, benefits from the clarity of hindsight. After everything has fallen apart, it’s easy to see that, say, a person selling an investment vehicle was using a new investor’s funds to pay someone who is clamoring for his or her money back.

In hindsight, it’s easier to see a Ponzi scheme than it may be in the crush of the moment. Some people plan to run Ponzi schemes, others fall into them through circumstance. Such is the way of the world.

In any event, loss for a Ponzi scheme can be tricky. Generally, the loss amount under the sentencing guidelines is the amount of money that was reasonably foreseeable to be lost by the victims. And it’s what’s reasonably foreseeable for the person committing the crime.

Ok, fair enough. The trouble is with the “credit against loss” rule. The sentencing guidelines explain that when the person being sentenced has paid some money back before the authorities or the victims cottoned onto the scheme, that money should be deducted from the loss amount.

This makes sense. If my son steals $20 from my wallet, but feels bad and puts it back before I notice, he should get some credit for that.

What makes this tricky is with a Ponzi scheme. There, early investors are paid money to convince them that the enterprise is earning its rate of return. The money often comes from a later investor’s contribution, sure, but it’s still real money that goes into the pockets of the early investor.

Does that money – the money paid to early investors – get deducted from the loss amount?

That’s the question which was answered in the Sixth Circuit’s United States v. Snelling.

There, Snelling pled guilty to being involved in a Ponzi scheme. He and another guy ran two companies that promised a 10 to 15 percent return to investors annually. Folks signed up. The investors, though, were paid from money raised by new investors, not from actual return generated from these investments.

As an aside, I would think it must be tremendously stressful to run a Ponzi scheme. The continual hunt for new investors – which must accelerate over time – just can’t be a good way to live. But I digress.

Under Mr. Snelling’s investment, many of the early investors were paid their advertised return. If you add up the amount that everyone put it, it would equal around $9 million. A $9 million loss, for Mr. Snelling, put him at a sentencing guidelines range of 121-151 months.

If, though, you subtract what folks were paid back, it would only be a $5 million loss (or so), with a range of 92-121.

So, do you subtract what the early investors were paid during the course of the Ponzi scheme.

The Sixth Circuit’s answer? Yes. But only to the amount originally invested.

So, if Investor A puts in $100,000 and is paid $150,000 – you’d only deduct $100,000.

It’s good to know the Sixth Circuit will be creating work for forensic accountants.

It’s a technical opinion, but great reading for anyone facing a credit against loss issue.