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.
The 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.