Would consider gains from fraud, not financial losses caused by fraud
NEW YORK (Reuters) — Some executives and others convicted of stock fraud could face shorter prison terms under a U.S. commission's proposal to change how white-collar criminals are sentenced.
The U.S. Sentencing Commission on Friday released proposals to amend advisory federal guidelines that would shift the emphasis in calculating a sentence for frauds on the market to financial gains instead of investor losses.
The proposal follows years of criticism by defence lawyers and some judges who say that the guidelines focus too much on financial losses caused by fraud, leading in certain cases to sentences that are too harsh. Judges have discretion to impose any sentence, but are required to consider the guidelines.
In stock fraud cases, losses can be in the hundreds of millions of dollars, contributing to an advisory sentence of life in prison.
Under the commission's proposal, judges in these cases would consider the gains from a fraud, a number defence lawyers say would often be considerably smaller.
The Sentencing Commission has scheduled a March 12 hearing on the proposals. The panel has until May 1 to submit any amendments to Congress. If Congress does not act by Nov. 1, the changes become law.
Notable securities fraud defendants include former Enron chief executive Jeffrey Skilling, who in 2013 had his prison sentence reduced by 10 years to 14 years following appeals, and former WorldCom CEO Bernard Ebbers, who in 2005 was sentenced to 25 years in prison.
The commission has proposed setting a threshold sentencing level for gains, ensuring punishment in cases where profits are minimal.
Depending on what floor is set, there is a "very good chance a number of cases would result in lower guideline sentencing ranges," said David Debold, a lawyer at Gibson, Dunn & Crutcher who heads up an advisory group to the commission.
Defence lawyers cautioned that the proposed changes would not always result in a lower sentencing range. Some frauds like penny stock manipulation, for example, could involve significant gains to defendants and might still lead to lengthy sentences.
Other proposals would affect the weight given to factors such as the harm to victims and the sophistication of a fraud.
Some defence lawyers say the proposals overall do not sufficiently emphasize a defendant's culpability and leaves loss as a driving factor for the bulk of fraud cases involving identity theft, mortgage fraud and health-care fraud.
"These changes don't go nearly as far as we would have liked," James Felman, a Florida lawyer and member of an American Bar Association task force advocating changes to the guidelines.
U.S. District Judge Patti Saris, the commission's chair, said in a statement that the panel did not consider "the guideline to be broken for most forms of fraud," but that its review had identified "some problem areas where changes may be necessary."
