Doing Time: A Requirement for White Collar Crime?

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In Brief

  • A recent Eleventh Circuit ruling underscores the importance of developing § 3553 factors for sentencing early as part of any White Collar defense.
  • Practitioners must address at sentencing the competing interests of deterrence and rehabilitation when seeking downward departures and variances from the Guidelines.

A recent decision from the Eleventh Circuit indicates that deterring future white collar crime is a substantial factor in shaping appellate court rulings relating to appropriate sentences for fraud, particularly when a defendant receives no jail time.

This focus on deterrence in U.S. v. Kuhlman, No. 11-15959, 2013 WL 857344 (11th Cir. Mar. 8, 2013) centered on whether a sentence that departed significantly downward from advisory Sentencing Guidelines met the test for “substantive reasonableness.” The Court found the sentence did not. Even post-offense rehabilitation, as approved by the Supreme Court in Gall v. U.S., 552 U.S. 38 (2007), did not sway the ruling.

The Eleventh Circuit’s Decision in Kuhlman

In Kuhlman, the defendant pled guilty to a 5-year, $3 million health care fraud scheme. The Guidelines recommended a sentencing range of 57 to 71 months imprisonment. The District Court, however, continued the sentencing hearing sua sponte to permit the defendant to make full restitution and to complete 391 hours of community service, upon which the court sentenced Kuhlman to 6 months probation. The Government appealed on the grounds that Kuhlman’s sentence was both procedurally and substantively unreasonable.

The Eleventh Circuit determined that the sentence was procedurally correct, but substantively unreasonable on the grounds that the sentencing court had failed to balance the § 3553(a) factors properly. On the sentence of probation, which required a downward variance of 57 months from the bottom of the applicable Guidelines range, the Court ruled that the “sentence fails to achieve an important goal of sentencing in a white-collar crime prosecution: the need for general deterrence. [. . .] We are hard-pressed to see how a non-custodial sentence serves the goals of general deterrence.” In rejecting the sentence of probation, the Court repeatedly emphasized the extent of the variance as its grounds.

Gall in Contrast

In Gall, the U.S. Supreme Court held that regardless of whether a District Court imposes a sentence inside or outside the Guidelines range, appellate courts must review sentences under an abuse-of-discretion standard for both procedural error and substantive reasonableness. When determining whether the sentence is substantively reasonable, appellate courts may apply a presumption of reasonableness to a sentence within the Guidelines range, but may not apply a presumption of unreasonableness for sentences outside the Guidelines range. Rather, when reviewing a sentence outside the Guidelines range, appellate courts may consider the extent of the deviation, but must give due deference to the District Court’s decision that the § 3553(a) factors justify the extent of the variance.

In Gall, the defendant was charged with conspiring to sell drugs from 1996 through 2002, but voluntarily withdrew from the conspiracy three years prior to the indictment. During that period, he graduated from college and successfully started a construction company. The Guidelines range recommended 30 to 37 months imprisonment. The District Court varied downward and imposed a sentence of probation based on Gall’s relatively young age and post-offense, pre-indictment rehabilitation.

The appellate court reversed and remanded based on its belief that any significant departure from the Guidelines required “extraordinary circumstances,” which it deemed absent. On further appeal, the Supreme Court rejected a requirement of extraordinary circumstances, and permitted lower courts to attach great weight to pre-indictment rehabilitation and the relative youth of a defendant as indicators that deterrence need not predominate the court’s judgment.

Kuhlman’s Teachings

Unlike Gall, the defendant in Kuhlman did not demonstrate any rehabilitative effort until after the District Court, sua sponte, continued the sentencing hearing to permit him to demonstrate remorse. The downward variance that the court subsequently applied, moreover, nearly doubled that of Gall — at nearly 60 months. The lesson for White Collar practitioners is clear: assist your clients in charting a course of rehabilitation (restitution and community service) as soon as possible, and hope for facts which require reasonable downward variances — five years now seems out of reach, at least in the Eleventh Circuit. Finally, as the chart below demonstrates, venue will play a part as well. Some circuits tolerate greater downward variances for fraud crimes than others.

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Source: U.S. SENT. COMM’N, FEDERAL SENTENCING STATISTICS BY STATE tbl. 6 (2011), available at http://www.ussc.gov/Data_and_Statistics/Federal_Sentencing_Statistics/State_District_Circuit/2011/index.cfm (last accessed Apr. 7, 2013).

Topics:  Abuse of Discretion, Federal Sentencing Guidelines, Fraud, Sentencing, Venue, White Collar Crimes

Published In: Criminal Law Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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