In a case illustrating the complexity of sentencing white collar crimes, the US Court of Appeals for the Seventh Circuit Court ordered the resentencing of a commodity pool operator where the district court made a “cascade of mistakes” in sentencing the defendant for fraud and money laundering. Defendant Brant Rushton pleaded guilty to mail fraud and money laundering for operating a commodity pool that he used as a vehicle for a Ponzi scheme. The commodity pool, which comingled investor contributions and bought and sold futures contracts, included investments from vulnerable, unsophisticated victims. Among the victims were the elderly and disabled, as well as the defendant’s own family members. Rushton used the stolen money to purchase personal luxury items, even spending $150,000 on horses. The district court ordered Rushton to pay $1.62 million in restitution to his victims and sentenced him to 96 months in prison.
Rushton appealed only the prison sentence, arguing that the district court misapplied the sentencing guidelines by applying an enhancement for abuse of trust in addition to the commodity pool operator fraud. On appeal, the government acknowledged that the guidelines preclude the abuse of trust enhancement in this context because commodity pool fraud requires proof of a violation of heightened fiduciary duties. However, the government argued that the lower court’s error was not prejudicial, because any error was offset by the judge’s failure to apply an equivalent sentencing enhancement due to the vulnerable victims of the fraud scheme.
The court ultimately found a “thoroughly botched sentencing” by the parties, the probation service and the sentencing judge, which required a “resentencing from scratch.” The court found error in the district court’s failure to consider the money laundering plea under the sentencing guidelines and failure to account for a vulnerable victim enhancement in that calculation. The court noted that on remand the district court’s sentence could be of equal or greater length than the 96 months Ruston had originally received. If calculated with the inclusion of the vulnerable victim enhancement, Rushton could now face a prison sentence ranging from 97 to 151 months.
United States of America v. Rushton, No. 1:12-cr-10037-JES-JAG-1 (7th Cir. December 26, 2013).