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Coping with "Loss": A Re-Examination of Sentencing Federal Economic Crimes under the Guidelines

Article excerpt

I. INTRODUCTION

The primary determinant of sentence length for federal economic criminals is the amount of "loss" resulting from an offender's conduct.' The idea of basing sentences for economic crimes primarily on "loss" has become the source of ongoing, complex, and proliferating disputes about what the term "loss" really means and how it should be interpreted in particular cases. The "loss" calculation is one of the most frequently litigated issues in federal sentencing law.2 There are at present splits of opinion between the federal circuits on at least eleven analytically distinct issues concerning the meaning and application of the "loss" concept.3 Even more significant than the identifiable circuit splits is the overall sense of uncertainty, confusion, and sheer aggravation that emerges whenever lawyers and judges who deal with federal economic crime discuss "loss."4

As Special Counsel to the Sentencing Commission in 1995-96, I was asked to examine the Federal Sentencing Guidelines relating to economic crimes, as well as the cases and materials construing the term "loss," for the purpose of identifying the problem areas and determining whether some adjustments or definitional changes ought to be considered.5 Since leaving the Commission, I have continued to grapple with "loss." In the course of more than two years of reading "loss" opinions penned by puzzled federal judges, and talking with equally puzzled practitioners, several points have become clear.

First, the United States Sentencing Commission was undoubtedly correct in the basic judgment that the sentences of economic criminals should be determined in significant part by the magnitude and nature of the economic deprivation caused by their crimes.6 Where the original Commission fell short of the ideal was in the translation of a sound fundamental intuition into a just, doctrinally coherent, reasonably easy-to-interpret set of rules. Since the Federal Sentencing Guidelines ("Guidelines") first went into effect in 1987, the Commission has amended guidelines provisions regarding property crimes and "loss" many times.7 Regrettably, each amendment in the series has been a patch designed to fix one small component of a vehicle for sentencing economic criminals that was unwieldy and imperfectly designed to begin with.

Second, although it is possible to view the many problems with the existing economic crime guidelines as a collection of particular technical difficulties to be addressed individually, this approach has been tried and has proven the equivalent of trying to subdue an octopus one tentacle at a time. No patchwork fix will suffice. Only a virtually complete rewrite of the guidelines and application notes regarding theft and fraud offers any hope of significantly ameliorating the many problems of both substance and interpretation the current guidelines spawn so regularly.

This Article has three objectives. First, it attempts to rethink the sentencing of federal economic criminals in light of the basic purposes of sentencing and of the Guidelines' particular structure and objectives. Second, it examines the deficiencies in the current sentencing guidelines regarding theft, fraud, and other economic crimes, and the problem areas in the case law construing those guidelines. Third, it proposes and analyzes a consolidated guideline, together with accompanying application notes, for sentencing virtually all theft and fraud cases (a draft of which follows the text of this Article as Appendix A).s

The economic harm resulting from a defendant's crime is an important factor in assessing offense seriousness, and therefore in assigning just punishments. The proposed consolidated guideline thus retains as a central component the concept of "loss." In addition, however, it identifies and accounts separately for other sentencing considerations that "loss" does not satisfactorily measure. In particular, the proposed guideline gives more attention to differences in mental state among defendants and attempts to place greater weight on harms not entirely captured in monetary measurements, such as the number of victims and the fact that identical monetary losses may have dramaticallY different effects on different victims. …