Losing the Loss Calculation: Toward a More Just Sentencing Regime in White-Collar Criminal Cases
Vollrath, Derick R., Duke Law Journal
The sentencing regime that governs white-collar criminal cases requires reform. The U.S. Sentencing Guidelines recommend sentences that are generally too high and place a grossly disproportionate emphasis on the concept of "loss"--the dollar value of the harm that a court finds a white-collar criminal to have caused. This concept of loss is ill defined, and often artificial to the point of being arbitrary. Moreover, the loss calculation fails to adequately approximate a defendant's culpability, dwarfing traditionally relevant considerations such as the manner in which the defendant committed the crime and the defendant's motive for doing so.
Fortunately, the Supreme Court has recently opened the door to systemic reform. In Kimbrough v. United States, the Supreme Court held that--at least in certain circumstances--a sentencing judge may deviate from a Guidelines recommendation based purely on policy disagreement with that guideline. This Note argues that sentencing judges should adopt an aggressive interpretation of the Supreme Court's Kimbrough opinion and exercise their newly rediscovered discretion to deemphasize the loss calculation and restore rationality to the sentencing of white-collar criminals.
Richard Adelson is no Bernie Madoff, but the U.S. Sentencing Guidelines don't account for this distinction.
Bernie Madoff will perhaps be remembered as one of the most loathsome white-collar criminals in history. Over the course of twenty years, (1) Madoff ran a Ponzi scheme that defrauded thousands of people of tens of billions of dollars. (2) His conduct was brazen. In addition to stealing from hedge funds and banks, Madoff targeted universities, charitable organizations, and individuals. (3) When meeting with a worried widow whose husband had invested his life savings with Madoff, Madoff put his arms around the widow and assured her that her money was safe. (4) Her concerns assuaged, the widow doubled down, investing both her pension fund and her own retirement savings with Madoff's firm. (5) Now, her money is gone and she has been forced to sell her home. (6) Madoff appears to have been motivated purely by greed. He comingled his victim's investments with his personal accounts and used the funds to pay for lavish personal expenditures, including a Manhattan apartment, two yachts, and four country club memberships. (7)
Madoff was evil, but Richard Adelson was merely weak. Adelson served as president of Impath, a publicly traded company that specialized in the detection and diagnosis of cancer, (8) During the course of his employment at Impath, Adelson uncovered a sophisticated accounting fraud that had been designed by various Impath accounting executives to misstate the company's financial results to inflate the value of the company's stock. (9) Rather than report the fraud, however, Adelson chose to conceal it and thus joined the conspiracy. (10) Adelson was a latecomer to the fraud. His participation was not based on greed or a desire to benefit by inflating the company's earnings; rather, "as President of the company, he feared the effects of exposing what he had belatedly learned was the substantial fraud perpetrated by others." (11)
Bernie Madoff and Richard Adelson are different kinds of criminals. Considered through the lens of the U.S. Sentencing Guidelines, however, Adelson's and Madoff's conduct is substantially identical. The amount of loss that a white-collar defendant is found to have caused largely drives the determination of his recommended sentencing range under the Guidelines. (12) Because both Adelson and Madoff committed high-dollar frauds, (13) the lengthy terms recommended by the Guidelines effectively consign both to a lifetime in prison when sentences for multiple counts are imposed consecutively. (14)
Despite these flaws, the Guidelines continue to dominate sentencing. Although the Supreme Court rendered the Guidelines no longer mandatory in United States v. …