Sentencing Guidelines for White Collar Crimes: Loss Calculations Unfair?

Defendants who are convicted of white collar crimes in federal court are subject to federal sentencing guidelines. In white collar cases, the driving force behind the sentencing guidelines is Loss Calculation. The sentencing guidelines' reliance on loss calculations is controversial because the calculations themselves can seem arbitrary, and the resulting prison time too long. This makes knowledge of how to apply the guidelines a key part of federal criminal defense.

The sentences in white collar criminal cases such as bank or mortgage fraud are based in large part on "loss calculations." Generally speaking, these figures represent the profits or losses, or potential profits or losses, involved in the crime. For white collar crime cases, the 2010 Federal Sentencing Guidelines define loss as whichever is larger, the actual loss (reasonably foreseeable financial harm) or the intended loss (intended financial harm). The use of "intended loss" calculations is the most problematic for white collar defendants.

In theory, the larger the losses are, the larger the sentence should be because the harm to innocent parties was more significant. In practice, however, the calculations are based on difficult concepts of intended loss, profit, actual loss, stock valuation and other measures. Defense and prosecution experts can arrive at widely differing conclusions regarding the appropriate loss amounts. In addition, the actual dollar loss does not necessarily reflect the defendant's responsibility in the matter. Furthermore, loss calculations can be made based on evidence not proven to a jury or a judge beyond a reasonable doubt.

Inaccurate loss calculations can dramatically increase a defendant's prison sentence .

Ex-Fund Manager Argues Against Guidelines

Joseph Contorinis, a former Jefferies Group fund manager, was convicted of securities fraud in October. He argued in papers submitted to the court that the government's assessment of his profits was incorrect. The length of Contorinis' sentence under the guidelines hinged in large part on the calculation of profits and avoided losses.

In December, Contorinis received a six-year prison sentence, and he will have to forfeit up to $13 million. Prosecutors had recommended that Contorinis receive 10 years in prison. Although the judge sentenced Contorinis to less than the requested time, he said that Contorinis would "become a poster child for what happens" to white collar criminals.

Nicos Stephanou, the ex-UBS banker who provided Contorinis with insider tips, was sentenced to 19 months in prison (time served) and paid a $973,000 disgorgement of profits. Stephanou cooperated with the government, including serving as a witness against Contorinis. Stephanou's lighter sentence points to the influence that cooperating with the government can have a white collar defendant's sentence.

Speak With a Federal Criminal Defense Attorney

Congress created the federal sentencing guidelines to set a standard for equal treatment of defendants from different parts of the country and different walks of life. This does not mean, however, that all federal sentencing guidelines are properly crafted. White collar defendants and their attorneys frequently speak out against the guidelines.

If you are being investigated for a white collar crime, or if you have been charged with securities fraud or another financial crime, contact a lawyer right away. An attorney can work to preserve your rights and your privacy.


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