UNITED STATES SENTENCING COMMISSION
PUBLIC HEARING
Tuesday, March 25, 2003
Thurgood Marshall Federal Judiciary Building
Judicial Conference Center
One Columbus Circle, N.E.
Washington, D.C. 20002
The public hearing convened, pursuant to notice, at 3:21 p.m.
BEFORE:
JUDGE DIANA E. MURPHY, Chair
United States Sentencing Commission
JOHN R. STEER, Vice Chair
JUDGE RUBEN CASTILLO, Vice Chair
JUDGE WILLIAM K. SESSIONS, III, Vice Chair
PROFESSOR MICHAEL E. O'NEILL, Commissioner
ERIC JASO, Ex-Officio Member
A G E N D A
Introductory Remarks
Judge Diana E. Murphy
PANEL ONE - MANSLAUGHTER
Honorable Lawrence E. Piersol
Chief Judge, United States District
Court for the District of South Dakota
Chair, Native Americans Advisory Group
Paul K. Charlton
United States Attorney for the District of Arizona
Jon M. Sands
Assistant Public Defender for the District of Arizona
PANEL TWO - SARBANES-OXLEY ACT OF 2002
William Mercer
United States Attorney for the District of Montana
Chair, Subcommittee on Sentencing
Guidelines, Attorney General's Advisory Committee
Lawrence S. Goldman
President, National Association of
Criminal Defense Lawyers
Frank Bowman
Associate Professor of Law
Indiana University School of Law
James Felman and Barry Boss
Co-Chairs, United States Sentencing
Commission Practitioners Advisory Group
P R O C E E D I N G S
JUDGE MURPHY: I would like to call the hearing to order. The Sentencing Reform Act, as all of you know in the room probably--or maybe a few don't--gave the Commission the responsibility of reaching out to the public and letting public have input into the work of federal sentencing. And every year, we publish notice about what we're up to; what we're thinking about; we ask for ideas about what we should be putting on our agenda; we develop some tentative proposals; we ask from your reaction to it; and the proposals get refined during the annual cycle.
And one important phase of this public interaction, is when we have a public hearing and we set this up--when we were thinking about it a couple of months ago, we thought that we might have some other issues on the agenda today, Oxycodone, and some others. But it appeared that what would be most useful for us in our process of coming up with the guidelines that we'll be sending to Congress on May 1, would be to get some further help with the Manslaughter guideline or guidelines. And, also, of course, with our response to the congressional statute corresponding to some of the criminal/corporate cases that people are familiar with, the Sarbanes-Oxley Act.
And so we have two panels and if the first panel would come up to the table. This will be on Manslaughter and we're very happy to have two people from our Native American Advisory Group, Chief Judge Larry Piersol, from the District of South Dakota, who chairs it; Jon Sands, who is a member of it, who also is a public defender in Arizona, or the assistant public defender in the District of Arizona; and then the United States Attorney for the District of Arizona, Paul Charlton.
So every year when we have public hearings, during my tenure, we've used a little clock, a timer, that would ding when five minutes happen and then it would really go off with a terrible noise at seven minutes. But I know two of the three of you, just met you, Mr. Charlton. I have confidence that you're going to stick to the time. So we just have the threat of the timer. I hope we won't use it. Because we would like to have some time to be able to ask some questions. Judge Piersol?
JUDGE PIERSOL: Thank you, Judge Murphy. This'll, I hadn't understood this ahead of time, so it's five minutes and then at seven, we get the hook, is that it?
JUDGE MURPHY: Well, we don't--we've read your written statements. I think sometimes the most--the interaction is the most productive, because we have fewer commissioners now and our ex-officio, Ed Reilly, had other business, but typically, commissioners have a lot of questions and so if you certainly want to have those and be able to.
JUDGE PIERSOL: Well, I know little, so it won't take long. So, Thank you very much Judge Murphy and members of the Commission for inviting me to come here.
And I'm here, as Judge Murphy's indicated in my capacity as the chair of the Sentencing Commission's Native American Sentencing Issues Ad Hoc Advisory Group, and so I'll be speaking when I'm speaking from the Interim Report that you received last week. I'll be speaking for the group and I'll try to stay close to the report.
And if I say something, that is a personal opinion on response to a question or something, I'll try and indicate that it is.
Because the only thing that we have that we have reached consensus on is the Interim Report that we have. I mean it isn't like we're having big disagreements on other things, but we are continuing to study, you know, other issues that we'll report to you later on in our final report.
As you know, because of the manslaughter issues, we went ahead and moved more quickly on that than any other issue. So for whatever the issue can make of it, we can report our views to you.
And to give you a little bit of what we did, I divided our group into different areas of subcommittees, you know, sex offenses, and assaultive behavior, and then the murder/manslaughter. And Jon Sands, to my right, is one of the members of that committee. Milos Pecora [ph], who is a victim's witness specialist, from the Central Division of South Dakota, which is Pier [ph], she's a member of the Crow Creek tribe, and she testified before you in Rapid City, if you remember. Strong testimony, I suspect that's why she was chosen to be on--she's also on that committee. Interesting, by the way, her husband's an FBI agent Pier, also, in the same division. Diane Hamitua [ph], who Paul Charlton has been kind enough to lend to us is Assistant United States Attorney in Arizona and a Hopi tribal member. She's also on the group that was specifically the subcommittee on this. As was Thomas LeClair [ph], who is a lawyer now, but was the Director of Tribal Justice in the Department of Justice and a member of the Mohawk Nation.
The subcommittee reported to us, so you can know something about our procedure--the subcommittee reported to the full committee in a written report, which we then had for consideration at our February meeting, where Paul Charlton, again, was kind enough to host us, including Krispy Kreams that we'll recover from soon. But it was a meeting where we devoted almost the entire day to murder/manslaughter because of the fact that that was the one that we were going to be reporting really, in a final way to you. And so we have about 12 pages single-spaced, just summarized minutes that discuss--that lay out the discussion, which is available, too, of course.
But then from that came our Interim Report, which we then had a subsequent telephone conference--which is how we've been doing a lot of our meetings, is by telephone conference, for economy, but it's worked well. Although that meeting in Arizona, of course, was with everybody there.
Now, just--before I get to the manslaughter and the breakdown between involuntary and voluntary. We left open the second-degree murder discussion because from our point of view, Native Americans did not constitute an overwhelming proportion of those convicted in federal court of second-degree murder. But it may be for reasons of proportionality and so on that we'll have to come back and consider that and so that is open. But we weren't reporting on that to you, because we went specifically then to manslaughter. And first of all, then, on the involuntary manslaughter--oh, by the way, I'm sorry, I didn't mention--although maybe you know--that we, of course, have had good staff assistance from Grace Chung Becker and Teresa Cooning , of our direct staff and Kevin Blackwell has furnished us with lots of good statistical information that we requested.
And a little bit of background on that, you know, Arizona and South Dakota are the two big states with regard to the most, and then New Mexico is regarded to these sorts of offenses, particularly, with Native Americans. And so we wanted to gather information from those states. Well, it isn't available in Arizona so we went to--and it isn't available in Montana, either--we went, then to South Dakota, which was next after Arizona, South Dakota, New Mexico, and Minnesota, because they had good databases.
And then when you go back to the 1997 study group which you had, which of course your manslaughter working group in 1997, they had essentially the same experience, you know, that the data wasn't available there. But we did get good data from those states which Kevin Blackwell then presented to us at various times.
Then, going to our considerations, you know that there's a sentencing base of 10 for criminal negligence; 14 for recklessness; and we had varying recommendations from defender groups and prosecutor groups. And we noted in our report that the involuntary manslaughter is overwhelmingly a Native American offense, about 75 percent of those. And the--of the cases are, a lot of them are alcohol-related vehicle offenses. But that isn't all of the cases, though. And I'll get back to that in a minute.
By comparison, we only had, of the criminal negligence, only had, I think, four or maybe five cases in the one-year database we had on those. So there really wasn't--weren't very many criminal negligence cases, but had a bigger database of the involuntary manslaughter.
But even then, you know, the numbers, compared--for instance when you look, compared to drug cases, you know, 40 percent of the 60,000 cases or whatever we have a year, you know, I mean we're talking very small numbers, here. But impacting one particular population a lot, Native Americans. But nonetheless, statistically, sometimes we were, at best, on the cusp, with regard to the statistics. And so, that's why I'd like to stress that without going through the entire make up of the board where we have, you know, prosecutors, defenders, hopefully, like Judge Malloy [ph] and myself, who are in the middle, have victims' assistance people; people, Maggie Jensen [ph], who's the Chief Probation Officer in Arizona, and others, you know from various perspectives. And I think that that is important, that's really why we're there, we make what we can of the statistics, but particularly when the statistics are sometimes not as big a base as we would like, I think it's even more important that we have the experience factor that we do.
And it has been a group, that I think has worked well and hard together, both the staff, as well as the group.
Now, there was--there have been suggestions that the base defense level go from 14 to 16 or 18 or 20, depending upon who you're listening to and, likewise, there had been suggestions before that criminal negligence go from 10 to 12 or 16. Our proposal, after a lot of discussion, as I say, 11 pages of it--that was just the summary--was that the base offense level for involuntary manslaughter be raised to a level 18. And, also, we advised that specific offense characteristics also be used: A four-level increase if death occurred while driving intoxicated or under the influence of alcohol or drugs. A two-level offense increase would occur if the actions of the defendant resulted in multiple homicides; about 9 percent, I think, were that. A two-level increase if the offense involved the use of a weapon in the offense.
And with regard to the use of a weapon in the offense, some were concerned that well, you'd say that every time that there was a car involved that would treated as a weapon and you'd get two points. And so we were suggesting a commentary that would add--would show that a vehicle would only be considered a weapon if it was so specifically used; for instance, driving a car into a crowd or, one that I had where you drive a car over somebody and drive it back over to them to make sure you got them, you know, that sort of a situation as opposed to the normal just driving and having an accident.
Then, with regard to the base defense level for criminal negligence, we recommended that it stay a that a level 10. And my reading of the 1997 group also was that they didn't make any recommendation on that. And there--we gave some examples in our report of how this would work. And, basically, on a category-one person--category-one criminal offense--that has a defense level 22, if they plead they would be a 19 and now you'd have a fence range of 10 to 16 months. And, by the way, one of the thing that you know and that you're well aware of, there have been a lot of upward departures on this. You know, way above the normal average of one percent, I think the average was around 11 percent, which is an indication that, obviously, the range is too low, I think.
Anyway, under our proposal, a category-one that plead would then have a range of 37 months and the high end of 37 months would be mid range of the statutory maximum.
Then, on voluntary manslaughter, it's a base defense now of 25 and there are no specific offense characteristics. And we looked back at the working group in 1997 and we adopted a recommendation of the statutory maximum be increased from 10 years to 20 years to reflect the severity of the conduct. And this allows some more sentencing flexibility at the upper end of the range. And, once again, voluntary manslaughter generally involves North American--Native American defendants.
We have another recommendation with regard to voluntary manslaughter, and that be that the base defense level stay the same, but that there be a two-level increase for the use of a weapon and a four-level increase for use of a firearm.
So, in a nutshell, without a lot of the discussion that went back and forth. Those are our recommendations on those points. And I don't want you to think that coming to the 18 was, we said, well, the defenders are at 16 and the prosecutors are at 20, so we'll be at 18. That wasn't the reason. It happened that way, but that wasn't the reason. The reason was, we had a lengthy discussion, we looked at the statistics, people relying upon their experience and their backgrounds and that's where we reached a complete consensus with regard to that, not just, well, we'll strike the middle, that wasn't it at all.
JUDGE MURPHY: I would think it would be a challenge to reach a complete consensus with your group.
JUDGE PIERSOL: Well--
JUDGE MURPHY: Having been there for a while at the first meeting.
JUDGE PIERSOL: --probably, there might have been some people that had their fingers crossed, but they expressed consensus. I imagine that there are those that would have preferred it be one place and some that would prefer it be another, but we had no dissents. So, if I could answer any questions, I'd be happy to.
JUDGE MURPHY: Maybe on the case of this panel, it would be best to get the input from each person and then ask or does somebody have a question that they want to ask right now? Okay, should we hear from the other member of the Advisory Group and then let you respond after that, perhaps.
MR. CHARLTON: Yes, Judge, that would be fine, thank you.
JUDGE MURPHY: Okay.
MR. SANDS: I want to thank the Commission, again, for having me here. I come with reservations. And I say that all because involuntary manslaughter as the judge pointed out is an overwhelmingly Indian or Native American offense. But involuntary manslaughter cuts across various types of action. One of the questions that the Commission would have to wrestle with is: Should you have just a base offense level that is the heartland of the case? Or should you have a base offense level that has specific characteristics that raise it for most of the offenses?
The committee believed strongly that the specific offense characteristics was the way go. The reason was that it continues the Commission's journey over the past several years of refining the guidelines to focus on specific conduct; in this case, the danger of drinking and driving. This was a danger that was expressed by the senators that wrote the letter; this was a danger that was present in the committee; and it will be a danger, I am sure, that Mr. Charlton will address in his comments.
Clearly, if you have a specific offense characteristic, it will--for drinking--it will affect most of the cases. But it leaves, as a lower base offense levels, those cases that don't involve drinking; it could be speeding; it could be a discharge of a weapon; it could be the myriad conduct that we all know and we know that it shouldn't be with the plus-four with the drinking. So we would urge the Commission to look at this carefully and seriously.
And there is precedent for it. For example, in the assault guidelines, virtually every assault has some sort of physical injury. That's not built into the base offense level, so that could be here. To do another one, immigration: Virtually all the immigration cases probably have aggravated felonies. Those are SOCs and the Commission should follow that here, as well.
We would also urge the Commission not to raise criminal negligence. There are very, very few cases. They are really the aberration and there is no call for raising that. And the Judge was right in that the Committee came with a consensus. The federal defenders have presented their proposals. I'm wearing both hats and I would take off my hat in recognition of the fine work that Judge Piersol has done and staff in getting the committee to come up with these recommendations. Thank you.
JUDGE MURPHY: Mr. Charlton.
MR. CHARLTON: Thank you, Judge. And thank you, members of the Commission, for inviting me here today, it's my privilege to be here and I very much appreciate the opportunity to visit with you about some of the unique issues that we deal with in the District of Arizona.
I want to thank Judge Piersol, as well, for his leadership on the ad hoc committee, and we very much appreciate the input that he's provided us and the information that he's given us to think about, as it relates to his committee recommendations.
I don't have to wear two hats today, though, so I'll be wearing the had of the chief federal prosecutor in the District of Arizona.
The topic is, as I said, particularly important to the District of Arizona because we routinely handle the highest numbers of prosecution under the Major Crimes Act, arising out of violations in Indian country, including federal manslaughter cases in the United States.
The low statutory and guideline sentences for these offenses are a topic of frustration routinely discussed among my counterparts with similar criminal jurisdiction responsibilities and who serve on the United States Attorney General's Native American Issues Advisory Subcommittee.
We have, as most of you know, exclusive authority to prosecute Major Crimes Act violations occurring within the Arizona--Arizona's 21 Indian reservations. Two of the largest Indian reservations in the United States are located within our state's boundaries: the Navajo Indian Reservation and the Tohono O'odham Indian Reservation. So we are fluent in the issues that affect victims and defendants as well as in our office, when it comes to manslaughter cases.
Today, the average range of sentence for a defendant for involuntary manslaughter is 16 to 24 months imprisonment; followed by three years of supervised release. We have shared with the Commission, through our prepared testimony, a number of examples of some of those cases that we think are compelling enough to move us in our desire to see some of these sentencing guidelines changed.
I'd like to share, though, if I may, just one case with you, in particular, that involves a gentleman by the name of Kyle Peterson [ph], who was charged with one count of involuntary manslaughter for the death of a 60-year-old man who was driving to work, south-bound on loop 101 Freeway in Phoenix. In order to understand this, you need to know just a little bit about our geography. There is an Indian reservation which lies right on the boundary of the City of Phoenix; the Salt River Indian Reservation.
Two vehicles collided head-on as they were entering a portion of the freeway located on this Indian reservation, the Salt River Indian Reservation. The victim was killed instantly.
Peterson suffered serious head injuries and his recovery has been positive. At the time of impact, Peterson's blood alcohol level was .158. He plead guilty to the charge of involuntary manslaughter and no agreements and was sentenced to 14 months in custody; followed by three years of supervised release.
In her victim impact statement, the decedent's widow stated, "Finally, there is my rage at a system that allows a criminal to face almost no punishment because of Federal Sentencing Commission laws. DUI is a criminal offense, why does the federal system not treat it as such?"
Victim families routinely hear or read about state drunk-driving homicide cases where long sentences are imposed by state court judges. Without exception, every assistant U.S. attorney and victim advocate assigned to federal drunk-driving homicides must go through the painful process of explaining to victim families that the long sentences meted out in the state system do not apply because the defendant will be sentenced under the Federal Sentencing Guidelines.
To illustrate this, in Arizona State Court, the crime of manslaughter is designed--excuse me, designated either dangerous or non-dangerous. In Maricopa County, the largest county in our state, DUI homicides are almost exclusively charged as dangerous felonies. The sentence for manslaughter, dangerous, ranges from 7 to 21 years in custody and yields a presumptive ten and a half year sentence. And therein lies much of the difficulty that we face as we try to talk to the victims of these families, many of whom--in fact, the great majority of whom--are Native Americans, themselves, and try to explain the inequities in the sentences that these defendants will receive.
Some of the victims in these cases were injured, rather than killed. And, as you know, had they been injured, under the guidelines, as they relate to assault resulting in seriously bodily injury, would have been harsher. Federal prosecutors routinely seek upward departures to increase a drunk-driving defendant's final adjusted sentence. However, courts are reluctant to impose upward departures in manslaughter cases. Additionally, if a defendant's tribal criminal history reflects repeated criminal conduct, while they are under the influence of alcohol, a prosecutor may seek an enhanced sentence, however, federal court judges are reluctant to apply an upward departure, even where a defendant has prior multiple tribal court DUI convictions.
In another case example that occurred in our District. A defendant by the name of Dale Hasken, received a 14 month sentence for a DUI homicide of a 15-year-old. Hasken had multiple prior DUIs in tribal court dating back 20 years. The District Court ruled that only one of Mr. Hasken's prior convictions was admissible because of inadequate documentation and his concern--that the District Court judge's concern--as to whether or not Hasken was represented in tribal court on those multiple convictions.
Depending on the extent and substance of a defendant's tribal criminal history, the facts and the character of the victim, the Court may make legal and factual findings that a defendant is entitled to enhancement. In drunk-driving homicides, however, it is hard for a prosecutor to argue that the Sentencing Commission did not take into account the loss of life or the degree of a defendant's intoxication, therefore, sentencing enhancement in those cases, although routinely sought, are difficult to substantiate and are, thus, rarely imposed.
It is my hope that these examples that we have previously submitted will serve to illustrate the need for immediate improvements to the manslaughter statutory penalty and sentencing guidelines.
I would, if I may, Judge, being very much of the time constraints, just briefly address the issue of second-degree murder, although I know that goes a little far afield of what we wanted to talk about today.
As you consider addressing manslaughter, I urge the Commission to re-examine the murder sentencing guidelines in relationship to the statutory maximum penalty, life imprisonment. The Commission must evaluate whether the 33 base offense level is appropriate, given that second-degree murder involves a high-level of culpability on the part of the defendant.
The frustration felt by the victims' families, prosecutors and often expressed by District Court judges themselves in imposing sentences us an all too common experience in the District of Arizona. So I am, as I said before, thankful and encouraged that this Commission continues to have an interest in this area. I want to thank, again, Judge Piersol for his work on the ad hoc advisory committee. My colleagues and I at the Attorney General's Native American Issues Advisory Committee, look forward to the Committee's findings. Thank you, again, for this invitation to speak here today.
JUDGE MURPHY: Judge Sessions.
JUDGE SESSIONS: Obviously, the offense is reckless involuntary manslaughter, you have a base defense level of 14 that you're recommending and then you say, four-level enhancement for intoxication for alcohol abuse or drugs. I guess my question is: Is a person who commits this offense under the influence of alcohol anymore culpable than a person who is not under the influence of alcohol? In other words, is there any rational basis for including the alcohol use as an enhancement as opposed to incorporated within the basic defense level?
JUDGE PIERSOL: Well, I think that Jon Sands addressed that partially. We had quite a little discussion about that. But the people that aren't the drinkers, which is going to be the minority but, nonetheless, there are other types of offenses and they shouldn't get branded with a higher built-in offense level. That's why we thought add it the other way around so it's a specific offense characteristic.
JUDGE SESSIONS: Yeah, but then, philosophically, why is it more serious to actually commit this offense while you're under the influence of alcohol as opposed to committing this offense while you're not under the influence of alcohol.
JUDGE PIERSOL: Well, Kevin Washburn [ph] made a good point on that, I thought. He's one of the members of our group. And he said, normally, with alcohol, people have had interdiction with the courts before, you know, because they've been picked up for--maybe they got a drunk driving reduced down to reckless or something, but people that drink a lot, usually have had interdiction with the courts and so they have been on notice, so to speak, that this is prohibited conduct and that adds a level of opprobrium, I think, to a drunk driving as opposed to somebody else that was reckless, maybe, but didn't do that because they've had an involvement with the courts. And I thought that was an interesting point.
MR. SANDS: Judge, one of the issues, too, is that it's just not the alcohol, it's driving. You are getting into a vehicle on a public road and getting into a vehicle, you are assuming that public risk. It's different from private conduct that may result in a reckless death. And so that is why we drew that distinction. It just not drinking, it's drinking while driving. And that goes to the concerns that were expressed from the Senate and from the U.S. attorneys that it's the drunk-driving that is the problem.
That also goes to an issue that came up in the past, which is road rage. That usually involves drinking or drugs, too. And so that plays into it.
JUDGE SESSIONS: But the recklessness is getting into a vehicle and then operating that vehicle under the influence, that is the recklessness, which essentially translates to the element of the offense. I'm just trying to figure out logically, why this wouldn't be in a base offense level. I hear Larry's point that, well, probably, they've had some sort of contact with the system before. It may be very well be that they have tribal convictions, I don't know about that. But theoretically, if they have criminal convictions in a state system, then those are all factored in the criminal history category. They're already taken care of. Anyway, that's the philosophical question that I have.
JUDGE PIERSOL: There's another way to address it, and I think your 1997 study dealt with this a little bit, in Appendix 4 to that study. you know in Europe, they look at drinking and driving differently. There's an opprobrium against even getting in a car there. In the United States, it seems that the social opprobrium only attaches, either getting caught or maiming or killing somebody. They have a different attitude than we do and our social attitudes haven't changed.
And the rest of it is that in the United States, we use enforcement to try and reduce our incidents, as opposed to addressing the causes of alcoholism, for example. And so, that would be another reason since we do use that method. It's a cheaper method, not as effective, but it's cheaper. That would be another reason to put four points on it for drinking to try and prevent it.
MR. CHARLTON: Judge, can I? Thank you, Judge. I would encourage the Commission to think about this guideline as one in which the mens rea element is one in which it encompasses the idea of whether or not you're drinking and driving or not, just as you asked that question, Judge Sessions.
Also, it's my understanding, Judge Murphy, and please correct me if I'm wrong--that in order for the Sentencing Commission to move on this issue now, they cannot, at this point in time, consider specific offense characteristics, and so what I would ask the Commission to do is to consider moving on this issue now, changing the base offense level to what the Department of Justice has asked for anyway, which is a 20, and then use the mens rea element as one in which we would try to fit this issue of drunk driving into.
MR. SANDS: The trouble with the mens rea is that there is no intent to kill. That's why this makes this involuntary as opposed to murder.
MR. CHARLTON: But recklessness, I think is, in part, defined by whether or not an individual gets into a vehicle and is drinking or not.
MR. SANDS: Which goes back to your point that, if a person has priors, then the government could seek a charge of second-degree murder in those cases, rather than trying to use the involuntary here.
MR. CHARLTON: Except that it's--my understanding is that the, I'm sorry--are we taking up time on an internal debate here, a little too much time?
JUDGE MURPHY: I know that some of the Commissioners have questions and, perhaps--
MR. CHARLTON: Pardon me, Judge Castillo, I did not--
JUDGE MURPHY: Well, he's conceded to Professor O'Neill.
JUDGE CASTILLO: That's okay, I'm going to defer to my fellow Commissioner.
PROFESSOR O'NEILL: I actually like listening to the give-and-take, it's interesting to have sort of both sides on the same panel or people representing slightly different views.
What I was going to say is it's interesting that you bring that up, as well, because ordinarily--just going back to the philosophy that Judge Sessions brought up--ordinarily, while it's Hornbook law that intoxication is not an defense to a general-intent crime, ordinarily intoxication is a defense to a specific-intent crime. And, therefore, perhaps, the Department of Justice's recommendation makes some theoretical sense to the way that we normally treat intoxication-type offenses; not to say whether the base defense level of 20 is too high or too low or what have you, but just in terms of how we traditionally treat those sorts of offenses.
JUDGE CASTILLO: I wanted to thank all three panels of Panel One, especially, our two Advisory Committee Members. And Mr. Charlton, you anticipated my question, because I was going to ask you what the Department of Justice's reaction or what your own personal reaction was to this consensus recommendation that our Advisory Group had made. Do you want to expand any further? I'm hearing loud and clear that you want us to adapt a base defense level of 20. Anything else you want to say?
MR. CHARLTON: I think there's an urgency to this issue, as well. I think part of our case examples are trying to underscore the fact that we are, on a daily basis, explaining to victims of crime that the sentence that their family member are going to receive or that their loved one would be vindicated on is going to be much less than what they might see in the state court system. You have an opportunity now to fix that problem. I'd encourage you to go forward with it if you take the tact of adjusting this guideline with specific offense characteristics. Again, not being completely up to speed on what the procedures are, I understand that you will have to publicize those changes and wait, again, for a period of time.
JUDGE CASTILLO: All of these cases that you presented to us are pretty horrendous. In this Peterson case, what was the sentencing range? If he received a 14-month sentence, what was the range, do you know?
MR. CHARLTON: I'm sorry, I don't have that information with me, but I'd be delighted to get it for you.
JUDGE CASTILLO: Do you know if your assistant advocated some type of upward departure and it was rejected?
MR. CHARLTON: I don't know that answer, either, Judge, I'm sorry.
JUDGE CASTILLO: That's okay, thank you.
JUDGE MURPHY: Judge Piersol, you had your hand up.
JUDGE PIERSOL: I'd just like to make the point that this is a personal one and not from the group. But from the point of view of a sentencing judge, and I sentenced five people yesterday and I sentence five people tomorrow, so you're affecting my work, believe me. But from the point of view of a sentencing judge, it's desirable to have specific offense characteristics. Sure, it does generate some more work, some more contention, maybe appellate decisions, but it's desirable from the point of view I think, of the sentencing judge because you can tailor the sentence. And I think you get away from some of the objections, at least, the judges have to the sentencing guidelines with specific offense characteristics because it gives you more to work with. One way or the other, you don't have to worry about the different attitudes that different circuits take with regard to departures, whether it's up or down.
JUDGE SESSIONS: Because you have more flexibility, you can essentially accept or reject the specific offense characteristics, without concern for being reversed.
JUDGE PIERSOL: Not that I worry about that.
JUDGE CASTILLO: That's because Judge Piersol's in a very good Circuit.
JUDGE MURPHY: Are there any other questions for the panel? I think Mr. Sands, you wanted to say something.
MR. SANDS: Excuse me?
JUDGE MURPHY: Didn't I see your hand up a minute ago, do you want to add.
MR. SANDS: Oh, I always take the opportunity for the last word. The recommendation of the Committee essentially doubles what the sentence would be. And that is an important consideration. Congress, a few years ago, increased the statutory maximum for six years. By following the Committee's recommendation, with the adjustment, you're looking at a sentencing range of 30 to 37 months after acceptance. If you go with an offense level of 20, assuming 50 or 51, with acceptance is 24 to 30. That sends a message on how serious the government is treating these offenses. But it also recognizes that no one gets into that car intending to kill someone, that involuntary is without the intent to kill.
JUDGE CASTILLO: Mr. Sands, I can't let you leave now, without telling you I enjoyed reading your bio and finding out that you have found true happiness in your job, very few people do. So I commend you for finding it.
MR. SANDS: Thank you.
MR. CHARLTON: Thank you very much.
JUDGE MURPHY: Thank you very much.
Mr. Goldman, since I know what the others look like. We'll follow the same general format for the Sarbanes-Oxley Act comments. Still standing is William Mercer, who is United States Attorney of the District of Montana and chairs the Sentencing Guidelines Subcommittee of the Attorney General's Advisory Committee. And then we have twins as the next speaker. Barry Boss and Jim Felman who are the Co-Chairs or our Practitioners Advisory Group. And we have the pleasure of receiving their regular advice and counsel from. And then it's Lawrence Goldman, I think, who is now President of the National Association of Criminal Defense Lawyers. And, finally, Professor Bowman, Frank Bowman from the University of Indiana who once wooed at the Sentencing Commission and has worked on our Economic Crime Package in 2001.
Some of you have heard me say that we originally intended to have this part of the program more evenly divided between points of view. But some of the invitees were unable to come because of, in on case illness and in another case death. So, at any rate, we're very happy to have all of you here and shall we start with you, Bill, and then have everybody else go at you or--
MR. MERCER: That's fine.
JUDGE MURPHY: --we'll give you a chance for rebuttal, then.
MR. MERCER: Thank you very much, Judge Murphy and fellow Commissioners. Thank you for the opportunity to discuss sentencing policy for fraud offenses on behalf of the Department of Justice. Before doing that, I want to thank the Commission for taking up the important question of the adequacy of the involuntary manslaughter guideline. For those of us in Indian country, it is a crucial issue.
On the Department's behalf, I'd first like to thank the Commission and its staff for being responsive to many of the Justice Department's concerns during this amendment cycle on various aspects of the Guidelines. The Department has had, and continues to have, differences with the Commission on certain important issues, such as Sarbanes-Oxley, just as Commissioners sometimes differ amongst themselves, our agencies may differ with Congress and so on. To us, those differences of opinion on matters of pubic policy, and the robust debate that accompanies these process of making law, evidences a healthy system, no one which is broken. We should not overlook the many areas, including important ones, where the Commission and the Administration agree, and we are grateful for all the hard work the Commission and its staff does in response many competing demands. We especially appreciate your efforts to implement recent legislation relating to bioterrorism and cybercrime, work that is critical to our country's ongoing fight against terrorism.
Let me turn to the topic at hand; the Commission's implementation of the Sarbanes-Oxley Act of 2002.
Combating corporate crime and fraud continues to be a top priority of this Administration and the Justice Department., and we continue to work to fulfill the President's goal, shared by the Congress, and embodied in the Sarbanes-Oxley Act, to renew public confidence in corporate America and revive trust in its markets. A key means that the Sarbanes-Oxley employed toward that end was to ensure consistently tough sentences for corporate criminals and for those who enrich themselves and harm innocent victims through fraud. The Act dramatically raised statutory penalties for fraud and obstruction, and Congress directed the Commission to re-evaluate and amend existing Guidelines penalties.
The need for swift and substantive Guideline amendments reflected the expectation of the President and the Congress that law enforcement would not wait to put the Sarbanes-Oxley to good use. Indeed, we have not. Just last week, the former chief financial officer of HealthSouth Corp., the nation's largest provider of outpatient surgery, diagnostic imaging and rehabilitative services, agreed to plead guilty to securities fraud, conspiracy to commit securities and wire fraud, as well as false certification of financial records which were designed to inflate the company's revenues and earnings by hundreds of millions of dollars. This is the first false certification case brought pursuant to Sarbanes-Oxley and is just one example of the more than 160 individuals charged by the Justice Department and its Corporate Fraud Task Force.
Although the Commission voted in January to increase penalties for those I would call exceptionally culpable criminals--senior corporate officers like the former HealthSouth CFO would be one example--it did nothing to raise the stakes for the vast majority of criminals federally prosecuted for fraud each year. Despite the Commission's subsequent efforts to convince the public and Congress that it's January amendments were actually tough on crime, its a--or more accurately its inaction--sent exactly the wrong message to those who would commit such offenses. We are here today in part to discussion what additional amendments, if any, would be appropriate and responsive to the Sarbanes-Oxley Act's directives. We will again hear a chorus of voices urging the Commission to do nothing further or, perhaps, even to repeal the narrow enhancements it passed in January. We hope that the Commission will, instead, heed the voices of the President and the Congress, and that it will take this final opportunity to finish the job the Act intended it to do and, thus, avoid the prospect that the President and Congress will feel compelled to do themselves.
Our position regarding the fraud guidelines and the need for significant penalty increases beyond what the Commission has already promulgated in its emergency guideline amendment has been set out in detail and continues to be quite clear. Since last August, we have set forth both in writing and orally before the Commission our strong view on the need for across-the-board changes to the fraud loss table on a number of occasions. Our October 2002 letter laid out in detail our proposal for implementing the
Sarbanes-Oxley by amending Section 2B1.1 to increase fraud sentences to respond appropriately to Congress clear direction and to correspond to the significant increases in the fraud statutory maxima that were key elements of this legislation. We need not repeat these details here.
However, I would like to restate some of the basic principles underlying our position, principles which also undergird the Sentencing Reform Act and the Sarbanes-Oxley.
First, we believe that the certainty of real and significant punishment--that is, the certainty of prison time for all but the most minor cases--best serves the purposes of deterring fraud offenders and particularly white collar criminals. As we have said before, and as the research shows, offenders usually decide to commit fraud and other forms of white collar crime not out of passion, but only after evaluating the costs and benefits of their actions. Certainly, criminal defense attorneys will tel you the overwhelming motivation of their clients is to stay out of prison. If the criminally inclined think the risk of prison is minimal, they will view fines, probation, home arrest and community confinement mere as a cost of doing business. We aim to remove the price tag from a prison term. We believe that if it is unmistakable that the automatic consequence for one who commits a fraud offense is prison, many will be deterred, and at the least those who do the crime will, indeed, do the time.
Second, we believe the certainty of significant penalties--meaning real jail time--in white collar cases fosters trust and confidence in the criminal justice system. If drug and violent offenders get long prison terms while many white collar offenders get probation, home arrest, community confinement, people will draw the conclusion that felons with wealth and influence are not held to the same standards as those without. Such cases feed the public perception that there is a double standard for haves and have-nots, and that certain people are above the law. We think this is unacceptable and corrosive to societal order.
Third, we believe that so-called "lower loss" frauds--those involving less than $100,000 or even less than $50,000, which for most people is a lot of money to have stolen--are serious crimes that should trigger at least some significant prison time for those who commit them. As the Attorney General said at a corporate fraud conference last fall, the Department is committed to pursuing "allegations of corporate fraud regardless of the size of the prominence of the company under scrutiny." to victims of such frauds--a small business targeted for embezzlement or creditors cheated by bankruptcy fraud (where only the federal government has jurisdiction to prosecute)--these losses can, indeed, be significant even devastating. Such cases constitute a significant percentage of federal fraud prosecutions, particularly outside the major cities. Also, the specter of prison time should also appear at these so-called "lower levels," to deter and punish smaller players who participate in, but may not be at the heart of a major corporate fraud. Because investigators must often work their way up the corporate ladder to uncover the extent of the scheme and bring the perpetrators to justice, we have found that the threat of prison time makes lower-level employees more willing to cooperate and provide information to obtain leniency.
Let me say a few words about downward departures. We remain very concerned about the growing number of non-substantial assistance downward departures and its impact on federal sentencing policy generally. Because Congress contemplated that the sentencing guidelines would cover most cases, the Sentencing Reform Act and, indeed, the original Guidelines, as evidenced by Justice Briar's "Law Review" article in the--"Law Review" in 1988," expressly anticipated that it would rarely be appropriate, much less necessary, for judges to depart from the prescribed sentence range. In the first few years the guidelines were in effect, that was, in fact, the case. Today, judges depart far more frequently and almost always downward. The trend is unmistakable, and it threatens to undermine the very goals of consistency and predictability that Congress meant to achieve in moving to determinate sentencing and that it expected the Commission to promote.
Thank you, again, for inviting me on behalf of the Department of Justice and for taking up these important issues of federal sentencing policy. And I will be happy, at the appropriate time to answer any questions that the Commission may have. Thank you.
JUDGE MURPHY: Mr. Boss and Mr. Felman.
MR. FELMAN: I think we decided that I'm going to go first and then Barry's going to go. I'm going to talk about whether there's a need to increase sentences, generally; and, then, specifically talk about whether there's a need to change the table; and then I'm going to talk about the proposal to change the base offense level. And then Mr. Boss is going to discuss some general comments about the role of the Commission, vis-a-vis Congress and the political process.
Much of what--and, obviously, it goes without saying as we always begin, that we really, truly appreciate the opportunity to appear before the Commission and share with the Commissioners what we hope to be the view of practitioners. We had a conference call earlier with 25 or so practitioners from across the country on the phone who weighed in on our presentation and, hopefully, added a few pearls of wisdom to what we have to say.
I think a lot of what we just--what I think I just heard from my colleague, Mr. Mercer, it sounds like something I might have heard five years ago. I think that we talked about all this for at least five years--it seemed longer than that at the time--leading up to the global economic crime package of 2001. And I think that, as a practitioner's advisory group, we look at the process that went into that as how this Commission really best functions. It is an illustration of what the Commission can achieve when it utilizes the resources that are available to it. There was effort by the staff to research and gather the data. There were hearings like this. There was a forum that George Mason University assisted with, where we heard from a broad spectrum of policymakers and academics. And it lead to certain decisions that I think were very hardly thought about and looked at, that addressed all of these issues.
And there doesn't seem to be any reason to believe or, based on any data, that the decisions made were wrong, because we simply don't even know what the impact of them is yet. I haven't had a case yet that has applied those guidelines, although I suspect they are just now starting to be in the pipeline. I think it really undermines the process of the Commission to go and revisit the exact same thing that it just spent five years on before we have any data to assess what the impact of that work was. And that's been said before and I was going to start with some Elizabeth Taylor husband joke or something as the way this feels. It just--it's the same thing that we've said over and over.
There does seem to be a misperception that somehow what happened in 2001 was a lowering of the sentences at the low end, just across the board. And it gets confusing and that's why, one time I think I gave you a piece of paper that is a loss-table comparison. You really have to look at whether or not the prior guideline used more than minimal planning or not. And at the lower level, cases with lower-level loss amounts, the more than minimal planning did not apply in about 60 percent of those cases. And if you forget about the more than minimal planning and assume that it did not apply, the '01 amendments lowered the penalties by one level only for losses of between $2,000 and $5,000. That is the only place in which they lowered the penalties. Otherwise, they were either the same or greater. And then, if there was more than minimal planning under the old guidelines, generally, they are the same--well, they're lower up until--and I put all this in a table that I gave you--they're lower until $30,000 and then they become the same for $30,000 to $40,000, and then they're one level lower from $40,000 to $70,000. But it's not a dramatic change.
But there was a reason why that change was made. As I recall, hearing articulated, there was a thought that the lower-level offenders do not always need to go to prison. In fact, I think what we heard from most of the social scientists and the data is that the real deterrent for many of those people is the stigmatization. Most of my clients, the jail time is the icing on the cake. These are people who generally have no prior record and they have business licenses; they're lawyers, doctors, accountants, they're in positions of authority and trust. And the impact for them is that their lives as they've previously known it, are over. Everything they went to school for and graduate school for, it's over. That is a permanent life-altering event for these people. The idea that somehow, you know, whether they go to jail for six months or eight months or twelve months after that, is somehow the big make-or-break, that's really not it for many of these people.
The severity of what just happened, in terms of the emergency amendments, to consider them to be soft on crime is stunning to me. I think they are of historic proportions. I think they usher in a new age of the incarceration of non-violent first-time offenders, for periods of time previously reserved only for those who have killed someone. And I will remind you and what I assume is going to happen again, although I don't agree with it, obviously, is essentially a plus-18 for anybody in one of these offenses. You've got a plus-6 for more than 250 victims; a cumulative plus-4 if there's a hundred of them that were substantially jeopardized; it's double counting of the same loss or the same harm, to me. You've then go sophisticated means--roll in the offense, abuse of trust. So, if there's no loss at all, you can get five years. If there's a $30,000 loss, you can get 10 years; if there's a $400,000 loss, you can get 20 years. And once the loss hits $2.5 million, it's life. So, virtually, if anyone--any of these cases that Sarbanes-Oxley was directed about is starting at life. And I just--I've been telling my colleagues in the criminal defense bar, and when I do, I usually have to wear body armor, which I know is a different subject, but I mean, it's, I've been telling them right now this is the heyday of criminal defense practice. Because once this stuff come down the pike, if you get a case where these adjustments apply, you're not even going to recognize the landscape, it's a sea change in what happened.
I think it, frankly, was done very rapidly without enough forethought and I would urge the Commission not to--and once you--and that's before you even get to the loss-table, that plus-18, to me it's triple counting. It's the dollar loss, plus the hundred people who lost it, plus the 250 who lost some, it's the same utter harm. And when I think about the objective of the guidelines to be rational and to sit there and weigh all the different things, I mean, who would come to this first--at first blush and say, let's do it this way. It's certainly not soft on crime.
But it fulfilled the purpose of the Sarbanes-Oxley Act, if anything, it did that. There isn't any need to further change the table. And I can't tell you how complex this is going to get. It already tough enough having to go to the book and figure out which table and what was the date and the date bargaining and what are the facts and which table applies when and now, if you change it again, it's just that all over again. There are cross-references, 20 or so to that table, throughout the book. Has anybody gone through and looked at them and said do we need to do that? Do we need to increase the punishments for all of those offenses by changing this table?
The changes to the base offense level is, also, again, complexity. And I, it was a simplification project that I guess couldn't be simplified or it just died on the vine, but I would hate to think what the people who wanted that to go through would think about this. Because, now, in order to figure out the base offense level, you have to pull out your statute book off the shelf, you have to look at the statute. And most of the statutes don't always have the punishments in them, they'll say, as punished by this other code provision. And I'm sorry, but there's a lot of defense lawyers out there, who just aren't as bright as we'd like them to be. And they don't follow all this stuff and they're going to miss it. And you're going to see people get it wrong. And you're also going to see incredible charge manipulation, where a prosecutor--and there's no way to measure this in advance--I understand the staff can tell you how many cases now are charges of mail fraud, but what they can't tell you is how many will be charges of mail fraud once it has a statutory lead--once there's a guideline--significance to it.
And I just find it so ironic, as somewhat a geek or a student of mail fraud, because of the statutory history of it. I mean, to think that that one, should be singled out for greater punishment? I mean it just barely has constitutional muster. I mean, it's about protecting the mails. And then they hook it in with the Commerce Clause so they can reach all of this. And if you go back and look at the history of the development of the mail fraud statute, it's like this broad, stop-gap, covering everything fraud, if you can't find anything more specific that's on point.
And to say that that one's worse, is, you know, it's just, when you match up the guideline with the code, you're not making sense. I understand the objective is to try to sort out the thefts from the frauds and to try to get there, but I think that we're going to have a lot of manipulation there, where prosecutor will say, if you plead guilty, I'll charge this statute. If you don't, I'll charge this one and it's just inherently antithetical to what the guidelines are about.
You know, when we tried to get you all to expand pursuant to 994J, to expand zones B and C, all I heard about was, well, you know, a lot of thought went into exactly where those lines are drawn and we don't want to mess with moving those tables down because we know exactly what loss numbers trigger in where and whatnot. And all that seems to just kind of go out the window now, where it's okay, we'll just bump it down a level. And it seems to me, at the very least, my compromise proposal back is, if you're going to drop it down a level, drop zones B and C down a level, while you're at it. And I think that everybody has looked for that as least as an increase in flexibility. And Congress didn't repeal 994J in Sarbanes-Oxley. And what it says is that every offense, except for--unless it's otherwise serious, should not get incarceration. And that wasn't repealed and there isn't anything in Sarbanes-Oxley that's inconsistent with that. And so I would urge you to consider that and I probably used too much of my time and so, I'll defer to my twin here, who will talk about other matters.
JUDGE MURPHY: You'll have to talk fast now.
MR. BOSS: I anticipated that he would use almost all the time.
MR. FELMAN: I offered to let him go first.
MR. BOSS: I'll be fairly brief. There really are only two points that I want to make. The first is that the key--first of all, I want to echo Jim's comments. We really do appreciate the opportunity, always, to come and give our perspective to the Commission. We do feel pretty strongly about this round of amendments and so we're glad to have the opportunity to tell you about our thoughts.
There are two issues I just want to address and I'll try to be brief. The first is, we've asked the Commission to be mindful of its role and its purpose in considering these amendments. As a matter of policy, the Practitioners Advisory Group is very concerned that the Commission be sheltered from the political winds. The whole purpose of the Commission, of course, is to be an independent, judicial agency with special expertise in sentencing. And the minute that the Commission becomes subject to political pressures and the emotional climate, the media climate about what's the crime du jour, we wind up with very bad policy. In fact, it was really critical to the court's analysis and it's threat of the constitutionality of the Sentencing Commission is that it's an independent judicial agency with special expertise. And probably the best example of the Commission exercising that expertise was the Economic Crime Package, which it took five years to study and assemble all the data. And I won't repeat what Jim said, but we all know the effort that went into that and at the end of the day we had a, you know, a debate about what level should be. And the Commission, in its infinite wisdom decided this is where it should be. And the guidelines were enacted as of November 1, 2001.
And the notion now of changing the Economic Crime Package based on the political climate, without any empirical data. And, of course, absolutely none has been provided flies completely in the face of the Commission's purpose of being an expert sentencing body. The Commission should act on data not on other extrinsic factors which tend to influence policy, perhaps, in Congress.
And we hope, the PAG, we feel it--we learned our less from the War on Drugs, where that was the crime du jour, everybody felt we needed to be really tough on drugs. And I think there's a widespread recognition that Congress, and even the Commission, went overboard in how it reacted to that War on Drugs. And, as we know, from the last amendment cycle, it is very hard--if not impossible--once we step into that abyss to ever come out. And to bring things back to a rational basis. And so, we ask the Commission to be very careful and to be true to its purpose in considering whether or not to go further than it has in the emergency amendments.
The second point that I want to make that is very, very troubling to the PAG is a new rationale that's been given for increasing loss levels for the low-end offenders. And that is, that it will increase the incentive for cooperation. We have never heard this rationale proffered before by the Department. Of course, it was always implicit and those of us on the defense side always knew that there was charge manipulation to try to get people to cooperate, but I thought that there was always a widespread recognition that that was improper. It's a violation of cue process, it's a violation of the purposes behind the Sentencing Reform Act, but now we're at the point where that's, we're saying okay, let's go ahead and just hold higher sentences over people's heads.
We believe sentences should be based on severity of the offense level--severity of the offense, excuse me. And the other consideration set forth in the enabling statute in the guidelines. Putting aside whether it's a legitimate way to create an offense level, that is holding a hammer over somebody's head to get them to cooperate. Even if you decide, well, that's okay for us to consider, it's horrible sentencing policy. Because what we learned in the drug area is the people at the bottom are the people who are least able to cooperate. And there's no reason to believe it would be any different in the economic crimes context. And so what we'll have happen is, these small potatoes, the people at the bottom, the minnows, as the Department refers to them in some of its press releases, they get eaten up. They just get a higher sentence and there's an incentive to cooperate, but they've got nothing to cooperate with and so what we're left with is they just get a higher sentence, without any rational basis for imposing that kind of sentence.
We just think it's bad for the Commission to be stepping into these areas. The Commission should exercise its expertise, its independence and wait to see what happens with the Economic Crime Package before going any further in this area.
Again, thank you for hearing from us.
JUDGE MURPHY: Mr. Goldman.
MR. GOLDMAN: Thank you. Thank you, Judge Murphy. Commissioners, thank you for the opportunity to on behalf of the National Association of Criminal Defense Lawyers and personally to speak with you.
I'm going to speak for a couple minutes, if I may, about some global effects of the sentencing guidelines, how they affect practice; some of the, I think, quite unintentional byproducts. And then try to tie it in to the issue of a desire of the Department of Justice for across-the-board increases in the levels of prison sentences for low-level economic crimes.
First, I think we should all remember that the issue is not who can go to jail, but the issue is, essentially, here who controls the jail decision. Every federal crime allows the possibility of incarceration. If somebody steals a candy bar from the stand, I think it's upstairs--downstairs, that person, potentially, is subject to a six-month jail sentence. It's up to the judge to decide whether he or she deserves it.
What the proposal is to eliminate that discretion. Not to make sentences possibly harsher, but to give the decision of whether there is mandatory jail to the administrative branch of government, the Department of Justice.
In a certain sense, it is, to be blunt, a turf battle. It's who makes the call, the prosecutors or the judges. Jail is always a possibility in the lower levels of economic crimes, like any other crimes.
Second, and I will not repeat much of what my colleagues on my right said. My immediate right, I should say, said and I agree with everything they say. Eighteen--less than 18 months ago after a very serious, painstaking review, this Commission enacted or put in effect, the Economic Crime Package, which will, undoubtedly, have severe increases in white collar penalties. We don't yet know how much but, certainly, we should await that before we go further.
Statistics show, contrary to what has been brooded about, that white collar defendants, indeed, receive substantial sentences. It has been--unlike other sentences, been creeping up--not creeping, but moving not quite at a gallop, but moving up constantly over the years so that they are roughly on a par with narcotics crimes and crimes of violence. And they are, clearly, going to get to be higher. So the old saw that white collar defendants are treated better is just out of date.
The real disparity in the system, or the real choice--the only real safety valve for the high-ends, or many of them, is the 5k1 letter. It's a question of prosecutorial control over who cooperates. These disparities in the system, frankly, are not from District to District or judge to judge, but who gets the benefit of that 5K1 recommendation, which judges in my experience have invariably followed to some extent, and who gets out of the harsher part of the guidelines.
The real people who suffer, as one of my colleagues said, are the poor schnook who has no one to give up. The people at the high-end can cooperate; the people at the middle-end can, but the poor person who committed a crime by himself or who comes into late or is irrelevant to the prosecutor's case, because the other have pleaded already, this is the person who suffers by the guidelines. The person who cannot get that 5k1 letter.
And what this also has happened, and I cannot document this, but I will tell you from my personal experience, I've see it and every white collar defense lawyer, as I am, will tell you, too: People who are actually innocent are pleading guilty. This is what has happened. And they do this because they go to the lawyer and the question is often one of intent. It's usually, or very often, the white collar question, not who did it, that's always given, not whether the acts were done; that's usually given, not always, but usually given. The question is the mens rea or lack of it, the criminal intent.
And over and over we deal--we, white collar defense lawyers--deal with people who have what I call criminally bad judgment. People who probably, technically have mens rea, but no one in his or her right mind a jury is going to credit it because their judgment is so bad.
But what happens very often is, the lawyer says to them, look, you are facing a very severe sentence, you can cooperate with the prosecutor, but you have to realize, you have to say as the prosecutors have told me point blank, that you intended to commit a crime. And I don't mean there's a subordination of perjury, it doesn't get that far. And part of this is educational, lawyer to client, prosecutor to lawyer. But what happens is people who actually did not believe they committed crimes end up cooperating.
And then they testify and when they testify they say, I intended to commit a crime and, in a way the jury, by nature, transfers that intent, as they see it to the defendant. So what this whole 5k1 syndrome--and mandatory sentences increase that effect anymore--it has brought the situation where, literally innocent people, in the white collar area are pleading guilty and, as sometimes happens, been convicted.
It's changed to a large extent how criminal defense lawyers act. We're no longer, many of us, criminal defense lawyers. We have six or sever cooperating clients for every one we go to trial with, only 3 percent go trial.
But let me speak, briefly, about the specific proposal to put across the board--increase across-the board sentences. The government has pushed, startling--that it's perhaps startling, perhaps not, that it's come out and said directly, we want--we need the minnows to get the big fish. Well, the bottom line is we they get the minnows anyhow.
Twenty percent of the people in white collar cases, 17 percent across the board get 5Ks, many, many more try for them, but they're too late or have too little. The first motion, most white collar defense lawyers make in a case as soon as the client comes in is to hail a taxi, raise their right hand, hail a taxi, go down to the prosecutor's office. That's what happens here. This is a system where, again, six to seven cooperators for every one who goes to trial. There's no shortage. And it isn't mandatory jail so much does it, but that puts a greater pressure--it's the possibility of jail.
Second, deterrents--most white collar people do, to be sure, deterrence is an element, but the bottom line, is most of them act out of desperation--some greed, to be sure--some greed, but desperation, misguided loyalty, to keep their jobs, to keep their companies going. And many of them, as I said, just because they have just dreadful judgment. So you cannot really deter someone who has dreadful judgment, because he or she doesn't really believe and--give sometimes the corporate client--a corporate climate, understandably, he or she doesn't believe that what he's doing is wrong.
I say we have gone very, very far in 2001. I would ask that we leave what little is left of judicial independence. I haven't talked about the judge's role, you know it much better than I. It's very different than it was years ago. But let's leave the judges what judicial independence they have left. Let's keep the playing field--what's level in it, let's keep that left.
There are better ways to fight white collar crime than the need of upping up sentences every time. We have weak regulatory agencies. We've abdicated--they've abdicated their responsibility to industrywide agencies. Many in terms of fairness many, many, many white collar defendants don't know what they were doing wrong because they were no guidelines, there are no rules. We're dealing with a most amorphous word: fraud. We're dealing with tax evasion, as opposed to tax avoidance. The difference is, how do you determine fraud? I've always said, it's what a prosecutor decides he or she in the stomach doesn't like and how far a judge is willing to tolerate that. It is such a amorphous concept to give incredibly harsh sentences for a bad judgment call, just seems wrong.
I'd ask this Commission--I understand--we all understand the tremendous pressures. The Department of Justice said it point blank, we can always go to the legislature, they say. No gentility about that. But increasing sentences is costly, it's harsh, and it's ineffective. Thank you.
JUDGE MURPHY: Thank you. Professor Bowman.
PROFESSOR BOWMAN: Judge Murphy, members of the Sentencing Commission, I want to thank you, first, for inviting me to appear before you this afternoon. It's always a pleasure to be here.
Over the last four months, you've received from me a number of responses to your requests for comments regarding proposed post-Sarbanes-Oxley amendments and I've also provided a written statement for this hearing and I'm not going to repeat here what I said in the letters or in my written statement.
Instead, I want to say a few words about the struggle for institutional control of federal sentencing, of which the debate of economic crime sentencing is only an incident.
I want to preface my remarks with a brief autobiographical aside, because, unlike the rest of my colleagues on this panel, I do not represent any institution or group, I speak only for myself. Before I grew this beard and became a pointy-headed academic, I was a prosecutor--federal and state, on three different occasions, totalling some 14 years. If serving as a prosecutor were a criminal offense, I've already had my third strike. I served in the Justice Department, as a trial attorney or an Assistant U.S. Attorney in the Administrations of Jimmy Carter, Ronald Reagan, the elder Bush and Bill Clinton.
At some deep level, I am a prosecutor and I always will be. Moreover, though I have prosecuted my share of robbers and rapists and murderers, I am not a member of what we used to call at the Denver D.A.'s office the knife and gun club, folks who believe that the only real crimes are violent crimes. Rather, in the criminal division, at the Denver D.A.'s office and at the Miami U.S. Attorney's office, I specialized in prosecuting white collar offenses. I have no sympathy for thieves and swindlers, they should be investigated vigorously by federal prosecutors; prosecuted aggressively, and sent to prison more often and for longer terms than had until recently been the case.
Now, that said, I find myself in the unaccustomed position of opposing the Justice Department on almost all points of their current proposal. I do so, not because becoming a teacher has made me into a big sissy, but because, as a supporter of both the sentencing guideline system, and the federal prosecutors, I am convinced that the Justice Department is pressing positions which are unwise. Positions so inflexible, so inconsiderate of the judgment and institutional prerogatives of the other actors in the federal sentencing system, that, if adopted, they push us several giant steps down the path towards the collapse of the guidelines experiment.
And we're here today, because the Department of Justice wants higher sentences for federal economic crimes. They insist that you, the Sentencing Commission pass a complete revision of the loss table 2B1.1. A revision that would increase sentences for all defendants, all defendants who cause losses greater than $10,000.
Now, in form, their proposal is an across-the-board sentence increase. Examined conceptually and carefully, it contains two different components.
First, they want to change the low end of the table to increase the number of defendants required to serve prison time. This would be accomplished by lowering the loss amounts that trigger eligibility for zone A, B, and C sentences. The objective is to restrict the discretion of judges to impose non-prison sentences, split sentences and other alternative punishments.
In shorthand, this component of the DOJ proposal is directed at the in/out decision.
The second component of the DOJ proposal is a modification of the loss table to increase the length of prison sentences for all economic crime defendants who would already be serving prison sentences under current guidelines.
The Department demands--and I think demands is not too strong a work--that the Commission pass both halves of its proposal. If its wishes are not met, says the Department, you will go to Congress. Let's consider the two parts of the Department of Justice proposal.
First, the low-end sentences or the in/out choice. The low-end portion of the DOJ position has two things going for it. The first is consistency and that is throughout the long economic crime package debate, the Department under both Presidents Clinton and Bush urged lower trigger points for incarceration. And in Senate testimony last summer, the Department expressed its concern about sentences for losses for less than $70,000.
Second, this component of the Department of Justice's position is supported by a logical argument. The argument is set out in Bill Mercer's written statement. In essence, the Department argues that serious offenses should result in some period of incarceration. And, in their view, the current loss table lets serious offenders--those who steal sums in the range of, say, $30,000 to $100,000 escape incarceration.
Now this is an argument with which I have consider personal sympathy. Seventy thousand dollars, for example, is a lot of money, stealing $70,000 is a serious matter. And one can argue perfectly reasonably that one who does so should be required to go to prison.
The weakness in the Department of Justice position is that it made exactly this same argument for five year, during the long process of developing the Economic Crime Package. And this Commission, after careful study, consultation with all the other interested institutions, judges, probation officers, the defense bar, arrived at a loss table with different trigger points than the Department of Justice would have preferred.
In the 15 months since November 2001, the Department's arguments have neither changed nor improved. The positions of the other interested parties have not altered. No new facts have come to light. Indeed, there has been no time to determine the effects of the November 2001 amendments. Only two things have changed: the control of the United States Senate and passage of a bill aimed at serious, large-scale corporate fraud.
By linking its recycled arguments for lower in/out trigger points to an across-the-board sentence increase, the Department of Justice hopes to harness congressional concern about serious corporate crime to compel the passage of provisions that have absolutely nothing to do with the language or purpose of the Sarbanes-Oxley Act.
Now what about sentence increases for crimes involving losses above $70,000? The Department's argument for raising sentences on all those already receiving prison terms is weak precisely where it's low-loss in/out argument was strong. First with respect to inconsistency. Before the passage of Sarbanes-Oxley, the Department did not argue that economic crime sentences, in general, were too low. Indeed, in June 2002, on June 19, 2002, in a hearing--in which I, myself, testified before the Senate Judiciary Committee--the United States Attorney for the Southern District of New York, New York, Mr. Komi [ph], specifically endorsed the Economic Crime Package as a substantial achievement. Since Sarbanes-Oxley, the Department's position on the adequacy mid-to-high loss economic crime sentences has reversed 180 degrees.
Second, even after the passage of the Sarbanes-Oxley Act, the Department has never attempted to explain why higher sentences for those already receiving prison sentences are necessary or even desirable. There has never been an effort to show that current sentencing levels provide inadequate deterrents or are disproportionate to the seriousness of the offense.
For example, if you read Bill Mercer's written testimony, it does contain a cogent argument for requiring more medium- to low-loss defendants to serve some prison time. However, it is utterly silent--utterly silent on the question of why, as a matter of sound sentencing policy every sentence of every defendant with a loss amount greater than $70,000 should increase. This silence speaks volumes.
Given the sentences now called for by the post November 2001 economic crime guidelines, it simply cannot be seriously argued that sentences for serious federal economic crime offenses are too low. That argument is simply not temple [ph].
The Department's sole argument is that Sarbanes-Oxley requires sentencing increases for everybody, regardless of whether or not their offenses bear any relation to the high-level corporate fraud at which Sarbanes-Oxley was transparently directed.
The Department's argument stated pointedly is that Sarbanes-Oxley leaves this Commission no discretion, no room for judgment about optimum sentencing policy. Indeed, no room for determining or attempting to determine the intent of Congress. The only permissible response to Sarbanes-Oxley, according to the Department of Justice is more prison for every federal defendant convicted of stealing.
At bottom, the arguments we've heard this afternoon from the Department of Justice, indeed, all the arguments that we're engaged in here are not about sentence length at all. This is an argument about power: institutional power over the sentencing process.
I've been a supporter of the federal sentencing guideline system, because at least as originally conceived, it markedly reduced judicial sentencing discretion, while leaving judges considerable de facto room for maneuver. I've supported the system because it gave prosecutors meaningful, if not absolute power to influence sentences. As a prosecutor, thought that was good, and I still do. And I've supported this system because it created a body of politically neutral specialists, this Commission, to provide a forum for rational argument about sentencing policy. As conceived, this system created a reasonable balance between the institutions most concerned with sentencing. The Commission, the courts, the Justice Department. And it, at least, provided a forum, in which the defense bar could be heard, even their views have, perhaps, carried less weight than some others.
What we see today, loathe though I am to say it, is the Department of Justice bent on gathering virtually all sentencing authority to itself. Consider the argument about the low end of the loss table. The Justice Department argues that the current guidelines do not provide prison sentences for defendants at certain loss levels. Not true. The current guidelines do not require prison sentences for someone who steals, for example, $50,000, but judges certainly have the power to impose prison sentences for such cases. And they often do.
If you look at your own statistics for fiscal year 2001, 30 percent of economic crime defendants who are eligible for straight probation are given prison by judges in this country. What the Department wants is to take away the judge's power of choice.
The same tenancy is at work in the area of departures. The Department insists, and always has, on unfettered power to charge bargain and to award 5K1 departures. A power that is, to be frank, often employed on behalf of defendants who have done little or nothing. But the exercise of judicial departure is to the complete and anathema.
The drive for institutional control over sentences is not limited to competition with the Judiciary. The 2001 Economic Crime Package was the result of years of careful study, consultation and negotiation among all the interested parties and institutions. It showed, if I may say so, what the sentencing Commission could do; how well the process could work; how valuable this institution is. Your work and your considered judgment are entitled to respect and to reasonable deference from all the parties to the sentencing process.
The present Department of Justice initiatives suggest that this Department of Justice views this Commission not as an authority, not as an institution worthy of deference and respect, but as an obstacle to centralizing sentencing authority in the Executive Branch.
I think this is profoundly unfortunate. The sentencing guidelines are a good thing. They're a very good thing for prosecutors. However, in order to survive, the system must have a reasonable distribution of rulemaking power; it must permit exercise of discretion by prosecutors, and judges and defendants, alike.
And these guidelines must not become a one-way ratchet creating ever higher sentences for everything. We are moving quickly in that direction. If the movement does not stop, this system will collapse in a burst of revulsion.
The institution, I must say, that would mourn the guidelines passing the most would be federal prosecutors. But the institution now doing the most to cause this downfall is the Department of Justice. I hope the Department of Justice will moderate it's positions and I hope this Commission will act in a way that's consistent with its important mandate. Thank you.
JUDGE MURPHY: Thank you. I said, at the beginning that you'd have a little opportunity for rebuttal.
MR. MERCER: Well, I think if you're open to it, I'll just answer questions from the Commission and hopefully have a chance to editorialize along the way to be responsive to my panel colleagues.
JUDGE MURPHY: Okay, this fine. Judge Castillo.
JUDGE CASTILLO: I'll take up your invitation raised by Mr. Felman to quote from that actress that you referred to and tell you what she told all of her various spouses. I'll try not to keep you very long.
I find myself, consistent, with my prior remarks in agreement with Mr. Goldman, Mr. Felman, Mr. Boss and, in particular what Professor Bowman. And I want to thank you, professor, for all your submissions. I've read them all very carefully, as I read all the submissions. And we share the same prosecutorial background, and I feel probably, the same sentiments about what is going on now.
Now, Mr. Mercer, you and I have interacted before and I apologize if that seemed like a deposition, it wasn't meant to. I will tell you that I think the Department of Justice should be happy. First of all, the Economic Crime Package in '01, is a piece of amendment legislation that I'm very proud of as a Commissioner. I think, in many ways, we were ahead of the curve in reacting to things that were just in the process of developing, but one of my missions since I came to the Commission was to increase the penalties for white collar crime. And I don't hesitate to say that in front of our Practitioners Advisory Group or the President of the National Association of Criminal Defense Lawyers because I thought, at the high end, especially, they were inadequate.
And so I think that that '01 legislation, which is probably the amendments that will apply to all these recent indictments, if you obtain convictions, was one that was considerable and studied process.
Now, I'm not--I don't have the same proud feelings about what we did in January. One, we were rushed, it was an emergency-type of situation. But I think that, again, on behalf of the U.S. Attorneys Committee, you should be very proud of all of the enactments that we undertook in January that became effective immediately and what remains is this one dangling issue as to the loss tables and what's to be done.
I've studied it very closely. I will tell you--I was especially taken and maybe Professor Bowman--and there is a question coming--Professor Bowman is familiar with a law review article that one of his colleagues from Washburn University School of Law Professor Mary Criner Ramirez [ph], has just put out an article in the "Loyola University Law Journal." It's called "Just in Crime: Guiding Economic Crime Reform after the Sarbanes-Oxley Act of 2002," where she makes a very good point that: one, our economic crime package in '01, was a well-considered change, but that there is a problem and the problem is with downward departures.
And so, I will tell you, when you go back to Montana, go back happy, because we will be making it clear, if we haven't, it's because we haven't been clear enough. As of tomorrow, I predict, if my predictions are good, we'll be announcing that we're going to be looking closely at downward departures. Because, in particular, I am concerned about how downward departures interact with white collar crime.
But other than that, my question is this: You make the point about this cooperation at low-level broad movers and in connection with white collar crime. Well, my question would be, the way relevant conduct principles apply, even if you were a lower-level person in a white collar criminal event, if you would call it that, my sense would be, as a judge, that the loss calculations and all of the enhancements would apply to somebody lower level and you would still get all the incentive if not more for cooperation. Am I somehow wrong in that analysis?
MR. MERCER: Well, certainly, relevant conduct is going to come into play interest he event the relevant conduct runs to everything that this particular defendant might know. I think that the testimony goes to the question of a defendant with a narrower set of understanding that probably few district judges would say, I'm going to start from point A and I'm going to find that this defendant somehow had knowledge that reaches to all these other parts of criminal conduct. Once again, I don't think there's much certainty in that and, in terms of trying to have the right set of guidelines in this area, I don't know if I think that relevant conduct would drive the sentence in a case like that. This is one of those areas, where I don't know if the Commission studied it, I don't know if academics have studied it. I don't have much of a sense of how relevant conduct has been applied by district courts in the white collar context, particularly those higher corporate fraud levels, so it's a little bit hard for me to know how that's run historically. But based upon the question, I'm not quite sure that that's a very--relevant conduct alone is a very powerful signal to the white collar--the potential white collar target who might be involved in an investigation.
JUDGE CASTILLO: One of the debates that we've been having just internally, since you last informally testified before us, is what's the definition of white collar crime? I know you--I asked you that, so I'm going to give you a complete nuclear energy opportunity to define that for me, if you will.
MR. MERCER: Well, I think the way you posed it during the last opportunity, for me to address the question. You asked whether a bank teller who was guilty of an embezzlement charge, should be considered as a white collar criminal?
JUDGE CASTILLO: Yes.
MR. MERCER: And I said, no. And, in a sense, I think I was looking to the way courts have construed abuse of trust and, frankly, the way the Commission has looked at abuse of trust. And I believe that unless we're talking about a lead teller, or the head teller, we're not going to see an abuse of trust enhancement. And I think we can argue that that's not a white collar crime.
I'm much more comfortable defining it the way the Commission's defined it, which saying, we're not going to try to decide something--whether something's a white collar crime or whether it is something else. We can describe all of these things as fraud crimes.
A bankruptcy fraud in a certain context, you know, it's always a fraud crime, whether it's always a white collar crime, it's not, but I think the guidelines--what the Commission did as part of the 2001 package was to collapse these things, theft, embezzlement fraud, into that one guideline. I think different people have questions about whether that makes sense or not, but the bottom line is, that's the way the Commission has construed it and I think it's going to be very difficult for us to always define what's a white collar crime. We certainly can't do it by statute, we can't say, this 1341 charge or that 1344 charge is a white collar crime always. Because sometimes it's going to be and sometimes it isn't going to be.
JUDGE CASTILLO: Your written testimony--this is the last question I'm sorry. Your written testimony emphasizes lower-level fraud offenders, so I take it that you draw a distinction between a lower-level fraud offender and lower-level theft offender or am I wrong about that?
MR. MERCER: I wouldn't want it to be construed that narrowly. I think we're trying to ask the Commission to look at the way it is structured to be 1.1 and we're not asking for you to bifurcate 2B1.1 into 2F1.1 again. What we've tried to say is that we think the Congress, based upon Section 905 of Sarbanes-Oxley and based upon the kind of comments that Professor Bowman and I heard from Senator Biden and others during hearings, indicates that members of Congress and, certainly, the Executive Branch is very concerned about the $65,000 fraud case. And very concerned that there isn't really any, yeah, it's true, it's a 6 to 12 guideline range. But I think we know from the Commission data, that there aren't very many people that are going to see 6 months or 12 months in a BOP facility, with that guideline calculation. They're going to get home arrest, they're going to get community confinement and that's not the appropriate message in terms of promoting respect for the law, all that.
And I, quite frankly, I have to say, this begins my editorializing, I do not--the argument that this is somehow an attempt for the Department of Justice to power grab the institutional questions on sentencing, this is a legislative rulemaking question, which is: What does the Commission think that a person who has committed a $65,000 fraud crime or a $100,000 fraud crime, what's the just punishment there? Is it home arrest? Is it community confinement? Is that going to achieve any purposes of sentencing, those statutory purposes? The Department's argument, and we believe the Congress's argument has been we need to worry more about the $50,000, $60,000 and it is inappropriate that those people are going to be in zone B.
JUDGE MURPHY: Professor O'Neill.
PROFESSOR O'NEILL: I'm definitely glad you added that editorializing at the end because I think that's one of the arguments that I've been frankly looking for the Department of Justice to make.
I need some help, basically. And here's sort of the help I need and some of the concerns, I guess that I have. I look at the decision to punish someone, to place them in prison is obviously one of the most awesome decisions that probably anybody can make in the criminal justice system. I'm lucky, when I leave my Commission job, I can just go and lecture to students and do things that have absolutely no impact on the world whatsoever. Unfortunately, many of my colleagues here on the Commission have to make those same sort of difficult decisions that, frankly, at this point in time, I'm glad I'm not necessarily having to make them, the fact that I'm also on the Commission.
Similarly, the decision to release somebody, or the decision to cut somebody's sentence is obviously a momentous decision; both in terms of someone who may have been victimized and also for the potential for other people to be victimized, as well. So, obviously that's one of the concerns that we have on the Sentencing Commission.
Ordinarily, we have sort of two theoretical bases for punishment: There's the idea of deterrence. General deterrence, holding you up as an example so other people won't do bad things. Specific to deterrence, let's make sure the bad person is not doing bad things again. Then there's the notion of retribution.
Well, as I go back even before the 2001 changes that the Sentencing Commission made to the fraud loss tables and to the guidelines and to the whole Economic Crimes Package, I notice a couple of kind of interesting things. General deterrence is always difficult to demonstrate. I think we all recognize it exists. It's very difficult to actually prove--a lot of people have done academic work on it, it's very difficult to demonstrate.
One of the things that I do notice and maybe this is something sort of useful for the Department as well, I'm sorry I don't have a PowerPoint or something to present this on. But if I look at prosecutions for the sort of traditional fraud-type crimes, embezzlement, larceny, whatever. I look at from fiscal year 1997 roughly 10,589 prosecutions being brought, which represents about 21.7 percent of all the federal criminal prosecutions being brought. I fast forward from 1997 to 2001 and I see a drop in the total number of frauds being prosecuted. So I see prior to the time that we actually made a change in the guidelines in 2001, I see a drop from 21.7 percent of the cases to 16.3 percent of the cases and a drop from 10,589 cases prosecuted to only, 9,708 cases being prosecuted. And I'd just like to note, because I was actually served as general counsel to the Senate Judicial Committee, at least during some of that time, but that was also during a period of time where we had an enormous expansion in terms of the number of investigators and also the number of AUSAs out there, especially following 1996 and the whole Oklahoma City tragedy where we increased the number of prosecutors and investigators generally.
So, looking back on it, just in terms and this is a very rough and a very crude sort of measure of general deterrents. And, perhaps, this is something that would be a nice collaborative effort between the Department of Justice and Sentencing Commission to look at. But from a general deterrent sort of perspective, I don't see the justification, frankly, we made, even for changing the 2001 guidelines, necessarily, at least at the high end.
The second thing, I'd say and that goes to the other type of deterrents, and that's the idea of specific deterrents. A guy named Daniel Reesberg [ph], I think I've got the name right, did a study a couple of years ago, looking at specific deterrents for individuals, for white collar criminals who received straight probation and the same sort of similarly situated defendants who went to prison Boom, do not pass GO, do not collect your $200, go directly to prison.
One of the interesting things that he found was that, with respect to both the people who received straight probation and the folks who actually went to prison, no difference in terms of subsequent recidivism rates.
Now, interestingly enough, the Sentencing Commission, in a project that I've been sort of working a lot on, I guess, and it has to do with the criminal history project that we're looking at in terms of doing our 15-year review of the guidelines, one of the other interesting things that we've found in cranking the data and cranking the numbers ourselves, is looking folks who actually went to prison, vis-a-vis, people who got probation, in terms of the recidivism project that we're doing, which is--I'll just have a little plug for the Sentencing Commission, here--it's the largest recidivism project of its type that's ever been done anywhere, at least as far as we know.
We got the same sort of a message and that's that people, whether they're at the low end or at the high end of the guidelines, don't seem to recidivate anymore whether they've gone to prison or whether they just get convicted and wind up going onto probation.
Now, the second issue, and that was the issue I think that you so eloquently addressed with respect to the retributivist [ph] element, is that if the Department feels like the penalties are simply in terms of just punishment, just not high enough, that's sort of the justification that I guess I would rather here. Because I'm just having sort of a difficult time deciding how we change these penalties when I have a tough time, when I crank the numbers, of looking at either the element of either specific deterrence or general deterrence.
Now, I will say that one big thing happened last year. And that's Sarbanes-Oxley. And I believe, and I think the Department is quite right, that the Department, rather that the Congress of the United States instructed us to change the penalties. There's obviously a question as to whether or not we have to change all the penalties from the lower-level offender to the highest level offender or whether it's just some subset of those folks. But I, at least, believe that Congress intended us to change these penalties. Obviously, they increased them four-fold with respect to mail and wire fraud; ten fold with respect to ERISA violations. So, clearly, Congress recognizes that there's a problem going on there.
Now, to that then, I would add, I would look at what we did in 2001 and I would say that for all crimes, for all fraud offenses above $120,000 in cost, we increased penalties pretty substantially across the board. And, in fact for crimes sort of below $70,000--the real change was below $70,000 to about $5,000 the change that we wrought in the fraud-loss tables wound up being about a month less time, obviously there are other concerns that are going to be involved there, that may, in fact, you know, change penalties even more. But then, for people who are under $2000K in terms of a loss, there was virtually no change in what we did in the $2,000 table as compared to what had been done before.
Now, so we've at least above $70,000 changed the penalties fairly substantially--for some things not for all things. Then in January, we did another change, which again, may not have addressed entirely what Congress wanted in Sarbanes-Oxley, but at least was probably a step in the right direction, perhaps, given the legislation.
So the question that I have is ought we to really be giving a little bit more time to see whether or not the changes that we did in 2001 and the changes that we effected in January, whether or not those satisfy what the congressional mandate was.
And if the answer to that is, well, there's a problem with respect to, you know, the retributive element of punishment, then that's obviously a different story.
The second thing that I would ask is perhaps we could work with the Department of Justice to see exactly what's going on in terms of deterrents. I hope, just as an academic, that in 2001 when we made the changes, that this was going to be a perfect example to be able to look at general deterrents, to give us the best shot, perhaps, we had at seeing whether or not there was any sort of deterrent effect. Now, obviously, we're not going to be able to do that because we are going to have to change the tables.
So, perhaps that's something we can, you know, work with the Department on in looking at. I guess there's not really a question here--it's more of an indication, I don't know.
MR. MERCER: You promised--you promised there was going to be a question. Yeah there are a couple questions.
PROFESSOR O'NEILL: Any response or any comments.
MR. JASO: I think the question is, isn't that so?
PROFESSOR O'NEILL: And so, since you were trained at George Mason, you recognize the importance that we place on empirical research.
MR. MERCER: I do, indeed, and I was thinking as you were defining the difference between general and specific deterrents, I was pleased to have Professor Parker talk to me about that at length, because I think I have a grasp of the difference of the two.
I agree that 2001, the 2001 package is not going to give the Commission the basis to make a determination about general deterrence. I can see how a significant study on those convicted of crimes, whether they were in the state system or the federal system, would give the Commission a basis to reach conclusions about specific deterrents. Because you've got a sample of offenders, you can track them, you can find out if they've recidivated and that's great.
There is not--I cannot conceive of a model where the clients of these gentlemen before they became clients that they could be evaluated by, you know, all of the great researchers that you have on the Commission and say to them, all right, now if we increase the base offense level in a way that if you commit $100,000-worth of fraud, in stead of the maximum, you're probably going to face is five months in a split-sentence. Let's say that we jump that up so that you were going to get something more like 12 to 18 months in a federal prison, do you think you'd commit that crime? The hypothetical is just--I don't know how the Commission would ever reach any conclusions there.
But what we believe is that general deterrence is a primary basis for this amendment because the public has the perception and they're correct, that if they steal $50,000, in all likelihood, it could be through a bankruptcy fraud, it could be through a scam, it could be through a number of different vehicles, as a first-time offender, they aren't going to go prison. And that gives them what they perceive to be an automatic get-out-of-jail-free card. And that is not helpful in terms of general deterrence.
The way the Commission can send a very different signal is that if they, if you take a serious look at this whole base offense level and say to yourselves, do we really think that we are deterring anyone from committing the $60,000, the $50,000 crime. And I don't believe it's there.
And on the second question, the one that you framed on just desserts, you know, I hope, I guess when I think about the Sentencing Reform Act and the reason why we've continued, and I'm delighted that Judge Castillo's announced the departure study, because one of the reasons why that's been a consistent message in this Administration is, we really do believe that the principle Sentencing Reform Act are very clear, that we want to treat similarly situated offenders in an equitable and fair manner. And it is really not occurring to the extent that $100,000 offender in one jurisdiction is going to get a split sentence and someone who has committed that same $100,000 mail fraud crime elsewhere, is going to get a straight probation sentence.
PROFESSOR O'NEILL: Let me interrupt for a second. Do you think that Sarbanes-Oxley, which is really why we're here today--because we probably wouldn't be changing this but for Sarbanes-Oxley, and probably, maybe the Department wouldn't even be asking for changes but for Sarbanes-Oxley--do you think that Sarbanes-Oxley was also intended to change the punishments for property destruction and for garden-variety theft offenses?
MR. MERCER: I think Section 905 said to the Commission and I think the testimony and the comments made by Senator Biden and others are very clear that this was a directive to the Commission to reconsider everything that--all the underpinnings of sentencing with respect to fraud crimes. It wasn't limited to the massive corporate criminal, exclusively.
PROFESSOR O'NEILL: Theft and destruction of property, included?
MR. MERCER: To the extent that it's covered by 2B1.1, 905, it gives the Commission--it directs the Commission to reconsider all these penalties. And that takes us into this mid-level, to the extent that we define a low-level crime, and I'm really hesitant to define $100,000 as a low-level crime, I'm really hesitant to do that. But I think that's the way that this has been framed is that those losses are somehow low-level. I think they're very significant and I think we send a bad signal when people don't--aren't in a zone B sentence for those crimes.
But, back to the just desserts question. We're at a point now where you can steel $900,000, in a country with a median income of--obviously, it's variable from state to state. In mine, it's about $20,000. So, if we have a bank fraud crime where the person has stolen $900,000. There aren't many members of the public that believe just desserts for that crime is a 24-month sentence. Which, based upon your 2001 amendments, is exactly what it is. It's a 14, plus an--it's a 14 over the base of 6, less 3 for acceptance at a 17, that's a 24 to 30 range. One bank is a victim, right?
Now, back to this question of just desserts, retribution, however, you want to frame it and promoting respect for the law, statutory principles of sentencing, there is a crisis of confidence in the public mind, I think when it comes to this sort of thing. And you would find, I think, both at the congressional level and, certainly among members of the public that it's wrong that somebody can steal $950,000 and be looking at a 24- to 30-month range if they plead.
So, I hope that's responsive. I think just desserts is a big component of this. You know, there certainly, I think, are just desserts aspects in other parts of the criminal law. But this is the area--this is the area where the defendants are educated, they are competent, they are savvy, they are represented by tremendous counsel and they are going to be responsive to incentives. And if this Commission sends a message that people in all likelihood are going to be in zone D and they're going to be in federal prisons, we believe that you will not only have a significant--made a significant contribution in terms of retribution, the just desserts aspect, but you will also send a very strong deterrence message.
JUDGE MURPHY: I'd like to interject a thought here. We are sincerely, still in progress working on what to do in this situation, so it's been very valuable for us for you all to be here. I'm mindful that we've already gone half an hour over the time and that we're keeping all the panelists here by that factor.
With that introduction, if anybody had a short question and there could be a short answer. It's just that, you know, the time runs away and we've gotten very valuable statements here that we're going to be thinking about. Eric, you had your hand up?
MR. JASO: Let me give it a shot. The comment was made before by essentially, everyone, the four non-Mercer people here, that--and there was a certain theme here I think it's fair to say. I mean, we heard several points being made every thing without recounting it from, you know what did mail fraud originally intend to cover to, you know, the idea that there's--the real problem here is some sort of regulatory weakness and that, you know, disenchanged [ph] people can't understand the law and, therefore, go astray.
The thing that strikes me and the question is directed, initially, to Professor Bowman, but the others can answer. And I invite them to, which is: You know, I did, I think Jim Felman said, he had sense of deja vue here. I do, too, because I was at the Biden hearing and Professor Bowman and others testified arguing strenuously that statutory penalties should not be increased because that was on the agenda at that point because that was the United States Congress for the reasons that essentially are being espoused here, which is we already did the job in 2001, let's have time for those things to work, there's no need to increase statutory penalties. At that time, I think the only thing people were really advocating, certainly, the Administration was advocating 10 years. Let me get to the question.
If Professor Bowman and others--you testified against increasing statutory penalties before the Senate and are now essentially arguing that, notwithstanding the increase the increase from 5 to 20 years for key white collar and fraud crimes, there is no need for the Sentencing Commission to increase penalties, then why were you making that argument before the Senate if that, ultimately, was not going to be the necessary result of what the Senate did in increasing--the Congress did in increasing penalties. I hope that was clear.
PROFESSOR BOWMAN: Well, I know the reason I made the argument is because I believed it to be true. I still believe it to be true. But I think what you're really asking is whether or not, since the argument was made by me and others, and since the Congress passed increases to statutory maximum sentences, doesn't that mean that somehow or other their action represents a general directive to the Sentencing Commission to increase all economic crime sentences? I think the answer is, no.
First of all I think senators and congressmen are really quite--those involved in drafting this legislation are really quite sophisticated and that they understand perfectly well that the increase in statutory maximum penalties does nothing necessarily at all with increasing sentencing guidelines.
I think they also understood that in placing directives in the legislation, it said to this Commission that it should consider fraud and theft and other white collar sentences and think about them carefully--it understood that this Commission is and is designed to be a repository of expertise and a place which is designed to be, by Congress itself, as a buffer against the temporary enthusiasms of the political moment.
And I think that those sophisticated legislators, at least some of them, understood that they could accomplish certain political objectives by raising, essentially, symbolic statutory maximum sentences, secure in the knowledge that this body would do what it is supposed to do, which is to look at sentences as they should be. And also to winnow out from the, frankly, rather confusing provisions of Sarbanes-Oxley that are directed at the Commission, those particular concerns that really motivated Congress in passing this legislation. And those particular concerns were concerns having to do expressly with the type of cases that led to the frenzy to pass Sarbanes-Oxley. And that is to say, the cases involving high-level corporate misconduct and extraordinarily high loss levels.
I think this Commission in January, hurried though its actions necessarily were, because of the deadline placed on it by Congress did precisely what it was supposed to do; precisely what you were set up to; precisely what you're sworn to do, which is to do the best thing for he entire system, irrespective of the political enthusiasms of the moment.
And I think to misconstrue what Congress did would be a dereliction of the duty that you were sworn to uphold.
MR. GOLDMAN: Let me just add one thing. I think it is always difficult to read congressional tea leaves and we're all having problems with it. Secondly--and I don't think it's the Commission's role, respectfully. Secondly, you're dealing with a particular case. There's a very good argument that the fraud statutes by themselves appeared to be too little, a five-year sentence. Indeed, in serious frauds that we all know that usually in mail fraud or wire fraud cases, there's a series of counts. What courts are often forced to do to meet the guidelines is give consecutive sentences. So, you're dealing with what was kind of an aberrational old statute, so I don't think it proves very much at all.
JUDGE MURPHY: Judge Sessions.
JUDGE SESSIONS: I want to say, I want to maybe address this to the four of you.
On the one hand you bring up the Justice Department's accusation, essentially that you are to do this and if you don't do this we're going to take this to Congress and then this will be stuffed down your throat and you see that as a sign of disrespect.
And then I also, I'm thinking about the arguments that you've made here and there are two things in particular that struck me most extraordinary. First there was some representation that historically this Commission just continues to increase the penalties and this is how we're responding to the process. That's absolutely simplistic and wrong. Absolutely wrong. So, I guess I need to vent that because that's the representation that's being made here that we're always increasing penalties and that is absolutely incorrect.
And the second thing is, I hear you say we should be insensitive to the political process. And I appreciate that this is supposed to be an independent body. We're here in a position of trying to interpret what Congress has said. And one of the things that you learn, I think, in a public policy position is that those people who forget about history, suffer its consequences.
This Commission in the past and going back for years has done things which, perhaps, politically fell upon deaf ears and, in fact, responded--resulted in responses which are not counterproductive to what we're doing, but have ramifications for you years. And I'm thinking about, just as one example, crack cocaine. To say that this Commission should not be actively involved in the political process and to understand what's happening on Capitol Hill, invites that kind of history to be repeated again and again and again. You know, and I-- So I listen to what you say and I'm thinking, well, that's absolutely right, you know, the Sentencing Commission should be absolutely free of all kinds of political processes and input.
On the other hand, I look at history and see where that's gotten us in the past. And my question to you, really, when you think about it, is that what we're supposed to do at this point? Are we supposed to be absolutely free of political influence? Are we not supposed to compromise among ourselves, knowing full well, that we are part of a larger network and, by the way, include such things as the view of PAG and the view of judges throughout the country. Aren't we supposed to be thinking about all of that? And in the sense arriving at some sort of conclusion which is the product of that kind of consolidation of thinking as opposed to just sitting back here in our naive world in Washington, D.C., trying to decide what's the best public policy?
MR. MERCER: May I respond to that, Judge?
JUDGE SESSIONS: Sure. I was actually going to only say two sentences, but it just got out of control.
MR. JASO: It was a question, though?
JUDGE SESSIONS: It was a question, right.
PROFESSOR BOWMAN: I hope that neither you nor anyone else construe what I've had to say today as the suggestion that the Commission is or should be outside of the political process. If you go back and look at the things that I've written over the years, I have specifically suggested in writing that this Commission, be more attuned to politics, be more attuned to what was going on the Hill, to consult. I think that that's one of the delightful things about the Economic Crime Package process, is that you did just that. I think under the leadership of Judge Murphy, you have changed the--your relationship to many people and many institutions revolving around the sentencing process.
But I guess what I want to say beyond that is this: I think the mantra of this particular group, or one of them, has been that we need to be politically responsive, you need to talk to people, you need to understand what's going on in order to restore the credibility of the Commission, from, perhaps, a somewhat lower level in the past. And I agreed with that and I still do, I think you have to be politically sensitive and I think making sure that you have credibility with other political actors is critical.
But my question then, is having done that, what do you use it for? What is it worth? I think you've done everything you could have possibly have done to restore any lost credibility with the political actors in this town. But if that gets you nothing, if it buys you no respect; if it buys you no deference from the Department of Justice or from relevant people on the Hill, what has it done for you? And so, no, I don't suggest you retreat from the political process, I suggest that you engage in it in the most active way.
And in this particular case, if your institutional reading is that, you know, overwhelming forces on Capitol Hill would simply roll over you, if you did nothing, then by golly I think you probably have to do something. But I'm not--it's not clear to me that that's true. Though you're going to be closer in touch with that than I am. It is not clear to me that if you proceed that you think best while also being sensitive to congressional desires and attentions in the Sarbanes-Oxley Act, that you can't go to the Hill and explain what you have done and ask them to respect your expertise the credibility that you've built up. And so long as you proceed in a reasonable way, have them honor you in the role that you fulfill. And if you can't do that, if you really think that all you have done is worth nothing, then why are we all here?
JUDGE MURPHY: Jim.
MR. FELMAN: I will also--I'm somewhat uncomfortable here, because I feel like I need to reconsider everything that I've ever thought, because I find myself in agreement almost entirely with Frank Bowman, which is certainly a first for me, but-- Let me offer my best defense for being naive that I can muster. The judge that I clerked for, Judge McMillian, had a perversion of the Janet Jackson song that I always appreciated. It was, instead of what have you done for me lately, people like Congress only know what you're going to do for them right now. They have no memory, I believe. When I first got here and saw this Commission come in, it was we must restore the credibility with Congress that was lost when the crack amendment was sent. I believe for restoring the credibility with the Congress was so that we could do something about crack because everyone recognized that it was wrong. And the thought was once we restore the Commission's credibility with Congress, we will then be able to do something about crack.
And what have you done about crack? They told you, after you restored all that credibility with them, don't send us an amendment, we don't want it. But we promise you, that if you send us a report, we'll hold hearings and we'll move on it. And they haven't and they won't. And you got nothing done on that. I mean, so the question now, I suppose is, you're not really talking about interpreting Sarbanes-Oxley, although some of it is about interpreting Sarbanes-Oxley, I think everybody knows that Sarbanes-Oxley was about the high-level, big-time cases and you addressed that--albeit in my opinion, overly severely, in January.
What we're really talking about is the threat that if you don't do something else here to blunt the feeling that somehow you haven't done everything the Department wants they're going to go back to Congress and Congress will act again. And the concern that I think I would have in your shoes, which I certainly don't envy, is if your task is no longer to interpret what Congress has told you, but to predict what they will do in the future, then by what guiding principle do you act?
Are you now doing what you really think is right or are you somehow doing what you think you have to do even though it isn't right because you think politically it's more expedient? And I think there are reasons that the Commission is not in the Legislative Branch, it's in the Judicial Branch and the statutes provide that a certain number of the commissioners must be judges. And there is a reason, I think, that there are judges on the Sentencing Commission because what judges do is study things impartially, apart from the fray, and I believe that Commissioners Steer and O'Neill engage in that same type activity here and should, and then do what they think is right and make a ruling.
And if they're wrong they get reversed, and if it's way wrong the Congress can act and enact legislation that reverses that ruling. But I think that the Commission's role is to do what it thinks is right using its expertise and establish the credibility with the Congress by bolstering what it's done with the facts, by saying we studied this for five years, here is the data, here is our expert opinion on the matter. If you disagree with us, it isn't because we don't have credibility, it's because you legitimately believe that the political process must take you elsewhere and it doesn't it's not a bad reflection on the Commission, you've done your job and then they've done their job. And when they tell you specifically, as they know well how to do, we want you to raise the guideline in 2B1.1 and amend the loss tables, they can easily tell you that. Then you do it. But I fear that if the role of the Commission is to predict what might happen politically in the future, if you don't do something now, I don't know what guiding principle you're acting under. And so I would exhort you to exercise your best independent judgment about what fair sentences you believe are and do it. And hope for the best.
JUDGE SESSIONS: But you see, one of the factors--
JUDGE MURPHY: Judge Sessions, you know Judge Castillo's been waiting to ask a question. I mean -- Judge Castillo.
JUDGE SESSIONS: No, I was going to debate him in this particular issue, but I'll remain quiet.
MR. FELMAN: Inasmuch as you vote and I don't, I think you win.
JUDGE SESSIONS: I have life tenure and--
JUDGE MURPHY: Judge Castillo.
JUDGE CASTILLO: I didn't mean to generate all this broad philosophical debate, so I'm sorry if I did. And Jim, I just have to say I don't consider the crack issue dead by any means. But here's my question. And it's directed at anyone. Hasn't any of the Department's concerns about low-end fraud offenders already been taken care of with the new restrictions on the use of correctional--community correctional centers? Hasn't that already accomplished, sort of through the back door what was not accomplished through the front door of a guideline amendment?
MR. MERCER: Do you want me to address that or is--
JUDGE CASTILLO: Anyone can address that.
MR. MERCER: You know, the directive to Ms. Sawyer [ph] deals with zone C and zone D offenders. So we start, I think by looking at those offenses that don't, under the current system, end up in either C or D, and there are plenty of them. And they sort of are the start of our concerns about the current system. As all of our statements over time have indicated, we're at a point now where a $30,000 fraud loss, something up to $29,999 is in the zero to six range. And that range we know, I was fascinated by Mr. Felman's comment that a significant number of folks are incarcerated, maybe it was Professor Bowman's argument that a significant number of people are incarcerated even though they're eligible for straight probationary sentences. And I'd be fascinated to know how many zone A offenders have been incarcerated over the last year or so. I don't think it's very many. And the Directive to Ms. Hawk [ph] isn't going to have any effect on zone A.
This brings back the point that I think the Sentencing Reform Act got at and that Justice Briar got at in that law review article, the whole notion of what the Commission did in that initial set of guidelines was to say we want to make sure that fraud defendants are subjected to some form of incapacitation and we've created now there this system of up to $30,000 loss, assuming the people are pleading guilty and getting acceptance responsibility, those folks are all zone A, all zero 6.
Then we turn to zone B, the loss amount of $30,000 to $70,000 under 2B1.1. It puts people into zone B, assuming they're pleading guilty. So the directive from the Deputy Attorney General has no force and effect on any guideline case where the loss is up to $70,000 and the defendant has plead guilty.
That then takes us to the $70,000 and above category and it is certainly the Department's view that while that directive will apply to the Bureau of Prisons, there are plenty of significant public reasons, given my discussion with Professor O'Neill, Commissioner O'Neill in terms of general deterrents and just desserts that suggests to the Department that the directive to Ms. Sawyer isn't going to have any substantial effect on achieving what the Department's proposal seeks.
JUDGE MURPHY: I'm going to take the prerogative of the chair now to thank all of you. You obviously have all put a lot of thought into what you said here. Very eloquent statements, and very much to the point, you're all very familiar with the nature of our work and what we're faced with here and hopefully you understand that we're trying to do the best we can. And we aren't sure how we're going to resolve our task next month. But you've given us a lot to think about here and we thank you very much.
(Whereupon, at 5:34 p.m., the public hearing concluded.)