12/17/19

Pre-Guidelines Sentencing

Sentencing — Judges had total discretion

¡ Focus on rehabilitation

¡ Could rely on any information

CORPORATE CRIMES ¡ Few procedural or evidentiary constraints at sentencing

¡ No explanation required for sentence

UNIVERSITY OF IOWA, COLLEGE OF LAW
— Limited only by statutory range
— Problems:

14 ¡
¡
Disparities in sentencing across protected categories
White collar offenders received lighter sentences

1 2

Individual Sentencing Guidelines: Chaps. 1-7 Guidelines Structure for Individuals

— 1984: Sentencing Commission created — Sentence is fixed by a Sentencing Table

¡ Independent agency of judicial branch — Offense Level
¡ Tasked with developing guidelines
— Criminal History
— 1987: Sentencing Guidelines for individuals released
¡ “Real offense” v. “charge offense”

¡ Modified real offense

— Increased sentences for white collar criminals

¡ 54% of fraud convicts got no jail time before Guidelines, 27%
after
¡ 57% before for tax crimes, 3% after

3 4

Criminal History Category Offense Level

— Represents “disposition to criminality” — Represents “seriousness of the present offense”

— Looks at prior criminal history — Procedure
¡ Start with base offense level
¡ Number of offenses
÷ Prescribed in a table
¡ Seriousness of offenses ÷ Ranges from 1-43

¡ Temporal Proximity ¡ Then modify for specific offense characteristics

÷ Includes characteristics common to the category of offense, e.g. degree
of injury, number of victims, more than minimal planning
÷ Look to all all relevant conduct
÷ Aggregation rules

¡ Then make adjustments based on victim characteristics, defendant’s

role, obstruction of justice, acceptance of responsibility and
cooperation

5 6

1

Departures
— The judge can depart above or below the range
— Based on “aggravating or mitigating circumstances
of a kind, or to a degree, not adequately taken into
consideration by the Sentencing Commission”
¡ Ordinarily not relevant: age, mental/physical condition, good
character, vocational skills, charitable service, socio-economic
status
7 8
Sentencing Insider Trading
— 2B1.4
— Base level: 8
— Specific offense characteristics:
¡ If gain exceeded $6500, increase by number from
Theft/Fraud table corresponding to amount
÷ Examples from table: $6,500 add 2; $250,000 add 12;
$3,500,000 add 18; $550,000,000 add 30
¡ If the offense involved an organized scheme and the
offense level is less than 14, increase to 14
9 10
Criticisms of the Guidelines
— Didn’t go far enough; still left too much discretion
— Went too far and gave more power to prosecutors to
fix sentences through charging decisions
11
12/17/19
Breakout Discussion
The base offense level for robbery is 20. Come up with
the base offense level and specific offense
characteristics for inside trading (Group A) and
environmental crimes (Group B).
Sentencing Environmental Crimes
— 2Q1.2: Mishandling of Hazardous or Toxic
Substances of Pesticides
— Base level: 8 (24 if done knowingly)
— Specific offense characteristics
¡ Ongoing, continuous or repetitive: +4
¡ Substantial likelihood of death or serious bodily injury: +4
¡ Resulted in disruption of public utilities, community
evacuation, expensive cleanup: +4
¡ Without a permit: +4
¡ For simple recordkeeping or reporting violations: -2
Constitutional Troubles: U.S. v. Booker
— Facts: Jury convicted Booker beyond a reasonable doubt of
possessing 92.5 grams of cocaine; this would have given a
range of 210-262 months; in post trial sentencing, judge
found by preponderance of evidence that Booker had another
566 grams and obstructed justice; these findings mandated a
range of 360 months to life under the Guidelines
— Issue: Do the Sentencing Guidelines violate the Sixth
Amendment right to trial by jury?
— Holding: Yes, because they mandate sentences based on facts
not found by a jury, they are no different than statutory
elements of a crime
— The Fix: Strike portions of Guidelines making them
mandatory
12
2
 12/17/19

Sentencing after Booker Sentencing after Booker, cont’d

— Statutory focus in sentencing is 18 U.S.C. 3553(a) — Guidelines are still important

¡ Purpose of punishment are retribution, deterrence, and — Judges must consult Guidelines, but are free to
rehabilitation
disregard after
¡ Factors:
÷ Nature of offense
— 79%-85% of sentences are within Guidelines range
÷ History of the defendant — Within-range sentences are presumed reasonable in
÷ Applicable Guidelines range some circuits
÷ Avoiding disparities
÷ Providing restitution
— Sentences overturned on appeal only for
“unreasonableness”

13 14

Summary 1 Organizational Sentencing Guidelines

— Individual Sentencing — Developed over concern that organizations were

¡ Balance real- and charge-offense philosophies
¡ Sentence determined by criminal history category and offense
level
— Though Booker made the guidelines
discretionary, still important
being treated more leniently than individuals
— First released 1991
— Chapter 8 of the Sentencing Guidelines
— Specifies familiar goals of corporate punishment:
retribution, rehabilitation, deterrence
— Sentencing Commission accepted three principles:
¡ Respondeat superior does not reflect gradations of seriousness

¡ Corporations can set up efficient internal policing

¡ Sentencing can create incentives to set them up

15 16

Other Sanctions Corporations Can Face Restitution under the Guidelines

— There are other formal and informal penalties for
corporate crime
¡ Reputational penalties and share value reduction
¡ Charter revocation
¡ Loss of license in regulated industries
— Corporations must pay victims full value of loss
— Unless:
¡ Remediation already made
¡ Number of victims too large to be practicable
¡ Complex issues would overly delay sentencing

— Note: The Guidelines do not require a sentencing

offset for these
¡ Though judges can permissively offset

17 18

3
 12/17/19

Fines Overview Fines Calculation Procedure

— Only kick in if corporation is able to pay full — Start with base fine
restitution ¡ Highest of:

— Only applies to certain crimes ÷ Individual guidelines fine

÷ Gain to the corporation
¡ Check list in 8C2.1
÷ Loss caused by the crime
— Corporate death penalty for “criminal purpose
organizations”
— Fine must be within statutory max and min
¡ Can be a significant limitation; many crimes have a max set at
twice the loss

19 20

Fine Calculation Procedure, cont’d Fine Calculation Procedure, cont’d

— Calculate culpability score — Use culpability score to identity minimum and maximum
multipliers
¡ Start with 5
— Apply multipliers to to base fine to calculate fine range
¡ Add or subtract points based on listed factors
— Choose a fine within the range, referring to enumerated
÷ Involvement of “high-level” or “substantial authority” personnel factors:
¢ HLP: Have substantial control or role in setting policy ¡ Collateral consequences and other non-criminal penalties
¢ SAP: Have substantial discretion to act on behalf of corporation ¡ Organization’s role
÷ Prior history ¡ Prior misconduct
÷ Obstruction of justice — Consider departing from range, referring to enumerated
factors
÷ Presence of an effective compliance program (see below for
details) ¡ Assisting authorities
¡ Risk of death or bodily injury
÷ Self-reporting, acceptance of responsibility, and cooperation ¡ Exceptional organizational culpability

21 22

Hypos Hypo 1

Consider the following firms who each committed a
crime with a base fine of $1 million. From what range
will the fine be selected if the firm is sentenced under
the Organizational Sentencing Guidelines. Explain
your how you arrive at the number. If you think you
need more information, indicate what information and
what bearing it has on the sentence.
Publicly held firm with more than 5,000 employees; no
prior bad conduct; manager in an overseas division
involved in the crime with 4,000 employees; the firm has a
compliance program; the government detects the crime
and the firm instantly cooperates.
— Start with 5
— Add 4 for participation of high-level personnel in
organization with 5,000 employees (8C2.5(b)(1)(B)(i))
— Subtract 2 for cooperation, but only if the firm also
accepts responsibility
— Answer: $1.4M-$2.8M

23 24

4
 12/17/19

Hypo 2 Hypo 3

Publicly held firm with more than 5,000 employees; no
prior bad conduct; no involvement of any manager in the
crime; the firm has a compliance program; the government
detects the crime and the firm instantly cooperates.
Start with 5
— ¡
— Subtract 3 points if compliance program is effective
Publicly held firm with more than 5,000 employees; no prior bad conduct;
managers are involved; the firm has a compliance program which includes the
right of the CCO to report directly to the board; the firm detects the crime but
fails to report; when the government detects the crime, the firm instantly
cooperates.
— Start with 5
— Add 5 if managers are HLPs
Or add 5 if m anagers are SAPs and tolerance is pervasive
¡
Or, if m anagers are H LPs or SAPs of just a division, aggravation depends on size of division
Or, If m anagers are SAPs but tolerance is not pervasive, add 2 (8C2.5(b)(4))
—
¡

Probably no compliance credit (if manager is an HLP and delay in

— Subtract 2 for cooperation, but only if the firm also reporting was unreasonable)
— Subtract 2 for cooperation, but only if the firm also accepts responsibility
accepts responsibility — Answer: $1.6M-$3.2M
— Answer: $50K-$200K

25 26

Hypo 4 Breakout Discussion

Small firm of 200 employees; no prior bad conduct; managers are Spell out a scenario that would crank the fine to its
involved; the firm has a compliance program which includes the
right of the CCO to report directly to the board; the firm detects the maximum.
crime but fails to report; when the government detects the crime,
the firm instantly cooperates.

— Start with 5
— Add 3 if managers are HLPs
¡ Or, add 3 if managers SAPs and tolerance is pervasive
¡ Or, if managers are SAPs but tolerance is not pervasive, add 2 (8C2.5(b)(4))
— Probably no compliance credit (if manager is an HLP and delay in
reporting was unreasonable)
— Subtract 2 for cooperation, but only if the firm also accepts
responsibility
— Answer: $1.2M-$2.4M

27 28

Probation Effective Compliance

— May be imposed whenever necessary to achieve one — These provisions kicked of the burgeoning
of the goals of sentencing compliance industry
— Court’s have a lot of discretion to tailor details — Featured of effective compliance:
¡ Due diligence to prevent and detect wrongdoing
¡ 1-5 year term; extended if probation violated
¡ Promoting an institutional culture that encourages “ethical
¡ Publicize offense
conduct”
¡ Create a compliance program ¡ Role for board and senior managers in implementing and
¡ Make submissions to a probation officer monitoring compliance
¡ Submit to regular unannounced examinations ¡ Periodic risk assessments required

¡ Do community service ¡ Noninvolvement of high-level personnel in misconduct

¡ Reporting mechanisms available to employees

— Keep Caremark in mind

29 30

5
 12/17/19

Effects of the Guidelines Summary 2

— Average corporate fines rose from $108K to more
than $10M
— Average fines for publicly held corporations rose
form $1.9M to $19M
— Average total sanctions faced by corporate criminal
is $49M
— Organizational Sentencing Guidelines
¡ Designed to increase sanctions on corporations and incentivize
internal monitoring
¡ Restitution, fines, probation
¡ Mechanics of calculating fine similar to process for individuals
¡ Effective compliance program defined

31 32