Federal sentencing guidelines for economic crime have long been subject to criticism due to high dollar loss amounts that can produce eye-popping prison terms.
Adding to the fodder, a new report issued by the United States Sentencing Commission found that securities and investment fraud offenders received the longest average sentences under the U.S. Sentencing Guidelines—more than twice as long as the average sentence for all economic crime offenders. The report, What Does Federal Economic Crime Really Look Like?, analyzes sentences imposed under § 2B1.1 of the Guidelines, which is the section that applies to most financial fraud cases, including those involving securities, bank, mail and wire fraud, money laundering, and conspiracy.
The report is chock full of data, but one of the Commission’s big-picture findings was that the average sentences for 29 categories of economic crime vary significantly. Not surprisingly, the report ties these variations to certain guideline enhancements, including loss amounts. For example, the report notes that in 2017, the median loss amount for securities and investment fraud was $2,105,620, a loss amount that corresponds to a 16-level increase under the Guidelines. This enhancement is substantially higher than any other specific offense type analyzed in the report.
- Average sentences for each economic crime category vary significantly. The average sentence for an economic crime offender was 23 months, about half the 45-month average sentence for all federal offenders. But as the report observed, “comparing economic crime offenders as one group to federal offenders overall generally tends to conceal substantial differences among the different specific economic crimes.”
For example, securities and investment fraud offenders received the highest average sentence (52 months) of all economic crime offenders. Average sentences for health care fraud (36 months) and advanced fee fraud (35 months) also were longer than the a
verage for all economic crimes, while average sentences for bank fraud (23 months) and government procurement fraud (22 months) fell in the middle of the spectrum.
- Loss amount was the primary driver of the guideline calculation under § 2B1.1. The Commission found wide variation in the rate at which certain guideline provisions measuring offense severity and an offender’s culpability were applied to different economic crimes. The most significant offense characteristic was the loss amount.
In 2017, 85% of economic crime offenders received an enhanced guideline calculation based on the loss amount. The median loss amount for all economic crimes was $131,750. Securities and investment fraud by far had the highest median loss amount of $2,105,620, followed by health care fraud, which had a median loss amount of $1,086,205. In contrast, the categories of mail-related fraud and false statements, which had the two shortest average sentences, also had the lowest median loss amounts of $1,815 and $0, respectively.
- An offender’s role in the offense was also significant in calculating guideline sentences for economic crimes. The Guidelines also establish certain sentencing enhancements based on an offender’s role in the crime. For instance, there is an enhancement for offenders who performed an aggravating role in the offense, such as by serving as an organizer, manager, or supervisor of a criminal activity that involved five or more participants. While only 4.7% of all federal offenders received an aggravating role enhancement, 10.4% of economic crime offenders received the enhancement in 2017. This adjustment was applied most frequently to health care fraud offenders (25.1%), because this type of offense “often involved clinic owners or physicians who directed overbilling scams” and recruited beneficiaries to provide benefit information in return for a fee.
Another common role enhancement was based on a defendant’s abuse of a position of trust or use of a special skill. Only 2.4% of all federal offenders receive this adjustment, in contrast with 17.1% of all economic crime offenders. More than a third of securities and investment fraud offenders received position-of-trust enhancements. These offenders tend to be corporate officers or directors, registered brokers or dealers, or investment advisors. Health care fraud offenders received this adjustment 31.3% of the time, as these offenders are often clinic owners, physicians, or others in a position to file claims.
Loss amount is the major reason why sentences for certain economic crimes such as securities and investment fraud are comparatively high. Indeed, the white-collar defense bar has long criticized the Guidelines’ focus on the amount of financial loss as the main measure of culpability. Although the Commission made several modest amendments to § 2B1.1 in 2015, including by emphasizing an offender’s personal intent to cause losses and adjusting the loss figures for inflation, the Guidelines still heavily emphasize the amount of financial loss in calculating a recommended sentence. But with more data illustrating that high loss amounts are driving longer prison terms, calls to revisit § 2B1.1 once again will likely continue.
Those interested in details about other categories of economic crime not specifically mentioned above will find similar data for all 29 economic crime categories in the report and its appendices.