Second Circuit Vacates Significantly Below-Guidelines Sentences Imposed in $100 Million Fraud

Just when we might be resting on our Gall/Kimbrough/Regalado laurels, along comes United States v. Cutler, 02-2516-cr-L, 2008 WL 706633 (2d Cir. March 17, 2008), which warns that the district court’s sentencing discretion is not boundless: the sentencing court cannot make an error of law or fact, or – and this is the kicker – it cannot impose a sentence that is “beyond the outer limits of the range of decisions permitted by § 3553(a).”  There’s a Potter Stewart quality to the general pronouncements in this decision, but clearly, for the majority of this panel, sentences of, respectively, probation and one year and a day for two wealthy business executives who were centrally engaged in a $100 million fraud, where the Guidelines called for sentences of 6.5 and 9 years, do not pass muster in the new liberal sentencing universe.

The majority subjects the district judge’s reasons for her sentence to a devastating 78-page critique – pointing out, for example, that the loss calculations could hardly overstate the defendants’ roles and culpability when they were key participants in the fraud, fully aware of its magnitude, and multi-million dollar beneficiaries of it, or that Cutler’s family’s need for financial support did not merit less prison time where Cutler had deliberately placed his substantial assets out of the reach of his children.  The majority even rejects the district judge’s pronouncement that “it know[s] to be true . . . that one does not get . . . immediate monitoring and immediate response” from the BOP on medical issues – a statement few district judges would disagree with, and is surely well within an experienced district judge’s body of knowledge.

But the majority does not rest at pointing out factual and legal errors.  It also engages in a detailed review of the substantive reasonableness of the sentences, showing in the process a clear bias in favor of within-Guidelines sentences (“the need for deterrence and the need to promote respect for the law are hardly served by imposing a term of imprisonment that is a small fraction of the period appropriate for the defendant’s offense . . .”) (my emphasis).  It is hard to square the majority’s decision in Cutler with the Court’s recent pronouncement in Regalado, that “we may not reverse the district court simply because we would have imposed a different sentence.” As Judge Pooler points out in her concurring opinion in Cutler, “[b]y concluding that the sentences of [the defendants’] are substantively unreasonable, the majority is substituting its view of what their proper sentences are, for that of the district court, an exercise we are reminded is not within out province to accomplish.” 

The case provides a lot of prosecutorial fodder to challenge standard departure/variance arguments defense lawyers make in all cases – relating to family circumstances, age and health, overstatement of role or culpability, and ratio of deterrence to prison length.  Practitioners, therefore, should be sure to distinguish Cutler on its facts, and to circumstances where a district court is making a traditional downward departure – as the sentencing court did in Cutler – rather than a more expansive, nuanced and individualized § 3553(a) analysis.