EDNY Judge Imposes Below-Guidelines Five-Year Sentence in Securities Fraud Case
EDNY Judge Weinstein’s much publicized sentencing decision in the securities fraud case, United States v. Butler, 2010 WL 234848 (E.D.N.Y. January 22, 2010), is notable for three reasons: the judge’s consultation with an advisory panel of judges before imposing sentence; the below guidelines sentence of five years, despite a government demand for a fifteen-year sentence and a potential guideline range of life in prison; and the court’s recognition that pervasive corruption on Wall Street undermines the deterrent effect of long prison sentences.
Advisory Panel of Judges
Given the sentencing complexities of the case, Judge Weinstein asked the Chief Judge to convene “an advisory panel of judges of the court and an expert on sentencing guidelines from the Probation Department” to meet with him before the sentence. This practice existed prior to the adoption of the Sentencing Guidelines and had been reinstituted in the EDNY after Booker. Quoting an article about Professor Daniel Freed, Judge Weinstein points out that noted commentators like Freed “had urged judges to reason among themselves about sentencing.”
Guideline Calculation and Sentence
Butler had been convicted after trial of securities fraud, among other charges, arising out of his sale of auction-rate securities. The government claimed the offense generated $1.1B in losses, and sought a prison sentence of 15 years (although their loss calculation yielded a guideline of life in prison and a statutory cap of 45 years). The defense asked for probation. The advisory panel counseled a sentence of between 6 and 10 years. Finding that the losses were impossible to determine (in part, because the victims’ securities were impaired but may over time “prove to possess some or all of the value of the original investments”), Judge Weinstein calculated a guideline range of 87 to 108 months, based on Butler’s gain ($250,000). He imposed a sentence of five years, citing the defendant’s family circumstances and prospects for rehabilitation as grounds for a below-Guidelines sentence.
Deterrent Effect of Long Sentence in Financial Fraud Case
Among the sentencing factors a district judge must consider is the general deterrent effect of the sentence. Adopting a novel view of contributory negligence in sentencing, Judge Weinstein points out (with some reason) that “the general deterrence value of sentencing may pale in comparison to the opportunities for short-term financial gain attainable by fraud such as defendant’s.” He goes on to say: “The staggering sums involved in this case reflect more than the magnitude of the defendant’s fraud. They also evince an industry beset by avarice that has been allowed to run rampant by regulators and negligent supervisors alike.”
Comment
There is a body of research in social psychology demonstrating that people will moderate their views when they believe they will be involved in face-to-face discussion with people who hold different views. Group discussion among people of like-minded views tends to lead to polarization (i.e. more extreme views), but the likelihood of a panel of advisory judges who all share the views of the sentencing judge is statistically small. It is notable that none of the judges on Judge Weinstein's advisory panel supported a sentence higher than 2/3 of the sentence advocated by the government, and anything remotely close to the 45-year sentence dictated by the government’s loss calculation. There are more than a few BOP inmates languishing under senseless, onerous sentences, who would surely have benefited from the kind of tempering, deliberative sentencing process encouraged by sentencing panels. It has the additional advantage of giving the sentencing judge the shield of consensus.
Lawyers: Paul Weinstein, Jean Babcock, Emmet, Marvin and Martin, LLP, Steven Molo, Molo Lamken, LLP (defendant); AUSAs Greg Andres, Daniel A. Spector, John P. Nowak, Claire Kedeshian.
Advisory Panel of Judges
Given the sentencing complexities of the case, Judge Weinstein asked the Chief Judge to convene “an advisory panel of judges of the court and an expert on sentencing guidelines from the Probation Department” to meet with him before the sentence. This practice existed prior to the adoption of the Sentencing Guidelines and had been reinstituted in the EDNY after Booker. Quoting an article about Professor Daniel Freed, Judge Weinstein points out that noted commentators like Freed “had urged judges to reason among themselves about sentencing.”
Guideline Calculation and Sentence
Butler had been convicted after trial of securities fraud, among other charges, arising out of his sale of auction-rate securities. The government claimed the offense generated $1.1B in losses, and sought a prison sentence of 15 years (although their loss calculation yielded a guideline of life in prison and a statutory cap of 45 years). The defense asked for probation. The advisory panel counseled a sentence of between 6 and 10 years. Finding that the losses were impossible to determine (in part, because the victims’ securities were impaired but may over time “prove to possess some or all of the value of the original investments”), Judge Weinstein calculated a guideline range of 87 to 108 months, based on Butler’s gain ($250,000). He imposed a sentence of five years, citing the defendant’s family circumstances and prospects for rehabilitation as grounds for a below-Guidelines sentence.
Deterrent Effect of Long Sentence in Financial Fraud Case
Among the sentencing factors a district judge must consider is the general deterrent effect of the sentence. Adopting a novel view of contributory negligence in sentencing, Judge Weinstein points out (with some reason) that “the general deterrence value of sentencing may pale in comparison to the opportunities for short-term financial gain attainable by fraud such as defendant’s.” He goes on to say: “The staggering sums involved in this case reflect more than the magnitude of the defendant’s fraud. They also evince an industry beset by avarice that has been allowed to run rampant by regulators and negligent supervisors alike.”
Comment
There is a body of research in social psychology demonstrating that people will moderate their views when they believe they will be involved in face-to-face discussion with people who hold different views. Group discussion among people of like-minded views tends to lead to polarization (i.e. more extreme views), but the likelihood of a panel of advisory judges who all share the views of the sentencing judge is statistically small. It is notable that none of the judges on Judge Weinstein's advisory panel supported a sentence higher than 2/3 of the sentence advocated by the government, and anything remotely close to the 45-year sentence dictated by the government’s loss calculation. There are more than a few BOP inmates languishing under senseless, onerous sentences, who would surely have benefited from the kind of tempering, deliberative sentencing process encouraged by sentencing panels. It has the additional advantage of giving the sentencing judge the shield of consensus.
Lawyers: Paul Weinstein, Jean Babcock, Emmet, Marvin and Martin, LLP, Steven Molo, Molo Lamken, LLP (defendant); AUSAs Greg Andres, Daniel A. Spector, John P. Nowak, Claire Kedeshian.
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