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White Collar Crimes in Federal Court

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    Federal crimes   Among the cases our firm handles in the Federal courts, the absolute majority are the cases related to white-collar crimes, such as wire fraud, money laundering, and related conspiracies. What is the difference between the state and the federal court system? As it relates to criminal cases, the Federal Court (United States District Court) is a court of limited federal jurisdiction that handles only the cases where the U.S. Congress specifically established federal crimes based on federal jurisdiction, such as any criminal wrongdoing affecting interstate commerce. For example, wire fraud has federal jurisdiction because it affects interstate commerce (usually victims and perpetrators reside in different states and the crimes are conducted over the internet, mail, other courier services, email, etc. that easily cross state lines). It is also essential that some federal law enforcement agency takes such a criminal complaint from the victim and starts an investigation. Examples of such federal law enforcement agencies are the FBI, DEA, ICE, etc. 

    Unlike the arrests that are done by local police, usually based on probable cause and without a warrant, a great majority of white-collar federal crimes (for example wire fraud) arrests are done on an arrest warrant signed by the Judge based on either felony information or indictment. That means that there is usually a long-term investigation into some criminal activity, sometimes involving confidential sources, and surveillance, that leads to significant proof that the crime has been committed, and that is presentable to the Grand Jury to obtain an indictment. The indictment or complaint in these cases is usually filed under seal so nobody knows that arrests and execution of search warrants are about to happen. Once the arrests are done, usually simultaneously for all members of the conspiracy, sometimes even in different states, the indictment is unsealed and published on a federal system called PACER (Public Access to Court Electronic Records).

     

    Following the arrest, the defendant will face a United States Magistrate for arraignment. At that time bail application can be decided. Bail in the federal system is different than the one in the New York state court. It usually requires several financially responsible persons to sign as guarantors so that the defendant would not disappear. Guarantors are required to submit to the Court and prosecution (Assistant United States Attorney) their financial information, such as pay stubs and income tax returns. Collateral in the form of real estate is also usually required.

     

    The next step in the process is discovery. The volume and complexity of discovery in white-collar federal crimes are incomparable to that of an average felony prosecution in the state system. It usually takes many months to obtain and review discovery from the Government. The discovery is typically sent on memory drives with huge data capacity. The reason for this is the very nature of white-collar crimes that usually deal with financial transactions. The typical discovery material in white-collar crimes (such as wire fraud, money laundering, bank fraud, and Medicaid fraud) is bank statements, deposit and withdrawal information, wire transfer information, email, or other electronic communication exchange, sometimes spanning several years. It could be also audio and video surveillance of the defendant and his co-conspirators. It takes great attention to detail, basic accounting skills, and very good organization for the attorney to go over such voluminous discovery and document its review.  The purpose of such a discovery review is to evaluate the Government’s case and make sure they can convict the defendant at trial if there is no plea agreement. At the same time, the purpose of the discovery review from the defense’s point is to find weaknesses in the Government’s case and to verify the foreseeable loss amount that the Government attributes to the defendant.

     

    The role of loss amount in white-collar criminal cases is hard to overestimate. The reason for this is the structure of the United States Sentencing Guidelines (“USSG”) and related charts. First of all, we would like to note, that unlike in the state system where there is plea bargaining between the Defendant, prosecutor, and the Judge who must ultimately approve any plea bargain, in the federal system there is only plea bargain between the Government (prosecution) and the defendant, but the Judge is not a party to that agreement. What it means in practice is that the defendant pleads guilty to a certain count of the indictment or information, if he waives his Grand jury right, in exchange for the Government’s recommendation of the sentencing range. This recommendation, however, is not binding on the Judge, who can sentence the Defendant to any punishment allowed by law. Federal criminal law is notorious for very lengthy sentences. For example, the sentencing range for wire fraud is up to 30 years of imprisonment. 

     

    In deciding the Defendant’s sentence, the Judge must use the Sentencing Guidelines as a starting point. According to the decisions of the United States Supreme Court, the Guidelines are advisory. The Judge is allowed to sentence the defendant outside of the Guidelines, and that is what usually the defense counsel asks the Court. The law provides for certain factors that the Court must consider to sentence the Defendant outside the Guidelines. Among them, the history and personal characteristics of the defendant, the nature and circumstance of the defendant’s participation in the offense, the need for just and appropriate punishment, public deterrence and personal deterrence to criminal conduct, protection of the public, the need to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct, and the need to provide restitution to the victims of the offense. 

     

    Let’s come back to the starting point in sentencing – the recommended Guidelines range. This range is based on the Chart that is part of the USSG. The sentencing range in months of imprisonment is a function of the defendant’s criminal history category (based on his prior convictions) and the offense level. If the defendant has never been convicted of a crime before, his Criminal History Category will be I. The calculation of offense level is more complicated and is determined by the Guidelines based on the type of crime and various aggravating or mitigating factors. 

    Let’s calculate the typical offense level for the defendant convicted of wire fraud conspiracy. The base offense level, according to USSG §2B1.1, is 7 because the maximum statutory term of imprisonment is 20 years or more. The next step in the calculation is the loss amount attributed to the defendant:

     

    Loss (Apply the Greatest)Increase in Level
    (A)$6,500 or lessno increase
    (B)More than $6,500add 2
    (C)More than $15,000add 4
    (D)More than $40,000add 6
    (E)More than $95,000add 8
    (F)More than $150,000add 10
    (G)More than $250,000add 12
    (H)More than $550,000add 14
    (I)More than $1,500,000add 16
    (J)More than $3,500,000add 18
    (K)More than $9,500,000add 20
    (L)More than $25,000,000add 22
    (M)More than $65,000,000add 24
    (N)More than $150,000,000add 26
    (O)More than $250,000,000add 28
    (P)More than $550,000,000add 30.

     

    As you can see from the above table, the growth of the offense level based on loss is tremendous. That is why it is imperative for the defense attorney to carefully review the discovery provided by the Government and aggressively challenge the loss amount attributed to the client. That may translate to the difference between probation and many years in prison.

     

    Let’s say, for our calculations, that the Government attributed to the defendant the loss amount of more than $250,000 but less than $550,000, and there is no way to further reduce that amount based on the facts of the case and the discovery. That takes our calculation of offense level to 7 (base level) +12 (increase based on the loss) = 19. Let’s say, there were more than 10 victims of the fraud. That will increase the offense level by 2 levels to 21. Let’s further assume, that in our case the defendant misrepresented to the victims that he was acting on behalf of a charity. That will increase the offense level by 2 levels to 23.

     

    We will turn now to the mitigating factors that may decrease the offense level. If the defendant was a minor participant in any criminal activity, we can decrease his offense level by 2 levels making it 21. If the defendant pleaded guilty and clearly demonstrated acceptance of responsibility and assisted the prosecution by timely pleading guilty, the offense level is decreased by an additional 3 levels, making the final level 18. 

    Here Below is an example of a Sentencing chart from the 2018 United States Sentencing Manual: 

     

    SENTENCING TABLE

    (in months of imprisonment)  

    Criminal History Category (Criminal History Points)
    OffenseIIIIIIIVVVI
    Level(0 or 1)(2 or 3)(4, 5, 6)(7, 8, 9)(10, 11, 12)(13 or more)
    10–60–60–60–60–60–6
    20–60–60–60–60–61–7
    30–60–60–60–62–83–9
    40–60–60–62–84–106–12
    50–60–61–74–106–129–15
    60–61–72–86–129–1512–18
    70–62–84–108–1412–1815–21
    80–64–106–1210–1615–2118–24
    94–106–128–1412–1818–2421–27
    106–128–1410–1615–2121–2724–30
    118–1410–1612–1818–2424–3027–33
    1210–1612–1815–2121–2727–3330–37
    1312–1815–2118–2424–3030–3733–41
    1415–2118–2421–2727–3333–4137–46
    1518–2421–2724–3030–3737–4641–51
    1621–2724–3027–3333–4141–5146–57
    1724–3027–3330–3737–4646–5751–63
    1827–3330–3733–4141–5151–6357–71
    1930–3733–4137–4646–5757–7163–78
    2033–4137–4641–5151–6363–7870–87
    2137–4641–5146–5757–7170–8777–96
    2241–5146–5751–6363–7877–9684–105
    2346–5751–6357–7170–8784–10592–115
    2451–6357–7163–7877–9692–115100–125
    2557–7163–7870–8784–105100–125110–137
    2663–7870–8778–9792–115110–137120–150
    2770–8778–9787–108100–125120–150130–162
    2878–9787–10897–121110–137130–162140–175
    2987–10897–121108–135121–151140–175151–188
    3097–121108–135121–151135–168151–188168–210
    31108–135121–151135–168151–188168–210188–235
    32121–151135–168151–188168–210188–235210–262
    33135–168151–188168–210188–235210–262235–293
    34151–188168–210188–235210–262235–293262–327
    35168–210188–235210–262235–293262–327292–365
    36188–235210–262235–293262–327292–365324–405
    37210–262235–293262–327292–365324–405360–life
    38235–293262–327292–365324–405360–life360–life
    39262–327292–365324–405360–life360–life360–life
    40292–365324–405360–life360–life360–life360–life
    41324–405360–life360–life360–life360–life360–life
    42360–life360–life360–life360–life360–life360–life
    43lifelifelifelifelifelife

     

    Based on the above chart, our hypothetical defendant will have a recommended Guidelines range of 27 – 33 months imprisonment. If we can convince the prosecution to lower the loss amount to below $250,000, the range will become 21-27 months. If the loss is above $550,000 but less than $1,500,000, the range will become 33-41 months.

    When the plea agreement is executed, the next step is Pre-sentence Investigation (“PSI”) by the U.S. Department of Probation. The client should be prepared to answer numerous questions by the Probation officer regarding his family situation, education, health, prior contacts with the criminal justice system, employment, any need for substance abuse treatment, and his role in the offense. A defense attorney is allowed to be present at the PSI interview. After the probation officer submits a preliminary PSI report, the defense and prosecution have the right to file written objections to that report. The probation department then has a chance to incorporate objections to its final report that is filed with the Court. Probation also gives its recommendation regarding the sentence. Usually, it is in line with the prosecution’s recommendation.

    Once the final PSI report is filed, both the defense and prosecution start working on their sentencing memorandums to the Court regarding the sentence. This is a crucial part that requires “heavy lifting” by the defense attorney. The defense must present its best arguments as to why the defendant should be sentenced outside of guidelines range to the lowest punishment possible under the law. The defense should work diligently with the defendant’s friends and family gathering letters to court that illustrate why the defendant deserves leniency. All such letters as well as other relevant documents are attached to the sentencing submission as exhibits.

    On the day of the sentence, the Court will allow both the Government and the defense to argue why the defendant should be sentenced as outlined in the respective parties’ submissions to the Court. Finally, the defendant will have a chance to address the court. After all parties had their chance to talk, the judge made his decision.  In conclusion, we would like to stress again that federal white-collar criminal cases tend to be very complex and require diligent work by the defense counsel to achieve the best possible result. If you have questions about federal charges such as wire fraud, money laundering, bank fraud, Medicaid fraud, health care fraud, and others,  please contact our firm.