Monday, March 31, 2008

4(b) and After

United States v. Frias, No. 06-5381-cr (2d Cir. March 31, 2008) (Cardamone, Sack, Katzmann, CJJ)

The ten-day time for filing a notice of appeal in a criminal case under Fed.R.Ap.Proc. 4(b) is not jurisdictional, which means that the court can consider an untimely appeal if the government forfeits a claim of untimeliness failing to raising it.

For many years, both the Second Circuit and the Supreme Court were somewhat careless in using the term “jurisdictional” in the context of time limits and filing deadlines, collectively known as “claim processing rules.” However, a string of Supreme Court cases in the past few years has clarified the terminology: since only Congress can determine a lower federal court’s subject matter jurisdiction, only those claim processing rules that have statutory origins are truly “jurisdictional.” Thus, for example, the seven-day deadline for filing a motion for a new trial under Fed.R.Crim.P. 33(a) is not jurisdictional because it does not derive from a statute. But the thirty-day time within which to file a civil notice of appeal under Fed.R.Ap.Proc. 4(a) is jurisdictional because the rule is merely a codification of 28 U.S.C. 2107(a).

Unlike Rule 4(a), the rule at issue here, Rule 4(b), is not based on a statutory prescription, thus the untimely filing of a criminal notice of appeal does not “withdraw federal jurisdiction over criminal appeals.” Thus, if the government does not raise a Rule 4(b) claim in responding to a criminal appeal, then the appellate court can, but does not have to, consider the merits. If the government properly objects to the untimeliness of a defendant’s appeal, however, then the “mandatory and inflexible” rule must be honored and the appeal will be dismissed, even though the court has not been deprived of subject matter jurisdiction.

The decision leaves open whether a court can, in its discretion, sua sponte, dismiss an untimely appeal.

Thursday, March 27, 2008

Summary Summary

It has been a slow week in Foley Square - lots of civil and immigration decisions, but not too much on the criminal front. So, here are some recent summary orders of interest:

In United States v. Williams, No. 06-5530-cr (2d Cir. March 27, 2008), the court dealt with an unusual circumstance in this circuit - an illegal reentry jury trial. The court rejected several case-specific evidentiary claims, but also touched on - without resolving - an interesting and important question: is the defendant's claim of derivative citizenship an affirmative that he bears the burden of proving, or must the government disprove the possibility of derivative citizenship beyond a reasonable doubt?

Title 18 U.S.C. § 3664(h) permits the sentencing judge to apportion restitution liability among defendants based both on their economic circumstances and level of contribution to the loss. In United States v. Rammelkamp, No. 06-4359-cr (2d Cir. March 19, 2008), the court vacated a restitution order where the district court incorrectly believed that it was required to impose full restitution, and hence did not exercise its apportionment discretion.

Finally, in United States v. Sanders, No. 06-2403-cr, the court upheld an above-Guideline supervised release violation sentence, finding that the district court's oral statement of reasons "brief though it was" was adequate to satisfy 18 U.S.C. § 3553(c). Its written statement, however, was inadequate, so the court remanded the case for the "limited purpose" of permitting the district court to record its specific reasons in writing.

Monday, March 24, 2008

About Face!

United States v. Dominguez, No. 05-7005-cr (2d Cir. February 15, 2008, amended March 20, 2008) (Miner, Sack, Hall, CJJ)

Last month, when we wrote up this case, we noted with alarm the circuit’s holding that, for cases where the defendant faced a mandatory minimum but provided substantial assistance to the government, under § 3553(e) “any reduction [in sentence] may be based only on substantial assistance to the government and on no other mitigating considerations.” We commented that this did “not really make much sense,” since it seemed to preclude application of § 3553(a) at this type of sentencing, even though that statute is supposed to apply in all sentencings. See The Government Giveth and the Government Taketh Away, posted February 24, 2008.

I guess the circuit reads this blog. In the amended version of the opinion, it has added the following sentence at the end of the paragraph that contains the worrisome language quoted above: “In arriving at a final sentence, of course, the district court may consider other factors in determining whether to grant the full extent of the departure permitted by § 3553(e).” Slip op. at 15.

That’s more like it. Although still not a model of clarity (since the first sentence of the relevant paragraph is still wrong, see slip op. p 14-15), the decision now more accurately reflects a correct sentencing procedure. The amended version can be fairly construed to hold that substantial assistance is the only thing the district court can consider in deciding whether to depart in 3553(e) cases, but other mitigating factors can be considered in determining the extent of the departure.

Out of Ammunition

United States v. Sero, No. 05-6967-cr (2d Cir. March 19, 2008) (per curiam)

Defendant Sero, who pled guilty to illegally exporting weapons to the Philippines, challenged his sentence. In doing so, he gave the court its first opportunity to consider U.S.S.G. § 2M5.2 and its “bump-down.” This particular Guideline ordinarily calls for a base offense level of 26, but this is reduced to 14 if the offense involved “only non-fully automatic small arms” and “the number of weapons did not exceed ten.” He argued that he was entitled to the lower level because his conduct was “minor,” although it included ammunition, which is not mentioned in the bump-down. He lost under the plain language of the guideline. “We find that the guideline does not permit finding an exception for including ammunition, no matter how small the quantity.” He was also disentitled to the bump-down because his shipment consisted of components that “were capable of servicing more than ten fully or non-fully automatic weapons.”

Fraud Man Out

United States v. Cutler, No. 05-2516(L) (2d Cir. March 17, 2008) (Jacobs, Kearse, Pooler, CJJ)

In this case, the government successfully appealed the exceptionally lenient sentences that Judge Preska imposed on two defendants convicted of a multi-million dollar fraud. The circuit found that the sentences were both procedurally and substantively unreasonable, and remanded the case for resentencing.


James Cutler was the CFO of a holding company that owned hotels; Sanford Freedman was its general counsel. Together, they helped the company and its principals cheat a number of banks out of more than $100 million. In very brief, the scheme worked like this:

In the 1990's, the holding company restructured its debt, and its principals executed deficiency notes that made them personally liable for those debts. Around the same time, they sold key assets of their company to another company for stock worth more than $100 million. Although they therefore had sufficient resources to meet the deficiency notes, they instead decided to invest that money in another venture, and to trick their creditors into settling for less than the balances due. They hid their assets, then approached the creditors and claimed that they did not have the resources to pay the notes. They also threatened to declare bankruptcy if the creditors did not enter into repayment agreements.

During these negotiations, defendant Freeman repeatedly made false claims about the principals’ supposed financial distress, even while completing paperwork for their new venture that indicated that each was worth more than $30 million. Freeman also assisted in creating a sham foreign investor whom he held out as willing to purchase the principals’ debts from the banks for pennies on the dollar. Cutler’s role was to appease those creditors who were unconvinced by Freeman’s representations by sending them false financial statements.

In the end, the banks capitulated, and lost $106 million, the difference between the balances on the notes and the amount they sold them for.

After a jury trial, Freedman was convicted of bank fraud and conspiracy to commit bank fraud, making false statements to banks, and perjury (for testifying falsely in a related bankruptcy proceeding). Cutler was likewise convicted of bank fraud and conspiracy, false statements, and several counts relating to a $29 million tax fraud (he helped the company’s principals hide their income).

The Sentencings


Cutler’s Guideline range was 78-97 months. He moved for a downward departure under Application Note 10 to § 2F1.1, arguing that the loss overstated the seriousness of the offense, and under § 5H1.6, claiming extraordinary family circumstances.

The district court granted the motions, and went down by 15 levels. It knocked off 6 levels on its finding that the loss overstated the seriousness of Cutler’s role (although the court had refused to grant a role reduction under § 3B1.2), conduct and offense. The court also granted a 9-level departure for family circumstances in light of his children’s economic circumstances. These departures brought Cutler from level 28 to level 13, with a range of 12 to 18 months’ imprisonment.

Turning to the statutory considerations, the court again cited Cutler’s lower level of culpability with respect to the bank frauds (but not the tax fraud), the fact that he received “little, if any” direct compensation from the scheme, the need to provide restitution, and his family obligations. She sentenced him to one year and one day in prison. This was within the departure-generated Guideline range, but the judge also indicated that she would give the same sentence under the statute.


Freedman did even better. His Guideline range was 103 to 135. The court found that the loss overstated his culpability, and downwardly departed. It also granted a family circumstances departure because of his relationships with his mother-in-law and elderly, mentally retarded brother, and a § 5H1.4 departure due to his age (he was 69) and physical condition. In doing so, the court rejected the BOP’s repeated assurances that it could provide Freedman with adequate care.

The court did not fix an ultimate Guideline range. Instead, it relied solely on § 3553(a). Citing the departure grounds noted above, and the “humiliation” and loss of livelihood associated with Freeman’s prosecution, Judge Preska sentenced him to 3 years of probation.

The Circuit’s Ruling

The circuit identified numerous problems with the district court’s approach, and vacated both sentences.

With respect to Cutler, the circuit first rejected the notion that the loss amount overstated his role or level of culpability. Under § 1B1.3, Cutler was properly held accountable for all of the losses caused by him and his confederates. Here, the $106 million in actual loss was not just foreseeable, it was the explicit goal of the scheme. As far as the circuit was concerned, Judge Preska “misinterpreted the Guidelines,” made “an error of law,” and “clearly erred,” all at the same time. The circuit also noted that the Application Note 10 departure applies in cases where the loss figure is driven by intended loss, not actual loss. The circuit seemed deeply offended that the Cutler's sentence was within the range that would apply to a $70,000 loss. It held that the “implicit finding that a fraud causing losses of more than $100,000,000 is no more serious than one causing losses of little more than $70,000” did not comply with § 3553(a)(2)(A)’s requirement of “just” punishment.

The court next rejected the district court’s finding that Cutler received only a small gain from the scheme. It first held that this is not a ground for a downward departure but also noted that, in any event, the $1.3 million that Cutler pocketed hardly constituted “little, if any, personal gain.”

The court next rejected the district court’s stated view that this type of fraud did not warrant a long sentence because, since imprisonment is itself a deterrent in white collar offenses, the length of the sentence is immaterial. Some of Cutler’s convictions related to tax fraud, and that there is a Guideline policy statement for tax cases that directly contradicts this view. While a court can disagree with a Guideline-based policy consideration, it has to give a sufficient reason for the disagreement, which the court here did not do.

The court was particularly skeptical of the family circumstances departure. Cutler’s children lived with his ex-wife and, while they would likely suffer hardship without his financial support, this case was not outside the “mainstream of family hardships.” More importantly, the circuit believed that there was evidence that Cutler would still be able to support his children while incarcerated if he wanted to. It turns out that he had used some of the proceeds from the scheme to purchase assets that he placed in his second wife’s name, out of reach of his ex-wife and the children: “That Cutler chose to put [assets] into his new wife’s name to provide for her, rather than leaving it in his own name to provide for his children, may be an exceptional circumstance, but it is surely not one that authorizes a downward departure.”

Finally, the court rejected the district court’s seemingly excessive reliance on the need for restitution, out of concern that this would “imply that virtually all defendants who are required to pay restitution in amounts exceeding their net worth should receive short prison terms.”

The circuit had similar qualms about Freedman’s sentence. First, it faulted the district court’s refusal to consider an obstruction of justice enhancement based on Freeman’s initial false statements to IRS investigators. Next, as with Cutler, the court disagreed with the district court’s belief that the loss amount overstated Freedman’s culpability, particularly given Freedman’s “pervasive” participation in the scheme, and his “multi-million-dollar” compensation. On this point, the circuit found a “clearly erroneous assessment of the evidence in the record as to the nature and pervasiveness of [Freedman’s] actions and his substantial financial interest in the success of the frauds.”

The appellate court also rejected the district court’s view that, given Freedman’s humiliation and disbarment, probation would be “just punishment for the offense.” Those consequences - not even “punishment,” in reality - were “hardly unusual,” and thus the district court’s reasoning risked creating unwarranted sentencing disparities.

As with Cutler, the court rejected the family circumstances departure. The disabled brother lived in an assisted living center, and they did not interact frequently in person. Moreover, there was another sibling nearby to help manage the brother’s affairs.

Lastly, the court rejected the downward departure based on Freedman’s age and health, concluding that the district judge made clearly erroneous assessments both of Freedman’s actual condition and of the BOP’s ability to care for him. “[W]e see no support in the record for the district court’s finding that the BOP could not or would not provide that care.”

In the end, for both defendants, given “the procedural errors, the clear factual errors, and the misinterpretations of the § 3553(a) factors” the lenient sentences here were “substantively unreasonable and constituted an abuse of discretion.”

In a short concurrence, Judge Pooler noted that, while she agreed that a remand was necessary, she believed that it was premature to conduct substantive reasonableness review because the lower court had not yet imposed a “procedurally adequate sentence.” Under Judge Pooler’s method, the district court should first be given an opportunity to correct the procedural errors. That sentence, if appealed, would then be subject to review for substantive reasonableness.


Is this the end of leniency in this circuit? It does not seem so. At least based on the facts as presented by the circuit, these two guys were particularly bad candidates for short sentences. Their conduct was unusually brazen, its consequences unusually serious, and their arguments for mitigation did not come close to outweighing the seriousness of the offense. Even under this decision, then, there is clearly still room for short prison sentences, or even probation, in white collar cases, where the equities genuinely support it.

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Tuesday, March 11, 2008

Another Fine Meth

United States v. Tran, No. 05-5644-cr (2d Cir. March 10, 2008) (Sack, Sotomayor, Hall, CJJ)

Defendant Tran was stopped by customs officers while crossing the border from Canada, ostensibly to go to a casino in New York. Customs agents found several bags of pills hidden in the interior roof lining of his rented car, but Tran repeatedly denied knowing that the drugs were there.

There were more than 40,000 pills, weighing more than 10 kilograms. A chemical analysis of 29 of the pills revealed that they contained ecstasy (in concentrations ranging from 15 to 28%) and d-methamphetamine (in concentrations ranging from 5.6 to 6.9%). At trial, a DEA chemist testified that these tests accurately reflected the amount and percentage of the drugs in all of the pills.

Tran testified, and explained that he did not know that there were drugs in the car. He was convicted, and sentenced to 235 months’ imprisonment.

The Jury Charge on Knowledge

In its charge on knowledge, the district court largely followed Sand, except that it instructed that, where a defendant is the “sole occupant of an apartment,” it would be “reasonable to conclude that” he “knew about the items in [that] apartment.” It went on to explain that a defendant’s “behavior” such as “[n]ervousness in the presence of drugs[,] or flight” from the scene “may also indicate knowledge.”

On appeal, Tran challenged these instructions, claiming - inaccurately - that the court charged that the jury could reasonably infer knowledge from sole occupancy of a vehicle. The appellate court pointed out Tran’s error, then refused to review the actual instruction given, since Tran did not challenge it. In a footnote the court chided both his counsel for making “material misrepresentation[s] of the record” (on this point and another), and the government, for failing to point out the errors.

Tran did, however, challenge the language about nervousness in the presence of drugs, but the circuit affirmed. “Even where drugs are hidden and therefore not immediately visible to the occupant or others, the possibility of discovery may cause an individual with knowledge of the drugs to respond with nervousness to a law enforcement officer’s presence.” The court noted that there might be a “stronger claim of error” where a court instructs that “nervousness alone” is a sufficient basis for finding knowledge, but the charge as a whole here did not convey this message. It gave examples of indicators of knowledge, including nervousness, and said that they were “neither exhaustive nor . . . conclusive.”

Sufficiency of the Evidence

The court also held that the evidence of knowledge was legally sufficient. While agreeing that “sole occupancy of a vehicle cannot alone suffice to prove knowledge of contraband found hidden in the vehicle,” here there was more. The government introduced evidence of “nervousness," in the agents’ testimony about Tran’s conduct when stopped, and of “suspicious circumstances,” such as Tran’s traveling without directions to a place he had never been, and his doing so without toiletries or a change of clothes. Finally, by testifying, Tran forfeited his right to have the sufficiency of the evidence determined on the government’s case alone.

Tran also challenged the sufficiency of the evidence that the pills contained 500 grams or more of methamphetamine, claiming that the chemist’s sample was too small. The court disagreed, noting that “sampling is a permissible method of proof,” and that the chemist had opined that all of the pills contained the same substances in approximately the same proportions.

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Thursday, March 06, 2008

The “Regalado Remand”

United States v. Regalado, No. 05-5379-cr (2d Cir. March 4, 2008) (Jacobs, Pooler, Sack, CJJ) (per curiam)

At last, the circuit has told us what to do in light of Kimbrough. And the answer is, in essence, a Crosby remand.

Regalado received a 262-month crack sentence, the bottom of the Guideline range (he was not a career offender). The sentencing judge said nothing about the 100-to-1 crack/cocaine disparity and the defendant never raised it. Due to this silence, the appellate court concluded that it could not "tell whether the district court would have exercised its now clear discretion to mitigate the sentencing range produced by the 100-to-1 ratio." To solve the problem, the court decided to import the "Crosby mechanism" to crack cases.

Specifically, where a "defendant has not preserved the argument that the sentencing range for the crack cocaine offense fails to serve the [statutory] sentencing objectives . . . , we will remand to give the district court an opportunity to indicate whether it would have imposed a non-Guidelines sentence knowing that it had the discretion" to do so. "If so, the court should vacate the original sentence and resentence the defendant. If not, the court should state on the record that it is declining to [and] provide an appropriate explanation." If the defendant again appeals, that sentence will be reviewed for reasonableness.


This is a wonderful opinion, filled with great language about a sentencing court’s discretion. It also has some really helpful language about plain error in sentencing cases, that, hopefully, the court will remember in other contexts.

The only remaining puzzle is what to call this kind of remand: A "Crosby/Kimbrough" remand? How about a "Cros/Kim"? This blogger, always a fan of alliteration, votes for the "Regalado Remand."

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Saturday, March 01, 2008

Career Angst

United States v. Sanchez, No. 05-3812-cr (2d Cir. February 29, 2008) (Kearse, Straub, Pooler, CJJ).

In this long opinion, the court considered several challenges to recidivist sentences in a drug case. Two defendants, both “career offenders” under Guidelines section 4B1.1, got relief. A third, sentenced to an enhanced mandatory minimum, did not.

Career Offender

Title 28 U.S.C. § 994(h) directed the Sentencing Commission to develop Sentencing Guidelines for career offenders that would fix a Guideline range “at or near” the statutory maximum. Here, the district judge made statements that seemed to indicate that she believed that this section required her to sentence the defendants above the mandatory minimum, which was 120 months. She gave one defendant 235 months, and the other 188.

The court appellate court concluded that the district court’s apparent belief was incorrect. It noted that § 994(h) is a direction to the Commission, not the courts; moreover, there is no statute giving similar instructions to judges. Indeed, Congress rejected such legislation when fashioning the 1984 Sentencing Reform Act. The circuit concluded that for both defendants, the record was at least ambiguous as to whether the court would have imposed the same sentence if it correctly understood that § 994(h) did not restrict its sentencing authority.

The court remanded for clarification without vacating the sentences, and gave some interesting instructions for the remand. Since the policy considerations behind § 994(h) are relevant to several of the factors set out in 18 U.S.C. § 3553(a), this “must be taken into account” by the district court. The circuit instructed the district court to first “provide the necessary clarifications” regarding its reasons for imposing the sentences it selected, under a procedure similar to a Crosby remand. If that clarification reveals that the court would have imposed the same sentence, it need take no other action. If the clarification reveals that the district court would have imposed a different sentence on either defendant, then it should vacate that sentence and resentence him.

The Prior Felony Information

A third defendant received an enhanced mandatory minimum, 20 years instead of 10, after the government filed a prior felony information. See 21 U.S.C. § 851. The court rejected two constitutional challenges to the sentence.

First, it held that the statutory delegation to the United States Attorney of the power to raise the mandatory minimum did not violate the constitutional principle of separation of powers. Section 851 does give the government “some degree of control” over the ultimate sentence. But this is simply part of the government’s legitimate power to decide whether to prosecute at all and, if so, to decide which among the various available statutes - with different maximums and minimums - to use.

The defendant also argued that the government’s failure to explain why it had chosen to file a prior felony information against this one defendant, but not the others, was a due process violation. The court disagreed. Here, there was no evidence of an improper motive that would overcome the presumption of regularity of prosecutorial decision-making.

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