On November 30, 2022, the Third Circuit Court of Appeals issued a significant decision affecting sentencing in white collar crime cases. In United States v. Banks, the defendant was convicted on fraud and other related charges. As alleged by the government, the defendant’s fraudulent scheme involved opening accounts with an investment firm and making deposits into those accounts. Because those deposits were drawn on other accounts with insufficient funds, the defendant unsuccessfully attempted to quickly withdraw the funds before the shortage was detected.
Because there was no actual monetary loss to the investment firm, the defendant argued at sentencing that there should be no increase to the offense level under Section 2B1.1(b) of the United States Sentencing Guidelines (USSG), which states that if the loss exceeds $6,500, the offense level should be increased in two-point intervals depending on the exact amount of loss. However, the defendant’s pre-sentence report (PSR) provided that the defendant’s offense level should be increased by 12 under Section 2B1.1(b), because the “attempted loss” was between $250,000 and $550,000.
The District Court adopted the PSR’s recommendation and increased the defendant’s offense level by 12 under Section 2B1.1(b)(1)(G). The District Court noted that the Sentencing Guidelines contains commentary in an application note, which defines the word “loss” as “the greater of actual loss or intended loss.” Section 2B1.1 App. Note 3(A). Because the defendant intended a loss greater than $250,000, that was a proper measure of loss under Section 2B1.1(b). The defendant was sentenced to 104 months in prison.
On appeal, the Third Circuit reversed, finding that the Sentencing Guideline’s Application Note commentary improperly expanded the definition of “loss” and, therefore, was entitled no weight. Because the Sentencing Guidelines themselves (sans commentary) do not define the word “loss,” the Third Circuit looked to the word’s ordinary meaning which, according to the Third Circuit, is limited to actual loss. Because the victim suffered no actual loss, the Third Circuit remanded the case for re-sentencing, and instructed the district court to re-sentence the defendant without the 12-point enhancement for loss.
While it is rare that the federal government pursues a fraud case that does not include some sort of actual loss such as the Banks case, what is very common is the government arguing that a defendant should be sentenced based on intended loss where the intended loss is higher than the actual loss (e.g., in a healthcare fraud case where a laboratory fraudulently bills Medicare $10 million, but Medicare only pays $5 million). In those cases, it will be crucial for defendants to cite the Third Circuit decision in Banks in their objections to PSRs and in sentencing memos.
The attorneys at Chilivis Grubman represent both individuals and companies in connection with criminal investigations and prosecutions. If you need assistance with such a matter, please feel free to contact us.