In his plea agreement, the parties agreed that the Guidelines sentencing range was 46-57 months.
At sentencing , the Government recommended to the sentencing judge a sentence of 1 year and 1 day (which, with the good in 18 U.S.C. § 3624(b) would be 47 days less than the sentence). The defendant argued for no incarceration -- probation.
The sentencing judge in Warner can gave a considerable variance, awarding probation.
Just last week, the Seventh Circuit heard oral argument in the Government's appeal. The oral argument is here. I previously posted the briefs. When is Booker Variance Too Much? Per DOJ, Certainly in the Ty Warner Case (Federal Tax Crimes 5/12/14), here; Ty Warner Appellee Brief on Sentencing Appeal (Federal Tax Crimes 7/28/14), here; and the Reply Brief is here.
This blog will focus on on the oral argument (linked above). Many hear the oral argument as indicating that the Court will uphold the sentence by the district judge. See e.g., Douglas Berman, Seventh Circuit panel seemingly unmoved by feds appeal of probation sentence given to Beanie Babies billionaire (Sentencing Law and Policy Blog 9/17/14), here.
I listened to the oral argument. Having spent four years doing court of appeals work with DOJ Tax and having many arguments), my experience is that it is often hard to predict results from questioning at oral argument. Sometimes judges just want to fully test an argument with tough questions before they accept it. But, if one can predict a result from this argument, it appears that the panel was not struggling with the issue of what was necessary to reverse and remand for sentencing but what was necessary to affirm. Still, I am not sure I would wager on either outcome. (I have said before that, given my perspective on the federal tax crimes system and the role of sentencing within it, if there was ever a case that demanded some incarceration in the context of sophisticated tax crimes, this was it; a probation sentence, if allowed, will bubble throughout tax sentencing and will force judges of good conscience to struggle with the issue of whether the defendant before them should be treated worse that Ty Warner.)
I want to make only a few points about the oral argument:
- The court wondered why, if Warner's conduct was so bad (multiple transgressions to hide the offshore monies), the Government agreed only to a single count of conviction. The Government attorney point out quite rightly that a single count of conviction was the deal then being offered by the Government for the cases that met its prosecution parameters. That was an exercise of prosecutorial discretion in designing the program. I think the panel's concern was that, in terms of the Government's position in Warner, it might have been a bad one.
- The Government also pointed out that the other bad conduct was still appropriate to consider both under Section 3553(a) and the relevant conduct inclusions under the Guidelines. It is not like with a single count of conviction, the other long-term conduct was ignored. Still, I am not sure the panel was persuaded.
- One claim the Government made was that it could never figure out how the money got offshore -- was it tax paid or nontax paid money? I wonder why the Government attorneys did not ask Warner during the negotiation or run-up to sentencing and, presumably, with the cooperation required for a guilty plea, he would have had to disclose. I would have thought that the Government would have required full and complete cooperation for agreeing to the single count. So, this is a bit a mystery to me (unless the Government attorneys were just out-lawyered).
- The fact that a number of other taxpayers were getting probation for similar conduct -- although not of the same scope -- troubled the judges in considering whether the sentence was too lenient. Of course, sentencing in financial crimes cases is all about the scope of the conduct -- particularly as measure by financial harm (tax loss in the tax crimes case). Warner had the largest tax loss and, to the extent that that factor (the principal factor under the Guidelines) indicates a sentence, some incarceration would be required.
- The panel was also concerned that, if Warner's conduct were so bad, why did the Government argue at sentencing for only a sentence of 1 year and 1 day when the Guidelines range was significantly higher. In other words, the Government may have created the problem of conveying Warner as a good guy by the sentencing range it proposed when at least some others were getting higher sentences.
- Warner's attorney exploited well this concern. In addition, Warner's attorney argued that, with a substantial downward variance argued by the Government itself to one year and one day, the sentencing judge was really presented with a binary choice of probation or one year and one day and the difference between the two (one year and one day) was not material enough for the conclusion that the judge abused his discretion. Very nice. (The Government's recommendation of 1 year and 1 day is a mystery to me; I would have thought that the seriousness of the crime would have fully justified at least a bottom of the range position, with the sentencing court then being given the flexibility to move somewhere in between; by giving up the major ground voluntarily, the signal was planted that, despite the numbers, Warner was a pretty good guy.
- The panel seemed to be impressed by the amount of the fine paid and the amount of taxes that Warner had paid over the years (suggesting an overwhelming pattern of compliance with this one aberration). And the court noted that the FBAR penalty was major -- the highest ever, so he is being punished for his crimes and a signal is sent to deter others.
I did not capture all the nuance of argument, but those are just some points that stuck with me.
Other relevant blog entries
Booker Variances are More Common in Tax Crimes. Why? And Do They Disproportionately Benefit the Rich? (Federal Tax Crimes Blog 5/16/14), here.
More on the Warner Sentencing Appeal (Federal Tax Crimes Blog 9/15/14), here.