Friday, April 17, 2015

Pinkerton and Sentencing for Jointly Undertaken Activity; Proposed Sentencing Guidelines Amendment (4/17/15)

Note to readers:  I posted this entry at the end of a long blog yesterday.  (That blog entry is here.)  I thought that the subject might not get the appropriate attention there and decided to lift it up to a separate blog entry.  In its summary order in United States v. Platt, 2015 U.S. App. LEXIS 6157 (2d Cir. 2015), here, the Court addressed the application of relevant conduct to jointly undertaken activity using the relevant conduct concept of the Sentencing Guidelines.

The trial court sentenced the defendants based on the activities of other persons who implemented the scheme.  The trial court relied on a spreadsheet prepared by the Government and did not make particularized findings to support the inclusions in the spreadsheet.  The Court of Appeals remanded for those findings, but had some interesting comments regarding the process.

The background for the comments is Pinkerton co-conspirator liability.  United States v. Pinkerton, 328 U.S. 640 (1946), here.  (This blog has discussed Pinkerton liability often; for the blog entries sorted by relevance, see here.) For purposes of criminal conviction, one conspirator can be prosecuted for the reasonably foreseeable criminal conduct of co-conspirators within the scope of the conspiracy.  For purposes of sentencing, though, the inclusion of financial loss from other persons' conduct is more restricted (I digress on that issue below, but first offer the analysis if the Second Circuit in the Platt opinion on which this blog entry is based):
Under Section 1B1.3(a)(1)(B) "[a] district court may sentence a defendant based on the reasonably foreseeable acts and omissions of his co-conspirators that were taken in relation to a conspiracy." United States v. Getto, 729 F.3d 221, 234 (2d Cir. 2013). However, to hold a defendant accountable for jointly undertaken criminal activity, a district court must first "make a particularized finding of the scope of the criminal activity agreed upon by the defendant" and, in addition, make a particularized finding that relevant co-conspirator conduct was foreseeable to the defendant. Studley, 47 F.3d at 574. 
At sentencing, the district court committed procedural error by failing to make particularized findings concerning whether the conduct of other gifting table participants fell within the scope of defendants' agreement, and whether this conduct was foreseeable to defendants. The district court relied on a spreadsheet prepared by the government that listed gains to other table participants, but excluded individuals who lacked an "established association"—or "material connection" in the district court's understanding—with defendants. The court further excluded gains to individuals where "it was unclear whether they were operating substantially independently" of defendants, and [17]  only partially including gains where "it was unclear whether part of the[] foreseeable gains [of other table participants] should be excluded." The court thereby eliminated from the loss amount calculation gains to some participants with apparently tenuous connections to defendants but neither explained what constituted a material connection nor clearly indicated whether the gains attributed to defendants were foreseeable. Accordingly, we conclude that the district court's findings did not comply with the requirement of Studley to make particularized findings relating to "the scope of the specific conduct and objectives embraced by the defendant[s'] agreement," Studley, 47 F.3d at 574 (quoting U.S.S.G. § 1B1.3, cmt. n. 2) (emphasis omitted), and "as to whether the activity was foreseeable to the defendant[s]," id.
Although we remand for the district court to make particularized findings, consistent with our decision in Studley, we harbor significant doubts regarding whether all of the women whose gain was used to calculate defendants' loss amounts were properly considered members of the fraud conspiracy. As we have noted "the scope of conduct for which a defendant can be held accountable under the sentencing guidelines is significantly narrower [18]  than the conduct embraced by the law of conspiracy." Getto, 729 F.3d at 234 n.11 (internal quotation marks omitted). For the purposes of sentencing, mere "knowledge of another participant's criminal acts" or "of the scope of the overall operation" does not make a defendant criminally responsible and it is less likely that an activity was jointly undertaken if the participants worked independently and did not "pool their profits and resources." See Studley, 47 F.3d at 575. 
We decline the government's invitation to affirm the loss calculation under Section 1B1.3(a)(1)(A), which provides that "acts . . . committed, aided, abetted, counseled, commanded, induced, procured, or willfully caused by the defendant . . . that occurred during the commission of the offense of conviction" are to be considered in calculating a defendant's base offense level. U.S.S.G. § 1B1.3(a)(1). While defendants supervised, trained, and otherwise interacted with many gifting table participants, the record evidence is insufficient to conclude that defendants aided or abetted all of the individuals whose conduct was attributed to them for purposes of calculating the loss amount. 
Accordingly, defendants' sentences are vacated and the case is remanded to the district court to make particularized findings, consistent [19]  with our decision in Studley, relating to the scope of the conspiracy defendants agreed to and the foreseeability of the gains caused by other gifting table participants, and to recalculate the total amount of loss attributable to each defendant. Because we remand this case, we do not reach defendants' other challenges to the procedural and substantive reasonableness of their sentences.

Now I want to digress on the distinction between the Pinkerton conspiracy substantive criminal liability and the joint undertaking inclusion in SG 1B1.3(a)(1)(B), here.  That provision deals with relevant conduct which permits a court to include in the sentencing calculations conduct other than conduct that the defendant committed for the count(s) of conviction.  For financial crimes, this permits losses other than losses caused by the defendant for the count(s) of conviction.  In the Platt setting, it would include losses of other participants.  The provision of the Guidelines is:
in the case of a jointly undertaken criminal activity (a criminal plan, scheme, endeavor, or enterprise undertaken by the defendant in concert with others, whether or not charged as a conspiracy), all reasonably foreseeable acts and omissions of others in furtherance of the jointly undertaken criminal activity,
Students of the federal criminal law familiar with Pinkertonhere, would think that this pretty much parallels Pinkerton liability.  The above opinion cryptically says that is not the case but then turns upon whether the sentencing judge made the required findings before including the other parties' conduct in the financial loss.

The differences between Pinkerton liability and the sentencing provision often comes up in drug convictions where the Guidelines turn on quantity.  The following is a good discussion from United States v. Spotted-Elk, 548 F.3d 641, 673-677 (8th Cir. 2008), here, in the context of a withdrawal defense (emphasis supplied by JAT; footnotes omitted).
The Guidelines include as relevant conduct in the case of a jointly undertaken criminal activity all (1) "reasonably foreseeable acts and omissions of others" (2) "in furtherance of" (3) "the jointly undertaken criminal activity." USSG § 1B1.3(a)(1)(B). These elements closely correspond to the classic statement of the common law requirements for substantive conspiracy liability. See Pinkerton v. United States, 328 U.S. 640, 647-48, 66 S. Ct. 1180, 90 L. Ed. 1489 (1946) ("A different case would arise if the substantive offense committed by one of the conspirators was not in fact done in furtherance of the conspiracy, did not fall within the scope of the unlawful project, or was merely a part of the ramifications of the plan which could not be reasonably foreseen as a necessary or natural consequence of the unlawful agreement."). 
But despite the Pinkertonian language of the guideline, the commentary to USSG § 1B1.3 explains that the concepts of relevant conduct under the Guidelines, on the one hand, and conspiracy liability, on the other, are not the same: "The principles and limits of sentencing accountability under this guideline are not always the same as the principles and limits of criminal liability. . . . [T]he focus [of the Guidelines] is on the specific acts and omissions for which the defendant is to be held accountable in determining the applicable guideline range, rather than on whether the defendant is criminally liable for an offense as a principal, accomplice, or conspirator." USSG § 1B1.3, comment. (n.1). This commentary was added in 1992, USSG App. C, Amendment 439, following criticism that "the relevant conduct section failed to adequately distinguish among conspirators and others involved in 'jointly undertaken activities.'" Roger W. Haines, Jr., et al., Federal Sentencing Guidelines Handbook 133 n.19 (2007-08 ed.). 
The commentary to § 1B1.3 shows that while the emphasis in substantive conspiracy liability [Pinkerton liability] is the scope of the entire conspiracy and foreseeability in light of that scope, the emphasis under § 1B1.3 is the scope of the individual defendant's undertaking and foreseeability in light of that undertaking, rather than the scope of the conspiracy as a whole: "Because a count may be worded broadly and include the conduct of many participants over a period of time, the scope of the criminal activity jointly undertaken by the defendant . . . is not necessarily the same as the scope of the entire conspiracy, and hence relevant conduct is not necessarily the same for every participant." USSG § 1B1.3, comment. (n.2). This distinction between the scope of the entire conspiracy, for which a defendant may be held accountable under Pinkerton, and the scope of the individual defendant's undertaking, for which a defendant may be held accountable under § 1B1.3, was highlighted as a "key point" in a law review article written by the Chairman and General Counsel of the Sentencing Commission in 1990. William W. Wilkins, Jr. and John R. Steer, Relevant Conduct: The Cornerstone of the Federal Sentencing Guidelines, 41 S.C.L. Rev. 495, 510 (1990). See generally United States v. McClatchey, 316 F.3d 1122, 1127-29 (10th Cir. 2003) (conviction of conspiracy does not make defendant responsible under § 1B1.3 for all reasonably foreseeable bribes paid by his co-conspirators; the bribes must also fall within the scope of the defendant's joint undertaking); United States v. Soto-Piedra, 525 F.3d 527, 531-33 (7th Cir.) ("Conspiracy liability . . . is generally much broader than jointly undertaken criminal activity under section 1B1.3. . . . Actions of coconspirators that a particular defendant does not assist or agree to promote are generally not within the scope of that defendant's jointly undertaken activity."), cert. denied, 129 S. Ct. 261, 172 L. Ed. 2d 195 (2008); United States v. Swiney, 203 F.3d 397, 404 (6th Cir. 2000) ("[T]he Sentencing Guidelines have modified the Pinkerton theory of liability so as to harmonize it with the Guidelines' goal of sentencing a defendant according to the 'seriousness of the actual conduct of the defendant and his accomplices.'") (quoting Wilkins & Steer, supra) (distinguished in United States v. McIntosh, 236 F.3d 968, 974 (8th Cir. 2001)); United States v. Lanni, 970 F.2d 1092, 1093 (2d Cir. 1992) ("[A]n important distinction exists between the criminal law standard for convicting a defendant of conspiracy and the Guidelines standard for sentencing a defendant convicted of conspiracy."). But see United States v. Lucht, 18 F.3d 541, 554 (8th Cir. 1994) (when defendant is convicted of substantive offense based on Pinkerton liability, he may be sentenced on the basis of aggregate amount of drugs involved in each count of conviction, based on jury's findings). 
As we have applied § 1B1.3 in the specific context of a drug distribution conspiracy, a defendant's conviction for conspiracy does not automatically mean that every conspirator has foreseen the total quantity of drugs involved in the entire conspiracy; in addition to membership in the conspiracy, the district court must find the scope of the individual defendant's commitment to the conspiracy and the foreseeability of particular drug sale amounts from the individual defendant's vantage point. United States v. Weekly, 118 F.3d 576, 578-80 (8th Cir.), modified on other grounds, 128 F.3d 1198 (8th Cir. 1997); United States v. Flores, 73 F.3d 826, 834 (8th Cir. 1996). We recently reversed a sentence in part because of the district court's blanket assertion that the defendant was responsible for actions of other conspirators that were a part of the conspiracy, unqualified by an analysis of whether the actions were foreseeable to the defendant. United States v. Delgado-Paz, 506 F.3d 652, 655 (8th Cir. 2007); accord United States v. Rogers, 982 F.2d 1241, 1245-46 (8th Cir. 1993) (remanding for findings regarding whether entire amount of drugs attributable to conspiracy were foreseeable to defendant); United States v. Anderson, 243 F.3d 478, 484 (8th Cir. 2001) (district court erred in attributing co-conspirator's drug sales to defendant without any evidence connecting the defendant to the drugs). Conversely, we recently affirmed a case in which two conspirators were held accountable for different amounts of drugs, based on different degrees of involvement in the conspiracy's activities. United States v. Pruneda, 518 F.3d 597, 607 (8th Cir. 2008). 
Factors bearing on the scope of the defendant's criminal undertaking and the foreseeability of particular criminal acts include: (1) whether and to what extent the defendant benefitted from his co-conspirators' criminal acts, and (2) whether the defendant showed a substantial level of commitment to the conspiracy. United States v. Alexander, 408 F.3d 1003, 1010 (8th Cir. 2005); Weekly, 118 F.3d at 578. 
The commentary to § 1B1.3 expressly states that conduct of the other conspirators that occurred before the defendant joined the conspiracy is ordinarily not "relevant conduct," comment. (n.2), and we have reasoned from this exclusion "that a person should also not be held responsible for the losses that occur after he exits the conspiracy." United States v. Oseby, 148 F.3d 1016, 1026 (8th Cir. 1998). 
Even though the scope of substantive liability for conspiracy and relevant conduct are not co-extensive, the government contends that the common-law test for withdrawal from a conspiracy should be determinative of relevant conduct under § 1B1.3. Two of the cases the government cites, United States v. Maggard, 156 F.3d 843, 851 (8th Cir. 1998), and United States v. Zimmer, 299 F.3d 710, 718 (8th Cir. 2002), do not examine the claim of withdrawal in the context of determining "relevant conduct," but instead are interpreting the common law of conspiracy in order to determine whether the defendant was still legally a member of the conspiracy at a certain time. See also United States v. Granados, 962 F.2d 767, 773 (8th Cir. 1992) (same) (decided before 1992 amendments clarifying § 1B1.3). The other case the government relies on, United States v. Jackson, 345 F.3d 638, 648 (8th Cir. 2003), discusses the common-law withdrawal test in the context of deciding whether the defendant was entitled to a jury instruction on withdrawal, not in determining relevant conduct for sentencing. However, other circuits have used the common-law withdrawal-from-conspiracy test in determining the scope of relevant conduct under § 1B1.3. See United States v. Nieves, 322 F.3d 51, 55 (1st Cir. 2003); United States v. Thomas, 324 U.S. App. D.C. 374, 114 F.3d 228, 267-68 (D.C. Cir. 1997); United States v. Schorovsky, 202 F.3d 727, 729 (5th Cir. 2000) (defendant withdrew). Under this test, a defendant who claims to have withdrawn from the conspiracy has the burden of proving an affirmative act of withdrawal, abandonment, or defeat of the conspiratorial purpose. Schorovsky, 202 F.3d at 729; accord Nieves, 322 F.3d at 55; see generally Pinkerton, 328 U.S. at 646-47. The affirmative act required is typically either a confession of the conspiracy to the government or else communication of the fact of withdrawal to the other conspirators; mere cessation of unlawful participation is not enough. Maggard, 156 F.3d at 851. 
There is some tension between the policy expressed in the commentary to § 1B1.3 of tailoring the scope of relevant conduct to each particular defendant's undertaking versus the common-law withdrawal test, under which, once the defendant has climbed on board the conspiracy, liability for reasonably foreseeable acts in furtherance of and within the scope of the conspiracy accrues automatically unless the defendant can show rather dramatic and unusual facts showing affirmative renunciation of the conspiracy. It could be questioned whether the common-law withdrawal from conspiracy test is entirely consistent with § 1B1.3. In particular, a defendant's voluntary and permanent absence from the conspiracy's operations would seem to lead to findings that his commitment to the conspiracy and his likelihood of benefitting from the conspiracy's activities were curtailed. However, even assuming that there is a place for the common-law test in applying § 1B1.3, it is nevertheless true that the test does not apply in cases where the conspiracy's activities expanded or changed in a way not foreseeable to the defendant at the time he discontinued his participation. In United States v. Ladum, 141 F.3d 1328, 1346 (9th Cir. 1998), the defendant, Ford, participated in a business that was illegally avoiding paying taxes for three years, quit for three years, and then began again. The court held that Ford should not automatically be liable for the tax loss during his three-year hiatus even though he did not affirmatively withdraw during those years because it was not "self evident to [the Ninth Circuit] that it was foreseeable to Ford that tax loss from the stores that were in operation in 1986 would continue to 1989, or that there would be tax loss from stores that had not been established in November 1986." Id. at 1347. The Ninth Circuit remanded for foreseeability findings. Id. Similarly, in United States v. Melton, 131 F.3d 1400, 1403-07  [677]  (10th Cir. 1997), the district court erred in basing a conspirator's sentence on new developments that occurred after the defendant had been arrested and had ceased participating in the criminal activity. Even though in these cases, the defendant did not withdraw by confessing or announcing his withdrawal to the other conspirators, his co-conspirators' new projects, undertaken in the defendant's absence, were not foreseeable to him and thus not relevant to his sentence. In contrast, in United States v. Melvin, 91 F.3d 1218, 1226 (9th Cir. 1996), a defendant was liable for losses that occurred after he was fired from an illegally run business; because he had created the schemes that others continued to operate after he left, the losses were foreseeable and within the scope of his contribution to the conspiracy, even though he was no longer actively engaged in the business. 
Thus, initially the district court must make the required findings that the actions of others were within the scope of the joint activity undertaken by the defendant, rather than the scope of the conspiracy as a whole; that the acts were in furtherance of that activity; and that they were known to or reasonably foreseeable by the defendant. Only if all these elements are satisfied will the defendant continue to be liable unless and until he withdraws from the conspiracy in accordance with the common-law rule.
In a tax crimes setting, this relevant conduct discussion will play out in considering what tax loss attributable to other parties' conduct is included in a defendant's tax loss calculation, which, as with economic loss for financial crimes, is the principal driver in the sentencing calculations.  See SG §2T1.1., here, and SG §2T4.1, here.

Proposed Guidelines Clarification:

The Sentencing Commission proposes to amend the relevant conduct Guideline . See Proposed Amendments to the Sentencing Guidelines (1/16/15), here, starting on p. 24.  These were voted on and approved on 4/9/15.  The proposal is summarized (p. 24):
The proposed amendment would revise §1B1.3 (Relevant Conduct (Factors that Determine the Guideline Range)) to provide more guidance on the use of “jointly undertaken criminal activity” in determining relevant conduct under the guidelines. See §1B1.3(a)(1)(B). Specifically, it restructures the guideline and its commentary to set out more clearly the three-step analysis the court applies to hold the defendant accountable for acts of others in the jointly undertaken criminal activity. The three-step test requires that the court (1) identify the scope of the criminal activity the defendant agreed to jointly undertake; (2) determine whether the conduct of others in the jointly undertaken criminal activity was in furtherance of that criminal activity; and (3) determine whether the conduct of others was reasonably foreseeable in connection with that criminal activity.
Allen Ellis, a prominent practitioner specializing in sentencing and related issues, summarizes the proposal here as follows:
Jointly Undertaken Criminal Activity 
Conspiracy cases often involve complex questions of fact regarding the liability of one conspirator for another. For purposes of trial, conspirator A can be held liable for the overt acts of conspirator B even if A had no actual knowledge of B’s acts, as long as B’s acts were in furtherance of the conspiracy. But the same does not necessarily hold for purposes of sentencing, and this has led to considerable confusion in the courts. 
At the trial level, courts are concerned with liability, while at sentencing the issue turns to culpability. Or as the Commission long has noted, “[t]he principles and limits of sentencing accountability . . . are not always the same as the principles and limits of criminal liability.” USSG §1B1.3, comment. n.1 (emphasis added). This has nevertheless led to confusion inasmuch as courts often equate trial liability with sentencing accountability. For example, in a fraud conspiracy involving A and B that resulted in $15 million in investor losses, while A and B may be criminally liable for the conspiracy, the guidelines recognize that A may not be as accountable—in other words, less culpable—as B especially where A’s role was comparatively small. The same of course holds true for drug conspiracies and other offenses that are quantity-driven, e.g., antitrust, bribery, tax fraud, and racketeering. 
The Commission now has clarified conspirator A can only be held accountable for the acts of conspirator B where (1) B’s acts were within the scope of criminal activity that A agreed to jointly undertake, (2) B’s acts were in furtherance of that criminal activity, and (3) B’s acts were reasonably foreseeable in connection with that criminal activity. The first criterion, which now has been added to the guidelines, clarifies that within conspiracies, each co-conspirator should only be held accountable for conduct that he actually agreed to jointly undertake with the other conspirators. 
This clarification hopefully will reverse the trend of automatically holding one conspirator accountable for the conduct of all other conspirators. After all, holding a conspirator accountable only for the foreseeable conduct they agreed to undertake, which was in furtherance of the conspiracy, is a far better measure of culpability than has often been the case.

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