The Role of Relevant Conduct in Federal Sentencing
Persons convicted of a federal criminal violation are sentenced pursuant to the United States Sentencing Guidelines Manual (USSG). A breakdown of basic sentencing procedures can be found at a prior post here. A basic understanding of the federal sentencing process will clarify this article and its concepts.
Importance of the Offense Level
The sentencing guidelines apply a mesh of statute and fact specific inquiries to arrive at a sentencing recommendation for the Court’s consideration. Those recommendations are provided in a span of months. The District Court must consider the USSG recommendation before ordering a sentence. Any sentence that deviates from the guideline recommendation must be justified by the Court.
The sentencing recommendation from the USSG serves as a starting point for all federal sentencings. This starting point greatly impacts the sentences available to a defendant; notably, their ability to obtain split sentences or probation. The further the District Court must move from the USSG recommendation, the more difficult obtaining the sought after sentence becomes.
For example, let’s assume a taxpayer is convicted of three counts of tax fraud. If the tax loss to the government was $500,000, the USSG would recommend a sentence of 33-41 months (level 20). The guidelines would not recommend probation, though such a sentence is not statutorily barred. The criminal tax attorney’s job is to argue for a variance down from the 33-41 month recommendation in hopes of securing something short of prison time. From level 20, probation can be obtained with strong mitigation.
Now, let’s assume the tax defendant was convicted of three counts of tax fraud with a tax loss that exceeded $150,000,000. The USSG would recommend a prison sentence between 121-151 months. At this level, there is a very limited set of mitigating factors that would justify the District Court’s decision to order probation. The distance between the recommendation and the final sentence is too great. Absent a life threatening illness, or other profound piece of mitigation, probation is not obtainable under those facts.
Finding the Offense Level
Most guideline calculations start with assessing the harm caused by the criminal episode. For criminal tax cases, the harm is tied to the tax loss. In a drug conspiracy, the recommendation is driven by the amount of controlled substance at issue. In a wire or bank fraud case, the recommendation is driven by the intended loss to the victims. Each statutory crime falls under one of the umbrella USSG sections. All of them will start the calculation with an assessment of the criminal category and the resulting starting point for sentencing.
On its face, this concept is easy enough. If a taxpayer underreports income, the tax loss is the difference between the paid and owed taxes under a proper return. In a drug conspiracy, one could simply determine the total weight of the substance to arrive at the offense level. A similar feat could be performed for bank or wire fraud.
Like most things in law, the calculations in practice are not that simple. The USSG does not solely incorporate the charged crime when calculating a recommended range of punishment. Both uncharged conduct and conduct outside the statute of limitations can be used to arrive at the initial offense level under USSG § 1B1.3. Under federal case law, this uncharged conduct is known as relevant conduct. This conduct is present in nearly every federal sentencing and must be considered early in the representation to effectively represent a client.
The Role of Relevant Conduct
The following example should assist in understanding the role of relevant conduct in a federal sentencing. Let’s assume a defendant has been charged with three counts of filing a false return in tax years 2016-2018. The tax loss attributed to the charged scheme is $1,000,000. Additionally, the criminal tax client filed similar falsities on his 2010-2015 returns. The prior returns are not charged in the indictment based on the six-year statute of limitations. The loss associated with the prior returns is $5,000,000.
If the client hopes to negotiate a plea deal, the criminal tax attorney will have to calculate the potential sentence under the USSG. Only after the calculation is finalized can the client make an informed decision regarding the waiver of his right to a jury trial.
To use conduct that falls outside the zone of conviction, the government must be able to prove, based on the preponderance of the evidence, the conduct was part of the indicted scheme. The USSG does not recognize a difference between convicted conduct, charged conduct, or conduct outside the statute of limitations. All loss attributable to the illegal scheme is in play.
Applying that rule to the current hypothetical highlights the draconian nature of relevant conduct. If the taxpayer pleads to one count in the three-count indictment (with the other two charges being dismissed), the tax loss at sentencing is $6,000,000. If the taxpayer pleads guilty to all three counts, the tax loss is $6,000,000. If the taxpayer goes to trial, and loses, the tax loss is $6,000,000. If the taxpayer is found guilty under one count, and not guilty under the other two, he/she is looking at the same sentencing recommendation. In this case, the USSG would recommend a sentence between 51-63 months.
Control the Tax Loss During Negotiations
Once a criminal tax case is plead, there is no way for the attorney to control the eventual tax loss. Assuredly, the probation department will err on the side of ratcheting up the sentence in every way possible. If there is any legal argument for including a particular slice of the loss, it will be included in the presentence report for the District Court.
Under that strategy, the lawyer is left to argue the biggest component of sentencing at the final hour. This option of last resort is a dangerous one. The difference between a recommendation within striking distance from probation and one that ensures prison time is huge for the client. Allowing the range to remain unsettled until the sentencing hearing is a game of chicken that should be avoided.
If at all possible, a criminal tax attorney should include an agreed amount of loss in the plea agreement. An agreement to the loss will strip the U.S. probation department of their ability to run wild with the numbers. And 9/10 times, the agreed loss will prevail in the sentencing hearing.
Under the hypothetical above, the attorney could likely get the government to agree to a loss close to $1,000,000. The government wants to obtain the guilty plea, and they will normally make concessions in this area. By curtailing the loss, the lawyer has lessened the recommended range from 51-63 to 33-41 months. The resulting drop in the guideline range could be the difference between years in prison and walking out of court with probation.
How to Handle Acquitted Conduct
Above we discussed the use of conduct that is not charged, not the basis for a conviction, and/or outside the statute of limitations. However, there is a fourth classification of conduct that must be considered – acquitted conduct. Acquitted conduct includes conduct where the judge/jury found the defendant not guilty at trial. The question is whether a District Court may consider the loss under the acquitted conduct at sentencing.
Using our example above, let’s assume the defendant went to trial on the three counts of tax fraud. The jury found the taxpayer guilty of one count and not guilty of the other two counts. Under the current law, the Court may consider the acquitted conduct for establishing the total loss amount under the USSG.
While this seems unfair, the logic makes sense. The government must prove guilt beyond a reasonable doubt at trial. However, the burden of proof drops to a preponderance of the evidence at sentencing. The two standards create a gray area where certain factual narratives may exist. It is entirely possible for a set of facts to meet the preponderance of the evidence standard while falling short of the heightened standard for a conviction.
This long standing rule has been crafted by the Circuit Courts of Appeals and sanctioned by the Supreme Court in United States v. Watts, 519 U,S, 148 (1997). However, the decision in Watts answered challenges tied to the provisions of the USSG. The Supreme Court has not decided whether the use of acquitted or uncharged conduct violates a defendant’s rights under the Fifth or Sixth Amendments to the United States Constitution.
The Supreme Court has finally decided to address that very issue in Karr v. United States. Karr received an enhancement under the USSG for causing the death of another after being acquitted for the same conduct at trial. The Supreme Court granted certiorari and should hear Karr’s case in the coming months. It will be interesting to see if the Supreme Court will deliver the first blow to Circuit decisions which have generally allowed all conduct to be considered at sentencing. When the Supreme Court delivers their opinion in Karr, we will navigate the procedural history and the ultimate outcome in a subsequent post.