United States v. Negroni, 2011 WL 1125854 (Mar. 29, 2011). This case involved a massive fraud scheme in which the perpetrators submitted false claims in securities class action settlements. The defendants here – Hall & Negroni – submitted false claims totaling at least $1 million of the more than $40 million involved in the scheme. Both entered guilty pleas to mail fraud and wire fraud (Hall also pled guilty to tax evasion). The district court sentenced Hall to 15 months’ imprisonment and Negroni to 5 years’ probation. The government had sought much higher sentences.
For Hall, the government had sought a Guidelines enhancement of six levels because the scheme allegedly involved more than 250 victims. According to the Court, the district court rejected the enhancement with little explanation, commenting only that it was reluctant to accept the cooperating witness’s testimony without corroboration. Without the enhancement, the range was 46-57 months. The government sought a high-end sentence, but the district court varied downward.
For Negroni, the range, including the enhancement, was 70-87 months. Negroni asked for a variance or departure based on diminished capacity, and an unhealthy dependence developed on the leader of the scheme during his unguided, unhappy youth. He presented letters describing his unfortunate history and reports by a psychologist and his treating therapist, In sentencing Negroni to probation (with some home confinement), the district court cited the abuse and neglect Negroni suffered, his attachment to the leader of the scheme, the psychologist’s report, his stable family life, his treatment, his acceptance of responsibility, and his ability to pay restitution.
The government objected to both sentences as unreasonable. Although the government labeled its challenges on appeal as “substantive” challenges, the Court held that it had not waived challenges to the procedural reasonableness of the sentence because many of the arguments the government presented in its brief fell squarely within the definition of procedural error.
The Court then held that the district court failed to provide adequate explanation for its rejection of the enhancement for 250 or more victims. The Court felt that the government had presented evidence in support of the enhancement, although the defense had identified weaknesses with that evidence. Because the district court did not give its reasons for rejecting the enhancement, the Court was unable to review that decision.
With regard to Negroni’s sentence, the Court held that the district court failed to provide sufficient explanation for variance from a range of 70 to 87 months to probation and home confinement. Although the district court individually identified each statutory sentencing factor, it did not discuss all of the factors, and did not explain how the factors it did discuss justified the extraordinary downward variance. In reversing, the Circuit expressed its “doubt” that the sentence could be justified, in view of the Sentencing Commission’s express concern with the under-punishment of white-collar crime.
A petition for rehearing has been filed and is available at: http://www.fd.org/pdf_lib/3Rehear-Negroni_e041211.pdf.