The on-line journal of the American Bar Association reports on two notable decisions from the 11th Circuit Court of Appeals. (The 11th Circuit, based in Atlanta, hears appeals from decisions of federal trial courts in the Southeastern states.) One decision, United States v. Martin (pdf), involved the former chief financial officer of HealthSouth, who was charged with participating in the fraud that cost investors $1.4 billion. During the four-year period of the fraud, Mr. Martin received about $14 million in salary and benefits from the company. After being caught, Mr. Martin pled guilty, agreed to cooperate with prosecutors as they went after Richard Scrushy, the chief executive officer of HealthSouth. Mr. Martin provided useful information and testified against Mr. Scrushy, who was nevertheless acquitted.
The federal sentencing guidelines (not mandatory) produced a sentence of 108 to 135 months of imprisonment for Mr. Martin, at what the feds call sentencing level 31. (The higher the sentencing level, the heavier the sentence.) At the sentencing hearing, the government recommended easing to level 25, resultingin a lighter sentence of 62 months. The sentencing judge, however, for reasons not clearly explained, dropped to level 10, resulting in a sentence of 6 to 12 months of imprisonment, but then, for reasons also not clearly explained, sentenced Mr. Martin to 6 months of home confinement on probation followed by 54 months of probation without confinement — no prison time.
The government appealed and said that this sentence was too light for someone who had cost others $1.4 billion and that Mr. Martin should spend at least 12 months in prison. The 11th Circuit vacated the sentence and sent the case back for another round.
The second time around, the government recommended a sentence of 42 months in prison (level 22). The court applied level 8, and sentenced Mr. Martin to 7 days in prison and 2 years of supervised release, which I imagine is something like probation. For the mathematically challenged, the prison time works out to 1 day per $200 million of fraud, or about 1 hour of prison time per $8 million of fraud. The government appealed again.
This time, the 11th Circuit was clear: "Martin’s cooperation," it said, "while commendable and extremely valuable, is not a get-out-of-jail-free card."
The other case, United States v. Crisp (pdf), deserves its own post, but I’ll summarize it here. In that case the defendant participated in a $500,000 bank fraud. After he was caught, he cooperated with prosecutors. He got a much worse deal than Mr. Martin did; he was sentenced to serve 1 hour per $100,000 of fraud, or 5 hours total. (At Mr. Martin’s rate for fraud, Mr. Crisp would have served just under a minute.)
The 11th Circuit is reading the public mood. Let’s cheer them on!