Academic

A really bad day in court(!)

By Tung Yin

Under the not mandatory but more or less kind of mandatory federal sentencing guidelines, even most white collar criminals are looking at some degree of prison time -- heck, Martha Stewart got a break from the judge and still had to serve 6 months in a federal prison for just lying to federal agents!  So if you're fraudster extraordinaire Bernie Madoff's lieutenant, you're probably looking at serious prison time.  To the extent the judge follows the sentencing guidelines, the only hope you have is to get the coveted section 5K1.1 "substantial assistance to authorities" departure, which allows the judge to drop way below the mandated sentencing range.

Typically, defendants angling for the 5K1.1 departure plead guilty pursuant to a plea agreement and cooperate with the government in ratting out other defendants.  For so long as they are useful, the government moves to continue the sentencing.  After all, the government wants the carrot of the 5K1.1 motion available to get continued cooperation; the defendant wants the government to say at sentencing, "Yes, he/she was helpful," because it's entirely up to the government whether to move for a 5K1.1 departure.

This arrangement benefits both sides, since the defendant is typically out of jail (though no doubt under government supervision), and the government gets to go after other defendants.  Then, at the appointed moment of sentencing, the defendant hopes that the 5K1.1 departure is enough to get the sentencing range to probation/supervised release, or at worst, home detention.

The expectation of this dynamic is probably why Madoff's lieutenant, Frank DiPascali, was shocked to get taken into custody after pleading guilty:

Attorneys argued the former chief financial officer should be free on bail to help investigators sift through a mountain of evidence. But U.S. District Judge Richard Sullivan surprised both sides by ordering DiPascali jailed immediately -- a rarity for a cooperator in a white-collar case who had pleaded guilty.

Sullivan said he felt compelled to keep 52-year-old DiPascali locked up after hearing the defendant admit that, at Madoff's direction, he lied to the Securities and Exchange Commission in 2006 when he thought they might discover the fraud. The judge said he was troubled too that DiPascali also lied repeatedly "to people who entrusted him with their life savings."

Ouch!  Oh well, I suppose this will really ratchet up his incentive to help the government . . . .  Anyway, I don't feel bad for the guy.  It seems astronomically unlikely that he would get no prison time, even with a 5K1.1 departure.  With sentencing projected for early 2010, he'll get credit for time served, and his sentence isn't going to be less than 6 months.

Full post as published by The Yin Blog on August 11, 2009 (boomark / email).