The United States Attorney’s Office is armed with two extraordinarily powerful motions that universally affect the net sentencing disposition of a cooperating defendant. It’s axiomatic that the existence of these motions within the Federal Rules of Criminal Procedure and United States Sentencing Guidelines are often used when government lawyers are attempting to convince an indicted individual to plead guilty and cooperate. More often than not, cooperating within the context of white collar prosecutions typically involves several sessions with government lawyers and case agents, and then testifying at trial. These proffer meetings and, of course, attending the big show (trial) build “equity” or justifiable rationalization for the filing of these motions.
This first motion is called a 5K1.1 and is typically filed with the court contemporaneously with the defendant’s sentencing. It generally signals that cooperation is complete and credit for the defendant is due. The second motion, called a Rule 35 is filed after the defendant’s first sentencing, but usually (unless good cause) no later than 12 months after the first sentencing. Each motion is a recommendation for a set number of levels the Government believes best reflects the defendant’s cooperation. The levels of departure correspond with an offense level, which produces an advisory guideline range, and so with “time” being the greatest negotiator, its little wonder why so much importance is attached to these motions.
The typical go-to argument for defendants in a white collar prosecution where some defendants elected to go to trial and others decided to plead out and testify is what is known as a “disparity” argument. Basically, the argument takes the shape of Defendant/Appellant saying, “Hey! I got more time because I went to trial. I’m getting punished more because I exercised my rights and my co-defendants got a lot less time. This isn’t fair!” This argument finds very little traction with the appellate courts, as the legal world was recently reminded in United States v. Fry, 2015, 8th Cir. No. 13-3502 (7/1/15). This was a $3.7B ponzi scheme, where the leader Thomas Petters was sentenced to 50 years in 2010, and James Nathan Fry, who solicited investors along with Frank Vennes Jr. through hedge funds, was given 210 months, just over 17 years.
Fry was convicted of securities fraud, wire fraud, and lying to the SEC. Vennes pled guilty and was given 10 years. The other co-defendants in the case pled guilty and received 5-year terms. When the government files these motions, they aim to get the sentences semi aligned. Citing no particular calculus when deciding the level of departures for cooperating witnesses, it generally appears that the lead cooperators receive 25-35% of the total sentence of the defendant who was convicted at trial. Notwithstanding, I have seen countless cases where the leader was sentenced to 25+ Years, and testifying co-defendants received as little as 2 years.
Fry’s next move will likely request en banc, a formal request to have all of the appeals court judges hear the case instead of the three-judge panel. Given the blistering dissent by Judge Myron H. Bright, Fry’s odds have increased slightly.