 You're watching FJTN, the Federal Judicial Television Network. I'm involved with the guidelines originally of course as a judge applying them and then reviewing other judges' applications of them, but now with 18 months of working on making them I'm more and more aware of how extraordinary complex this system is. We don't just pluck these amendments from the air like I might have thought once upon a time from the outside. We really do use the input that we get from all kinds of groups. I think what that big book of amendments is, to the extent that it is a big book, it's our effort to be a little bit more surgical, a little bit more targeting as to the worst offenders, and at the same time trying to create more discretion for judges to use if he or she chooses to do so with your assistance with regard to first-time nonviolent offenders. Live from the Federal Judiciary Studios in Washington, D.C., the Federal Judicial Center and the United States Sentencing Commission present Sentencing and Guidelines 2001 Amendments moderating today's program from the Federal Judicial Center Lauren Woods. For the next two hours we're going to explore the amendments to the sentencing guidelines that recently went into effect November 1st 2001 with the United States Sentencing Commission and joining me we have Pamela Montgomery the Director and Chief Counsel of the Commission's Office of Education and Sentencing Practice along with Ellen Dorhoffer a staff attorney also with the Education Office. Now Pam and Ellen are going to discuss the background and legal issues surrounding the amendments but for the details on the amendments themselves we're going to turn to the podium where we have Education and Sentencing Practice specialists Rachel Pierce and Krista Rubin who are waiting there to provide us with all the details. Now as with past sentencing and guideline programs this program is also available for those people who want to receive CLE credit. Just make sure that if you're interested you're gonna have to read and follow all those detailed instructions that are available in the written materials that accompany today's broadcast. Now those written materials if you don't already have them written materials and additional references are found on the FJC's page on the DCN and that address is listed below is jnet.fjc.dcn. Now we really look forward to your participation by fax. In fact we are counting on it so please fax this your comments and questions at any time during the broadcast. We've set aside time a little bit before our first break well our only break actually a little bit before that and then again at the end of the program where we'll have some time to answer your questions and comments regarding the amendments. Now as I mentioned our broadcast today highlights the key points of the 2001 amendments and resulting changes to the guidelines manual. What we really wanted to do today was to answer the question that a pre-sentence report writer might have well okay so now what do I have to do differently with these new amendments and in order to do that we're going to cover five main topics of this year's package as well as some additional other amendments that as well as some additional other amendments. Now as you know the Commission submitted to Congress the package on May 1st of this year and that completed the Commission's first full amendment cycle. Now this package was rather large included 26 areas of guideline application and resolved 19 circuit conflicts by some account this year's package could affect anywhere from 40 to 60 percent of the cases that are sentenced under the guidelines. So Pam you know why don't we get this discussion started right away and find out why were there so many amendments in this year's package. Well Lauren as you said this was the first full amendment cycle that the Commission has had since it was appointed in 1999. During its first year in 2000 the Commission focused primarily on addressing congressional directives. This past year in 2001 the Commission's policy agenda focused on three specific areas. First the Commission looked to address congressional legislation. Some of this legislation dealt with specific directives to the Commission to make changes to the guidelines. Other pieces of the legislation had changes to status that required the Commission to increase penalties and make some change to the guidelines in some ways. Second the Commission focused on resolving a number of circuit conflicts and third the Commission on its own initiative looked at a number of areas that our research and users of the guidelines said needed to be changed. Okay and one of those Commission initiatives was the large economic crimes package and Alan why don't you give us some background on that. Okay Lauren the economic crimes package it was an evolving process in 1998 the Commission sent out a field test to a number of judges practitioners such as attorneys and probation officers and realized that the 2F 1.1 and 2B 1.1 guidelines might want to be changed. In October of 2000 the Commission sponsored an economic crime symposium over at George Mason Law School in which we heard from a number of practitioners in the field and also academia relating to the economic crimes area. The amendments that resulted from this work included a lot of input from various groups such as the Criminal Law Committee, the probation officers advisory group, Department of Justice, federal defenders and the Practitioners Advisory Group as well as many other individuals. This amendment package had a twofold approach. Number one was to try to simplify the theft and fraud guidelines and as you'll see Kristen Rachel talk about the specifics of what we've done with 2F 1.1 and 2B 1.1. The second I guess goal of the Commission was to try to get more low-level fraud and theft offenders into zones A, B or C and therefore give judges some more alternatives to prison time zones A, B and C giving judges a little bit more flexibility in sentencing options. Furthermore at the other end the Commission realized that they needed to punish more severely some of the high-level fraud and theft offenders. Once again what the Commission has done and you'll be it'll be an overriding theme through the fraud economic crimes area and throughout the guidelines is the Commission has tried to punish those individuals that they felt were more culpable and cause more damage to both individuals and society with these packages. Okay great and so we're going to start with the details of that large economics crime package and for that we're going to go over to the podium with Rachel and Krista for the details. Thank you Lauren. Well as you have already said the economic crime package was a very large package and it contains a number of changes that will affect crimes such as fraud, theft, larceny and property destruction just to name a few. As a matter of fact our fiscal year 2000 data indicates that of all of the guideline cases that were sentenced last year approximately 15% of those cases were for offenses such as fraud and theft. The corresponding guidelines being 2B 1.1 and 2F 1.1. Of course these two guidelines are going to be the primary focus of the economic crime package. Exactly and we're going to start off a discussion today with the economic crimes package by talking about how the guideline actually looks different and the first change that you're going to notice right off the bat is that we have consolidated a number of guidelines. 2B 1.1 the theft guideline, 2B 1.3 the guideline for property destruction and 2F 1.1 the guideline for fraud have now been consolidated into one guideline to be 1.1 to address all of these different types of offenses. Now because as a result of the merging of these offenses under one guideline you will find that the new 2B 1.1 has 12 specific offense characteristics, three cross references and 15 application notes and it's going to be very important for all of you to read carefully through those application notes in order to get some understanding about some of the new rules that we talk about in the definition of loss as well as some perhaps double counting issues as well. If you have multiple counts of theft and fraud we have some good news. In the past as you know before November 1st if you had a theft offense you would go to guideline 2B 1.1 if you had a fraud offense you would start out at 2F 1.1. Well now as a result of the merging of these guidelines or the consolidation of these guidelines if you have multiple counts of theft and fraud you're no longer going to need to necessarily compare the offense levels between 2B 1.1 and 2F 1.1 instead you're operating under one guideline and so if you have multiple counts of theft and fraud all of that conduct will be aggregated under the new 2B 1.1. That's right Krista. Now the second major change that you'll notice when you look at this new guideline is the creation of a new loss table because these guidelines have been consolidated the commission has had to create a new loss table to apply to one guideline. Now as you I'm sure already know the commission has decided that loss is really the best proxy for harm that is caused by these types of offenses. Now previously in the loss table that existed at the theft guideline at 2B 1.1 you started out with a hundred dollars as your first coming into the table there and the table provided one level increments between your different dollar amounts. Now similar to that table at the theft guideline the fraud table at 2F 1.1 also provided one level increases between the dollar amounts. That table however started at $2,000. Looking at this new loss table you're going to see several things. First of all you're going to see that the new loss table starts at $5,000. Secondly you're going to see that we now have two level increments between these dollar amounts and the third thing you will notice is that there's more room between these dollar amounts there's a larger number in between the levels that you add each time you go up and what this will do is this will serve to reduce the fact finding that is necessary by the courts in order to determine the loss associated with these offenses and that in turn will accomplish the goal that Alan was talking about earlier of providing lower sentences for the low level fraud offenders and thus more options and sentencing for the court and then of course the higher sentences for the higher level fraud offenders. Specifically you will notice at the $70,000 mark you're going to have a significantly higher offense levels and that's higher sentences for those defendants. Exactly and besides the difference in the loss table I'm sure over the years you all have become very familiar with certain specific offense characteristics that existed in both the fraud guideline and the theft guideline. So one change you will notice immediately is that the specific offense characteristic for more than minimal planning that existed has now been eliminated from the new 2B1.1 and in the past this specific offense characteristic applied probably in over 80% of all cases but that now has been eliminated there is no longer any adjustment for more than minimal planning. Another specific offense characteristic that you probably are familiar with is one dealing with mass marketing and it had a two level increase if the offense did involve mass marketing to a large number of people. Well the commission has modified this specific offense characteristic by adding the number of victims that are necessary to trigger this mass marketing enhancement. The first prong of this specific offense characteristic states that if the offense involved more than 10 or less than 50 victims or was committed through mass marketing you would increase by two levels. Additionally there is a four level increase or alternatively I should say if the offense involved 50 or more victims you would then increase by four levels. So that looks a bit different. Now one thing you're going to need to remember about the application of this specific offense characteristic is that in order for someone to qualify as a victim under this guideline they must have actually suffered some of the loss that was a result of the offense. And what we're going to do now is talk a little bit more specifically about the loss definition. As Rachel mentioned loss is the proxy that is used to assess the harm that the defendant has caused during the course of the offense and we're going to take a look at those definitions right now. Lauren? Thanks Krista and that's pretty much how the program's going to work. We're going to do some discussion over here we're going to go over to the table and get into the more details of the program and that's how we'll run for the for the two hours of the program. One note that I just remembered if anybody is happens to be looking for slides accompanying today's presentation that is listed in the table of contents note we were doing some last-minute changes to those slides so we're going to have them posted for you on the DC and by November 19th okay but that does bring us back to the table for discussion so Pam let's talk about that new loss definition what is so different about it. Well Lauren the basic premise of this loss definition is the same as its predecessor you use the greater of actual or intended loss but having said that there are some major changes and it's very important that users of the guidelines read the application notes the changes to the definition of loss are in those application notes we give you examples on how to calculate loss in particular cases by changing this definition of loss the Commission has resolved a number of circuit conflicts and therefore is important to you to familiarize yourself with this definition and how it impacts the circuit the case law in your particular circuit. Okay now you mentioned circuit conflicts so let's step back for a minute and just talk about that for a little bit and the authority that the Commission has to resolve those conflicts. Well back in 1991 the Supreme Court in a case Braxton v. United States said that the sentencing Commission had the primary and initial the primary authority to resolve circuit conflicts that interpret the guidelines the court looked at the Commission statutory authority to review and revise the guidelines and that it also had the authority to determine whether its amendment should be retroactive and looking at all this authority that the Commission had the court said that it shouldn't grant so many certiorari opinions and these kinds of guideline cases that the Commission should do that and since that time the Commission has resolved a number of circuit conflicts and as you mentioned the Commission has resolved 19 circuit conflicts this past year. Okay great thanks but now back to that loss definition and Alan can you tell us how did that resolve some of these circuit conflicts. Well one circuit conflict that has been resolved involves the use of gain as a proxy for loss Lauren. There had been a circuit split that had developed over whether when and how it was appropriate to use gain as a proxy for loss. Some circuits have said that loss could never be used if there was not an actual loss in the case and some circuits have said that loss would be acceptable in those situations. What the Commission has done is clarified that gain is allowed but it is allowed in only one of in one circumstance and that is if number one there is an actual loss in the case so that somebody must have suffered some kind of loss and number two that the loss cannot be reasonably determined under the calculation. So you need both approaches in order to use gain as a proxy for loss. Okay so the only time then that you can ever use gain or profit as a substitute for loss is when both of those conditions are met that what did you just say that there is a loss and that it cannot be reasonably determined. Correct that's an important point is that gain can only be used if number one there is an actual loss and number two the loss cannot be reasonably determined. If it can be reasonably determined then you're going to be using the greater of actual or intended loss. Okay and to get to that that was another circuit conflict right. Right it was a circuit conflict over realistic loss dealing with intended loss and whether unlikely or impossible losses can be calculated into the loss calculation. Some circuits had held that in order for a loss amount to include these unlikely or impossible losses that anything goes as long as the defendant intended this loss to happen whether it was realistic or not that loss would be included. Some other circuits had stated that the loss amount could only include losses that would be realistic or that are likely to occur. I think an example might be the best way of trying to explain this. If I've decided to fake the fact that my car has been stolen and I write to the insurance company I call them up and claim that my car is actually worth twenty five thousand dollars now and I get paperwork and I get affidavits stating that I put some working to the car and now it's worth twenty five thousand dollars. Even though my policy may only cover me up to fifteen thousand dollars which means the the most of the insurance company would ever give me has cut me a check for fifteen thousand dollars in this scenario my loss would be considered twenty five thousand dollars the intended loss would be twenty five thousand not the fifteen thousand dollars which is the realistic because that's the most that I would ever get. So just so I can recap this case if the intended loss here is the twenty five thousand dollars even though the defendant has no chance of ever collecting that amount of money because the policy only went up to fifteen thousand dollars. Correct Lauren and the reason behind this the commission felt was that this even though they're unlikely or impossible losses that this actually will account for the culpability of the defendant because this is what the defendant is actually intending to cause regardless of whether he has the opportunity to get that amount. Okay and now there is also some changes to or have some changes to the calculation of actual loss as well right. Correct before we even go any further let me try to sum up what the actual definition of loss is and this as Pam has stated I just would like to reiterate these application notes are very important in looking at this guideline as you'll see with this guideline some of the other guidelines that we have we've done the application note is is where these definitions and these instructions take place so you cannot just look at the actual guideline without looking at the application notes. The application notes in this situation under the new 2B 1.1 guidelines explain what the definition of loss is. Definition of loss actually the new definition is the reasonably foreseeable pecuniary harms that resulted from the offense. What this means is reasonably foreseeable pecuniary harm is defined to include pecuniary harm that the defendant knew or under the circumstances should have known would result from his actions. For example the best way to try to explain this is this is a but for causation standard meaning that in this situation when you look at the but for but for the defendant's actions with these losses have occurred. Now this but for causation standard is also working in conjunction with another standard and that's the legal causation standard. This legal causation standard may work to put a stop on or put a hold on some of the but for losses that have occurred. So you need to look at both the but for and a legal causation the legal causation standard which will possibly limit the exposure that the defendant is facing with some of these losses. This resolves the circuit split that had developed over the years since the guidelines have gotten into effect in trying to figure out what's the causation standard and three or four different causation standards now the new definition is the reasonable foreseeable pecuniary harm that the defendant caused or should have known he was going to cause. In addition another circuit conflict that has been resolved has been over the use of consequential damages. In the past the old guideline had allowed consequential damages specifically in two types of cases. Number one procurement forward cases and number two product substitution cases and that was the only time within the guidelines that the guidelines specifically stated consequential damages could arise. A circuit split had developed over whether consequential damages could be applied to other type of forward cases. What the commission has done Lauren is with this new definition of loss in the new 2B1.1 guideline is we have taken out the term consequential damages. You will not find consequential damages the term within the actual guideline. However these losses may still come into play in these types of cases the procurement forward and the product substitution cases and sometimes in some other cases under the reasonably foreseeable pecuniary harm standard that the commission has set up. So consequential damages will not be the term being applied by the actual guideline but these losses may still come into account under reasonably foreseeable standards. Okay so just to tie this up a little bit. Actual loss needs to be reasonably foreseeable. Intended loss doesn't have to be realistic right? Correct. Now whichever of these two losses is greater that's the amount that you need to use in calculating the loss. When you're working through the scenario facing you and facing the defendant is you use the greater of the actual intended so you'll go through look to see what the actual intended loss by the defendant and then the actual loss that was actually occurred in the case. Okay now both Pam both you and Alan mentioned the importance of the application notes in here. Now do they contain anything else that we need to worry about with regards to loss? Yes Lauren the new application notes contain several exclusions from loss. Loss does not include emotional stress, harm to reputation, other not economic harms nor cost to the government or the victims for the investigation or prosecution of the offense. These issues should be used in determining restitution and not loss. Additionally the commission has decided to exclude interest from loss. This resolves another circuit conflict where some courts had included bargain for interest in the definition of loss. The commission has decided to exclude all interest for the purpose of calculating loss. Okay great now is there anything else that we need to know about this loss definition like credits for example? Yes Lauren under what's called crediting or net loss approach the defendant can get a credit from the loss calculation if he's actually returned some benefits the value or services provided to an actual victim. The reason that the commission has set this crediting or net loss approach is that the commission felt that individuals who have given back something to the victim are less culpable than individuals that have not. They're still culpable and should be punished but not to the same level as individuals that have not returned something of value. Take a example might be the best way of explaining this. If I've tried to embezzle for my employer $15,000 let's say over the last four months and then today I've decided that I'm going to put back $5,000 of that amount. As long as I put back that amount before the detection of the offense then that $5,000 can be credited against the loss calculation. So even though I have embezzled $15,000 at some point prior to the to the detection of the offense the guidelines allow for what's called the crediting approach the $5,000 that I've put back will be offset the $15,000 will be offset by that $5,000 so the loss calculation would be $10,000. So you run through that calculation first and then apply the credit. Right and the another scenario in which credits also and value that defendants have given back may lower defendants loss calculation is also pledge collateral. In loan application cases oftentimes the defendants or individuals will have to pledge some kind of collateral. If defendant has pled some collateral the value of that collateral depending on the fair market value at the time of the disposition or at the time of the sentencing hearing can be credited against the defendant's calculation. Okay so here dates are kind of important right with with the case of transferred benefits it's before there was any sentencing any trial and even knowledge that the offense had even occurred but in the case of pledge collateral the date is either the sentencing date or if it had been disposed of earlier than that earlier date right. Correct Lauren and you bring up a good point the key point here is the timing for benefits conferred to the victim and for value and property you look to see the fair market value at the actual time of the detection of the offense. It's important to remember it's the time of the detection of the offense not the date of sentencing with pledge collateral you use either the disposition that the value at the time of the disposition or the sentencing hearing date the date of sentencing not the date of the detection of the offense. Okay timing is very important depending on the type of scenario you have. Okay now you've given us some examples before how about in this case with both pledge collateral and transferred benefits. Sure Lauren let's use a case of transferred benefits first. Let's use a stock fraud scenario if someone is trying to commit a stock fraud and at the time of the detection of the offense the stock was worth five dollars a share. Well now about six months later the sentencing hearing date is approaching and all of a sudden the stock has gone up to ten dollars a share. Stock is now worth ten dollars an increase of five dollars a share. Because these are values that have been transferred or values or property given under that definition and that set of rules you would use the five dollar value credit the defendant for the stock as if they were five dollars per share because you're using the date of the detection of the offense. So you'd use the five dollars as opposed to the ten dollars. In a pledge collateral situation it is a little bit different. Remember you're going to use either the date of the disposition of the item or the actual date of sentencing. So for example in a fraudulent loan case in which a house is worth two hundred thousand dollars at the time that the individual fills out the loan papers says the house is worth two hundred thousand dollars. Well person is arrested because of fraudulent filling out some loan applications lied about the assets that he actually has. The bank takes the house back. Well at the date of sentencing now if that house is worth four hundred thousand dollars you would use that four hundred thousand dollars amount at the date of sentencing. At that situation vice versa if the house is worth you claim the house is worth four hundred thousand dollars and at the date of sentencing it's actually worth two hundred thousand dollars you use that two hundred thousand dollars. It's the date of sentencing in that situation. Okay okay great thanks. Now there's still a couple of more things to consider with the economics current package and for that we are going to turn to Chris, continuing with the theme that Alan was just discussing about crediting loss, we have to remember there are certain situations where credit is not given. The first of these is where we have fraudulent professional services. For example, someone is posing as an attorney practicing law without a license, writing wills, providing legal advice. Religious to this new guideline, some courts had decided that a value of the services that were given should be reduced from the loss amount. The commission has decided that in these cases, no credit should be given for those fraudulent professional services. The second area where credit is not to be given is where we have fraudulent regulatory approval. And this really gets at a public health policy issue. For example, a defendant may be marketing an herbal supplement and claims that this herbal supplement has been approved by the FDA when in fact it was not. In these types of situations, no credit should be given for the value of the herbal supplement. It may work, it may work fine, but no credit should be given for the value of these types of cases because of the public health issue, the public policy issues that are associated with that. Another area where credit should not be given is in investment schemes for any profits that are realized in investment schemes. And this really gets to Ponzi schemes and pyramid schemes. And what I mean by profits realized by investment schemes means over what was initially invested. So for example, if I am running a pyramid scheme and I approach Rachel and Allen and ask each of them to give me $10,000 to start up my pyramid scheme, Rachel gives me her $10,000, Allen gives me his $10,000. Now as the scheme continues and what allows the scheme to continue is the fact that initial investors are receiving some sort of profit, some sort of reward for the initial investment that they made. So I return to Rachel $5,000 of the $10,000 that she gave me and I return to Allen $12,000. So he has actually gained $2,000 from his initial investment of $10,000. It should only be given for the $5,000 I've returned to Rachel and the $10,000 that Allen has received from his, to credit against his initial investment. I should not be receiving any credit for the additional $2,000 worth of profit that Allen has received. So in those cases you would only be credited up to the initial investment amount. No additional profit should be realized or credited in the loss calculation. There's another special rule for diversion of government benefit programs. Benefits provided to the intended recipients are not included in the loss amount. So for example, if there is some sort of Medicare fraud, if some of that Medicare money was getting to the people it was supposed to be getting to, that money should not be used to calculate the loss amount. In other words, in diversion of government benefit program fraud, you need to calculate the loss according to the value of what actually was diverted from the intended recipients. So there's some special rules there and again they're contained in your application notes but you need to take a look at those when you're considering these types of cases. That's absolutely right, Kristen. I just want to echo that again. How important it is to make sure that you read not only the new guideline because it is a new guideline and it has some new specific offense characteristics but also all of the application notes and the commentary because there's a lot packed into it. As you can see, the loss definition has changed significantly. We have special rules. We have other things that you're supposed to include and not include and you're not going to know about those things if you don't read the application notes. So before we move on to discuss some of the other finer points, changes in the economic crime amendment package, let's do a brief summary of what we've discussed regarding the loss definition thus far. As Pam mentioned earlier, the general premise is the same and that is that the greater of actual or intended loss is to be used when calculating loss for this guideline. The actual loss definition, however, has changed. The commission has gone in and reserves a circuit conflict regarding causation and adopted a new definition saying that actual loss is the reasonably foreseeable pecuniary harm caused by the offense. Another issue to be aware of is that intended loss need not be realistic. This was also a resolution of a circuit conflict and the commission decided that the intended loss, if you go with that amount, does not even need to be realistic or even possible. Another resolution of a circuit conflict, the commission decided to clarify that gain is only to be used if there is a loss from the offense, but that loss cannot reasonably be determined. We talked about specific exclusions, these are things that you need to be aware of when you're doing your loss calculations. Loss does not include certain non-economic harms, for example, emotional stress. Additionally, loss does not include costs to the government or victims for the investigation or prosecution of the offense. Loss does not include interest. Once again, this is a resolution of a circuit conflict. Some circuits were allowing the courts to use bargain for interest and the commission has stated that in no cases is interest to be used in the calculation of loss. Now it's also important to note that the commission has codified an approach to loss that has really developed through case law over the last several years and that is this concept of a net loss or crediting, if you will. The commission states that it is appropriate in certain cases where certain benefits are transferred to the victim or the defendant has pledged collateral, and Alan talked about the time frames that you have to remember, and in some cases it will be appropriate to give the defendant a credit where this happens. In the same token, however, the commission does lay out certain instances in which credit is not appropriate. In fraudulent professional services cases, in fraudulent regulatory approval cases where you have a Ponzi scheme and any profits are realized by the investors in the investment scheme, and any benefits provided to intended recipients in a diversion of government program benefits. So as I said, there are a lot of things that are incorporated into this loss definition, so it's important that you remember all of those as you're going through your guideline calculations. Now I want to talk briefly about a couple of more circuit conflicts that deal with specific offense characteristics at the guideline at 2B1.1, and one of them is the specific offense characteristic for in the business of receiving and selling stolen property. In the past there was a circuit conflict over the specific offense characteristic regarding how to determine whether or not the specific offense characteristic applies, and some courts were using what is known as the fence test, where the court had to go in and make the determination if the stolen property was actually bought or sold, and then how those transactions then affected the furthering of that offense, or allowing others to continue committing that offense. Other circuits, however, were adopting the totality of circumstances test where you looked more at the regularity and the sophistication of the offense, so it was a little bit easier to make that analysis and you don't have to make such specific findings. The commission has decided to adopt the totality of the circumstances test, and hopefully that will make it easier for the courts to determine the situations in which this specific offense characteristic applies. The second one that I want to mention specifically is the specific offense characteristic regarding acting on behalf of a charitable organization or government agency. Now the circuit split for this situation regarded or revolved around the defendant's actual association with that organization or governmental agency. Some circuits were saying that the defendant had to really legitimately be connected to that organization or that governmental agency and misrepresenting something and getting some sort of benefit on the basis of that legitimate connection to that. Other circuits were saying that the defendant's connection or status with the agency or the organization didn't matter if the specific offense characteristic applied then it applied, and that is the approach that the commission has gone with, resolved that circuit conflict by saying that the defendant's actual association with the government agency or the organization is not relevant in determining whether or not the specific offense characteristic applies. Now the economic crimes package does not just deal with the new guideline 2B1.1. The commission has made some changes to the tax guidelines as well. The first of these is a change to the tax loss table where you can see that previously where the incremental increase under this loss table had been by one level now the tax loss table similarly has two level increments just as the new table in guideline 2B1.1 and again this reduces judicial fact finding in order to come up with that tax loss range. Secondly, another change under the tax guideline is we have an instruction now that tax loss will be the aggregate of corporate and individual tax loss and this is based primarily on the premise that they could be considered to be the same course of conduct or common schema plan as defined under application note nine of relevant conduct. And then finally, sophisticated concealment, a specific offense characteristic that had addressed that in the past, has now been changed to sophisticated means. So again take a look at the application notes there under 2T1.1 and make sure that you understand that definition as well. Thanks, Krista. Now that wraps up our first discussion on the economic crimes package. So I'm sure we didn't have time to cover everything regarding that and if you have any questions be sure to fax them in before, well at any time during the program. We'll try to get to them right before we take our break which will be in a couple minutes or again at the end of the program. But now before we move on let's quickly review the amendment process itself. Now Pam, these amendments were submitted to Congress on May 1 and went into effect November 1. And in this particular cycle Congress did not have to or did not modify or reject any of the proposed amendments, correct? Correct. Okay and that's pretty much the standard time frame for how the amendment process works, right? Yes it is Lauren. By statute the commission must submit to Congress on or before May 1st all new amendments to the guidelines manual. If Congress does not act those amendments automatically go into effect on November 1st. Sometimes however Congress gives the commission directives to enact a change to the guidelines outside of that normal process. We call this emergency amendment authority and from time to time the commission does indeed have this emergency amendment authority. Congress may say enact a change to the guidelines within 60 days, 90 days, some other time frame. Okay and is that emergency authority automatically become permanent? No. Once the commission promulgates an emergency amendment it has to repromulgate that amendment during the normal amendment process that November 1st deadline that I talked about. Then the emergency amendment becomes permanent once it's been repromulgated. Sometimes however the commission may make changes in the permanent amendment. Something may look a little different than an emergency amendment. Okay and that brings us to our next topic which involves a lot of that amendment authority and I think there are some changes between what was the emergency and what was changed now. So for those changes to the drug amendments is what we're talking about now we're going to go to Krista and Rachel. The majority of the amendments that the commission has made to guideline 2D 1.1 which deals with drug trafficking and 2D 1.11 which deals with listed chemicals were the result of emergency authority. The result of directives that Congress had given to us over the past year. The methamphetamine anti-proliferation act of 2000 and the ecstasy anti-proliferation act of 2000 was the legislation where we found a number of these directives and the commission responded to these using that emergency authority. In fact some amendments went into effect on December 16th of 2000 and others went into effect on May 1st of 2001. They've been repromulgated and have been made permanent and for that went into effect on November 1st of 2001. That's right let's start by looking at the changes that the drug trafficking guideline 2D 1.1. As Krista stated as a result of the methamphetamine anti-proliferation act of 2000 Congress was very concerned about offenses involving the production of methamphetamine and anphetamine as well. And as a result of that concern the commission was given some very specific directives for increasing the penalties associated with offenses involving the production of methamphetamine and anphetamine. And specific I mean very specific and very specific language that the commission increased by not less than three levels and provide a floor of twenty seven for offenses that create a substantial risk of harm to human life or the environment and also to increase by not less than six levels and provide a floor of thirty for these types of offenses that create a substantial risk of harm to the life of a minor or an incompetent. Now when you look at the guideline at 2D 1.1 and you see these new specific offense characteristics you'll see that what we've done is basically lifted that statute or lifted that language excuse me directly from that directive and placed it into the guideline and the new SOC there at 2D 1.1. Now as Christa stated this amendment originally was promulgated in December of two thousand under emergency amendment authority and you may remember that there was a previous specific offense characteristic that dealt with the emission of toxic materials into the environment. So it was thought that maybe this might present a double counting issue so while the commission was looking at in between the emergency promulgation of the amendment and the permanent promulgation of the amendment November first while the commission was looking at that they decided the best way to remedy that would be to have these specific offense characteristics apply alternatively because previously they had applied cumulatively. So now that when you look at the guideline what you will see is the previous specific offense characteristic that deals with unlawful discharge transportation or storage of a hazardous substance providing a two level increase you'll see one of the new specific offense characteristics to prove to write an increase of three levels but not less than twenty seven for the offense involving substantial risk of harm to human life or the environment and the third specific offense characteristic that provides for an increase of six levels but a floor of thirty for those offenses that involve a substantial risk of harm to the life of a minor or an incompetent and the instructions in the guideline tell you that you are to apply the greater of these so whichever is going to result in the highest defense level for your defendant that's the specific offense characteristic that you will apply. So prior to November first it was possible to get the two level increase for the unlawful discharge plus either the three level increase or the six level increase as a result of the directives. But now it's either two, three or six. Well in addition to those changes congress was very concerned with not only the manufacture of methamphetamine but the manufacture of amphetamine as well. So as a result all of the ratios in the drug trafficking guideline 2d1.1 you will find that methamphetamine and amphetamine are now being treated equally and as the commission researched and as we learned from groups and from congress the manufacture of these controlled substances is so similar that in fact sometimes you will have defendants claiming that they are manufacturing methamphetamine when in actuality they are manufacturing amphetamine instead. So you will see now that the ratios have been equalized under the drug quantity table or the drug equivalency table. Additionally any specific offense characteristic that has existed in 2d1.1 dealing with the manufacture of meth now includes the manufacture of amphetamine as well. So you can see the concern that has been building over these controlled substances. Now additionally we need to look at some of the chemicals that are used in the manufacture of methamphetamine and amphetamine. Aphedrine, pseudo-phedrine and phenopropanalamine are now listed in the drug equivalency table in 2d1.1. What this means is that there is an equivalency to marijuana so if you have an offense that involves these listed chemicals one gram is equal to one kilogram of marijuana so the conversion to go back into the drug quantity table is easier and this especially comes into play when you have a defendant who is convicted of an offense that would take you to guideline 2d1.11 which would deal with the unlawful use or possession of listed chemicals as you may know there's a cross-reference at 2d1.11 that says if the offense involved the manufacture of methamphetamine or the attempted manufacture of a controlled substance you should cross-reference out of the listed chemical guideline and go over to the drug trafficking guideline 2d1.1. Well prior to this change there was no clear instruction as to the amount of drugs that could be created from these listed chemicals and what the commission has based the marijuana conversion on the equivalency table at 2d1.1 for effedrine, pseudo effedrine and PPA is a fifty percent theoretical yield. Now let's go on and talk about another one of the major changes and I say major because this generated a lot of attention from the outside world there was a lot of press coverage on this particular change and that is the increased penalties for offenses involving ecstasy or MDMA you may know that MDMA and some of its other like substances are actually a derivative of methamphetamine it's just a little bit of a difference in the chemical structure there but the base that you're starting with is methamphetamine what is happening across the country is that a large number of teenagers and young adults are using this drug and it's becoming very widespread and congress is very concerned about that so in response to that concern and ecstasy anti-proliferation act of 2000 the commission was given some directives for increasing the penalties for cases involving ecstasy now prior to the changes that went into effect actually may first this was an emergency amendment authority change the equivalency for one gram of ecstasy at the drug guideline was thirty five grams of marijuana and as you can see the increase is quite great one gram of ecstasy now equals five hundred grams of marijuana and just to put it in perspective as to where it fits on the table and how it's punished on the table one gram of cocaine equals two hundred grams of marijuana and one gram of heroin equals one kilogram of marijuana so it's not kind of in the middle of those two and it's very it's punished much more severely than it was before to put it in another perspective you may also know that the majority of ecstasy is manufactured and also subsequently distributed for use in pill form so if you're seeing more of these cases you're most likely going to see cases involving large numbers of pills so to put it in that sort of reference eight hundred pills is going to get a five-year sentence and eight thousand pills is going to equal about a ten-year sentence so that's what you're looking at there with offenses involving ecstasy now there were also some changes regarding schedule one and two substances and what we've done here is we've increased the cap or we've lifted the cap from level twenty and now you can go all the way up to a level thirty eight for these types of offenses and this was in response to concern over really and truly the date rape drug ghb uh... you may have heard of the date rape drug ghb we also found doing uh... our research for ecstasy that ghb is also being used in conjunction with ecstasy since ecstasy is a derivative of methamphetamine to put you on a high and some of these kids are using this ghb to come down off of the ecstasy so obviously that's going to affect those types of cases as well and other date rape drugs such as fluna trisapam and of course any other schedule one and two substance will be affected by this the lifting of this cap now not all of the amendments that we've made under the drug guideline or ballistic chemical guideline with the result of congressional directives we do have a couple of changes that were the result of commission initiatives the first of these deals with defendants who qualify for the safety valve reduction under the drug guideline that is the two level reduction at two d one point one b six previously this reduction was only available two defendants whose offense level was a level twenty six or greater that floor has been erased now the safety valve is available to any defendant whose sentence is calculated under guideline two d one point one regardless of whether the defendant is subject to a mandatory minimum penalty or not now related to this guideline five c one point two the safety valve guideline itself the commission has implemented a minimum floor offense level of seventeen for those defendants who are subject to a mandatory minimum but still meet the criteria one through five under guideline five c one point two now the reason that this has been implemented is to more strictly comply with an instruction that congress gave to us when they actually implemented the safety valve provision in the statute congress had stated that a sentence of twenty four months would be appropriate for defendants who qualify relief under the safety valve and if you look at your sentencing table you will notice that in criminal history category one offense level seventeen that is the first place on the sentencing table where a twenty four month sentence is the minimum of the guideline range and so that's why we've targeted that offense level seventeen or made that floor under five c one point two okay let's shift gears somewhat and let's talk about some of the changes that have occurred to the list of chemical guideline which is found at two d one point eleven now these changes were made in conjunction with the changes for the lab operators and methamphetamine at two d one point one and also as a result of directives from the methamphetamine anti-proliferation act of two thousand congress was once again concerned about the production of methamphetamine and as we know there are precursors that are involved precursor chemicals that are involved in the production of methamphetamine so what we've done is we've increased the penalties for these three or for three for actually all of the precursors but there are three big precursors we like to call them those are afedron pseudo afedron and phenylpropanolamine and what we've done is we've created a new chemical quantity table a separate chemical quantity table for these three precursors the biggies if you will the list of chemical guideline at two d one point eleven and by doing that we've increased maximum base of fence levels for these types of fences involving these types of listed chemicals from what was previously a thirty to now what is a level thirty eight we have also increased a fence levels for other precursors that are involved in the production of methamphetamine although you don't see them as often and it typically requires a little bit more uh... chemical expertise if you will to use some of these other precursors in the production of methamphetamine those in response to congress' concerns those penalties have also been raised as well since we have pulled out these three precursors and and put them into their separate little quantity table at two d one point eleven we no longer have a conversion table for other listed chemicals to afedron if you if you will remember there was a conversion table at two d one point eleven that worked in much the same way as the conversion table at two d one point one in that if you had multiple listed chemicals you were to convert them all to afedron and then do your calculations for your offense level in that fashion well since we no longer have that conversion table we have new rules when you have a case involving multiple listed chemicals the new rule is that the single listed chemical that provides the highest offense level is going to be used to determine the offense level in these types of cases at two d one point eleven so hopefully that'll clear that up for you a couple of additional changes i'd like to touch on quickly is that we've added iodine and gbl to the precursor chemical table at two d one point eleven you may be aware already that iodine is used in the production of methamphetamine and gbl is a precursor for ghp which is the date rape drug that i had talked about earlier in addition there is a new offense that was created by congress involving the transportation of anhydrous ammonia across state lines for purposes of producing methamphetamine that new offense will be referenced in your appendix a two guideline two d one point twelve now that brings us almost to a break and it is time now for our questions and to take time to answer your questions that you might have we did get a couple of faxes and we're going to take some time to take a look at those and get an answer to you about those right after the break but um... to start us off here there was um... one question that i have heard the commission helpline is frequently received him is um... have any of these amendments been made retroactive no lauren the commission decided this year not to make any of the amendments retroactive therefore there are no new amendments to be added to guideline one b one point ten well that answers that question now there's a couple of other on frequently asked questions that uh... i think the helpline has been collecting since the amendments were proposed so a couple of those on the first one has to do with uh... the economic crimes in this will be directed to christa and the question here is if the offense involves a telemarketing fraud and the defendant receives an enhancement for mass marketing section to be one point one b two a can that defendant also receive an enhancement under section three a one a a one point one for targeting vulnerable victims yes as a matter of fact if a defendant receives a two-level increase for mass marketing under the new to be one point one guideline an additional increase under three a one point one the vulnerable victim guideline can be applied for the defendant who where the offense involves a vulnerable victim and if there was a large number of vulnerable victims involved in the offense however if a defendant receives a four-level increase under the new to be one point one guideline for uh... having anywhere from more than fifty victims the only available increase under the vulnerable victim guideline would be an additional two levels so you can see in this is listed specifically in an application note under to be one point one so basically the maximum amount or the maximum number of levels that a defendant can receive for mass marketing and for vulnerable victim enhancement is a total of six so if the def the defendant would receive a two-level increase for mass marketing a possible for additional levels is available under guideline three a one point one but if a defendant receives four levels under to be one point one having an offense involving over fifty victims only an additional two levels will be available under the vulnerable victim guideline okay great thanks christa now on the next question that we have here has to do with the uh... the drug guidelines that christin rachel we're just talking about the family direct this question to you and ask when applying section two d one point eleven can a two-level reduction for the safety valve be applied as in section duty d one point one lauren it's not available unless the defendant who is uh... cross it would be cross-referenced out of two d one point eleven there's no specific offense characteristic in that listed chemical guideline for that safety valve reduction it's only if there's a cross-reference because the offense involved the manufacturing of a control substance offense are the attempted manufacturing control substance and the resulting offense level be higher it's only if the defendant is in guideline two d one point one is that safety valve reduction available for a defendant who is not subject to a mandatory minimum but meets those five criteria in the safety valve okay so only under two d one point one not necessarily under two d one point eleven only with the cross-reference correct okay great uh... like i said we did receive a couple of other faxes uh... we are going to get those answers for you right after the break which we are going to take right now uh... and after the break we will pick up the pace a little bit and move a bit more quickly through the rest of the amendments so we'll see you in ten minutes