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Food For Thought: Court of Appeals Questions Relevance Of Guidelines To Case Of Fraud Involving Supplemental Nutrition Assistance Program

In United States v. Algahaim, No. 15-2024(L), the Second Circuit (Newman, Winters, Cabranes) upheld the conviction of two defendants for misconduct involving the Supplemental Nutrition Assistance Program (“SNAP”), but remanded to the district court for consideration of a below-Guidelines sentence.  The Court, in an opinion by Judge Newman, held that the outsize effect of the loss amount enhancement on the defendant’s base offense level—a sentencing scheme for fraud that is “unknown to other sentencing systems”—required the district court to reconsider whether a non-Guidelines sentence was warranted.

Ahmed Algahaim and Moffaddal Murshed, an owner and employee at a deli in Hudson, New York, were both convicted after trial of distributing cash, rather than food, to customers presenting SNAP EBT cards, a violation of the federal statute governing SNAP benefits.  Murshed’s Guidelines calculation began with a base level of six for an offense involving fraud with a statutory maximum of less than 20 years.  From the Sentencing Guidelines’ loss table, twelve levels were added because of the amount of loss, for an adjusted offense level of 18—three times the base level.  Murshed was assigned criminal  history category I and sentenced to 30 months’ imprisonment.  Algahaim also began with a base offense level of six, increased to an adjusted offense level of 16 based on the amount of loss.  He was also assigned criminal history category I, and received a sentence of 21 months’ imprisonment.  There was no dispute that these sentences were calculated correctly under the Guidelines.

Judge Newman acknowledged that it was within the Sentencing Commission’s authority to construct a sentencing scheme that “use[s] loss amount as the predominant determination of the adjusted offense level for monetary offenses.”  However, he observed that “the Commission could have approached monetary offenses quite differently. For example, it could have started the Guidelines calculation for fraud offenses by selecting a base level that realistically reflected the seriousness of a typical fraud offense and then permitted adjustments up or down to reflect especially large or small amounts of loss.”

The “unusualness” of the Guidelines system, the Court held, can be considered by a sentencing judge under Kimbrough v. United States.  “Where the Commission has assigned a rather low base offense level to a crime and then increased it significantly by a loss enhancement, that combination of circumstances entitles a sentencing judge to consider a non-Guidelines sentence.”  The Court did not hold that the sentences were in error, but remanded for the district court’s reconsideration of the sentences.  Although the Court does not cite to Section 3553(a), the citation to Kimbrough suggests that this is where the Court derives its authority for today’s ruling.

Judge Newman has long been a skeptic of the Guidelines approach to sentencing.  In this short opinion, he cites the pre-Booker decision in United States v. Lauersen, 348 F.2d 329 (2d Cir. 2003), an opinion he authored at a time when the Guidelines were mandatory, except for downward departures.  Lauersen held that where the cumulative impact of overlapping Guidelines enhancements (in that case, for loss amount and for defrauding a financial institution of more than $1 million) resulted in an overly long sentence, the district court could downwardly depart.  See also United States v. Gigante, 94 F.3d 53, 56 (2d Cir. 1996) (holding that a downward departure under the Guidelines is appropriate if the use of acquitted conduct drove up the Guidelines range). 

In Algahaim, Judge Newman carries this concept forward to the more open-ended sentencing regime given to us by Booker, Gall and Kimbrough.  Many judges have stated that the Guidelines are not helpful in white-collar cases and that their emphasis on loss can lead to results that are “patently unreasonable.”  E.g., United States v. Adelson, 441 F. Supp. 2d 506, 509 (S.D.N.Y. 2006) (Rakoff, J.).  Practitioners have also advocated for shorter sentences in cases involving relatively low loss amounts or where the defendant had no prior record.  See ABA Criminal Justice Section, “A Report on Behalf of the ABA Criminal Justice Section Task Force on the Reform of Federal Sentencing for Economic Crimes” (November 10, 2014) (last visited December 1, 2016).  To the extent that district judges needed any further encouragement, Judge Newman’s decision lets district judges know that a Guidelines sentence need not be imposed where the “significant effect of the loss enhancement” leads to an unduly long sentence.

The Court also briefly dealt with several other challenges raised by the defendants, holding that there was no error in the district court’s jury charge or subsequent clarifications; that there was sufficient evidence of mens rea; and that the district court appropriately declined to give Algahaim a mitigating role adjustment.

-By Stephanie Teplin and Harry Sandick