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Increased Fraud Penalties Are on the Horizon

By David Debold and Matthew Benjamin
June 28, 2012

The guidelines governing the sentencing of fraud offenses ' long criticized as irrational, unduly severe, and the product of overt political pressure ' require wholesale reform. A diverse group of stakeholders, including federal judges, defense lawyers, academics, and even the Department of Justice (DOJ), have implored the U.S. Sentencing Commission (the Commission) to conduct a comprehensive review of the fraud guidelines, memorably derided by Judge Frederick Block as “a black stain on common sense.”

In the wake of this uncommon consensus, as well as Congress's directive in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act that the Commission revisit the penalties for financial institution fraud and securities fraud, the Commission has signaled that a comprehensive, multi-year review may finally materialize. In the short-term, however, the Commission's approach is less ambitious. On April 13, 2012, it responded to Congress's Dodd-Frank directive by promulgating more narrow, piecemeal amendments to the guidelines for securities fraud, mortgage fraud and financial institution fraud ' a modest course of action that is unlikely to satisfy the fraud guidelines' many critics.

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