In a surprising development, the U.S. Supreme Court yesterday declined to clarify its its decision earlier this year in U.S. v. Booker (previous posts here), in which the Court struck down the mandatory nature of the federal criminal sentencing system. Without comment, the Supreme Court declined to hear a new case — Rodriguez v. U.S. — even though the Justice Department had recommended last week in a parallel case (U.S. v. Barnett) that the Court adjudicate the issue in the case, which is whether a criminal sentence that violates Booker’s constitutional principle is “plain error” and must be overturned.
U.S. v. Booker limits federal judges in punishing convicted defendants for aggravating factors that were not proven to a jury or that the defendant did not admit. That decision threw the federal sentencing system into a bit of a kerfuffle as thousands of inmates challenged their sentences and many petitioned for earlier release dates. In Booker, the Supreme Court did not specify how the decision should be should be applied, so the federal circuit courts of appeal have been supervising application of the decision.
Four circuits have ruled that any sentence longer than the maximum allowed under the jury’s findings of fact or the defendant’s admissions usually would require a new sentences. One circuit decided that the trial courts would have to decide whether resentencing was needed, and two other circuits concluded that defendants would not be entitled to a rehearing on their sentences unless they could show that the trial court would have handed down a lighter sentence had the federal sentencing guidelines been deemed to be advisory rather than mandatory. Consequently, there is a clear conflict at this point among the circuit courts on how Booker is to be applied to previous sentences.
The best source for detailed analysis of these Booker-related decisions and issues is Professor Berman’s blog, where he has already commented on yesterday’s developments here and here.

The New York state court jury in the criminal trial against former Tyco International Ltd. CEO L. Dennis Kozlowski and former Tyco finance chief Mark H. Swartz has rendered a guilty verdict against the two former Tyco executives on 22 of 23 counts, including grand larceny, conspiracy, securities fraud and falsifying business records. In essence, the jury concluded that the two had masterminded a scheme to loot Tyco of millions of dollars in unauthorized compensation and perks.
The result is not particularly surprising, especially after Mr. Kowlozski’s less-than-inspiring performance on the witness stand (see previous posts here and here). Prosecutors will propose that the two serve between 15 and 30 years in prison, but my sense is that the two will be sentenced to considerably less than that. Sentencing is tentatively scheduled for August 2.
During the trial, prosecutors contended that Messrs. Kowlozski and Swartz stole millions in secret bonuses, including the forgiveness of $37.5 million in loans from Tyco. The defense contended that the two former executives did not hide the bonuses from either the Tyco board or outside auditors and, thus, lacked the requisite mens rea to commit the crimes alleged.
The first Tyco trial ended with a mistrial last year under colorful circumstances after two weeks of jury deliberations when one of the jurors — who, it was later learned, had been holding out in favor of acquittal — received a letter she perceived as threatening. The juror’s name had been published by several media outlets after she had appeared to make a “thumbs up” hand signal to the defense team in court. After the declaration of mistrial, several of the jurors said that the panel was 11-1 in favor of conviction on most counts.

Over this past weekend, this NY Times article reviewed the civil litigation and criminal investigation into KPMG’s mass-marketing of dubious tax shelters from the late 1990’s through late 2003. Here are the previous posts over the past year and a half on KPMG’s tax shelter woes.
Now, based on this Wall Street Journal ($) article, it appears that KPMG is literally fighting for its life as the Justice Department decides whether to indict the firm over is role in promoting the tax shelters. What is particularly troubling about KPMG’s perilous situation is that the firm has cooperated with the Justice Department in an effort to stave off a criminal indictment. That should give the American International Group Inc. board members pause as they consider their similar decision to cooperate with governmental investigations into AIG.
The threat of an indictment already has KPMG pursuing a settlement of the case under a deferred-prosecution agreement or other settlement with the Justice Department. However, some partners in KPMG management are now convinced that even a deferred-prosecution settlement of potential criminal charges would seriously damage the firm and possibly cause an Arthur Andersen-type meltdown. An indictment would almost certainly cause thousands of innocent KPMG employees to lose their jobs and force KPMG’s dozens of equally innocent institutional clients to find another accounting firm among the remaining three large accounting firms.
So, the dubious governmental policy of criminalizing merely questionable business practices may result in some big companies not being able to to find an accounting firm capable of providing adequate audit services at all.
Some governmental policy, eh? And even if an indictment of KPMG is justified in this particular circumstance, Professor Ribstein points out the irony in the situation.