MEDIA

August 12, 2011

Sentencing on ‘Illegal Re-Entry,’ Restitution, Respondeat Superior

Published in: New York Law Journal | volume 246

This column reports on several significant, representative decisions handed down recently in the U.S. District Court for the Eastern District of New York. Judge Eric N. Vitaliano discussed reasons for imposing a below-Guidelines sentence in an ‘illegal re-entry’ case. Judge Nicholas G. Garaufis (a) found that the government, seeking restitution in a securities fraud case, had failed three times to connect the victims’ losses to defendant’s offense; and (b) gave suggestions on how to proceed in its fourth and final attempt. Judge Frederic Block granted a defendant hospital’s motion for summary judgment in a suit brought by an employee alleging age discrimination. And Judge Jack B. Weinstein discussed vicarious liability, under respondeat superior, for a private entity based on conduct of an employee acting as a certified peace officer.

Sentencing Guidelines

In United States v. Lozano,10 CR 298 (EDNY, July 14, 2011), Judge Vitaliano, departing downward from the U.S. Sentencing Guidelines in an ‘illegal re-entry’ case, commented on anomalies in the law as applied to defendant’s ‘criminal history’ category.

Defendant pled guilty to illegal re-entry, 8 U.S.C. §1326. Her sentencing range was greatly enhanced by 16 criminal history points, under the Probation Department’s correct position that an illegal entry is a continuing offense that starts with the date of entry and ends with the date of discovery by the authorities. Because defendant illegally re-entered the United States in March 2005 and was not ‘found’ until April 2010, the early ‘start date’ of the offense became significant for guidelines purposes, by (inter alia) drawing into her criminal history calculation several old narcotics convictions-in 1990, 1991 and 1997-that would otherwise have been too stale to be counted (or fully counted). U.S.S.G. §4A1.2(e)(1), for example, has a 15-year reach for including old convictions in a defendant’s ‘criminal history.’

Trying to get around this problem, defendant argued that the offense should be construed as having taken place only on the date of discovery, April 1, 2010.

The U.S. Court of Appeals for the Second Circuit has never addressed, in calculating a criminal history, whether being ‘found in’ the U.S. in violation of §1326 is a continuing offense that started on the date of illegal entry. But in determining dates for the statute of limitations applicable to prosecutions for illegal entry, the Second Circuit has repeatedly held that the offense begins when the illegal alien enters the country-the real crime-and ends when she is found. These decisions, Judge Vitaliano observed, serve a strong purpose: If the limitations clock begins to run the moment the illegal alien sets foot on American soil, the shadowy alien who successfully avoids timely discovery will escape prosecution.

At the same time, strictly applying these concepts to criminal history calculations threatens policies of repose and recency in the criminal law. For example, if defendant here were never arrested until the year 2041, at the age of 90, her prior convictions-over four decades earlier-would still be used against her, as part of her criminal history, under the guidelines. This is because her offense is deemed to start on the date of illegal entry, in March 2005.

The court nevertheless found itself bound by circuit precedent, even though defendant has for years played a positive role in her community. The court could and did use its discretion, post-United States v. Booker, 543 U.S. 220 (2005), to depart downward in imposing sentence. Slip op. 5.

Judge Vitaliano recommended adoption of an Application Note directing, for guidelines purposes, that the date of discovery in illegal re-entry cases be used to calculate criminal history.

Proof of Restitution Amounts

In United States v. Gushlak, 03 CR 833 (EDNY, July 25, 2011), Judge Garaufis dealt with the government’s proof problems regarding its request for restitution to the victims of defendant’s crimes. The government, the court found, has now failed three times to prove loss causation and the amounts of each victim’s loss. Judge Garaufis gave the government one final chance to carry its burden under 18 U.S.C. §§3663A and 3664.

In 2003 defendant pleaded guilty to conspiracies to commit securities fraud and money laundering. He admitted to a scheme to manipulate the price of GlobalNet common stock and the stock of other publicly traded companies by artificially inflating the price of the stock and paying kickbacks to brokers to cause their clients to purchase the stock at the inflated prices. In November 2010, the court sentenced defendant to 72 months’ incarceration and directed the government to submit proof of the victims’ losses in support of restitution.

The Mandatory Victim Restitution Act (MVRA) requires the court to identify the victims of a defendant’s crime and determine the amounts of each victim’s actual losses. Under the MVRA, ‘the amount of loss is ‘the greater of the value of the property on the date of the damage, loss, or destruction; or the value of the property on the date of sentencing, less the value (as of the date the property is returned) of any part of the property that is returned.’ Slip op. 5.

The government must prove transaction causation and loss causation. Transaction causation requires a showing that claimed misrepresentations or omissions caused the victim to enter into the securities transaction resulting in the loss. Loss causation requires a causal link between the misconduct and the economic harm suffered by the plaintiff, i.e., proximate cause.

In its first effort to prove the losses suffered by defendant’s victims, the government submitted a letter to the court stating that ‘based on its review of records of trading activity in the shares of GlobalNet, the victims of defendant’s offense lost approximately $20,468,876.29.’ The government did not provide the trading records to the court, describe its methodology or include a list of victims and their losses. The court found this submission inadequate and asked the government to submit additional papers on these issues for in camera review.

The government’s second attempt at providing the victims’ losses included a declaration from an analyst with the Financial Industry Regulatory Authority explaining how he used the trading records to calculate the victims’ losses and prepare spreadsheets of securities trading data. Once again, the government’s assumptions were not supported by the evidence. The court requested facts underlying the stock manipulation conspiracy, additional trading records and other information.

In its third try to prove loss causation, the government failed to show that ‘any of the people who purchased GlobalNet stock lost money because of Gushlak’s securities fraud conspiracy.’ Slip op. 9. Even though the stock of GlobalNet declined in value, there was no evidence to connect that decline with the release of information about the fraud, because the fraud was revealed long after the price declined and after the stock was no longer publicly traded. In addition, defendant’s expert testified that two similar publicly traded telecommunications companies had similar declines in value during the same period as a result of the dot-com collapse of 2000-01.

Judge Garaufis gave the government one more chance to provide evidence of loss causation and offered some suggestions for how to do so. Slip op. 16. The court referred to the suggestion in its second restitution order that ‘the Government could carry its burden of proving victim losses by providing ‘a detailed presentation of the facts of the GlobalNet stock manipulation conspiracy, additional trading records, and other information relevant to assessing the effect exogenous market factors might have had on GlobalNet’s stock price.” Slip op. 13. The government could also (1) submit ‘a detailed factual explanation of how the GobalNet conspiracy was carried out and ended’ by looking at information gleaned during defendant’s long cooperation with the government; (2) offer evidence to measure investor losses; and (3) have an expert identify comparable companies and examine the movement of their shares.

Age Discrimination Claim

In Groeneveld v. St. Charles Hospital and Rehabilitation Center, 07 CV 4803 (EDNY, June 16, 2011), Judge Block granted summary judgment in defendant’s favor, finding plaintiff’s claims of age discrimination and retaliation to be unsupported.

Plaintiff, a 65-year-old woman, claimed that defendant hospital discriminated against her because of her age and then fired her for complaining about that discrimination, in violation of the Age Discrimination in Employment Act and New York State Human Rights Law.

In 1977 plaintiff began working as a secretary at the hospital’s Facilitation Maintenance Department. She initially got good performance reviews. By 2004 that changed. In May 2006 plaintiff was terminated. She filed a charge of discrimination with the Equal Employment Opportunity Commission, which issued a right to sue letter.

Judge Block found that plaintiff failed to establish a prima facie case. The hospital disputed her claim that she was ‘qualified’ for the job. But because she had held the job for seven years, that element was satisfied. Plaintiff, however, could not show any adverse employment action under circumstances giving rise to an inference of discrimination. On this issue plaintiff argued that another secretary, Susan Murphy, had improperly accessed her medical records to determine ‘plaintiff’s age’ (in fact, for the purpose of arranging a birthday party), showing that plaintiff ‘was treated differently from her co-workers with respect to the conditions of her employment.’ But there was ‘no evidence’ that Ms. Murphy had a hand in the hospital’s termination decision.

As the court noted, the complaint’s allegation that plaintiff was replaced by an employee in her early 30s would, if supported, create an inference of discrimination. The fatal problem was plaintiff’s failure to provide evidence, by affidavits or otherwise, showing a ‘genuine issue for trial.’

Nor could plaintiff show that the reasons for her termination-inadequate job performance-were pretextual. Plaintiff’s retaliation claims fared no better. Slip op. 8-9.

Exercising supplemental jurisdiction over the state-law claims in the interests of judicial economy, Judge Block granted summary judgment on those claims as well.

Respondeat Superior Liability

In Brown v. Starrett City Associates, 09 CV 3282 (EDNY, July 13, 2011), Judge Weinstein addressed whether a private housing development could be held vicariously liable for the activities of a certified peace officer under respondeat superior. The court held that, while vicarious liability is not available under §1983, under New York law the private housing development would be liable. Similarly, a private individual defendant may not invoke the defense of qualified immunity.

In our June 10, 2011, column, we reported on Judge Weinstein’s decision in this case, dated May 13, 2011, in which the court denied summary judgment to Starrett City Associates, the private housing development, on vicarious liability in connection with excessive force and false arrest claims under New York law. The court also denied summary judgment on false arrest and excessive force claims against the peace officer.

The case went to trial in July 2011, and a jury found defendants not liable for false arrest and ‘liable for excessive force in placing tight handcuffs on plaintiff after she had warned the arresting officer of a preexisting carpal tunnel syndrome. Damages of $500 were awarded.’ Slip op. 4. To simplify the jury instructions, Judge Weinstein had sent only two issues to the jury: false arrest and excessive force claims against both defendants.

The court commented that under prevailing §1983 case law, private employers of police officers are equated with municipalities using a public police force and are not liable under respondeat superior absent a practice or pattern of unconstitutional acts. The court opined that private corporations, such as defendant here, should be held liable under respondeat superior for actions of its peace officers under §1983. Judge Weinstein compared the situation to a tort committed by a truck driver who injured someone in the course of employment. The special protection given to municipalities was intended to protect public bodies from enormous liability, which private entities can avoid with insurance. Because the employer here was vicariously liable under New York law, the restrictions of §1983 did not block a recovery.

Harvey M. Stone and Richard H. Dolan are partners at Schlam Stone & Dolan. Bennette D. Kramer, a partner of the firm, assisted in the preparation of the article.

[This article is reprinted with permission from the August 12, 2011, issue of the New York Law Journal. Copyright © 2011 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.]