By Jonathan Stempel
(Reuters) - A federal judicial panel on Thursday adopted new guidelines for sentencing white-collar criminals in fraud cases, in an effort to make punishments more fairly reflect the harm suffered by victims and the intent of offenders to cause harm.
The changes approved by the U.S. Sentencing Commission will take effect on Nov. 1 unless Congress objects.
They follow years of criticism from defense lawyers and some judges who say federal sentencing guidelines have led to overly severe punishments, potentially reaching life in prison, because they emphasize financial losses such as from falling stock prices. Judges need not follow the guidelines, but must consider them.
"These amendments emphasize substantial financial harms to victims rather than simply the mere number of victims and recognize concerns regarding double-counting and over-emphasis on loss," said Chief Judge Patti Saris of the federal court in Massachusetts, who chairs the commission.
The changes call for "intended" losses to reflect financial harm that defendants "purposely sought to inflict," and give judges greater discretion in factoring actual losses in stocks, bonds or commodities into punishments.
They also permit greater punishments when even just one or a few people suffer "substantial financial hardship" from fraud, while current guidelines emphasize the number of victims, even if their losses are small. Another change adjusts fraud losses for inflation for the first time.
The U.S. Department of Justice had expressed concern that the new definition of intended loss could let defendants claim they never intended to financially harm anyone.
It also said an inflation adjustment could negate the "overwhelming societal consensus" favoring tougher punishments for fraud, and reduce the length of typical sentences by roughly one-fourth.
On the other hand, the Justice Department welcomed the greater focus on actual harm inflicted.
A Justice Department spokesman declined to comment on Thursday.
David Debold, a Gibson, Dunn & Crutcher partner who led an advisory group to the commission, said the changes on balance "tend to make sentences more fair" in fraud cases.
"They make punishment better reflect the harm that defendants actually intended," he said. "That's an important change, and a good one."
Fraud accounts for the third most federal crimes, after immigration and drugs.
The sentencing commission also voted to increase penalties associated with the prescription narcotic hydrocodone.
(Reporting by Jonathan Stempel in New York; Editing by Leslie Adler)