January 3, 2023
A new ruling by a federal court of appeals could dramatically reduce the penalties that the Department of Justice and other federal agencies are able to extract in many cases, including negotiated resolutions. The U.S. Court of Appeals for the Third Circuit in Philadelphia held in United States v. Banks that judges may not use intended loss—instead, they may rely only on actual loss—to calculate the range of criminal penalties applicable in fraud cases. As significant as that ruling is, the court’s reasoning extends beyond criminal sentencings for fraud offenses. It will reduce the penalties that courts can impose for a wide array of other federal criminal offenses. But more broadly, its impact will be felt in deferred prosecution agreements (“DPAs”), non-prosecution agreements (“NPAs”), and other negotiated resolutions where a penalty is based on the United States Sentencing Guidelines.
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The Banks decision, and other cases following its reasoning, may result in significantly lower penalties in a wide array of settlement agreements and contested criminal proceedings, such as:
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