What Cioffi and Tannin are Facing

In Cioffi and Tannin’s indictment, at paragraph 55, the government states “Eventually, investors were told that the Funds had both lost 100% of their respective values, resulting in a total investor loss of approximately $1.4 billion."

So what penalty are these two men facing? That answer is contained in the United States Sentencing Guidelines. Those guidelines contain the convoluted method of assigning points to the dollars lost and certain surrounding events. A full version of the Fraud section of the Sentencing Guidelines are here. This is a copy of the table for crimes of “Basic Economic Offenses” (Non applicable sections have been deleted):

1. THEFT, EMBEZZLEMENT, RECEIPT OF STOLEN PROPERTY, PROPERTY DESTRUCTION, AND OFFENSES INVOLVING FRAUD OR DECEIT

§2B1.1. Larceny, Embezzlement, and Other Forms of Theft; Offenses Involving Stolen Property; Property Damage or Destruction; Fraud and Deceit; Forgery; Offenses Involving Altered or Counterfeit Instruments Other than Counterfeit Bearer Obligations of the United States

(a) Base Offense Level:

…

(2) 6, otherwise.

(b) Specific Offense Characteristics

	Loss(Apply the Greatest)	Increase in Level
(A)	$5,000 or less	no increase
(B)	More than $5,000	add 2
(C)	More than $10,000	add 4
(D)	More than $30,000	add 6
(E)	More than $70,000	add 8
(F)	More than $120,000	add 10
(G)	More than $200,000	add 12
(H)	More than $400,000	add 14
(I)	More than $1,000,000	add 16
(J)	More than $2,500,000	add 18
(K)	More than $7,000,000	add 20
(L)	More than $20,000,000	add 22
(M)	More than $50,000,000	add 24
(N)	More than $100,000,000	add 26
(O)	More than $200,000,000	add 28
(P)	More than $400,000,000	add 30

(2) (Apply the greatest) If the offense—

(A) (i) involved 10 or more victims; or (ii) was committed through mass-marketing, increase by 2 levels;

(B) involved 50 or more victims, increase by 4 levels; or

(C) involved 250 or more victims, increase by 6 levels.

…

(13) (Apply the greater) If—

(A) the defendant derived more than $1,000,000 in gross receipts from one or more financial institutions as a result of the offense, increase by 2 levels; or

(B) the offense (i) substantially jeopardized the safety and soundness of a financial institution; (ii) substantially endangered the solvency or financial security of an organization that, at any time during the offense, (I) was a publicly traded company; or (II) had 1,000 or more employees; or (iii) substantially endangered the solvency or financial security of 100 or more victims, increase by 4 levels.

(C) The cumulative adjustments from application of both subsections (b)(2) and (b)(13)(B) shall not exceed 8 levels, except as provided in subdivision (D).

(D) If the resulting offense level determined under subdivision (A) or (B) is less than level 24, increase to level 24.

…

(15) If the offense involved—

(A) a violation of securities law and, at the time of the offense, the defendant was (i) an officer or a director of a publicly traded company; (ii) a registered broker or dealer, or a person associated with a broker or dealer; or (iii) an investment adviser, or a person associated with an investment adviser; or

(B) a violation of commodities law and, at the time of the offense, the defendant was (i) an officer or a director of a futures commission merchant or an introducing broker; (ii) a commodities trading advisor; or (iii) a commodity pool operator,

increase by 4 levels.

To determine the number of levels, it is just an addition problem:

Basic Offense 6

Total Loss exceeds $400 million 30

Assume less than 50 “victims” 4

Safety of institutions 4

Violation of securities laws 4

Grand Total 48

With that total of 48 levels, a judge then goes to the “Sentencing Table” to determine the sentence. The full version is here. This is an excerpt.

Offense Level	Months
19	30-37
20	33-41
21	37-46
22	41-51
23	46-57
24	51-63
25	57-71
26	63-78
27	70-87
28	78-97
29	87-108
30	97-121
31	108-135
32	121-151
33	135-168
34	151-188
35	168-210
36	188-235
37	210-262
38	235-293
39	262-327
40	292-365
41	324-405
42	360-life
43	life

The table above starts at 19 for simplicity in addition to which it is inconceivable that with the bloodlust created by the press and fostered by the government a sentence less than level 19 could be imposed. As you can see, the table only goes to a level 43 which mandates a life sentence.

These men are looking at life in prison! And they have not even been accused with causing any loss! In future posts, I will begin dissecting the indictment, not from a legal viewpoint, but from the viewpoint of one who has already gone through the process.