[Federal Register Volume 68, Number 14 (Wednesday, January 22, 2003)]
[Notices]
[Pages 3080-3086]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1297]


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UNITED STATES SENTENCING COMMISSION


Sentencing Guidelines for United States Courts

AGENCY: United States Sentencing Commission.

ACTION: Notice of promulgation of temporary, emergency amendments to 
the sentencing guidelines and commentary.

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SUMMARY: The Commission has promulgated two temporary, emergency 
amendments to the sentencing guidelines as follows: (1) pursuant to 
sections 805, 905, and 1104 of the Sarbanes-Oxley Act of 2002, Pub. L. 
107-204, and its general authority under 28 U.S.C. 994, the Commission 
has promulgated amendments to Sec. Sec.  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), 2E5.3 (False Statements and 
Concealment of Facts in Relation to Documents Required by the Employee 
Retirement Income Security Act; Failure to Maintain and Falsification 
of Records Required by the Labor Management Reporting and Disclosure 
Act), 2J1.2 (Obstruction of Justice), and 2T4.1 (Tax Table), and 
Appendix A (Statutory Index); and (2) pursuant to section 314 of the 
Bipartisan Campaign Reform Act of 2002, Pub. L. 107-155, and its 
general authority under 28 U.S.C. 994, the Commission has promulgated a 
new guideline in chapter two, part C (Offenses Involving Public 
Officials), and amendments to Sec. Sec.  3D1.2 (Groups of Closely 
Related Counts), and 5E1.2 (Fines for Individual Defendants), and 
Appendix A (Statutory Index). The Commission also has requested public 
comment, to be submitted to the Commission not later than March 17, 
2003, regarding repromulgation of these two temporary, emergency 
amendments as permanent amendments (see the issue of the Federal 
Register published on January 17, 2003).

DATES: The Commission has specified an effective date of January 25, 
2003, for the temporary, emergency amendments set forth in this notice.

ADDRESSES: Public comment should be sent to: United States Sentencing 
Commission, One Columbus Circle, NE., Suite 2-500, Washington, DC 
20002-8002, Attention: Public Affairs.

FOR FURTHER INFORMATION CONTACT: Michael Courlander, Public Affairs 
Officer, Telephone: (202) 502-4590.

SUPPLEMENTARY INFORMATION: The United States Sentencing Commission is 
an independent agency in the judicial branch of the United States 
Government. The Commission promulgates sentencing guidelines and policy 
statements for federal courts pursuant to 28 U.S.C. 994(a). The 
Commission also periodically reviews and revises previously promulgated 
guidelines pursuant to 28 U.S.C. 994(o) and submits guideline 
amendments to the Congress not later than the first day of May of each 
year pursuant to 28 U.S.C. 994(p). The Commission also may promulgate 
emergency amendments prior to the first day of May if required to do so 
by specific congressional legislation.
    The Commission has promulgated two temporary, emergency guidelines 
in response to specific congressional legislation. First, in response 
to the Sarbanes-Oxley Act, the Commission has promulgated an amendment 
that increases the penalties for corporate fraud and offenses involving 
the obstruction of justice. Second, in response to the Bipartisan 
Campaign Reform Act of 2002, the Commission has promulgated an 
amendment that provides a new guideline and increased penalties for 
offenses involving a violation of Federal election campaign laws. The 
Commission has specified an effective date of January 25, 2003, for 
both amendments.
    Additional information pertaining to the amendments described in 
this notice may be accessed through the Commission's website at 
www.ussc.gov.

    Authority: Sections 805, 905, and 1104 of the Sarbanes-Oxley Act 
of 2002, Pub. L. 107-204; section 314 of the Bipartisan Campaign 
Reform Act of 2002, Pub. L. 107-155; 28 U.S.C. 994(a), (o), (p), 
(x); USSC rules of practice and procedure, rule 4.4.

Diana E. Murphy,
Chair.

1. Corporate Fraud

    Amendment: Section 2B1.1(b)(1) is amended by striking the period; 
and by adding at the end the following:

``(O) More than $200,000,000 add 28
 (P) More than $400,000,000 add 30.''.

    Section 2B1.1 is amended by striking subsection (b)(2) as follows:
    ``(2) (Apply the greater) If the offense--
    (A) (i) involved more than 10, but less than 50, victims; or (ii) 
was committed through mass-marketing, increase by 2 levels; or
    (B) involved 50 or more victims, increase by 4 levels.'',

and inserting the following:

[[Page 3081]]

    ``(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.''.
    Section 2B1.1 is amended by striking subsection (b)(12)(B) as 
follows:
    ``(B) the offense substantially jeopardized the safety and 
soundness of a financial institution, increase by 4 levels.'',

and inserting the following:
    ``(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.''.
    Section 2B1.1(b) is amended by adding at the end the following:
    ``(13) If the offense involved a violation of securities law and, 
at the time of the offense, the defendant was an officer or a director 
of a publicly traded company, increase by 4 levels.''.
    The Commentary to Sec.  2B1.1 captioned ``Statutory Provisions'' is 
amended by inserting ``1348, 1350,'' after ``1341-1344,''.
    The Commentary to Sec.  2B1.1 captioned ``Application Notes'' is 
amended in Note 1 by adding after ``Resources).'' the following new 
paragraph:
    `` `Equity securities' has the meaning given that term in section 
3(a)(11) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(11)).'';
by inserting after ``Secretary of the Interior.'' the following new 
paragraph:
    `` `Publicly traded company' means an issuer (A) with a class of 
securities registered under section 12 of the Securities Exchange Act 
of 1934 (15 U.S.C. 78l); or (B) that is required to file reports under 
section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 
78o(d)). `Issuer' has the meaning given that term in section 3 of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c).'';

and by adding at the end the following:
    `` `Victim' means (A) any person who sustained any part of the 
actual loss determined under subsection (b)(1); or (B) any individual 
who sustained bodily injury as a result of the offense. `Person' 
includes individuals, corporations, companies, associations, firms, 
partnerships, societies, and joint stock companies.''.
    The Commentary to Sec.  2B1.1 captioned ``Application Notes'' is 
amended in Note 2(C) by redesignating subdivision (iv) as (v); and by 
adding after subdivision (iii) the following new subdivision:
    ``(iv) The reduction that resulted from the offense in the value of 
equity securities or other corporate assets.''.
    The Commentary to Sec.  2B1.1 captioned ``Application Notes'' is 
amended in Note 3 by striking ``Victim and Mass-Marketing Enhancement 
under'' in the heading and inserting ``Application of''; by striking 
subdivision (A) as follows:
    ``(A) Definitions.--For purposes of subsection (b)(2):
    (i) `Mass-marketing' means a plan, program, promotion, or campaign 
that is conducted through solicitation by telephone, mail, the 
Internet, or other means to induce a large number of persons to (I) 
purchase goods or services; (II) participate in a contest or 
sweepstakes; or (III) invest for financial profit. `Mass-marketing' 
includes, for example, a telemarketing campaign that solicits a large 
number of individuals to purchase fraudulent life insurance policies.
    (ii) `Victim' means (I) any person who sustained any part of the 
actual loss determined under subsection (b)(1); or (II) any individual 
who sustained bodily injury as a result of the offense. `Person' 
includes individuals, corporations, companies, associations, firms, 
partnerships, societies, and joint stock companies.'',

and inserting the following:
    ``(A) Definition.--For purposes of subsection (b)(2), `mass-
marketing' means a plan, program, promotion, or campaign that is 
conducted through solicitation by telephone, mail, the Internet, or 
other means to induce a large number of persons to (i) purchase goods 
or services; (ii) participate in a contest or sweepstakes; or (iii) 
invest for financial profit. `Mass-marketing' includes, for example, a 
telemarketing campaign that solicits a large number of individuals to 
purchase fraudulent life insurance policies.'';

in subdivision (B)(i)(I) by striking ``described in subdivision (A)(ii) 
of this note;'' and inserting ``any victim as defined in Application 
Note 1;'';

in subdivision (B)(ii)(IV) by inserting ``at least'' after ``to have 
involved''; and in subdivision (C) by inserting ``or (C)'' after 
``(B)''.
    The Commentary to Sec.  2B1.1 captioned ``Application Notes'' is 
amended by redesignating Notes 11 through 15 as Notes 12 through 16, 
respectively.
    The Commentary to Sec.  2B1.1 captioned ``Application Notes'' is 
amended by striking Note 10 as follows:
    ``10. Enhancement for Substantially Jeopardizing the Safety and 
Soundness of a Financial Institution under Subsection (b)(12)(B).--For 
purposes of subsection (b)(12)(B), an offense shall be considered to 
have substantially jeopardized the safety and soundness of a financial 
institution if, as a consequence of the offense, the institution (A) 
became insolvent; (B) substantially reduced benefits to pensioners or 
insureds; (C) was unable on demand to refund fully any deposit, 
payment, or investment; (D) was so depleted of its assets as to be 
forced to merge with another institution in order to continue active 
operations; or (E) was placed in substantial jeopardy of any of 
subdivisions (A) through (D) of this note.'',

and inserting the following:
    ``10. Application of Subsection (b)(12)(B).--
    (A) Application of Subsection (b)(12)(B)(i).--The following is a 
non-exhaustive list of factors that the court shall consider in 
determining whether, as a result of the offense, the safety and 
soundness of a financial institution was substantially jeopardized:
    (i) The financial institution became insolvent.
    (ii) The financial institution substantially reduced benefits to 
pensioners or insureds.
    (iii) The financial institution was unable on demand to refund 
fully any deposit, payment, or investment.
    (iv) The financial institution was so depleted of its assets as to 
be forced to merge with another institution in order to continue active 
operations.
    (B) Application of Subsection (b)(12)(B)(ii).--
    (i) Definition.--For purposes of this subsection, `organization' 
has the meaning given that term in Application Note 1 of Sec.  8A1.1 
(Applicability of chapter Eight).
    (ii) In General.--The following is a non-exhaustive list of factors 
that the court shall consider in determining whether, as a result of 
the offense, the solvency or financial security of an organization that 
was a publicly traded company or that had more than 1,000 employees was 
substantially endangered:
    (I) The organization became insolvent or suffered a substantial 
reduction in the value of its assets.
    (II) The organization filed for bankruptcy under chapters 7, 11, or 
13 of the Bankruptcy Code (title 11, United States Code).
    (III) The organization suffered a substantial reduction in the 
value of its equity securities or the value of its employee retirement 
accounts.

[[Page 3082]]

    (IV) The organization substantially reduced its workforce.
    (V) The organization substantially reduced its employee pension 
benefits.
    (VI) The liquidity of the equity securities of a publicly traded 
company was substantially endangered. For example, the company was 
delisted from its primary listing exchange, or trading of the company's 
securities was halted for more than one full trading day.
    11. Application of Subsection (b)(13).--
    (A) Definition.--For purposes of this subsection, `securities law' 
(i) means 18 U.S.C. 1348, 1350, and the provisions of law referred to 
in section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(47)); and (ii) includes the rules, regulations, and orders 
issued by the Securities and Exchange Commission pursuant to the 
provisions of law referred to in such section.
    (B) In General.--A conviction under a securities law is not 
required in order for subsection (b)(13) to apply. This subsection 
would apply in the case of a defendant convicted under a general fraud 
statute if the defendant's conduct violated a securities law. For 
example, this subsection would apply if an officer of a publicly traded 
company violated regulations issued by the Securities and Exchange 
Commission by fraudulently influencing an independent audit of the 
company's financial statements for the purposes of rendering such 
financial statements materially misleading, even if the officer is 
convicted only of wire fraud.
    (C) Nonapplicability of Sec.  3B1.3 (Abuse of Position of Trust or 
Use of Special Skill).--If subsection (b)(13) applies, do not apply 
Sec.  3B1.3.''.
    The Commentary to Sec.  2B1.1 captioned ``Application Notes'' is 
amended in Note 16, as redesignated by this amendment, by striking 
subdivision (v) as follows:
    ``(v) The offense endangered the solvency or financial security of 
one or more victims.'';

and by redesignating subdivisions (vi) and (vii) as subdivisions (v) 
and (vi), respectively.
    The Commentary to Sec.  2B1.1 captioned ``Background'' is amended 
in the last paragraph by inserting ``(i)'' after ``(B)''.
    Section 2E5.3 is amended in the heading by adding at the end ``; 
Destruction and Failure to Maintain Corporate Audit Records''.
    Section 2E5.3 is amended by striking subsection (a)(2) as follows:
    ``(2) If the offense was committed to facilitate or conceal a theft 
or embezzlement, or an offense involving a bribe or a gratuity, apply 
Sec.  2B1.1 or Sec.  2E5.1, as applicable.'',

and inserting the following:
    ``(2) If the offense was committed to facilitate or conceal (A) an 
offense involving a theft, a fraud, or an embezzlement; (B) an offense 
involving a bribe or a gratuity; or (C) an obstruction of justice 
offense, apply Sec.  2B1.1 (Theft, Property Destruction, and Fraud), 
Sec.  2E5.1 (Offering, Accepting, or Soliciting a Bribe or Gratuity 
Affecting the Operation of an Employee Welfare or Pension Benefit Plan; 
Prohibited Payments or Lending of Money by Employer or Agent to 
Employees, Representatives, or Labor Organizations), or Sec.  2J1.2 
(Obstruction of Justice), as applicable.''.
    The Commentary to Sec.  2E5.3 captioned ``Statutory Provisions'' is 
amended by inserting ``Sec. '' before ``1027''; and by inserting ``, 
1520'' after ``1027''.
    Section 2J1.2(a) is amended by striking ``12'' and inserting 
``14''.
    Section 2J1.2(b) is amended by adding at the end the following:
    ``(3) If the offense (A) involved the destruction, alteration, or 
fabrication of a substantial number of records, documents, or tangible 
objects; (B) involved the selection of any essential or especially 
probative record, document, or tangible object, to destroy or alter; or 
(C) was otherwise extensive in scope, planning, or preparation, 
increase by 2 levels.''.
    The Commentary to Sec.  2J1.2 captioned ``Statutory Provisions'' is 
amended by inserting ``, 1519'' after ``1516''.
    Section 2T4.1 is amended in the table by striking the period and 
adding at the end the following:

``(O) More than $200,000,000 34
 (P) More than $400,000,000 36.''.
    Appendix A (Statutory Index) is amended by inserting after the line 
referenced to 18 U.S.C. 1347 the following new lines:

``18 U.S.C. 1348 2B1.1
18 U.S.C. 1349 2X1.1
18 U.S.C. 1350 2B1.1''.
    Appendix A (Statutory Index) is amended in the line referenced to 
18 U.S.C. 1512(c) by striking ``(c)'' and inserting ``(d)''.
    Appendix A (Statutory Index) is amended by inserting after the line 
referenced to 18 U.S.C. 1512(b) the following new line:

``18 U.S.C. 1512(c) 2J1.2''.
    Appendix A (Statutory Index) is amended by inserting after the line 
referenced to 18 U.S.C. 1518 the following new lines:

``18 U.S.C. 1519 2J1.2
18 U.S.C. 1520 2E5.3''.
    Reason for Amendment: This amendment implements directives to the 
Commission contained in sections 805, 905, and 1104 of the Sarbanes-
Oxley Act of 2002, Pub. L. 107-204 (the ``Act''), by making several 
modifications to Sec.  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) and Sec.  2J1.2 (Obstruction of Justice). The 
directives pertain to serious fraud and related offenses and 
obstruction of justice offenses. The directives require the Commission 
under emergency amendment authority to promulgate amendments 
addressing, among other things, officers and directors of publicly 
traded companies who commit fraud and related offenses, fraud offenses 
that endanger the solvency or financial security of a substantial 
number of victims, fraud offenses that involve significantly greater 
than 50 victims, and obstruction of justice offenses that involve the 
destruction of evidence.
    First, the amendment addresses the directive contained in section 
1104(b)(5) of the Act to ``ensure that the guideline offense levels and 
enhancements under United States Sentencing Guideline Sec.  2B1.1 (as 
in effect on the date of enactment of this Act) are sufficient for a 
fraud offense when the number of victims adversely involved is 
significantly greater than 50.'' The amendment implements this 
directive by expanding the existing enhancement at Sec.  2B1.1(b)(2) 
based on the number of victims involved in the offense. Prior to the 
amendment, subsection (b)(2) provided a two level enhancement if the 
offense involved more than 10, but less than 50, victims (or was 
committed through mass-marketing), and a four level enhancement if the 
offense involved 50 or more victims. The amendment provides an 
additional two level increase, for a total of six levels, if the 
offense involved 250 or more victims. The Commission determined that an 
enhancement of this magnitude appropriately responds to the pertinent 
directive and reflects the extensive nature of, and the large scale 
victimization caused by, such offenses.
    Second, the amendment addresses directives contained in sections 
805 and 1104 of the Act pertaining to securities and accounting fraud 
offenses and fraud offenses that endanger the solvency or financial 
security of a substantial number of victims. Specifically, section 
805(a)(4) directs the Commission to ensure that ``a specific offense 
characteristic enhancing sentencing is provided under United States

[[Page 3083]]

Sentencing Guideline 2B1.1 (as in effect on the date of enactment of 
this Act) for a fraud offense that endangers the solvency or financial 
security of a substantial number of victims.'' In addition, section 
1104(b)(1) directs the Commission to ``ensure that the sentencing 
guidelines and policy statements reflect the serious nature of 
securities, pension, and accounting fraud and the need for aggressive 
and appropriate law enforcement action to prevent such offenses.'' The 
amendment implements these directives by expanding the scope of the 
existing enhancement at Sec.  2B1.1(b)(12)(B).
    Prior to the amendment, Sec.  2B1.1(b)(12)(B) provided a four level 
enhancement and a minimum offense level of 24 if the offense 
substantially jeopardized the safety and soundness of a financial 
institution. The amendment expands the scope of this enhancement by 
providing two additional prongs. The first prong applies to offenses 
that substantially endanger the solvency or financial security of an 
organization that, at any time during the offense, was a publicly 
traded company or had 1,000 or more employees. The addition of this 
prong reflects the Commission's determination that such an offense 
undermines the public's confidence in the securities and investment 
market much in the same manner as an offense that jeopardizes the 
safety and soundness of a financial institution undermines the public's 
confidence in the banking system. This prong also reflects the 
likelihood that an offense that endangers the solvency or financial 
security of an employer of this size will similarly affect a 
substantial number of individual victims, without requiring the court 
to determine whether the solvency or financial security of each 
individual victim was substantially endangered.
    A corresponding application note for Sec.  2B1.1(b)(12)(B) sets 
forth a non-exhaustive list of factors that the court shall consider in 
determining whether the offense endangered the solvency or financial 
security of a publicly traded company or an organization with 1,000 or 
more employees. The list of factors includes references to insolvency, 
filing for bankruptcy, substantially reducing the value of the 
company's stock, and substantially reducing the company's workforce 
among the list of factors that the court shall consider when applying 
the new enhancement, and other factors not enumerated in the 
application note could be considered by the court as appropriate.
    The amendment also modifies the application note of the previously 
existing prong of Sec.  2B1.1(b)(12)(B), the financial institutions 
enhancement, to be consistent structurally with the new prongs of the 
enhancement. Prior to the amendment, the presence of any one of the 
factors enumerated in the application note would trigger the financial 
institutions enhancement under Sec.  2B1.1(b)(12)(B). Under the 
amendment, the application note to the financial institutions 
enhancement sets forth a non-exhaustive list of factors that the court 
shall consider in determining whether the offense substantially 
jeopardized the safety and soundness of a financial institution. The 
list of factors that the court shall consider when applying this 
enhancement includes references to insolvency, substantially reducing 
benefits to pensioners and insureds, and an inability to refund fully 
any deposit, payment, or investment on demand.
    The second prong added to Sec.  2B1.1(b)(12)(B) by the amendment 
applies to offenses that substantially endangered the solvency or 
financial security of 100 or more victims, regardless of whether a 
publicly traded company or other organization was affected by the 
offense. The Commission concluded that the specificity of the directive 
in section 805(a)(4) required an enhancement focused specifically on 
conduct that endangers the financial security of individual victims. 
Thus, use of this prong of the enhancement will be appropriate in cases 
in which there is sufficient evidence for the court to determine that 
the amount of loss suffered by individual victims of the offense 
substantially endangered the solvency or financial security of those 
victims. The Commission also determined that the enhancement provided 
in Sec.  2B1.1(b)(12)(B) shall apply cumulatively with the enhancement 
at Sec.  2B1.1(b)(2), which is based solely on the number of victims 
involved in the offense, to reflect the particularly acute harm 
suffered by victims of offenses for which the new prongs of subsection 
(b)(12)(B) apply.
    Third, the amendment addresses the directive contained at section 
1104(a)(2) of the Act to ``consider the promulgation of new sentencing 
guidelines or amendments to existing sentencing guidelines to provide 
an enhancement for officers or directors of publicly traded 
corporations who commit fraud and related offenses.'' The amendment 
implements this directive by providing a new, four level enhancement at 
Sec.  2B1.1(b)(13) that applies if the offense involved a violation of 
securities law and, at the time of the offense, the defendant was an 
officer or director of a publicly traded company. The Commission 
concluded that a four level enhancement appropriately reflects that an 
officer or director of a publicly traded company who commits such an 
offense violates certain heightened fiduciary duties imposed by 
securities law upon such individuals. Accordingly, the court is not 
required to determine specifically whether the defendant abused a 
position of trust in order for the enhancement to apply, and a 
corresponding application note provides that, in cases in which the 
new, four level enhancement applies, the existing two level enhancement 
for abuse of position of trust at Sec.  3B1.3 (Abuse of Position of 
Trust or Use of Special Skill) shall not apply.
    The corresponding application note also expressly provides that the 
enhancement would apply regardless of whether the defendant was 
convicted under a specific securities fraud statute (e.g., 18 U.S.C. 
1348, a new offense created by the Act specifically prohibiting 
securities fraud) or under a general fraud statute (e.g., 18 U.S.C. 
1341, prohibiting mail fraud), provided that the offense involved a 
violation of ``securities law'' as defined in the application note.
    Fourth, the amendment expands the loss table at Sec.  2B1.1(b)(1) 
to punish adequately offenses that cause catastrophic losses of 
magnitudes previously unforeseen, such as the serious corporate 
scandals that gave rise to several portions of the Act. Prior to the 
amendment, the loss table at Sec.  2B1.1(b)(1) provided sentencing 
enhancements in two level increments up to a maximum of 26 levels for 
offenses in which the loss exceeded $100,000,000. The amendment adds 
two additional loss amount categories to the table; an increase of 28 
levels for offenses in which the loss exceeded $200,000,000, and an 
increase of 30 levels for offenses in which the loss exceeded 
$400,000,000. These additions to the loss table address congressional 
concern regarding particularly extensive and serious fraud offenses, 
and more fully effectuate increases in statutory maximum penalties 
provided by the Act (e.g., the increase in the statutory maximum 
penalties for wire fraud and mail fraud offenses from five to 20 years 
set forth in section 903 of the Act). The amendment also modifies the 
tax table in Sec.  2T4.1 in a similar manner to maintain the 
longstanding proportional relationship between the loss table in Sec.  
2B1.1 and the tax table.
    The amendment also adds a new factor to the general, enumerated 
factors that the court may consider in determining the amount of loss 
under Sec.  2B1.1(b)(1). Specifically, the amendment adds the reduction 
in the

[[Page 3084]]

value of equity securities or other corporate assets that resulted from 
the offense to the list of general factors set forth in Application 
Note 2(C) of Sec.  2B1.1. This factor was added to provide courts 
additional guidance in determining loss in certain cases, particularly 
in complex white collar cases.
    Fifth, the amendment modifies Sec.  2J1.2 to address the directives 
pertaining to obstruction of justice offenses contained in sections 805 
and 1104 of the Act. Specifically, section 805(a) of the Act directs 
the Commission to ensure that the base offense level and existing 
enhancements in Sec.  2J1.2 are sufficient to deter and punish 
obstruction of justice offenses generally, and specifically are 
adequate in cases involving the destruction, alteration, or fabrication 
of a large amount of evidence, a large number of participants, the 
selection of evidence that is particularly probative or essential to 
the investigation, more than minimal planning, or abuse of a special 
skill or a position of trust. Section 1104(b) of the Act further 
directs the Commission to ensure that the ``guideline offense levels 
and enhancements for an obstruction of justice offense are adequate in 
cases where documents or other physical evidence are actually destroyed 
or fabricated.''
    The amendment implements these directives by making two 
modifications to Sec.  2J1.2. First, the amendment increases the base 
offense level in Sec.  2J1.2 from level 12 to level 14. Second, the 
amendment adds a new two level enhancement to Sec.  2J1.2. This 
enhancement applies if the offense (i) involved the destruction, 
alteration, or fabrication of a substantial number of records, 
documents or tangible objects; (ii) involved the selection of any 
essential or especially probative record, document, or tangible object 
to destroy or alter; or (iii) was otherwise extensive in scope, 
planning, or preparation. The Commission determined that existing 
adjustments in chapter three for aggravating role, Sec.  3B1.1, and 
abuse of position of trust or use of special skill, Sec.  3B1.3, 
adequately account for those particular factors described in section 
805(a) of the Act.
    Sixth, the amendment addresses new offenses created by the Act. 
Section 1520 of title 18, United States Code, relating to destruction 
of corporate audit records, is referenced to Sec.  2E5.3 (False 
Statements and Concealment of Facts in Relation to Documents Required 
by the Employee Retirement Income Security Act; Failure to Maintain and 
Falsification of Records Required by the Labor Management Reporting and 
Disclosure Act; Destruction and Failure to Maintain Corporate Audit 
Records). Section 1520 provides a statutory maximum penalty of ten 
years' imprisonment for knowing and willful violations of document 
maintenance requirements as set forth in that section or in rules or 
regulations to be promulgated by the Securities and Exchange Commission 
pursuant to that section. The amendment also expands the existing cross 
reference in Sec.  2E5.3(a)(2) specifically to cover fraud and 
obstruction of justice offenses. Accordingly, if a defendant who is 
convicted under 18 U.S.C. 1520 committed the offense in order to 
obstruct justice, the amendment to the cross reference provision 
requires the court to apply Sec.  2J1.2 instead of Sec.  2E5.3. Other 
new offenses are listed in Appendix A (Statutory Index), as well as in 
the statutory provisions of the relevant guidelines.
    648. Amendment: Chapter two, part C is amended in the heading by 
adding at the end ``and violations of Federal election campaign laws''.
    Chapter two, part C is amended by striking the introductory 
commentary as follows:
Introductory Commentary
    The Commission believes that pre-guidelines sentencing practice did 
not adequately reflect the seriousness of public corruption offenses. 
Therefore, these guidelines provide for sentences that are considerably 
higher than average pre-guidelines practice.''.
    Chapter two, part C is amended by adding at the end the following 
new guideline and accompanying commentary:
    Sec.  2C1.8. Making, Receiving, or Failing to Report a 
Contribution, Donation, or Expenditure in Violation of the Federal 
Election Campaign Act; Fraudulently Misrepresenting Campaign Authority; 
Soliciting or Receiving a Donation in Connection with an Election While 
on Certain Federal Property
    (a) Base Offense Level: 8
    (b) Specific Offense Characteristics
    (1) If the value of the illegal transactions exceeded $5,000, 
increase by the number of levels from the table in Sec.  2B1.1 (Theft, 
Property Destruction, and Fraud) corresponding to that amount.
    (2) (Apply the greater) If the offense involved, directly or 
indirectly, an illegal transaction made by or received from--
    (A) A foreign national, increase by two levels; or
    (B) A government of a foreign country, increase by four levels.
    (3) If (A) the offense involved the contribution, donation, 
solicitation, expenditure, disbursement, or receipt of governmental 
funds; or (B) the defendant committed the offense for the purpose of 
obtaining a specific, identifiable non-monetary Federal benefit, 
increase by two levels.
    (4) If the defendant engaged in 30 or more illegal transactions, 
increase by two levels.
    (5) If the offense involved a contribution, donation, solicitation, 
or expenditure made or obtained through intimidation, threat of 
pecuniary or other harm, or coercion, increase by four levels.
    (c) Cross Reference
    (1) If the offense involved a bribe or gratuity, apply Sec.  2C1.1 
(Offering, Giving, Soliciting, or Receiving a Bribe; Extortion Under 
Color of Official Right) or Sec.  2C1.2 (Offering, Giving, Soliciting, 
or Receiving a Gratuity), as appropriate, if the resulting offense 
level is greater than the offense level determined above.
Commentary
    Statutory Provisions: 2 U.S.C. 437g(d)(1), 439a, 441a, 441a-1, 
441b, 441c, 441d, 441e, 441f, 441g, 441h(a), 441i, 441k; 18 U.S.C. 607. 
For additional provision(s), see Statutory Index (Appendix A).
    Application Notes:
    1. Definitions.--For purposes of this guideline:
    `Foreign national' has the meaning given that term in section 
319(b) of the Federal Election Campaign Act of 1971, 2 U.S.C. 441e(b).
    `Government of a foreign country' has the meaning given that term 
in section 1(e) of the Foreign Agents Registration Act of 1938 (22 
U.S.C. 611(e)).
    `Governmental funds' means money, assets, or property, of the 
United States government, of a State government, or of a local 
government, including any branch, subdivision, department, agency, or 
other component of any such government. `State' means any of the 50 
States, the District of Columbia, the Commonwealth of Puerto Rico, the 
United States Virgin Islands, Guam, the Northern Mariana Islands, or 
American Samoa. `Local government' means the government of a political 
subdivision of a State.
    `Illegal transaction' means (A) any contribution, donation, 
solicitation, or expenditure of money or anything of value, or any 
other conduct, prohibited by the Federal Election Campaign Act of 1971, 
2 U.S.C. 431 et seq.; (B) any contribution, donation, solicitation, or 
expenditure of money or anything of value made in excess of the amount 
of such contribution, donation,

[[Page 3085]]

solicitation, or expenditure that may be made under such Act; and (C) 
in the case of a violation of 18 U.S.C. 607, any solicitation or 
receipt of money or anything of value under that section. The terms 
`contribution' and `expenditure' have the meaning given those terms in 
section 301(8) and (9) of the Federal Election Campaign Act of 1971 (2 
U.S.C. 431(8) and (9)), respectively.
    2. Application of Subsection (b)(3)(B).--Subsection (b)(3)(B) 
provides an enhancement for a defendant who commits the offense for the 
purpose of achieving a specific, identifiable non-monetary Federal 
benefit that does not rise to the level of a bribe or a gratuity. 
Subsection (b)(3)(B) is not intended to apply to offenses under this 
guideline in which the defendant's only motivation for commission of 
the offense is generally to achieve increased visibility with, or 
heightened access to, public officials. Rather, subsection (b)(3)(B) is 
intended to apply to defendants who commit the offense to obtain a 
specific, identifiable non-monetary Federal benefit, such as a 
Presidential pardon or information proprietary to the government.
    3. Application of Subsection (b)(4).--Subsection (b)(4) shall apply 
if the defendant engaged in any combination of 30 or more illegal 
transactions during the course of the offense, whether or not the 
illegal transactions resulted in a conviction for such conduct.
    4. Departure Provision.--In a case in which the defendant's conduct 
was part of a systematic or pervasive corruption of a governmental 
function, process, or office that may cause loss of public confidence 
in government, an upward departure may be warranted.''.
    Section 3D1.2(d) is amended by inserting ``, 2C1.8'' after 
``2C1.7''.
    The Commentary to Sec.  5E1.2 captioned ``Application Notes'' is 
amended in the second sentence of Note 5 by striking ``and'' after 
``Control Act;'' and by inserting before the period at the end the 
following:

``; and 2 U.S.C. 437g(d)(1)(D), which authorizes, for violations of the 
Federal Election Campaign Act under 2 U.S.C. 441f, a fine up to the 
greater of $50,000 or 1,000 percent of the amount of the violation, and 
which requires, in the case of such a violation, a minimum fine of not 
less than 300 percent of the amount of the violation.
    There may be cases in which the defendant has entered into a 
conciliation agreement with the Federal Election Commission under 
section 309 of the Federal Election Campaign Act of 1971 in order to 
correct or prevent a violation of such Act by the defendant. The 
existence of a conciliation agreement between the defendant and Federal 
Election Commission, and the extent of compliance with that 
conciliation agreement, may be appropriate factors in determining at 
what point within the applicable fine guideline range to sentence the 
defendant, unless the defendant began negotiations toward a 
conciliation agreement after becoming aware of a criminal 
investigation''.
    Appendix A (Statutory Index) is amended by inserting before the 
line referenced to 7 U.S.C. 6 the following new lines:

``2 U.S.C. 437g(d) 2C1.8
2 U.S.C. 439a 2C1.8
2 U.S.C. 441a 2C1.8
2 U.S.C. 441a-1 2C1.8
2 U.S.C. 441b 2C1.8
2 U.S.C. 441c 2C1.8
2 U.S.C. 441d 2C1.8
2 U.S.C. 441e 2C1.8
2 U.S.C. 441f 2C1.8
2 U.S.C. 441g 2C1.8
2 U.S.C. 441h(a) 2C1.8
2 U.S.C. 441i 2C1.8
2 U.S.C. 441k 2C1.8''.
    Appendix A (Statutory Index) is amended by inserting after the line 
referenced to 18 U.S.C. 597 the following new line:

``18 U.S.C. 607 2C1.8''.
    Reason for Amendment: This amendment implements the directive from 
Congress contained in the Bipartisan Campaign Reform Act of 2002, Pub. 
L. 107-155, (the ``BCRA'') to the effect that the Commission 
``promulgate a guideline, or amend an existing guideline * * *, for 
penalties for violations of the Federal Election Campaign Act of 1971 
(the ``FECA'') and related election laws * * *''. The BCRA 
significantly increased statutory penalties for campaign finance 
crimes, formerly misdemeanors under the FECA. The new statutory maximum 
term of imprisonment for even the least serious of these offenses is 
now two years and for more serious offenses, the maximum term of 
imprisonment is five years.
    To effectively punish these offenses, the Commission chose to 
create a new guideline at Sec.  2C1.8 (Making, Receiving, or Failing to 
Report a Contribution, Donation, or Expenditure in Violation of the 
Federal Election Campaign Act; Fraudulently Misrepresenting Campaign 
Authority; Soliciting or Receiving a Donation in Connection with an 
Election While on Certain Federal Property). The Commission opted 
against simply amending an existing guideline because it determined 
after review that the characteristics of election-violation cases did 
not bear sufficient similarity to cases sentenced under any existing 
guideline. The offenses which will be sentenced under Sec.  2C1.8 
include: violations of the statutory prohibitions against ``soft 
money'' (2 U.S.C. 441i); restrictions on ``hard money'' contributions 
(2 U.S.C. 441a); contributions by foreign nationals (2 U.S.C. 441e); 
restrictions on ``electioneering communications'' as defined at 2 
U.S.C. 434(f)(3)(C); certain fraudulent misrepresentations (2 U.S.C. 
441h); and ``conduit contributions'' (2 U.S.C. 441f).
    The new guideline has a base offense level of level 8, which 
reflects the fact that these offenses, while they are somewhat similar 
to fraud offenses (sentenced under Sec.  2B1.1 (Theft, Property 
Destruction, and Fraud) at a base offense level of level 6), generally 
are more serious due to the additional harm, or the potential harm, of 
corrupting the elective process.
    The new guideline provides five specific offense characteristics to 
ensure appropriate penalty enhancements for aggravating conduct which 
may occur during the commission of certain campaign finance offenses. 
First, the new guideline provides a specific offense characteristic, at 
Sec.  2C1.8(b)(1), that uses the fraud loss table in Sec.  2B1.1 to 
incrementally increase the offense level in proportion to the monetary 
amounts involved in the illegal transactions. This both assures 
proportionality with penalties for fraud offenses and responds to 
Congress' directive to provide an enhancement for ``a large aggregate 
amount of illegal contributions.''
    Second, the new guideline provides alternative enhancements, at 
Sec.  2C1.8(b)(2), if the offense involved a foreign national (two 
levels) or a foreign government (four levels). These enhancements 
respond to another specific directive in the BCRA and reflect the 
seriousness of foreign entities attempting to tamper with the United 
States' election processes.
    Third, the new guideline provides alternative two level 
enhancements, at Sec.  2C1.8(b)(3), when the offense involves either 
``governmental funds,'' defined broadly to include Federal, State, or 
local funds, or an intent to derive ``a specific, identifiable non-
monetary Federal benefit'' (e.g., a presidential pardon). Each of these 
enhancements responds to specific directives of the BCRA.
    Fourth, the new guideline provides a two level enhancement, at 
subsection (b)(4), when the offender engages in ``30 or more illegal 
transactions.'' After a

[[Page 3086]]

review of all campaign finance cases in the Commission's datafile, the 
Commission chose 30 transactions as the number best illustrative of a 
``large number'' in that context. This enhancement also responds to a 
specific directive in the BCRA to the effect that the Commission 
provide enhanced sentencing for cases involving ``a large number of 
illegal transactions.''
    Fifth, the new guideline provides a four level enhancement, at 
Sec.  2C1.8(b)(5), if the offense involves the use of ``intimidation, 
threat of pecuniary or other harm, or coercion.'' This enhancement 
responds to information received from the Federal Election Commission 
and the Public Integrity Section of the Department of Justice which 
characterizes offenses of this type as some of the most aggravated 
offenses committed under the FECA.
    The new guideline also provides a cross reference, at subsection 
(c), which directs the sentencing court to apply either Sec.  2C1.1 or 
Sec.  2C1.2, as appropriate, if the offense involved a bribe or a 
gratuity and the resulting offense level would be greater than that 
determined under Sec.  2C1.8.
    Section 3D1.2 (Groups of Closely Related Counts) has been amended, 
consistent with the principles underlying the rules for grouping 
multiple counts of conviction, to include Sec.  2C1.8 offenses among 
those in which the offense level is determined largely on the basis of 
the total amount of harm or loss or some other measure of aggregate 
harm. (See Sec.  3D1.2(d)).
    Finally, Sec.  5E1.2 (Fines for Individual Defendants) has been 
amended to specifically reflect fine provisions unique to the FECA. 
This part of the amendment also provides that the defendant's 
participation in a conciliation agreement with the Federal Election 
Commission may be an appropriate factor for use in determining the 
specific fine within the applicable fine guideline range unless the 
defendant began negotiations with the Federal Election Commission after 
the defendant became aware that he or it was the subject of a criminal 
investigation.

[FR Doc. 03-1297 Filed 1-21-03; 8:45 am]
BILLING CODE 2211-01-P