U.S. v. Emmenegger

• Decision Date: 04 August 2004
• Docket Number: No. 04 CR. 334(GEL).,04 CR. 334(GEL).
• Parties: UNITED STATES OF AMERICA, v. Daniel EMMENEGGER, Defendant.
• Court: U.S. District Court — Southern District of New York

329 F.Supp.2d 416

UNITED STATES OF AMERICA, v. Daniel EMMENEGGER, Defendant.

No. 04 CR. 334(GEL).

United States District Court, S.D. New York.

August 4, 2004.

Scott L. Marrah, Assistant United States Attorney, New York, NY (David N. Kelley, United States Attorney for the Southern District of New York, of counsel), for U.S.

Jennifer L. Brown, The Legal Aid Society, Federal Defender Division, New York, NY, for defendant Daniel Emmenegger.

SENTENCING OPINION

LYNCH, District Judge.

The most pressing legal question in federal criminal law at this moment is whether the Supreme Court's recent decision in Blakely v. Washington, ___ U.S. ___, 124 S.Ct. 2531, 159 L.Ed.2d 403 (2004), invalidates all or significant parts of the sentencing guidelines regime introduced by the Sentencing Reform Act of 1984, Pub.L. No. 98-473, 98 Stat.1987. This Court has not yet been required to address that question. Either defense counsel or the Government, or both, have sought adjournments in cases pending sentence when the Supreme Court decided Blakely, and the Court has routinely granted such adjournments to provide the parties time to absorb the opinion and reassess their arguments about appropriate sentences in view of it.

The time has now come for the Court to face the question, for it is squarely presented by this case. Of course, district courts will play a limited role in the ultimate resolution of the issues raised by Blakely. But they do not enjoy the luxury to await guidance from the Supreme Court; they must move forward with processing the many criminal cases before them, applying the law as best they can determine it. This case provides a classic occasion to address the main questions with which the federal courts have wrestled since Blakely.

BACKGROUND

On April 16, 2004, defendant Daniel Emmenegger, an employee of a registered securities broker-dealer, pled guilty to a five-count indictment charging him with securities fraud and wire fraud. The Government had charged Emmenegger with a fairly simple scheme to defraud his employer, Susquehanna International Group, LLP. As an employee of Susquehanna, Emmenegger had been authorized to trade index options. Between July 2002 and March 2004, he repeatedly engaged in trades between Susquehanna's proprietary account and accounts under his personal control, on terms different from prevailing market prices, in a manner that caused his accounts to gain and Susquehanna's to lose. The Government alleges that Emmenegger's scheme occasioned losses of more than $300,000.

It is the Government's proclaimed policy to refuse to enter into sentencing stipulations short of the highest readily-provable range under the U.S. Sentencing Guidelines ("U.S.S.G" or "Guidelines"). See United States v. Green, No. Cr. A. 02-10054, 2004 WL 1381101, at *6 (D.Mass. June 18, 2004), citing Sept. 22, 2003, Memorandum from Attorney General John Ashcroft Setting Forth Justice Department's Charging and Plea Policies § I.A, reprinted in 16 Fed. Sent. Rep. 129 (2003). Like many defendants in recent years, Emmenegger therefore chose simply to plead guilty to the entire indictment, without either receiving promises from the Government or stipulating to any facts beyond those necessary to furnish an adequate factual basis for his plea. At his plea allocution, when the Court asked Emmenegger what he had done to make him believe himself guilty of the crimes charged in the indictment, his entire response was as follows:

From the summer of 2002 through early 2004 while working both as a trading assistant and market maker; I made off-market trades at prices to my own advantage. Through these trades I caused my employer to lose money and gain[ed] money for my own accounts.

I was in Manhattan at the time I executed those trades and sent confirmation orders to Connecticut where I had set up accounts that my employer was unaware of.

At the time that I executed these trades I knew that what I was doing was wrong and illegal and I'm ashamed of myself right now for doing this.

(Tr. 16.) The Government agreed that this statement provided an adequate factual basis for his plea, subject only to Emmenegger's confirmation, in response to a follow-up question suggested by the prosecutor, that he transmitted the interstate confirmations "[e]lectronically," over wires. (Id.) Neither the Court nor the Government asked Emmenegger about, nor did he specify, the extent of the unlawful trades or the magnitude of the consequent losses.¹

Consistent with prevailing practice in the Second Circuit, see United States v. Pimentel, 932 F.2d 1029, 1034 (2d Cir.1991), the Government provided Emmenegger with a letter setting forth its understanding, as of the time of the plea, of the applicable sentencing analysis pursuant to the Guidelines. Before Emmenegger entered his plea, the Court advised him that this letter neither binds the Court nor constitutes a "guarantee or promise that [his] sentence would be within [the] range" specified by the Government (Tr. 14), and that "by pleading guilty [he was] exposing himself to the possibility of receiving any combination of punishments up to the maximum" sentence of 20 years on each count, or "up to 100 years [of] imprisonment" (Tr. 11). Emmenegger acknowledged that he understood this advice. (Tr. 12, 14.)

According to the Government, pursuant to U.S.S.G. § 2B1.1(a)(1), Emmenegger's base offense level is seven, which must be increased by four additional levels because the offense involved a violation of the securities laws and Emmenegger was associated with a broker-dealer at the time of the offense, U.S.S.G. § 2B1.1(b)(14)(A)(ii), and by twelve more levels because the aggregate loss was between $200,000 and $400,000. U.S.S.G. § 2B1.1(b)(1)(G). Awarding Emmenegger credit for timely acceptance of responsibility would reduce his offense level by three, U.S.S.G. §§ 3E1.1(1)(a) and (b), yielding, by the Government's calculation, an adjusted final offense level of 20 (7 + 4 + 12 — 3). Because the parties agree that Emmenegger has no prior criminal record, the sentencing range, according to the Government's calculation, should be 33 — 41 months of imprisonment. On July 13, 2004, the Probation Department provided the Court with a Presentence Report ("PSR"), which adopted the same calculation and recommended that Emmenegger be sentenced at the bottom of that range.

The Court must address the constitutionality of the guidelines regime only if it makes a practical difference here. Accordingly, the Court will first determine Emmenegger's sentence under three different, potentially applicable, sentencing regimes.

SENTENCING CALCULATIONS

I. Sentencing Guidelines

Were the Court to use the guidelines regime universally applied by federal courts before Blakely, it would reach the same conclusion arrived at by the Government and the Probation Department. The guidelines analysis is straightforward, for it requires resolution of only one disputed guidelines issue and a decision on one arguable ground for departure.

A. Offense Level: "Person Associated with a Broker or Dealer"

While Emmenegger argues that Blakely renders the guidelines regime unconstitutional, and that the Guidelines therefore should not be applied to his case at all (Letter from Jennifer L. Brown, to the Court, dated July 16, 2004, at 1 ("Brown Ltr.")), he offers an alternative analysis under the Guidelines in the event the Court rejects that argument. (Id. at 9.) Emmenegger's analysis effectively concedes that his base offense level is seven, and that the Court could correctly find by a preponderance of the evidence that his offense caused an aggregate loss within the range asserted by the Government.²

Emmenegger does, however, dispute the four-level adjustment imposed pursuant to U.S.S.G. § 2B1.1(b)(14)(A)(ii). This section enhances a sentence for a fraud or theft crime if the offense involves a violation of the securities laws and the offender is "a person associated with a broker or dealer." Id. Emmenegger pled guilty to securities fraud, thus establishing the first prerequisite to this enhancement. The Guidelines commentary makes clear that "a person associated with a broker or dealer" is a term of art defined by the securities regulation statutes. U.S.S.G. § 2B1.1, Application Note 13(A). The referenced definition applies the term to, among others,

any employee of such broker or dealer, except that any person associated with a broker or dealer whose functions are solely clerical or ministerial shall not be included in the meaning of such term for purposes of 780(b) of this title (other than paragraph (6) thereof).

15 U.S.C. § 78c(a)(18).

Emmenegger argues that this definition does not apply to him because, at least during the portion of his employment when he held the title "trading assistant,"³ his job was "essentially ministerial or clerical in nature." (Brown Ltr. at 9.) The Court rejects that characterization, for both legal and factual reasons.

First, as a matter of law, the statutory definition of "a person associated with a broker or dealer" includes clerical or ministerial employees, except with regard to one particular aspect of the securities laws, which is not implicated here. The primary definition covers "any employee of [a] broker or dealer." 15 U.S.C. § 78c(a)(18) (emphasis added). The only exception does not remove clerical or ministerial employees from the definition of associated persons generally; the statute makes an exception for clerical or ministerial employees solely for purposes of 15 U.S.C. § 78o(b). Indeed, the statutory language emphasizes that employees exempt from the definition for those limited purposes are persons who have already been defined as "person[s] associated with a broker or dealer" for all other purposes. Id. The effect of the "clerical or ministerial" exception is therefore simply to exempt employees in that category from certain requirements of § 15(b) of the Securities Exchange Act...