United States v. Cole
2008 U.S. Dist. LEXIS 100089, 2008 WL 5204441, 622 F. Supp. 2d 632 (2008)
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Rule of Law:
Under 18 U.S.C. § 3553(a), a district court has the discretion to impose a non-guideline sentence by varying from the advisory Sentencing Guidelines, provided it gives a thorough explanation justifying the variance based on the specific facts of the case and the statutory purposes of sentencing, such as retribution and deterrence.
Facts:
- Robert G. Cole worked as a sales representative for Diebold, Inc., a publicly traded company whose stock traded on the New York Stock Exchange.
- As an employee, Cole received confidential information and was aware of a company policy prohibiting employees from trading in Diebold securities while possessing material nonpublic information.
- On July 27, 2005, Diebold publicly announced positive earnings guidance for the upcoming quarter and the full year.
- On September 13, 2005, Cole received internal Diebold financial reports containing non-public information that the company was not meeting its sales targets and would fail to meet its public earnings projections.
- Beginning on September 15, 2005, Cole purchased Diebold 'put option' contracts for a total cost of $70,110, betting that the company's stock price would decline.
- On September 21, 2005, Diebold publicly released a revised, lower earnings forecast, which caused its stock price to fall by more than 16%.
- In the days following the announcement, Cole sold his put option contracts for approximately $579,190, realizing a profit of $509,080.
- Prior to being charged, Cole disgorged the full $509,080 profit to the government.
Procedural Posture:
- The United States filed a one-count Information against Robert G. Cole in the U.S. District Court for the Northern District of Ohio, charging him with securities fraud.
- Cole was arraigned and subsequently entered into a plea agreement with the United States government.
- Pursuant to the plea agreement, Cole pled guilty to one count of securities fraud.
- Cole appeared for a sentencing hearing before the district court.
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Issue:
Is a sentence of one year and one day of imprisonment and a $180,000 fine, which represents a downward variance in prison time and an upward variance in the fine from the advisory Sentencing Guidelines, a reasonable sentence for securities fraud under the factors listed in 18 U.S.C. § 3553(a)?
Opinions:
Majority - Gwin, District Judge
Yes. A sentence below the advisory Guidelines for imprisonment but above the Guidelines for a fine is reasonable because it is sufficient, but not greater than necessary, to comply with the purposes of sentencing. After calculating the advisory Guidelines range (30-37 months imprisonment, $6,000-$60,000 fine), the court must conduct an individualized assessment using the § 3553(a) factors. While Cole's crime was a serious betrayal of trust that undermined the integrity of securities markets, his personal history—including decorated military service and no criminal record—was commendable. The court reasoned that specific deterrence and incapacitation were not significant factors, as Cole was unlikely to re-offend. The key justification for the variance was general deterrence; for a white-collar offender motivated by greed, a significant financial penalty (a $180,000 fine, representing ~20% of Cole's net worth) combined with a shorter but still significant prison term acts as a more effective deterrent to other potential offenders than a longer prison sentence with a smaller fine.
Analysis:
This sentencing memorandum is a significant illustration of a district court's discretion in the post-Booker era, where the Sentencing Guidelines are advisory. It provides a detailed roadmap for how a judge can justify a variance by methodically applying the § 3553(a) factors. The opinion's focus on general deterrence for white-collar crime, and its novel conclusion that a higher fine can be a more effective deterrent than a longer prison sentence, offers a persuasive rationale that could influence sentencing in similar economic crime cases. It highlights the tension between sentencing goals like retribution and deterrence and demonstrates how a court can tailor a sentence to the specific offender and offense, rather than rigidly adhering to the Guidelines.
