Apples and Oranges: Securities Market Losses Should Be Treated Differently for Major White-Collar Criminal Sentencing under the Federal Guidelines

Part II analyzes the history of market loss, a calculation of loss that arose as a damage calculation in private plaintiff civil securities fraud actions. This Part describes the evolving theory of loss causation in order to understand the foundation for market loss at criminal sentencing. This Part also explains how market loss might have been used in sentencing before the Guidelines. After the codification of the Guidelines, victim loss became the official driving factor in fraud sentencing. Thus, Part III examines the loss table and how a large loss finding leads to a long prison term recommendation. Because the court must calculate victim loss to adhere to the Guidelines, courts determine market loss in a manner similar to previous civil securities fraud cases. Part III also analyzes the subsequent developments in federal court. Part IV argues that market loss is inappropriate for criminal sentencing in its current form, because it differs from direct victim loss due to weaker causation. A defendant might be civilly liable for market loss, but he is not responsible for that loss in the way that criminal sentencing should require. Loss causation, even if sufficient in civil cases, should be afforded special treatment for sentencing purposes. Part V presents a solution in which market loss punishes the defendant less severely than direct loss because of the weaker causal link. Adopting a parallel loss table for market loss can accomplish this differentiation. Such an amendment to the Guidelines would help solve the problems this Article identifies