Criminal Defense Lawyers

Arguing Loss Amount at Federal Counterfeiting Sentencings

Introduction

Counterfeiting is a serious crime that can have major economic impacts. Under federal law, defendants convicted of counterfeiting face potentially lengthy prison sentences, with the specific sentence dependent on factors like the loss amount and the defendant’s criminal history. Loss amount – the financial loss attributable to the counterfeiting – is a critical issue at sentencing because it largely determines the sentencing range under the U.S. Sentencing Guidelines. This article examines strategies and arguments defense attorneys can use to minimize the loss amount and secure a more lenient sentence for clients facing federal counterfeiting charges.

Challenging the Government’s Loss Calculation

The government bears the burden of proving loss amount when seeking an enhanced sentence based on that factor. The defense should scrutinize the government’s methodology for calculating loss and look for flaws that could result in an inflated figure. For example, the government may base its loss amount on the full face value of all counterfeit items, when the true economic harm may be far less because of the inferior quality of the fakes[1]. The defense can retain an expert to critique the methodology and provide an alternative calculation showing a lower loss figure.

The defense should also scour the government’s evidence for gaps that undermine the reliability of the loss amount. If the evidence doesn’t establish exactly how many counterfeit items were produced or how many entered the marketplace, the defense can argue that the court should use the lowest plausible estimate. “Loss amount must be proven by a preponderance of the evidence. Where the record provides no reliable basis for determining the scope of the offense, the court must err on the side of caution and use the lowest conceivable amount.”[2]

Distinguishing Between Actual and Intended Loss

Another key strategy is distinguishing between actual loss and intended loss. Under the sentencing guidelines, loss amount is the greater of actual loss – the reasonably foreseeable pecuniary harm that resulted from the offense – and intended loss – the pecuniary harm the defendant purposely sought to inflict[3]. In many cases, intended loss will be far greater, since the defendant hoped to distribute all the counterfeit items produced.

But intended loss should not be used if it “overstates the seriousness of the offense.”[3] The defense can argue that basing the sentence on the full intended loss would unfairly punish the defendant for harm that never actually occurred. The court should consider only the actual loss, which could be substantially lower in cases where the defendant was caught before most of the counterfeit items entered the market.

Challenging the Use of Retail Value

When counterfeit goods are involved, the government will often calculate loss based on the retail value of the genuine versions of those goods. But the sentencing guidelines say loss amount should be determined by the “fair market value” of the infringed item[4]. The defense should argue that retail value results in an inflated loss figure because the true fair market value is the wholesale price or the price the defendant could have sold the items for.

The defense can explain that the defendant never could have achieved retail value, since selling at retail requires marketing, warranties, customer service, and other costs that counterfeiters don’t incur. Basing loss on retail value punishes the defendant for harm that never would have occurred, since the counterfeits could not displace genuine sales at retail prices.

Seeking a Downward Departure

In some cases, even a conservative loss estimate may result in a guideline range the defense views as excessive. The defense can argue that the court should depart downward under the sentencing guidelines if the loss amount overstates the seriousness of the offense[3]. The defense would need to establish mitigating factors, such as:

• The counterfeit goods were of obviously inferior quality, meaning consumers were not truly defrauded.
• The defendant’s role was minor and did not involve manufacturing or distributing the counterfeits.
• The offense was an isolated mistake in an otherwise law-abiding life.

The defense may need to use expert testimony to convince the court that a downward departure is warranted on the facts of the particular case.

Variance Arguments Under 18 U.S.C. § 3553(a)

If a departure under the guidelines is not feasible, the defense can urge a variance under 18 U.S.C. § 3553(a). That statute instructs courts to impose a sentence “sufficient, but not greater than necessary” based on factors like the nature of the offense, the defendant’s history, and the need to provide just punishment. The defense would argue that counterfeiting is less serious than many other frauds because it does not ordinarily cause substantial harm to identifiable victims[5]. The defense can also emphasize individual mitigating factors, such as:

• The defendant’s difficult upbringing.
• The defendant’s mental health or addiction issues.
• The defendant’s family responsibilities.
• The defendant’s charitable works and positive contributions to society.

These factors may justify a sentence below the guidelines, since the guidelines measure only harm and culpability and ignore mitigating personal circumstances.