United States v. James Fry
2015 U.S. App. LEXIS 11303
| 8th Cir. | 2015Background
- James Fry ran Arrowhead hedge funds that invested over $500 million in Petters Company notes; he solicited investors by misrepresenting the nature and payment of the notes and caused ≈$130 million in investor losses.
- Fry was convicted by a jury of securities fraud, wire fraud, and making false statements to the SEC (12 counts) and sentenced to 210 months’ imprisonment; several related co-participants pleaded guilty and received lesser sentences.
- At sentencing the district court found aggravating factors: leadership/organizer role, obstruction (lying to the SEC), status as a registered broker/adviser, and offshore conduct; guideline calculation produced an advisory 1,440-month range but the court varied downward to 210 months.
- Fry appealed, arguing (1) multiplicitous SEC false-statement counts (Double Jeopardy), (2) that his higher post-trial sentence (versus co-defendants who pled guilty) gives rise to a presumption of vindictiveness, and (3) procedural and substantive sentencing error under 18 U.S.C. § 3553(a).
- The majority declined to reach the multiplicity claim because Fry failed to raise it timely and did not show "good cause" under amended Rule 12; it rejected a presumption of vindictiveness and affirmed the sentence as procedurally and substantively proper.
- Judge Bright dissented as to sentence: he would vacate and remand, arguing the district court failed to meaningfully analyze § 3553(a) factors (beyond offense conduct), did not adequately explain the disparity with co-defendants, and that the record permits an inference of vindictiveness or at least requires a reasoned explanation to allow meaningful appellate review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Multiplicity / Double Jeopardy for two § 1001 counts | Fry: two SEC false-statement counts are multiplicitous and violate Double Jeopardy | Government: counts are distinct; Fry failed to timely raise the claim | Court: Fry failed to raise issue pretrial and showed no "good cause" under amended Rule 12(c)(3); decline to address claim on appeal |
| Presumption of judicial vindictiveness from higher post-trial sentence | Fry: longer sentence than co-defendants who pled guilty shows a presumption of vindictiveness for exercising right to jury trial | Government: Smith and related precedent reject such a prophylactic presumption when comparing different defendants or post-plea vs post-trial sentencings; plea-based leniency and greater information after trial justify disparities | Court: No presumption; Fry must prove actual vindictiveness and did not do so; Due Process not violated |
| Procedural sentencing error under § 3553(a)(6) (failure to avoid unwarranted disparities / inadequate explanation) | Fry: court failed to adequately consider disparity with co-conspirators and did not sufficiently explain sentence | Government: court expressly addressed disparities, listed related defendants, explained differences and aggravating facts; sentencing record shows consideration of § 3553(a) factors | Court: No plain procedural error; district court considered § 3553(a) and gave adequate explanation under plain-error review |
| Substantive reasonableness of 210-month sentence | Fry: sentence greater than necessary; disparity with lighter sentences of co-participants shows unreasonableness | Government: substantial downward variance from absurd Guideline range; aggravating conduct, obstruction, leadership role, and multiple counts justify sentence | Court: Sentence is substantively reasonable and not an abuse of discretion given factors and large downward variance from guidelines |
Key Cases Cited
- North Carolina v. Pearce, 395 U.S. 711 (1969) (prophylactic presumption of vindictiveness where increased sentence follows reconviction)
- Alabama v. Smith, 490 U.S. 794 (1989) (rejected presumption where greater information after trial and plea-based leniency justify sentencing differences)
- Texas v. McCullough, 475 U.S. 134 (1986) (judge must cite objective information to rebut presumption when it applies)
- Gall v. United States, 552 U.S. 38 (2007) (review standard for reasonableness; requirement that sentencing court adequately explain variance)
- Koon v. United States, 518 U.S. 81 (1996) (sentencing judges consider individual circumstances; disparity among defendants expected)
- United States v. Lazenby, 439 F.3d 928 (8th Cir. 2006) (narrow relief for extreme disparity among co-conspirators when consolidated on appeal)
- United States v. Petters, 663 F.3d 375 (8th Cir. 2011) (background on Petters Ponzi scheme and related prosecutions)