Federal Criminal Lawyer Blog
Yesterday, the Eleventh Circuit Court of Appeals issued its fourth opinion regarding the federal sentencing of Kenneth Livesay, former chief information officer for HealthSouth Corporation. The Court has insisted that Livesay must serve time in prison for his role in the accounting fraud at HealthSouth. We are disappointed in the Court’s decision, because in our view, the sentence was supported by the Supreme Court’s decision in Gall v. United States.
Prior to 1999, Livesay was an assistant controller for HealthSouth who played a direct role in the accounting fraud that came to light following Sarbanes-Oxley in 2003. In 1999, however, Livesay decided that he could no longer stomach the fraud, so he transferred to the IT department, where he became CIO. Before the fraud was discovered, he was asked repeatedly to return to the accounting department, but he refused.
In 2004, Livesay pleaded guilty to conspiracy to commit wire fraud, securities fraud, and falsifying records; falsely certifying financial information filed with the SEC; and a forfeiture court. Pursuant to his plea agreement, the government agreed to recommend a reduction in his offense level for acceptance of responsibility, a sentence at the low end of the guidelines, and a downward departure in exchange for Livesay’s cooperation with the government.
And cooperate, he did. Livesay immediately assisted the government in its prosecutions relating to the fraud. He created a roadmap for how HealthSouth had manipulated its accounts and provided information, including documents, he had maintained as evidence of the fraud. He met with various governmental agencies on at least 10 occasions and testified against CEO Richard Scrushy for four days and finance exec Sonny Crumpler for two days. The judge in those cases (and his most recent sentencing hearing) was particularly impressed with his credibility as a witness.
Judge Clemon of the Northern District of Alabama sentenced Livesay to 60 months probation, including 6 months of home detention, a $10,000 fine, and forfeiture of $750,000. The government appealed the sentence and the Eleventh Circuit remanded for resentencing in Livesay I, holding that the court below had failed to state the reasons supporting the extent of its departure from the Guidelines sentence.
On remand, he was given the same sentence. The Eleventh Circuit again reversed in Livesay II, holding that the departure and the ultimate sentence were unreasonable due to Livesay’s role in the massive fraud. The Supreme Court granted certiorari, vacated Livesay II, and remanded for reconsideration in light of Gall. On remand, the Eleventh Circuit again vacated Livesay’s sentence in Livesay III, holding that the sentencing court had impermissibly considered Livesay’s repudiation of the conspiracy in its departure. Judge Clemon recused himself.
Judge Bowdre imposed the same sentence again at Livesay’s third sentencing hearing. In explaining its reasoning for the departure, the court focused on the significance and usefulness of Livesay’s assistance to the government, as well as the timeliness of that assistance. Then in its Booker analysis, the court focused on Livesay’s history and characteristics, including his inability to stomach participating in the fraud by remaining in the accounting department.
The court also focused on sentencing disparities in the case, particularly regarding Emery Harris, Kay Morgan, and Richard Botts. Livesay initially directed Harris and Morgan to make false entries, but after his move to another department, they were promoted to positions equal to or higher than his in the fraud and they remained until the end. Harris received only 5 months in custody and Morgan received 48 months of probation. Richard Botts, a senior vice president, received only 60 months probation and 6 months home confinement, like Livesay. After his resentencing for the same amount of time, the government did not appeal his sentence.
In Gall, the Supreme Court held that appellate courts must review the substantive reasonableness of sentences under an abuse-of-discretion standard and must give due deference to the district court’s decision that § 3553(a) factors justify the extent of the variance from the Guidelines range. The Court recognized that “[t]he sentencing judge is in a superior position to find facts and judge their import under § 3553(a) in the individual case” and have “an institutional advantage over appellate courts in making these sorts of determinations.” The Court also pointed out that while custodial sentences are more severe than probation, probation is a “substantial restriction of freedom” that should be given weight.
The Eleventh Circuit ignored the unique position of the sentencing judge and the weight of probation as a sentence in Livesay IV yesterday. Its opinion failed to mention any of the reasons for the sentencing court’s decision, simply holding that the probationary sentence “is patently unreasonable in light of Livesay’s role in this massive corporate fraud” and that “any sentence of probation would be unreasonable.”
Livesay’s attorney has stated his intent to request a rehearing. We hope the Eleventh Circuit reconsiders this case and prevents Livesay from enduring a fourth sentencing hearing. As of now, Livesay has already fulfilled payment of the fine and the forfeiture, as well as serving the home confinement time. He has lost his CPA license and spent 5 years with the agonizing uncertainty of the appellate process. As Judge Bowdre said at the last resentencing: “I believe it’s time for this to come to an end.”
The Eleventh Circuit’s opinion in Livesay I is available here.
The Eleventh Circuit’s opinion in Livesay II is available here.
The Eleventh Circuit’s opinion in Livesay III is available here.
The Eleventh Circuit’s opinion in Livesay IV is available here.
The Supreme Court’s opinion in Gall is available here.