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Click here for the full text of this decision FACTS:Jamie Olis was the senior director of tax planning, and then finance, at Dynegy Corp. He worked on a complex five-year deal involving natural gas transactions called “Project Alpha.” Under Project Alpha, Dynegy would borrow $300 million to fool the public, and Arthur Andersen, its auditor, into thinking that the cash was generated by Dynegy business operations. Project Alpha included the creation of a special purpose entity called ABG Gas Supply, which was owned by two international banks. During 2001, ABG bought natural gas at market prices and sold it to Dynegy at a discount. Dynegy then sold the gas at market prices, netting $300 million. From 2002 to 2005, ABG would buy gas at market prices and resell it to Dynegy at above-market prices. The money that came in from these sales would flow into the banks, which would recoup the $300 million plus interest. To perpetuate the notion that the transactions were really operations, ABG was kept sufficiently independent from Dynegy and ABG’s owners had to bear risk. Nonetheless, Olis and two others put into place secret hedge arrangements to ensure that the banks would not lose any money. Arthur Andersen was unaware of these arrangements, and saw only what looked like normal operations. The Securities and Exchange Commission began investigating Dynegy in general and Project Alpha in particular, determining that Project Alpha’s cash flow was really derived from financing, not operations. The revelation that Dynegy was borrowing money, not earning it, caused the company’s stock price to fall. Olis and his colleagues were charged with conspiracy to commit mail fraud, wire fraud and securities fraud, as well as the completion of all three of these fraud charges. Olis’ colleagues pleaded guilty, but Olis took his case to trial, where one of his colleagues testified against him. The jury convicted Olis as charged. At the punishment phase, the district court applied the sentencing guidelines as mandatory. It imposed at 292-month sentence, finding that the fraudulent scheme caused a loss of $105 million to a shareholder, that Olis used special skill and sophisticated means to carry out the fraud and that there were more than 50 victims of his fraud. On appeal, Olis attacks the sufficiency of the evidence supporting his conviction. He also raises a Booker challenge to his more-than-24-year sentence. United States v. Booker, 125 S.Ct. 738 (2005) HOLDING:Affirmed in part; vacated and remanded in part. The court finds that a reasonable jury, basing its conclusion on the testimony of Olis’ colleague and on the Arthur Andersen auditor familiar with Dynegy’s books, together with incriminating e-mail Olis and his co-conspirators exchanged, plus “a wealth of other evidence,” could easily have found Olis guilty beyond a reasonable doubt of all the charged crimes. The court affirms Olis’ conviction. The court turns, then, to Olis’ Booker challenge. The court observes that based on the findings of the district court about the skill involved in the fraud, the number of victims, etc., Olis’ total offense level was bumped up to 40, which carried a range of 292 to 365 months in prison. The increase in base offense level led to a dramatically higher sentencing range beyond that which the jury’s verdict would have produced. Consequently there was a Booker violation. The court rejects the government’s argument that the error should be reviewed only for plain error. The court points out that Olis repeatedly objected to both the district court’s loss calculation and to how the district court distributed the burden of proof. Though Olis never specifically mentioned how the increase in his base offense level violated his Sixth Amendment right, his repeated objections adequately apprised the district court that he was raising a constitutional error with respect to the loss calculation. Consequently, the district court’s error will be vacated and remanded unless this court can say the error was harmless under Federal Rule of Criminal Procedure 52(a). “In this case, the Government points to no evidence proving beyond a reasonable doubt that the district court would have sentenced Olis to nearly twenty-five years in prison had it acted under an advisory Sentencing Guidelines scheme as required by Booker. Therefore, we vacate Olis’s sentence and remand for resentencing.” The court examines next whether the district court erred by using the 2001 version of the sentencing guideline rather than the 2000 version. The court finds that the three conspiracy counts were governed by the 2001 amendments to the guidelines because the conspiracy straddled the period before and after the effective date of the guidelines. The remaining fraud claims occurred in 2001. The court then reviews the actual loss calculation. The court notes that “the gravamen of the offense conduct is securities fraud perpetrated on an established market.” The amount of damages in a civil setting should serve as a backdrop for criminal responsibility. The court further notes that there is no loss attributable to a misrepresentation unless and until the truth of a fraud is subsequently revealed and the price of the stock declines accordingly. If the stock declines for some other reason, though, that decline is not a loss for purposes of loss calculation. The court goes over several cases from other jurisdictions. It finds several noteworthy features of them: 1. given the time and evidentiary constraints on the sentencing process, the methods these cases adopt are necessarily less exact that the measure of damages applicable in civil securities litigation; 2. some cases reject an oversimplified market capitalization measure of damages and embrace a more nuanced approach modeled on loss-causation principles; 3. all the cases rejected the defendants’ attempts to reason away all losses; and 4. the factual variations among the cases reflect the importance of thorough analyses grounded in economic reality. The court faults the district court, which, when “faced with a”cook the books’ fraud, overemphasized [its] discretion as factfinder at the expense of economic analysis.” Because the district court’s loss calculation did not take into account the impact of extrinsic factors on Dynegy’s stock price decline, Olis is entitled to resentencing on this factor. Though the court questions the four-level enhancement for a crime involving more than 50 victims � the presentence report counted all 140,000 employees of Dynegy’s biggest stockholder, University of California Retirement System � because of the somewhat attenuated impact on the employees by Dynegy’s stock decline. However, it is “inconceivable” that fewer than 50 of Dynegy’s other shareholders suffered market loss from purchases or sales of stock caused by Olis’ fraud. “This enhancement may unduly skew the guidelines range in”cook the books’ securities frauds, but it clearly applies.” OPINION:Jones, J.; Garwood, Jones and Stewart, JJ.

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