John M. Rusnak, the former Allfirst Financial Inc. currency trader who lost $691.2 million, could face a tough battle in winning a light sentence if convicted, legal experts said yesterday.
Rusnak, 37, who is at the center of one of the largest bank scandals in history, was indicted on seven counts of bank fraud Wednesday. If convicted on all counts, he faces a maximum of 30 years in prison and a $1 million fine for each count.
None of the legal experts thinks Rusnak would receive the maximum sentence. They predicted a range of three to 10 years.
Working in his favor, they said, is that he has cooperated with federal authorities since the outset of the case and that he didn't pocket the money.
But several factors could make it difficult to win a light sentence: the duration of the scheme, which lasted five years; the elaborate steps he took to conceal the losses; and, most important, the size of the loss, experts said.
"Given the losses that appear to have been generated as a result of this trading scandal, there is no question he would be looking at a very significant stretch in jail," said Robert A. Mintz, head of the white-collar crime and government investigations practice group at McCarter & English LLP in Newark, N.J.
"If the losses are as great as they appear to be, he could face in the neighborhood of six to eight years in jail. For a nonviolent offense, that would be a significant prison term."
In addition, Rusnak would face penalties if convicted and might have to make restitution to the bank, depending on his ability to pay, Mintz said. He also might be barred from the securities industry.
The federal government's case against Rusnak could end in a plea agreement, which might stipulate a length of incarceration, experts said.
Determining a prison sentence depends on federal guidelines, which establish a range of time, measured in months, experts said. Those guidelines were recently toughened for fraud offenses, experts said.
"These guidelines are very unforgiving and are widely disliked by criminal defense lawyers," said Martin Himeles Jr., a white-collar defense attorney at Zuckerman Spaeder LLP in Baltimore.
The sentence also depends on the magnitude of the offense. In this case, prosecutors will weigh factors including whether Rusnak's scheme required planning, placed the bank in jeopardy, its duration and whether Rusnak abused his position, legal experts said.
Most important, however, is the size of Allfirst's loss, experts said. The highest loss recognized by the latest federal sentencing guidelines for fraud schemes is $100 million. The loss at Allfirst is more than six times that amount.
"Needless to say, this offense is certainly more significant than the drafters of the sentencing guideline envisioned," said Andrew C. White, a criminal defense attorney in Baltimore who specializes in white-collar crime.
Gregg L. Bernstein, a defense attorney at Martin, Snyder & Bernstein in Baltimore, said that in fraud cases the duration of incarceration is a function of the size of the loss.
"The greater the loss, the higher your sentence range," said Bernstein, who believes Rusnak could face about five years in prison. "Given the amount of the loss, I would be surprised if the government didn't seek a significant period of incarceration."
But a sentence could be reduced by several factors, and the most important is cooperation, experts said.
Rusnak has been cooperating with federal authorities since the outset of the investigation. He has turned over to the FBI his bank accounts, spending records and the hard-drive to the laptop computer that he used at home for some of his trading.
Federal sentencing guidelines allow for lesser sentences to be granted to those who acknowledge their roles in crimes and provide cooperation to prosecutors, experts said.
Cooperation "is huge," White said. "Cooperation in many cases is the most important aspect of sentencing for a defendant. If there are number of different persons against whom Mr. Rusnak can cooperate, the reduction in his sentence can be tremendous."
White believes that Rusnak could receive anywhere from three to four years in prison if he is convicted. The judge may even take into consideration that Rusnak has a wife and children.
"The judge can take him all the way down to probation, [but] I think it is doubtful," White said.
In its case against Rusnak, the government is using Section 1005 of the U.S. Code, which makes it unlawful to file false statements or reports to defraud a financial institution or deceive a bank officer or bank examiner.
Federal authorities have used Section 1005 widely and successfully to prosecute bank tellers and bank employees where they have made false statements to cover up theft.