By Nate Raymond

LAS VEGAS (Reuters) - A prominent Manhattan judge has called for federal sentencing guidelines to be revamped, saying their current emphasis on losses in white-collar crimes has led to irrational results.

U.S. District Judge Jed Rakoff, a longtime critic of the sentencing guidelines, told attendees of a Las Vegas legal conference Thursday that the United States should move away from its current system of distilling offenses into numbers for calculating a sentence to one that was more flexible.

"My modest proposal is that they should be scrapped in their entirety and in their place there should be a non-arithmetic, multi-factor test," he said.

Rakoff made the remarks during a lunchtime keynote address at the National Institute on White Collar Crime conference sponsored by the American Bar Association.

The ABA's white-collar group has recently created a committee that includes Rakoff as a member to focus on how white-collar sentencing guidelines should be changed.

The guidelines came into place following the passage of the Sentencing Reform Act of 1984, which gave birth to the U.S. Sentencing Commission. The goal at the time was to reduce discrepancies in sentences.

Rakoff argued that the "fundamental flaw" of the guidelines is they assume every situation can be distilled into a number for the purpose of then calculating a sentence. He called the numbers assigned to various situations "arbitrary."

"The Sentencing Commission to this day has never been able to articulate why it has two points for this, or four points for that," he said. "These are just numbers. And yet once they are placed the whole thing is blessed and said to be rational."

RAKOFF CHOOSES 3-1/2 YEARS, NOT 85

In white-collar cases, Rakoff said, the guidelines have resulted in an overemphasis on the amount of losses suffered by the victims, which is the major factor in calculating a sentence. He said that focus was "kind of nuts" as it ignores the intent and other factors in the case.

Initially mandatory, the guidelines became non-binding following the U.S. Supreme Court's 2005 decision in United States v. Booker. Most judges still issue guideline sentences, Rakoff said, since it's the easy way.

Rakoff, however, has been known to deviate. In a case he discussed in his speech, Rakoff in 2006 sentenced Richard Adelson, the former president of Impath Inc, to 3-1/2 years in prison for overstating results at the biotech company.

Rakoff had calculated the losses attributable to the conspiracy as $50 million, which under the guidelines would have resulted in an 85-year sentence.

"Now that struck me as barbaric, to be frank," he said.

In a 2010 letter to the Sentencing Commission, the U.S. Department of Justice said the Adelson sentencing and three other post-Booker sentences were "unacceptable," adding that the recent financial crisis had demonstrated the need for significant prison terms for white-collar crimes.

Rakoff said he is not opposed to tough sentences, noting that in 2009 he sentenced former lawyer Marc Dreier to 20 years in prison for running a $400 million investment fraud. Prosecutors had sought 145 years.

But he was concerned with "the irrationality of the guidelines, particularly in white-collar cases."

"This blind emphasis on the loss calculation to the exclusion of everything else leads to bizarre results in case after case after case, Adelson being just one example," he said.

Instead of focusing on numbers, Rakoff said the guidelines should instead be overhauled for a list of factors judges would be required to analyze in writing. They could weigh the factors however they wanted, and the sentences would be subject to a robust appellate review.

"But it would not result in this irrational and in my view terribly dangerous situation we have now where certain factors are just singled out, given artificially inflated numbers and then imposed directly or indirectly on judges," he said.

A spokeswoman for the U.S. Sentencing Commission declined comment Friday on Rakoff's remarks. In a report in January, the commission reaffirmed its view that a "strong and effective" guidelines system is the best way to achieve the purpose of the Sentencing Reform Act.

The commission is planning a roundtable meeting on its fraud guidelines in the fall.

Follow us on Twitter @ReutersLegal | Like us on Facebook