Tuesday, November 2, 2004

More Crime or More Prosecutions?

An interesting article by Eduardo Porter, entitled More Corporate Crime, or Just Prosecutions?, appeared in Sunday’s New York Times Week in Review section (Oct. 31, 2004) (forwarded by Professor Jerry Israel). The article considers the following:

But is the flood tide of scandals evidence of a flood tide of malfeasance? Economists have their doubts. Chicanery does tend to flourish when the economy is booming and regulation is weakening, they say, but the last few years have hardly been boom times. More likely, they say, is that bad business behavior is about as common now as it ever was, but that it has attracted more notice because Americans are tolerating it less.

It quotes Professors James D. Cox (Duke) and John C. Coffee, III (Columbia). Professor Cox noted the emergence of the state Attorneys General as a force in white collar crime prosecutions, a relatively recent phenomenon:

“Prosecutors are going after white-collar crime with an eagerness we hadn't seen before," said James D. Cox, a professor of law at Duke University. "The state attorneys general realized that the governor-in-waiting, otherwise known as the attorney general, can get a lot of headlines.”

Professor Coffee noted:

Perhaps more important, though, prosperity promotes tolerance for deception. “In a bubble, people want to be lied to,” said John C. Coffee Jr., a professor at Columbia Law School. “It was more than a conflict of interest - securities analysts boosted stocks because people wanted them to.”

While the “scandal du jour” attracts the media’s attention, most understand that the amount of white collar crime is not driven by the economy, although the type of white collar crime often depends on whether the economy is in boom or bust period. It is also important to remember that the level of resources committed by the government, especially the federal government, will affect the volume of cases. This was shown in the late 1980s with the S&L crisis, and today significant resources are devoted to health care fraud cases. (ph)


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