Friday, September 16, 2005

Are White Collar Crime Sentences Too Severe?

The sentencing of former Tyco CEO Dennis Kozlowski and CFO Mark Swartz is scheduled for Monday, Sept. 19 in New York Supreme Court before Judge Michael Obus.  A New York Times article (here) raises the question whether sentences in white collar crime cases have become too severe, looking at the prison terms that Bernie Ebbers (25 years) and John Rigas (15 years) received in their fraud prosecutions. The article does not mention the substantial term (24+ years) received by Jaime Olis, a mid-level manager convicted of conspiracy and fraud for his work at Dynegy who is awaiting the outcome of his appeal (including the Booker remand issue).

This is quite a turnabout from the pre-Sentencing Guidelines days, when much of the disparity decried in the indeterminate system used by the federal courts arose in white collar cases.  The view that defendants in white collar crime cases were more likely to receive lower sentences, or probation, was prevalent, and the "poster boys" of corporate malfeasance in the 1980, Ivan Boesky and Michael Milken, received what are now viewed as fairly light sentences, serving less than three years.  Sentences received by the high-profile defendants are not the only ones that show the increase in punishment meted out in white collar cases.  A recent post (here) discussed a 30-year sentence to a lawyer who was a first-time offender in a large mortgage fraud scheme. 

One wrinkle Kozlowski and Swartz face in their sentencing is the possibility of having to serve at least a portion of the term in a maximum security prison.  In an earlier post, I discussed the potential sentence, and excerpt it below:

The most serious charge on which the jury convicted Kozlowski and Swartz was first degree grand larceny, which under New York law is a class B felony "when the value of the property exceeds one million dollars," which was certainly the case here (see N.Y. Penal Law Sec. 155.42 here).  Unlike the federal Sentencing Guidelines, which require a fairly intricate analysis of the circumstances surrounding the conviction and the relevant conduct of the defendant in the crime that leads to a "offense level" that gets plugged into a sentencing grid, New York provides for a range of sentences based on the type of offense and gives the sentencing judge discretion within that range to impose a term of imprisonment (i.e. an "indeterminate sentence").  Under N.Y. Penal Law Sec. 70.00(2)(b) & (3)(b) (here), the minimum sentence for a class B felony is from 1 to 8.3 years, and the maximum is 3 to 25 years (i.e. the minimum is 1/3 of the maximum).

What makes things dicey for Kozlowski and Swartz is that, under New York law, a sentence of more than six years means that they will be sent to a maximum security prison, such as Attica or the Downstate Correctional Facility in Fishkill, NY (doesn't that sound inviting).  While federal prisons are not necessarily pleasant, a minimum security camp is much less structured, and threatening, than a New York State Correctional Facility, especially a maximum security prison.  As discussed in a CNN.Com article (here), the usual practice in New York is to take the prisoner from the courtroom immediately after sentencing to begin serving the term of imprisonment, although the person will be processed for approximately six weeks until being sent to the assigned prison.  If Justice Obus does not grant Kozlowski and Swartz bail pending appeal, which is a distinct possibility, they could be in a New York prison by the end of the summer.

If Kozlowski and Swartz receive substantial prison terms, it will certainly draw the attention of corporate executives (and others) nationwide.  In that sense, the convictions may have a substantial deterrent effect, but how much is too much?  There's no answer to that one. (ph)

                                                                                                         

UPDATE: Tom Kirkendall on the Houston's Clear Thinkers blog asks (here) how the New York Times could have overlooked the Jaime Olis sentencing.  Sometimes memory only stretches back three months (or so), and Olis is "so yesterday."  How can the Fifth Circuit let him dangle, too?

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