Thursday, December 3, 2015

21-Day Insider Trading Sentence to Cooperator Considered Harsh

The New York Times reported today (Goldstein, "Witness in Insider Trading Inquiry Sentenced to 21 Days, see here) what it called a "surprising" 21-day prison sentence imposed  by Judge P. Kevin Castel upon a felony conviction broke "what has been the standard practice" in insider trading cases in the Southern District of New York.  Anyone not familiar with the customs of that court's prosecutors and judges might think that such a sentence was out-of-the-ordinary lenient.  However, as the article makes clear, that sentence, for a major cooperator, was apparently considered out-of-the-ordinary harsh.

The defendant, Richard Choo-Beng Lee, was a California hedge-fund owner who, after being approached by FBI agents with evidence that he (and his partner, Ali Far, who was later sentenced to probation by a different judge) had broken securities laws, cooperated with the government by recording 171 phone calls with 28 people, including Steven A. Cohen, DOJ's no. 1 target, who has not been indicted (although his firm, SAC Capital Advisers, was and pleaded guilty and paid a multi-billion dollar fine). 

New York City is the cooperation capital of the world.  As the Times article indicates, cooperators in white-collar (and other) cases in the Southern District of New York are given considerable benefits for cooperating (far greater than in most jurisdictions) and the default and almost uniform sentence for them is probation and not jail.  To be sure, cooperators make cases, and many of those cases and the individuals charged would go undetected without cooperators looking to provide assistance to the government to lessen their own potential sentences.

However, the cooperation culture in New York has many deleterious consequences. To the extent that deterrence is achieved by jail sentences (and I believe it is in white-collar cases, but not in many other areas), its effect has been minimized.  The clever white-collar criminal (and most but not all are intelligent) knows that he has in his pocket a "get-out-of-jail card," the ability to cooperate against others and get a non-jail sentence. The mid-level financial criminal can commit crimes, enjoy an outrageously lucrative, high-end life style, and, when and if caught, cooperate, stay out of jail and pay back what assets, if any, remain from his wrongdoing.

Knowledgeable white-collar defense attorneys are well aware of the benefits of cooperation.  It is often good lawyering to urge cooperation, at times even in marginal cases, to avoid jail sentences.  Indeed, more than a  a trifling number of those who plead guilty in white-collar cases are actually innocent, often because they lack the requisite mens rea  (a difficult, even when accurate, defense).  And sometimes, at the urging of their lawyers, they admit guilt and tailor their stories and testimony to what the prosecutors and agents (who usually see only the dark side of equivocal facts and circumstances) believe actually occurred so that others actually innocent are convicted (or also choose to plead guilty and perhaps cooperate against others).  The bar for indictment and conviction has been lowered. The adversary system has been turned sideways, if not upside-down.

To many, probably most,  lawyers, cooperation is personally easier than going to trial.  Cooperation avoids the stress of battle and the distress of  (statistically probable) defeat at trial.  No longer do lawyers walk around with "no-snitch" buttons.  The white-collar bar has become generally a non-combative bar. To the extent it ever had one, it (with notable and not-so-notable exceptions) has lost its mojo. The first (and often only) motion many lawyers make upon being retained is to hail a taxi to the prosecutor's office.

I write about the role of the bar as a lament more than a criticism.  I too represent cooperators when I think cooperation is to their benefit.  There is a great penalty (or, to put it gently, "loss of benefit") for not cooperating.  Those accused who choose not to cooperate, or those whose own scope of criminality and knowledge of wrongdoing of others is so limited that they cannot, receive (in my opinion sometimes, but far from usually, appropriate) severe jail sentences.  Those who cooperate, except for the unfortunate  Mr. Lee, almost always avoid jail.

Lawyers and professors talk about the "trial penalty," the extra, often draconian, prison time one receives for exercising his right to trial.  The principal "penalty" in white-collar cases is not the trial penalty, but the "non-cooperation penalty."  Even those who choose not to go to trial and plead guilty are punished much more severely than those who cooperate.

 

 

http://lawprofessors.typepad.com/whitecollarcrime_blog/2015/12/21-day-sentence-to-insider-trading-sentence-considered-remarkable.html

Current Affairs, Defense Counsel, Insider Trading, Judicial Opinions, Prosecutors, Sentencing | Permalink

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