Friday, February 23, 2007
Considering White Collar Crime Sentences
Blog co-editor Ellen Podgor published an interesting article in the Yale Law Journal Pocket Part about the current nature of white collar crime sentences, "Throw Away the Key." She discusses the recent phenomenon of lengthy sentence for white collar defendants who are almost always first-time offenders posing no threat to society. She argues:
No doubt many of these white-collar offenders committed thefts within companies, and in some cases decimated employees’ and investors’ savings. But the sentencing Guidelines limit courts’ abilities to consider factors such as the motive of the perpetrator, the benefit he or she received, and the extenuating circumstances that caused the harm. Instead, the judge may only consider the sentencing Guidelines’ mathematical computation of loss when imposing a sentence. As a result, in some courts the person who steals to benefit the company without personal remuneration can receive a comparable sentence to the rogue employee who cashes in his or her company stock to obtain an immediate personal profit. The accused becomes irrelevant in a sentencing world ruled by the cold mathematical calculations found in the sentencing Guidelines. Not even the Supreme Court’s decision in United States v. Booker, which grants trial judges some flexibility after using the Guidelines, provides much relief. The statistics show that judges usually stick to the sentences provided in the Guideline grid.
A response to Professor Podgor's article was written by Andrew Weissmann and Joshua Block from the Jenner & Block firm -- Weissmann was head of the Enron Task Force before leaving for private practice. Their article, "White-Collar Defendants and White-Collar Crimes," agrees with her point that long sentences for white collar defendants do not provide much deterrence, but disagree with the argument that such defendants should be viewed differently. They argue:
Most troubling are Podgor’s arguments with respect to white-collar criminals. It is one thing to say that certain criminal acts are not as bad as others. But it is quite another to argue that people who commit white-collar crimes as a generalized group should be punished differently from those who commit other crimes. Any such differences often correlate in fact to race and almost always to class. One of the laudatory goals in promulgating the Sentencing Guidelines was to remedy the potential for hidden—or unhidden—bias in favor of “white collar” defendants.
The discussion is especially pertinent because the pace of white collar crime prosecutions continues. Lord Conrad Black faces securities fraud, conspiracy and RICO charges in Chicago over transactions at Hollinger International when he was CEO, and former Qwest CEO Joseph Nacchio will go on trial in Denver on insider trading charges for selling over $100 million in shares shortly before the company's stock price collapsed due in part to accounting problems. Like CEOs before them, these men face substantial sentences, which could amount to a virtual life term, for conduct that involved rather mundane corporate transactions. (ph)
As a former white collar criminal I would agree “that long sentences for white collar defendants do not provide much deterrence.” No criminal reading any newspaper or watching television and learning of the long prison sentences recently given to Jeffrey Skilling of Enron (24 years and 4 months) and Bernie Ebbers of WorldCom (about 25 years) will find morality. No crimes in progress or contemplated crimes will be stopped as a result of long prison sentences.
Criminals think in terms of incentive, opportunity, and capability. As a criminal my main concern was the successful execution of my crimes (opportunity). To prevent white collar crime we require strong internal controls, effective internal checks and balances, effective independent external auditors, and legislation such as Sarbanes-Oxley,
However, strong prison sentences are necessary though not for purposes of deterrence but for the purpose of exacting accountability and responsibility. White collar crime can be just as brutal as violent crime in that it imposes a collective harm on society that is not limited to its immediate victims.
White collar crime destroys the main pillar of our great capitalist economic system – the integrity and reliability of financial information and our capital markets. For example, securities frauds not only result in losses for the effected company’s shareholders, but also result in employee layoffs, unpaid creditors, layoffs at unpaid creditors, litigation payouts for accounting firms, reduced pension benefits for retirees (whose pensions, 401k’s, and savings were invested in the company’s stock), a general reduction of the overall market capitalization of all public companies, higher insurance premiums for other innocent companies seeking liability protection, and higher borrowing costs for other companies (since unpaid debts are added to the cost of a lenders business), etc.
Sam E. Antar (former Crazy Eddie CFO & convicted felon)
Posted by: Sam E. Antar (Former Crazy Eddie CFO & convicted felon) | Feb 24, 2007 10:55:42 PM
While the felons who destroy lives with drugs are certainly despicable, they destroy lives on a retail level. Energy trading fraud at Enron alone, according to McCullough Research, destroyed about 100,000 jobs in the Pacific Northwest. (We used to produce aluminium competitively here.) Show me a drug dealer who does comparable human damage to Lay and Skilling's corporate malfeasance and I'll consider reducing sentances on white collar criminals.
Additionally, there is substantially greater difficulty associated with bringing white collar criminals to justice. Even when white collar criminals are figuratively caught with a smoking gun over a fresh corpse, understanding the crime is exceptionally difficult for prosecutors, judges, and juries. This is certainly not helped by Ivy League economics professors, like Dr. Jan Acton, twisting theory beyond comprehension to cover for the criminals.
Posted by: Patrick S Lasswell | Feb 24, 2007 9:38:13 PM