White-Collar Felon Registries, Hester Prynne and The Drive-By Truckers

No white-collar recidivism here.

No white-collar recidivism here.

Although one must admire the historicist sensibilities of a state legislature that just reinstated the firing squad  as a methodology for execution, the Utah legislature’s passage of a bill to create a white-collar crime registry modeled on sex offender registries is unwise where it is not silly.

As a New York Times article notes:

With just a point and a click, you can browse a face book of felons, a new government website that will warn of the danger these criminals pose to society.

Only these are not the faces of sex offenders and serial killers. These criminals are mortgage schemers and inside traders, most likely armed with nothing more than an M.B.A. or a law degree.

Their faces will soon appear online courtesy of the Utah Legislature, which on Wednesday approved a measure to build the nation’s first white-collar offender registry, appending a scarlet letter of sorts on the state’s financial felons. The registry — quirky even by the standards of a legislature that this week reinstated firing squads as a method of execution — will be replete with a “a recent photograph” of Utah’s white-collar offenders and, in case they try to run or hide, their “date of birth, height, weight, and eye and hair color.”

What are the issues here?
Lillian Gish (1893 - 1993) as Hester Prynne, white-collar felon.

Lillian Gish (1893 – 1993) as Hester Prynne, white-collar felon.

First, a white-collar registry would be “scarlet-lettering” without an offsetting benefit.  Politically satisfying, perhaps, but it is a “pitchfork” approach that upends proportionality and other counterweights that prevent a criminal justice system from turning into an inquisitorial system.  (We have written about pitchfork mentalities before: Stalking Horses, Pitchfork Crowds, Narrow Neckties, Mr. Rogers’s Slippers and Indicted Employees: 6 Steps To Dodge Being Deweyed and  Why Innocent People Plead Guilty: Judge Rakoff, Eddie Coyle, Albert Camus and Sweet Dreams of Oppression).

On the subject of The Scarlet Letter, consider Hawthorne and the core meaning of the story, which is about confession and redemption rather than legalism’s unforgetting (and unforgiving) recollection of sin.
With regard to “unforgetting,” a registry is  the inverse of the “right to be forgotten” movement, as represented by a recent Eurpean Union case.  Consider this from a Mockingbird article, Divine Memory and The Right to Be Forgotten:
In Hawthorne’s Scarlet Letter, protagonist adulterer Hester Prynne is saddled with a big red letter “A” to be worn on her chest at all times. The letter acts as a shaming reminder to the greater community to keep their sexuality in line. While Hawthorne goes on to make Hester a dignified example of the power of confession, top hits of Google searches aren’t unlike a big letter “a” for many whose mistakes just won’t go away. Identity is at the core of both stories . . . .  Should a foreclosure 16 years ago be part of the plaintiff’s identity? Who gets to control the ever-important first impression- the politician on his rebound or the Google search?
I've got my eye on you.

I’ve got my eye on you.

 

Second, a registry is most justified when there is a substantial body of evidence that offenders are very likely to recidivate; where the victim-population is peculiarly and legally unable to protect itself; and where the harm is not meaningfully compensable.  Sexual depredation of children satisfies these criteria, and thus we see widespread legal and cultural acceptance of sex-offender registries.

 

Although the data is mixed, white-collar felons, like nonviolent offenders in general, have a relatively low rate of recidivism.  Further, white-collar offenders commit money-crimes, and money-remedies are available if the offender is solvent (admittedly, sometimes a big “if”).

He's made his list, he's checked it twice and now it's on the internet.

He’s made his list, he’s checked it twice and now it’s on the internet.

Third, are citizens of Utah, like minors, peculiarly unable to be clothed with legal rights and responsibilities?  Paternalism may have its place, but here? The legislative assumption seems to be that Utahans in general and Mormons in particular are so naive or insular that they need to be protected from themselves.  Or, in the words of a Guardian (UK) article: Utah creates white-collar crime registry to protect ‘trusting’ Mormon population.

What next? Hasidic Jews? Southern Baptists? Episcopalians?  (The last denomination is unfair. I have no data on the subject, but anecdotal evidence suggests that many of the most temporarily successful white-collar offenders are, in fact, Episcopalians).
Fourth, the Utah Attorney General claims that white-collar crime is “epidemic” in Utah.  Again, from the Times:
“White-collar crime is an epidemic in Utah,” said Sean Reyes, the state’s attorney general who formulated the idea for the registry when he was a defense lawyer, “representing some of these bad guys.” A former mixed martial arts fighter who has a metal plate lodged in his eye socket from a basketball injury, Mr. Reyes noted that while violent crimes were devastating, many “physical wounds heal,” whereas white-collar crimes “can forever deplete your life savings.”
A handful of large dollar loss offenses do not an “epidemic” make.  According to the United States Sentencing Commission, fraud offenses account for only 5.2% of federal inmates — less than firearms offenses (18%) or pornography and prostitution (5.7%), and a figure dwarfed by drug offenses (51%).  The Bernie Madoffs of the world grab eye-popping dollar headlines, but the median loss in fraud offenses committed by offenders in the federal prison population is $696,295 — not a small sum, but a figure which is likely driven misleadingly high by Madoff-like numbers.  Even if it there were an epidemic, the solution is carefully crafted, clear laws that criminalize wrongful activities in a manner consistent with commonly accepted norms in Anglo American criminal law history.

A challenge getting to the keyboard.

A challenge getting to the keyboard.

Fifth, there is no reason to expect that the registry will provide any particular deterrence.  If the prospect of prison, financial ruin, loss of reputation, bankruptcy, dissolution of family, loss of law or CPA licenses, and debarment from federal contracting does not dissuade a bad actor, being put on a website will have little effect.

 

 

 

 

Law should be just, or it is not law, but on occasion it should be tempered with mercy, as the Drive-By Truckers point out in Mercy Buckets:

 


Why Innocent People Plead Guilty: Judge Rakoff, Eddie Coyle, Albert Camus and Sweet Dreams of Oppression

If they give awards for “Best White-Collar Article of The Year,” I wish to nominate one.  And it’s not even, strictly speaking, an article only about white-collar crime.

Judge Jed Rakoff

Judge Jed Rakoff

Jed Rakoff is a federal district judge in the Southern District of New York (in other words, in Manhattan).  We have mentioned Judge Rakoff before, here and here.  He also famously criticized DOJ’s failure, as he perceived it, to prosecute individual executives in the financial crisis.

Here, he has a thoughtful article on Why Innocent People Plead Guilty.

Portions bear quoting at some length:

The criminal justice system in the United States today bears little relationship to what the Founding Fathers contemplated, what the movies and television portray, or what the average American believes.

To the Founding Fathers, the critical element in the system was the jury trial, which served not only as a truth-seeking mechanism and a means of achieving fairness, but also as a shield against tyranny. As Thomas Jefferson famously said, “I consider [trial by jury] as the only anchor ever yet imagined by man, by which a government can be held to the principles of its constitution.”

The Sixth Amendment guarantees that “in all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury.” The Constitution further guarantees that at the trial, the accused will have the assistance of counsel, who can confront and cross-examine his accusers and present evidence on the accused’s behalf. He may be convicted only if an impartial jury of his peers is unanimously of the view that he is guilty beyond a reasonable doubt and so states, publicly, in its verdict.

The drama inherent in these guarantees is regularly portrayed in movies and television programs as an open battle played out in public before a judge and jury. But this is all a mirage. In actuality, our criminal justice system is almost exclusively a system of plea bargaining, negotiated behind closed doors and with no judicial oversight. The outcome is very largely determined by the prosecutor alone.

Dark WatersJudge Rakoff explains why it is really the prosecutor, rather than the judge, who sets the sentence:

[T]he information-deprived defense lawyer, typically within a few days after the arrest, meets with the overconfident prosecutor, who makes clear that, unless the case can be promptly resolved by a plea bargain, he intends to charge the defendant with the most severe offenses he can prove. Indeed, until late last year, federal prosecutors were under orders from a series of attorney generals to charge the defendant with the most serious charges that could be proved—unless, of course, the defendant was willing to enter into a plea bargain. If, however, the defendant wants to plead guilty, the prosecutor will offer him a considerably reduced charge—but only if the plea is agreed to promptly (thus saving the prosecutor valuable resources). Otherwise, he will charge the maximum, and, while he will not close the door to any later plea bargain, it will be to a higher-level offense than the one offered at the outset of the case.

In this typical situation, the prosecutor has all the advantages. He knows a lot about the case (and, as noted, probably feels more confident about it than he should, since he has only heard from one side), whereas the defense lawyer knows very little. Furthermore, the prosecutor controls the decision to charge the defendant with a crime. Indeed, the law of every US jurisdiction leaves this to the prosecutor’s unfettered discretion; and both the prosecutor and the defense lawyer know that the grand jury, which typically will hear from one side only, is highly likely to approve any charge the prosecutor recommends.

But what really puts the prosecutor in the driver’s seat is the fact that he—because of mandatory minimums, sentencing guidelines (which, though no longer mandatory in the federal system, are still widely followed by most judges), and simply his ability to shape whatever charges are brought—can effectively dictate the sentence by how he publicly describes the offense. For example, the prosecutor can agree with the defense counsel in a federal narcotics case that, if there is a plea bargain, the defendant will only have to plead guilty to the personal sale of a few ounces of heroin, which carries no mandatory minimum and a guidelines range of less than two years; but if the defendant does not plead guilty, he will be charged with the drug conspiracy of which his sale was a small part, a conspiracy involving many kilograms of heroin, which could mean a ten-year mandatory minimum and a guidelines range of twenty years or more. Put another way, it is the prosecutor, not the judge, who effectively exercises the sentencing power, albeit cloaked as a charging decision.

Why should you care about any of this?  You haven’t tried heroin since the 1970s, much less sold it.

You should care because you likely do not consider yourself a criminal and would be be offended if someone in authority charged you publicly with being one.  As Judge Rakoff puts it:

A cynic might ask: What’s wrong with that? After all, crime rates have declined over the past twenty years to levels not seen since the early 1960s, and it is difficult to escape the conclusion that our criminal justice system, by giving prosecutors the power to force criminals to accept significant jail terms, has played a major part in this reduction. Most Americans feel a lot safer today than they did just a few decades ago, and that feeling has contributed substantially to their enjoyment of life. Why should we cavil at the empowering of prosecutors that has brought us this result?

* * * *

First, it is one-sided. Our criminal justice system is premised on the notion that, before we deprive a person of his liberty, he will have his “day in court,” i.e., he will be able to put the government to its proof and present his own facts and arguments, following which a jury of his peers will determine whether or not he is guilty of a crime and a neutral judge will, if he is found guilty, determine his sentence. As noted, numerous guarantees of this fair-minded approach are embodied in our Constitution, and were put there because of the Founding Fathers’ experience with the rigged British system of colonial justice. Is not the plea bargain system we have now substituted for our constitutional ideal similarly rigged?

Second, and closely related, the system of plea bargains dictated by prosecutors is the product of largely secret negotiations behind closed doors in the prosecutor’s office, and is subject to almost no review, either internally or by the courts. Such a secretive system inevitably invites arbitrary results. Indeed, there is a great irony in the fact that legislative measures that were designed to rectify the perceived evils of disparity and arbitrariness in sentencing have empowered prosecutors to preside over a plea-bargaining system that is so secretive and without rules that we do not even know whether or not it operates in an arbitrary manner.

Third, and possibly the gravest objection of all, the prosecutor-dictated plea bargain system, by creating such inordinate pressures to enter into plea bargains, appears to have led a significant number of defendants to plead guilty to crimes they never actually committed. . . . . [T]his self-protective psychology operates in noncapital cases as well, and recent studies suggest that this is a widespread problem. For example, the National Registry of Exonerations (a joint project of Michigan Law School and Northwestern Law School) records that of 1,428 legally acknowledged exonerations that have occurred since 1989 involving the full range of felony charges, 151 (or, again, about 10 percent) involved false guilty pleas.

When a defendant enters a plea in federal court, the judge asks him or her questions about the defendant’s acknowledgment of guilt. This process is called a “colloquy” under Rule 11 of the Federal Rules of Criminal Procedure.  The court must assure itself that “there is a factual basis for the plea” and that “the plea is voluntary and did not result from force, threats, or promises (other than promises in the plea agreement).”

"Now, you're sure this is voluntary and everything?"

“Now, you’re sure this is voluntary and everything?”

But in a system where, as Judge Rakoff puts it, “it is the prosecutor, not the judge, who effectively exercises the sentencing power, albeit cloaked as a charging decision,” what constitutes “force”?  Who defines “threats”?

Usually, Rule 11 colloquies are perfunctory, although occasionally the pleading defendant balks entirely, and the plea goes out the window.

Rarely, though, you get some actual discussion, as with a former Bechtel executive, accused of taking millions of dollars in kickbacks from energy companies, who entered a guilty plea last week:

During the hearing, Judge Deborah K. Chasanow asked Mr. Elgawhary if he was entering the plea because of threats against him or his family. Mr. Elgawhary laughed. “Not at all,” he said.

“Tell me why that caused that reaction?” the judge asked.

“I just want to…ease the life of my family.” he responded

“So you are pleading guilty because you are acknowledging your responsibility and this is the best you think you are going to do for minimizing impact on other people you care about?”

But had anyone threatened him with harm, the judge asked, or was the pressure he felt just from the charges themselves?

“It’s the fact that the charges are there and I don’t want to pay something more,” he said. “Let us stop here and deal with it”

Pressing further, the judge asked: “The pressure you feel comes from the charges themselves, is that correct, and not because someone else is putting any pressure on you to plead guilty?”

“Most likely, you honor,” Mr. Elgawhary said.

Cooperation, indeed.

A plea often comes with a Government price-tag known as “cooperation.”  The Economist makes a similar point about prosecutors-on-steroids and “cooperating” witnesses in The kings of the courtroom: How prosecutors came to dominate the criminal-justice system:

Another change that empowers prosecutors is the proliferation of incomprehensible new laws. This gives prosecutors more room for interpretation and encourages them to overcharge defendants in order to bully them into plea deals, says Harvey Silverglate, a defence lawyer. Since the financial crisis, says Alex Kozinski, a judge, prosecutors have been more tempted to pore over statutes looking for ways to stretch them so that this or that activity can be construed as illegal. “That’s not how criminal law is supposed to work. It should be clear what is illegal,” he says.

The same threats and incentives that push the innocent to plead guilty also drive many suspects to testify against others. Deals with “co-operating witnesses”, once rare, have grown common. In federal cases an estimated 25-30% of defendants offer some form of co-operation, and around half of those receive some credit for it. The proportion is double that in drug cases. Most federal cases are resolved using the actual or anticipated testimony of co-operating defendants.

Co-operator testimony often sways juries because snitches are seen as having first-hand knowledge of the pattern of criminal activity. But snitches hoping to avoid draconian jail terms may sometimes be tempted to compose rather than merely to sing.

As Robert Mitchum said in The Friends Of Eddie Coyle (1973): “If I give you this, I can’t do no time.”

Here is an excerpt from our earlier take on all things Eddie Coyle, the worn-out cooperator (or snitch):  George V. Higgins and the Archeology of White-Collar Crime:

In popular culture, business-crime is presented cartoon-fashion. In movies, on television or in novels, businesspeople who are corporate targets of government investigations come across as Snidely Whiplashes with French cuffs.  This practice is predictable, its results boring.  Not so with the work of the late Boston-based novelist and one-time Assistant United States Attorney George V. Higgins (1939 – 1999).

(Read the rest of the post here).

A grubby world, plea-bargaining.

A grubby world, plea-bargaining.

If plea-bargaining and press-ganged cooperation are two legs of the devil’s stool for white-collar defendants, the third leg is the evaporation of the presumption of innocence, a point we made in a post about Independence Day:

[T]he “presumption of innocence” about which we all learned (or, at least, used to learn) in civics class has been translated into a presumption of guilt.  Most citizens, most of the time, believe that when a person or company is charged with a criminal offense, they are guilty (or perhaps guilty of something pretty close to the charged offense).  (We have discussed presumption problems here and here).

In real life, how do I tell a client to not put very many eggs in the presumption-of-innocence basket?

To a businessperson or a professional, I say something like this:

“Imagine that you’re at breakfast one morning and see a news item.  The news item says that someone has been arrested and charged with running a meth lab.  To the extent you think about it at all, what do you think?  You think the guy’s most likely guilty and was in fact running a meth lab, or do you think that he’s most likely innocent and is being falsely charged?”

I pause, watch it sink in and go on:

“Now, consider the guy who runs the meth lab. He sees a news item at breakfast that a banker has been charged with fraud; or a doctor has been charged with taking kickbacks; or a defense contractor has been charged with false billing.  To the extent he thinks about it all, does he think that the banker or the doctor or the defense contractor is most likely innocent or most likely guilty?”

I realize that “most likely” is, technically speaking, not the standard in a criminal case.  A discussion about the presumption of innocence cannot meaningfully proceed, however, without an appreciation of what I’ve come to realize over the years: jurors did not really apply (and sometimes do not even understand) the “beyond a reasonable doubt” standard.

Rather, jurors apply what I call “preponderance plus.” By “preponderance plus,” I mean that they apply the “more likely than not” standard used in civil cases, and then they tighten it.  In everyday conversation, we and they use “most likely” constantly, and the words mean something.  When was the last time you used the phrase “beyond a reasonable doubt” outside of a legal discussion?

So what, if anything, is to be done?

I love Judge Rakoff’s proposal to involve judges in the plea-bargaining process, but that is unlikely to happen.

The Fall

The Fall

Perhaps the tonic needed is the self-knowledge articulated by Clamence, the protagonist of Albert Camus’s The Fall (1956): “I was a lawyer before coming here. Now, I am a judge-penitent.”

The truth is that every intelligent man, as you know, dreams of being a gangster and of ruling over society by force alone. As it is not so easy as the detective novels might lead one to believe, one generally relies on politics and joins the cruelest party. What does it matter, after all, if by humiliating one’s mind one succeeds in dominating every one? I discovered in myself sweet dreams of oppression.

 

 


The Winter Olympics of Cooperation: The Bridge On The River Kwai, White-Collar Self-Image and Federal Sentencing

“Cooperation” is a complex concept for individuals and businesses caught up in white-collar criminal cases, compliance reviews and breakdowns of business ethics.  As with the more obscure or corrupt Winter Olympic events, there are ways to demystify the complexity, but it is not easy.

The Bridge On The River Kwai (1957).

The Bridge On The River Kwai (1957).

In David Lean’s 1957 film The Bridge On The River Kwai, we see cross-currents of duty, vainglory, cooperation, resistance, collaboration and death.  (We also hear some great whistling, but that is another matter).  All of these ideas and emotions come into play when a colleague, an employee or a corporate officer or director is faced with the question: “Do I [or we] cooperate with [the Government, the Audit Committee Special counsel, the court-appointed corporate monitor, etc.]?

Remember that, in the sense in which we use the term, “cooperate” is not exactly the opposite of “be obstreperous.”  Rather, we mean to work together with whatever authority is opposed to us, in the hopes of a better outcome, rather than going down another path.

So, before we choose whichever path, a few observations to guide those of us — internal counsel, internal audit, compliance, risk management and outside counsel — charged in turn with guiding the unfortunates who must actually make the decision.

Not your everyday Saturday morning cartoon about cooperation.

Not your everyday Saturday morning cartoon about cooperation.

Cooperation Is A Shock To The Potential Cooperator.  An innocent-minded employee or corporate officer will see cooperation as natural — What do I have to hide? — until he or she appreciates the necessary condition: a cooperator has something to cooperate about.  He or she has something to offer in exchange for lenient treatment.  If you have something to cooperate about, odds are you have done something to put yourself in that position.  At a minimum, everyone will believe you did.  (We have written earlier about motive and otherwise apparently innocent-minded people, here: Good People, Bad Acts and Intent).

This shock-effect is a close cousin to the reluctance of most businesspeople to invoke their rights under the Fifth Amendment.  We have discussed that reluctance before — Salinas and The Fifth Amendment  — and it can be fatal.

Rejecting the proposed plea agreement.

Rejecting the proposed plea agreement.

Cooperation Is Not A Sign Of Guilt Or Weakness, Nor Is Fighting Proof Of Innocence Or Strength.  Shock may lead to misapprehension of the nature of cooperation.  Cooperation is an economic transaction, not a moral one.  The cooperator offers something of value (information or action) in order to receive something of value (leniency or favor).  We must help our client, employee or colleague understand the transactional nature of cooperation.

 

"Sure, I falsified a couple of wastewater reports, but who knew it's make that much mess?"

“Sure, I falsified a couple of wastewater reports, but who knew it’d make that much mess?”

Cooperation Is Not Explanation, Or Putting The Story In Context.  The innocent-minded may conclude, especially on first blush, that “If I can just tell my story and put things in context, the problem will vanish.”  This is a canard.  (“Canard” is French for “duck,” and I double-majored in political science and French, so I sometimes like to say things like that).  Whatever the external, outside force we are facing — a government investigation, say — its representatives are only tangentially interested in the “truth,” at least in an objective fashion.  Rather, they are assessing a case, fulfilling a mandate or looking to preserve or advance a higher good.  To the FBI or Homeland Security agent, the effort to contextualize will likely be misunderstood and, if understood, then perceived to be an effort to minimize wrongdoing.  They don’t really care.

Testifying in the grand jury on Christmas Eve.

Testifying in the grand jury on Christmas Eve.

Cooperation Has Benefits, But The Burdens Can Run For A Long Time.  For some of the reasons set out below, cooperation can bring benefits, but the extent and duration of cooperation can come as an unpleasant surprise.  You are not selling your soul, but you are putting your conscience and your sleep out on a long-term lease to someone else.

 

 

Early Cooperators Do Better.  This is conventional wisdom, but it is almost always true.  Is it ever too late to cooperate?  Here’s a thoughtful piece Why Didn’t Martoma Cooperate? And Is It Too Late?  by Lawrence S. Goldman at the White Collar Crime Prof blog.

Sharpen your pencils.

Sharpen your pencils.

Cooperation, Resolution and Disclosure

Cooperation can play a significant role in settlement (of a civil enforcement action) or in a plea deal (in a criminal prosecution). The relationship between cooperation and resolution is not precise.  As Professor Peter J. Henning points out in a recent note on the subject — For Settlements, Companies Sketch Contours of a Black Box — it is difficult even to figure out how the government arrives at tan acceptable dollar figure for resolution:

The government is taking an increasingly hard line in seeking large settlements, as shown by the litigation reserves companies are required to set up once they have determined the cost of resolving a case. What we don’t really know, however, is what goes into the process of assessing a penalty and how it relates to the harm caused by a violation.

* * * *

Accounting rules require a company to disclose a material loss because of litigation once it is both probable and the amount can be reasonably estimated. When that line is crossed is a matter of judgment, but once the parameters of a deal with the government are in place, a company can be expected to disclose how much it thinks it will have to pay.

How the two sides arrive at the penalty remains something of a mystery to the general public. Companies rarely disclose what happened in the negotiations, as Avon did.

Federal statutes provide the maximum fine for a violation, but that is only for a single violation. Corporate crime often involves hundreds, or even thousands, of separate offenses, so the total potential fine could be enormous.

The federal sentencing guidelines provide a set of factors to be considered when a court determines a financial penalty. The list includes whether a company cooperated in the investigation and the involvement of senior management in the crime.

But few cases involving large corporations ever see the inside of a courtroom. Instead, the Justice Department usually resolves corporate investigations through deferred and nonprosecution agreements, along with civil settlements, that do not require judicial approval of any penalty assessed against a company. So it is often unclear how the government determined the amount to be paid as the punishment for a violation.

The Sentencing Guidelines: Cooperation, Resolution and Dollars

Contemplating a Guidelines recalculation.

Contemplating a Guidelines recalculation.

Professor Henning mentions the federal Sentencing Guidelines, and it is worth a brief review here as they relate to cooperation, settlement and the amount of a financial penalty.

A primary source, of course, is the United States Sentencing Commission’s 2010 FEDERAL SENTENCING GUIDELINES MANUAL CHAPTER EIGHT – SENTENCING OF ORGANIZATIONS, which sets out in great detail the Commission’s view of organizational sentencing.  In particular, the Commission sets out four general principles, with “cooperation” being one [emphasis added]:

First, the court must, whenever practicable, order the organization to remedy any harm caused by the offense. The resources expended to remedy the harm should not be viewed as punishment, but rather as a means of making victims whole for the harm caused.

Second, if the organization operated primarily for a criminal purpose or primarily by criminal means, the fine should be set sufficiently high to divest the organization of all its assets.

Third, the fine range for any other organization should be based on the seriousness of the offense and the culpability of the organization. The seriousness of the offense generally will be reflected by the greatest of the pecuniary gain, the pecuniary loss, or the amount in a guideline offense level fine table. Culpability generally will be determined by six factors that the sentencing court must consider. The four factors that increase the ultimate punishment of an organization are: (i) the involvement in or tolerance of criminal activity; (ii) the prior history of the organization; (iii) the violation of an order; and (iv) the obstruction of justice. The two factors that mitigate the ultimate punishment of an organization are: (i) the existence of an effective compliance and ethics program; and (ii) self-reporting, cooperation, or acceptance of responsibility.

Fourth, probation is an appropriate sentence for an organizational defendant when needed to ensure that another sanction will be fully implemented, or to ensure that steps will be taken within the organization to reduce the likelihood of future criminal conduct.

These principles have taken on urgency for companies that do business in the United Kingdom.   As we see here — U.K. Issues New Sentencing Guidelines for Corporate Fraud — the new guidelines are intended to be implemented alongside the UK’s deployment of American-style deferred-prosecution agreements.

The other key document to have to hand is a copy of DOJ’s Principles of Federal Prosecution of Business Organizations, essentially a set of charging guidelines for prosecutors.  They have discretion.  Try to leverage it in your favor.

Speaking of discretion, we leave you with a note from Matthew 5:23-26:

So if you are offering your gift at the altar and there remember that your brother has something against you, leave your gift there before the altar and go. First be reconciled to your brother, and then come and offer your gift. Come to terms quickly with your accuser while you are going with him to court, lest your accuser hand you over to the judge, and the judge to the guard, and you be put in prison. Truly, I say to you, you will never get out until you have paid the last penny.


Conservatives and Mandatory Minimum Federal Sentences

"Who spilled the bong water?"

“Who spilled the bong water?”

From Professor Berman’s “Sentencing Law and Policy Blog,” why conservatives should support the effort to reform mandatory minimums in non-violent federal sentences: the Heritage Foundation and mandatory minimum sentences:

A conservative friend alerted me to this notable entry from the blog of The Heritage Foundation authored by Evan Bernick and headlined “Time to Reconsider Mandatory Minimum Sentences.”   Here are excerpts: 

The Smarter Sentencing Act is narrowly tailored to address one of the most pressing problems with mandatory minimums — arbitrary, severe punishments for nonviolent offenses— while leaving for another day the question of whether mandatory minimums should apply to violent crimes….

Mandatory minimums were intended to address widely acknowledged problems with the criminal justice system. But good intentions don’t necessarily give rise to good results. In particular, some drug offenses, which make up a significant proportion of mandatory minimums, can give rise to unduly severe punishments. The difference between a drug quantity that triggers a mandatory minimum and one that does not will often produce a “cliff effect.” For example, someone with 0.9 grams of LSD might not spend much time incarcerated, but another fraction of a gram will result in a five years behind bars. It is difficult to conclude that the additional one-tenth of a gram demands a minimum sentence of five years’ imprisonment in every case, regardless of its facts.

The Smarter Sentencing Act would allow judges to sentence nonviolent drug offenders below a mandatory minimum if the court finds that the defendant is not a serious offender (that is, the defendant has a limited or no criminal history, as defined by the U.S. Sentencing Guidelines, and no prior firearm, racketeering, terrorism, or sex offense convictions). The act would also make retroactive the Fairness in Sentencing Act of 2010, which prospectively reduced the disparity between the amount of crack cocaine and powder cocaine needed to trigger mandatory minimum sentences.

Mandatory minimum sentences have wrought terrible injustices in certain cases.  Granting district courts some additional limited sentencing discretion would improve the status quo without returning us to the era of unbounded judicial discretion.  It’s encouraging that, at a time when bipartisan consensus is difficult to come by, there is broad agreement that there are some problems with our federal criminal laws that ought to be addressed.  Too many mandatory minimums for nonviolent drug offenses committed by low-level offenders do not serve the ends of justice and leave no room for mercy.

I am not sure if this blog post represents the official view of The Heritage Foundation and therefore amounts to an official endorsement of the SSA.  But I am sure that those eager to see the SSA move forward in Congress should be encouraged to see this kind of sentiment being expressed on the website of a very influential think tank which says here that its “mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense.” 

I am hopeful, based in part on the calls for reform represented by the votes and voices of Senators Ted Cruz, Mike Lee and Rand Paul, that a number of other groups and media with a mission “to formulate and promote conservative public policies” will also be vocal supporters of the Smarter Sentencing Act. If other prominent conservative groups echo the sentiments expressed above, my optimism about serious sentencing reforms being passed through this Congress may start to grow considerably.

William F. Buckley, Jr.

William F. Buckley, Jr.

In addition to arguing from fairness and proportion, this notion hearkens back to earlier, 20th-century formulations of American conservatism, many of which had a strong libertarian streak, as we see in this William F. Buckley quote — about drug-legalization — from a National Review symposium:

WE ARE speaking of a plague that consumes an estimated $75 billion per year of public money, exacts an estimated $70 billion a year from consumers, is responsible for nearly 50 per cent of the million Americans who are today in jail, occupies an estimated 50 per cent of the trial time of our judiciary, and takes the time of 400,000 policemen — yet a plague for which no cure is at hand, nor in prospect.

Perhaps you, ladies and gentlemen of the Bar, will understand it if I chronicle my own itinerary on the subject of drugs and public policy. When I ran for mayor of New York, the political race was jocular, but the thought given to municipal problems was entirely serious, and in my paper on drugs and in my post-election book I advocated their continued embargo, but on unusual grounds. I had read — and I think the evidence continues to affirm it — that drug-taking is a gregarious activity. What this means, I said, is that an addict is in pursuit of company and therefore attempts to entice others to share with him his habit. Under the circumstances, I said, it can reasonably be held that drug-taking is a contagious disease and, accordingly, subject to the conventional restrictions employed to shield the innocent from Typhoid Mary. Some sport was made of my position by libertarians, including Professor Milton Friedman, who asked whether the police might legitimately be summoned if it were established that keeping company with me was a contagious activity.

I recall all of this in search of philosophical perspective. Back in 1965 I sought to pay conventional deference to libertarian presumptions against outlawing any activity potentially harmful only to the person who engages in that activity. I cited John Stuart Mill and, while at it, opined that there was no warrant for requiring motorcyclists to wear a helmet. I was seeking, and I thought I had found, a reason to override the presumption against intercession by the state.

About ten years later, I deferred to a different allegiance, this one not the presumptive opposition to state intervention, but a different order of priorities. A conservative should evaluate the practicality of a legal constriction, as for instance in those states whose statute books continue to outlaw sodomy, which interdiction is unenforceable, making the law nothing more than print-on-paper. I came to the conclusion that the so-called war against drugs was not working, that it would not work absent a change in the structure of the civil rights to which we are accustomed and to which we cling as a valuable part of our patrimony. And that therefore if that war against drugs is not working, we should look into what effects the war has, a canvass of the casualties consequent on its failure to work. That consideration encouraged me to weigh utilitarian principles: the Benthamite calculus of pain and pleasure introduced by the illegalization of drugs.

A YEAR or so ago I thought to calculate a ratio, however roughly arrived at, toward the elaboration of which I would need to place a dollar figure on deprivations that do not lend themselves to quantification. Yet the law, lacking any other recourse, every day countenances such quantifications, as when asking a jury to put a dollar figure on the damage done by the loss of a plaintiff’s right arm, amputated by defective machinery at the factory. My enterprise became allegorical in character — I couldn’t do the arithmetic — but the model, I think, proves useful in sharpening perspectives.

Professor Steven Duke of Yale Law School, in his valuable book, America’s Longest War: Rethinking Our Tragic Crusade against Drugs, and scholarly essay, “Drug Prohibition: An Unnatural Disaster,” reminds us that it isn’t the use of illegal drugs that we have any business complaining about, it is the abuse of such drugs. It is acknowledged that tens of millions of Americans (I have seen the figure 85 million) have at one time or another consumed, or exposed themselves to, an illegal drug. But the estimate authorized by the federal agency charged with such explorations is that there are not more than 1 million regular cocaine users, defined as those who have used the drug at least once in the preceding week. There are (again, an informed estimate) 5 million Americans who regularly use marijuana; and again, an estimated 70 million who once upon a time, or even twice upon a time, inhaled marijuana. From the above we reasonably deduce that Americans who abuse a drug, here defined as Americans who become addicted to it or even habituated to it, are a very small percentage of those who have experimented with a drug, or who continue to use a drug without any observable distraction in their lives or careers. About such users one might say that they are the equivalent of those Americans who drink liquor but do not become alcoholics, or those Americans who smoke cigarettes but do not suffer a shortened lifespan as a result.

Curiosity naturally flows to ask, next, How many users of illegal drugs in fact die from the use of them? The answer is complicated in part because marijuana finds itself lumped together with cocaine and heroin, and nobody has ever been found dead from marijuana. The question of deaths from cocaine is complicated by the factor of impurity. It would not be useful to draw any conclusions about alcohol consumption, for instance, by observing that, in 1931, one thousand Americans died from alcohol consumption if it happened that half of those deaths, or more than half, were the result of drinking alcohol with toxic ingredients extrinsic to the drug as conventionally used. When alcohol was illegal, the consumer could never know whether he had been given relatively harmless alcohol to drink — such alcoholic beverages as we find today in the liquor store — or whether the bootlegger had come up with paralyzing rotgut. By the same token, purchasers of illegal cocaine and heroin cannot know whether they are consuming a drug that would qualify for regulated consumption after clinical analysis.

But we do know this, and I approach the nexus of my inquiry, which is that more people die every year as a result of the war against drugs than die from what we call, generically, overdosing. These fatalities include, perhaps most prominently, drug merchants who compete for commercial territory, but include also people who are robbed and killed by those desperate for money to buy the drug to which they have become addicted.

This is perhaps the moment to note that the pharmaceutical cost of cocaine and heroin is approximately 2 per cent of the street price of those drugs. Since a cocaine addict can spend as much as $1,000 per week to sustain his habit, he would need to come up with that $1,000. The approximate fencing cost of stolen goods is 80 per cent, so that to come up with $1,000 can require stealing $5,000 worth of jewels, cars, whatever. We can see that at free-market rates, $20 per week would provide the addict with the cocaine which, in this wartime drug situation, requires of him $1,000.

My mind turned, then, to auxiliary expenses — auxiliary pains, if you wish. The crime rate, whatever one made of its modest curtsy last year toward diminution, continues its secular rise. Serious crime is 480 per cent higher than in 1965. The correlation is not absolute, but it is suggestive: crime is reduced by the number of available enforcers of law and order, namely policemen. The heralded new crime legislation, passed last year and acclaimed by President Clinton, provides for 100,000 extra policemen, even if only for a limited amount of time. But 400,000 policemen would be freed to pursue criminals engaged in activity other than the sale and distribution of drugs if such sale and distribution, at a price at which there was no profit, were to be done by, say, a federal drugstore.

So then we attempt to put a value on the goods stolen by addicts. The figure arrived at by Professor Duke is $10 billion. But we need to add to this pain of stolen property, surely, the extra-material pain suffered by victims of robbers. If someone breaks into your house at night, perhaps holding you at gunpoint while taking your money and your jewelry and whatever, it is reasonable to assign a higher “cost” to the episode than the commercial value of the stolen money and jewelry. If we were modest, we might reasonably, however arbitrarily, put at $1,000 the “value” of the victim’s pain. But then the hurt, the psychological trauma, might be evaluated by a jury at ten times, or one hundred times, that sum.

But we must consider other factors, not readily quantifiable, but no less tangible. Fifty years ago, to walk at night across Central Park was no more adventurous than to walk down Fifth Avenue. But walking across the park is no longer done, save by the kind of people who climb the Matterhorn. Is it fair to put a value on a lost amenity? If the Metropolitan Museum were to close, mightn’t we, without fear of distortion, judge that we had been deprived of something valuable? What value might we assign to confidence that, at night, one can sleep without fear of intrusion by criminals seeking money or goods exchangeable for drugs?

Pursuing utilitarian analysis, we ask: What are the relative costs, on the one hand, of medical and psychological treatment for addicts and, on the other, incarceration for drug offenses? It transpires that treatment is seven times more cost-effective. By this is meant that one dollar spent on the treatment of an addict reduces the probability of continued addiction seven times more than one dollar spent on incarceration. Looked at another way: Treatment is not now available for almost half of those who would benefit from it. Yet we are willing to build more and more jails in which to isolate drug users even though at one-seventh the cost of building and maintaining jail space and pursuing, detaining, and prosecuting the drug user, we could subsidize commensurately effective medical care and psychological treatment.

I HAVE spared you, even as I spared myself, an arithmetical consummation of my inquiry, but the data here cited instruct us that the cost of the drug war is many times more painful, in all its manifestations, than would be the licensing of drugs combined with intensive education of non-users and intensive education designed to warn those who experiment with drugs. We have seen a substantial reduction in the use of tobacco over the last thirty years, and this is not because tobacco became illegal but because a sentient community began, in substantial numbers, to apprehend the high cost of tobacco to human health, even as, we can assume, a growing number of Americans desist from practicing unsafe sex and using polluted needles in this age of AIDS. If 80 million Americans can experiment with drugs and resist addiction using information publicly available, we can reasonably hope that approximately the same number would resist the temptation to purchase such drugs even if they were available at a federal drugstore at the mere cost of production.

And added to the above is the point of civil justice. Those who suffer from the abuse of drugs have themselves to blame for it. This does not mean that society is absolved from active concern for their plight. It does mean that their plight is subordinate to the plight of those citizens who do not experiment with drugs but whose life, liberty, and property are substantially affected by the illegalization of the drugs sought after by the minority.

I have not spoken of the cost to our society of the astonishing legal weapons available now to policemen and prosecutors; of the penalty of forfeiture of one’s home and property for violation of laws which, though designed to advance the war against drugs, could legally be used — I am told by learned counsel — as penalties for the neglect of one’s pets. I leave it at this, that it is outrageous to live in a society whose laws tolerate sending young people to life in prison because they grew, or distributed, a dozen ounces of marijuana. I would hope that the good offices of your vital profession would mobilize at least to protest such excesses of wartime zeal, the legal equivalent of a My Lai massacre. And perhaps proceed to recommend the legalization of the sale of most drugs, except to minors.

 


Take The Deal or Go To Trial? Exactly.

"I know.  I should've taken the deal."

“I know. I should’ve taken the deal.”

The awful pressure to plead guilty, brought on by the significantly enhanced sentences that the Government often seeks where a defendant asserts his right to a trial, is highlighted in the media in drug cases, as here: Prosecutors Draw Fire for Sentences Called Harsh. For white-collar defendants — businesspeople who may be otherwise wholly unacquainted with the criminal justice system — the combination of mandatory minimums, ardent prosecutors and a public consciousness that prefers to blame for their woes abstractions (“Wall Street” or “the accountants” or “bankers”) rather than individual choices means that going to trial is almost impossible.  Plus, the costs can be prohibitive.

Not Rodin's "Thinker"

Not Rodin’s “Thinker”

Indeed, when a federal judge says in public that the wrong people decide who goes to prison, things have come to a head.  There is a move afoot in Congress to address sentencing, but it’s focused primarily on drugs.  Maybe, though, reform will trickle up to the businessperson’s case.


Why’d He Do It?

monopoly-banker

Here’s a note from Professor Ellen Podgor about an article on Sentencing the Why of White Collar Crime by Todd Haugh (Illinois Institute of Technology – Chicago-Kent College of Law)  in the Fordham Law Review.  From the abstract:

“So why did Mr. Gupta do it?” That question was at the heart of Judge Jed Rakoff’s recent sentencing of Rajat Gupta, a former Wall Street titan and the most high-profile insider trading defendant of the past 30 years. The answer, which the court actively sought by inquiring into Gupta’s psychological motivations, resulted in a two-year sentence, eight years less than the government requested. What was it that Judge Rakoff found in Gupta that warranted such a modest sentence? While it was ultimately unclear to the court exactly what motivated Gupta to commit such a “terrible breach of trust,” it is exceedingly clear that Judge Rakoff’s search for those motivations impacted the sentence imposed.

This search by judges sentencing white collar defendants — the search to understand the “why” motivating defendants’ actions — is what this article explores.

Suchet_Poirot

“Motive,” of course, is much more popular in detective fiction than in sentencing law, but motive in business-crime cases is more nuanced than in street-crime cases.  A better understanding of “why” not only yields better sentencing but would also yield greater public understanding of white-collar sentencing.

 


Alabama’s New Sentencing Guidelines

File:Judge Landis and Warren Cook in The Immigrant.png

A good summary from Sentencing Law and Policy Blog about Alabama’s new sentencing guidelines:

I find it so very telling that when states create sentencing guidelines which generally push judges away from long prison terms (unlike the federal guidelines which general push judges toward long prison terms) we hear state prosecutors complaining that use of guidelines at sentencing does not capture all the unique facets of offenses and offenders. This provide for me still more proof that the severity of applicable rules is what really shapes the litigants perspectives as to whether sentencing guidelines should be presumptive or merely advisory.

For lots of reasons, and perhaps especially because Alabama’s sentencing laws are evolving in kind of the reverse concerning how federal sentencing laws evolved over the last 25 years, I think sentencing reformers ought to be studying Alabama sentencing reforms past, present and future very closely.

This is the truth: discussion about sentencing guidelines hinges on your view of their severity (or the lack thereof).


From our friends at the White Collar Crime Prof Blog

Quick collection of white-collar news from the   White Collar Crime Prof Blog:

Mark Hamblett & Sara Randazzo, The AmLaw Daily, Ex-Kirkland Partner Sentenced to One Year For Tax  Fraud

George J. Terwilliger III, National Law Journal, Walking a Tightrope in White-Collar Investigations

AP, Las Vegas Sun, Ex-Akamai exec barred for 5 years in SEC case; Bob Van Voris, Bloomberg, Ex-Akamai Executive Settles SEC Suit Over Rajaratnam Tips

Nate Raymond, Reuters, Baltimore Sun, U.S. prosecutor cautions against white-collar sentencing revamp

Jennifer Koons, Main Justice, Former Enron Prosecutor Tapped to Head Criminal Division

Zachery Fagenson, Reuters, Ex-Bolivian anti-corruption official denied bail in Miami extortion case


White-collar news stories via White Collar Crime Prof Blog

Good roundup of white-collar news stories from Ellen Podgor and White Collar Crime Prof Blog:

Mark Hamblett & Sara Randazzo, The AmLaw Daily, Ex-Kirkland Partner Sentenced to One Year For Tax  Fraud

George J. Terwilliger III, National Law Journal, Walking a Tightrope in White-Collar Investigations

AP, Las Vegas Sun, Ex-Akamai exec barred for 5 years in SEC case; Bob Van Voris, Bloomberg, Ex-Akamai Executive Settles SEC Suit Over Rajaratnam Tips

Nate Raymond, Reuters, Baltimore Sun, U.S. prosecutor cautions against white-collar sentencing revamp

Jennifer Koons, Main Justice, Former Enron Prosecutor Tapped to Head Criminal Division

Zachery Fagenson, Reuters, Ex-Bolivian anti-corruption official denied bail in Miami extortion case

 


Mine Blast Plea: Dust, Documents and Deaths

coal miners denied time

As the  article (via @Law360) points out, Ex-Massey Exec Gets 42 Months In Mine Blast Case this Massey mining manager pleaded to “pre-notifying” about MSHA inspections (and conspiracy pertaining thereto).  It’s interesting that, in his plea colloquy, he was was apparently careful and narrow, almost ascribing a business-culture source for the conduct:

“I’m sorry for what I’ve done — pre-notifying about mine inspections,” Hughart said at his sentencing, according to the Associated Press. “I grew up that way. I accepted it as common practice. I know better now, and I apologize.”

That kind of approach needs to be handled gingerly, though.  The larger case landscape is important for sentencing considerations (implicitly, if not explicitly):

Hughie Elbert Stover, Massey’s former security chief, was sentenced to three years in prison in February 2012, after being convicted of lying to members of the FBI and the MSHA as well as directing the destruction of security-related documents in order to stymie the investigation into the causes of the mining disaster.

In March 2012, former mine superintendent Gary May pled guilty to charges that he hid from federal investigators hazards at the Upper Big Branch mine such as excessive coal dust piles and poor air flow. The disaster killed all but two miners working in the mine, making it the worst mining accident in the U.S. since 1972.

The combination of the deaths of the miners; the document-destruction; and the false statements was overwhelming.

Here’s another take (via @WSJ):  Former Massey Coal Executive Sentenced to Prison