Thursday, September 28, 2006


White-collar crime redux

It seems that this is the week to review and update some older entries. The Washington Post gives me a good reason to point back to something I said in January: the other day the WaPo talked about Bernard Ebbers's 25-year prison sentence in its article "Cook the Books, Get Life in Prison: Is Justice Served?", and in January I opined about "What punishment for Enron executives?". From the Washington Post:

Tomorrow, the man who once swaggered through the halls of his telecommunications company as a cowboy-booted billionaire is scheduled to surrender to authorities and begin a 25-year sentence. Federal prison policies virtually ensure that Ebbers, who has a heart ailment, will spend the rest of his life in prison for his role in an $11 billion accounting fraud. Ebbers, 65, is to report to prison on the same day that former Enron Corp. finance chief Andrew S. Fastow will be sentenced by a federal judge in Houston. Fastow, who secretly pocketed more than $45 million in a scheme to disguise mounting financial problems at the energy company, faces a maximum of 10 years in prison as part of his plea deal.

In January I suggested alternative sentences for these "white-collar" criminals, and I maintain that as the right answer:

If they are found guilty, then to the extent that their criminal actions deprived people of retirement benefits, they should be required to replace that retirement money. Their current assets, their future incomes, and their own retirement incomes should go toward this. It may not replace the entire 75% that Ms Black has lost, nor all of what everyone else has lost. But it will compensate those former employees, who have had to struggle to make it back from the company's collapse.

Some object to treating this sort of crime more lightly than "real" crime. From the WaPo:

What's more, legal experts say, former executives do not deserve lighter treatment than drug dealers or burglars simply because they broke accounting rules or lied — crimes that are harder to unravel and whose victims are more diffuse. "You want people to understand that just because they're in high places, they make a lot of money and they can hire fabulous lawyers, that they're not going to walk away with a slap on the wrist," said former Securities and Exchange Commission chairman Harvey L. Pitt. "If you ask me, 'Did Bernie Ebbers destroy lives?' I would tell you that his conduct did."
Indeed it did! But, far from giving him a walk, a sentence that makes him work for the people he cheated extracts real restitution from him and at least partially compensates his victims. It provides both deterrence and benefit. Putting him in prison costs us all yet more money and benefits no one. Where's the sense in that?

[By the way, Mr Ebbers reported on schedule, and Mr Fastow got a six-year sentence.]

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