August 07, 2004
Isn't that what the civil courts are for?

Ginger emailed me about this TechCentral Station column in which author Gil Weinrich laments using criminal justice remedies for white-collar crimes.

Andrew Fastow is expected to serve a 10-year sentence, and Enron CEO Kenneth Lay could face as much as 30 years if convicted in the massive corporate fraud, in which Fastow and others concealed billions of dollars in debt in off-the-books partnerships. The crime wiped out $68 billion in market value, destroyed at least 5,600 jobs and vaporized workers' retirement savings.

So what's the connection between the jobs and money lost at Enron and Lea Fastow's forcible removal from her children, menial labor and potentially dangerous cellmates? Precious little if you ask me. Does a single Enron worker get his job back because Lea Fastow is washing underwear? Does a single Enron creditor get its money back because she is baking tater tots or cleaning dishes? And does Andrew Fastow's 10-year prison sentence repay his debt to society -- a debt that can be measured in the billions?

Our society does a poor job of penalizing crime. In the sphere of violent crime, the high recidivism rate of convicted felons indicates a failure adequately to protect society from dangerous criminals. In the white-collar arena, the unrequited losses endured by victims of financial crime similarly underscore the fecklessness of the system.

Besides the injustice to victims there is an inherent lack of mercy to criminals who are not given an opportunity to make amends. For the sake of the victims of Enron and other white-collar crimes, we need to shift away from a system based on punishment to one based on restitution.

You know, if Fastow had lifted a couple of bags of cash from a poorly-guarded Brink's truck, I don't think Weinrich would advocate for an alternate to jail time even if all of the money he swiped were recovered. I fail to see the justification for treating criminals in three-piece suits any differently from criminals in stocking masks. The criminal justice system is about prevention, rehabilitation, and punishment. It's not about restoring equity - that's what the civil courts are for.

Tom Kirkendall points out another problem with Weinrich's scheme:

[T]he fact that politicians have arranged for absurdly long prison sentences in business cases to appeal to the public passion to punish wealthy people excessively does not mean that there should be no penal system disincentive whatsoever for engaging in corporate crime. One imagines Bialystock & Bloom in "The Producers" blithely continuing to create Ponzi schemes in perpetuity under Weinrich's proposed system (and so long as Zero Mostel could continue to play Bialystock, that might not be such a bad thing).

Exactly. Who's to say that, given a mandate to raise enough money to compensate his victims or else, that Fastow wouldn't cook up another Death Star to fulfill the terms of his sentence as quickly as possible? I'm perfectly happy for him (and Lea and Rick Causey and all of the other malefactors who've done the perp walk so far) to contemplate their wrongdoing in a federally-funded timeout, and for the class action system to work out the rest of it.

Posted by Charles Kuffner on August 07, 2004 to Enronarama | TrackBack

I know that "criminal punishment acts as a deterrent" is a statement that a lot of people disagree with, but as far as I can tell, it's all we have going for us.

Let's say I'm out to make money, by hook or by crook. I know that if I do something shady, the only penalty is going to be monetary. Why wouldn't I just figure on making enough money to cover the penalty? Worse comes to worse, declare bankruptcy and start over?

Am I missing something, here?

Posted by: kodi on August 9, 2004 11:20 AM