September 27, 2004
Private: Schadenfreude for White Collar Criminals
by Josh Kobrin, Sr. Editor-at-Large
It appears America is still not used to the rich and powerful being sent to prison. Last week, the media gave Martha Stewart's request for immediate incarceration front-page treatment. After a press conference at which Stewart claimed that she hoped "to serve my sentence now to put this behind me, and get on with my life and living as soon as possible," every media outlet from cable news to NPR to Entertainment Weekly ardently covered the now inevitability that the millionaire domestic guru would go to prison. Numerous legal experts had claimed there was little chance Stewart would succeed on appeal, but the decision to bite the bullet and start serving time made it certain: a mighty had fallen.
Overall, America appears entertained by the irony of Stewart behind bars. How will the legendary homemaker look in prison khaki? Will prison food meet the standard of Stewart's usual recipes? Will Stewart be allowed to plant annuals in the prison garden? (Henry Blodget's clever "Martha Meter" coverage captured this sentiment best.) But there was also, arguably, a larger sense of schadenfreude; it's often just fun to see the mighty fall.
It's been a good couple of years for those who enjoy such riches to rags stories, with the descents of Fastow, Quattrone, and Waksal. In July, the New York Times Magazine dedicated an issue, technically the "Money" issue, to white collar crime.
The last time things got this crazy was the late 80s, when the names Boesky and Milken went from famous to infamous. At that time, Columbia Law Professor John Coffee wrote an op/ed in the Washington Post about his concerns regarding the "Golden Age of white collar criminal prosecutions." That period, like the current one, yielded many justified white collar convictions, but it also led scholars like Coffee to worry about overzealous prosecutors. Coffee's primary concern was that in this new era "almost any violation of an administrative rule or regulation is today potentially indictable as a felony." He worried that when regulatory standards with "fuzzy edges" or "sweeping terms" are criminalized, the greater deterrence may come at a "cost of anxiety and insecurity to those in the industry who are now subjected daily to the threat of severe penalties for even minor transgressions."
In the intervening years, however, the game has changed even more. When the Federal Sentencing Guidelines took effect nationwide in 1989, judges lost much of their discretion in sentencing and had to follow (the now constitutionally questionable) rules regarding base offense levels, mitigating circumstances, and enhancements. When judges expressed frustration that drug sentences put people away for years while non-violent criminals often received probation, a push for greater equity led to stricter sentences for all non-violent offenders. Suddenly, those fuzzy regulatory standards were really a cause for concern.
Soon people began seriously doubting the manner in which white collar criminals were ending up behind bars, and legal scholars began looking at alternatives. Some, like Dan Kahan, led the movement to "shame" rather than incarcerate non-violent criminals. Such a plan, he argued, would lead to a greater efficiency: strong deterrence, no costly locking-up.
Yet just when it seemed the movement to keep white collar offenders out of prison could begin to grow, the business community showed that fines, fear, and even the potential of incarceration did not serve as a strong enough deterrent. The most recent "Golden Age" of white collar prosecutions has only proven that sweeping regulations and longer sentences still fail to deter.
So we keep upping the ante, as well as the chance that the mighty will not just fall, but like Stewart, might find themselves behind bars. Sarbanes-Oxley, the government's reaction to the business world's recent "accounting problems," goes to new lengths in criminalizing regulations and increasing white collar sentences. Which brings us back to Stewart. Her white collar crime - lying to investigators about the reason for her sale of ImClone stock - struck many as unfair. The situation is a reflection of Coffee's 1989 concern about the creation "of 'new' crimes through creative prosecutorial manipulation of legal theories." Stewart got burned for the cover-up--not the crime. As a woman whose image is synonymous with the home is torn away from her own, might we reconsider shaming?
A few weeks after the Times Magazine's "Money" issue, the publication ran a column entitled Decarcerate?. The piece posited that future civilizations might view incarceration as the most barbarous act of our era. While the article described the incredible explosion in the prison population over the past 40 years, it also analyzed incarceration's often hazy justifications: rehabilitation, punishment, and retribution.
While groups that push for the end of prisons admit that they are "a necessary evil for now," these self-proclaimed "abolitionists" still aim to end incarceration for many categories of prisoners. Two weeks after the article ran, the wife of a white collar, first-time offender wrote the Times, explaining that her husband received two years in a federal penitentiary when a "hefty fine, community service and educational programs would promote betterment for the offender, the family and the community." But given the recent flood of financial and stock related frauds, others might disagree. The shame and costs inherent in any criminal investigation, let alone prosecution, appear to have done little to stop white collar crime.