Corporate Crackdown Not Netting Lots of Jail

Article excerpt

Sixty-one percent of defendants sentenced in the Bush administration's crackdown on corporate fraud spent no more than two years in jail, escaping the stiff penalties given WorldCom Inc. and Enron Corp. executives.

In the past five years, 28 percent of those sentenced got no prison time and 6 percent received 10 years or more, according to a review of 1,236 white-collar convictions. Former WorldCom Chief Executive Officer Bernard Ebbers is serving 25 years and ex-Enron CEO Jeffrey Skilling is serving 24.

"Sentencing white-collar defendants to two years or less does not send a strong deterrent message," says Joshua Hochberg, who ran the Justice Department's criminal fraud section from 1998 to 2005. "On the other hand, convicting a lot of defendants sends the message that you will be caught and there are consequences."

A wave of corporate corruption marked by Enron's collapse in 2001 and an accounting scandal at WorldCom led Congress to enact harsher penalties. President Bush signed the Sarbanes-Oxley Act to reform governance and named a Corporate Fraud Task Force to push "significant" prosecutions.

"This broad effort is sending a clear warning and a clear message to every dishonest corporate leader: You will be exposed and you will be punished," Bush told hundreds of prosecutors and agents in a speech on Sept. 26, 2002. "We will deter corporate crimes by enforcing tough penalties."

Lighter sentences

Defendants got reduced jail time when they helped prosecutors investigate frauds, served as low- or mid-level executives, or committed crimes that were less sophisticated than complex accounting conspiracies, the review by Bloomberg News found. The list includes embezzlers such as a credit union teller who stole less than $20,000.

Of the 1,236 convictions from 2002 to 2007 in the review, 1,133 defendants were sentenced. Forty-seven percent of them got a year or less in prison.

Direct comparisons of sentences before and after 2002 can't be made because the Justice Department added a corporate fraud category in 2003 and the U.S. Sentencing Commission stiffened advisory guidelines.

Median sentences for white-collar crime changed little in the 1990s, holding in a range of 12 to 13 months, commission data shows. That number increased to 15 months in 2001 and reached 18 months last year, reflecting the new guidelines.

No conviction list

The Justice Department claimed credit for 1,236 convictions in the crackdown on corruption. The department says it doesn't have a comprehensive list. Bloomberg assembled a comparable list based on more than 350 cases from task force annual reports, lists of executives, and press releases on the department's Web site.

The review includes 981 cases coded by prosecutors as corporate frauds and obtained electronically under the Freedom of Information Act by Syracuse University's Transactional Records Access Clearinghouse, a nonprofit research center that analyzes government data. Some of the 981 cases overlapped with the 350 convictions compiled from Justice Department documents.

The sentences include the 6 1/2 years imposed on Conrad Black, the former Hollinger International Inc. chairman convicted of mail fraud and obstructing justice, on Dec. 10.

Steven Dodge, a former Converse Inc. executive, got 18 months probation for misleading auditors after helping prosecutors investigate an athletic-shoe retailer. Anu Saad, former CEO of Impath Inc., a provider of cancer diagnostic services, was sentenced to three months for lying about her pay, after more serious charges were dropped.

'Very strong deterrent'

"Anything under two years is not significant, unless somebody is a cooperator," says Kirby Behre, a former prosecutor and co-author of "Federal Sentencing for Business Crimes," published by LexisNexis in 2002.

Joan Meyer, who oversees the task force as senior counsel to the deputy attorney general, argues that any prison sentence can serve as a deterrent. …