Go Directly to Jail: White Collar Sentencing after the Sarbanes-Oxley Act

Article excerpt

We begin with the principle that the certainty of real and significant punishment best serves the purposes of deterring white collar criminals. ... [I]f it is unmistakable that the automatic consequence for one committing a significant white collar offense is prison, then many will be deterred.

--James B. Comey, Jr., United States Attorney for the Southern District of New York, explaining the rationale behind the White-Collar Crime Penalty Enhancement Act of 2002. (1)

In 2002, reacting to the devastating collapse of Enron and other major American corporations, (2) Congress enacted the Sarbanes-Oxley Act (3) ("Sarbanes-Oxley" or "the Act"). Passed hastily by a shaken legislature, the Act included a multitude of reforms aimed at preventing another meltdown. (4) One particular area of reform was white collar criminal sentencing: included in the Act was the White-Collar Crime Penalty Enhancement Act of 2002 (5) (WCCPA), which sharply increased penalties for various forms of fraud. Unfortunately, both the Act and the WCCPA have proven overly rushed and insufficiently prescient to deal with the changing face of business crimes in America. (6) This Note argues that a major reason for this result is that judges have reacted to the harsher WCCPA sentences by increasingly departing from the Federal Sentencing Guidelines. For this reason, WCCPA-enhanced sentences have become at least as disparate and unreliable as white collar sentences were in the past. Instead of deterring crime, the WCCPA has made criminal punishment less of a fear for those who would commit fraud. In order to remedy the damage caused by the last seven years of unpredictable sentences, either Congress or the United States Sentencing Commission must take steps to stabilize and rationalize the white collar sentencing system. This Note proposes that the best way to achieve this goal would be to tie Guidelines sentencing levels to actual loss, (7) rather than intended loss, which would better mirror the social impact and perceived moral culpability of white collar crimes. Only with a sentencing scheme that encourages judges to sentence systematically and consistently can the deterrence desired by the drafters of the WCCPA be accomplished.

This argument requires two brief qualifications. First, for the purposes of this Note the term "white collar crime" will be limited to the crimes covered by name in the WCCPA: false and incomplete SEC filings, (8) and mail and wire fraud. (9) Second, this Note assumes that individuals who contemplate broad-scale white collar crimes are sophisticated actors, familiar with the law and current events. As such, they know the available punishments and recent comparable sentences for their contemplated crimes, and they incorporate those potential downsides into their decisionmaking process. (10)

This Note proceeds in three Parts. Part I lays out a basic flaw in modern white collar criminal sentencing, discussing how the current sentencing scheme neither deters crime nor requires a just level of punishment, and is thus an ineffective and perhaps retrograde method of achieving societal goals. Part II proposes two possible reasons that this problem has arisen: First, from an institutional perspective, judges may perceive white collar crime as less dangerous and prone to recidivism than other crimes. Second, from a personal perspective, judges may be hesitant to impose upon a white collar criminal the same sentence they impose upon the murderers, rapists, and armed robbers they regularly see before them. Part III proposes several solutions to these problems, including alteration of the loss calculation mechanism.


With the passage of the Sarbanes-Oxley Act and the WCCPA, Congress sharply raised penalties for many white collar criminal activities. (11) In so doing, Congress attempted to deal with a growing rash of major business crimes. (12) However, judges seem to be unwilling to consistently impose the higher sentences required by the WCCPA (13)--departures (14) from the Guidelines have increased since the WCCPA was passed. …