Criminalization as Policy: Using Federal Criminal Law as a Regulatory Device
Anderson, William L., Jackson, Candice E., The Journal of Social, Political, and Economic Studies
Since the mid-1980s, the U.S. Department of Justice has increasingly used criminal charges as a means to affect regulatory policy. From the Wall Street prosecutions by Rudy Guiliani to the current indictments, convictions, and investigation of Enron executives, the seeming recent legal trend has been for federal prosecutors to interpret some business activity in areas either loosely regulated or where regulatory boundaries are fuzzy or sometimes non-existent as being criminal in nature. The authors attempt to determine whether the focus of prosecution on so-called white-collar crime has changed from the way it was conducted in the past. Their research finds that much of current white-collar prosecution reflects a different interpretation of what is considered criminal behavior in business activity and reflects an alternative path of government regulation of business.
Key Words: white-collar crimes, regulation of business activity, trends in regulation
In a recent paper, Yandle and Morriss (2004) outline what they believe is a disturbing trend in government regulation: the growing tendency of federal agencies - especially the Environmental Protection Agency - to engage in what they call "the filing of lawsuits for the purpose of regulation" (p. 401). This activity, which Viscuzi (2002) and Yandle, Morriss, and Kosnik (2002) refer to as regulation by litigation, adds to the power that regulatory agencies already possess, allowing them not only to implement and enforce existing regulations but also to use the courts to impose new rules and agreements that do not exist either in the law or the regulation manuals.
Those authors write that the results have been quite favorable to government agencies, and they cite the example of the EPA's recent settlement with U.S. truck manufacturers whom the agency sued to force them to redesign their engines to meet standards that were not on the books. From tobacco companies to electric utilities, the courtrooms have been a new staging ground for government agencies to force American businesses to change their policies - despite the fact that those policies are legal and fall within regulatory proscriptions.
An obvious question here involves why the courts would permit this form of regulation through litigation to proceed, especially since the defendants were operating within the scope of the law, something that Yandle and Morriss do not address in their paper. While it is impossible to know what judges are thinking, the precedent of the courts deferring to the executive branch on matters of regulation and legal interpretation has long been established since the Great Depression, something with which we examine later in this paper. This deference toward the executive branch, we believe, is one reason that the courts permit such action by regulatory agencies.
We demonstrate in this paper that this trend to use the courts, and particularly federal courts, to bring about changes in business policy is not limited to civil actions. Indeed, an additional trend has been underway in the federal justice system: the criminalization of many business practices that either are otherwise legal or, at worst, are in the "gray" area of the law and regulatory policy. Institutional incentives play a role in this phenomenon. The current legal climate in the United States strongly rewards U.S. attorneys who engage in regulatory criminalization, as well as the regulators who advocate the process. The most famous federal prosecutor to follow such a course is Rudolph Guiliani, who as U.S. attorney for the Southern District of New York during the 1980s rode the prosecutions of Michael Milken and other Wall Street traders and investment firms to fame and fortune in politics and beyond, even becoming Time Magazine's "Man of the Year" in 2001. There seems to be little or no down-side to following Guiliani's example, at least in terms of career and political benefits. …