Commentary

A Criminal Red Herring in Corporate Reform

Watching the stock market these days is enough to make the average investor seasick. Americans have weathered the turbulence of Wall Street before, but the Titanic-size dive of some well-known firms has sent many stockholders scrambling for life preservers. What has turned investor despondence into rage, however, are the ongoing revelations that some captains of industry were involved in corporate shenanigans.

Now people want blood — and in an election year, national politicians are more than eager to quench this blood thirst with tough rhetoric and legislation. Many of the recent proposals address areas in desperate need of change, such as misleading accounting practices and the enduring problem of corporate self-dealing. But the sometimes hysterical calls for reform have now moved beyond civil business regulation and into the arena of criminal justice.

In his recent speech to Wall Street, President Bush proposed an increase in the maximum sentence for mail and wire fraud, and called upon the U.S. Sentencing Commission to enhance punishment for corrupt executives. Since that time, federal lawmakers have fallen all over themselves trying to look even tougher, offering both newfangled business crimes and harsher punishments for existing offenses. As Rep. Michael Oxley (R-Ohio) quipped, “summary executions would get about 85 votes in the Senate right now.”

But there are good reasons to be skeptical about the use of the federal criminal justice system as a tool of corporate reform. To begin with, most of the proposed changes would have little, if any, effect on the prosecution of white-collar criminals. Virtually all of the recent corporate misconduct can (and will) be handled with laws already on the books.

No matter. The effectiveness of criminal legislation is often less important to politicians than the sound bites it produces. Recall Polly Klaas, the 12-year-old murder victim whose image was exploited by campaigning politicians in support of California’s infamous “Three Strikes” sentencing law. Officials didn’t seem to care much that “Three Strikes” was theoretically deficient, enormously expensive, and downright cruel in some applications. Instead, most political candidates rode the misguided law all the way to election-day victories.

Consider also Congress’ enactment of harsh punishment in the wake of the crack cocaine hysteria of the 1980’s. Although politicians pointed to their handiwork as evidence of their toughness on crime, the legislation has had little effect on drug markets. Indeed, the primary effect has been to inundate federal prisons with low-level, minority offenders.

In a real sense, then, the recurrent use and abuse of sentencing laws for political gain, particularly by federal officials, represents an ongoing fraud on the American people. Quick fix solutions implicating the federal criminal system help elect politicians, all of whom know (or should know) the limited and sometimes negative consequences of their latest social panacea. More importantly, sentencing machinations for political ends have spawned a Moby Dick-size red herring on the problems with punishment in federal courts.

Unknown to many Americans, federal sentencing is controlled by a largely unaccountable and insulated agency, the U.S. Sentencing Commission. This “fourth branch” of government has assumed Congress’ power to make criminal law and usurped much of the judiciary’s traditional authority over criminal punishment. Through its enactment of mandatory “sentencing guidelines,” the commission has all but eliminated the ability of trial courts to mete out individualized punishment and simultaneously expanded the power of federal prosecutors, giving them another tool to squeeze out information and guilty pleas from defendants. With unique prosecutorial authority over penalty reductions and lenient rules of evidence at sentencing hearings, federal law enforcement needs more leverage in the criminal process like Arthur Anderson needs more shredders. The congressional propensity to criminalize and punish only obscures real scandals: Federal sentencing law is determined by an unconstitutional “junior varsity Congress”; the guidelines have drastically shifted authority from judges to prosecutors, remaking the former into little more than rubber stamps during sentencing; and defendants are being punished under a confusing, hyper-technical, mechanical process that treats people like widgets rather than human beings.

Like most Americans who have lost their shorts over the past weeks and months, I have little sympathy for corporate executives who swindle innocent investors and irreparably damage their companies and employees to boot. But I also lack compassion for political opportunists who use the criminal process as a means to capitalize on gut-wrenching events. If members of Congress were really serious about their jobs — and the sentencing regime erected under their watch — they would stop tinkering with federal punishment for personal, electoral gain and start talking about large-scale reform of a broken penal system.

Erik Luna is associate professor of law at the University of Utah and author of the forthcoming Cato Institute Study, “Misguided Guidelines: How the Federal Sentencing Regime Really Operates.”