Some Stupid Questions from White Collar Crime Prof Blog, and Answers

It asks some really stupid questions apropos of Enron CFO Andy Fastow:

White Collar Crime Prof Blog: Fastow to Be Sentenced This Week: Andrew Fastow will be sentenced. He will receive a sentence of ten years pursuant to an agreement, although he will have to first listen to the sad testimony of victims who suffered as a result of his conduct as CFO at Enron. (see Houston Chronicle here). His lawyers will ask for leniency premised on him being a "changed" man (see here)

Several issues deserve mention here -

1. Is it fair for Fastow to receive this low a sentence all because he cooperated with the government? This is yet another case of the government providing an enormous benefit to someone who cooperates, while demanding a higher sentence for those who decide to go to trial. Selecting to use the constitutional right of a jury trial comes with the enormous risk of a significantly greater sentence if the jury returns a verdict of "guilty."
2. Should the government have given the plea for cooperation to this person, or did they select the wrong person in using their discretion? The government discretion to provide a "deal" to whoever they decide they would like, often produces inequities. In this case one has to ask whether Fastow was more culpable than Jeff Skilling or the now deceased Ken Lay.
3. Is putting Fastow in prison the correct way to punish a white collar offender? We did not fear Andrew Fastow while he was free pending his sentencing. The Houston Chronicle reports on his admirable deeds and recognition for being a good father. (see here). This is a no-win situation. As with so many white collar cases, the individual is not someone we fear once their ability to commit future white collar offenses is removed. The sentence is for retribution, and incorporating the victim statements at the hearing just emphasizes this point. But many will suffer by sending Andrew Fastow to prison, most notably his children. Is prison really the appropriate way to punish this individual, or should the sentence consider the unique characteristics and qualifications of the individual and punish the person with a sentence that will maximize those skills for the betterment of society?

Answer to 1a: No, it is not fair. Fastow deserves a higher sentence. But without the government's offer of leniency, Fastow's three equally guilty superiors would have escaped scot-free. That would have been a significantly greater miscarriage of justice than Fastow's too-lenient sentence.

Answer to 1b: The significantly greater verdict if the jury comes in "guilty" is highly likely to be fair. If you are in fact guilty--and nearly everybody found guilty is--then you have not only committed the crime, but you have perjured yourself and conspired to cover it up in the process of mounting your and your co-defendents' case. These aren't actions we wish to encourage, or reward. These are actions we wish to penalize.

If you are factually innocent, of course, the miscarriage of justice is created by the fact that there is evidence to convince every member of the jury that you are guilty beyond a reasonable doubt. In the case of rich guys with money, there are few such miscarriages--and this isn't one. I know of nobody not paid to do so who maintains that Fastow, Skilling, Lay, and company were factually innocent.

Answer to 2: If Ken Lay had wanted to become a witness for the government immediately after the collapse of Enron, the door was open. If Jeff Skilling had wanted to become a witness for the government immediately after the collapse of Enron, the door was open. The fact that they did not choose to walk through that door--while Fastow did--does not create an "inequity" about which Skilling or Lay have any standing to complain.

Answer to 3: The imprisonment of Andrew Fastow is for both retribution and deterrence. The fact that Fastow is not the only high Fortune 500 executive being sent to jail this year for similar crimes suggests that our mechanisms of deterrence have been inadequate to date.

The question of retribution is a harder one than WhiteCollarCrimeProfBlog admits. Yes, those harmed by Fastow's imprisonment are greatly harmed. Yes, the slight warm glow that the victims of Fastow's frauds get by knowing that he was sent to jail is small and feeble in each individual victim's case. But there were a huge number of victims. And small benefits to each of tens of thousands of victims--they add up.

WhiteCollarCrimeDefenseBlog's belief that Fastow has "unique characteristics and qualifications" and that the sentence should "maximize those skills for the benefit of society" has sent four people I know rolling on the floor in laughter this evening. Fastow's "unique skills and characteristics" are a talent for creating false accounts and undertaking large-scale financial fraud. What company would want him as a CFO? What CFO would want him on his staff? The skills he has are not for the betterment but for the worsening of society.

Final comment: If WhiteCollarCrimeDefenseBlog is trying to inform its readers about the Enron case and America's legal system, it is doing a very lousy job. On the other hand, it is doing a good job if it is auditioning for a place in the teams that defend high corporate excecutives accused of white-collar crimes.