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Friday, June 01, 2007

White-collared and Red-handed

Greetings from the bayou. Thanks to Dan Markel and PrawfsBlawg for inviting me to be a guest blogger during the month of June. I teach and write about criminal law at LSU Law School and am the author of Lying, Cheating, and Stealing: A Moral Theory of White Collar Crime, recently published by OUP in paperback. My attention was piqued this week by two items in the news that might roughly, and mundanely, be categorized as "White Collar Crime--Asia."

The first item involves Toshikatsu Matsuoka, Japan's agriculture minister, who committed suicide just hours before he was to face parliamentary questioning about alleged bid-rigging in road construction projects and the padding of office expenses. The second item involves Zheng Xiaoyu, the former head of China's top food and drug safety agency, who was sentenced to death for accepting bribes in exchange for approving bogus drug production licenses. From the American perspective, both stories seem bizarre. In America, government officials and corporate titans charged with white collar crimes like bid rigging and expense account fraud almost never suffer from the kind of shame that presumably drove Matsuoka to take his own life: rather, they fight every allegation tooth and nail; and even after conviction, continue to maintain their innocence.

White collar criminals are supposed to be more sensitive than their “blue collar” counterparts to the disapprobation of their peers, or so social scientists have told us. But the reality is that even when caught red-handed with their paws in the cookie jar (to mix several metaphors), white collar criminals in America tend to remain unrepentant. Indeed, it's almost impossible to imagine defiant characters like Tom DeLay or Jack Abramoff hanging themselves from the rafters. The Zheng Xiaoyu case seems even more surreal. The death penalty for bribery?! Even in Louisiana, where our state Supreme Court recently upheld the use of the death penalty for rape of a child, we don’t do that.

But the Zheng case does raise a more general question about the use of harsh penalties for white collar crimes.

In a forthcoming article entitled “Of Breaches of the Peace, Home Invasions and Securities Fraud,” corporate law scholar Christine Hurt has expressed skepticism about the appropriateness of a 24-year sentence meted out to Enron’s Jeff Skilling for his conviction on multiple counts of conspiracy, securities fraud, false statements, and insider trading. According to Hurt, Skilling’s sentence “can be compared to the sentence for someone who murdered five people, without passion and without any mitigating circumstances.”

Regardless of whether Hurt’s math is correct (and I’m skeptical that it is), she raises an important issue: What is the appropriate penalty for white collar crimes? When are they too harsh? When too lenient? Criminal law scholars traditionally distinguish between ordinal and cardinal proportionality. Ordinal proportionality concerns how wrongdoers are punished relative to each other. Cardinal proportionality deals with the absolute severity levels anchoring the penalty scheme as a whole. Most commentators believe that the sentencing scheme in the U.S. (as in China) is far too harsh from the perspective of cardinal proportionality: the whole system is ratcheted up too high. But ordinal proportionality is something else. Is there any reason why the penalties for our most serious white collar crimes should necessarily be lower than the penalties for our most serious blue collar crimes?

White collar crimes tend to be more diffuse and attenuated in their harms than traditional blue collar crimes. But they often affect larger numbers of people than do more traditional violent crimes. The effect in the aggregate can be tremendous: The crimes of Enron and its executives, for example, caused tens of thousands of people to lose their pensions. The case of Zheng Xiaoyu is even more dramatic: China in recent years has been plagued by rampant problems concerning counterfeit and substandard drugs and improperly inspected foods. Tens of thousands of people have been sickened and many have died as a result.

Much of the problem can be attributed to corruption within China’s food and drug inspection system, of which Zheng was the head. In this case, he was convicted of accepting more than $800,000 in bribes in exchange for approving bogus drug production licenses. Who knows how many people were harmed as a result? I’m certainly not suggesting that Zheng Xiaoyu’s sentence was proper. In fact, I believe that the death penalty is never justified for any crime. But I do believe that certain white collar crimes can be every bit as serious in their own way as more traditional blue collar offenses. There’s no reason why they shouldn’t be punished as such.

Posted by Stuart Green on June 1, 2007 at 08:55 AM in Criminal Law | Permalink


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Professor Stuart Green is doing a guest stint at the PrawfsBlawg and has an interesting post (here) on sentencing in white collar crimes, White-Collar and Red-Handed. He discusses the recent sentencing of a former Chinese government official to death for [Read More]

Tracked on Jun 3, 2007 1:14:22 AM


Sorry if this is a bit of a quibble, but Skilling's crimes at Enron did not cause thousands to lose their retirement savings. The employees who lost everything did so becuase they made a ridiculously bad decision to concentrate all of their retrirement savings in Enron stock. I worked at Enron, and took a bath on my stock options when the company went under, but I walked away with my 401(k) intact because I had the sense to diversify my retirement savings. In case you can't tell, I agree with Hurt -- 24 years for Skilling is far too long.

Posted by: Geaux Tigers | Jun 2, 2007 1:46:53 PM

The move of the social system of the US from a primarily blue-collar economy to a white-collar economy has been quite recent. Until computers became more pervasive, it seems like it would have been more difficult to catch the perpetrator of a white-collar crime than a blue-collar crime. While I think the US will change over time and white-collar crimes will be penalized more severely in the future, will this have a deterrent effect at all? China, where they offer the death penalty for white-collar crimes, still has great problems with corruption and fraud.

Posted by: Ed | Jun 1, 2007 7:56:04 PM

To deter fraud we have these two options.

OPTION 1: Stop fraudsters from obtaining our personal details, stolen and skimmed cards and PIN numbers. It is obvious that it is virtually impossible for us to stop fraudsters from obtaining these details. This shows why our bad problems will continue to get worse because we are relying on this bad system to deter fraud.

OPTION 2: Make signature and PIN number systems reliable as proposed via use of ID KEY system described on website www.xwave.co.uk Since this system will deter fraudsters from getting tempted to misuse our details they have obtained it will be effective in deterring fraud and hence eliminate the need for us to protect our personal details, cards and PIN numbers. This shows that unless the government and financial institutions support and implement ID KEY system fraud crimes will continue to grow like wild forest fires in every sector of the industry.

Since the government and financial institutions do not have effective system to protect the public and entire business from fraudsters, they should exploit proposed ID KEY system before it is too late to stop a fraud boom.

Posted by: Roger | Jun 1, 2007 2:33:30 PM

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