IT BEGAN with Enron and Arthur Andersen, spread to WorldCom and Adelphia, and most recently may even engulf AOL-Time Warner, the United States' largest telecommunications provider, pending an accounting investigation. Since the spring, the intricate web of corporate fraud and wrongdoing being brought to public attention has grown steadily with more and more money lost, more severe criminal allegations, and more innocent investors and employees affected by these scandals.
President George W. Bush has pledged that he will do everything in his power to make sure that the perpetrators of these corporate crimes will be punished for their actions. Bush must follow through with his promise to crack down on white-collar crime. Starting to enact meaningful punishments on corporate criminals - more than just a fine and minimum security prison - would be a step in the right direction.
Corporate criminality is a legal area usually not heavily punished for several reasons. For starters, the criminals who commit transgressions often are affluent businessmen. Although impartiality is emphasized in our legal system, it often is difficult for judges and juries to consider such defendants, who may have previously been considered upstanding citizens and role models, to be the hardened felons they are.
In the recent cases with large corporations there is usually a tight connection with government officials. Often, these associations are completely legal and necessary, since companies like Enron and WorldCom represent large market shares in their respective industries, and the government must regulate and keep track of such areas of economic importance.
However, there are connections of questionable and possibly illegal significance in play as well. Some of these companies support political candidates in their bids for office. In Enron's case, they were major contributors to Bush's campaign. Although in theory such monetary affiliations are legal to a certain extent, it is impossible to know the influence these donations have on the policy of these elected officials.
Corporate crime is as vicious as "conventional" crime, if not more so. For one thing, it affects a much larger number of people. If someone gets robbed, it is a tragedy for that person alone and possibly, his or her family. With corporate crime, it is a similar tragedy, only it hurts hundreds or thousands of investors. It also indirectly but powerfully affects the employees of these companies. With executive squandering, employees possibly lose pay raises the stolen money had been intended for.
Additionally, cash does not become reinvested in the company, which hurts job security as the company loses its competitive edge. At an even higher level, corporate criminal activity envelops the entire United States and even the world as the fallout from financial mismanagement negatively affects the U.S. economy. This means that because of a few fat cat managers who decided to cheat the system, everybody who holds any stake in the economy, which is practically everybody, is hurt as a result.
Because we all are affected by such crimes, one would think these perpetrators would be sentenced to the harshest punishments possible for having harmed thousands, if not millions of people. Nothing could be further from the truth. White-collar criminals usually get off easy. They have money, resources and political connections most criminals don't have.
According to congressional testimony by Frank Bowman, an associate professor at Indiana University School of Law, "defendants convicted of larceny, embezzlement, fraud, and counterfeiting who were sentenced to federal prison received average (mean) sentences of 15.6 months, 9.9 months, 18 months, and 17 months respectively. By contrast, robbery defendants received 110.6 months, drug defendants 75.3 months, and firearms offenders 64.1 months."
In a PBS/Fortune Magazine editorial, business expert Karen Gibbs asserts, "The punishment for many white-collar crimes is a slap on the wrist and, if particularly creative, a monetary fine. Rarely are white-collar criminals sentenced to jail time, and even then it's not hard time." Corporate criminals know this, and unfortunately, corporate crime does pay in the end. If executive criminals steal and don't get caught, they win big. And if they do get caught but wisely put away their illegal earnings to have access to them after they get out of minimum security prison prison, they still win, just not as big.
Corporate criminals must be punished at levels commensurate with their crimes. Even though they may deceive us with the apparent lack of severity of their misdeeds, the legal system must be given the tools to see through their facade for the felons they really are and to act accordingly. Reform means more than just adjusting the laws on corporate crime - it means making sure that white-collar criminals are not being let off on serious charges.
These are people that have stolen millions or even billions of dollars from thousands of innocent people. In any other context, they would be at the top of "America's Most Wanted." As long as the risk of punishment remains as low as it is now, corporate crime will continue at present levels. It is imperative for Bush to push through and enforce his agenda for increasing executive crime punishments. After all, these are criminals that specialize in making profits, and currently, corporate crime does just that.
(Alex Rosemblat is a Cavalier Daily columnist. He can be reached at arosemblat@cavalierdaily.com.)
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