Federal crime issues of note

The subject of policing financial institutions, solving financial crimes and meting out punishment is beginning to make it’s way into the news.

The New York Times recently reported President Bush gutted the F.B.I.’s fraud investigation unit following 9/11.

The Federal Bureau of Investigation is struggling to find enough agents and resources to investigate criminal wrongdoing tied to the country’s economic crisis, according to current and former bureau officials.

The bureau slashed its criminal investigative work force to expand its national security role after the Sept. 11 attacks, shifting more than 1,800 agents, or nearly one-third of all agents in criminal programs, to terrorism and intelligence duties. Current and former officials say the cutbacks have left the bureau seriously exposed in investigating areas like white-collar crime, which has taken on urgent importance in recent weeks because of the nation’s economic woes…

…In the last four years, the Justice Department has scored fewer of the big-name prosecutions that marked President Bush’s first term in office. Even when investigations have pointed to corporate wrongdoing, the Justice Department has agreed, in dozens of cases in the last four years, to “deferred prosecutions" that allowed companies to pay fines in order to avoid criminal prosecution.

Business Week offered another take:

AIG Fraud Case: Using the Market to Set Jail Terms, Under new federal guidelines, defendants in big stock swindles could get 30 years to life

In coming weeks, five former insurance executives, including General Reinsurance ex-CEO Ronald Ferguson, are due to appear in federal court in Hartford. There, U.S. District Judge Christopher F. Droney will sentence them for their role in a sham transaction to boost the loss reserves of American International Group (AIG). When the deal was disclosed in 2005, prosecutors contend, it caused AIG's share price to drop 6% to 15%. Because of that, the defendants, who were convicted of fraud in February, could go to prison for life…

…Given the size of losses related to the subprime meltdown, prosecutors may be able to threaten alleged culprits with lifetime incarceration. Reid H. Weingarten, a Washington attorney representing Elizabeth Monrad, the convicted former Gen Re CFO, argues that "this puts unhealthy leverage in prosecutors' hands to extract unfair plea deals.

I have to agree, prosecutorial power threatening some people with life in prison, will start a “liars festival” just like it does in drug prosecutions. And these types of prosecutions seldom lead to culpable offenders punished appropriately — it leads guys and gals last in line, or those who stubbornly takes his or her case to trial — decades to life in federal prison. People will say anything under stress and duress of federal indictment, and to get out from underneath the weight of it. The Innocence Project has discovered and explored this easily exploited human tendency. That said, there will never be thousands upon thousands of “Organizational Offenders” (corporate and business fraud offenders) to warrant enough public pressure for their earned, early release, even if the wrong people end up in federal prison. With ill gotten goods confiscated, some will lack political power they had in two decades past. They’ll be just like us, only there won’t be many of them — a few hundred before this new federal ‘witch-hunt’ is over, perhaps — and victimized people won't be satisfied.

Before anyone rushes to condemn and terrify the offenders in the financial collapse, we need instead, to use this criminal financial crisis to re-visit powers of prosecutors, the politicization of crime, and what our incarceration system is supposed to achieve — especially on the federal level. If it is to build and maintain public and private gulags, without thought to the cost to our economy and human resources, remind your leaders over-incarceration doesn’t work. When people go home, they are broken, not better.

Financial institutions and powerful corporations leaned on the Sentencing Commission when mandatory minimum sentencing provisions for 'organizational crimes' were developed. How much imprisonment can our citizens tolerate?

There are about 113,500 drug offenders in federal prison today and most took plea bargains because they were threatened with decades of prison time. There are growing numbers of drug lifers, like Sharanda Jones who’ll die behind bars, without public intervention. Please read Sharanda’s story.

The country’s federal crime policy needs thoughtful revision, not another half-baked witch hunt that victimizes more people than any justice it metes out. Eroded constitutional rights, need restoration. “I love my country, but fear my government,” sits on the lips of too many good citizens. Returning to rule of law, and transparent legal procedures would restore citizen trust. Without trust in our leaders and powerful legal institutions, citizens will battle, not stand with their leaders.

Who makes the laws, and for whom?

Since the time I began proclaiming there wasn’t any justice in the war on drugs, nigh on a dozen years ago, our country and world has changed dramatically. Still, there is little substantive discussion about what went on back in the mid-1980’s when changes to our federal criminal justice system set us on the path we find ourselves today.

Raw capitalism requires wealth and consumption. Power can become unbalanced in a system such as this, so a democracy has to put in checks and balances for the people that don’t have wealth. When the system of checks and balances break down — good intentions go awry. Our federal criminal justice system shows glaring breakdown, so do our banks and financial institutions and the issues are deeply connected.

We were recently reminded by Joe Biden during the Vice Presidential debates that when “we don’t know what causes a problem, we can’t fix it.”

While the tough-on-crime Congress and Presidency of the mid-1980’s were beating their mostly white, hairy chests about fairness in federal law and about to get real tough, and mandatory on criminals across the lawless United States, corporate and business interests began a strategy that would coax five drafts in five years of wrangling before the Sentencing Guidelines for business crimes were put into law. Each draft was less, and less punitive.

Gone are the days of parole and hope of earned, early release. It is lock them up and throw away the key, but the US Sentencing Commission never recommended prison as a first choice for the banker, corporate polluter, development investor who ran afoul of federal law. Fines and probation were in the first draft and when the final draft was made law in 1991 — the fines were 97% lower than the Commission had originally recommended. And you could put your fines on credit so you didn’t have to do probation! So much for all that get tough — the only federal law violation that brought tougher sanctions was a drug violation. Five years for a couple of rocks, no prison time for stealing stock.

While the good citizens across the country were being sold a bill of goods about fairness and new, harsh justice philosophy coming to America, business interests wrangled out from under broad legal investigatory powers, punishments, fines and probation. The result? A conversation begging to find it’s way into mainstream headlines because this is part of ‘deregulation,’ and large part the cause of our growing unease, perhaps economic collapse.

For over 25 years, federal policing has been focused primarily on drug law violators and ‘street level’ crime, not on criminal players in business and financial institutions. After the Enron debacle, but not until 2004 would the Commission re-visit penalties for corporate, and business crime.

The interests of the public good has been long suffering while cherished legal principles continue to be destroyed in the name of a federal war on drugs.
New conversations about the over-haul of our criminal justice system are easy to identify, but seldom include critiques of the apparatus now in place, a Sentencing Commission that upholds draconian laws that punish the poor, even as corrupted financial institutions crumble, not just in the United States, but around the world.

For further reading:
Structural Contradictions and the United States Sentencing Commission, The development of federal organizational sentencing guidelines by Laurie J. Rodriguez & David E. Barlow.

Abstract: This research is a case study of criminal justice policy formation involving the development of federal sentencing guidelines for business organizations by the United States Sentencing Commission. It describes the decision-making process of the Commission and the influence of other groups and individuals on the process, and recounts their actions within the framework of structural contradictions theory. In the case of the federal sentencing guidelines, it is demonstrated that representatives of business opposed any legislation that was meant to limit the power of corporations or sanction the actions of their representatives, and therefore placed pressure on members of the Commission to eliminate or minimize such sanctions. The study confirms that the state, in an effort to foster the continued capital accumulation necessary for a healthy economy, acknowledged capitalist provisos and at least partially submitted to them during the development of the guidelines.