Several commenters have expressed some concern about the severity of criminal sanctions for Lay & Skilling's actions. My question is then: what punishment would be appropriate? Are the civil sanctions sufficient? Larry believes they are enough: "[C]onsider the other deterrence mechanisms we have at our disposal – crushing civil liability, loss of a prestigious job and livelihood, the destruction of a hard-earned reputation. Petty crooks and drug dealers don’t worry a lot about these things, but corporate executives do."
But is the civil liability really "crushing"? Can't most of these folks survive the damages and fines and live fairly comfortable lives after that? And sure, your reputation is hurt, but having your freedom and millions still in the bank probably eases the pain.
For me, one of the most important aspects of the criminal conviction is the loss of the bankruptcy homestead protection. Perhaps you've seen pictures of Skilling's gated mansion -- his "homestead." Under Texas bankruptcy protections, Skilling and Lay could shield their homes from repossession to pay outstanding judgments. However, housing is only protected up to $125,000 if you've been convicted of securities fraud. I'm not sure if this new provision is retroactive, but sanctions like this actually put some bite into non-incarceratory punishment.
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1. Posted by John Davidson on June 2, 2006 @ 7:26 | Permalink
this is not an original observation, but in talking about the sentence for Lay and Skilling the following should be recalled:
"The Las Vegas couple who admitted planting a severed finger in a bowl of chili at a San Jose Wendy's in an attempt to extort money from the company were given lengthy prison sentences this morning by a Santa Clara County judge who said they were overtaken by greed and avarice.
"Judge Edward Davila gave a nine-year sentence to 40-year-old Anna Ayala, who initially alleged she had found the fingertip in a bowl of chili last March 22.
Her husband, Jaime Placencia, 44, received a 12-year, four-month sentence for his role in the attempted scam, which included buying the finger from co-worker Brian Paul Rossiter, who had lost it when it got stuck in a truck hoist.
"Davila also ordered the couple to pay $21.2 million in restitution to Wendy's International, nearly $500,000 to JEM Management, which owns the Monterey Road Wendy's where the incident occurred and seven other Bay Area Wendy's, and $170,605 to Wendy's employees for lost wages.
"Greed and avarice overtook this couple to the point where they lost their moral compass," Davila said in announcing the sentence.
"During this morning's hearing, Ayala and Placencia both apologized"
I have not seen a posse of law professors for the elites, like those who post here, marching outside the prison gates demanding the release of this couple.
Wendy's stock, by the way, is up 50% since this happened and therefore the fraud was actually a good thing. A lot of people found out that Wendy's sells Chili
2. Posted by Jeff Yates on June 2, 2006 @ 8:14 | Permalink
I think that I would have to agree that incarceration is in order in these cases - or, alternatively, something that really has some "teeth" to it. Check any mainstream textbook on criminal justice and you'll see that there are a number of rationales for criminal punishment, including: deterrence (both specific and general), retribution, incapacitation, and rehabilitation, among others. We need to think about how these justifications are promoted by civil penalties that leave white-collar convicts with relatively comfortable lives.
Look back about 5-7 years ago to people who were convicted in high profile white -collar crime cases; how are they living now? Probably pretty comfortably; probably a lot better than people who were convicted for minor theft or petty drug possession crimes; and they (the white-collar convicts) probably ruined more lives and are, presently, a greater danger to society.
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Jeff Yates
Associate Professor
Department of Political Science
University of Georgia
www.uga.edu/pol-sci/people/yates.htm
SSRN page: http://ssrn.com/author=454290
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3. Posted by Auto on June 3, 2006 @ 18:13 | Permalink
Justice demands they serve time. This country locks up nonviolent but poor criminals for what seem like trivial felonies. No way should Skilling and Lay be allowed to walk the streets.
I think Fastow's 10 years is a slap on the wrist. And after they're been sentenced, I think Skilling and Lay will agree.
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