August 11, 2006
The Irreparable Harm of Prosecutorial Overreaching
Posted by Christine Hurt

The prosecutorial response to white collar crime post-Enron has had some setbacks.  In both the Arthur Andersen case and the Enron Nigerian Barge case, appellate courts eventually said that the fact pattern did not constitute the crime in question.  However, as welcomed as these decisions are, they cannot turn back time.  Arthur Andersen was destroyed by the investigation and conviction and, like a corpse after an autopsy, cannot be brought back to life.  The defendants in the Nigerian barge case will never get back the years they spent defending themselves and actually living in prison, not to mention the untold defense costs.  I am writing a paper on the relative burdens on the various parties in criminal and civil corporate misconduct cases, and I find it interesting that we have so many requirements and presumptions to save corporate civil defendants from vexatious litigation and exorbitant discovery costs, but we seem not to care about the corporate criminal defendant who must wait until a jury verdict or an appellate ruling to determine whether the prosecution was without merit.

I was reminded of this paradox when reading this story in the WSJ this morning about the decimation of BetOnSports.  As I blogged before, the DOJ arrested the CEO, who is not a U.S. citizen or resident, as he was changing planes in Dallas on his way from London to Costa Rica.  BetOnSports is not a U.S. company, is not listed on any U.S. exchange, and has no assets in the U.S.  BetOnSports is listed on a UK exchange and is headquarted in Costa Rica.  Mr. Carruthers is still in jail in St. Louis, separated from family and business in a foreign country.  Now, surely to try to appease the DOJ, BetOnSports has announced that it will take no more bets from Americans and will return their deposits.  Analysts say this will in fact mean the end of BetOnSports, who received 3/4 of its revenue from American bettors.  And by the time a U.S. court ever answers the question of whether prosecutors can actually make a case against Carruthers and BetOnSports under existing law, the damage will have been done.

Playboy is banned in many countries.  If the governments there found out that their citizens were able to order the magazine over the Internet or access its website, would the DOJ stand back if Hugh Hefner was arrested while traveling? 

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