Prison time, fines, and federal white-collar criminals: the anatomy of a racial disparity.

• Author: Schanzenbach, Max M.
• Position: The Changing Face of White-Collar Crime

1. INTRODUCTION

   Do criminals of different races, sexes, or socio-economic status receive different sentences? If so, why? For decades, these have been among the predominant questions in the academic and political discussion of sentencing. There was at least one study of sentencing disparity conducted in the 1920s, (1) and many other studies were undertaken over the next six decades. (2) The Federal Sentencing Guidelines (the "Federal Guidelines" or the "Guidelines") arose in part from a desire to eliminate unwarranted sentencing disparity between judges, (3) and the focus on disparity has not abated since the Guidelines took effect in 1987. (4) Indeed, the recent Supreme Court decision in United States v. Booker, (5) which arguably grants greater discretion to district courts in criminal sentencing by making the Guidelines "advisory," will heighten interest in disparity.

   We examine racial disparities in white collar criminal sentencing using a large dataset provided by the United States Sentencing Commission. We also discuss sex disparities at some length, in part because they provide an interesting contrast to racial disparities. We focus on white collar crimes (non-violent, economic crimes) for several reasons. First, it is perhaps surprising that racial disparities persist for such crimes, which would not appear to be as racially tinged as those involving violence or drug trafficking. Second, the presence of significant alternative punishments, such as fines, leaves more room for judicial discretion than in the case of more serious crimes. Finally, there are fewer sources of disparity in white collar crimes. For example, in the case of drug crimes, legislatures make distinctions between crack and powder cocaine and mandate minimum sentences. (6) In addition, the crimes are likely reported in different ways: drug traffickers are likely caught in sting operations, whereas those who commit fraud or embezzlement are likely more often sought after due to victim complaints.

   We find large racial disparities using standard regression techniques. In other words, when controlling for as many relevant characteristics as possible, blacks and Hispanics receive longer prison sentences than whites. This is consistent with previous studies. However, careful consideration of the nature of white collar crimes reveals that a large portion (up to one-third) of the estimated disparity is driven by the ability to pay a fine. Similarly, income is also shown to be an important factor, and it is poorly measured in the data. In addition, we find that the calculation of the Guideline's sentencing range may actually work in favor of minorities, and determining the sentencing range is one of the most important elements of Guideline's sentencing scheme. Our results call into question traditional studies of sentencing disparities, and we conclude that the estimation of racial disparities, even under a determinant sentencing framework like the Guidelines, is more complicated than previous work indicates.

   This Paper is organized as follows: Part II discusses how prison sentences and fines are calculated under the Federal Sentencing Guidelines. Part III discusses the empirical and theoretical literature on fines and white-collar sentencing. Part IV discusses the data and the methodology of our study with a particular focus on the problems of identifying racial bias empirically. Part V describes and interprets the results of our study. Part VI concludes.

2. THE FEDERAL SENTENCING GUIDELINES

   For most of American history, federal district court judges had vast discretion over sentencing. Some statutes prescribed a maximum fine or time of imprisonment for a particular crime, and a handful prescribed minimums. Otherwise, trial judges were basically free to impose the sentences they thought appropriate. The law gave them almost no guidance in the exercise of their discretion, and their judgments were virtually never subject to appellate review. (7)

   All of this changed when Congress passed the Sentencing Reform Act of 1984. (8) The law established the Sentencing Commission, a bipartisan, independent agency within the judicial branch, and charged it with "promulgating detailed guidelines prescribing the appropriate sentences for [federal] offenders." (9) The Sentencing Act also "direct[ed] the Commission to periodically review and revise the Guidelines" and "authorize[ed] the Commission to submit amendments to Congress." (10) Accordingly, from the time the Guidelines took effect on November 1, 1987 until the Booker decision, sentencing in federal courts has been controlled by a comprehensive set of rules created by an administrative agency. Prior to Booker, the Guidelines were mandatory and were treated as such by the courts. (11) Except for special circumstances in which "departures" are authorized, a trial judge must sentence a criminal in accordance with the Guidelines or risk a reversal on appellate review. (12) Booker, discussed in greater detail below, made the Guidelines "advisory" but still requires district court judges to consult them.

   1. PRISON SENTENCES UNDER THE GUIDELINES

      Although complex in application, the Guidelines are fairly straightforward in theory. As one commentator has observed, the Guidelines can be understood as "nothing more than a set of instructions for one chart--the Sentencing Table." (13)

      Under the Guidelines, a defendant is sentenced by determining in which of the 258 boxes of the Table he or she belongs. (14) A judge uses the Guidelines to calculate the defendant's "offense level," a figure intended to measure the gravity of the crime currently, and the defendant's "criminal history category," a figure intended to measure the gravity of the offender's past criminal conduct. The offense level is the position on the vertical or y-axis of the grid (expressed in Arabic numerals), and the criminal history category is the position on the horizontal or x-axis of the grid (expressed in Roman numerals). The intercept of the two factors provides a sentencing range expressed in months. For example, a defendant with an offense level of 9 and a criminal history category of I can be sentenced from four to ten months. Because all sentences are expressed on the chart in terms of months of imprisonment, sentences consisting solely of probation, fines, or non-prison confinement (the latter category includes house arrest and time in a "half way house") are denoted as sentences of "0" months. This range is the area in which a judge has absolute discretion. If a judge has properly calculated the offense level and criminal history, a sentence within this range is unreviewable. (15)

      1. Offense Level Calculations

         A defendant's offense level is comprised of several elements: (1) the points assigned to the specific statutory violation at issue (also called the base offense level); (16) (2) adjustments to the base offense level that reflect relevant conduct specific to the crime of conviction ("relevant conduct" is a term of art under the Guidelines and can include size of the loss, other crimes committed by the defendant, and even other crimes committed by his accomplices); (17) and (3) the points assigned to general offense adjustments that apply equally to all offense categories, such as the offender played an aggravating role in the offense. (18)

         The points assigned to the specific statutory violation at issue take two forms: the "base offense level" of the crime, meaning the amount of points the commission assigned to conviction for a particular statutory violation, and the "specific offense characteristics" of the crime, meaning the particular aspects of a crime that make it more or less blameworthy than other violations of the same statute. (19) Examples of specific offense characteristics include the amount of money stolen in a fraud and the amount of violence involved in the course of a robbery. (20) So far, then, the system appears relatively simple in application as well as theory: Every criminal who commits a robbery receives the base level of points, and those who commit an especially violent robbery receive additional points for specific offense characteristics. However, the precise number of special points given for specific offense conduct depends not only upon the conduct--such as possessing a weapon--but also upon the underlying statutory crime. For example, a robber receives five extra points for possessing a firearm, while a drug trafficker receives just two points for possessing any dangerous weapon (including a firearm). (21)

         As noted above, "relevant conduct" can include other crimes by the defendant and other crimes committed by his accomplices. A court is supposed to take "relevant conduct" into effect if it is proved by a "preponderance of the evidence" (a lower standard than "beyond a reasonable doubt") at the sentencing hearing, irrespective of whether the defendant had been charged with the conduct in the indictment. A judge is even supposed to consider some "relevant conduct" if that conduct underlies charges for which a defendant has been acquitted. (22)

         General offense adjustments are applied for aspects of crimes that are not confined to particular statutory violations. Moreover, while the number of points allotted for specific offense characteristics varies depending on the underlying statutory violation, general offense adjustments carry the same weight regardless of the underlying statutory violation. For example, the "vulnerable victim" adjustment is applied for all crimes in which the defendant knew or should have known that the victim was unusually vulnerable due to his age, mental condition, or physical condition; and in all crimes it raises the base offense level by two points. (23)

      2. Criminal History Calculations

         Criminal history calculations are somewhat more straightforward than offense level calculations. Defendants are assigned criminal history points on the basis of their nominal...