White-collar plea bargaining and sentencing after Booker.

AuthorBibas, Stephanos

Until 2004, white-collar sentencing appeared to exemplify the ratchet effect. As the media exposed ever more corporate corruption and shady dealing, lawmakers competed to prove their toughness on crime by raising sentences. This irresistible force, however, met a seemingly immovable object: the Supreme Court's new Sixth Amendment limits on judicial sentencing. Apprendi v. New Jersey, (1) Blakely v. Washington, (2) and most recently United States v. Booker (3) have upended sentencing law by requiring juries, not judges, to find beyond a reasonable doubt facts that raise maximum sentences. Booker's remedy was to invalidate the binding force of the U.S. Sentencing Guidelines. (4) Apprendi and Blakely have had large and obvious effects on violent and drug crime prosecutions. These cases, however, also portend a revolution in white-collar plea bargaining and sentencing. This Essay is a brief effort to speculate about federal white-collar plea bargaining and sentencing after Booker, now that the U.S. Sentencing Guidelines are no longer binding.

Part I summarizes the criminal law's traditional leniency toward white-collar defendants and how that thinking began to change. Part II notes the U.S. Sentencing Commission's and Congress's efforts to toughen white-collar penalties, culminating in the Sarbanes-Oxley Act of 2002. Part III considers how Booker changed this landscape by striking down the Sentencing Guidelines. In the short term, Booker restores some judicial power to counterbalance prosecutorial control of plea bargaining and sentencing. The price, however, is that judges have more leeway to show excessive leniency, which will incense prosecutors and prod Congress to act. Part IV discusses Congress's likely responses to this state of affairs. Congress is unlikely to accept the status quo or to entrust cumbersome fact-finding to juries. Rather, Congress will likely either restore binding minimum guidelines or pass mandatory minimum penalty statutes, which will greatly increase prosecutorial power to charge bargain. White-collar sentencing may replicate some of the pathologies of mandatory drug sentencing, although it will never be as draconian in practice. Part V proposes two modest solutions. First, clarifying how to compute losses would reduce prosecutorial manipulation of white-collar sentences based on speculation about the causes of stock-price drops and the like. Second, greater use of shaming penalties could ensure short sentences with bite, to express the community's condemnation while avoiding disproportionate punishment.

  1. TRADITIONAL LENIENCY TOWARD WHITE-COLLAR DEFENDANTS

    Traditionally, penalties for white-collar crimes such as fraud, embezzlement, and insider trading were significantly lower than penalties for violent, drug, or even physical property crimes. White-collar offenders were much more likely to receive probation than thieves who stole equivalent amounts, and when white-collar offenders did go to prison their sentences were substantially shorter. (5) For example, before the Sentencing Guidelines, an average of 59% of fraud defendants received straight probation sentences, and the average prison time served was seven months. (6) For tax defendants, the figures were comparable: 57% received straight probation, and the average prison time served was five and a half months. (7) Generally, these white-collar defendants came from well-off backgrounds, had no criminal histories, and seemed unlikely to recidivate, let alone endanger anyone. So there was little need for specific deterrence, and few people thought retribution required imprisonment. Thus, white-collar criminals usually got probation, community service, restitution, or similar soft punishments.

    Our thinking about white-collar crime has undergone a sea change in the last two decades. White-collar crime came to epitomize greed, which increasingly seemed morally wrong and more deserving of retribution. (8) Moreover, the sentencing-reform movement focused on meting out equal sentences for equally bad crimes. (9) If we imprison the black teenager who steals a $25,000 car, equal treatment demands that we also imprison the middle-aged white guy who steals $25,000. Otherwise, sentencing judges may be indulging unconscious racial and class stereotypes by going easy on defendants who remind judges of themselves or with whom judges can identify. (10)

    In addition, white-collar crime is more rational, cool, and calculated than sudden crimes of passion or opportunity, so it should be a prime candidate for general deterrence. An economist would argue that if one increased the expected cost of white-collar crime by raising the expected penalty, white-collar crime would be unprofitable and would thus cease. (11)

    Nevertheless, many judges lean toward home confinement or probation. (12) Although economists may focus on ex ante deterrence, judges may prefer to look ex post at the sympathetic, white, educated offender who reminds judges of themselves and seems to pose no danger. Allowing these offenders to escape imprisonment, however, is inequitable and undercuts the law's deterrent and moral message condemning white-collar crime.

  2. CONGRESS AND THE SENTENCING COMMISSION TOUGHEN PENALTIES

    In the early 1980s, Congress indicated that it wanted to raise white-collar sentences, (13) and the Sentencing Commission set out to do so. Although the Sentencing Commission based most of its sentencing guidelines on average past sentences, it raised sentencing ranges for white-collar crimes to bring them into line with larceny sentences. (14) By using short but certain terms of imprisonment to deter and punish, the Commission hoped to reduce greatly the percentage of offenders receiving probation. (15)

    The Sentencing Guidelines somewhat checked the judicial temptation to leniency but did not stop it. Federal judges continued to give non-imprisonment sentences to more than 30% of fraud defendants and more than 40% of embezzlers. (16) When the Sentencing Guidelines gave judges the option of imprisonment or another alternative, such as probation or home confinement, judges chose the non-prison alternative for about 57% of embezzlers and 65% of fraud defendants. (17) Moreover, judges sometimes departed downward from the Sentencing Guidelines to give probationary sentences to white-collar defendants who would otherwise have received prison terms. (18) For example, when I was a federal prosecutor, I prosecuted one conspiracy that had defrauded the U.S. Postal Service of between $55,000 and $91,000. The ringleader of the conspiracy was a young man from a good family who had gone to college and then entered the family business, orchestrating a series of false and inflated billings and records that spanned several years. The Sentencing Guidelines clearly required a short imprisonment term for this cold, premeditated, prolonged fraud. Yet the district judge pitied him, departed downward, and sentenced him to probation. The judge's strained rationale was that the prolonged scheme was supposedly an "aberrant act." (19) Every federal prosecutor can tell stories like this one: although the majority of judges generally follow the Sentencing Guidelines, some judges find ways to misapply, twist, or circumvent them.

    To counteract judicial leniency, the Sentencing Commission raised sentences for theft and fraud in 1998 and again in its 2001 Economic Crime Package. (20) After Enron filed for bankruptcy at the end of 2001, President Bush, members of Congress, and the Department of Justice called for even tougher penalties, (21) which resulted in the Sarbanes-Oxley Act of 2002. The Act ordered the Sentencing Commission to review and consider enhancing the Sentencing Guidelines to reflect the seriousness of fraud and related offenses. (22) In compliance, the Sentencing Commission raised its penalties for fraud even further and added more enhancements. (23) These enhancements required judges to imprison defendants for moderate to large frauds. Very simple frauds of $70,000 or less, or $30,000 or less that involved the use of the mails or telephone, however, could still result in probation if the defendants pleaded guilty. (24)

    Describing these penalties as mandatory, however, is misleading. Just as so-called mandatory minimum statutes bind sentencing judges but not prosecutors who choose not to charge them, so the Sentencing Guidelines are subject to a host of prosecutorial manipulation. In other words, the Sentencing Guidelines constrain judicial discretion but still leave significant discretion in the hands of prosecutors.

    For example, section 2B1.1 of the Sentencing Guidelines keys the base offense level to the statutory maximum sentence of the crime charged. (25) If the prosecutor chooses to file a mail or wire fraud charge, the base offense level is seven, but if the prosecutor chooses instead to charge it as simple embezzlement or false statements to the government, the base offense level is six. This one-level difference frequently means the difference between brief imprisonment and probation and gives prosecutors leverage to extract pleas. Moreover, prosecutors can choose to decline or divert charges for civil resolution or restitution, enter into non-prosecution agreements, or sign cooperation agreements. All of these avenues leave prosecutors the keys to the prison. Alternatively, if prosecutors want to imprison someone for only a short time, they can charge bargain down to misdemeanors or other offenses with low statutory maxima. (26) For example, Jamie Olis's two codefendants in the Dynegy scandal accepted charge bargains that capped their sentences at five years, but Olis insisted on going to trial and lost. (27) His penalty for exercising his constitutional right to trial was steep: the Sentencing Guidelines demanded a sentence of at least 292 months, more than 24 years. (28)

    Moreover, prosecutors have substantial room to bargain over the facts. Fraud sentences...

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