Prosecutors Send a Message. Are Executives Listening?
nytimes.com
March 14, 2004
DETERRENCE STRATEGY
By JONATHAN D. GLATER
THE NEW YORK TIMES
THE case would "send an important message that we will not, and frankly, cannot tolerate dishonesty and corruption."
So said David N. Kelley, the United States attorney in Manhattan, after the Martha Stewart verdict, echoing similar statements from prosecutors and regulators about the current wave of white-collar trials.
But do high-profile prosecutions, like those now under way against Enron and Adelphia executives, among others, actually discourage people from considering criminal acts? The large number of corporate trials over the last two years may be putting that notion of deterrence itself on trial.
Dan Kahan, a professor at Yale Law School, said the value of white-collar prosecutions was extremely difficult to measure. Punishment may make an impact but not if, say, the culture inside a brokerage house encourages employees to believe it's O.K., even if illegal, to trade on inside tips.
On the other hand, executives are often well-informed about the law and have a lot to lose if they are caught committing a crime, said Mary Jo White, the former United States attorney in Manhattan and now a lawyer in private practice.
"You have a very attentive audience that pays attention to what gets prosecuted," Ms. White said. "I think you as a prosecutor can accomplish a lot of deterrence in the white-collar arena."
But if executives think they are unlikely to be caught, they will not be deterred, said Jonathan Simon, a law professor at the University of California at Berkeley. The lesson of watching prominent executives like Martha Stewart on trial may only be: Don't break the rules if you're famous, because celebrity draws prosecutors' interest.
"Certainty is a much more important aspect than severity," Mr. Simon said, arguing for more oversight and run-of-the-mill prosecutions, rather than the occasional high-profile trial.
Splashy white-collar trials were also held in the late 1980's - including those of Ivan F. Boesky and Michael Milken. But, as David Callahan, author of "The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead," observed, by the late 1990's corporate crime was once again seen as corrosive, with widespread economic and social effects.
No one knows whether today's trials will give pause to tomorrow's would-be white-collar criminals. "We don't know what's going to happen with Skilling, we don't know if Frank Quattrone's going to be convicted the next time around," Mr. Callahan said, referring to the former Enron chief executive Jeffrey K. Skilling, who faces a criminal indictment, and Mr. Quattrone, the former Credit Suisse First Boston banker whose trial last fall on obstruction-of-justice charges ended in a hung jury. Both men have pleaded not guilty to the charges against them.
Simply being accused of a crime includes a social stigma. Mr. Kahan notes, however, that executives may not believe that what they did was wrong.
"What is shameful is constructed by all kinds of interactions you have with others," Mr. Kahan said. Some executives may not see the shame in their actions until they find themselves in the glare of criminal proceedings and media attention. In other words, if executives think that only losers follow the rules, they will keep breaking them even if they know it is wrong.
"Most people will want to do the right thing, but most people do not want to be treated like a chump," Mr. Kahan said. "Which of those sensibilities dominates will depend on their perception of whether other people in similar situations" are doing the right thing - or, if they do the wrong thing, whether they pay a price.
That's why individual prosecutions need to be part of a broader enforcement system, said Ms. White, the former United States attorney. "You need a more comprehensive mechanism of sending the message, making it easier for people to comply."
But even if people have heard such a message from current prosecutions and new regulations, Rudolph W. Giuliani, who as United States attorney in the 1980's led the Boesky and Milken prosecutions, suggested that the effect may fade over time. He likened the current cases to being caught for speeding.
"People get a speeding ticket, and then most people don't speed for a while," he said. The real question, he added, is for how long. |
