Prosecutorial discretion in white-collar crime cases

¶ … discretion in relation/emphasis to white collar crimes. The paper represents a useful and practical source for fraud examiners and other white collar crime investigators. The paper needs to examine arguments for and against the uses of discretion by white collar crime participants and/or victims.

One of the issues of white-collar crime is the issue of Prosecutorial discretion. Prosecutors who dabble with white-collar crimes have great scope of discretion in that they can determine whether to bring a criminal case and which issues to quote if they do indict. The nature of the white collar statutes often cedes discretion to prosecutors. This is because they may be seen to overlap into the area of civil, rather than criminal, interest and are therefore seen by many as encompassing economic regulations that fall within the perimeters of civil enforcement. Critics see this as an unjust and partisan system, whilst supporters see it as being blessed with flexibility rendered by cautious and rational prosecutors, and checked by presiding judges . The issues, back and forth about the fairness or unfairness of the discretionary system, are febrile and ongoing. Suggestions such as inquisitorial trials (with jury assessing prosecutorial decisions) have been suggested, but none have been taken seriously. It is likely that the issue will not be so readily solved since prosecutorial discretion has been an entrenched and accepted part of the criminal justice system ever since the beginning and will likely remain so in the future. The best one can do is monitor prosecutorial decisions with presiding judge, and this is what is being done at the moment.

2. Introduction

White-collar crime, as distinguished from common crime in that it is generally perpetrated by people (or corporations) of higher status and is a more genteel sort of crime, falls outside the jurisdiction of criminal penalty. Rather, it is judged by a system of prosecutorial discretion where prosecutors practice flexibility and arbitrariness in deciding whether or not to inculpate the individual and, if so, what his or her penalty should be.

Some see prosecutors, consequently, as having "more control over life, liberty, and reputation than any other person in America" and as performing "the role of god." (Moohr, nd). The reputation of prosecutors has particular raised since the 1980s when a string of scandals such as the Enron affair, results in prosecutors putting new laws into action for protection of the public. One of the laws, at least in this case, was the Sarbanes-Oxley Act. The Act augmented the position of prosecutors by inventing a new caliber of crimes, enhancing sentences of existing crimes, and introducing a string of Congressional directives. In this way, prosecutors are seen as doing a good thing. They recognize the distinction between the common criminal case and the white-collar act, and treat it accordingly.

At the same time, however, some fear that these prosecutors may be too omnipotent and that their power may cause them to be partisan and biased. The general topic of prosecutorial authority concerns many, particularly when we are talking about an incompetent prosecutor who treats the white collar offender more deferentially than he should be punished.

The following essay analyzes both opinions and concludes by assessing future directions on the topic.

3. White Collar Crime Discretion

In order to talk about prosecutorial discretion in white collar crime, we first have to define the concept of 'white collar crime'.

The earliest known definition of white collar crime was formulated by Criminologist and sociologist Edwin Sutherland first in 1939 who defined it as crimes "committed by a person of respectability and high social status in the course of his occupation." (Strader, 1999).) Included in this definition were crimes committed by corporations and other legal entities. Sutherland posited that white-collar crimes have a greatly underestimated impact on our society.

Sutherland's opinion of white collar crimes changed in the latter half of the 20th century, as observers noted that crimes that we generally consider white-collar, such as securities fraud and tax fraud, are perpetrated by people of divergent backgrounds. Although, therefore, a misnomer the term is still used, probably because people use it to differentiate this type of 'meeker', more genteel type of crime from common crime. In fact, in 1988 the United States Department of Justice described white collar crime as such as consisting of:

nonviolent crime for financial gain committed by means of deception by persons whose occupational status is entrepreneurial, professional or semi-professional and utilizing their special occupational skills and opportunities; also, nonviolent crime for financial gain utilizing deception and committed by anyone having special technical and professional knowledge of business and government, irrespective of the person's occupation. (Bureau of Justice Statistics, 1981).)

This, according to the white collar crime prosecutor or defense attorney would however be still too narrow. They would define white collar crime as:

(a) Not necessarily involving force against a person or property;

(b) Directly relating to the possession, sale, or distribution of narcotics;

(c) Directly relating to organized crime activities;

(d) Directly relating to such national policies as immigration, civil rights, and national security; or (e) Directly involving "vice crimes" or the common theft of property (Strader, online)

A recent example, therefore, of a white collar crime was that committed by Neil Armstrong who was accused of doping on narcotics in order to win his bicycle races. He was acquitted

4. Public perception of white collar crime

White collar crime is not as 'white' as erroneously labeled. In 1988 a string of white collar crime befell he nation committed by powerful corporations and the United States Supreme Court declared that white collar crime "is one of the most serious problems confronting law enforcement authorities" (Braswell v. United States, 1988).). This is because it causes grievous and endurable harm as well as huge financial losses to federal, state, and local governments, to private organizations, and to individuals.

Some stories will illustrate the impact. The 1980s was the era of corporate scandal, and one of these was the phenomena of corporate insiders trading on secret information to the detriment of ordinary investors who lacked access to that privileged information. In the late 1980s and early 1990s, too, the savings and loan industry collapsed largely due to individuals and companies that engaged in fraudulent accounting activities. Thousands of people became poor as a result, and jobs closed. In 2002, Wall Street experienced accounting scandals and many lost their retirement accounts and their entire life's savings. And the list continues. White-collar crime still continues to this day on a regular basis.

Unfortunately, white collar crime is very difficult to detect. In this way, too, it may be arguably worse than common crime. White collar crime is perpetrated in the privacy of the home or the office, usually with very few others knowing and no 'smoking gun' left to reveal the details. Proof comes instead from an intricate and complex paper trail. Secondly, the sheer scope of energy and time invested in unraveling and dealing with investigating white-collar crimes can last months, if not years, and the government often lacks the energy and resources to do so. More than one office has to be involved, and so, frequently, white-collar crimes become submerged by lack of attention.

Is this fair?

For decades, academicians have been calling for change in this, what they see, as unjust and partisan system. To them, the system contains at least two wrongs: Firstly, it places too much power in the hands of prosecutors. Secondly, the system invests prosecutors with the ability to accord differential treatment based upon partisan allegiances. The issues, back and forth about the fairness or unfairness of the discretionary system are febrile and ongoing. They are covered in the following two sections.

6. Arguments in favor of discretion

White-collar crime is seen as a "malum prohibitum," which means that the public makes a distinction between that and common crime and, in order to maintain the public perception of the severity of common crime, supporters of prosecutorial discretion argue that this '"malum prohibitum" perception should be retained. Prosecutorial discretion has been an entrenched and accepted part of the criminal justice system ever since the beginning and will likely remain so in the future.

Most supporters also see the system as generally fair. Sometimes, there is an 'overzealous' prosecutor but he is held in check by the controlling judge who words the statutory language of the white-collar case in such a way that the underlying 'innocence' of the moral intention comes through.

Finally, supporters of the system laud it for its flexibility. Frequently, perpetrators of white-collar crime are unintentionally committing these crimes. They belong in the civil arena, rather than as deliberate offense against private others and their possession; neither are they meant to deliberately hurt others. Prosecutors are, generally, fair and unbiased. When they tend to be overzealous, a judge corrects them. With this being the case, therefore, prosecutorial discretion has always been the criminal system. Supporters of prosecutorial discretion, therefore, say that there is no need to change it. Prosecutors go to great pains to ensure rational and unbiased judgment. Lapses hardly occur. When they do occur, overarching judges are carful to remand them.

7. Arguments against the exercise of discretion

Whilst some see the prosecutorial discretion as a blessing and as an inalterable part of the American criminal system, others see it as a curse. Not only does it place too much power in the hands of prosecutors but it can also lead to partisan and biased judgments.

One such case that made headlines was the decision by the U.S. Attorney's Office for the Central District of California against prosecuting Lance Armstrong. Admittedly, they had good reason: recent federal prosecutions that involved drug use by celebrities expended a great deal of money with poor or no results. If Armstrong did dope, his doping was not a federal crime. Finally -- and this is where it turned controversial -- Armstrong is enormously popular with a great deal of money. The prosecutors (some said) were swayed by this force (Prosecutorial Discretion Is the Better Part of Valor (Feb 8, 2012)).

There is no reason -- critics argue -- that white-collar offenders should be treated more deferentially than 'common' criminals. They hurt people as badly, if not more so, than common criminals do, and to differentiate on the basis of class and status alone is not only not fair but also not democratic.

Discretion, furthermore, also eventuates in inconsistent sentences which only lead to breakdown in respect of the law and to potential perpetration of further white-collar crimes. Deterrence can only be assured by a consistent set of sentences that shows no favoritism to any one individual or organization and where the sentence does not lie on the particular individual engineering it. Morally credible enforcement procedures, accordingly, would not only serve as greater deterrence but would also ascertain that individuals have a greater respect for the law and more instantly become law-abiding citizens.

8. Limits on discretion

White collar crimes are an often "malum prohibitum" crime which means that they do not appear as common crimes to the public perception although it is a crime to engage in such conduct. Fallone (2012) argues that the person who overlooks the fact that it is a "malum prohibitum" crime and deliberately engages in such a crime should receive different treatment (and the criminal status) than one who treats it as a "malum prohibitum" offense. Such a person is morally culpable and should be prosecuted since he deliberately engaged in such an offense. On the other hand, the one who unintentionally committed such a crime should receive a less sever penalty than the other although some penalty is in order due to the fact that "ignorance of the law is no defense."

A prosecutor's charging decisions should generally reflect these principles. Sometimes, there is an 'overzealous' prosecutor but he is held in check by the controlling judge who words the statutory language of the white-collar case in such a way that the underlying 'innocence' of the moral intention comes through. Such was the case in Justice Thomas' opinion for the Supreme Court in Staples v. United States, or in the Supreme Court's conduct in Liparota v. United States decision.

Moohr (nd) thinks that the system should revolve around an inquisitorial approach where a jury would act as check on, and investigate the prosecutor's decision. However, there seems to be little sign that the system will be changed -- at least not in the near future.

13. Conclusion

Issues of discretionary freedom with white collar crime are febrile and ongoing. On the one hand, critics complain that prosecutors have too much freedom in deciding whether or not white collar crime is criminal and in deciding how to penalize it. On the other hand, supporters of the system say that the system is mostly fair and that it is distinguished from criminal activities in that it deals with civil content. In this way, white-collar crime cannot be judged as a criminal matter and must be accorded different conditions. Critics, however, dispute that saying that there is no reason why white-collar crime which is just as severe as common crime, if not more so, should be treated in a more deferential way.

Suggestions such as inquisitorial trials (with jury assessing prosecutorial decisions) have been suggested, but none have been taken seriously. Fallene (2012) thinks that the issue will not be so readily solved since prosecutorial discretion has been an entrenched and accepted part of the criminal justice system ever since the beginning and will likely remain so in the future. This is mostly due to the fact that white collar crimes are often "malum prohibitum" crimes which mean that they do not appear as common crimes to the public perception although it is a crime to engage in such conduct. They are therefore open to broad treatment and interpretation. The best one can do is monitor prosecutorial decisions with presiding judge, and this is what is being done at the moment.

Sources

Bureau of Justice Statistics, United States Department of Justice, Dictionary of Criminal Justice Data Terminology 215, 1981

Justia. U.S. Supreme Court "Braswell v. United States, 487 U.S. 99, 115," 1988