Crime and Too Little Punishment

“Some men rob you with a six-gun – others rob you with a fountain pen.” Woody Guthrie


“Do the math. Far from a deterrent, multi-million dollar fines are a minuscule cost of doing business…million dollar fines on billion dollar profiteering won’t deter it…” Jim Hightower on    fines for illegal behavior in the meat packing industry.


Last week I wrote about corporate crime and how it is more prevalent, more costly, and more harmful to society than ordinary street crime (like murder, assault, robbery or rape). This week we look at the enemic law enforcement for corporate crime, the lack of meaningful consequences, and the ease with which corporate criminals can game the system.


It is no surprise that law enforcement impacts the the poor, immigrants and minorities more  than the rich and powerful. The primary reason for police is to keep the rabble in their place. But in a democracy there should be some equality in the administration of justice. This is not the case in our country.


The United States has more people incarcerated than any other country, many of them for minor drug offenses and a disproportionate number are black or brown. Minorities are routinely arrested and prosecuted at higher rates than whiles. U.S. Customs and Border Protection is the nation’s largest federal law enforcement agency. Immigration violations are 52% of all  federal criminal prosecutions.


In contrast corporate and white collar crime – done with a fountain pen – receive much less attention. Estimates are that white collar crimes are only 3% of federal prosecutions (4,727 in 2021) and are down by over 50% since 2011. In 2020 only 94 corporations either pled guilty or were found guilty of crimes by the feds. The peak was 296 in 2000.


Mihailis Diamantis, University of Iowa Law School, and  William Laufer, University of Pennsylvania Wharton School, research corporate crime. In a 2019 paper they say, “Though the United States purports to have a vigorous system of corporate criminal law enforcement, one could reasonably ask whether that system actually takes corporate crime seriously. Corporate prosecutions, convictions, and punishment continue to be rare events” (“Prosecution and Punishment of Corporate Criminality”)


Regarding punishment Professor Diamantis with co-author Will Thomas of the Michigan Ross Business School in another research paper say, “The biggest corporate criminals routinely side-step all criminal procedure and any possibility of conviction by cutting deals with prosecutors, trading paltry fines and empty promises of reform for government press releases praising their cooperation” (2021 paper “But We Haven’t Got Corporate Criminal Law!”).


Paying fines is just one more cost of doing business. Many critics (Jim Hightower in the quote above) point out even million dollar fines don’t mean much to companies raking in billions. Plus fines don’t sanction the corporate managers actually committing, encouraging or allowing the crimes to happen. The cost of fines is simply passed on to shareholders in reduced dividends, consumers with higher prices and taxpayers if the fines are deductible. So fines are not a deterrent to corporate crime.

Professors Diamantis and Laufer agree. They write, “…using fines [as a] deterrent mechanism doesn’t work… As we increase the financial sanctions on corporations, we don’t get a corresponding decrease in corporate criminality…We need a mechanism in place that will translate criminal sanction into positive corporate action.”


What needs to be done? Many experts have looked at the problems and made a broad range of suggestions. The situation is complicated and the solutions are not easy. Like other intractable problems – climate change, racism or war – human nature is a big part of the problem. Societies have been struggling with common human behaviors like selfishness and greed since we came down from the trees. But again, in a supposedly democratic society governed by the rule of law, we should not tolerate, or make excuses for, harmful illegal behavior just because the perps are businesses.


Obviously a major reform begins with changing our thinking about crime. We need to recognize that white collar and corporate crimes are harmful and should be effectively sanctioned in a similar manor as other street crimes. We need to reject the common political propaganda about crime


Another area of bad thinking is the notion that businesses exist only to make money for shareholders. We need to return to the earlier recognition that businesses have a responsibility to customers, workers, local communities, and society as a whole.


We must reject the false notion that regulations and regulatory agencies are unnecessary, bad for the economy and kill jobs. We need to recognize that regulations are laws that exist to protect the heath and safety of the public. They create the playing field in which business operates. These important functions of government, like the police, must be adequately staffed and funded. These agencies must also have sufficient independence to be effective. Political manipulation, regulatory capture and revolving door issues must be addressed.


Another issue is that legally corporations are not people (despite what the Supreme Court ruled on campaign contributions) and can not be prosecuted as criminals. Who do you lock up when a company kills someone with pollution or unsafe products? Many experts advocate new laws to make top corporate management personally responsible for the illegal actions of the companies they control.


There needs to be much more aggressive investigations and prosecutions of white collar and corporate crime. Plea bargains and “Deferred Prosecution Agreements” need to be replaced with sanctions that actual change the bad behavior. For example, any company convicted of a crime should be barred from government contracts.


There needs to be much better data collection. This is a problem with all crime. Legislation has been introduced to create a national database of corporate and white collar crime. You can’t manage or control what you don’t know about.


Many of the giant corporations simply need to be broken up or not allowed to become so huge. Globe spanning corporations, with more money than many countries, are not good for “free market” competition, democracy, or effective law enforcement.


All this is something to remember the next time you hear a politician pontificating about “skyrocketing” crime rates while voting to abolish the agencies that protect everyone from corporate crime.