Ex-Tyco CEO Dennis Kozlowski and CFO Mark Swartz have each been sentenced to 8-1/3 to 25 years for stealing from Tyco. Unlike federal white collar defendants, who typically end up in one of the Club Fed minimum security prisons, Kozlowski and Swartz likely will end up doing serious hard time in a NY State maximum security facility like Attica or Sing Sing. Is that an appropriate punishment for first time white collar offenders?
Economists tell us that rational actors weigh the expected sanction in determining whether to commit crimes. Invoking that model, while also criticizing its application to non-white collar criminals, David Feige argued in the Nation that:
Put bluntly, it's not irrational to steal $10 million if the worst-case scenario is a few years in Camp Fed. But change that sentence to read Sing Sing or Attica or Pelican Bay and what emerges is a whole new calculus of crime.
In dealing with rational actors, it may well be that the conditions of confinement matter far more than the length of the sentence. ... The truth is that to most people, the prospect of even a short stint in a maximum-security prison is far more frightening than years in Camp Fed.
I think that's basically right as a matter of general deterrence (and thus respectfully would disagree with Ellen Podgor's observation that "the SHAME in the community is by far the harshest punishment felt by the white collar offender.").
Having said that, however, there are two competing considerations. First, the risk of over-deterrence. We want business executives to take risks. As we increasingly criminalize corporate governance failures, we increase the possibility that somebody eventually is going to be convicted for having taken risks that proved, with the benefit of hindsight, to be unwise. Of course, this consideration has minimal traction with respect to the sort of aggressive thievery a jury concluded Kozlowski and Swartz committed.
Second, and more pertinent to their case, general deterrence is not the only function of the law. Punishment policy also includes notions of specific deterrence and retributive justice. On those considerations, it's not clear that hard time is proportionate to the crime. Ellen Podgor blawgs:
Is this sentence necessary? No. The minimum would have been 1-3 years and perhaps the sentence should have been closer to that time frame. Closer not because the crime was not wrong and should be punished, but closer because these individuals are first offenders who are unlikely to commit a crime again in the future. Their positions of power have been stripped from them and they are unlikely to have the ability or power to ever be a menace to society again.
