January 13, 2009
The criminalization-of-business lottery
On the other hand, Jamie Olis may have been the earliest big loser.
Just as with a gambling lottery, there is no rhyme or reason as to who wins or loses in the criminalization-of-business lottery. But in this lottery -- which does little or nothing to deter the true business criminals of the world -- the losers and their families give up much more than merely money.
A truly civil society would find a better way.
Posted by Tom at January 13, 2009 12:01 AM |
I am genuinely interested to know who you would call a true business criminal. I am assuming you would agree someone like Madoff is a criminal? But outside of someone who's actually admitted to being a criminal, what businessman would you consider deserving of prosecution?
Also, do you think retribution can be a valid purpose of punishment? Or are you a strict utilitarian?
Huge fan of your blog, of course, but it sometimes seems as though you believe defrauding the market shouldn't be a crime (or at least a crime that is punishable with prison time). I'm not saying Skilling and Lay and everyone else mentioned above did what was alleged. If I understand you correctly, you don't trust prosecutors and juries to figure it out anyway. Even if they ARE guilty, there's no way to prove it due to the complexities involved.
Let me provide some context for my questions by thanking you for blogging thoughtfully about prosecutorial abuses. But these abuses are a fact of life for anyone facing any sort of criminal prosecution. If you mistrust juries, surely you can't expect them to fare well against prosecutorial misconduct, whether it's a "business crime" or not.
I'm not asking for you to describe a "better way." Just wondering if you can clearly define the class of cases that deserve or require it.
Posted by: mrshl at January 12, 2009 11:05 PM
Mrshl, thanks for reading HCT and for your comment.
I have no problem with punishing business crimes for either deterrent or retributive purposes. My point is that let's be clear about what is a crime.
Running a Ponzi scheme such as Madoff is a crime and should be punished. Similarly, embezzling money from a company is a crime, as is paying kickbacks and bribes.
But what has happened post-Enron is that the line between a clear business crime, on one hand, and normal business actions, on the other, has become blurred.
For example, is a business executive now obligated to risk his company's existence by advising the market about negative information that he does not agree with? What if the market already knows about the negative information and has factored it into the company's stock price? Is it still a crime if the executive is simply attempting to persuade the market that the negative information is not true?
This is essentially the "crime" for which Skilling and Lay were convicted. You cannot make a rational distinction between what Skilling and Lay advised the market about Enron from what dozens of Wall Street executives told the market about their companies before and during the meltdown this past year on Wall Street.
And what about the advisors who provided the executives with the more positive information about the company to combat the negative information. Are they also criminally liable if the company goes down the tubes?
This is the reason that I maintain that the civil justice system is a far better forum in which to regulate questionable business decisions than the criminal justice system. You can gather all the potentially responsible parties in one forum and allocate liability accordingly.
It simply makes no sense from a policy standpoint to deprive business executives of their freedom (as opposed to simply reducing their wealth in the civil justice system) for taking risks that create jobs and wealth when those risks do not work out. The inevitable result of such a system would be to deter business people from taking the risks that create wealth and jobs.
Posted by: Tom K. at January 13, 2009 6:54 AM
What do you think of the Steve Jobs -- Apple issue now, Tom? Should Jobs share his personal health data with Apple shareholders who follow his battle with pancreatic cancer with bated breath? (seems Apple shareholders are a very cultist group who firmly believe Jobs walks on water, or at least semi-conductors).
Is it misconduct for a CEO like Jobs to either mislead shareholders, or simply not answer health questions?
For full disclosure I am a shareholder of Apple (one whole share).
Posted by: GRG51 at January 16, 2009 4:00 PM
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