Skilling, Enron, and the Justice System
Stetson University law school dean Ellen Podgor wonders whether it’s fair that former Enron CFO Andrew Fastow is getting a radically reduced sentence for testifying against his corporate superiors, thereby essentially punishing those who elected to exercise their Constitutional right to a jury trial. He also wonders if prison is even the most appropriate way to punish non-violent, white collar criminals.
Like McArdle, I have followed the case only peripherally, so I have no strong views one way or the other on what punishment Fastow deserves. In the broader sense, though, I agree with her (and, one presumes, Henning) that there is something perverse about the state offering incentives to criminals to testify against others accused of crimes. If one is getting the promise of liberty in exchange for the conviction of one’s fellows, one has a strong incentive to embellish.
As she notes, this matter is especially problematic in cases involving highly technical legal issues.
[T]he odds that a jury of laypeople have correctly decided a complex securities case cannot be greater than random. I sincerely doubt that Mr Delong or I could master enough of the correct securities law, accounting procedure, and evidence in the case, to turn in a good verdict within the required timespan; I am quite positive that my mother, aunt, best friend, dry cleaner, and building superintendant–good and clever people all–could not.
Her analysis of the result of this information deficit matches my own:
Once indicted, it seems obvious to me that Skilling and Lay were bound to be convicted simply because they were the public face of an enormous financial disaster–not because 12 solid citizens soberly acquired the equivalent of a Phd in financial accounting, and after carefully weighing the evidence, determined that these two gentlemen deserved to go to jail. This may be the correct outcome, but it had nothing to do with the process; it was predestined–written, as the Calvinists say, at the beginning of time. So why give Fastow a break on a case that was already a slam dunk? I find it troublingly possible that prosecutors needed Fastow’s testimony not to convict his equally guilty bosses, but for window dressing: the minimum veil of decency that allowed us to pretend we were not basically witnessing a show trial.
My instinct in these matters is that, given the enormous amount of shady dealings at Enron, Skilling and Lay either knew or had a duty to know something wrong was going on. Still, jurors generally start with the view that indicted people are “probably guilty” and that’s geometrically more true for celebrity defendants already convicted in the press months or even years before jury selection. Having a co-conspirator as a government witness makes that even more likely.
As to the appropriateness of prison as a punishment, I generally think it should be reserved for violent criminals whose liberty would be harmful to the public. In most white collar cases, some combination of restitution, community service, and loss of licensure is more productive. I’m less certain of that, though, in cases where large numbers of people have been bilked out of millions of dollars. DeLong may be right that retribution for its own sake is important in those cases.
Correction: I originally attributed Podgor’s post to her co-author, Wayne State law prof Peter Henning.
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