Judges Feel Pressure on Sentencing
Jul. 18, 2002
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NEW YORK (AP) _ When United States District Judge Lewis A. Kaplan in Manhattan recently sentenced a former principal of a ``boiler-room'' brokerage to five years for a $5 million stock fraud, he invoked big-name corporate scandals as he imposed the maximum sentence.
``If anybody has read the papers for the last six months,'' he said during the July 8 court proceeding, ``it has become so clear that ... the greatness of the economic system (depends on) the proposition that the deck is not rigged. We have all been shaken on that score recently.''
The case didn't involve Enron Corp. or WorldCom Inc., although the judge mentioned both companies by name during the sentencing. Instead, the proceeding was against Glen Benussi of now-defunct penny-stock firm Nationwide Securities Inc. Despite its low-profile nature, the Benussi sentencing and others like it illustrate how some judges are being affected by the recent call for stiffer penalties on corporate criminals.
But some legal experts question whether the proposals by President Bush and Congress for more jail time will prompt a major overhaul in the way judges mete out sentences. Many experts note that United States district judges must adhere to federal sentencing guidelines, which wouldn't automatically change even if the maximum fraud penalty is raised to 10 years from five, as proposed.
The guidelines _ a narrower sentencing range that takes into account the dollar amount of a crime, a defendant's cooperation with authorities, and other factors _ are set by the United States Sentencing Commission.
The agency, created by a 1984 act of Congress, hasn't taken a public position on the proposals for stiffer sentences. Observers note that the agency would likely amend the current guidelines if Congress approves the new penalties, although the changes wouldn't go until effect until November at the earliest, based on the commission's operating schedule.
For now, ``doubling the maximum term of prison ... would not add a single day to any criminal. The guidelines would have to be amended,'' said Kirby Behre, a partner at Paul Hastings Janoksy & Walker in Washington and co-author of a treatise on sentencing for business crimes. ``It's complete window-dressing.''
Although federal judges are limited by guidelines, some use their discretion to impose lenient sentences on white-collar criminals, who often are first-time offenders with nonviolent pasts and a history of philanthropical deeds.
In the Southern District of New York, which hears the most Wall Street cases, about 20.6 percent of defendants convicted of fraud in 2000 received probation only, or no jail time, according to statistics from the sentencing commission. Of those sentenced for fraud, the average prison term was 24.6 months.
In a noteworthy case two years ago, United States District Judge Kimba M. Wood sentenced James McDermott, the former chief executive of Keefe Bruyette & Woods Inc., to eight months in prison for securities fraud.
McDermott, the first CEO of a well-known Wall Street firm to be convicted of insider trading, could have received up to two-and-a-half years in prison under federal sentencing guidelines. The judge cited McDermott's ailing daughter and letters of support from friends and former colleagues as reason for the lower sentence.
With public outrage building as more corporate scandals surface, white-collar lawyers predict an initial increase in stiffer sentences.
``Federal judges are human,'' says Tom Carlucci, a former federal prosecutor with Foley & Lardner. ``They're affected by what's going on. They'll naturally be sensitive to those issues.''
Armand Arabian, a retired California Supreme Court judge who now serves as an adjunct professor at Pepperdine University's law shcool, agrees. ``We'll definitely see some very serious sentences imposed,'' he said.
In the long term, however, he doesn't believe the push for tougher sentences will affect the sentencing pattern of the court. ``A conservative judge will tend to be a little harsher, and a liberal judge will tend to go the other way, which is lighter,'' he said. ``I don't that will change the mentality of judges at sentencing.''
Some legal observers say more attention, and resources, should be directed to regulators, prosecutors and others charged with the task of uncovering fraud.
Others say prison time isn't necessarily a deterrent to corporate fraudsters who often don't believe they're doing anything wrong or, if they do, are convinced they won't get caught.
``Of all the kinds of changes that can be made ... increasing the sentences is silly to the point of stupid,'' says Warren L. Dennis, a partner in the white-collar group at Proskauer Rose.
``While it satisfies the lust of the coliseum crowd for blood, it really is cosmetic, and much ado about nothing.''