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Has It Become Impossible to Prosecute White-Collar Crime?

168 points by cryoshon 11y ago

deleted 11y ago
[deleted]
chollida1 11y ago
I have really no insight into the US legal system but to me this seems to be almost entirely because people charged with "white collar" crimes are relatively wealthy and can afford a very vigorous defense. There might be other issues as well such as - a white collar employee being bit smarter, in terms of covering their tracks, ie don't use email, only take via phone or face to face. This makes these crimes much tougher to figure out. - working in groups that ensure that everyone is equally guilty, ala the LIBOR fixing cabal. Having powerful friends is still a great deterrent to being charged with a crime. Look at the British child sex scandal. - these crimes are much less publicized and incendiary. It's easy to get some people worked up over drug or assault crimes as they can put a face to a victim but with white collar crime its much tougher. - their crimes tend not to affect other high power people. - white collar crimes tend to be more sophisticated. If you believe this then it's not a stretch to think that you need to have better law enforcement working on these cases. This has always been the knock on the rating agencies, Moodies, S&P and Fitch, is that they need to be as good as the wall street quants to understand the new products but if they were that good then they wouldn't be working for the rating agencies. I'm not sure I buy that argument completely but I believe that there is a bit of truth to it. I mean I know alot of quants on wall street and those that work for the rating agencies fall into two buckets, those that want to work 9-5 and those that aren't what I'd consider to be top tier quants. Just look at the 2008 financial crisis. White collar employee's got rich leading up to it. and then to fix it, the US flooded the markets with money meaning that white collar employee's made even more money when fixing the mess. Bernie Madoff's biggest failing was that he ripped off rich people.
- coldcode 11y ago
  It think it's easier to prosecute people who rip off individuals, as Bernie did, rather than ripping off the general public. It's easy for people to see harm in the faces of the harmed (be they rich or poor) rather than failing to follow a complex law with an even more complex scheme. The harm to the public may be terrible but if you can't easily explain things to lay people, you might have difficulty over many months of tedious testimony getting them to care.
  - dnautics 11y ago
    I think the real problem is that these miscreants are only able to rip off the public because government policy pushes the general public into a position where they are exposed to the risk of dealing with fraudsters. For example, decades of policy encouraging unsustainable home ownership in the leadup to the housing crisis. More generally, a policy of monetary devaluation that nudges individuals and retirement accounts, etc. Into risky investments (instead of stashing under the mattress). Fictional regulatory reporting requirements that make it easier to create the veneer of propiety than actually exercise it, etc. So there is a problem that ultimately the government can't look too hard into these problems without making it glaringly obvious that the reason why the public is exposed to harm that would normally be against individuals is it's own fault.
  - mason240 11y ago
    That's pretty similar to what my response was going to be. - a white collar crime probably doesn't have direct victim A victim of robbery will initiate the police to act. A violated regulation can't do the same.
    - TheOtherHobbes 11y ago
      White collar crime has plenty of indirect victims. Fixing LIBOR had very real life-changing consequences for many people. They weren't as direct as a knife attack, but they still made a huge difference to the financial - sometimes also the personal - opportunities available to many people. The difference is that most of those people would have had no idea they were being robbed. They would simply have had less money to spend - but they wouldn't have been aware why. In a fair world there would be immediate compensation for all victims in the form of basic recompense plus punitive damages. IMO that would be more effective in stopping white collar crime than the prospect of jail, because it would change the risk/reward profile and skew it more towards financial damage and loss of customer good will.
- nostromo 11y ago
  Your analysis is inaccurate with regards to the article at hand. Rich, powerful people were on both sides of the Dewey & LeBoeuf case. This is an example of rich people ripping off other rich people (usually investors). All of cases listed in the article follow this pattern. However, you are correct with regards to the Libor scandal, which wasn't mentioned in this article directly, but would be a better example of serious crime against the public going almost entirely unprosecuted.
- caseysoftware 11y ago
  Well, former US Attorney General Eric Holder took back his old job at the white collar law firm that represents these guys. Here's the money quote: "Holder will reassume his lucrative partnership (he made $2.5 million the last year he worked there) and take his seat in an office that reportedly – this is no joke – was kept empty for him in his absence." Ref: http://www.rollingstone.com/politics/news/eric-holder-wall-street-double-agent-comes-in-from-the-cold-20150708 http://www.rollingstone.com/politics/news/eric-holder-wall-s...
  - rcarrigan87 11y ago
    I'm not debating Eric Holder going back to his old gig isn't fishy, it certainly is. And the revolving door bt Wall Street and Washington is ridiculous. But RollingStone has the most slanted, sensational coverage on anything Wall Street. Their accounts aren't journalism.
    - shawn-furyan 11y ago
      By Rolling Stone, you mean Matt Taibbi. Because he's the only reason Rolling Stone covers Wallstreet at all. I'm not a fan of Taibbi's style, and I think that he jumps to biased conclusions. But I've read just about everything I've come across regarding the Financial crisis, and Taibbi has contributed substantial and important reporting to fill out the context of what exactly went down. To me, Taibbi is a pretty good source for facts, since he wears his biases so openly on his sleeves, it is trivial to account for when he does reach. He also has a completely different perspective and motivational drive than the Financial press beat reporters who are afraid to stray too far from the self-serving accepted wisdom that's developed in the financial industry, as well as the broad audience reporters who are mostly afraid to dive into the minutia. Taibbi is highly idiosyncratic, but his perspective is valuable as long as you're taking in a spectrum of views and have an ability to bring a sense of skepticism to reported claims.
      - twoodfin 11y ago
        I appreciate this comment, but it seems a little like saying that William Randolph Hearst had a "completely different perspective and motivational drive" when investigating the sinking of the USS Maine. I'm not sure that kind of 'reporting' is a net positive.
- roymurdock 11y ago
  Bernie Madoff failed to avoid jail time because he employed a ponzi scheme - a type of fraud that is is (somewhat) easily understood and has a legal precedent of being successfully prosecuted. It also has the tendency to blow up spectacularly when it unwinds, and Madoff refused to implicate anyone else in the scheme, making it easier to hand him a harsh sentence. His main accountant and auditor Frank DiPascali, on the other hand, cooperated fully with investigators and testified at the trial of 5 other high level members of the fraud. Although he could have been given over 100 years, he received 1 year home detention and 1 year of supervised release during his final sentencing in May 2015 (6 years after pleading guilty). So it's not really about ripping off rich people, it's more about committing fraud in a very legally and technically opaque manner, passing responsibility down the chain (LIBOR), and never EVER committing it in a manner that can be recorded or traced. This last point is widely believed to be the reason why GS recently fired ~30 new analysts. If they were negligent enough to cheat on a test in a trackable manner (googling answers on company computers), they represented a huge potential liability to the firm.
  - Kalium 11y ago
    If nobody can prove that you committed a crime, then you haven't committed a crime.
anonbanker 11y ago
This might be the only exception to Betteridge's Law.
- api 11y ago
  I hate lazy heuristics like Betteridge's Law. The only thing it accomplishes is to make writers think 'hmm... if I'm going to explore this topic I should restate my title in some form other than a question so idiots won't skip it because it's a question.'
  - krapp 11y ago
    >The only thing it accomplishes is to make writers think 'hmm... if I'm going to explore this topic I should restate my title in some form other than a question so idiots won't skip it because it's a question.' Which would result in more accurate, less biased and clickbaity headlines. I don't see the problem.
  - bweitzman 11y ago
    Yeah, that's sort of the point, isn't it?
  - mikeash 11y ago
    That sounds like an excellent accomplishment if so.
MichaelGG 11y ago
This mostly shows off the silliness of the jury system. Why on earth does anyone think grabbing 12 randoms is gonna somehow lead to proper application of justice? I could see it when the US Founders may have thought it'd be other well-educated folks like themselves - it's a good check (if that's what they indeed intended, I don't know). Why would we think untrained folks are going to do a good job figuring out complex things and properly weighting evidence? Courts already have an issue with not understanding Bayes; adding to it by bringing in even less critical people isn't going to help. The style is weird too. The juries don't seem to be able to do their own investigation; they are passive, relying on a presentation given to them. They should be able to ask questions, inquire about things like the base rate of an occurrence. And things like jury instructions, telling people to disregard info or their biases. This is simply not how human brains work. Let alone untrained ones. We'd be far, far, better off having a panel of judges. And proper review to identify systemic issues. Someone said "If I'm guilty, I'd much prefer a jury; if I'm innocent I'd prefer judges".
- WalterSear 11y ago
  They aren't random. They get vetted by the lawyers for being dim and pliable. An actually random jury would be a vast improvement.
  - baconner 11y ago
    I served on a jury for a murder case last year and think your characterization is not accurate (and only partially because I don't think I'm dim or plyant). Yes the prosecutors were clearly selecting for their own advantage but that doesn't necessarily mean dim or plyant. There's as much reason for one side to select for intelligence and skepticism as there is for the other to select for sheeplike qualities. During deliberation we did have a couple of folks who were imo way to casual hangemhigh types, but the majority were methodical and serious about getting it right and held the rest of us to a high standard. Juries are far from perfect, but the system has some merit.
  - saryant 11y ago
    I just served on a jury for a criminal trial (a police officer tipped off a suspected pedophile about an investigation). The very first people to go were the idiots who couldn't string a sentence together. After that it was anyone who expressed the slightest anti-cop sentiment. The judge didn't even make the lawyers waste blackballs on them, she just summarily dismissed them for cause. The jury was two software engineers, a contractor, a pastor, some stay-at-home moms, a mechanic, a teacher and a geologist.
paulsutter 11y ago
How about a jury of peers? Perhaps juries for financial crimes need analytical skills that are on par with the defendant's crimes.
pvaldes 11y ago
Just highly improbable
cubano 11y ago
Articles like this utterly piss me the fuck off. A few weeks ago, I was doing hard time with people who, due to fairly outrageous "re-offender" statues, were serving 15 years for stealing $50 items, or 5 for walking out of Home Depot with a couple hundred dollars in a cart. These assholes steal millions, often from the elderly who trusted "the system", and just walk away scot free because the jury doesn't understand it? It is beyond outrageous and really shows, to me at least, how our entire CJS in the US has become an sick disgusting joke. I got 15 months for having a small amount of heroin and an oz of weed...I almost lost almost everything I owned and left my clients in a big mess, and these guys don't get any time or even a felony conviction to mess up their lives like mine does? Fuck them and fuck the douchebag prosecutors who are afraid of losing one damn case and messing up their all important conviction ratio. [edited]
- disposition2 11y ago
  > jury doesn't understand it? Everytime I hear a finance person use the excuse of 'you wouldn't understand' to a complex, I can't help but correlate it to a developer who's obfuscated code tell another developer they wouldn't understand, without acknowledging that they obfuscated the code. I'm sure I understand, you just don't want me to because then it would be obvious you are just ripping people off to make more money for yourself / company. Kind of like how the government has used 'enhanced interrogation' rather than the common definition of torture to get around breaking the law.
  - unimpressive 11y ago
    This sort of plausible deniability depends on there being financial instruments which are genuinely difficult to understand. I'm sure you would agree that there are in fact mechanisms and systems in computer programming which would be fairly difficult to explain quickly. Especially in terms which are anything approaching accuracy.
    - collyw 11y ago
      As software professionals we (some of us take) pride in trying to build stable systems that are decoupled and not overly complex. Financial systems seem to be build the opposite way.
nether 11y ago
Betteridge's law of headlines fails in this case.
nether 11y ago
Betteridge's law of headlines fails in this case.
rayiner 11y ago
In my previous job, I saw a lot of federal criminal cases come up on appeal. In nearly every "blue-collar crime" case, it was clear the prosecution had the defendant dead-to-rights. E.g. the defendant tried to sell drugs to a cop; they arrested him and found X grams of cocaine on his person; they searched his house and found Y more grams. Now, there is huge room for debate about, e.g., whether selling drugs should be illegal or whether people should receive jail sentences for stealing a TV. But in those prosecutions it's exceedingly rare that there is any doubt about whether the defendant actually did what he was accused of doing. The line between legal conduct and illegal conduct is clear and it's easy to prove when someone has crossed it. White-collar crime is totally different. Selling stock, making out like a bandit on a deal, screwing someone on the other side of a transaction, losing a bunch of someone else's money--all those things can be legal or illegal depending on what you knew or said while it happened. Proving knowledge and intent beyond a reasonable doubt is really hard to begin with, and especially so when it comes to subject matter (like financial transactions) that are complex and difficult to understand. And frankly, you wouldn't want it any other way. You really don't want the government coming up with creative prosecutions to get guys who did "bad" things but followed the letter of the law. That's not a society you want to live in.
- rcarrigan87 11y ago
  Completely agree. If the government wasn't checked by the justice system we'd have witch hunts left and right. I'm not defending the financial industry (there seems to be a higher level of corruption relative to other industries), but every industry has its uglies and what we definitely don't need is the gov't pointing fingers and jumping to conclusions on the morality of business decisions. It sucks because the system is slow and frustrating and bad actors do get away, but the alternative is much worse.
- VLM 11y ago
  One interesting distinction is white collar is often very binary. You did or did not have insider knowledge before you did that trade? On the other hand for blue collar / property / violence crimes there are a bazillion analog levels. There are many levels and layers of criminal charges for killing someone ranging from "driver ran over a bicyclist" up to serial killer with punishment in proportion to level of intent and likelihood of repeating etc. Its not that its hard to prove or there is little evidence beyond circumstantial, its that typical police going after a typical guy for typical things will bust someone frankly obviously at "level 5" and the prosecutor offers them the choice of a trial against charges of "level 4" or plea bargain out as guilty of a "level 3". White collar crime tends not to have a sliding scale of criminal activity. Maybe a small dollar value is a misdemeanor vs a felony, but its very binary either you cheated or you didn't and one or two steps below the binary "did it" is you walk not even hit a grand jury. This is before you get into theory about open conspiracy and control fraud. If everyone knows the whole structure relies on no bad apples and someone is a bad apple then what do you do, indict the entire economic system for having intentionally created a ridiculously cross connected system?
DennisP 11y ago
Maybe a "jury of your peers" should mean a jury of people who have a chance of understanding what you did.
- mjevans 11y ago
  You mean if you're trying someone of a crime related to a profession at least SOME of the jury should be trained in that profession? (I'd go for at least a third, or slightly less than half (half minus one) of 'closely related fields'.)
Animats 11y ago
One solution to this is forcibly simplifying some aspects of business to make regulation easier. The Utility Holding Company Act[1] (enacted 1935, repealed 2005) is one such Depression-era law. It limited the complexity of the ownership structures of utility companies to make them easier to regulate. A number of laws like that were repealed in the 1999-2008 period, Glass-Steagall being the best known. Glass-Steagall kept banks out of the stock market, and stockbrokers out of banking. In 1999, the big banks convinced Congress that with their new risk models, the systemic failure of 1929 was no longer possible. They were wrong. It's useful to go back to 1999 and read articles about the repeal.[3] "Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century,'' Treasury Secretary Lawrence H. Summers said. ''This historic legislation will better enable American companies to compete in the new economy." "The world changes, and we have to change with it,'' said Senator Phil Gramm of Texas, who wrote the law that will bear his name along with the two other main Republican sponsors, Representative Jim Leach of Iowa and Representative Thomas J. Bliley Jr. of Virginia. "We have a new century coming, and we have an opportunity to dominate that century the same way we dominated this century. Glass-Steagall, in the midst of the Great Depression, came at a time when the thinking was that the government was the answer. In this era of economic prosperity, we have decided that freedom is the answer." One member of Congress got it right. "I think we will look back in 10 years' time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930's is true in 2010," said Senator Byron L. Dorgan, Democrat of North Dakota. [1] https://en.wikipedia.org/wiki/Public_Utility_Holding_Company_Act_of_1935 https://en.wikipedia.org/wiki/Public_Utility_Holding_Company... [2] http://www.usnews.com/opinion/blogs/economic-intelligence/2012/08/27/repeal-of-glass-steagall-caused-the-financial-crisis http://www.usnews.com/opinion/blogs/economic-intelligence/20... [3] http://www.nytimes.com/1999/11/05/business/congress-passes-wide-ranging-bill-easing-bank-laws.html http://www.nytimes.com/1999/11/05/business/congress-passes-w...
ccvannorman 11y ago
Maybe the solution is lawyers who know how to explain things better. A trite solution, yes? But truthfully, if a lawyer cannot explain to the jury why this white-collar criminal deserves death (or whatever!), perhaps they should enlist some of the commenters on HN as translators.
gethoht 11y ago
I don't believe that it's impossible... while the complexity of the crime itself might be beyond most people's understanding, there is a virtually limitless toolbox at the hands of federal prosecutors, from RICO to conspiracy charges, which have exceptionally lower bars to proving guilt. The fact of the matter is that it has generally been the policy of the DOJ not to prosecute financial crimes under the purview of Eric Holder. This policy has recently changed but it's mostly too late to prosecute for the obvious amount of outright fraud that triggered the financial crisis of 2008. http://www.nytimes.com/2015/09/12/business/dealbook/justice-dept-shift-on-white-collar-crime-is-long-overdue.html http://www.nytimes.com/2015/09/12/business/dealbook/justice-...
downandout 11y ago
The "problem" here is that in many white collar cases, the defendants have the money to be represented by competent counsel and are thus confident in going to trial. Our system is setup so that most cases, when brought to trial with competent defense counsel, are a difficult win for the prosecution. This is as it should be. Our insanely high conviction rates are the result of the extortion scheme that is our plea bargaining system - not because prosecutors are great at their jobs. It appears from this article that prosecutors are unhappy when defendants have the resources to avail themselves of the rights they have under our system of law, but I find it hard to imagine that they will find many people that are sympathetic to their complaints.
dpatru 11y ago
The article assumes that the defendants are guilty. It should assume that they are innocent and ask why prosecutors are trying people they can't prove are guilty.
fldjksjfdlksjl 11y ago
Obligatory Chief Wiggum quote: http://i.imgur.com/Prf929F.png http://i.imgur.com/Prf929F.png
e12e 11y ago
At the same time, it was recently announced that the Icelandic bankers that were jailed after the Kaupþing Bank collapse lost their appeal in Supreme Court: http://icelandreview.com/news/2015/02/12/icelandic-bankers-sentenced-prison http://icelandreview.com/news/2015/02/12/icelandic-bankers-s...
- jakeogh 11y ago
  26: http://icelandmag.visir.is/article/26-bankers-already-sentenced-a-combined-74-years-prison http://icelandmag.visir.is/article/26-bankers-already-senten...
datashovel 11y ago
I think the evidence that people don't understand these things bankers are selling makes it all the more obvious they're doing something criminal. IANAL but I've got to think there are consumer protection laws against selling things to people without them understanding what they're buying.
- datashovel 11y ago
  I'll rephrase. Without them being able to comprehend what they're buying. It's one thing to not understand, and an entirely different thing to not mentally be able to comprehend the financial instruments people are buying.
mirimir 11y ago
Maybe it has. The financial sector has attracted many people who are extremely smart and skilled. Over the past few decades, they have designed some truly elegant (albeit maybe too chaotic) stuff. Even if prosecutors can find competent experts, trials devolve into expert duels. And juries just can't cope, especially with a "beyond reasonable doubt" standard. Imagine a future with AI-designed finance ;)

168 points by cryoshon 11y ago

deleted 11y ago

[deleted]

I have really no insight into the US legal system but to me this seems to be almost entirely because people charged with "white collar" crimes are relatively wealthy and can afford a very vigorous defense. There might be other issues as well such as - a white collar employee being bit smarter, in terms of covering their tracks, ie don't use email, only take via phone or face to face. This makes these crimes much tougher to figure out. - working in groups that ensure that everyone is equally guilty, ala the LIBOR fixing cabal. Having powerful friends is still a great deterrent to being charged with a crime. Look at the British child sex scandal. - these crimes are much less publicized and incendiary. It's easy to get some people worked up over drug or assault crimes as they can put a face to a victim but with white collar crime its much tougher. - their crimes tend not to affect other high power people. - white collar crimes tend to be more sophisticated. If you believe this then it's not a stretch to think that you need to have better law enforcement working on these cases. This has always been the knock on the rating agencies, Moodies, S&P and Fitch, is that they need to be as good as the wall street quants to understand the new products but if they were that good then they wouldn't be working for the rating agencies. I'm not sure I buy that argument completely but I believe that there is a bit of truth to it. I mean I know alot of quants on wall street and those that work for the rating agencies fall into two buckets, those that want to work 9-5 and those that aren't what I'd consider to be top tier quants. Just look at the 2008 financial crisis. White collar employee's got rich leading up to it. and then to fix it, the US flooded the markets with money meaning that white collar employee's made even more money when fixing the mess. Bernie Madoff's biggest failing was that he ripped off rich people.

coldcode 11y ago
It think it's easier to prosecute people who rip off individuals, as Bernie did, rather than ripping off the general public. It's easy for people to see harm in the faces of the harmed (be they rich or poor) rather than failing to follow a complex law with an even more complex scheme. The harm to the public may be terrible but if you can't easily explain things to lay people, you might have difficulty over many months of tedious testimony getting them to care.
- dnautics 11y ago
  I think the real problem is that these miscreants are only able to rip off the public because government policy pushes the general public into a position where they are exposed to the risk of dealing with fraudsters. For example, decades of policy encouraging unsustainable home ownership in the leadup to the housing crisis. More generally, a policy of monetary devaluation that nudges individuals and retirement accounts, etc. Into risky investments (instead of stashing under the mattress). Fictional regulatory reporting requirements that make it easier to create the veneer of propiety than actually exercise it, etc. So there is a problem that ultimately the government can't look too hard into these problems without making it glaringly obvious that the reason why the public is exposed to harm that would normally be against individuals is it's own fault.
- mason240 11y ago
  That's pretty similar to what my response was going to be. - a white collar crime probably doesn't have direct victim A victim of robbery will initiate the police to act. A violated regulation can't do the same.
  - TheOtherHobbes 11y ago
    White collar crime has plenty of indirect victims. Fixing LIBOR had very real life-changing consequences for many people. They weren't as direct as a knife attack, but they still made a huge difference to the financial - sometimes also the personal - opportunities available to many people. The difference is that most of those people would have had no idea they were being robbed. They would simply have had less money to spend - but they wouldn't have been aware why. In a fair world there would be immediate compensation for all victims in the form of basic recompense plus punitive damages. IMO that would be more effective in stopping white collar crime than the prospect of jail, because it would change the risk/reward profile and skew it more towards financial damage and loss of customer good will.
nostromo 11y ago
Your analysis is inaccurate with regards to the article at hand. Rich, powerful people were on both sides of the Dewey & LeBoeuf case. This is an example of rich people ripping off other rich people (usually investors). All of cases listed in the article follow this pattern. However, you are correct with regards to the Libor scandal, which wasn't mentioned in this article directly, but would be a better example of serious crime against the public going almost entirely unprosecuted.
caseysoftware 11y ago
Well, former US Attorney General Eric Holder took back his old job at the white collar law firm that represents these guys. Here's the money quote: "Holder will reassume his lucrative partnership (he made $2.5 million the last year he worked there) and take his seat in an office that reportedly – this is no joke – was kept empty for him in his absence." Ref: http://www.rollingstone.com/politics/news/eric-holder-wall-street-double-agent-comes-in-from-the-cold-20150708 http://www.rollingstone.com/politics/news/eric-holder-wall-s...
- rcarrigan87 11y ago
  I'm not debating Eric Holder going back to his old gig isn't fishy, it certainly is. And the revolving door bt Wall Street and Washington is ridiculous. But RollingStone has the most slanted, sensational coverage on anything Wall Street. Their accounts aren't journalism.
  - shawn-furyan 11y ago
    By Rolling Stone, you mean Matt Taibbi. Because he's the only reason Rolling Stone covers Wallstreet at all. I'm not a fan of Taibbi's style, and I think that he jumps to biased conclusions. But I've read just about everything I've come across regarding the Financial crisis, and Taibbi has contributed substantial and important reporting to fill out the context of what exactly went down. To me, Taibbi is a pretty good source for facts, since he wears his biases so openly on his sleeves, it is trivial to account for when he does reach. He also has a completely different perspective and motivational drive than the Financial press beat reporters who are afraid to stray too far from the self-serving accepted wisdom that's developed in the financial industry, as well as the broad audience reporters who are mostly afraid to dive into the minutia. Taibbi is highly idiosyncratic, but his perspective is valuable as long as you're taking in a spectrum of views and have an ability to bring a sense of skepticism to reported claims.
    - twoodfin 11y ago
      I appreciate this comment, but it seems a little like saying that William Randolph Hearst had a "completely different perspective and motivational drive" when investigating the sinking of the USS Maine. I'm not sure that kind of 'reporting' is a net positive.
roymurdock 11y ago
Bernie Madoff failed to avoid jail time because he employed a ponzi scheme - a type of fraud that is is (somewhat) easily understood and has a legal precedent of being successfully prosecuted. It also has the tendency to blow up spectacularly when it unwinds, and Madoff refused to implicate anyone else in the scheme, making it easier to hand him a harsh sentence. His main accountant and auditor Frank DiPascali, on the other hand, cooperated fully with investigators and testified at the trial of 5 other high level members of the fraud. Although he could have been given over 100 years, he received 1 year home detention and 1 year of supervised release during his final sentencing in May 2015 (6 years after pleading guilty). So it's not really about ripping off rich people, it's more about committing fraud in a very legally and technically opaque manner, passing responsibility down the chain (LIBOR), and never EVER committing it in a manner that can be recorded or traced. This last point is widely believed to be the reason why GS recently fired ~30 new analysts. If they were negligent enough to cheat on a test in a trackable manner (googling answers on company computers), they represented a huge potential liability to the firm.
- Kalium 11y ago
  If nobody can prove that you committed a crime, then you haven't committed a crime.

anonbanker 11y ago

This might be the only exception to Betteridge's Law.

api 11y ago
I hate lazy heuristics like Betteridge's Law. The only thing it accomplishes is to make writers think 'hmm... if I'm going to explore this topic I should restate my title in some form other than a question so idiots won't skip it because it's a question.'
- krapp 11y ago
  >The only thing it accomplishes is to make writers think 'hmm... if I'm going to explore this topic I should restate my title in some form other than a question so idiots won't skip it because it's a question.' Which would result in more accurate, less biased and clickbaity headlines. I don't see the problem.
- bweitzman 11y ago
  Yeah, that's sort of the point, isn't it?
- mikeash 11y ago
  That sounds like an excellent accomplishment if so.

MichaelGG 11y ago

This mostly shows off the silliness of the jury system. Why on earth does anyone think grabbing 12 randoms is gonna somehow lead to proper application of justice? I could see it when the US Founders may have thought it'd be other well-educated folks like themselves - it's a good check (if that's what they indeed intended, I don't know). Why would we think untrained folks are going to do a good job figuring out complex things and properly weighting evidence? Courts already have an issue with not understanding Bayes; adding to it by bringing in even less critical people isn't going to help. The style is weird too. The juries don't seem to be able to do their own investigation; they are passive, relying on a presentation given to them. They should be able to ask questions, inquire about things like the base rate of an occurrence. And things like jury instructions, telling people to disregard info or their biases. This is simply not how human brains work. Let alone untrained ones. We'd be far, far, better off having a panel of judges. And proper review to identify systemic issues. Someone said "If I'm guilty, I'd much prefer a jury; if I'm innocent I'd prefer judges".

WalterSear 11y ago
They aren't random. They get vetted by the lawyers for being dim and pliable. An actually random jury would be a vast improvement.
- baconner 11y ago
  I served on a jury for a murder case last year and think your characterization is not accurate (and only partially because I don't think I'm dim or plyant). Yes the prosecutors were clearly selecting for their own advantage but that doesn't necessarily mean dim or plyant. There's as much reason for one side to select for intelligence and skepticism as there is for the other to select for sheeplike qualities. During deliberation we did have a couple of folks who were imo way to casual hangemhigh types, but the majority were methodical and serious about getting it right and held the rest of us to a high standard. Juries are far from perfect, but the system has some merit.
- saryant 11y ago
  I just served on a jury for a criminal trial (a police officer tipped off a suspected pedophile about an investigation). The very first people to go were the idiots who couldn't string a sentence together. After that it was anyone who expressed the slightest anti-cop sentiment. The judge didn't even make the lawyers waste blackballs on them, she just summarily dismissed them for cause. The jury was two software engineers, a contractor, a pastor, some stay-at-home moms, a mechanic, a teacher and a geologist.

paulsutter 11y ago

How about a jury of peers? Perhaps juries for financial crimes need analytical skills that are on par with the defendant's crimes.

pvaldes 11y ago

Just highly improbable

cubano 11y ago

Articles like this utterly piss me the fuck off. A few weeks ago, I was doing hard time with people who, due to fairly outrageous "re-offender" statues, were serving 15 years for stealing $50 items, or 5 for walking out of Home Depot with a couple hundred dollars in a cart. These assholes steal millions, often from the elderly who trusted "the system", and just walk away scot free because the jury doesn't understand it? It is beyond outrageous and really shows, to me at least, how our entire CJS in the US has become an sick disgusting joke. I got 15 months for having a small amount of heroin and an oz of weed...I almost lost almost everything I owned and left my clients in a big mess, and these guys don't get any time or even a felony conviction to mess up their lives like mine does? Fuck them and fuck the douchebag prosecutors who are afraid of losing one damn case and messing up their all important conviction ratio. [edited]

disposition2 11y ago
> jury doesn't understand it? Everytime I hear a finance person use the excuse of 'you wouldn't understand' to a complex, I can't help but correlate it to a developer who's obfuscated code tell another developer they wouldn't understand, without acknowledging that they obfuscated the code. I'm sure I understand, you just don't want me to because then it would be obvious you are just ripping people off to make more money for yourself / company. Kind of like how the government has used 'enhanced interrogation' rather than the common definition of torture to get around breaking the law.
- unimpressive 11y ago
  This sort of plausible deniability depends on there being financial instruments which are genuinely difficult to understand. I'm sure you would agree that there are in fact mechanisms and systems in computer programming which would be fairly difficult to explain quickly. Especially in terms which are anything approaching accuracy.
  - collyw 11y ago
    As software professionals we (some of us take) pride in trying to build stable systems that are decoupled and not overly complex. Financial systems seem to be build the opposite way.

nether 11y ago

Betteridge's law of headlines fails in this case.

nether 11y ago

Betteridge's law of headlines fails in this case.

rayiner 11y ago

In my previous job, I saw a lot of federal criminal cases come up on appeal. In nearly every "blue-collar crime" case, it was clear the prosecution had the defendant dead-to-rights. E.g. the defendant tried to sell drugs to a cop; they arrested him and found X grams of cocaine on his person; they searched his house and found Y more grams. Now, there is huge room for debate about, e.g., whether selling drugs should be illegal or whether people should receive jail sentences for stealing a TV. But in those prosecutions it's exceedingly rare that there is any doubt about whether the defendant actually did what he was accused of doing. The line between legal conduct and illegal conduct is clear and it's easy to prove when someone has crossed it. White-collar crime is totally different. Selling stock, making out like a bandit on a deal, screwing someone on the other side of a transaction, losing a bunch of someone else's money--all those things can be legal or illegal depending on what you knew or said while it happened. Proving knowledge and intent beyond a reasonable doubt is really hard to begin with, and especially so when it comes to subject matter (like financial transactions) that are complex and difficult to understand. And frankly, you wouldn't want it any other way. You really don't want the government coming up with creative prosecutions to get guys who did "bad" things but followed the letter of the law. That's not a society you want to live in.

rcarrigan87 11y ago
Completely agree. If the government wasn't checked by the justice system we'd have witch hunts left and right. I'm not defending the financial industry (there seems to be a higher level of corruption relative to other industries), but every industry has its uglies and what we definitely don't need is the gov't pointing fingers and jumping to conclusions on the morality of business decisions. It sucks because the system is slow and frustrating and bad actors do get away, but the alternative is much worse.
VLM 11y ago
One interesting distinction is white collar is often very binary. You did or did not have insider knowledge before you did that trade? On the other hand for blue collar / property / violence crimes there are a bazillion analog levels. There are many levels and layers of criminal charges for killing someone ranging from "driver ran over a bicyclist" up to serial killer with punishment in proportion to level of intent and likelihood of repeating etc. Its not that its hard to prove or there is little evidence beyond circumstantial, its that typical police going after a typical guy for typical things will bust someone frankly obviously at "level 5" and the prosecutor offers them the choice of a trial against charges of "level 4" or plea bargain out as guilty of a "level 3". White collar crime tends not to have a sliding scale of criminal activity. Maybe a small dollar value is a misdemeanor vs a felony, but its very binary either you cheated or you didn't and one or two steps below the binary "did it" is you walk not even hit a grand jury. This is before you get into theory about open conspiracy and control fraud. If everyone knows the whole structure relies on no bad apples and someone is a bad apple then what do you do, indict the entire economic system for having intentionally created a ridiculously cross connected system?

DennisP 11y ago

Maybe a "jury of your peers" should mean a jury of people who have a chance of understanding what you did.

mjevans 11y ago
You mean if you're trying someone of a crime related to a profession at least SOME of the jury should be trained in that profession? (I'd go for at least a third, or slightly less than half (half minus one) of 'closely related fields'.)

Animats 11y ago

One solution to this is forcibly simplifying some aspects of business to make regulation easier. The Utility Holding Company Act[1] (enacted 1935, repealed 2005) is one such Depression-era law. It limited the complexity of the ownership structures of utility companies to make them easier to regulate. A number of laws like that were repealed in the 1999-2008 period, Glass-Steagall being the best known. Glass-Steagall kept banks out of the stock market, and stockbrokers out of banking. In 1999, the big banks convinced Congress that with their new risk models, the systemic failure of 1929 was no longer possible. They were wrong. It's useful to go back to 1999 and read articles about the repeal.[3] "Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century,'' Treasury Secretary Lawrence H. Summers said. ''This historic legislation will better enable American companies to compete in the new economy." "The world changes, and we have to change with it,'' said Senator Phil Gramm of Texas, who wrote the law that will bear his name along with the two other main Republican sponsors, Representative Jim Leach of Iowa and Representative Thomas J. Bliley Jr. of Virginia. "We have a new century coming, and we have an opportunity to dominate that century the same way we dominated this century. Glass-Steagall, in the midst of the Great Depression, came at a time when the thinking was that the government was the answer. In this era of economic prosperity, we have decided that freedom is the answer." One member of Congress got it right. "I think we will look back in 10 years' time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930's is true in 2010," said Senator Byron L. Dorgan, Democrat of North Dakota. [1] https://en.wikipedia.org/wiki/Public_Utility_Holding_Company_Act_of_1935 https://en.wikipedia.org/wiki/Public_Utility_Holding_Company... [2] http://www.usnews.com/opinion/blogs/economic-intelligence/2012/08/27/repeal-of-glass-steagall-caused-the-financial-crisis http://www.usnews.com/opinion/blogs/economic-intelligence/20... [3] http://www.nytimes.com/1999/11/05/business/congress-passes-wide-ranging-bill-easing-bank-laws.html http://www.nytimes.com/1999/11/05/business/congress-passes-w...

ccvannorman 11y ago

Maybe the solution is lawyers who know how to explain things better. A trite solution, yes? But truthfully, if a lawyer cannot explain to the jury why this white-collar criminal deserves death (or whatever!), perhaps they should enlist some of the commenters on HN as translators.

gethoht 11y ago

I don't believe that it's impossible... while the complexity of the crime itself might be beyond most people's understanding, there is a virtually limitless toolbox at the hands of federal prosecutors, from RICO to conspiracy charges, which have exceptionally lower bars to proving guilt. The fact of the matter is that it has generally been the policy of the DOJ not to prosecute financial crimes under the purview of Eric Holder. This policy has recently changed but it's mostly too late to prosecute for the obvious amount of outright fraud that triggered the financial crisis of 2008. http://www.nytimes.com/2015/09/12/business/dealbook/justice-dept-shift-on-white-collar-crime-is-long-overdue.html http://www.nytimes.com/2015/09/12/business/dealbook/justice-...

downandout 11y ago

The "problem" here is that in many white collar cases, the defendants have the money to be represented by competent counsel and are thus confident in going to trial. Our system is setup so that most cases, when brought to trial with competent defense counsel, are a difficult win for the prosecution. This is as it should be. Our insanely high conviction rates are the result of the extortion scheme that is our plea bargaining system - not because prosecutors are great at their jobs. It appears from this article that prosecutors are unhappy when defendants have the resources to avail themselves of the rights they have under our system of law, but I find it hard to imagine that they will find many people that are sympathetic to their complaints.

dpatru 11y ago

The article assumes that the defendants are guilty. It should assume that they are innocent and ask why prosecutors are trying people they can't prove are guilty.

fldjksjfdlksjl 11y ago

Obligatory Chief Wiggum quote: http://i.imgur.com/Prf929F.png http://i.imgur.com/Prf929F.png

e12e 11y ago

At the same time, it was recently announced that the Icelandic bankers that were jailed after the Kaupþing Bank collapse lost their appeal in Supreme Court: http://icelandreview.com/news/2015/02/12/icelandic-bankers-sentenced-prison http://icelandreview.com/news/2015/02/12/icelandic-bankers-s...

jakeogh 11y ago
26: http://icelandmag.visir.is/article/26-bankers-already-sentenced-a-combined-74-years-prison http://icelandmag.visir.is/article/26-bankers-already-senten...

datashovel 11y ago

I think the evidence that people don't understand these things bankers are selling makes it all the more obvious they're doing something criminal. IANAL but I've got to think there are consumer protection laws against selling things to people without them understanding what they're buying.

datashovel 11y ago
I'll rephrase. Without them being able to comprehend what they're buying. It's one thing to not understand, and an entirely different thing to not mentally be able to comprehend the financial instruments people are buying.

mirimir 11y ago

Maybe it has. The financial sector has attracted many people who are extremely smart and skilled. Over the past few decades, they have designed some truly elegant (albeit maybe too chaotic) stuff. Even if prosecutors can find competent experts, trials devolve into expert duels. And juries just can't cope, especially with a "beyond reasonable doubt" standard. Imagine a future with AI-designed finance ;)