Businessman in handcuffs
A common theme in liberal and left-of-center circles over the past few days is that the prosecutions of Michael Cohen and Paul Manafort show that we as a nation don’t prosecute enough white-collar crime. Over at Vox, Matt Yglesias has a post titled, “The Mueller investigation is showing how badly we’ve failed to prosecute white-collar crime.” He writes that “there are a lot of white collar criminals out there who aren’t being prosecuted because their lives don’t happen to intersect with a special counsel investigation.”
He is wrong. In no sense should we be prosecuting more people in this country. Practically we already incarcerate too many desperate people for fraud without addressing the underlying causes of their crimes. But even taking “white-collar crime” as many people use it colloquially, meaning big prosecutions of the rich and famous, it’s unclear that putting more people in jail solves any of our problems.
We prosecute a ton of white-collar crime in this country, using the same flawed criminal system that puts people in cages for jumping the subway turnstile, or being too poor to pay a fine or bail, or having a drug problem. Convicting someone for a crime that is financial in nature doesn’t magically remove it from the systemic rot of the American prison-industrial complex.
All of those different kinds of prosecutors report to the same boss.
The white-collar crime prosecuted in America is mostly, like, a guy and a few partners who started drinking one night and came up with a genius plan to swindle some people out of money. Fraud is bad. It can be ruinous to the swindled! But it’s often committed, just like tons of other crimes in America, by people who are desperate. They are unemployed or in debt and searching for a way to get out. Instead, they largely get caught and charged with real estate, health care, and securities fraud (plus those people who trade stock tips at that one country club in Massachusetts).
Fraud and other white-collar crimes accounted for about 8,000 federal prosecutions last year. That’s 12 percent of the cases prosecuted in the federal system — roughly the same amount as firearms cases, and a little less than half the number of drug cases prosecuted in 2017. (Federal data is easiest to get, but all fifty states are prosecuting people for fraud, too.) Assuming, as I
do, that we massively over prosecute people in this country, I would not consider white-collar crime exempt.
To be more generous to Yglesias’s argument, I think what he means when he says we under-prosecute “white-collar crime” is that we don’t put enough rich and powerful people behind bars. That’s closer to being factually accurate, but I still don’t think we get much out of putting more people in jail. Prosecuting people is a (violent) individualistic solution to a variety of
problems that are largely systemic. Whether you are talking about mortgage fraud or drugs or theft there will always be more individuals with the incentive to step up and commit those crimes until the underlying issue is fixed.
When people think about “white-collar crime” they envision the rich and famous behind bars. They think about the few glitzy prosecutions that do happen. For example, the insider trading prosecution of SAC Capital’s Mathew Martoma a few years ago. Martoma got nine years in prison for receiving and trading on some information about a new drug a little early. It was a massively profitable trade. It was illegal, although the people hurt were… the market? Other institutional investors? The actual harm Martoma did seems minimally correlated with spending a decade in prison, but that’s a different topic for a different day. More importantly, Mathew Martoma is doing nine years in prison while the man he reported to, Steven Cohen, is still running a hedge fund (er, enormous “family office”) with hundreds of non-deterred employees. This is not because prosecutors didn’t want to go after Cohen. Maybe at the margin it was a question of resources, but Preet Bharara sniffed around him for a decade. Cohen had good lawyers and he insulated himself and made sure that he personally did not explicitly leave evidence of committing any crimes. The rich and powerful will always have wealth and power to insulate them. (And, of course, you can do bad things that hurt people without committing
any crimes!)
But even more fundamental than that, what exactly is the point of putting bankers in jail? Incarceration is an ex post action. It’s revenge, not a solution. It’s a lazy way of pretending to fix our social problems without facing the broken policy underlying them. Is there a small deterrence effect of throwing people in jail? Maybe, but the system in place to prosecute bankers is exactly the same system we relied on to fight the “war on drugs.” Does anyone
serious think that locking up drug dealers keeps drugs off the street? What makes anyone so sure that locking up bankers will have a different outcome?
The problem with America is that it’s controlled by plutocrats and corporations, with the deck stacked against the 99(.9) percent. That’s not illegal — it’s baked into the law. It’s forced arbitration and rock bottom corporate and capital gains taxes and no social safety net. It’s financial deregulation and filling the Treasury Department with the Goldman Sachs revolving door. Going after individuals to fix a problem that is fundamentally systemic won’t actually change anything.
Why not focus our political outrage at systemic solutions? We need a wealth tax. We need universal healthcare. We need to stop directing the power of the state toward benefiting corporations over citizens. And we need to stop locking human beings in cages.
Shane Ferro is a law student and a former professional blogger. She is (obviously) a bleeding-heart public interest kid.
America’s Problem Is Not Too Few White-Collar Prosecutions curated from Above the Law
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