A Return To ‘The One-Way White-Collar Sentencing Ratchet’? Reflections On The Remarks Of Attorney General Merrick B. Garland And Assistant Attorney General Kenneth A. Polite Jr. At The ABA Institute On White-Collar Crime

Earlier this month, at the annual institute on white-collar crime run by the American Bar Association, Attorney General Merrick B. Garland and Assistant Attorney General for the Criminal Division Kenneth A. Polite Jr. gave speeches (here and here) highlighting certain DOJ priorities with respect to white-collar crime. Their overarching messages were simple: The DOJ will prioritize the prosecution of individuals responsible for corporate crimes, as well as the rights of victims of white-collar crime. The speeches left unanswered, however, key questions about what it means to prioritize individual accountability and victims’ rights—including whether the DOJ intends to seek enhanced penalties for defendants in white-collar cases—and it is the answers to these questions that could ultimately shape this DOJ’s white-collar agenda.

In the speeches, both Mr. Garland and Mr. Polite highlighted the DOJ’s priority of prosecuting individuals in connection with corporate crime. Mr. Garland explained that prosecuting individuals for white-collar offenses is the DOJ’s “first priority” because “corporations only act through individuals,” “penalties imposed on individual wrongdoers are felt by those wrongdoers, rather than by shareholders or inanimate organizations,” “the prospect of personal liability” is “the best deterrent to corporate crime,” and “it is essential to Americans’ trust in the rule of law.” On this last point, Mr. Garland emphasized that “the rule of law requires that there not be one rule for the powerful and another for the powerless; one rule for the rich and another for the poor.” This is because, Mr. Garland said, “the essence of the rule of law is that like cases are treated alike,” and “to fail to aggressively prosecute corporate crime leads citizens to doubt that their government adheres to this principle.”

Mr. Polite echoed Mr. Garland’s themes, repeating that “the department’s first priority in corporate criminal cases is to prosecute the individuals who commit and profit from corporate malfeasance.” Mr. Polite said that “corporations commit crimes the same way that they commit other acts—through people,” and, for this reason, the DOJ will prosecute those people “to the fullest extent that our laws allow.” (Of course, DOJ officials in the prior administration delivered similar messages. For example, in a May 2018 speech at another white-collar conference, then-Deputy Attorney General Rod Rosenstein highlighted the DOJ’s commitment to prosecuting individuals, explaining that “our goal in every case should be to make the next violation less likely to occur by punishing individual wrongdoers.” By the end of the Trump Administration, however, the prosecution of white-collar offenders had reached an all-time low.)

Mr. Polite also discussed the DOJ’s commitment to vindicate the interests of victims of financial crimes, saying that “[c]onsidering victims must be at the center of our white-collar cases.” To this end, Mr. Polite made three specific announcements. First, Mr. Polite announced that the DOJ will be “adding a Victim Coordinator” to the front office, “with responsibility for crime victim issues and to further promote consistency in our approach division-wide.” Second, Mr. Polite announced that DOJ supervisors “are conducting an assessment of our litigating components’ tools and resources that support victims’ interests in our cases or assist victims in swiftly and robustly reporting financial crimes.” Third, Mr. Polite announced that going forward, DOJ prosecutors “will be asking companies to more fully address victim issues as part of their Filip Factors presentations.”

Beyond the specific proposals, Mr. Polite expanded on Mr. Garland’s theme of treating like cases alike, stating that “when we talk about drug dealing and violence, we all have no problem conjuring notions of accountability for the criminal actors.” “But the sheer mention of individual accountability in white-collar cases,” Mr. Polite continued, “is received as a shockwave in our practice.” Mr. Polite emphasized how “[t]hat inconsistency, that hypocrisy, is yet another reason why some question the credibility of our criminal justice system.”

Mr. Garland’s and Mr. Polite’s stated commitments to prosecuting culpable individuals and to vindicating the interests of crime victims, on their surface, appear in line with longstanding DOJ priorities. But their remarks leave at least two important questions unanswered.

First, and most importantly, when Mr. Garland speaks of adhering to the rule that “like cases are treated alike,” what exactly does he mean? Mr. Garland and Mr. Polite each expressed this idea in multiple ways, as when they suggested that there should not be “one rule for the rich and another for the poor” (Mr. Garland), or certain “notions of accountability” for “drug dealing and violence” but not for “white-collar cases” (Mr. Polite). Neither Mr. Garland nor Mr. Polite explained precisely what it might mean to treat like cases alike, or the rich like the poor, or “drug dealing and violence” like “white-collar cases.” But these messages suggest that this DOJ intends to make efforts to ratchet up the penalties it seeks for individual white-collar defendants.

When Mr. Garland said that there cannot be one rule for “the powerful and another for the powerless,” and “one rule for the rich and another for the poor,” the implication is that white-collar defendants (the powerful, the rich), should not be given a pass when street crime defendants (the powerless, the poor), face stringent penalties. Mr. Polite seemed to confirm this meaning when the spoke of the “inconsistency” and “hypocrisy” of treating street crime any differently than white-collar crime.

Neither Mr. Garland nor Mr. Polite spoke expressly of seeking substantial sentences for white-collar defendants. The speeches simply called for equal treatment of comparable cases. Reading the speeches literally in this way could even suggest that Mr. Garland and Mr. Polite intend to seek more lenient outcomes in white-collar cases. After all, prosecutors throughout the country, including Manhattan District Attorney Alvin Bragg, as well as prosecutors in Philadelphia, Los Angeles, and San Francisco, among other places, have policies designed to reduce the penalties involved in cases of drug dealing and (to a lesser extent) violence. Such prosecutors have faced substantial criticism, but have also garnered support. When Mr. Garland and Mr. Polite speak of treating like cases alike—treating white-collar cases on par with cases involving street crime—it is at least theoretically possible that they intend to convey that they will seek to ratchet down the penalties for white-collar crime, in the same way some prosecutors are seeking to ratchet down the penalties for street crime.

But it seems highly unlikely, to say the least, that Mr. Garland and Mr. Polite intended to convey any intention to seek reduced penalties for white-collar crime in line with the approaches taken by certain prosecutors around the country toward street crime. A more plausible interpretation of their remarks is just the opposite: that they intend to seek to ratchet up the penalties for white-collar crime: In the same way our federal system metes out stringent penalties for street crime, they seem to be saying, they will ensure that the system metes out comparably high penalties for corporate crimes. Neither Mr. Garland nor Mr. Polite said this outright, but it is difficult to come up with a more natural interpretation of their remarks about treating like cases alike.

There is nothing novel, however, about the idea that white-collar sentences should be ratcheted up to the level of street crime sentences. The idea is as old—and as problematic—as the United States Sentencing Guidelines themselves. More than a decade ago, in a 2011 article called “Sometimes the Cure is Worse Than the Disease: The One-Way White-Collar Sentencing Ratchet,” Carlton Gunn and Myra Sun observed that “the U.S. Sentencing Commission has been hard at work since 1987, gradually narrowing the disparity between sentences for white-collar offenses and crimes such as those involving violence, stealing, and firearms through amendments to the sentencing guidelines.” As a result, they wrote, the “disparity” in sentences “is disappearing.” The authors acknowledged how eliminating this disparity also eliminates, or lessens, “the human rights problem of disparity between defendants whose differences may be rooted in race, class, and social factors”—problems that Mr. Garland and Mr. Polite alluded to as continuing ones. But, the authors argued, the Sentencing Commission had attacked this “problem of white-collar and ‘blue-collar’ sentence disparity” in “the wrong way, by grossly increasing white-collar crime sentences.” The increase in white-collar sentences, they explained, is highly problematic and “highlights another human rights problem in this country—the unhesitating and grossly excessive use of incarceration as a purported remedy for crime.”

The same criticisms these authors leveled at the Sentencing Commission and the Sentencing Guidelines in 2011 could apply equally today to any intent Mr. Garland and Mr. Polite may have to seek increased penalties in white-collar cases. First, in a country where we “put people in prison for so much longer . . . than in other first world countries,” one could reasonably ask why the DOJ would be calling for any substantial increase in sentences for corporate crimes—or any crimes—rather than purely for the reduction of sentences for blue-collar crimes. Rather than increasing punishment, the Biden Administration promised to reduce the prison population. Second, the idea that white-collar crime should be punished more strictly, as the authors of the 2011 study point out, is not properly rooted in any “empirical research.” Third, as the authors also observe (and as I have written about elsewhere), “long sentences do not seem to be necessary to deter crime,” perhaps “especially in the case of white-collar offenders.”

The DOJ’s “waxing” interest in white-collar enforcement (to use Mr. Garland’s word) could potentially stem from a perceived failure of the prior administration to tackle white-collar crime aggressively, and from anecdotal examples of seemingly lenient dispositions. Going forward, it remains to be seen whether the DOJ will in fact aggressively seek enhanced penalties in white-collar cases in a manner out of step with other criminal justice reform efforts.

A second question raised—but not answered—by Mr. Polite’s remarks in particular is how the DOJ will take victims’ interests into account in white-collar cases. If victims’ interests are to be considered—and Mr. Polite suggested those interests will receive careful consideration—the initial question for DOJ prosecutors and defense attorneys is simple: Who are the victims? In some cases, the answer is easy. Mr. Polite highlighted, for example, “the 40,000 victims worldwide of the Bernie Madoff fraud scheme.” In many other white-collar cases, however, identifying the victims is not so easy. For example, it is not clear who are the victims of insider-trading schemes. Some argue that insider trading is a victimless crime entirely. Similarly, some argue that there are no victims of spoofing, another white-collar crime that has been of increasing interest to prosecutors. In other cases, the victims of white-collar crimes are large institutions or governments where the losses are diffuse and not felt directly by individuals, unlike in Mr. Madoff’s case where identifiable victims lost their life savings. Institutional and governmental victims are no less worthy of consideration, but crimes that victimize institutions are arguably (though not necessarily) different in their degree of culpability from crimes that victimize individuals.

Mr. Polite acknowledged that “in the white-collar space, especially in the corporate context, identifying the individuals harmed and affected by a crime is not always a straightforward exercise.” But even while acknowledging this important question, his speech left open another one: If the DOJ is going to look at harm to victims as an important factor in assessing the appropriate disposition in a white-collar case, how will the DOJ treat white-collar cases that do not have an identifiable victim? Or those with corporate or government victims and diffuse losses? Is the DOJ prepared to offer more lenient dispositions in those white-collar cases that do not have identifiable victims? And if not—if the DOJ intends to seek stringent sentences in white-collar cases regardless of the presence of individual victims—then does the DOJ truly intend to take victims’ interests into account in determining the dispositions of cases?

There is little to take issue with on the face of Mr. Garland’s and Mr. Polite’s stated interests in individual accountability and victims’ rights in white-collar cases. But to the extent their speeches may be read to signal that the DOJ is reflexively falling back on the view—dating back decades—that white-collar sentences should be ratcheted up, policy-makers at the DOJ should consider carefully whether that approach, and the increase in the prison population it entails, truly serves the goal of treating like cases alike.

Ariel Cohen, an associate at the firm, assisted in the preparation of this blog post.

To read more from Brian A. Jacobs, please visit www.maglaw.com.