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April 5, 2013

"Sentencing the Why of White Collar Crime"

The title of this post is the title of this notable new article by Todd Haugh now available via SSRN. (This article seems especially timely in light of the recent news that a sentencing deal might be in the works for former Enron CEO Jeff Skilling.) Here is the abstract:

“So why did Mr. Gupta do it?” That question was at the heart of Judge Jed Rakoff’s recent sentencing of Rajat Gupta, a former Wall Street titan and the most high-profile insider trading defendant of the past 30 years.  The answer, which the court actively sought by inquiring into Gupta’s psychological motivations, resulted in a two-year sentence, eight years less than the government requested.  What was it that Judge Rakoff found in Gupta that warranted such a modest sentence?  While it was ultimately unclear to the court exactly what motivated Gupta to commit such a “terrible breach of trust,” it is exceedingly clear that Judge Rakoff’s search for those motivations impacted the sentence imposed.

This search by judges sentencing white collar defendants — the search to understand the “why” motivating defendants’ actions — is what this article explores.  When judges inquire into defendants’ motivations, they necessarily delve into the psychological justifications defendants employ to free themselves from the social norms they previously followed, thereby allowing themselves to engage in criminality.  These “techniques of neutralization” are precursors to white collar crime, and they impact courts’ sentencing decisions.  Yet the role of neutralizations in sentencing has been largely unexamined. 

This article rectifies that absence by drawing on established criminological theory and applying it to three recent high-profile white collar cases.  Ultimately, this article concludes that judges’ search for the “why” of white collar crime, which occurs primarily through the exploration of offender neutralizations, is legally and normatively justified.  While there are potential drawbacks to judges conducting these inquiries, they are outweighed by the benefits of increased individualized sentencing and opportunities to disrupt the mechanisms that make white collar crime possible.

April 5, 2013 at 09:49 AM | Permalink


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“So why did Mr. Gupta do it?”


Posted by: Bill Otis | Apr 5, 2013 10:02:58 AM

Love Judge Rakoff (and a number of other federal judges) for his willingness to explore such issues and temper his sentences accordingly. But please, let this analysis only be the start. Let other scholars also explore the motivations of many other classes of defendants -- who are often driven by dire financial need, romantic entanglements, addictions, self-medication, mental and psychological problems -- many of the circumstances that the guidelines found not ordinarily relevant but which deserve consideration in any system that seeks to impose just deserts as well as protect the public.

Posted by: Carmen Hernandez | Apr 5, 2013 11:12:50 AM

Carmen Hernandez --

The question posed in the very first line of the excerpt is "So why did Mr. Gupta do it?”

My answer is greed.

Do you have evidence that Gupta did it ("it" being some zillion dollar swindle) for some OTHER reason? What would that be? Dire financial need? Romantic entanglements? Addictions? What?

It's mind-boggling that, when these tycoons get caught with their hand in the cookie jar, they overnight transform themselves (with the help of expert defense counsel like you) from a person living like a king to a desperate, woebegotten victim.

Far out!

Personally, there were times when money was tight, and I've had my share of "romantic entanglements," but, oddly, I've lived my entire life without swindling people out of their savings in order to make sure I never ran low on smack.

This is not because I'm a saint. It's because I'm a normal person. Maybe Mr. Gupta could have troubled himself................

Posted by: Bill Otis | Apr 5, 2013 11:52:08 AM

And the reason the judges ask the question in these particular cases is that they (the judges) see a lot more of themselves in white collar defendants and so want to understand how their own social norms came to be violated by people seen as being of similar social class. And seen through that light I would say any searching quest for such an answer is entirely inappropriate.

A couple questions on the subject would be fine but not a deep probing for answers.

Posted by: Soronel Haetir | Apr 5, 2013 11:58:21 AM

Soronel --

I saw a lot of sentencings. Asking the defendant why he or she did it was utterly routine.

It was almost always the case that the truthful answer was, "Because I wanted to get money quick without having to work at a lousy job."

And that was the one answer I never, ever heard. This was with almost 20 years of listening.

Posted by: Bill Otis | Apr 5, 2013 12:10:56 PM

The question posed in the very first line of the excerpt is "So why did Mr. Gupta do it?”

My answer is greed.

Do you have evidence that Gupta did it ("it" being some zillion dollar swindle) for some OTHER reason?

Well, the problem with "greed" as an answer for Gupta specifically is that he didn't personally profit from the insider trading in this case, which even the AUSA allowed (http://www.bloomberg.com/news/2012-10-24/rajat-gupta-gets-two-year-sentence-for-insider-trading-1-.html). That's probably a large part of why he is serving two years instead of eleven like Raj Rajaratnam in the same case.

Posted by: dsfan | Apr 5, 2013 2:33:14 PM

dsfan --

No, he didn't put money directly into his own pocket (which he hardly needed to, already being a zillionaire). Instead, he effectively put it into his buddy AND BUSINESS PARTNER'S pocket, as the article you linked makes quite clear:

"While Gupta didn’t personally profit, his tips allowed Rajaratnam to earn millions of dollars, Tarlowe [the AUSA] said."

So I should have said "greed once removed."

BTW, this is what Rakoff, a judge who never saw a white collar defendant he couldn't find SOME excuse for, is reported in your article to have said about Mr. Greed Once Removed:

"The evidence that Gupta passed illegal information about New York-based Goldman Sachs to Rajaratnam, his friend and business partner, 'was not only overwhelming, it was disgusting in its implications,' Rakoff said in court."

Thank you for making my point for me in a manner more refined and precise than I did.

Posted by: Bill Otis | Apr 5, 2013 5:40:00 PM

The law prohibiting insider trading is constitutionally unacceptably vague. One suspects the motive of the prosecution rather than of the defendant. One suspects they are feminist lawyers and male running dogs pursuing the assets of the productive male, sometimes admittedly engaging in sharp business practices. However, no defense lawyer will ever attack the prosecutor for its improper motive.

Posted by: Supremacy Claus | Apr 7, 2013 7:20:10 PM

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