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January 5, 2022

Making the case, because "upper-class offenders ... might be even more reprehensible," for a severe sentence for Elizabeth Holmes

Former federal prosecutor Barbara McQuade has this notable MSNBC opinion piece that makes a full-throated argument for throwing the book ay former Theranos founder Elizabeth Holmes. I recommend the piece in full, and here are excerpts:

Some people steal money with guns.  Other people steal money with lies.  In a court of law, they’re all crooks. But not all crooks are treated the same by the justice system, a fact Elizabeth Holmes may be counting on when it comes to her sentencing....  White-collar criminals like Holmes may not get their hands dirty in the traditional sense, but their conduct is no less criminal than a stickup in an alley.  In fact, upper-class offenders like Holmes might be even more reprehensible; while street crime is often motivated by need, white-collar crime is usually motivated by greed....

The government quantified Holmes’ investor fraud, arguing it amounted to more than $140 million, a figure that will largely influence her eventual sentence. Federal sentencing guidelines consider a number of factors, including the amount of money involved in the scheme. Based on that number, as well as enhancements and the sophistication of her scheme, Holmes is likely looking at a sentence between 14 and 17 years.

Sentencing is a key inflection point for disparities in the criminal justice system.  But will a judge actually give Holmes a 15-year sentence? Holmes’ defense attorneys, like the attorneys of many criminals before her, will certainly try to argue that the sentencing guidelines in white-collar cases are simply “too high.”  This argument has worked with judges in the past, and high-priced attorneys know that judges can reduce the sentence considerably in a fraud case, as long as they articulate a good reason. (Unlike in criminal cases involving drugs or guns, for example, Holmes does not face a mandatory minimum sentence.)...

Perhaps because judges see offenders who look like them or who share similar backgrounds, they often bite on the argument that sentences for white-collar crimes should be something less than the guidelines range.  I have heard defense attorneys argue that their clients have already been punished enough through societal shame.  You can imagine one of these white-collar defendants lamenting to his lawyer that he can’t even walk through the country club dining room without getting a nasty look from a fellow member.

The other advantage white-collar defendants enjoy at sentencing is their ability to showcase a life of good deeds and letters of support.  An upper-income defendant can often point to service on boards or donations to charitable causes as mitigating factors.  Here again we find problematic disparities baked into the justice system: A low-income defendant lacks the resources to amass anything resembling that kind of track record.  Similarly, while a defendant like Holmes can likely find prominent people to write her letters of support, a defendant lacking her resources usually also lacks the connections needed to mount a similar campaign.

Another argument often made by defense attorneys in white-collar cases is that incarcerating their clients would be a waste of resources because they pose no threat to public safety.  This may be true, but the federal sentencing statute provides that the purpose of sentencing also includes deterrence and just punishment.  Deterrence is especially important in white-collar cases because these are crimes that are carefully planned. No one commits investor fraud in the heat of passion. If defendants who perpetrate massive fraud can get away with a slap on the wrist, then others will calculate that it is worth the gamble to do the same.  A strong sentence in white-collar cases can provide an important data point in that calculation. And fraud is not an inherently victimless crime.

As we think about ways to address racial and economic disparities in the criminal justice system, we should consider not only the disproportionately long sentences that are imposed on street criminals.  We should also consider the paltry ones that are meted out to the wealthy.  We will find out soon enough how Elizabeth Holmes’ sentence does or does not contribute to this pattern.

Because I do not think all that many federal defendants (even "wealthy" ones) actually do get "paltry" sentences — unless and until they cut a special deal with a federal prosecutor, see, e.g., Jeffrey Epstein's first pass — I think we generally need to worry a whole lot more about disproportionately long federal sentences than about problematically short ones.  Still, this commentary  does usefully highlights how advantaged defendants are often better able to present mitigating sentencing factors than disadvantages ones.  For me, that provides a reason for the system to work harder to help the disadvantaged, not a reason to slam the advantaged.  As I expressed in an article nearly 15 years ago, it always worries me when an emphasis on sentencing consistency  fuels "a leveling up dynamic"  that pushes sentences to be more consistently harsh.

Prior related post:

January 5, 2022 at 06:34 PM | Permalink


On the one hand, I'm not unsympathetic to the argument that if a sentence is a priori too high, an underprivileged defendant who received a stiff sentence isn't particularly helped simply by ensuring an affluent defendant gets a long sentence too. On the other hand, all else being equal, a sentence shouldn't depend on one's wealth. So if rich defendants are getting lower sentences on average for the same crimes than poor ones, that very much is an injustice. And something should be done about it.

Relatedly, I also hear your concern about "leveling up" sentences to be consistent.

Nonetheless, I think to some extent you're arguing apples and oranges. The article, as I read it, is specifically distinguishing white-collar crimes, like Holmes did, with, as McQuade puts it, "street crime." Those are totally different categories of crimes to begin with. Moreover, a great deal of "street crime" gets handled at the state level, does it not? Whereas white-collar often tends to be federal, again, as in Holmes' case.

Given the above, I'm not really seeing how anyone on the "street crime" side of the fence has much to fear if sentences over on the white-collar side (a white-collar picket fence?) are amplified—as well they should be, for the reasons McQuade gave. Again, the two sides of the fence are pretty separate and different. So it's far from obvious how things happening on one side necessarily influence things on the other. You can address the injustices in white collar—which are myriad—and it doesn't follow that anything has to change (at least not for the worse) for street crime.

Of course, one thing McQuade totally fails to address is the issue of who gets charged in white-collar cases in the first place. As much as Holmes is—or at least was—a media darling, the actual harm to society from her crimes was fairly minimal. The conduct she was convicted of only involved ripping off some quite careless (despite supposedly being "sophisticated") and greedy high-net-worth individual investors and hedge funds. I'm not trying to say that Holmes' conduct was laudable; far from it, but let's face it, (1) at the end of the day, those HNW investors and funds will be fine—it's not like some poor schmo on the street lost his/her life savings and (2) connected to (1), the investors and funds have ample means to pursue civil remedies without the U.S. Attorney's Office also carrying water for them and tying up scarce gov't time and resources in the process.

Madoff's case was very similar—a lot of juicy headlines, but actual broader impact on society? Not so much. Again, the people who took a bath on Madoff were the well-off and well-connected. It's not like he was accepting investments from any old person; you had to be in the right clique.

Finally, Madoff is a good segue to the financial crisis. Again, nobody at the top of the food chain was even mildly inconvenienced—let alone actually charged or convicted with something. The sole conviction was a low-level peon at Credit Suisse. Oh, and a similar no-name errand boy at Goldman got dinged by the SEC in a civil case—the horrors! Naturally, both of them were foreigners, which fact I'm sure played absolutely no role in the decisions to pursue them.

It's certainly a problem for McQuade if she notes that a lot of the most culpable and reprehensible—in the sense of causing the greatest harm to society—people don't even get charged in white-collar matters. The reason being that it would reflect poorly on her former profession and former colleagues—federal prosecutors. It doesn't make for a fun op-ed that MSNBC wants to publish either. So easier just to ignore it and criticize judges and defense lawyers instead. I'm not saying some criticism isn't warranted there, but it's a little too convenient for McQuade to go easy on herself and her fellow travelers.

Posted by: kotodama | Jan 5, 2022 10:42:34 PM

Oh and credit is definitely due to Prof. B. for mentioning folks who "cut a special deal with a federal prosecutor." That's another third rail I'm sure McQuade wanted to get nowhere near. Sometimes it can certainly be appropriate. But aside from the Epstein case as noted, I'm also thinking of Rick Singer in Varsity Blues. I personally find it absurd that the mastermind of the whole scheme is being dealt with so leniently, while the gov't is out for blood when it comes to his customers, seemingly just because they're celebrities or high profile businesspeople. Again, it'd be pretty uncomfortable for McQuade to delve into that though.

Posted by: kotodama | Jan 5, 2022 10:56:26 PM

Typical hackery from a prosecutor. All they want is long sentences.

Posted by: whatever | Jan 6, 2022 9:52:01 AM

There are a ton of problems with McQuad's argument. It appears she doesn't even consider that maybe the problem is that we are over-sentencing in other cases, not that we are too lenient on white collar criminals.

And I don't think we go THAT easy on them. Bernie Ebbers got 25 years and served 13. Jeff Skilling got 14 and served 12. Bernie Madoff, who pleaded guilty, got 150 years. While such a sentence is obviously impossible to serve out, it sets a benchmark that will no doubt be used to put others in cages for decades at a time.

Incapacitation matters. When you release a gun robber, he can find another gun and go back to robbing people. Elizabeth Holmes at this point couldn't raise money to start up a lemonade stand. Also, Holmes was already sanctioned in a parallel civil case, which doesn't have its equivalent for violent crimes.

I think that 2-3 years, rather than the 15 that McQuade is salivating for, is a pretty significant deterrent. For anyone else similarly situated, the possibility of several years in prison is a pretty horrifying thought, and that is on top of the collateral consequences she is facing and has already faced.

And besides that, are there very many examples like Holmes that even need to be deterred? Her case was pretty unusual, arguably a one-off.

Posted by: Marc Shepherd | Jan 6, 2022 9:59:41 AM

Let's face it, US sentencing "policy" is driven by not much more than retribution. Bill Otis' "just desserts[sic]." McQuaid's argument is retributive in nature. And, I fundamentally agree that white collar sentencing should be harsher relative to what it has been and to other sentencing. From those to whom much is given, much should be expected.

But I also agree that using other sentencing as a yardstick falls into the retributive trap.

Also, while the empirical evidence I believe shows that sentences and sentencing policy has little deterrent effect on common crimes, there might just be some deterrent effect among "upper class" criminals. That is, letting them know that their privileged schemes are in fact unlawful and will be punished. Much like newly criminalizing behavior, which I believe is known to have deterrent effect.

Posted by: Fat Bastard | Jan 6, 2022 11:30:53 AM

@Fat: I think the long white collar sentences are almost entirely retributive. For someone who might be tempted to commit such a crime, what deterrent effect does a 25-year sentence have, that a 20-year sentence does not? Probably zero. To someone who has never seen the inside of a cage, 20 years inside is "an almost unimaginably long time."

Posted by: Marc Shepherd | Jan 6, 2022 3:19:54 PM

Good point, Marc. I think you are actually correct. It's, as usual, the fact of apprehension and prosecution and the fact of conviction, rather than the actual sentence, that provides any deterren effect.

I'm not a criminal lawyer, but when CJ policy comes up in conversation, which it does pretty frequently, you find laypeople citing deterrence all the time, reflecting the belief that it is a legitimate function of sentencing in something other than theory.

I'm pretty strident in pointing out that deterrence is mostly illusory.

On the bright side, it seems most people accept that the rehabilitative justification for sentencing is, practically, nonexistent.

Posted by: Fat Bastard | Jan 7, 2022 10:21:23 AM

Idk how that piece came up with a guidelines range of only 14-17 years. To my non-lawyer eyes, in the 2018 manual, I see the following:

base offense + 140M loss + 10 or more victims + risk of death or bodily injury + security violation + leading role

7 + 24 + 2 + 2 + 4 + 4 = 43.

As I've said before, nonviolent offenders are generally over-punished. Because of the risk of death from fake blood test results, idk if she is nonviolent or not. I'd still like to see 25 years here. I agree with Bill Otis that it probably won't happen.

Posted by: William C Jockusch | Jan 7, 2022 11:25:44 PM

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