Can people go to jail for committing white-collar crime?
By Bruce Livesey
The short answer is yes.
But not very often.
In the early 2000s, after the collapse of Enron, WorldCom and Tyco, the CEOs of these three companies all ended up in prison with heavy sentences.
But only a few short years later, when the 2007-‘09 credit crisis rolled around, no one on Wall Street went to jail despite the banks and investment houses having sold mortgage-backed securities based on toxic debt – and lying about it. That’s the very definition of corporate fraud.
A couple of Bear Stearns executives were charged and prosecuted – but were acquitted.
As PBS’s Frontline exposed in a documentary in 2013 (called “The Untouchables”), the US Department of Justice clearly had grounds to lay more charges for fraud against Wall Street - but for political reasons decided against it. President Obama had taken a lot of money from Wall Street during his 2008 election campaign, and he seemed determined not to hold bankers and investment managers to account.
Whether or not you go to jail often depends on the jurisdiction the corporate fraud occurs in, and who is running the local securities regulator or justice department.
In the US, while still being gentle with corporate criminals, you have a better shot of being sent to jail. Especially if you have an aggressive state’s attorney office. In Canada, by comparison, there is very little chance of that happening.
Take the case of Conrad Black, the Canadian-born former newspaper baron who once ran the third-largest media chain in the world. In 2007, a Chicago jury found him guilty of defrauding his newspaper company, Hollinger International, and he was sent to prison for 37 months.
The Ontario Securities Commission (OSC), the main securities regulator in Canada, had laid almost identical charges against Black as the US Attorney’s office in Illinois had hit him with. The OSC’s charges were laid in 2005.
But the OSC did nothing even after Black was finally released from a prison in 2012 and returned to live in Canada. Finally, in 2013 – eight years after the initial charges – they began a case against Black.
But their penalty was not a prison sentence, but merely banning him from being a director of a publicly-traded company. Which was not much of a punishment given Black stated he had no plans of attempting to become a director of a publicly-traded company.
In fact, governments these days feel the only proper punishment is hitting companies with fines – no matter how serious the crime.
In the case of rampant criminality by banks and companies like HSBC, Wells Fargo, Sino-Forest, SNC-Lavalin, UBS and other conspirators in the LIBOR scandal – no one went jail. Volkswagen and other car companies that engaged in the massive emissions fraud with their diesel cars – no executive has yet been sent to prison (although this might change). Instead, the firms received fines that amounted to slaps on the wrist.
This seems to be the new norm.
In short, yes you can go to jail for committing corporate fraud.
But the chances are remote.