Crime and Punishment: Sentencing in Financial Fraud Cases

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While investigating fraud for more than a decade, I have consistently been amazed by the disparity among criminal sentences in financial fraud cases. Of course, there are many facts that go into a sentencing decision, and so it is difficult to make an apples-to-apples comparison of sentences between cases.

However, it’s clear to me that there is a wide range of sentences that are not necessarily fair to either the victims or the fraud perpetrators. We can’t discount the fact that determining a sentence is a complex process. There are many factors that come into play, so simply assessing the number of years at the end of the process is a little simplistic.

Yet the fact remains that disparities in sentencing should be examined closer. Lawmakers, judges, and prosecutors owe it to consumer and victims to work toward a system that is fair and equitable to all parties. Continue reading

Executive Prison Sentences and Fraud Deterrence

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One of the key parts of Sarbanes-Oxley, the legislation created to address the problem of massive financial statement fraud at public companies like Enron and WorldCom, was the increased prison sentences for executives participating in fraud.

Supporters of the legislation cheered harsher potential punishment for executives as one of the keys that would help prevent fraud.

Others weren’t so sure that longer prison sentences would really do anything to deter executives who want to commit fraud. If you’ve studied corporate fraud for any length of time, you have seen that fraud by executives is often fueled by feelings of arrogance and entitlement. These are important pieces of the fraud puzzle for executives, and they are part of the reason why executives may be unphased by penalties for committing fraud. Continue reading