In a recent post to this blog, Professor Amy Sepinwall made a startling argument. Reflecting on the debate between liberals and conservatives over the Sentencing Reform and Corrections Act of 2016, she strongly suggested that the Act’s strengthening of the mens rea element in criminal cases should be limited to the disadvantaged and not extended to “the already advantaged.” She applauded the proposed bill for providing “deserved fairness for the disadvantaged,” but appeared to lament the fact that a more stringent mens rea requirement under that bill would be available for “some senior corporate management ‘fat cats,’” as well. This position is consistent with her defense of the “responsible corporate officer” doctrine, which does away with any mens rea requirement in certain cases against high level corporate officers.
Perhaps Professor Sepinwall meant to reflect on the motives of those conservative Republicans who are pushing for criminal justice reform, but in making her argument she leaves her readers with the impression that the requirements under the criminal law should vary according to the economic status of defendants. Coming from a professor of law, her approach is surprising.
The truth is that political concerns have infected criminal law enforcement in this country, especially when it comes to the investigation and prosecution of white collar crime, to a troubling degree. This is undoubtedly the result, at least in part, of the anger people feel toward Wall Street as a result of the Great Recession. That anger is certainly understandable, but even the most intense anger does not properly translate into criminal indictments of Wall Street “fat cats.” Traditionally, when proving fraud, prosecutors must indeed prove mens rea – that the defendant was at least generally aware of the wrongful nature of his or her conduct. Indeed, criminal intent is a critical element of any fraud prosecution, and, notwithstanding the “responsible corporate officer” doctrine, mere negligence has not generally been criminalized.
It must be conceded that much of what caused the Great Recession was negligent conduct – a series of missteps by a large number of people. The easy business of selling residential mortgages to be packaged and securitized dramatically lessened the risks faced by mortgage banks and led mortgage bankers to relax their standards. Those investment bankers who bought up and securitized the mortgages relied on the common wisdom that pooling mortgages allowed them to spread and thereby lessen the risk to residential mortgage backed securities investors. The institutional buyers of those securities bought into that system and purchased the instruments believing that the risk of default had been greatly reduced. Almost no one anticipated the collapse of the housing market and the resulting disintegration of value in mortgage securitizations. Negligence was indeed widespread.
Nevertheless, politicians, the press, and investors called out for the indictment of senior Wall Street executives, missing, or choosing to ignore, the difference between negligence and criminal intent. That difference can sometimes be hard to discern, especially where defendants made lots of money off their mistakes. But good prosecutors know to look for solid proof that the people they charge intended to cause harm, not that they simply screwed up.
This point was repeatedly made, in the face of often scathing criticism, by Preet Bharara, the former United States Attorney for the Southern District of New York. Speaking to The New Yorker, Bharara explained,
There’s a natural frustration, given how bad the consequences were for the country, that more people didn’t go to prison for it, because it’s clearly true that when you see a bad thing happen, like you see a building go up in flames, you have to wonder if there’s arson. You have to wonder if there’s anybody prosecuting. Now, sometimes it’s not arson, it’s an accident. Sometimes it is arson, and you can’t prove it.
To take Mr. Bharara’s point one step further, changing the mens rea standard for one select segment of the population, while leaving it alone for another simply because a “bad thing” happened, would likely pose serious Equal Protection questions.
When journalists and politicians run roughshod over the critical distinction between intentional fraud and negligence, and call from the rooftops for the prosecution of senior executives, they do great harm not just to the targets of their ire but indeed to the whole system of criminal law enforcement. It is disappointing that a sophisticated legal analyst would join the call to treat people differently based on their socio-economic status.
To be sure, people from all economic walks of life who screw up and hurt others should be made to pay for their mistakes. However, whether they are “disadvantaged” or “already advantaged,” that payment should not be the loss of their liberty when there is insufficient proof that they knew they were harming others.
Lee S. Richards is a founding partner of Richards Kibbe & Orbe.
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