Thomas Coughlin feared a stiff penalty for defrauding Wal-Mart, but he didn’t expect a death sentence.

The former vice chairman of the world’s largest company pleaded guilty in 2006 to looting his ex-employer of $306,842 in cash, gift cards and merchandise, as well as defrauding the IRS of $104,395.

The multimillionaire’s fall from grace attracted widespread outrage, yet his status as America’s latest corporate bad boy didn’t deter Judge Robert Dawson from accepting that Coughlin’s serious cardiac problems could kill him in jail.

Last year he ruled that Coughlin’s “fragile condition” qualified as an “extraordinary physical impairment,” which justified departing from the 27- to-33-month imprisonment federal sentencing guidelines stipulate. Instead the 58-year-old was handed 27 months of home confinement, a fine of $50,000 and restitution of $411,218.

The 8th Circuit, though, wasn’t happy with the reduced sentence. In August it split 2–1 to reverse and remand Coughlin for resentencing on the basis that the district court “clearly erred” and “abused its discretion by departing downward by eight levels.”

It was a rare move for the court, which tends to reverse criminal sentences only in cases where it believes the sentence was too harsh. Emphasizing the defendant’s status as a “successful and prominent” executive, Chief Judge James Loken and Circuit Judge William Riley commented that “perhaps Coughlin’s family ties and station in the community, as well as his lofty corporate position of trust and power, exacerbate the nature of his crimes, especially for Coughlin’s victims: Wal-Mart and, more generally, American businesses.”

Lock ‘Em Up
At trial Coughlin’s cardiologist testified that the stress associated with prison, in addition to the unavailability of certain medications, equipment and specialized care, could threaten the life of his 330-pound patient, who nearly died of a heart attack in 2003. Even the prosecution’s medical expert testified that Coughlin is “at very high risk cardiac- and pulmonary-wise.”

That did little to sway the 8th Circuit. “In a sense the 8th Circuit is saying: ‘If you are breathing, you can go to jail,’?EUR?” says Peter Henning, a professor at Wayne State University Law School who writes a blog about white-collar crime. “I guess there was a concern, on the majority’s part, that ‘you put us on a slippery slope of making finer and finer distinctions as to what will get a defendant a lighter prison term or no prison. Where do we draw the line on excuses?’ “

These days it may be that no excuse will do as corporate fraudsters garner about as much sympathy as child molesters. Coughlin’s litany of ailments, including severe pulmonary hypertension and Type 2 diabetes, got short shrift in the court of public opinion where a leading newspaper denounced his sentence as “a judicial slap on the wrist.”

The 8th Circuit concurred. “The record, omitting conjecture, does not show Coughlin’s condition would worsen in a BOP [Federal Bureau of Prisons] facility or that Coughlin requires special care the BOP cannot provide,” the majority held.

Their conclusion prompted an incredulous dissent from Judge Kermit Bye, who rejected the prosecution’s argument that Coughlin’s case could “open the floodgates” for all criminals to argue prison is too stressful.

“In light of the overwhelming medical evidence in this case, a more prescient concern is who will be granted a departure for an extraordinary physical impairment if not Coughlin?” Bye said.

Defense attorneys say the public’s appetite for retribution shows no sign of waning. “There is no question that post-Enron, post-WorldCom, corporate defendants and white-collar defendants such as Coughlin have been treated much more harshly,” says Barry Boss, a partner with Cozen O’Connor. “It has reached the point of absurdity,”

‘Life’ Sentences
Absurd or not, some fallen corporate titans are serving what amount to life sentences, including John Rigas, the cancer-stricken 80-year-old former chair of Adelphia who got 15 years, and Bernard Ebbers, 64, the WorldCom ex-chair who was sentenced to 25 years.

Meanwhile Enron’s ex-CEO, Jeffrey Skilling, 53, has asked the 5th Circuit to throw out as “unreasonable” his “close-to-a-life sentence” of 24 years.

“To put its severity in perspective, Skilling’s sentence is … 12 years longer than the average sentence for leaders of massive drug conspiracies; 10 years longer than the average federal sentence for armed robbers with extensive felony records; and six years longer than the average federal sentence for first-degree murder,” his appeal brief complains.

Skilling probably faces an uphill battle since circuit courts still are reluctant to countenance downward departures from imprisonment for corporate criminals, even after the Supreme Court decreed in U.S.A. v. Booker (2005) and Rita v. United States (2007) that the Sentencing Commission’s guidelines are advisory and that district courts are empowered to impose “reasonable” sentences that should be overturned only for “abuse of discretion.”

“Since a sentence within the guidelines is almost always affirmed, you are continuing to see high sentences for white-collar crimes,” Boss says.

Prosecutors and legislators argue tough sentences are effective.

“The purpose of these very severe sentences, for those who have urged them, is to say that if anybody is going to be deterred by the possibility of severe punishment, it would be well-educated people who are not acting out of the heat of passion,” says James K. Robinson, a partner at Cadwalader, Wickersham & Taft.