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The U.S. Sentencing Commission is feeling the heat as it struggles to implement its part of the Sarbanes-Oxley Act. In temporary guidelines adopted in January, the commission significantly increased penalties for major white-collar violations, but left terms for lower-level business crimes untouched. That rankled the U.S. Department of Justice, which wants a crackdown across the board. The department may get its way, concede sentencing officials. They say they will take another look at the penalties for lower-level offenses as they draft permanent guidelines, due to Congress on May 1. While the fight is partly Beltway politics — with Justice and the Bush administration wanting to look tough on corporate crime — there are other reasons for the dispute. For one thing, Sarbanes-Oxley didn’t give the commission much guidance. When legislators wrote the sweeping corporate governance act, they increased the penalties for certain high-profile offenses. For example, the maximum term for mail and wire fraud went up fourfold, to 20 years. But for all other white-collar crimes, Congress gave the commission a vague charge to toughen the penalties for “serious fraud offenses.” The commission took that to mean it should address violations on the scale of Enron Corp. or WorldCom, Inc. Specifically, sentencing officials decided to target only those crimes that affect more than 250 victims or involve more than $200 million. Penalties for those offenses were upped by 25 percent or more in the temporary guidelines. The commission also increased sentences for violations that endanger the solvency of a large corporation, or that involve a company officer or director. An executive who defrauds more than 250 people out of more than $1 million would receive 121 — 151 months in prison, more than double the time under previous guidelines. Small Fry And Big Fish But for lower-level crimes — those involving smaller amounts of money and fewer victims — the agency didn’t increase penalties, and that upset Justice. “We were less than satisfied” with the temporary guidelines, says department spokesman Mark Corallo. The commission, he maintains, “seems to have disregarded the intent” of Sarbanes-Oxley. Justice argues that harsher penalties for lower-level crimes are necessary so that prosecutors will have the leverage to force small fry to incriminate big fish. For example, the department wants to require prison time for all frauds greater than $50,000, and to eliminate a judge’s discretion in handing out probation in such cases. The Justice Department’s stance infuriates Amy Baron-Evans, a white-collar criminal defense attorney who serves on the sentencing commission’s advisory board. “It’s ridiculous — it’s all political,” she says of Justice’s demand to throw the book at secretaries and clerks. The partner at Boston’s Dwyer & Collora is also worried that the crackdown will be implemented unfairly. Baron-Evans notes that after penalties for drug offenses were increased in the eighties, thousands of dealers ended up in jail, yet most kingpins were left unscathed. Another member of the advisory group draws the same parallel. “It wasn’t the Colombian cartel leaders who got thrown in jail for life,” this lawyer says. “It was the lower-level people.” Still, sentencing officials say that Justice’s concerns about penalties for lower-level violations will likely be addressed in the permanent guidelines. Disagreements On The Ultimate Effect This won’t be the first time the commission has gotten tough on executives. It increased penalties for business crimes in November 2001 — the first revamping of the guidelines for white-collar offenses in 14 years. Punishments were stiffened considerably for all crimes involving more than $120,000. And despite the heated arguments over how much the commission should hike sentences this time around, it’s hard to tell how much impact those actions will have. Jennifer Arlen, a professor at New York University Law School who studies corporate crime, notes that on the one hand, most judges don’t hand out the maximum sentence in white-collar cases anyway. Increasing penalties, therefore, may be a moot point. On the other hand, Arlen points to what happened after Congress expanded the guidelines for criminal fines levied against corporations in 1991. In a study eight years later, Arlen found that heavier sanctions were imposed not just in cases that fell within the revised guidelines, but also in those that did not. The upshot? The current outrage over corporate crime may prompt prosecutors and judges to seek and hand out tougher penalties, regardless of how the sentencing guidelines are changed.

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