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The extraordinary guilty plea of Andrew Fastow, Enron’s former chief financial officer, is far more than an isolated news event. It is a dramatic sign that the ground has shifted in our treatment of corporate wrongdoing. The agreed 10-year prison sentence for a white-collar defendant in a paper case is layered with significance and irony. This is actually the latest step in an ongoing evolution. There is nothing new about criminals in suits and ties, but it has taken us a long time to recognize the need to treat their crimes seriously. It was not so very long ago that financial and regulatory crimes were rarely prosecuted, and white-collar defendants rarely went to jail. More than 20 years ago, as a young prosecutor with the U.S. Department of Justice, I tried a month-long criminal regulatory case that ended up with a hung jury. The jury did not deadlock on the issue of whether the defendants did something wrong; everyone on the jury agreed that they had. Rather, some jurors could not accept the notion that this wrongdoing was criminal. Criminals, after all, were scruffy-looking bad guys who mugged old ladies on the street, not well-dressed corporate executives who violated government regulations. This was a common perception that took a long time to change. The rise in jury convictions for white-collar crime comes from several factors. One is the media’s need for high-profile targets, leading to greater awareness of such crimes. Second is an increase in cynicism and a decrease in respect for authority generally. Third is the average American’s increased stake in corporate America. Years ago, mom and pop relied on pensions and didn’t invest directly in Wall Street. Today, everyone has a 401(K) retirement savings plan, and average people are hurt directly by corporate fraud. Scandal after scandal chipped away at the notion that corporate executives were the good guys. Pressure outside the courtroom has also had an effect. In Congress, sentencing white-collar defendants has become a political perfect storm. What could be more popular than being tough on crime and tough on the rich at the same time? In 1984, Congress set in motion the Federal Sentencing Guidelines, significantly increasing sentences for white-collar defendants; amendments have continued to raise the bar. Society has an interest in deterring crime. With corruption, bank fraud and other scandals, it has become ever clearer that white-collar crimes were, in fact, damaging to the public and needed to be addressed more aggressively. Prosecutions became more common, and convictions and prison sentences more accepted. Nothing, however, prepared us for Enron and the resulting wave of scandals. The notion that a relatively small group of already rich individuals would use their success to rape and pillage an enormous publicly held company came as a shock. Equally shocking was their ability to wreak such havoc in a company subject to public auditing. And these kinds of fraudulent schemes were being hatched in corporate boardrooms, accounting firms and law firms. A Brave New World Whatever balance we had achieved in the prosecution of white-collar crimes had not worked. Fastow and those like him had not taken seriously enough the likelihood or risks of getting caught. And so the irony. Fastow, having played a key role in demonstrating to all that the old regulatory and law enforcement environment was not working, now becomes a poster boy for this brave new world. Just a few years ago, when Fastow was committing his crimes, a 10-year sentence in any white-collar case was rare. It was unheard of in a case concerning a defendant with no prior record who had pleaded guilty and had agreed to provide what may be substantial cooperation. Fastow has unintentionally reaped what he sowed. He played a key role in creating an environment where such a sentence no longer seems so harsh. Now we get to see whether the government can use Fastow to continue its climb up the Enron ladder and prosecute other top officers. Soon after the plea, the government indicted Richard Causey, Enron’s top accountant. Future Enron defendants will not be able to challenge Fastow’s credibility by complaining that he sold his testimony for a slap on the wrist. Some say Fastow’s sentence is unfair. Certainly, there is a risk that the pendulum may swing too far in some cases, but not here. After all, the dictionary defines justice as due reward or treatment. Small, a former federal prosecutor, is a partner in the Miami office of Broad and Cassel. Small has lectured at Harvard Law School on federal litigation and is the author of Going to Trial and Preparing Witnesses (ABA publishing).

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