What’s That Smell?

Am I the only one who finds our system of justice sometimes strange and inconsistent?  My attention was caught by a short item in Wednesday’s USA Today (6/22/2011, p. B1).  It reported that,

Psst. Wanna Buy A Mortgage?

The CEO of what had been one of the nation’s largest privately held mortgage lenders was sentenced to more than three years in prison for his role in a $3 billion scheme that officials called one of the biggest corporate frauds in U.S. history.   Paul R. Allen was sentenced to 40 months.  Allen was CEO at Taylor Bean & Whitaker, which collapsed in 2009, resulting in its 2,000 employees losing their jobs.  The fraud also contributed to the collapse of Colonial Bank after it bought millions of dollars in Taylor Bean mortgages that had already been sold to other investors.  Deutche Bank and BNP Paribas lost nearly $2 billion after buying corporate paper from Taylor Bean that was not properly backed with collateral.

One thing that puzzled me, considering the seismic fiscal magnitude of the offense, was that there was no mention of a fine or recoupment.  Not a dollar, not so much as a farthing.  And yet thousands of employees, investors and stockholders were financially devastated by this man.  Shouldn’t the government have stripped this guy of his excess wealth and given it to reimburse the injured?  I don’t get it; maybe some reader can suggest a reason, but it is beyond me for sure.  I looked for additional details and found some on the FBI site, but no mention of a fine.

Then there was the short sentence.  Forty months?  Are you kidding me?  People get more than that in some places for getting caught with a joint of marijuana, or even for petty theft.  Probably get out early on probation too.  A search engine turned up one headline like this:  “Man Gets Six-Year Prison Sentence for Stealing pair of Socks”.

So what was Mr. Allen’s line of defense?  I found it on yet another web site.  It was this,

Executive Board Room Facility at Crowne Plaza ...

In a sentencing memorandum filed June 13, Allen argued that he had little influence on his former company’s operation and should not receive severe punishment for a scheme orchestrated by others. Prosecutors sought a five-year sentence.

Get that?  This guy, whom his company apparently thought worth his $400,000 annual salary and a potential $5,000,000 stock bonus, had little influence on his company’s operation.  Gee, I wonder what his salary would have been if he could actually cause something to happen?

I have always thought that penalties should be in proportion to the magnitude of the crime, and in proportion to the responsibility involved and the authority exercised.  In this age when CEO’s are compensated lavishly, sometimes making as much in a day as a worker does in a year, sure seems to me that something is rotten in Denmark.  And in the executive suite.

[Author’s note:  bold emphasis in quotations were added by me.]

About Jim Wheeler

U. S. Naval Academy, BS, Engineering, 1959; Naval line officer and submariner, 1959 -1981, Commander, USN; The George Washington U., MSA, Management Eng.; Aerospace Engineer, 1981-1999; Resident Gadfly, 1999 - present. Political affiliation: Democratic.
This entry was posted in Accountability, Economics, Justice and tagged , , , , , , , , . Bookmark the permalink.

9 Responses to What’s That Smell?

  1. johncerickson says:

    There’s an old saying. “Justice costs money. How much justice do you want?” The more money, the less time you spend behind bars. In this guy’s case, I wouldn’t be that concerned about the amount of time behind bars if they stripped him of every penny he made since his company first sold those mortgages, and as you suggest, put that into a fund to pay off the people who lost everything.
    But that won’t happen. Because he wanted a lot of justice, and he had the money for it.
    Sad, but true.


    • Jim Wheeler says:

      Right, John. Makes one examine the circumstances. Let’s see.
      A. Judges are lawyers.
      B. Politicians are lawyers.
      C. The ABA gives lots of money to politicians’ campaigns.
      D. Lawyers make a lot of money on cases like this.
      E. Rich defendants need a lot of money to pay their lawyers.
      F. Rich defendants get to keep the money they made cheating their victims.

      Egad. I think I may see a pattern here! What do you think of this circumstantial case, jury?


  2. ansonburlingame says:

    To both,

    Making the guy pay back the losses is a great idea. BUT, did or does he have any money left now becomes the question in part. It could well be that the turnip has no more blood in it for any number of reasons. And try getting any of that money paid to lawyers for his defense. Probably a few million right there.

    For the prison term length, I also agree that if he in fact did as described he should be locked up and the key thrown away. Are there not some sentences that demand restitution and when the guilty have no money to pay the restitution they spend a day in jail for $X per day to repay that owed? Apply the same standard to the “rich”. Bet he might reach into an offshore account to get out of jail with such a sentence would he not?

    Now let’s talk about OJ, again.



    • Jim Wheeler says:

      If anyone believes that Allen the turnip doesn’t have millions socked away, I’ve got a bridge to sell them. But, here’s the thing. If the feds tried to get some blood back out of him and failed, why didn’t the press cover the effort? The way I see it, either the press failed or the Feds did.

      As for OJ, just because the system failed that time is no reason, IMO, to restrain outrage in other cases.


  3. ansonburlingame says:

    I think I expressed outrage in BOTH cases and probably come up with a few hundred more if I looked hard enough. I could also find many cases where indigent people got a raw deal from the justice system because they could not afford a lawyer and had to rely on public defenders.

    But then I don’t know ANY system of justice that renders real justice in all cases. Maybe we ought to add that one to our list after we fix Medicare and SS. But for now we have so many things to fix in America according to some people and not nearly enough money to do 25% or them at least in my opinion.

    So when I read about yet another “need” to do something I will first ask which other “need” should be deleted from our current list. OR we can just expect the government to fix it without any more money. Ha. try that one, like make all current judges and lawyers “play fair” and dispense real justice. Right now we have a system that “who pays the most for a lawyer” has a much better chance of winning, justice be damned.

    While I acknowledge the problem I will let you, Jim, tilt at that windmill while I tilt at debt and deficit for the time being.



    • Jim Wheeler says:

      Hmm. I am not thinking of this one as a problem that should require money to fix. Right now I am blaming the press for not even bringing up the money issue. I do know that it was a very big issue in the Bernie Madoff case, and that a considerable amount of money has been recovered for the victims.


  4. sekanblogger says:

    Great post Jim. I share your outrage.
    There are poor dumb kids doing more time for getting caught with pot.
    Jesus wept….


  5. IzaakMak says:

    I know that no one likes to equate life with dollars, but as far as I’m concerned, the person who causes what it’s taken me my entire life to build to just disappear has robbed me of my entire life. A slap on the wrist and a few months in “Club Fed” just won’t cut it for punishment!


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