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,
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,
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.]
- Colonial Bank exec sentenced to 8 years in prison (seattlepi.com)
- Former Taylor Bean CEO Allen Admits to Fraud Conspiracy (businessweek.com)