Justice for a backdater

Larry Ribstein —  11 November 2010

Two days ago I discussed the sentencing of KB Home’s Bruce Karatz, where the court was weighing the Probation Office’s recommendation of home detention against the U.S. Attorney’s 6.5 year jail sentence recommendation.  I noted the argument that was being made that “swindlers shouldn’t be treated better than dope dealers,” and responded “Injustice to drug dealers doesn’t justify injustice to backdaters.”

Peter Lattman writing in today’s Dealbook reports that the judge not only accepted the Probation Office’s recommendation, but slammed the prosecutors.  The prosecutors had argued:

To promote respect for the law, the public must be assured that a wealthy, well-connected individual, regardless of his station, array of prominent friends and associates, history of private success or acts of public largess, will be subject to the same standard of criminal justice as those less fortunate.

Judge Otis D. Wright II called the memo “mean-spirited and beneath this office,” adding:

But what was even more disturbing was the inflammatory language in the government’s report that if this court did not impose a harsh sentence that it was evidence of a two-tiered justice system, one of the rich and one for everyone else. To invite public ridicule and scorn on this institution, I think, is unspeakable.” * * * I don’t care, sir, whether or not you have a pot to piss in,” Judge Wright said to Mr. Karatz. “What you get here is fairness.

John Emshwiller of Enron story fame, reporting on the sentencing in the WSJ, evidently didn’t think the judge’s outburst was very notable, since his only reference to it in the story was the mild comment:  

The judge also criticized the prosecutors for raising the specter in their filings that Mr. Karatz might receive leniency because of his wealth and success.

Larry Ribstein


Professor of Law, University of Illinois College of Law

4 responses to Justice for a backdater


    Yes, this business of treating white-collar criminals as if they were violent offenders is insane. Part of it comes from a sans-culotte/scruffy Bolshevik attitude that the privileged all ought to be sent to the guillotine. But a lot of it comes from insecure congressional aides who think all their work drafting legislation will be ignored if they don’t criminalize everything they wish to ban, and add in huge mandatory sentences to boot.

    There are a lot of questionable business practices that are and ought to be banned, and sanctioned. Most of them need not be felonies: it’s quite enough to censure the offender and fine his organization. In 95 – 99% of all cases, it won’t happen again in the same place. For those who continually flaunt the law there are other penalties available; there’s also the little point that shareholders and lenders will almost always pull the rug out from under such an enterprise. Enough is enough, unless you agree with the mobs that felt that merely owning some silk knee breeches was grounds for cutting someone’s head off.

    save_the_rustbelt 11 November 2010 at 6:15 am

    If he was a poor black kid with a drug problem he would be slammed into a medium to maximum security federal lockup for a long time.

    Hate to say it (for lots of reasons) but I have to support DOJ on this one.

    And of course no UBS bankers are waking up in federal prison this morning, except for the whistleblower who exposed the largest tax evasion scheme in US history. Blame DOJ for that.


      As Larry pointed out, one injustice doesn’t excuse another. As for “the bankers” who aren’t doing hard time: (a) sorry, but you have to be convicted of a felony before you can be sent to jail, even in our post-2008 world, and (b) the problem with offenders not being sanctioned isn’t that the laws are too lenient, it’s that regulation has been spotty to nonexistent, with the big banks being given free ‘get out of jail’ cards because the authorities were persuaded that otherwise the financial system would freeze up altogether.

      One of the problems with draconian enforcement is that it is so drastic, and so expensive, that it is almost always used arbitrarily, which psychologists will tell you is less effective than the near-certainty of a less drastic penalty.

      BTW, it isn’t clear that all the people you are condemning in “the largest tax evasion scheme in US history” were guilty of anything at all, other than being a convenient scapegoat for the press. I have a special place in my heart for the people who were gambling in derivative markets with their shareholders’ capital, rather than focusing on the dull business of lending money to those with a chance of repaying it, which is what they have their licenses for. But that was bad business judgment, not a felony, and I would expect that those responsible should be run out of the business, rather than spot-picking a few for long jail sentences, and letting the rest go their merry way, which is what seems to be happening.

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