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Punishments that Fit the Crime?

Two principals of a defunct investment management firm pleaded guilty to a fraudulent tax scheme that generated $9.6 billion in fake losses. In order to offset capital gains taxes to wealthy clients, the partners essentially defrauded the government of $240 million.

What is interesting from a business ethics standpoint is not their relatively small $7 million fine, reduced prison time, or egregious crime, but the type of consequence handed to them “in the meantime.”

Both men must address students at their former universities—the University of Washington School of Business for Greenstein and the New York University School of Law for Wilk—about business and legal ethics.

It appears the court believes that society or business ethics education has something to gain from their story. Certainly, our culture can benefit from the reflections and actions of reformed convicts: former MCI WorldCom Executive Walter Pavlo and Special Counsel to President Nixon Charles Colson come to mind. I’m sure that many—from a sensationalist standpoint—want to hear from these experts in tax evasion. However, would these ad hoc lectures truly serve as appropriate and fitting “punishments?” What kind of message do they send to future lawyers and prospective entrepreneurs?

Certainly an argument could be made that the business partners made off well financially in the meantime before their indictments . . . and with possible offshore accounts, who knows? What kind of attitudes would seep out underneath their expected warnings and statements of contrition: true remorse, subtle arrogance, or ultimate displeasure at getting caught?

The notion of a forced confession from tarnished alumni just does not seem enlightening. Think of arguments and fights between spouses or kids. Sincere and reflective apologies often require a time out or in this case imprisonment. Another possible purpose, albeit faint, is the malicious intent to humiliate the defendants publicly in front of their alma maters−certainly a strange form of cruel and unusual punishment.

Delivering a mandatory public confession seems premature, but the press could be missing some important facts from this story. A year has passed between indictment and conviction; the defendants and the judge need the benefit of the doubt. If the principals are truly remorseful, desire to tell their story, and their business and law schools are agreeable then by all means . . . but if the lecture is an artifice of the court, and the defendants’ intentions are anything but true, then we should heed Pavlo’s recent blog: “Not Every Felon is Worth Hearing From”−at least not yet.

Thanks to Alexander Sum for pointing me toward this interesting piece.

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