Sentencing panel's plan on corporate fraud draws fire

WASHINGTON -- Criticizing a sentencing panel's proposal for punishing corporate wrongdoers, the Justice Department says new guidelines for judges must ensure that corporate criminals spend significant time in prison.

In letters this month and in October to the U.S. Sentencing Commission, the department said the panel's proposals would not significantly increase penalties and would virtually ignore cases of fraud in smaller businesses.

Responding to corporate scandals, Congress approved legislation this year to substantially increase maximum penalties for corporate fraud and obstruction of justice. The Sentencing Commission was directed to amend its guidelines to allow judges to carry out Congress' directive.

"The President and Congress sent a clear message in one voice: that those who commit corporate crimes will be held accountable, and will do real time in prison, just as do those who steal from innocent victims using force rather than guile," wrote Eric Jaso, counselor to the assistant attorney general.

The department said increased penalties should be determined by the amount of loss.

In addition, judges would consider a wider range of conduct as part of the crime and restrict factors that could lower the punishment.

"We believe that these penalty increases should apply not only to the billion-dollar cases that have dominated the news headlines in recent months, but also to the many so-called lower-loss criminal fraud cases that make up the bulk of federal prosecutions across the country," Jaso wrote.

"In addition to the WorldComs and Enrons, the department prosecutes many smaller-scale frauds around the country that, while evidently less newsworthy, nonetheless constitute heart-rending calamities for their victims."

He said Congress did not intend to ignore the smaller cases but the commission's initial proposal did so, and added the plan would "send the entirely wrong signal" that corporate fraud is not taken seriously.