When someone is alleged to have stolen $50 billion, it’s the birth of an industry.  Previous financial felons like Jeffrey Skilling of Enron fame, $1 billion and 24 years, or Bernie Ebbers of Worldcom, $2.2 billion and 25 years, look like pikers in comparison.  So what do we do with him?

The first issue is bail.  Ken at Popehat provides a great discussion of the law pertaining to release from federal custody in contrast to this stroke of genius from The Corner at the  National Review.

A Despicable Decision   [ Larry Kudlow]

It was Federal District Judge Gabriel Gorenstein who released big-time, $50 billion scam-artist/fraud/crook Bernard Madoff. He is the one who did it. This ruling allows Madoff to stay out of jail, even though he couldn’t meet the original bail conditions that he provide four co-signers to his $10 million bond.

Write Judge Gorenstein. E-mail him. Call his office. (Contact info here.) Let him know what a terrible injustice he has done to every law-abiding citizen in this country, not to speak of the victims of this incredible fraud.

It is an outrage to me that Madoff is sitting back home in his $7 million Park Avenue pad after what he did to this country. What a joke. It is a complete and utter outrage. 

Don’t get too close to Larry Kudlow, or some of that foam around his mouth is likely to spray you.  As Ken ably notes, Kudlow’s venom may be well placed, but premature.  We try to convict first, then punish.  Bond is an entirely different matter, having nothing to do with punishment.  Of course, one can’t help but wonder when someone with Bernie Madoff’s resources, and at his age, might have an incentive to take an extended vacation in the south of France.  Bond secured by $10 million would likely keep most of us put, but this is what Bernie spends at El Posto for appetizers, and may not mean as much to him as to others.

Should we eventually get to the point of conviction, however, there remains a troubling question.  How does one sentence someone like Bernie Madoff?  Harlan Protass at Slate argues that we’ve lost all perspective.  While accepting the premise that more drugs should mean a longer sentence, he questions whether more money stolen means the same.

Tying jail terms to the amount of money lost also puts way too much power in the hands of prosecutors. It gives them the muscle to threaten long prison stretches in order to coerce guilty pleas. If it weren’t for the risk of lengthy sentences if convicted, many defendants might opt to test the government’s evidence before a jury.

Linking jail time to dollars lost also severs many of the ties to factors courts are supposed to consider when determining and imposing sentences. For example, a relatively short prison term—years, not decades—can be enough to deter prospective financial fraudsters. And economic offenders pose little future threat because they’re generally stripped of powers that would permit continued criminal conduct. Also, aren’t there more fitting and useful ways to punish the titan fraudsters of Wall Street? Strip them of their wealth. Make them work to pay back those they ripped off or to serve the public good.

The gist of Protass’ disconnect seems to connect more to the relative severity of sentence between white collar and street crime. How does one compare a murder to a billion dollar theft?  How does one compare the harm done to one person, and all those who are related to that one person, versus the 10,000 people whose lives are left in shambles as a result of a crime? 

Protass focuses almost exclusively on the individual deterrence factor, and is likely right that these defendants will never have an opportunity commit a similar crime again, ending any concern about recidivism.  But that’s not the only factor to be considered.  General deterrence seems a far larger concern here, and that may well be a numbers game of some concern.  Would you risk a five year prison sentence for $10 billion?  Many people would, and frankly wouldn’t be all that upset to serve it if they’ve hidden their assets well enough so that they (and their family) can enjoy the benefits in their golden years.

Doug Berman, naturally, has much to say about Protass’ sentencing issues.

For me the core problem with an obsessive concern with loss amounts is that, in many settings, the quantifiable amount of “loss” under the guidelines often has little or no connection to offenders’ culpable mental states and subjective culpability.  There are suggestions, however, that Bernie Madoff was in fact very culpable (perhaps for a very long time), and that the high loss levels in his case may have a direct relationship to his subjective culpability.

Moreover, Harlan’s effective commentary still effectively ducks in the hardest question: exactly what punishment levels should be the norm in large-scale frauds involving public companies.  He suggests that years and not decades may be the right ballpark, but there is a huge gulf between say three and thirty years imprisonment.  These cases are so hard — and the current guidelines are so inadequate — because we do not have a ready metric or shared moral sense of how best to assess these kinds of crimes.  But, as suggested above, I do think subjective culpability should be more important and that “loss” concepts are too important in the current federal sentencing scheme.

There’s no doubt that the existing guidelines are inadequate to handle cases such as this, truly beyond the anticipation of the United States Sentencing Commission.  But Doug’s point, that there is no rational metric to judge how much time in prison is proper for conduct of this magnitude, is certainly true.  Is it even possible?

From my standpoint in the trenches, the one troubling aspect of the Bernie Madoff case has been the tossing about of the $50 billion number.  As Harlan Protass notes, the sentencing guidelines put too much sentencing power in the hands of prosecutors when sentence is determined based upon financial loss.  Right now, we haven’t a clue whether this $50 billion is real or sheer hyperbole, yet it’s already so ingrained in the myth of the case that it’s got Larry Kudlow spitting.

Many of these cases leave the subject of loss amount wide open, almost impossible to ascertain with any degree of precision.  Rob a bank and we know how much was taken.  But sophisticated schemes involve all sorts of calculations, many in dispute, and reflect money in and out all over the place.  The government tends to only add up the money going out, without adding back the money coming in.  It’s too much trouble and doesn’t help their position. 

The guidelines are awful when it comes to determining loss amount for white collar crime.  Rather than provide for anything approaching a sophisticated assessment of actual loss, it basically punts and allows the court to estimate the loss in the most simplistic fashion.  Regardless of whether numbers are small or huge, they rarely have much foundation in actual loss.  With a good old murder, at least we have a body count.

Caselaw has helped on an ad hoc basis, narrowing the definition of loss to the actual amount gained in certain instances, but hardly enough to cover the problem with plea agreements that provide for an agreed-upon loss.  Typically, the more accommodating members of the white collar criminal defense bar will accept a plea that overstates the loss amount by millions because it’s what their buddies (and former co-workers) at the United States Attorneys office put on the table.  Once it’s accepted, there’s no longer an issue.  And we certainly wouldn’t expect them to turn down a plea over a few million, here and there.

But this case, if one accepts the myth as true, is so far beyond the outer limits of the guidelines that there is nothing with which to compare it.  Given his age, it’s likely that Bernie Madoff, bastion of NASDAQ, will end his life in prison.  But if Skilling and Ebbers received about a quarter century for their crimes, does Madoff get a millennium?  Still, it’s not like he killed anyone.  Or is it?

News of late has made it painfully clear how strong a motivator pathological greed can be, and the crimes it’s produced are of a magnitude that no one would have believed possible.  Contrary to Protass’ view, the sentences handed out are insufficient to provide general deterrence on the upper end of the scale.  People will take a lot of risk for a few billion. 

And a few billion loss hurts a lot of people. 

It still doesn’t answer the question of what constitutes a proper period of time in prison for a crime such as Madoff’s, and there is no calm and thoughtful consensus to guide us.  But this may open the debate about how many murders equals a billion dollars of loss, and whether there is any rational basis to connect the two together.  Given the nature of white collar crime of late, this is a discussion that must be had.