Real Execution

An eye for an eye, a life for an ant scheme. That’s the principle that Chinese administrators put in practice last week when they executed Wang Zhendong for fraud. Zhendong had duped investors out of over 400 million dollars with a bogus plan to breed ants with aphrodisiac effects. China thus established a clear policy of (very) tough justice for white-collar criminals who operate on a large scale.

While it may be extreme to expect U.S. district attorneys to demand the heads of Wall Street executives, the financial crisis has raised the stakes on white-collar sentences.

We are officially in a recession now, but we may still think back upon a happier economic time for instruction: prosperous, distant 2005. In that year, two executives of the multi-national manufacturing firm Tyco received prison sentences for stealing hundreds of millions of dollars from the company for various personal purposes—most infamously, former chief executive officer L. Dennis Kozlowski’s $6,000 shower curtain. These sentences—ranging from 8 1/3 to 25 years of incarceration—were considered forceful messages to other executives tempted to skim off their company’s bottom line. Yet Kozlowski and CFO Mark H. Swartz could be granted parole after just six years in prison.

Kozlowski was arguably the most high-profile executive crook of this millennium, but he had plenty of company, in crime and punishment. The top players at Adelphi Communications and Worldcom were also convicted of fraud, and saddled with imprisonments from 15 to 25 years. These sentences are certainly not insignificant. Yet, when you factor in the possibility for parole, the fates of these criminals seems less bleak—especially in light of their Chinese counterpart.

Consider that the multi-billion-dollar scale of Enron executives’ criminal conduct and its destructive effect on innocent people dwarfs the ant scam; however, former CEO Jeffrey Skilling received just 24 years in prison, and two of his associates (and accomplices) could win parole after just five years behind bars.

There will likely be scant accountability following the recent extinction of banks like Lehman Bros. and Bear Stearns, the collapse and sale of Merrill Lynch, or he bailout of A.I.G. Richard S. Fuld, Jr., Lehman’s CEO, might not face any more discomfort than his public roasting by Rep. Henry Waxman, the new chairman of the House Committee on Oversight and Government Reform. No judge can sentence him to pay back the $300 million he took from the company in the last few years, because he did so legally—if unethically.

There is one primary difference between the current crop of crooked executives and those of Kozlowski’s “generation.” The earlier set, today imprisoned, stole money out of largely stable companies for their own personal use. Today’s top guns learned from their example, and siphoned their massive cuts, through bonuses and other forms of compensation, out of firms that turned out to be poorly-managed, colossal houses of cards, ready to collapse at any moment. Doesn’t the latter class of actions beg for convictions and new sentences as much as the former? Why shouldn’t criminal negligence extend to white-collar board members?

Obviously, the United States need not go as far as China by executing these hucksters, nor should it react so sensitively as Latvia, where simply bringing up the financial crisis in a public setting can earn you two years in jail. Yet the U.S. justice system can at least make a symbolic gesture in denying the parole of corporate criminals recently convicted for crimes. Their sentences were hailed not long ago for the strong signal they sent to would-be embezzlers; the time is right to use strict enforcement of those sentences to restate that message.

Kozlowski recently complained that the technically legal actions of executives who profited as Wall Street burned in the past few months were far more damaging and reprehensible than his own theft. Perhaps he’s right; there are some fallen Wall Street executives who ought to join him in jail. They, like he, ought to be made into memorable examples, serving out full terms for their highly destructive crimes.



Alexander R. Konrad ’11, a Crimson editorial writer, is a history concentrator in Quincy House.