For the past two decades high net worth individuals, with the help of Deutsche Bank, avoided U.S. government taxes. From 1996 through 2005 these individuals evaded approximately $6 billion in individual income taxes through tax shelters constructed by Deutsche Bank. Yesterday, Deutsche announced that it would settle the civil investigation for $553 million and admitted its wrongdoing in illicitly aiding clients in tax fraud. The $553 that Deutsche must pay represents the fees that the Bank collected from the transactions it facilitated plus a $149 million civil penalty. No Deutsche Bank executives were prosecuted; no employees are serving jail time.
This year Giuseppe Spera of Middletown, CT was also involved in criminal activities. He was accused of stealing $170,000 in cars from an auto dealership that he worked for. He was arrested by Middletown police, and as part of a settlement, he is expected to spend three years in prison.
The contrast between these two crimes raises concerns about the equity of our justice system. In looking at the Deutsche crimes it is unavoidable to not be alarmed by the absolute scale of the fraud – billions of dollars of fraudulent reporting leading to hundreds of million dollars of revenue for Deutsche. Guiseppe Spera, on the other hand, embezzled $170,000 of cars from his dealership employer. A crime, inexcusable, but also on a very different scale. Think about how society as a whole suffered as a result of these two crimes.
Our justice system’s punishment for the two crimes is also troubling because they create a startling dichotomy. Justice should serve two purposes: 1) Does the punishment fit the crime (i.e. “a proportional response” and 2) Does the punishment deter future criminal activities? In answering both of these questions, financial regulation and enforcement seems to be inadequate.
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There are a whole host of reasons for the differences in punishment for "white collar" crimes and "street" crimes:
ReplyDelete- Perception plays a large factor: white collar crimes tend to impact a larger population than other crimes whose impacts may be limited to an individual or a family. Since the impact of, lets say DB's tax evasion, is spread across more people, the intensity of the crime may be perceived to be less than say, an individual getting his/her car stolen or murdered.
- Better legal advice/representation: DB probably had more money to ensure that it got the best representation and legal advice that money could buy. Mr. Spera.. probably not.
- Who did it?: more often, its tougher to assign blame/single out individuals in white collar crimes. One can't send the whole bank to jail - instead, one can make corporations pay for their offenses.
Some food for thought:
In Florida, street crime amounted to $35 per crime while the average loss to white-collar criminal activities was $621,000 (Eitzen, 1986:427).
Your last two questions are interesting - in 1945, Edwin Sutherland wrote a paper titled: Is "White Collar Crime" Crime? Generally speaking, to define an act as a crime, there should be legal description of the act as socially injurious and legal provision of a penalty for the act. Perhaps its worthwhile to take another look at the basic rules of the legal system..