Reforming Punishment of Financial Reporting Fraud

Present sentencing law in criminal cases of financial reporting fraud is embarrassingly flawed. The problem is urgent given that courts are now regularly sentencing corporate offenders, sometimes (but sometimes not) to extremely punitive terms of imprisonment. Policing of fraud by multiple jurisdictions in a federal system means that principled sentencing law is necessary not only for first-order policy reasons but also for coordination of sanctioning efforts. Proportionality and rationality demand that sentencing law have an agreed scale for measuring cases of financial reporting fraud in relation to each other, a sound methodology for fixing a given case on that scale, and a reasoned calibration of that scale. Current federal law, which controls most such cases and is a focal point for non-federal cases and public debate, is close to sensible on the first score but far off the mark on the other two. In this contribution to a symposium on Fraud and Federalism, I describe problems in present law and offer relatively uncontroversial reform measures that could substantially improve the law governing sentencing of financial reporting fraud