Home > Uncategorized > No, let’s not go easier on white collar criminals

No, let’s not go easier on white collar criminals

December 3, 2015

We all know the minimum sentencing laws for drug violations are nuts in this country. Combined with “broken windows” policing, those laws have sent entire generations of minority men to jail. We need criminal justice reform badly.

But one version of the bipartisan effort to address this issue, called H.R.4002 and backed by the Koch brothers, goes too far in a big way. In particular, it extends to white-collar crime and it insists that the defendant in a Federal criminal case “acted with intent.”

The entire bill is here, you can read it for yourself. Concentrate on Section 11, where it state:

if the offense consists of conduct that a reasonable person in the same or similar circumstances would not know, or would not have reason to believe, was unlawful, the Government must prove that the defendant knew, or had reason to believe, the conduct was unlawful.

Here’s why I am particularly aggravated about this. In writing my book I’ve been researching the way corporations rely on algorithms which are often unfair and discriminatory. Sometimes that unfairness is unintentional, but often it’s simply careless. In my book I’m calling for people to hold themselves and the algorithms accountable.

One of the trickiest things about the current state of affairs is that nobody in particular understands the algorithms they are using. They think of them, in a way, as “the voice of God.” Actually it’s more like “the voice of science,” because they are assumed to be scientific and objective. But in any case nobody interrogates them or their consequences, however unreasonable. Under this new law, there’d be no criminal charges against anyone, ever, who used such arbitrary tools.

I’d go further, in fact. If this law were on the books, there’d be every incentive in the world for corporations to hide tricky or criminal decisions in algorithms just for the reason that afterwards they would be able to say they didn’t know about it, and thus had no criminal intent. It would be an invitation for obfuscation. Such algorithms would be just the thing to introduce to allay litigation risk.

Have you noticed a lot of people going to jail for their part in mortgage fraud? Neither have I. We don’t actually need a new law that would make it harder for white-collar criminals to do time. We already live in a 2-tiered justice system; let’s not make it even worse.

There’s a Occupy the SEC petition that you can sign urging Congress to oppose this bill. It’s here. Please think about signing.

Categories: Uncategorized
  1. davidwlocke
    December 3, 2015 at 6:58 am

    The housing crisis happened, because the home sellers ran out of buyers. They used mortgage packaging to lower risk and reach additional buyers. Mortgage packaging does work, however, under the circumstances, the need to be a stochastic system was trumped by the temporal nature of the mortgage market.

    CEOs get paid for going to school and getting good grades. They are supposed to be smart and exceptional, but this law lets them act like the nominal citizen. The nominal citizen doesn’t understand stochastic systems and the need for randomness. CEOs do understand the need for randomness and its absence.

    I’ve seen CEOs claim they didn’t know. But, audit letters directed auditors not to look at this to that, the very thing that was fraudulent. CEOs, even today, claim that their organizations are too big for them to know everything, even with SOX demanding that they know everything. CEOs want to be exceptional when it comes to pay, and unexceptional when it comes to their responsibilities.

    CEOs should go to fail every time they claim that they are not exceptional, that they should be compared to the nominal citizen. CEOs have lawyers. They know.


  2. December 3, 2015 at 8:39 am

    Ok, so the fact that the Koch brothers are involved is strong prima facie evidence that this bill is a bad idea. That said, a couple of questions:

    (1) What is the gold standard for algorithm auditing to make sure that no laws will be unintentionally violated by acting according to a model output? As someone who builds, implements, and acts on models from time to time, perhaps I should already know this, but I don’t.

    (2) What is the definition of “reasonable person in similar circumstances?” For most financial institutions, individuals in positions of responsibility are, by regulation, required to have certain competencies and knowledge that are not typical of the average person (for example, relating to financial regulation). If RPinSC means someone in a similar position at a similar institution with the required compliance knowledge, then is this such a problem? The Occupy SEC petition implies that the wording of the bill would excuse negligence, gross negligence, and recklessness. However, all of those modes seem outside the scope of RPinSC. Of course, I’m just offering a lay-person’s reading, I don’t really know how fraught with meaning these words would be in the hands of a legal jargon jujitsu master.

    Ultimately, I think this last point is a strong component of the two tier (actually, many tier) justice system. Those who are able to hire lawyers and law firms that can make the words mean the right thing for them can never really be held accountable. At the same time, citizens at large are not able to provide oversight because we don’t actually understand what the laws mean, even if they seem to be written in plain English, that just means we don’t recognize that jargon being employed.

    Liked by 2 people

    • December 3, 2015 at 9:04 am

      Freaking great questions, Josh. I will think about how to answer them more fully, but the short answer is there’s no gold standard: we have to build one, or rather a framework. Same for the second.

      Liked by 1 person

    • Josh
      December 3, 2015 at 11:38 am

      Yes, excellent questions Josh

      There is a similar situation where a money-manager was fined for using a risk model with a serious bug in it and misrepresenting to clients the risk they were taking. The SEC put rules in place that say, more or less, that you should make sure your computer code doesn’t have bugs and the industry pushed back saying you can’t ever be sure of that.

      The regulator’s answer was basically, well, if it is clear that you make a serious effort to avoid them, that’s enough

      Ultimately, we need to rely on prosecutors, judges and juries to be reasonable.

      On that count, prosecutors have been unreasonable — but biased away from prosecuting white collar crime, not for being too tough. So, it is very unclear why we are in need of a new law making it much more difficult to prosecute.


  3. December 3, 2015 at 8:52 am

    This is one of those posts I completely agree with. White collar crime hurts EVERYONE and is far reaching. Thank you for bringing this to my/our attention.



  4. Gordon
    December 3, 2015 at 9:11 am

    I totally disagree with your take on this. The US has a barbaric approach to imprisonment, and the fact that so many people are in jail already should be considered a national failure and disgrace. Any bill that makes it harder to for the state to deprive people of their liberty should be applauded, and more efforts made to repeal the idiotic laws that have put so many people in jail already.


    • December 3, 2015 at 10:22 am

      >>the fact that so many people are in jail already should be considered a national failure and disgrace

      Totally agree with this. Which reform bills do you support; what are the pros/cons? Personally, I’ve always been partial to drug decriminalization as the main course with a side of three-strikes roll-back, but I’m not an expert in this field.

      Liked by 1 person

  5. December 3, 2015 at 10:13 am

    We’ve become a society of what I call “The Dupes of Hazard”. In time we will see if the VW story about people lying with computer code has enough impact. It did bring that to light, that people cheat with computer code and models.

    We already have portions of the Chinese Citizen Score in place in the US, whether folks want to admit it or not. I write about healthcare and look no further than the Predictive Medication Adherence Scoring. Even pharmacists hate it as they have to work with the flawed data it produces and “scores” people as non compliant as a default if enough information is not found to generate a score. Sadly, Operation Perception-Deception is in full swing in the US. The ACLU gave a big warning about this and I elaborated to show examples that exist today in the US.


    We have little or no common sense anymore as all have been duped to think “everything needs a score” whether it does or not and of course news rigging keeps all of this in everyone’s face every day.


    • December 3, 2015 at 10:01 pm

      Duck?!? You’re here as well? Is there anywhere you do not go? I hope you are doing well! Great work on the blog!


  6. Alina
    December 5, 2015 at 5:43 pm

    Reblogged this on Alina's Blog.


  7. December 7, 2015 at 8:56 am

    Seems to me it is an effort to extend the “two tiered” system that allows white collar crime to be thought of as accidental whims of the market rather than criminal behaviour for personal gain. This quick read concerning law enforcement may add. https://reason.com/archives/2010/08/02/ignorance-of-the-law-is-no-exc


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