The Tyco verdict

Well, Koslowski and Swartz were finally found guilty, after five months of trial and 11 days of deliberation in their second trial. Christine Hurt says that this was just theft, not an artifact of the Enron era.

Well, folks, that’s really what the post-Enron era has been about – prosecuting ordinary theft.  Well, not ordinary theft – theft with the aggravating circumstance of “greed.” More accurately, it’s really about resentment, as I noted after the abortive first trial:

Not merely envy (one’s discomfort at comparing oneself with another), or wanting to have what another person has, but disliking that person for having it and believing that his good fortune is undeserved. The resenter wants to lower the envied person to his level.

This is the common element in Tyco, Martha Stewart, Mike Milken and many other cases of this ilk, despite the facial dissimilarity of the offenses being tried.

Resentment is pernicious enough in itself because it seeks to degrade human achievement.  But it’s worse when it leads to criminal prosecutions for what amount to agency costs – failure to get the requisite corporate approval for expenditures.  The marginal criminality of these offenses is what leads to months of hugely expensive trials. 

The supposed social payoff is deterrence.  But the Kozlowskis of the world probably will keep doing this stuff while the legitimate sorts will be ever more afraid of taking chances.  Not that the conduct in Tyco was particularly worth encouraging, but Mike Milken was a different case, in my view, and I don’t see much chance of politically ambitious prosecutors being able or willing to tell the difference.

The prosecution obviously learned a lesson in this case.  The hold-out juror, as I discussed in my earlier post linked above, was evidently grossed out by the prosecution’s attempt to base the case on greed and life style.  So we heard less about Sardinia this time around.

But chances are that what really won it for the prosecution was the $37.5 million the defendants “forgot” to put on their W-2’s.  This is the sort of simple stuff a jury latches onto, like the socially egregious plaintiff’s mother in the Jackson trial. 

So white collar prosecutions become a sort of lottery.  If the prosecution can come up with something colorful, it wins, or maybe loses if it’s too colorful (Sardinia).  These are not the elements of a rational criminal justice system.