At first glance it looked like a constructive display of judicial creativity. Within a few days of one another, two federal district court judges imposed a program of compulsory charity on two corporations found guilty of breaking criminal laws. In Oregon, Judge Otto Skopil ordered a sportswear firm, White Stag, to make restitution for customs violations by donating monies to various charitable, educational and health groups. About a dozen projects ranging from assistance to handicapped people to the purchase of a nature area will benefit from some $56,000 worth of reparations.
Across the continent in Connecticut, Federal Judge Robert C. Zampano ordered the Olin corporation to pay $510,000 for charity programs in New Haven.
The judge’s order came after Olin pleaded “no contest” to government charges that its Winchester division had engaged in illegal arms sales to South Africa. Olin was given a suspended sentence and placed on probation with the condition that a suitable fund be set up to distribute what amounted to the maximum fine that could be imposed for the violation.
Given the corporate crime epidemic that is alarming more than a few leading members of the business and legal community, these rulings could be the start of a significant source of corporate funds for local charities. The theory behind such impositions is that the corporation should be required to help the community that was generally wronged by the crimes.
In recent years judges have been searching for ways to dispense justice and deterrence in cases involving economic crimes. Since corporations are artificial entities, they cannot be sentenced to jail. And putting top corporate executives behind bars is not popular with judges even if prosecutors were willing to engage in the arduous task of trying to obtain incarceration.
Fining giant corporations is like water off a duck’s back and not much water at that. So what is left?
One California judge a few years ago ordered the culpable executives in a price-fixing case to expiate themselves by making speeches about their crimes and about their penance before local groups.
This type of order skirts the edge of a potentially powerful judicial discretion to require behavioral sanctions. Examples of this sanction would be court orders to require adjudged defendants to work in the areas they illegally mistreated.
For instance, conviction for serious job hazard violations could entail coal company executives being sentenced to several months work in coal mines next to the miners whose safety they abused.
Anyone doubting the sobering effect such a behavioral sanction would have in deterring future violations should check with the board of directors of Armco Steel.
The head of that company, William Verity, invited them and a few company executives down into one of their coal mines. After a few minutes in the cold, dark, damp interior, they began to look at coal miners quite differently. One shaken executive told me: “I’ll never believe that coal miners are overpaid anymore.”
Putting criminal corporate violators to work side by side with victims is far more rehabilitative and productive of more deterrence than the sanctions of compulsory charity issued by the two federal judges in Oregon and Connecticut.
Judge Zampano acknowledged that one purpose of his ruling is to restore the community’s confidence in the Olin corporation. He even suggested that the half-million-dollar contribution could be distributed so as to provide Olin with “tax advantages.”
Quite conceivably, companies could turn such rulings into public relations victories and further entrench their influence in the community, partly at taxpayers’ expense. The abstraction of the company’s crimes is no match for the immediacy of the company’s ‘largess’ backed by the expected press agentry.
Whether in government or business there is no substitute for personal sanctions applied directly to the culpable executives. To make private or public bureaucracies responsible, judges should make the bureaucrats themselves accountable.
Compulsory charity just makes them look good when the goal is to make them do good by obeying the criminal laws.