TCS Daily


Free Lea Fastow!

By Gil Weinreich - August 5, 2004 12:00 AM

Lea Fastow, the wife of Enron CFO Andrew Fastow, began serving her prison sentence on July 12 in a Federal detention center in downtown Houston. There she is to live for one year in an eight-foot-by-10-foot cell for the misdemeanor of signing a fraudulent tax return to conceal her husband's ill-gotten gains. U.S. District Judge David Hittner refused to accommodate Mrs. Fastow's preference to serve her term in a minimum-security camp for women, where there is a playground her young children, ages 8 and 5, could enjoy during visits and where the inmates are white-collar criminals like herself. Instead, Fastow, heiress to a grocery and real estate fortune before marrying her Enron kingpin husband, will be washing laundry or serving food for no more than 50 cents an hour, while sharing a cell with women incarcerated for drug-related or violent crimes.

Andrew Fastow is expected to serve a 10-year sentence, and Enron CEO Kenneth Lay could face as much as 30 years if convicted in the massive corporate fraud, in which Fastow and others concealed billions of dollars in debt in off-the-books partnerships. The crime wiped out $68 billion in market value, destroyed at least 5,600 jobs and vaporized workers' retirement savings.

So what's the connection between the jobs and money lost at Enron and Lea Fastow's forcible removal from her children, menial labor and potentially dangerous cellmates? Precious little if you ask me. Does a single Enron worker get his job back because Lea Fastow is washing underwear? Does a single Enron creditor get its money back because she is baking tater tots or cleaning dishes? And does Andrew Fastow's 10-year prison sentence repay his debt to society -- a debt that can be measured in the billions?

Our society does a poor job of penalizing crime. In the sphere of violent crime, the high recidivism rate of convicted felons indicates a failure adequately to protect society from dangerous criminals. In the white-collar arena, the unrequited losses endured by victims of financial crime similarly underscore the fecklessness of the system.

Besides the injustice to victims there is an inherent lack of mercy to criminals who are not given an opportunity to make amends. For the sake of the victims of Enron and other white-collar crimes, we need to shift away from a system based on punishment to one based on restitution.

Facing One's Misdeeds

When Andrew Fastow pleaded guilty early this year, he agreed to surrender $23.8 million in cash and property, including vacation homes in Vermont and Galveston, Texas. That's a start. He and those who shared in his crime should be apportioned the part of the losses for which a court deems them responsible, including an extra 10 percent to compensate for the unearned return on the victims' money, and an additional fine to compensate the government if the perpetrator did not cooperate in the investigation of the crime.

The perpetrators should then spend as long as it takes, up to the rest of their lives if necessary, to repay that debt. Andrew Fastow may be a criminal but he is also a financially savvy corporate executive. Surely his vast talents can be put to some good use for some company somewhere. A court could give him an allowance (based on a percentage of his income so that he would always have an incentive to increase his earnings), with the lion's share (say, 90 percent) devoted to a restitution fund.

Ideally, the court would schedule at regular intervals ceremonies whereby the Fastows could personally meet victims to make disbursements out of the restitution fund. In this way, they would have to confront their crimes by seeing the faces of their victims, and the victims would get the benefit of both compensation and a sense of the triumph of justice. I can think of no better way to work toward the rehabilitation of white-collar criminals than to harness them to a program for repairing the damage they have done. Certainly this beats wallowing in shame, humiliation and danger in a prison cell, only to come out one day to your mansion and martinis and put it all behind you. Instead, restitution puts it all in front of you. You know exactly what you did, to whom and what it will take to repay your debt.

And when the debt is paid off -- not easy to imagine in Andrew Fastow's case but eminently attainable in the case of Lea Fastow -- the court should institute another ceremony, solemn but upbeat, to welcome back the debtor as a full-fledged and honored member of society. The ceremony should evince no hard feelings, guilt or shame. The debt has truly been paid off. Justice has been done. Those involved in the crime as victims and perpetrators and society at large are confirmed in the principle that crime does not pay. The former thief can and likely will truly turn over a new leaf, perhaps devoting himself to related philanthropic causes.

Paying Off Debt

In another high profile sentencing, also in July, U.S. District Judge Miriam Goldman Cedarbaum sentenced former stockbroker, TV personality and CEO Martha Stewart to five months in prison, five months in home detention, a $30,000 fine and two years probation. To her credit, Judge Cedarbaum chose the minimum sentence recommended by federal sentencing guidelines. Still, I think Justice Cedarbaum missed an opportunity in rejecting Stewart's bid to perform community service in lieu of prison time helping underprivileged women launch their own businesses.

According to a Bloomberg report, Cedarbaum expressed her views on crime and punishment in a 1999 sentencing in which she said, "I think that there is shock value from being in prison in terms of really discouraging people.'' Cedarbaum, who appears to have an admirable sentencing record particularly in her toughness vis-à-vis drunk drivers, may be confusing shock value with justice value. The most basic principle of justice is that the punishment should fit the crime.

Though many details of the government's prosecution of Stewart appear iffy to some legal observers, assuming the prosecution's case is correct, Stewart should disgorge ill-gotten gains on her illicit stock trade and pay a fine. As for lying to the government, a distinction should be made between perjury -- lying under oath -- and Stewart's misleading answers to investigators. The former is deserving of prison time because it is a flagrant assault on the system of justice itself. The latter is a foul but not fatal abuse; she could still testify honestly in court or at least plead the Fifth, allowing the burden of proof to rest with the government.

For actions destructive of the processes of our government, fit punishment would be to engage in something constructive, as Stewart proposed. She could reform herself through helping others. Putting Martha Stewart in a prison camp and giving her a time out in her home serves no purpose other than to humiliate.

The Fastows, Martha Stewart and her broker, Peter Bacanovic, need not suffer degradation in a dank prison cell. Their victims need not remain victims. And society need not waste its precious resources imprisoning people who are no menace to their neighbors. We don't need to build more prisons; we need white-collar criminals to repay their debt to society -- literally.

Gil Weinreich is the editor of Research magazine and can be reached through his website, www.ethical-advisor.com.


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