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Jobs and Punishment: Public Opinion on Leniency for White-Collar Crime

Jobs and Punishment: Public Opinion on Leniency for White-Collar Crime Governments routinely offer deals to companies accused of white-collar crimes, allowing them to escape criminal charges in exchange for fines or penalties. This lets prosecutors avoid costly litigation and protects companies’ right to bid on lucrative public contracts, which can reduce the likelihood of bankruptcies or layoffs. Striking deals with white- collar criminals can be risky for governments because it could affect the perceived legitimacy of the legal system. This article explores the conditions under which the general public supports leniency agreements. Building on theoretical intuitions from the literature, we identify three characteristics that could affect mass attitudes: home bias, economic incentives, and retribution. We conduct a survey experiment in the United States and find moderate support for leniency agreements. Whether the crime occurs on US soil or abroad does not affect public opinion, and the number of jobs that would be jeopardized by criminal prosecution only has a small effect. Instead, survey respondents become much more supportive of a deal when it includes criminal charges for the corporate managers who were personally involved in the alleged wrongdoing. In the court of public opinion, punishing a handful of individuals appears to matter more than saving thousands of jobs. Keywords public opinion, criminal law enforcement, white-collar crime, corporate leniency, deferred prosecution agreements White-collar crime is common, and its consequences are In recent years, corporate scandals have remained dire. As of 2021, financial losses from white-collar crimes salient, but the number of white-collar prosecutions and are estimated at $426 billion to $1.7 trillion a year, with trials has continuously declined (TRAC 2021, 2022). Part such a wide range of estimates due to most crimes being of this decline can be traced to the rise of leniency deals unreported (Flynn 2022). White-collar crime harms vic- such as “Deferred Prosecution Agreements.” These legal tims directly, but also affects the broader community: it agreements are negotiated between public prosecutors and can have environmental and security implications as well lawyers who defend companies accused of criminal as hamper governments’ ability to fund public services wrongdoing. Prosecutors will typically end criminal court (International Public Sector Fraud Forum 2020). proceedings without a guilty plea if the accused company How the justice system deals with white-collar crime agrees to pay fines and implement good governance re- can affect its own legitimacy. Since the 2007–2008 fi- forms. The intended goal of these agreements is to avoid nancial crisis and the corporate crime scandals that fol- costly legal proceedings and to allow companies to remain lowed, the public’s attitude toward law enforcement and in business without the stigma and legal consequences the justice system has soured. In 2019, 41% of Americans that come with an admission of guilt. However, even held an unfavorable opinion of the Department of Justice. It ranked lower than other law enforcement bodies such as the FBI and the CIA, and lower than the U.S. Postal Universite´ de Montreal, ´ Montreal, QC, Canada Harvard University, Cambridge, MA, USA Service or the Environmental Protection Agency (Pew Research Center 2019). This low esteem may be linked to Corresponding Author: the widespread belief that criminals can often escape Simon St-Georges, Political science Department, Universite´ de Montreal, ´ punishment if they are rich and well-connected (Claypool 3150, rue Jean-Brillant, Montreal, QC H3C 3J7, Canada. 2021). Email: simon.st-georges@umontreal.ca 2 Political Research Quarterly 0(0) when these deals impose large financial penalties, they attitudes toward policy instruments like leniency agree- often amount to one-tenth of one percent of a corpora- ments. Third, we consider theoretical arguments in favor tion’s market capitalization, and the stock price of public and against leniency agreements and identify key char- companies usually goes up after their announcement acteristics which may affect the public’s view of this (Coffee Jr 2020; Markoff 2013). Leniency agreements, policy. Fourth, we describe a survey experiment designed therefore, risk being perceived as too favorable towards to gauge the factors that affect the level of public support corporations. Over-relying on them, in the absence of for striking deals with white-collar criminals. After re- more orthodox criminal proceedings, might lead to the porting the results of this experiment, we conclude by weakening of the punitiveness of law enforcement discussing the implications of our findings for our un- (Campbell 2019). derstanding of public perceptions of white-collar crime The widespread use of these leniency agreements, and, more broadly, for the legitimacy of the legal system. coupled with a decrease in corporate investigations and prosecutions, poses an important challenge to the legiti- Legitimacy, Public Policy, and macy of corporate criminal law and the justice system. Public Opinion Indeed, legal scholars have been asking whether allowing white-collar offenders to escape criminal proceedings Western societies are going through “an age of distrust”: “undermine[s] the public’s confidence in the adminis- citizens increasingly exercise vigilance, oversight, and tration of justice” (Coffee Jr 2020, 36; Rakoff 2014). denunciation, which means power holders must either Indeed, according to many criminal law scholars, “there adapt to popular pressures or be subjected to the tribunal remains a deep public sentiment that corporations are of public opinion (Rosanvallon and Goldhammer 2008). ‘getting away’ with crime,” especially since the housing Like some other parts of the legal system, the Department bubble burst (Buell 2016, 117). Yet, we have very little of Justice has built a fair amount of autonomy over the systematic evidence about public opinion on these mat- years. Today, it holds a “reservoir of goodwill” that allows ters, particularly when it comes to the factors shaping the it to “get away with unpopular decisions (Gibson and acceptability of deals between the government and cor- Caldeira 2009, 140).” But this reservoir is not infinite. porate actors. Even though public prosecutors and civil servants have a This article addresses these concerns by taking a first great amount of autonomy and executive discretion, they step toward a better empirical understanding of the le- must be wary of their reputations in the public eye gitimacy and acceptability of different kinds of leniency (Noyon, de Keijser, and Crijns 2020; see also Carpenter agreements. To achieve this, we conduct a survey ex- 2001, 2010). periment in the United States and assess people’s views on As Tyler and Jackson (2013) note, the empirical le- different kinds of deals between public prosecutors and gitimacy of the governmental organizations in charge of corporate actors. The results of this study yield key in- prosecuting white-collar crime is built on the trust that sights into the public acceptability and legitimacy of le- people bestow on the criminal justice system and the niency deals. perceived obligation to obey it (see also Sunshine and We find that American citizens are moderately sup- Tyler 2003; Tyler 2009). This may be an especially portive of the government striking deals with white-collar sensitive area of action because negative news and un- criminals. Surprisingly, support for leniency agreements popular decisions can erode public support and eventually does not appear to be affected by the economic conse- compromise the legitimacy of both courts and law en- quences of a guilty verdict (i.e., the number of jobs that forcement agencies (Casillas et al. 2011). As Zilis (2021) would be lost), or by the location where criminal activity has argued in the case of the Supreme Court, widespread allegedly occurred (i.e., domestic or foreign). In contrast, antipathy toward “big business,” and a string of unpopular respondents’ support for a deal increases considerably decisions in favor of corporate rights, may have con- when criminal charges are pressed against the individual tributed to decreasing its empirical legitimacy. In the managers who were personally involved in criminal United States, the Department of Justice (DoJ) oversees wrongdoing. This suggests that public opinion is driven the Fraud Section, responsible for investigating and more by a concern for punishment and retribution, rather prosecuting sophisticated economic crimes. As such, it than by a rational economic calculus to save jobs. seems useful to think about the handling of white-collar The rest of this paper unfolds as follows. First, we criminal proceedings, trials, plea deals, and leniency argue that the empirical legitimacy of the legal system is agreements as a key part of the DoJ’s mission, and efforts tied to public perceptions of both the severity and the to foster its empirical legitimacy. policy response to white-collar crime. Second, we discuss Political scientists and criminologists have shown that prior research on public opinion on white-collar crime and public officials care about public attitudes and preferences suggest that there is a need for a better understanding of toward crime rates, high-profile cases, criminal sentencing, St-Georges et al. 3 and policy responses to crime (Erikson et al. 2002; Pickett White-collar crime enforcement is very limited, and 2019; Shapiro 2011). In Incarceration Nation, for example, most cases against offenders do not invoke criminal laws Enns (2016) shows how mass incarceration is in large part a (Baer 2018, 90; Simpson et al. 2019). Only 3% of federal political response to the public’s views on punitiveness, prosecutions target white-collar crime (Bajoka PLLC spending priorities, and perceptions of public safety. Legal 2020). What’s more, since the terrorist attacks of 9/11, officials at the state and federal levels are concerned with law enforcement resource allocation has shifted away public opinion as well, especially since most of them are from white-collar crime toward fighting terrorism elected or appointed by elected officials (Pickett 2019,418- (Nguyen 2021). White-collar enforcement declined to an 419). More than half of US states have judicial elections for all-time low during the Trump administration, which trial, appellate, and higher courts (Brace and Boyea 2008). further shifted resources toward immigration surveillance Non-elected legal actors also tend to be responsive to public (Garrett 2019; Hurtado et al. 2020; McGrath and Healy opinion because they are concerned about maintaining in- 2021). Current law enforcement practices may thus fail to stitutional legitimacy. Casillas et al. (2011) suggest that have much of a deterrent effect on potential offenders and public opinion exerts an important influence on Supreme to sustain public trust in the criminal system (Claypool Court decisions. Owens and Wohlfarth (2017) find similar 2021, Smith 2021). results for federal circuit courts, despite both levels of Courts It is important to assess whether certain characteristics granting lifetime tenure. Indeed, legal scholars recognize the in crimes and ensuing legal proceedings shape views on need for sentences to be neither too harsh nor too lenient punitiveness and fairness more than others (Van Slyke and because public trust in legal institutions is central to the Rebovich 2016). Among the public, white-collar crimes legitimacy of the law (Robinson 2013). are perceived as less harshly prosecuted than other types of crimes; indeed, most people recognize that white-collar offenders have a smaller chance of being apprehended and Public Opinion on White-Collar Crime punished compared to other types of criminals (Van Slyke Despite its major consequences, white-collar crime has and Rebovich 2016). often been portrayed as less harmful and worrying than There is unfortunately little research pertaining spe- violent street crime (Cullen et al. 2019). Indeed, early cifically to public attitudes and white-collar crime en- research suggested that white-collar crimes were mis- forcement (Healy and McGrath 2019). The research that takenly perceived as being of similar seriousness to does exist does not tell us how leniency for corporate “victimless and minor property offenses” (Rossi et al. offenders stands in public opinion compared to traditional 1974). This perception has evolved over the past few sanctions or incarceration. There is thus a need to further decades, with events like the savings and loan crisis, the examine public views about white-collar crime, particu- Enron scandal, and the Great Recession. Some evidence larly how the public perceives criminal sanctions for suggests that the public may now view corporate crime as business entities and executives (Cullen et al. 2019, 224). equally or more damaging than conventional street crimes This article is part of an emerging research agenda that (Michel 2016; Cullen et al. 2019). An overwhelming assesses public perceptions of white-collar crime and the majority of Americans support stricter penalties, including policy responses to it, including the use of leniency longer prison terms, for executives who commit fraud agreements. The public considers white-collar crime to be (Unnever et al. 2008). Voters across party lines agree that serious, and both legal and political actors should be the criminal justice system unfairly targets the poor over susceptible to respond to their views. the wealthy, that corporations and wealthy people regu- Given public mood on these matters, the acceptability larly evade fair punishment, and that this is a concerning of legal tools like leniency agreements ought to be con- issue for public trust and the rule of law (Smith 2021). sidered, especially given their novelty and widespread use When it comes to how white-collar crime is prosecuted in in white-collar crime cases. Studying leniency agreements the US, there seems to be a disconnect between the gov- allows researchers and policymakers to uniquely under- ernment and the people it represents (Grasso 2021). In the stand how the public perceives the trade-offs between wake of corporate scandals, the public and politicians often punishing corporate wrongdoing and minimizing harm to demand severe sanctions for white-collar criminals (Healy innocent third parties, such as workers. This balancing of and McGrath 2019). Yet, corporations or their managers are competing interests is at the heart of leniency agreements rarely accused of criminal conduct. In the few cases that are (Lund and Sarin 2022). As opposed to trials and plea prosecuted, the DoJ increasingly resorts to leniency agree- agreements that both seek a corporate recognition of guilt, ments (Garrett 2014, 2019). These agreements can conform leniency agreements can be seen as a compromise of to legal principles, but they may not always match the punishment, a way of prosecuting corporations without public’s idea of what white-collar criminal proceedings using the fullest extent of the law. Some members of the ought to look like. public may view leniency agreements as too lenient if they 4 Political Research Quarterly 0(0) allow corporations to escape punishment only by paying of prosecutors if they need to please the political officers of fines. Others may view leniency as reasonable to avoid the Department of Justice or if they become too risk-averse collateral damage when prosecuting a corporation, the to go to trial (Eisinger 2018; Uhlmann 2013). This can traditional way would lead to important job losses. We reduce their expertise and willingness to fight high-profile discuss in more detail below how certain trade-offs and cases in courts, depriving both the judicial community and features of leniency agreements inform our hypotheses. citizens of jurisprudential development and jury feedback (Campbell 2019,283; King andLord2018,117, 127). Risk- aversion and groupthink from prosecutors are one of the When is leniency acceptable? criteria that may delegitimate an agency such as the De- Leniency agreements are typically concluded in complex partment of Justice in the eyes of the public (Levi, 2013, situations such as antitrust, bribery, or fraud cases under the 167). Foreign Corrupt Practices Act, or to settle pharmaceutical, In the empirical portion of this study, we draw in- public health, or environmental accusations. Such cases can spiration from the main arguments in favor and against be extremely costly to prosecute. Striking a deal with white- leniency agreements, to identify characteristics that could collar criminals can thus be advantageous for resource- affect whether the general finds such agreements ac- constrained governments, by allowing them to avoid ceptable. We focus on the primary policy objectives of costly legal proceedings. In so doing, leniency agreements corporate accountability, including for individual can free-state resources for more enforcement actions, and wrongdoers, while also protecting jobs and business the penalties paid by businesses under those agreements can reputation. We also explore how a sense of nationalism also help capacity building. Furthermore, leniency agree- may affect the acceptability of leniency agreements. ments foster self-disclosure of corporate wrongdoings if they are only offered to businesses willing to collaborate with the Individual Responsibility authorities. These deals could ultimately increase the total number of enforcement actions against corporate crime According to many observers, deferred prosecution (OECD 2019). agreements are not deterrent enough because they permit From the perspective of businesses, leniency agreements too many senior executives involved in criminal accu- canalsobebeneficial, because they avoid the consequences sations to escape prosecution (Coffee Jr 2020, 9, 32; of plea bargains and criminal trials, which involve an ad- Eisinger 2018; Garrett 2011, 2014). Garrett (2014, 13) mission or a recognition of guilt (Garrett 2019,15).The confirms that only about one-third of the cases in which consequences can be severe: many countries have public public companies benefited from deferred prosecution contract laws that exclude companies with criminal con- agreements led to criminal prosecutions of individuals. victions from getting public contracts. For many large Furthermore, few higher-up officers were charged; most companies, access to public contracts is necessary for individual prosecutions targeted “middle” and “low” competitiveness and survival. Lenders and suppliers may company employees (Garrett 2015, 1802). also cut contractual ties with businesses plagued by criminal When guilty players directly responsible for wrongdoing scandals, which provokes cascading effects on the reputation go unpunished, people might come to believe that the legal and viability of the business. system is not working properly, and legitimacy might suffer. Despite advantages for both business and government, Facing mounting criticism, the Obama administration at- deferred prosecution agreements remain a controversial tempted to correct this situation before the 2016 general policy instrument. Reilly (2018) writes that such deals make elections with the “Yates Memorandum,” named after the the criminal justice system a “mockery” because they allow Deputy Attorney General at the time (Yates 2015). Essen- discretion abuses while exacerbating inequalities between tially, the Justice Department modified its official policy on litigants. Leniency agreements are criticized on all sides of deferred prosecution agreements to stress the need for in- the political spectrum. Conservatives worry that they in- dividual accountability. Despite these efforts, the number of terfere with the rigorous application of the principles of law individual prosecutions continued to decline. For example, and order, while progressives fear that they may amount to a of the 21 deferred prosecution agreements signed in 2018, small corruption tax for large companies that are “too big to only five involved individual prosecutions (Garrett 2019,see jail” (Garrett 2014; Steinzor 2015). Many critics do not also Coffee Jr 2020, 37, 50). Given the rising controversy oppose the existence of these deals altogether. Instead, they surrounding the lack of prosecutions of white-collar crim- deplore their abuse by the Department of Justice, which they inals, we expect citizens to be sensitive to this consideration. think should pursue more plea bargains and trials for of- We expect that survey respondents will be more supportive fending businesses (Buell 2016; Eisinger 2018; Garrett of a leniency agreement if it guarantees that corporate 2014; King and Lord 2018; Koehler 2015). Some fear managers personally involved in the wrongdoing will be that leniency agreements may compromise the independence prosecuted. St-Georges et al. 5 Hypothesis 1: The public is more likely to support companies compared to domestic companies; when given leniency deals when they specify that managers the option to enter a leniency agreement, foreign companies personally involved in the wrongdoing will face are made to pay considerably higher fines (Garrett 2011, criminal charges. 2014). By contrast, prominent Department of Justice cases involving US-based public companies and financial insti- tutions are less common (Garrett 2019). This phenomenon Economic Consequences contributed to the adoption of leniency agreements in other One of the strongest and most often cited arguments in countries, partly because other law enforcement agencies favor of deferred prosecution agreements is that they collaborated with, or reacted to the international reach of the protect third parties from the actions of individuals di- Department of Justice. Leniency agreements spread rectly responsible for corporate crimes (Golumbic and throughout the Western world and even Asia, notwith- Lichy 2014). By reducing the economic impact of a standing significant differences in the countries’ criminal recognition of guilt on the corporation, they protect in- justice systems (OECD 2014, 2019). National economic nocent employees, pensioners, or contractual partners interests and patriotism may explain this phenomenon from a criminal recognition of guilt (Ainslie 2006; Resnik (Saint-Martin 2021; see also Lüth 2021; Woll 2023). It is and Dougall 2006; see, however, Markoff 2013). While important to understand if a national or patriotic sentiment criminal wrongdoing should warrant consequences for a also exists in the population concerning punitive attitudes. company’s managers, targeting the whole company puts We examine whether US citizens exhibit a home bias as its employees in a precarious position for no fault of their follows. We compare, on one hand, their level of support for own. Ensuring proper criminal law enforcement is key to leniency deals when the crime is committed domestically the perceived legitimacy of the DoJ, but saving jobs is also against the US government and, on the other hand, when the a legitimate economic and political goal for governments. crime is committed abroad against a foreign country and its Our research design incorporates these concerns for the foreign citizens. We expect the public to be less lenient with protectionofAmericanjobs. Specifically, it ascertains a corporation that defrauds the US government instead of a whether the level of support for a deal varies depending on foreign government. Therefore, we expect citizens to be the number of employees of the accused corporation. We more supportive of a leniency agreement when fraud and expect acceptability to increase when a higher number of corruption are committed abroad. jobs are at risk. Americans are concerned with policies that Previous studies suggest the presence of a home bias: generate negative economic consequences and are willing to people favor their own country and their fellow citizens. go to great lengths to preserve even a handful of jobs (Mutz This is a consistent finding in research bridging public and Lee 2020). For example, policy preferences over opinion and international political economy. On trade, globalization and climate change are highly sensitive to local Mutz and Lee (2020) find that American citizens sys- job market outcomes (Feng et al. 2021; Mansfield and Mutz tematically value their co-nationals’ livelihoods more than 2013; Scheve and Slaughter 2001; Vona 2019). those of other citizens living in partner countries; simi- Considering how important job creation is for electoral larly, Brutger and Rathbun (2021, 880) find that outcomes (Lewis-Beck and Stegmaier, 2000) and how “Americans have an egoistically biased sense of fairness, sensitive citizens are to economic shocks affecting em- responding particularly negatively to any outcome that ployment (Margalit 2019), we expect that survey re- leaves the United States relatively worse off.” On out- spondents will be more supportive of leniency agreements sourcing, Mansfield and Mutz (2013) argue that Ameri- if they protect the livelihoods of innocent workers. cans see economic exchanges as a zero-sum game between their domestic ingroup and foreign outgroups. Hypothesis 2: The public is more likely to support On international corporate taxation, Arel-Bundock and leniency deals when they protect a higher number of Blais (2023) find that the public favors reforms to their jobs. own country’s financial advantage. On foreign aid, Milner and Tingley (2013) find that many Americans only support foreign aid when it strategically aims to benefit the Home Bias US economy. We expect that people will be less lenient We chose bribery and fraud for the context of our research when fraud is committed against the US government than design because such scenarios allow us to consider the in- when the fraud affects a foreign government. ternational dimension of crime. Theriseofdeferredpros- ecutionagreements inAmerica has had an interesting side- Hypothesis 3: The public is more likely to support effect: prosecutors are harsher on non-US corporations than leniency deals when the crime is committed against on US corporations involved in criminal activities. The a foreign government rather than their own Department of Justice indicts more often foreign-based government. 6 Political Research Quarterly 0(0) To study these issues, it is useful to focus on a particularly factors in the vignettes that respondents read. Each of salient category of leniency agreements that have caused those factors is randomized independently. controversy in recent years. Deferred prosecution agreements For the Criminal Charges factor, half of the respon- follow legal frameworks that allow for variation along the dents are assigned to read that “4 of the company’s dimensions described above. In the next section, we describe a managers will face criminal charges for their personal survey-based research design which allows us to test our three involvement in the bribery” at the end of the vignette. The hypotheses in the context of deferred prosecution agreements. other half does not see this sentence. Centering our research design on these agreements increases For the Jobs at Risk factor, half of the respondents are external validity by allowing us to link our findings to concrete assigned to read that 100 jobs are at risk, whereas the other cases of prosecutorial leniency in white-collar cases. half are told that 5000 jobs are at risk. For the Crime Abroad factor, half of the respondents are assigned to read that the American company com- Research Design mitted the crime on US soil, whereas the other half read The theoretical and substantive considerations explored that an American company committed the crime in Brazil. above led us to study the effect of three factors on public After displaying the vignettes, we measure the out- support for deferred prosecution agreements: (1) whether the come of interest with the following question: deal includes criminal charges for individuals involved in the crime; (2) the number of jobs jeopardized by the prosecution; Do you support or oppose this deal? 0 means that you (3) whether the US or a foreign government was targeted by “Strongly Oppose” the deal. 10 means that you “Strongly the criminal wrongdoing. To measure how these three factors Support” it. relate to acceptability, we conducted a pre-registered survey experiment with an online sample of 2000 US adults. Now that the research design has been outlined, the We set our study in the context of corruption and fraud following section examines the data and presents the against a government, which typically implies an illegal results. exchange of favors with a high level of violation of public trust and a large pool of victims (Cullen et al. 2019). When Results bribery, fraud, or corruption occurs, the local population pays much higher costs for public projects, often with Before describing how the randomized treatments relate to increased environmental and security risks (International support, it is helpful to take an exploratory look at the Public Sector Fraud Forum 2020). Moreover, when a outcome variable. Table 1 shows the average level of corruption scandal irrupts, the loss of trust in institutions support for a deal and its standard deviation for different can lead to further economic and social consequences. subgroups of the survey sample. Several points are The experiment consists of a single vignette about a noteworthy. fictional company: To begin, we see that the average level of support for a deal is somewhat positive among the American public, We would like to have your views about deals that are hovering above 6 on a scale ranging from 0 to 10. sometimes made between the U.S. Department of Justice and However, we also see that there is a fair amount of American companies accused of criminal activity. variation across that mean, with a standard deviation of about 2.5. Table 1 also shows substantial variation in Imagine that an American company is involved in a major support across socio-demographic groups. On average, case of bribery and fraud against the [U.S. government / men are more supportive of a deal than women, and the government of Brazil]. The U.S. Department of Justice has level of support appears to decline with age. In contrast, strong evidence that the company committed this crime. If there does not appear to be any clear relationship between they go to court and the company is found guilty, the education and this item. company will be forced to declare bankruptcy and lay off To estimate the association between experimental [100 / 5,000] innocent American employees. conditions and support, we estimate a linear regression To save those jobs, the U.S. Department of Justice decides to model of this form offer the company a deal: The lawsuit will be dropped if the company agrees to pay a big fine. [In addition, 4 of the Support Deal ¼ β þ β Criminal Charges þ β Jobs at Risk 0 1 2 company’s managers will face criminal charges for their þ β Crime Abroad þ ε personal involvement in the bribery.] β estimates the effect of the Criminal Charges treatment, which is equal to 1 when respondents learn that the To assess how each of the three factors above relates to company’s managers will face personal criminal acceptability, we introduce random variation among three St-Georges et al. 7 Table 1. Support for Deferred Prosecution Agreements on A consequences for their actions, and 0 otherwise. If people Ten-Point Scale by Gender, Age Group, and Education Level. are motivated by a desire for punitiveness, they should be more willing to support a deal that punishes white-collar Mean Std. Dev. criminals, and the β coefficient should be positive. β 1 2 Gender estimates the effect of the Jobs at Risk treatment, which is Man 6.44 2.66 equal to 1 if 5000 American jobs are at risk, and 0 if 100 Other 4.67 1.97 jobs are at risk. Since respondents should be more lenient Woman 5.98 2.53 when the costs of prosecution increase, we expect the β Age coefficient to be positive. β estimates the effect of the 18–34 6.45 2.49 Crime Abroad treatment, which is equal to 1 if the crime 35–54 6.27 2.64 was committed in Brazil and 0 if it occurred in the US. We 55+ 5.67 2.58 expect American respondents to be more favorable to a Education deal when the company commits a crime abroad rather No formal education 5.90 1.66 than on US soil. If this is correct, the β coefficient should Some primary school 6.43 2.92 be positive. Primary school completed 6.52 2.51 Figure 1 presents our point estimates along with 95% Some secondary/high school 6.27 2.45 confidence intervals built using heteroskedasticity- Secondary/high school completed 6.03 2.45 consistent standard errors. The full results are presented Some college or university 6.25 2.59 in Table B of the online appendix. University completed or higher 6.30 2.79 Discussion The first major result of our study is that the inclusion of punishment. For many American respondents, it is more criminal charges has a large effect on public support for important to punish four (4) guilty managers than save such agreements. On average, pressing criminal charges 5000 innocent workers. Our results also suggest that against four of the company’s managers increases support American patriotism does not affect the acceptability of for a deal by about 0.8 on the ten-point scale, or about 1/ leniency agreements. These results send a strong signal to rd 3 of a standard deviation (p<0:001). This is a substantial practitioners and politicians that the legitimacy of white- effect and a key finding of this study. collar crime enforcement rests more on appropriate The second important result in Figure 1 is that the punishment than on pragmatic, economic considerations. Democratic theory and consensus perspectives on number of jobs has a positive but very small effect on criminal law suggest that crime control must reflect public acceptability. On average, moving from 100 to 5000 jobs at risk increases the level of support for a deal by 0.14 on a wishes and important social norms (Van Slyke and ten-point scale. While this result crosses conventional Rebovich et al. 2016). The criminal justice system thresholds of statistical significance, the estimated effect plays a key role in American society, but its handling of th st size is substantively small: It is equivalent to about 1/10 corporate criminal cases in the 21 century may contribute of a standard deviation in the dependent variable. This to weakening its legitimacy. To preserve its legitimacy, weak effect is all the more striking given that the treatment public administrations must respond to public opinion on is arguably very strong; the difference between 100 and corporate crime levels and sentencing (Tyler and Jackson 5000 lost jobs should be an important consideration for 2013; see also Moore and Mills 1990; Roberts and Stalans most citizens and policymakers (see for ex. Feng et al. 2004; Unnever et al. 2008, 165). At a time when politi- 2021; Mutz and Lee 2020). cians and the public frequently condemn corporate ex- The third important result is that whether the US or a cesses and criminal conduct (Healy and McGrath 2019), foreign government is targeted does not appear to be an leniency agreements for white-collar criminals risk di- important consideration for respondents. Indeed, β is minishing the public’s trust in its institutions. substantively small and it is not statistically significant. Our study sheds new light on these matters. Using a There is no statistically significant effect of the location of vignette experiment, we measure how variations in key a corporate crime on people’s propensity to support a deal. features of a deal affect support by the public. Our results This is also surprising given previous research on national suggest that even though public acceptance of leniency economic interest and patriotism in public attitudes (see agreements is moderately positive, respondents do not e.g., Brutger and Rathbun 2021; Mansfield and Mutz give much weight to the economic rationale—protecting 2013). jobs—that often underlies them. Instead, acceptance is considerably enhanced when prosecutors prioritize These findings are striking; they point to a major holding company managers accountable for corporate tension between economic rationality and hunger for 8 Political Research Quarterly 0(0) Figure 1. The effect of criminal charges, jobs at risk, and crime location on support for deferred prosecution agreements. The dependent variable is on a scale of 0–10, where 10 means “strongly support” the deferred prosecution agreement. The outcome has a mean of 6.2 and a standard deviation of 2.6. crimes. Moreover, respondents are indifferent to the lo- individual criminal accountability for officers of Boeing, cation of the crime: their opinion does not change when a concerning fraud conspiracy over the 737 MAX evalu- foreign country rather than the US is targeted by bribery ations, Wells Fargo, regarding its predatory cross-selling and fraud. fraud, or even Purdue Pharma for its role in an illegal opioid scheme (Claypool 2021). These cases are not Taken together, our results suggest that people exceptional since individual prosecutions accompany support leniency agreements when they perceive them only 27% of leniency agreements (Garrett 2019). Yet there as fair and sufficiently punitive—regardless of how is evidence suggesting that optimal corporate deterrence many US jobs they can save. Our results thus suggest should focus more on seeking consequences for top in- that deontological considerations trump utilitarian cost- dividuals and less on financial penalties for companies benefit calculations in the perceived legitimacy of these (Lund and Sarin 2022). deals. Research in moral psychology indicates that Because the perceived legitimacy of the Department “political attitudes held with moral conviction are as- of Justice, and other law enforcement agencies, largely sociated with a characteristically deontological (action- depend on public perceptions of fairness, more research oriented) processing style,” which implies disregard for is required on corporate crime enforcement in general. the practice of weighing costs against benefits (Ryan Public attitudes toward corporate crime enforcement 2019,429). Deontology,inthissense,refersto “the may notably vary depending on how and when re- psychological mode in which judgments stem from the spondents are probed. They may react differently to inherent appropriateness of an action, rather than similar experiments in periods of economic crisis, or in consequences” (Ryan 2019, 428). Therefore, respon- the face of corporate scandals involving large institu- dents who think about an issue using a deontological tions, such as Enron, WorldCom, Halliburton, and processing style will tend to be insensitive to infor- major banks during the Great Recession. Survey and mation about its policy effects. experiment results may also be influenced by the level A clear takeaway from this study, for practitioners of awareness of criminal corporate enforcement, and and researchers alike, is that the public seems com- how its rather technical concepts are presented to re- fortable with leniency agreements when they ensure spondents (see Michel et al. 2016a, 2016b). More criminal prosecutions for influential individuals. These political science research should also focus on public results are in line with the official statement from a support for law enforcement. Our results differ from former chief prosecutor of foreign bribery, Mark expectations on the impact that patriotism and national Mendelsohn, according to whom “It is [the Department economic interests may have in shaping public attitudes of Justice’s] view that to have a credible deterrent ef- (Arel-Bundock and Blais 2023; Brutger and Rathbun fect, peoplehavetogotojail” (Corporate Crime 2021; Feng et al. 2021; Mansfield and Mutz 2013; Reporter 2008). If public officials care about public Milner and Tingley 2013; Mutz and Lee 2020; Scheve opinion as much as they claim they do, leniency and Slaughter 2001; Vona 2019). agreements aimed at protecting innocent parties should also prioritize the inclusion of criminal charges al- Acknowledgments lowing for the punishment of guilty ones. We thank Denis Saint-Martin, Jessica Schoenherr, the editors, It is of utmost importance for the legitimacy of the legal and the reviewers. Simon St-Georges thanks the Vanier Canada system that white-collar criminals do not go unpunished. Accusations against corporate entities rarely lead to Graduate Scholarships Program for the financial support of its consequences for high-profile executives. There was no doctoral research. St-Georges et al. 9 advantage, or to conceal or cover up other wrongdoing” Declaration of Conflicting Interests (Strader et al. 2021). Therefore, white-collar crime encom- The author(s) declared no potential conflicts of interest with passes a variety of crimes ruled by federal and state statutes on respect to the research, authorship, and/or publication of this securities fraud, antitrust violations, bribery, tax offenses, bank article. embezzlement, postal and wire fraud, false claims and state- ments, and credit or lending fraud (Healy and McGrath 2019). Funding White-collar crime is performed by legal entities, employees, The author(s) disclosed receipt of the following financial support but also rogue individuals. On the other hand, “corporate for the research, authorship, and/or publication of this article: crime” refers to a corporation’s punishable conduct or of its This work was funded by the Social Sciences and Humanities representatives acting on its behalf (Braithwaite 1985). Research Council of Canada grant #435-2019-0434. 6. For example, when reviewing the Standard and Poor 3000 between 1996 and 2013, Simpson et al. (2019) found that of Replication data the 10,812 cases brought against firms for accounting, bribery, environmental, and anti-competitive offenses, less Available at https://osf.io/na6vq. than 5% opted for the criminal law venue. Public prose- cutors instead favored administrative sanctions (57%) and ORCID iDs civil suits (38%), despite having criminal prosecution as a Simon St-Georges  https://orcid.org/0000-0003-1189-8007 clear statutory option for these kinds of cases. On average, Marco Mendoza Avina  https://orcid.org/0000-0001-8102- criminal accusations target smaller, younger, and less in- 938X fluential companies or outright criminal organizations (Simpson and Yeager 2015; Simpson 2019). 7. For example, the US, China, Germany, Australia, Brazil, Supplemental Material Canada, South Africa, and the World Bank all have such Supplemental material for this article is available online. policies in place (World Bank 2021). 8. More features of deferred prosecution agreements could be Notes studied in future research, such as the gravity of the crime 1. Such criticisms have reached the general public via popular committed, voluntary disclosure by the accused, awards to culture, through TV shows and documentaries like “Dirty repeat offenders, the extent of judicial revision, or the im- Money” (Teodorczuk 2018; see also Khardori 2022; portance of reparation to victims. According to Dodge (2020), Viswanatha and Michaels 2021). white-collar crime traditionally leads to little compensation or 2. The concept of “empirical legitimacy” refers to the per- justice for the victims. Leniencyagreementsalsoveryrarely ceived right to rule (de Fine Licht et al. 2022). It can be compensate victims of bribery and corruption in foreign contrasted with “normative legitimacy,” which focuses on countries (Garrett 2014; OECD 2019,97). the moral grounds to rule, such as justice or rationality (see 9. Because our research design also allows us to examine Beetham 2013; Hinsch 2010; Merquior 1980). reactions to the number of US jobs at risk, we do not 3. Chief prosecutors, state, county, and district attorneys are, for consider the home bias associated with the foreign/domestic the most part, elected or appointed by elected members of the nationality of the accused corporation. executive branch (Wright 2008). Elected officials are more 10. The pre-analysis plan was submitted to the AsPredicted likely to respond to public mood on law and order, including website on 05/27/2021. Data were collected via the Qual- oversight priorities (Erikson et al. 2002; Enns 2016). trics platform between May 31 and June 3, 2021. Partici- pants were recruited by research firm Dynata to fill 4. Research in the 80s notably found that 89% of respondents demographic quotas for gender (men and women), age believed white-collar criminals deserve to go to jail for their group (18–34, 35–49, 50–64, 65+) education level (no high crimes like everyone else (Cullen et al. 1983). In 2005, one- third of respondents to a national survey regarded white- school, high school/some college, bachelors/postgraduate collar crimes as “more harmful to society than ordinary degree), and Census region (Midwest, Northeast, South, crimes,” while the majority of respondents thought “the West). Since respondents who did not meet these quotas government should allocate equal or more resources to were systematically redirected out of our survey, our sample tackling white-collar crime” (Holtfreter et al. 2008). is balanced across these demographics without the need for 5. The term “white-collar crime” was coinedin1939todistin- survey weights. Table A of the online appendix compares guish it from “common” or “street” crime, which is often our sample to data from the 2021 Current Population Survey violent (Sutherland 1983). Even if definitions of white-collar by the US Census Bureau. crime are plural, they usually refer to “illegal activities that 11. The relationships between support for the deal and gender, principally use deceit, deception, concealment, fraud, or and support for the deal and age, are statistically significant misrepresentation to obtain money, property, or some other at the α ¼ 0:001 level. 10 Political Research Quarterly 0(0) 12. In Table C of the online appendix, we show that our results Handbook of White-Collar Crime, edited by. Melissa Rorie, are not substantially different when we estimate an ordered 209-228. Hoboken: John Wiley and Sons, Ltd. logistic regression model instead of linear regression. Cullen, Francis T., Gregory A. Clark, Richard A. Mathers, and John B. 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Jobs and Punishment: Public Opinion on Leniency for White-Collar Crime

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Publisher
SAGE
Copyright
© The Author(s) 2023
ISSN
1065-9129
eISSN
1938-274X
DOI
10.1177/10659129231176211
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Abstract

Governments routinely offer deals to companies accused of white-collar crimes, allowing them to escape criminal charges in exchange for fines or penalties. This lets prosecutors avoid costly litigation and protects companies’ right to bid on lucrative public contracts, which can reduce the likelihood of bankruptcies or layoffs. Striking deals with white- collar criminals can be risky for governments because it could affect the perceived legitimacy of the legal system. This article explores the conditions under which the general public supports leniency agreements. Building on theoretical intuitions from the literature, we identify three characteristics that could affect mass attitudes: home bias, economic incentives, and retribution. We conduct a survey experiment in the United States and find moderate support for leniency agreements. Whether the crime occurs on US soil or abroad does not affect public opinion, and the number of jobs that would be jeopardized by criminal prosecution only has a small effect. Instead, survey respondents become much more supportive of a deal when it includes criminal charges for the corporate managers who were personally involved in the alleged wrongdoing. In the court of public opinion, punishing a handful of individuals appears to matter more than saving thousands of jobs. Keywords public opinion, criminal law enforcement, white-collar crime, corporate leniency, deferred prosecution agreements White-collar crime is common, and its consequences are In recent years, corporate scandals have remained dire. As of 2021, financial losses from white-collar crimes salient, but the number of white-collar prosecutions and are estimated at $426 billion to $1.7 trillion a year, with trials has continuously declined (TRAC 2021, 2022). Part such a wide range of estimates due to most crimes being of this decline can be traced to the rise of leniency deals unreported (Flynn 2022). White-collar crime harms vic- such as “Deferred Prosecution Agreements.” These legal tims directly, but also affects the broader community: it agreements are negotiated between public prosecutors and can have environmental and security implications as well lawyers who defend companies accused of criminal as hamper governments’ ability to fund public services wrongdoing. Prosecutors will typically end criminal court (International Public Sector Fraud Forum 2020). proceedings without a guilty plea if the accused company How the justice system deals with white-collar crime agrees to pay fines and implement good governance re- can affect its own legitimacy. Since the 2007–2008 fi- forms. The intended goal of these agreements is to avoid nancial crisis and the corporate crime scandals that fol- costly legal proceedings and to allow companies to remain lowed, the public’s attitude toward law enforcement and in business without the stigma and legal consequences the justice system has soured. In 2019, 41% of Americans that come with an admission of guilt. However, even held an unfavorable opinion of the Department of Justice. It ranked lower than other law enforcement bodies such as the FBI and the CIA, and lower than the U.S. Postal Universite´ de Montreal, ´ Montreal, QC, Canada Harvard University, Cambridge, MA, USA Service or the Environmental Protection Agency (Pew Research Center 2019). This low esteem may be linked to Corresponding Author: the widespread belief that criminals can often escape Simon St-Georges, Political science Department, Universite´ de Montreal, ´ punishment if they are rich and well-connected (Claypool 3150, rue Jean-Brillant, Montreal, QC H3C 3J7, Canada. 2021). Email: simon.st-georges@umontreal.ca 2 Political Research Quarterly 0(0) when these deals impose large financial penalties, they attitudes toward policy instruments like leniency agree- often amount to one-tenth of one percent of a corpora- ments. Third, we consider theoretical arguments in favor tion’s market capitalization, and the stock price of public and against leniency agreements and identify key char- companies usually goes up after their announcement acteristics which may affect the public’s view of this (Coffee Jr 2020; Markoff 2013). Leniency agreements, policy. Fourth, we describe a survey experiment designed therefore, risk being perceived as too favorable towards to gauge the factors that affect the level of public support corporations. Over-relying on them, in the absence of for striking deals with white-collar criminals. After re- more orthodox criminal proceedings, might lead to the porting the results of this experiment, we conclude by weakening of the punitiveness of law enforcement discussing the implications of our findings for our un- (Campbell 2019). derstanding of public perceptions of white-collar crime The widespread use of these leniency agreements, and, more broadly, for the legitimacy of the legal system. coupled with a decrease in corporate investigations and prosecutions, poses an important challenge to the legiti- Legitimacy, Public Policy, and macy of corporate criminal law and the justice system. Public Opinion Indeed, legal scholars have been asking whether allowing white-collar offenders to escape criminal proceedings Western societies are going through “an age of distrust”: “undermine[s] the public’s confidence in the adminis- citizens increasingly exercise vigilance, oversight, and tration of justice” (Coffee Jr 2020, 36; Rakoff 2014). denunciation, which means power holders must either Indeed, according to many criminal law scholars, “there adapt to popular pressures or be subjected to the tribunal remains a deep public sentiment that corporations are of public opinion (Rosanvallon and Goldhammer 2008). ‘getting away’ with crime,” especially since the housing Like some other parts of the legal system, the Department bubble burst (Buell 2016, 117). Yet, we have very little of Justice has built a fair amount of autonomy over the systematic evidence about public opinion on these mat- years. Today, it holds a “reservoir of goodwill” that allows ters, particularly when it comes to the factors shaping the it to “get away with unpopular decisions (Gibson and acceptability of deals between the government and cor- Caldeira 2009, 140).” But this reservoir is not infinite. porate actors. Even though public prosecutors and civil servants have a This article addresses these concerns by taking a first great amount of autonomy and executive discretion, they step toward a better empirical understanding of the le- must be wary of their reputations in the public eye gitimacy and acceptability of different kinds of leniency (Noyon, de Keijser, and Crijns 2020; see also Carpenter agreements. To achieve this, we conduct a survey ex- 2001, 2010). periment in the United States and assess people’s views on As Tyler and Jackson (2013) note, the empirical le- different kinds of deals between public prosecutors and gitimacy of the governmental organizations in charge of corporate actors. The results of this study yield key in- prosecuting white-collar crime is built on the trust that sights into the public acceptability and legitimacy of le- people bestow on the criminal justice system and the niency deals. perceived obligation to obey it (see also Sunshine and We find that American citizens are moderately sup- Tyler 2003; Tyler 2009). This may be an especially portive of the government striking deals with white-collar sensitive area of action because negative news and un- criminals. Surprisingly, support for leniency agreements popular decisions can erode public support and eventually does not appear to be affected by the economic conse- compromise the legitimacy of both courts and law en- quences of a guilty verdict (i.e., the number of jobs that forcement agencies (Casillas et al. 2011). As Zilis (2021) would be lost), or by the location where criminal activity has argued in the case of the Supreme Court, widespread allegedly occurred (i.e., domestic or foreign). In contrast, antipathy toward “big business,” and a string of unpopular respondents’ support for a deal increases considerably decisions in favor of corporate rights, may have con- when criminal charges are pressed against the individual tributed to decreasing its empirical legitimacy. In the managers who were personally involved in criminal United States, the Department of Justice (DoJ) oversees wrongdoing. This suggests that public opinion is driven the Fraud Section, responsible for investigating and more by a concern for punishment and retribution, rather prosecuting sophisticated economic crimes. As such, it than by a rational economic calculus to save jobs. seems useful to think about the handling of white-collar The rest of this paper unfolds as follows. First, we criminal proceedings, trials, plea deals, and leniency argue that the empirical legitimacy of the legal system is agreements as a key part of the DoJ’s mission, and efforts tied to public perceptions of both the severity and the to foster its empirical legitimacy. policy response to white-collar crime. Second, we discuss Political scientists and criminologists have shown that prior research on public opinion on white-collar crime and public officials care about public attitudes and preferences suggest that there is a need for a better understanding of toward crime rates, high-profile cases, criminal sentencing, St-Georges et al. 3 and policy responses to crime (Erikson et al. 2002; Pickett White-collar crime enforcement is very limited, and 2019; Shapiro 2011). In Incarceration Nation, for example, most cases against offenders do not invoke criminal laws Enns (2016) shows how mass incarceration is in large part a (Baer 2018, 90; Simpson et al. 2019). Only 3% of federal political response to the public’s views on punitiveness, prosecutions target white-collar crime (Bajoka PLLC spending priorities, and perceptions of public safety. Legal 2020). What’s more, since the terrorist attacks of 9/11, officials at the state and federal levels are concerned with law enforcement resource allocation has shifted away public opinion as well, especially since most of them are from white-collar crime toward fighting terrorism elected or appointed by elected officials (Pickett 2019,418- (Nguyen 2021). White-collar enforcement declined to an 419). More than half of US states have judicial elections for all-time low during the Trump administration, which trial, appellate, and higher courts (Brace and Boyea 2008). further shifted resources toward immigration surveillance Non-elected legal actors also tend to be responsive to public (Garrett 2019; Hurtado et al. 2020; McGrath and Healy opinion because they are concerned about maintaining in- 2021). Current law enforcement practices may thus fail to stitutional legitimacy. Casillas et al. (2011) suggest that have much of a deterrent effect on potential offenders and public opinion exerts an important influence on Supreme to sustain public trust in the criminal system (Claypool Court decisions. Owens and Wohlfarth (2017) find similar 2021, Smith 2021). results for federal circuit courts, despite both levels of Courts It is important to assess whether certain characteristics granting lifetime tenure. Indeed, legal scholars recognize the in crimes and ensuing legal proceedings shape views on need for sentences to be neither too harsh nor too lenient punitiveness and fairness more than others (Van Slyke and because public trust in legal institutions is central to the Rebovich 2016). Among the public, white-collar crimes legitimacy of the law (Robinson 2013). are perceived as less harshly prosecuted than other types of crimes; indeed, most people recognize that white-collar offenders have a smaller chance of being apprehended and Public Opinion on White-Collar Crime punished compared to other types of criminals (Van Slyke Despite its major consequences, white-collar crime has and Rebovich 2016). often been portrayed as less harmful and worrying than There is unfortunately little research pertaining spe- violent street crime (Cullen et al. 2019). Indeed, early cifically to public attitudes and white-collar crime en- research suggested that white-collar crimes were mis- forcement (Healy and McGrath 2019). The research that takenly perceived as being of similar seriousness to does exist does not tell us how leniency for corporate “victimless and minor property offenses” (Rossi et al. offenders stands in public opinion compared to traditional 1974). This perception has evolved over the past few sanctions or incarceration. There is thus a need to further decades, with events like the savings and loan crisis, the examine public views about white-collar crime, particu- Enron scandal, and the Great Recession. Some evidence larly how the public perceives criminal sanctions for suggests that the public may now view corporate crime as business entities and executives (Cullen et al. 2019, 224). equally or more damaging than conventional street crimes This article is part of an emerging research agenda that (Michel 2016; Cullen et al. 2019). An overwhelming assesses public perceptions of white-collar crime and the majority of Americans support stricter penalties, including policy responses to it, including the use of leniency longer prison terms, for executives who commit fraud agreements. The public considers white-collar crime to be (Unnever et al. 2008). Voters across party lines agree that serious, and both legal and political actors should be the criminal justice system unfairly targets the poor over susceptible to respond to their views. the wealthy, that corporations and wealthy people regu- Given public mood on these matters, the acceptability larly evade fair punishment, and that this is a concerning of legal tools like leniency agreements ought to be con- issue for public trust and the rule of law (Smith 2021). sidered, especially given their novelty and widespread use When it comes to how white-collar crime is prosecuted in in white-collar crime cases. Studying leniency agreements the US, there seems to be a disconnect between the gov- allows researchers and policymakers to uniquely under- ernment and the people it represents (Grasso 2021). In the stand how the public perceives the trade-offs between wake of corporate scandals, the public and politicians often punishing corporate wrongdoing and minimizing harm to demand severe sanctions for white-collar criminals (Healy innocent third parties, such as workers. This balancing of and McGrath 2019). Yet, corporations or their managers are competing interests is at the heart of leniency agreements rarely accused of criminal conduct. In the few cases that are (Lund and Sarin 2022). As opposed to trials and plea prosecuted, the DoJ increasingly resorts to leniency agree- agreements that both seek a corporate recognition of guilt, ments (Garrett 2014, 2019). These agreements can conform leniency agreements can be seen as a compromise of to legal principles, but they may not always match the punishment, a way of prosecuting corporations without public’s idea of what white-collar criminal proceedings using the fullest extent of the law. Some members of the ought to look like. public may view leniency agreements as too lenient if they 4 Political Research Quarterly 0(0) allow corporations to escape punishment only by paying of prosecutors if they need to please the political officers of fines. Others may view leniency as reasonable to avoid the Department of Justice or if they become too risk-averse collateral damage when prosecuting a corporation, the to go to trial (Eisinger 2018; Uhlmann 2013). This can traditional way would lead to important job losses. We reduce their expertise and willingness to fight high-profile discuss in more detail below how certain trade-offs and cases in courts, depriving both the judicial community and features of leniency agreements inform our hypotheses. citizens of jurisprudential development and jury feedback (Campbell 2019,283; King andLord2018,117, 127). Risk- aversion and groupthink from prosecutors are one of the When is leniency acceptable? criteria that may delegitimate an agency such as the De- Leniency agreements are typically concluded in complex partment of Justice in the eyes of the public (Levi, 2013, situations such as antitrust, bribery, or fraud cases under the 167). Foreign Corrupt Practices Act, or to settle pharmaceutical, In the empirical portion of this study, we draw in- public health, or environmental accusations. Such cases can spiration from the main arguments in favor and against be extremely costly to prosecute. Striking a deal with white- leniency agreements, to identify characteristics that could collar criminals can thus be advantageous for resource- affect whether the general finds such agreements ac- constrained governments, by allowing them to avoid ceptable. We focus on the primary policy objectives of costly legal proceedings. In so doing, leniency agreements corporate accountability, including for individual can free-state resources for more enforcement actions, and wrongdoers, while also protecting jobs and business the penalties paid by businesses under those agreements can reputation. We also explore how a sense of nationalism also help capacity building. Furthermore, leniency agree- may affect the acceptability of leniency agreements. ments foster self-disclosure of corporate wrongdoings if they are only offered to businesses willing to collaborate with the Individual Responsibility authorities. These deals could ultimately increase the total number of enforcement actions against corporate crime According to many observers, deferred prosecution (OECD 2019). agreements are not deterrent enough because they permit From the perspective of businesses, leniency agreements too many senior executives involved in criminal accu- canalsobebeneficial, because they avoid the consequences sations to escape prosecution (Coffee Jr 2020, 9, 32; of plea bargains and criminal trials, which involve an ad- Eisinger 2018; Garrett 2011, 2014). Garrett (2014, 13) mission or a recognition of guilt (Garrett 2019,15).The confirms that only about one-third of the cases in which consequences can be severe: many countries have public public companies benefited from deferred prosecution contract laws that exclude companies with criminal con- agreements led to criminal prosecutions of individuals. victions from getting public contracts. For many large Furthermore, few higher-up officers were charged; most companies, access to public contracts is necessary for individual prosecutions targeted “middle” and “low” competitiveness and survival. Lenders and suppliers may company employees (Garrett 2015, 1802). also cut contractual ties with businesses plagued by criminal When guilty players directly responsible for wrongdoing scandals, which provokes cascading effects on the reputation go unpunished, people might come to believe that the legal and viability of the business. system is not working properly, and legitimacy might suffer. Despite advantages for both business and government, Facing mounting criticism, the Obama administration at- deferred prosecution agreements remain a controversial tempted to correct this situation before the 2016 general policy instrument. Reilly (2018) writes that such deals make elections with the “Yates Memorandum,” named after the the criminal justice system a “mockery” because they allow Deputy Attorney General at the time (Yates 2015). Essen- discretion abuses while exacerbating inequalities between tially, the Justice Department modified its official policy on litigants. Leniency agreements are criticized on all sides of deferred prosecution agreements to stress the need for in- the political spectrum. Conservatives worry that they in- dividual accountability. Despite these efforts, the number of terfere with the rigorous application of the principles of law individual prosecutions continued to decline. For example, and order, while progressives fear that they may amount to a of the 21 deferred prosecution agreements signed in 2018, small corruption tax for large companies that are “too big to only five involved individual prosecutions (Garrett 2019,see jail” (Garrett 2014; Steinzor 2015). Many critics do not also Coffee Jr 2020, 37, 50). Given the rising controversy oppose the existence of these deals altogether. Instead, they surrounding the lack of prosecutions of white-collar crim- deplore their abuse by the Department of Justice, which they inals, we expect citizens to be sensitive to this consideration. think should pursue more plea bargains and trials for of- We expect that survey respondents will be more supportive fending businesses (Buell 2016; Eisinger 2018; Garrett of a leniency agreement if it guarantees that corporate 2014; King and Lord 2018; Koehler 2015). Some fear managers personally involved in the wrongdoing will be that leniency agreements may compromise the independence prosecuted. St-Georges et al. 5 Hypothesis 1: The public is more likely to support companies compared to domestic companies; when given leniency deals when they specify that managers the option to enter a leniency agreement, foreign companies personally involved in the wrongdoing will face are made to pay considerably higher fines (Garrett 2011, criminal charges. 2014). By contrast, prominent Department of Justice cases involving US-based public companies and financial insti- tutions are less common (Garrett 2019). This phenomenon Economic Consequences contributed to the adoption of leniency agreements in other One of the strongest and most often cited arguments in countries, partly because other law enforcement agencies favor of deferred prosecution agreements is that they collaborated with, or reacted to the international reach of the protect third parties from the actions of individuals di- Department of Justice. Leniency agreements spread rectly responsible for corporate crimes (Golumbic and throughout the Western world and even Asia, notwith- Lichy 2014). By reducing the economic impact of a standing significant differences in the countries’ criminal recognition of guilt on the corporation, they protect in- justice systems (OECD 2014, 2019). National economic nocent employees, pensioners, or contractual partners interests and patriotism may explain this phenomenon from a criminal recognition of guilt (Ainslie 2006; Resnik (Saint-Martin 2021; see also Lüth 2021; Woll 2023). It is and Dougall 2006; see, however, Markoff 2013). While important to understand if a national or patriotic sentiment criminal wrongdoing should warrant consequences for a also exists in the population concerning punitive attitudes. company’s managers, targeting the whole company puts We examine whether US citizens exhibit a home bias as its employees in a precarious position for no fault of their follows. We compare, on one hand, their level of support for own. Ensuring proper criminal law enforcement is key to leniency deals when the crime is committed domestically the perceived legitimacy of the DoJ, but saving jobs is also against the US government and, on the other hand, when the a legitimate economic and political goal for governments. crime is committed abroad against a foreign country and its Our research design incorporates these concerns for the foreign citizens. We expect the public to be less lenient with protectionofAmericanjobs. Specifically, it ascertains a corporation that defrauds the US government instead of a whether the level of support for a deal varies depending on foreign government. Therefore, we expect citizens to be the number of employees of the accused corporation. We more supportive of a leniency agreement when fraud and expect acceptability to increase when a higher number of corruption are committed abroad. jobs are at risk. Americans are concerned with policies that Previous studies suggest the presence of a home bias: generate negative economic consequences and are willing to people favor their own country and their fellow citizens. go to great lengths to preserve even a handful of jobs (Mutz This is a consistent finding in research bridging public and Lee 2020). For example, policy preferences over opinion and international political economy. On trade, globalization and climate change are highly sensitive to local Mutz and Lee (2020) find that American citizens sys- job market outcomes (Feng et al. 2021; Mansfield and Mutz tematically value their co-nationals’ livelihoods more than 2013; Scheve and Slaughter 2001; Vona 2019). those of other citizens living in partner countries; simi- Considering how important job creation is for electoral larly, Brutger and Rathbun (2021, 880) find that outcomes (Lewis-Beck and Stegmaier, 2000) and how “Americans have an egoistically biased sense of fairness, sensitive citizens are to economic shocks affecting em- responding particularly negatively to any outcome that ployment (Margalit 2019), we expect that survey re- leaves the United States relatively worse off.” On out- spondents will be more supportive of leniency agreements sourcing, Mansfield and Mutz (2013) argue that Ameri- if they protect the livelihoods of innocent workers. cans see economic exchanges as a zero-sum game between their domestic ingroup and foreign outgroups. Hypothesis 2: The public is more likely to support On international corporate taxation, Arel-Bundock and leniency deals when they protect a higher number of Blais (2023) find that the public favors reforms to their jobs. own country’s financial advantage. On foreign aid, Milner and Tingley (2013) find that many Americans only support foreign aid when it strategically aims to benefit the Home Bias US economy. We expect that people will be less lenient We chose bribery and fraud for the context of our research when fraud is committed against the US government than design because such scenarios allow us to consider the in- when the fraud affects a foreign government. ternational dimension of crime. Theriseofdeferredpros- ecutionagreements inAmerica has had an interesting side- Hypothesis 3: The public is more likely to support effect: prosecutors are harsher on non-US corporations than leniency deals when the crime is committed against on US corporations involved in criminal activities. The a foreign government rather than their own Department of Justice indicts more often foreign-based government. 6 Political Research Quarterly 0(0) To study these issues, it is useful to focus on a particularly factors in the vignettes that respondents read. Each of salient category of leniency agreements that have caused those factors is randomized independently. controversy in recent years. Deferred prosecution agreements For the Criminal Charges factor, half of the respon- follow legal frameworks that allow for variation along the dents are assigned to read that “4 of the company’s dimensions described above. In the next section, we describe a managers will face criminal charges for their personal survey-based research design which allows us to test our three involvement in the bribery” at the end of the vignette. The hypotheses in the context of deferred prosecution agreements. other half does not see this sentence. Centering our research design on these agreements increases For the Jobs at Risk factor, half of the respondents are external validity by allowing us to link our findings to concrete assigned to read that 100 jobs are at risk, whereas the other cases of prosecutorial leniency in white-collar cases. half are told that 5000 jobs are at risk. For the Crime Abroad factor, half of the respondents are assigned to read that the American company com- Research Design mitted the crime on US soil, whereas the other half read The theoretical and substantive considerations explored that an American company committed the crime in Brazil. above led us to study the effect of three factors on public After displaying the vignettes, we measure the out- support for deferred prosecution agreements: (1) whether the come of interest with the following question: deal includes criminal charges for individuals involved in the crime; (2) the number of jobs jeopardized by the prosecution; Do you support or oppose this deal? 0 means that you (3) whether the US or a foreign government was targeted by “Strongly Oppose” the deal. 10 means that you “Strongly the criminal wrongdoing. To measure how these three factors Support” it. relate to acceptability, we conducted a pre-registered survey experiment with an online sample of 2000 US adults. Now that the research design has been outlined, the We set our study in the context of corruption and fraud following section examines the data and presents the against a government, which typically implies an illegal results. exchange of favors with a high level of violation of public trust and a large pool of victims (Cullen et al. 2019). When Results bribery, fraud, or corruption occurs, the local population pays much higher costs for public projects, often with Before describing how the randomized treatments relate to increased environmental and security risks (International support, it is helpful to take an exploratory look at the Public Sector Fraud Forum 2020). Moreover, when a outcome variable. Table 1 shows the average level of corruption scandal irrupts, the loss of trust in institutions support for a deal and its standard deviation for different can lead to further economic and social consequences. subgroups of the survey sample. Several points are The experiment consists of a single vignette about a noteworthy. fictional company: To begin, we see that the average level of support for a deal is somewhat positive among the American public, We would like to have your views about deals that are hovering above 6 on a scale ranging from 0 to 10. sometimes made between the U.S. Department of Justice and However, we also see that there is a fair amount of American companies accused of criminal activity. variation across that mean, with a standard deviation of about 2.5. Table 1 also shows substantial variation in Imagine that an American company is involved in a major support across socio-demographic groups. On average, case of bribery and fraud against the [U.S. government / men are more supportive of a deal than women, and the government of Brazil]. The U.S. Department of Justice has level of support appears to decline with age. In contrast, strong evidence that the company committed this crime. If there does not appear to be any clear relationship between they go to court and the company is found guilty, the education and this item. company will be forced to declare bankruptcy and lay off To estimate the association between experimental [100 / 5,000] innocent American employees. conditions and support, we estimate a linear regression To save those jobs, the U.S. Department of Justice decides to model of this form offer the company a deal: The lawsuit will be dropped if the company agrees to pay a big fine. [In addition, 4 of the Support Deal ¼ β þ β Criminal Charges þ β Jobs at Risk 0 1 2 company’s managers will face criminal charges for their þ β Crime Abroad þ ε personal involvement in the bribery.] β estimates the effect of the Criminal Charges treatment, which is equal to 1 when respondents learn that the To assess how each of the three factors above relates to company’s managers will face personal criminal acceptability, we introduce random variation among three St-Georges et al. 7 Table 1. Support for Deferred Prosecution Agreements on A consequences for their actions, and 0 otherwise. If people Ten-Point Scale by Gender, Age Group, and Education Level. are motivated by a desire for punitiveness, they should be more willing to support a deal that punishes white-collar Mean Std. Dev. criminals, and the β coefficient should be positive. β 1 2 Gender estimates the effect of the Jobs at Risk treatment, which is Man 6.44 2.66 equal to 1 if 5000 American jobs are at risk, and 0 if 100 Other 4.67 1.97 jobs are at risk. Since respondents should be more lenient Woman 5.98 2.53 when the costs of prosecution increase, we expect the β Age coefficient to be positive. β estimates the effect of the 18–34 6.45 2.49 Crime Abroad treatment, which is equal to 1 if the crime 35–54 6.27 2.64 was committed in Brazil and 0 if it occurred in the US. We 55+ 5.67 2.58 expect American respondents to be more favorable to a Education deal when the company commits a crime abroad rather No formal education 5.90 1.66 than on US soil. If this is correct, the β coefficient should Some primary school 6.43 2.92 be positive. Primary school completed 6.52 2.51 Figure 1 presents our point estimates along with 95% Some secondary/high school 6.27 2.45 confidence intervals built using heteroskedasticity- Secondary/high school completed 6.03 2.45 consistent standard errors. The full results are presented Some college or university 6.25 2.59 in Table B of the online appendix. University completed or higher 6.30 2.79 Discussion The first major result of our study is that the inclusion of punishment. For many American respondents, it is more criminal charges has a large effect on public support for important to punish four (4) guilty managers than save such agreements. On average, pressing criminal charges 5000 innocent workers. Our results also suggest that against four of the company’s managers increases support American patriotism does not affect the acceptability of for a deal by about 0.8 on the ten-point scale, or about 1/ leniency agreements. These results send a strong signal to rd 3 of a standard deviation (p<0:001). This is a substantial practitioners and politicians that the legitimacy of white- effect and a key finding of this study. collar crime enforcement rests more on appropriate The second important result in Figure 1 is that the punishment than on pragmatic, economic considerations. Democratic theory and consensus perspectives on number of jobs has a positive but very small effect on criminal law suggest that crime control must reflect public acceptability. On average, moving from 100 to 5000 jobs at risk increases the level of support for a deal by 0.14 on a wishes and important social norms (Van Slyke and ten-point scale. While this result crosses conventional Rebovich et al. 2016). The criminal justice system thresholds of statistical significance, the estimated effect plays a key role in American society, but its handling of th st size is substantively small: It is equivalent to about 1/10 corporate criminal cases in the 21 century may contribute of a standard deviation in the dependent variable. This to weakening its legitimacy. To preserve its legitimacy, weak effect is all the more striking given that the treatment public administrations must respond to public opinion on is arguably very strong; the difference between 100 and corporate crime levels and sentencing (Tyler and Jackson 5000 lost jobs should be an important consideration for 2013; see also Moore and Mills 1990; Roberts and Stalans most citizens and policymakers (see for ex. Feng et al. 2004; Unnever et al. 2008, 165). At a time when politi- 2021; Mutz and Lee 2020). cians and the public frequently condemn corporate ex- The third important result is that whether the US or a cesses and criminal conduct (Healy and McGrath 2019), foreign government is targeted does not appear to be an leniency agreements for white-collar criminals risk di- important consideration for respondents. Indeed, β is minishing the public’s trust in its institutions. substantively small and it is not statistically significant. Our study sheds new light on these matters. Using a There is no statistically significant effect of the location of vignette experiment, we measure how variations in key a corporate crime on people’s propensity to support a deal. features of a deal affect support by the public. Our results This is also surprising given previous research on national suggest that even though public acceptance of leniency economic interest and patriotism in public attitudes (see agreements is moderately positive, respondents do not e.g., Brutger and Rathbun 2021; Mansfield and Mutz give much weight to the economic rationale—protecting 2013). jobs—that often underlies them. Instead, acceptance is considerably enhanced when prosecutors prioritize These findings are striking; they point to a major holding company managers accountable for corporate tension between economic rationality and hunger for 8 Political Research Quarterly 0(0) Figure 1. The effect of criminal charges, jobs at risk, and crime location on support for deferred prosecution agreements. The dependent variable is on a scale of 0–10, where 10 means “strongly support” the deferred prosecution agreement. The outcome has a mean of 6.2 and a standard deviation of 2.6. crimes. Moreover, respondents are indifferent to the lo- individual criminal accountability for officers of Boeing, cation of the crime: their opinion does not change when a concerning fraud conspiracy over the 737 MAX evalu- foreign country rather than the US is targeted by bribery ations, Wells Fargo, regarding its predatory cross-selling and fraud. fraud, or even Purdue Pharma for its role in an illegal opioid scheme (Claypool 2021). These cases are not Taken together, our results suggest that people exceptional since individual prosecutions accompany support leniency agreements when they perceive them only 27% of leniency agreements (Garrett 2019). Yet there as fair and sufficiently punitive—regardless of how is evidence suggesting that optimal corporate deterrence many US jobs they can save. Our results thus suggest should focus more on seeking consequences for top in- that deontological considerations trump utilitarian cost- dividuals and less on financial penalties for companies benefit calculations in the perceived legitimacy of these (Lund and Sarin 2022). deals. Research in moral psychology indicates that Because the perceived legitimacy of the Department “political attitudes held with moral conviction are as- of Justice, and other law enforcement agencies, largely sociated with a characteristically deontological (action- depend on public perceptions of fairness, more research oriented) processing style,” which implies disregard for is required on corporate crime enforcement in general. the practice of weighing costs against benefits (Ryan Public attitudes toward corporate crime enforcement 2019,429). Deontology,inthissense,refersto “the may notably vary depending on how and when re- psychological mode in which judgments stem from the spondents are probed. They may react differently to inherent appropriateness of an action, rather than similar experiments in periods of economic crisis, or in consequences” (Ryan 2019, 428). Therefore, respon- the face of corporate scandals involving large institu- dents who think about an issue using a deontological tions, such as Enron, WorldCom, Halliburton, and processing style will tend to be insensitive to infor- major banks during the Great Recession. Survey and mation about its policy effects. experiment results may also be influenced by the level A clear takeaway from this study, for practitioners of awareness of criminal corporate enforcement, and and researchers alike, is that the public seems com- how its rather technical concepts are presented to re- fortable with leniency agreements when they ensure spondents (see Michel et al. 2016a, 2016b). More criminal prosecutions for influential individuals. These political science research should also focus on public results are in line with the official statement from a support for law enforcement. Our results differ from former chief prosecutor of foreign bribery, Mark expectations on the impact that patriotism and national Mendelsohn, according to whom “It is [the Department economic interests may have in shaping public attitudes of Justice’s] view that to have a credible deterrent ef- (Arel-Bundock and Blais 2023; Brutger and Rathbun fect, peoplehavetogotojail” (Corporate Crime 2021; Feng et al. 2021; Mansfield and Mutz 2013; Reporter 2008). If public officials care about public Milner and Tingley 2013; Mutz and Lee 2020; Scheve opinion as much as they claim they do, leniency and Slaughter 2001; Vona 2019). agreements aimed at protecting innocent parties should also prioritize the inclusion of criminal charges al- Acknowledgments lowing for the punishment of guilty ones. We thank Denis Saint-Martin, Jessica Schoenherr, the editors, It is of utmost importance for the legitimacy of the legal and the reviewers. Simon St-Georges thanks the Vanier Canada system that white-collar criminals do not go unpunished. Accusations against corporate entities rarely lead to Graduate Scholarships Program for the financial support of its consequences for high-profile executives. There was no doctoral research. St-Georges et al. 9 advantage, or to conceal or cover up other wrongdoing” Declaration of Conflicting Interests (Strader et al. 2021). Therefore, white-collar crime encom- The author(s) declared no potential conflicts of interest with passes a variety of crimes ruled by federal and state statutes on respect to the research, authorship, and/or publication of this securities fraud, antitrust violations, bribery, tax offenses, bank article. embezzlement, postal and wire fraud, false claims and state- ments, and credit or lending fraud (Healy and McGrath 2019). Funding White-collar crime is performed by legal entities, employees, The author(s) disclosed receipt of the following financial support but also rogue individuals. On the other hand, “corporate for the research, authorship, and/or publication of this article: crime” refers to a corporation’s punishable conduct or of its This work was funded by the Social Sciences and Humanities representatives acting on its behalf (Braithwaite 1985). Research Council of Canada grant #435-2019-0434. 6. For example, when reviewing the Standard and Poor 3000 between 1996 and 2013, Simpson et al. (2019) found that of Replication data the 10,812 cases brought against firms for accounting, bribery, environmental, and anti-competitive offenses, less Available at https://osf.io/na6vq. than 5% opted for the criminal law venue. Public prose- cutors instead favored administrative sanctions (57%) and ORCID iDs civil suits (38%), despite having criminal prosecution as a Simon St-Georges  https://orcid.org/0000-0003-1189-8007 clear statutory option for these kinds of cases. On average, Marco Mendoza Avina  https://orcid.org/0000-0001-8102- criminal accusations target smaller, younger, and less in- 938X fluential companies or outright criminal organizations (Simpson and Yeager 2015; Simpson 2019). 7. For example, the US, China, Germany, Australia, Brazil, Supplemental Material Canada, South Africa, and the World Bank all have such Supplemental material for this article is available online. policies in place (World Bank 2021). 8. More features of deferred prosecution agreements could be Notes studied in future research, such as the gravity of the crime 1. Such criticisms have reached the general public via popular committed, voluntary disclosure by the accused, awards to culture, through TV shows and documentaries like “Dirty repeat offenders, the extent of judicial revision, or the im- Money” (Teodorczuk 2018; see also Khardori 2022; portance of reparation to victims. According to Dodge (2020), Viswanatha and Michaels 2021). white-collar crime traditionally leads to little compensation or 2. The concept of “empirical legitimacy” refers to the per- justice for the victims. Leniencyagreementsalsoveryrarely ceived right to rule (de Fine Licht et al. 2022). It can be compensate victims of bribery and corruption in foreign contrasted with “normative legitimacy,” which focuses on countries (Garrett 2014; OECD 2019,97). the moral grounds to rule, such as justice or rationality (see 9. Because our research design also allows us to examine Beetham 2013; Hinsch 2010; Merquior 1980). reactions to the number of US jobs at risk, we do not 3. Chief prosecutors, state, county, and district attorneys are, for consider the home bias associated with the foreign/domestic the most part, elected or appointed by elected members of the nationality of the accused corporation. executive branch (Wright 2008). Elected officials are more 10. The pre-analysis plan was submitted to the AsPredicted likely to respond to public mood on law and order, including website on 05/27/2021. Data were collected via the Qual- oversight priorities (Erikson et al. 2002; Enns 2016). trics platform between May 31 and June 3, 2021. Partici- pants were recruited by research firm Dynata to fill 4. Research in the 80s notably found that 89% of respondents demographic quotas for gender (men and women), age believed white-collar criminals deserve to go to jail for their group (18–34, 35–49, 50–64, 65+) education level (no high crimes like everyone else (Cullen et al. 1983). In 2005, one- third of respondents to a national survey regarded white- school, high school/some college, bachelors/postgraduate collar crimes as “more harmful to society than ordinary degree), and Census region (Midwest, Northeast, South, crimes,” while the majority of respondents thought “the West). Since respondents who did not meet these quotas government should allocate equal or more resources to were systematically redirected out of our survey, our sample tackling white-collar crime” (Holtfreter et al. 2008). is balanced across these demographics without the need for 5. The term “white-collar crime” was coinedin1939todistin- survey weights. Table A of the online appendix compares guish it from “common” or “street” crime, which is often our sample to data from the 2021 Current Population Survey violent (Sutherland 1983). Even if definitions of white-collar by the US Census Bureau. crime are plural, they usually refer to “illegal activities that 11. The relationships between support for the deal and gender, principally use deceit, deception, concealment, fraud, or and support for the deal and age, are statistically significant misrepresentation to obtain money, property, or some other at the α ¼ 0:001 level. 10 Political Research Quarterly 0(0) 12. In Table C of the online appendix, we show that our results Handbook of White-Collar Crime, edited by. Melissa Rorie, are not substantially different when we estimate an ordered 209-228. Hoboken: John Wiley and Sons, Ltd. logistic regression model instead of linear regression. Cullen, Francis T., Gregory A. Clark, Richard A. Mathers, and John B. 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Journal

Political Research QuarterlySAGE

Published: Dec 1, 2023

Keywords: public opinion; criminal law enforcement; white-collar crime; corporate leniency; deferred prosecution agreements

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