Monthly Archives: October 2013

Cognitive Dissonance, or Why I’m Conflicted About Kwame Kilpatrick Getting 28 Years in Federal Prison…

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Watch out for the Vampire Squid…

I’m an auditor and a fraud investigator, so anytime I hear about a corrupt public official receiving actual prison time for fraud, I feel satisfied. Not happy per se, because I’m all too aware of how devastating the effects of fraud are on families, communities, institutions, and society overall. However, a nice public conviction does make me feel somewhat vindicated and proud of my profession and those who do the hard work of bringing malfeasance to light and helping ensure that justice is done, even if that outcome is all too rare.

So the news yesterday that former Detroit mayor Kwame Kilpatrick received a 28-year sentence in federal prison for his 23 felony convictions related to a veritable cornucopia of fraud charges made me momentarily giddy. “Good. I hope he does all 28 years,” I thought. But as the day wore on, I noticed that underneath the glow of righteous satisfaction I felt at hearing the news of Kilpatrick’s conviction there was a definite undercurrent of unease. It took me a little while to figure out why I was feeling the creeping dread of cognitive dissonance, but I think I finally nailed it down:

Kwame Kilpatrick is a two-bit crook, compared to the sorts of long-con fraud schemes perpetrated by many financial industry executives in the last ten years. What’s worse? – NONE OF THOSE WALL STREET CATS ARE IN PRISON.

“But still,” you say, Kilpatrick stole a bunch of money, diverted public funds to friends, family, and business associates, and was, by all accounts, an a-hole of staggering proportions. He’s getting what he deserves.” Fine, all true, but let’s take a look at what he did and what he got, and quantitatively compare his sentence to some other miscreants who haven’t been charged or convicted…

From the Detroit News:

“Prosecutors and defense attorneys haggled over the estimated $9.6 million in profits reaped by Kilpatrick and co-defendant contractor Bobby Ferguson in their racketeering scheme. After hearing roughly 20 minutes of arguments on that key point, U.S. District Judge Nancy Edmunds set a conservative estimate of $4.6 million for sentencing purposes.”

So, setting aside all the various and sundry illicit activities that were an integral part of the overall fraud (tax evasion, wire fraud, perjury, etc.) and looking at Kilpatrick’s crimes from a purely financial point of view, we can solve the following equation:

$4.6 million / 28 years = $164,286 stolen per year of prison sentence.  

That’s using Judge Edmund’s conservative estimate. Suppose one were to use the prosecutor’s $9.6 million figure:

$9.6 million / 28 years = $342,857 stolen per year of prison sentence.

Okay, I’ll grant you that $4.6 million is a lot more than one could expect to haul in from knocking over the corner liquor store, but when we start talking about .0001%-er-hedge-fund-manager-private-jet-chartering-let’s-do-a-bunch-of-cocaine-off-a-stripper’s…well, you know what I’m getting at. Or, in case you don’t, there’s this. Or this. Or this.

See my point? How many of the principals involved in those financial industry scandals have been charged, convicted, and sentenced? Answer: This many.

Let’s do some more math. Using the “Kilpatrick Ratio” of a year of prison sentence for roughly $165,000 in fraudulently-obtained or “missing” funds, we would get the following prison sentences:

MF Global/Jon Corzine = 9,697 years ($1.6 billion)

Goldman Sachs/Lloyd Blankfein/Fabulous Fabrice Tourre = 6,060 years ($1.2 billion)

JP Morgan Chase/Jamie Dimon = 37,576 years ($6.2 billion and counting, NOT counting the big settlements that are pending)

“But wait, we can’t do that,” scream The Apologists. “These banks, and the super-smart ( and TOTALLY coincidentally, entirely white male) people who manage them are far too valuable to the global economy to prosecute, it will send the wrong message, it would inhibit capitalism, blah blah blah.” We all know the deal, but that doesn’t mean that it isn’t enormously frustrating.

Now, I’m not saying Kwame Kilpatrick didn’t deserve to go to prison, in fact quite the contrary – throw the book at him.

But it just doesn’t seem right that he doesn’t have a bunch of fellow inmates who were formerly employed on Wall St.

In the end, as Georgle Carlin liked to remind us, it’s a club, and you ain’t in it. 

 

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