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Are White-Collar Crime Registries the Key to Preventing Another Financial Crisis?

On Wednesday, the Utah State Legislature created a sex-offender-style registry for warning the public about Utah's Gordon Gekkos. The idea might just catch on.
Thumbnail image via U.S. Department of Justice

On Wednesday, the Utah Legislature approved a measure that will create the first white-collar offender registry in the United States. Membership in the online database will brand the state's Ponzi schemers and crooked bankers as dangerous characters the public needs to be leery of, even if they're not physically violent.

It's a catchy idea that's sure to temporarily soothe the bitter feelings of some Americans who thirst for the blood of Wall Street bankers, but does it make sense as a tool to deter future financial panics?


When Sean Reyes, the attorney general who came up with the idea in the first place, testified before Utah lawmakers, he threw in an odd remark about perpetrators of fraud. According to the New York Times, he said that "physical wounds heal," but these people "can forever deplete your life savings."

It's a crude comparison, but it might be apt.

The emotional and physical toll violent crime takes on victims is intangible, and it's only trivialized by actuary tables and spreadsheets. Meanwhile, the overall cost of crimes like fraud and financial impropriety can be measured, and it is enormous: $300 billion per year, according to the FBI. Compare that to the annual $4.6 billion America loses to burglary each year (according to the most recent FBI numbers from 2010), and maybe a little bit of stigma for white-collar criminals is an idea whose time has come.

One opponent of the bill, Utah Representative Fred C. Cox, is concerned about that stigma. He said in a speech from the State House floor that "these are important crimes that we want to protect individuals against, but I'm not ready for a scarlet A, or whatever letter would be involved."

The online database will feature mug shots along with basic, DMV-type info: date of birth, height, weight, hair color, and the like. That means it's going to look essentially like any sex offender registry—once you're on it, you can consider yourself publicly shamed.


Former North Carolina Congressman Brad Miller, who worked extensively on financial regulation, told us he likes the idea of employing shame to "deter the rampant dishonesty we've seen in the last few years," but is worried that white-collar criminals are shame-proof.

"I think white-collar criminals still get invited to the same parties they were invited to before their conviction," Miller said. He doesn't see much evidence of contrition, or any shunning from their former business associates. "Active prison sentences by anyone other than the smallest of fry are vanishingly rare, and financial penalties are a cost of doing business," he added.

That might be because the Obama Administration has scarcely tried to weaponize shame during its six years of ostensibly rooting out white-collar crime. In 2009, the president wagged his finger at Wall Street, famously calling their $20 billion in bonuses "shameful" and bankers "fat cats," but the actions of his Justice Department have sent another message entirely.

Attorney General Eric Holder has consistently pulled his punches when it comes to bankers. His agenda has centered on splashy settlements with eye-popping fines but no jail time for individual execs, robbing us of any more those oh-so-satisfying white-collar perp walks.

In 2013, Holder gave his "too big to jail" speech, testifying before the Senate Judiciary Committee that he was "concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute—if we do bring a criminal charge—it will have a negative impact on the national economy, perhaps even the world economy."


Given that the database will only contain felons, and not persons and entities found liable in civil cases, would it even have the worst of the bad guys in it?

In a phone interview, Columbia law professor John Coffee told me, "Civil offenses, you can overcome. You may have gotten fired. You may have gotten thrown out of the industry, but you can sneak back in elsewhere."

But as for those who do end up on the registry, "I think it's more symbolic than practical," Coffee said, emphasizing that he does not disapprove of the registry as a public resource. "It's more of stigma sanction than it is a resource for consumers. The consumer who gets defrauded is often someone who hasn't exercised due care adequately."

We might soon see whether consumers nationwide will take advantage of that resource, however. The law was sponsored by Representative Curtis S. Bramble, president-elect of the National Conference of State Legislatures, and he plans to use that influence to spread the idea around. He told the New York Times, "The registry could become a best practices for other states."

But for the time being, the registry isn't going to be filled with Goldman Sachs employees, but a bunch of small-time hucksters from Utah, the number one state for a crime called "affinity fraud."It's a huge industry; according to the FBI, there were 4,400 victims in 2012 alone, and their losses total $1.4 billion.

In the schemes, the con artists make themselves appear trustworthy by suggesting that they're card-carrying former Boy Scouts, and fellow members of the Church of Jesus Christ of Latter-Day Saints—before bilking their marks out of their life savings. For the most part, the registry is aimed at exposing these kinds of small-time con artists. But the possibility of using it as a tool to tackle bigger fish is tantalizing.

In her new book Is Shame Necessary, Jennifer Jacquet argues that during the fallout from the 2008 financial crisis, watching Wall Street get away with murder really burned people up. One measly top banker went to jail over the disaster, a number in stark contrast to the hundreds who got locked up during the Savings and Loan crisis of the 1980s. So people used shame as a weapon, inventing the term "1 Percent." All the shaming "is not because society sees [bankers] as 'less than human,'" Jacquet writes, "but because there is no alternative."

Jacquet's thesis is that yes, shame is necessary. It's our only shot at depriving white-collar criminals (along with environmental villains and unethical companies) of their good names, which is something that they feel much more acutely than fines or jail time. As Jacquet said in a speech shortly before the book came out, "You can use shame—weak against strong—at the group level. It can scale, and it can be much more efficient than some other forms of punishment."

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