Abstract: The Criminal Sanction for Executive Fraud in the Post-Enron Period

Virginia Maurer


In passing the Sarbanes Oxley Act of 2002, the U.S. Congress drastically increased the maximum penalties available to federal judges in sentencing executives convicted of federal securities fraud, mail fraud, or wire fraud. Congress passed SOX in the wake of stunning corporate frauds and thereby ushered in the post-Enron period. After Enron, the American public appreciated afresh the personal impact of fraud and the threat fraud posed to one's personal future. In the new "equity society"—the widely dispersed holding of corporate securities in private pension funds—executive fraud poses a heightened level of threat, not only to the financial markets, but also to the moral order itself. The public demanded effective punishment to redress broken public trust in the financial markets and in personal integrity. The paper uses Herbert Packer's observation in 1968 that fashions of criminal punishment in American history alternate, depending on the nature of the threat posed by the crime, among morally based Retribution theory, psychologically based Behavioral theory, and utilitarian-based Deterrence theory. SOX's new mandates for punishing corporate executives reflect the renewed ascendency of previously discredited Retribution theory and partially dislodge utilitarian-based Deterrence theory.