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Making a Federal Case Out of It

by Stephanos Bibas

Regulation by prosecution

In 1999, federal fisheries agents received an anonymous tip by fax. The fax claimed that David McNab was importing lobsters from Honduras that were packed in clear plastic bags, not the cardboard boxes prescribed by Honduran law, and that some of the lobster tails were undersized.

Acting on the tip, the feds seized a $4 million shipment of lobster tails and charged McNab and three of his customers with felonies for violating and conspiring to violate the Lacey Act, which forbids taking wildlife in violation of local laws and regulations. They also charged McNab et al. with smuggling, because the lobster importation violated the Lacey Act, and money laundering, for depositing the proceeds of smuggling. The Honduran government intervened on behalf of the defendants, contending that they had done no serious wrong and that the Honduran regulations were void or had been repealed. But the four were convicted of multiple federal felonies, and three of them received eight years each in federal prison.

When we think about crimes, we (and local prosecutors) normally focus on inherently wrongful acts that harm or threaten to harm persons or property. Defendants have plenty of notice that it is wrong to do these things. Traditional crimes are also defined to include some level of mens rea, or  guilty mind, which limits punishment to intentional, reckless, or at least negligent wrongdoers. It makes perfect sense for prosecutors to pursue zealously such harmful wrongs, to punish them and stamp out crime.

But federal law criminalizes much more than these classic violent, property, or even drug crimes. It also punishes a wide range of regulatory offenses, ranging from tax and white-collar offenses to violations of environmental and wildlife laws such as the Lacey Act. These laws are less intuitive and less well known. Many of them dispense with mens rea requirements, in whole or in part. They often draw vague lines separating lawful conduct from civil infractions from crimes. Yet many of them brand violators as felons and threaten them with years of imprisonment.

As a result, federal prosecutors have tremendous discretion in deciding what amounts to a federal crime, a civil wrong, or a debatable violation to be overlooked. They carry fewer cases than do local prosecutors and often have specialized mandates, so they do not have to weigh the benefits of pursuing regulatory crime versus traditional street crime.

Federal prosecutors can also hold the threat of criminal enforcement in reserve, using it to coerce civil settlements and consent decrees even where proof of wrongdoing is shaky. Indeed, prosecutors of white-collar crimes often enter into deferred-prosecution agreements, in which businesses are not prosecuted in exchange for paying fines, firing employees, or making other internal changes not provided for by law or regulation. That allows regulatory agencies to flex their muscles and read laws expansively — for example, reading the Clean Water Act to cover all kinds of building in wetlands. Any criminal conviction amounts to the death penalty for a legitimate business (as it was for Big Five accounting firm Arthur Andersen, even after its conviction was reversed on appeal). Thus, few businessmen dare to fight federal power grabs, and regulators can push the envelope of their power.

Federal regulators can afford to use criminal prosecutions sparingly so long as the loaded gun of criminal penalties lies in full view on the negotiating table. A corollary is that defendants are prosecuted not for being the worst of the worst, but for refusing to play ball.

In one case (on which I worked as a young lawyer), Maryland real-estate developer Jim Wilson developed a plot of land alleged to be a wetland. The Army Corps of Engineers asserted federal jurisdiction over the land as a navigable water, even though the nearest river was six miles away, and Wilson dared to fight back with a takings lawsuit. In response, the feds prosecuted him for felonies under the Clean Water Act, on the theory that digging ditches and putting the removed dirt next to the ditches amounted to discharging a pollutant into navigable waters without a permit. They offered to settle the case for a $1 million fine and an admission of wrongdoing, but Wilson refused. He and his company were convicted and punished with several million dollars in fines, and Wilson was sentenced to almost two years in prison. The conviction was later overturned on appeal.

In another case, outdoorsman Tom Lindsey and his friends got federal permits to float down the Snake River in Idaho and Oregon but began their rafting days at 7 a.m., rather than the officially permitted 9 a.m. starting time, and used gas stoves at their camps. Lindsey had an anti-government attitude and had had run-ins with Forest Service agents before. On this occasion the agents came by helicopter to arrest the gang, sent him a letter revoking the camping permits, and indicted Lindsey and his brother for the felonies of camping without a permit and building a campfire without a permit. Like Wilson, who was prosecuted after challenging the Army Corps of Engineers, Lindsey may have been prosecuted in part because of his prior run-ins with the feds. The case against Lindsey was ultimately dismissed.

The criminal law is a powerful tool. Traditionally, we have tried to use it sparingly, to condemn the most obviously harmful wrongs. That approach leaves everything else to civil law and regulations and conserves the law’s moral credibility. But regulators increasingly add this powerful weapon to their arsenals to aggrandize their power and force civil settlements.

We conservatives rightly distrust big government, but we have been slow to apply that suspicion to the criminal side of the regulatory state. Within the traditional sphere of harmful wrongs, conservative tough-on-crime instincts make perfect sense. We want police and prosecutors to be zealous in chasing and punishing murderers, robbers, and rapists; everyone knows and agrees that these acts are wrong and deserve zero tolerance.

But our libertarian and limited-government instincts should make us more skeptical of newfangled regulatory crimes, especially federal ones. The government appropriates the machinery of criminal justice as a tool for turning regulatory objectives into coercive moral crusades. These new crimes are not inherently or obviously wrongful, let alone wrongful enough to be crimes. And many of them do not require proof of mens rea, so unwitting violators of workplace-safety rules and the like may be at risk.

The government’s temptation to overuse this powerful tool is often irresistible. Branding a problem criminal is a way for legislators to show that they take it seriously without having to budget for a new enforcement bureaucracy. Regulators announcing new rules must first provide public notice, allow comment, and prove that the new rules carry more benefits than costs, but agents and prosecutors are not fettered by cost-benefit analysis when deciding how zealously to prosecute.

Regulatory agencies lobby law enforcement to arrest and prosecute violators to further their narrow missions and justify their existence and budgets, and the FBI and federal prosecutors have a hard time saying no. Unlike civil inspectors, criminal-enforcement agents get instant attention and respect, inducing quick compliance and settlements. And while new rules have to face judicial review, settlements and plea bargains effectively insulate prosecutorial enforcement decisions from review.

Certainly, the government needs to regulate pollution, fraud, tax shelters, hunting, and fishing. Civil penalties, and even court-ordered injunctions, are often necessary. But the government has far too much low-visibility power and discretion to turn a civil wrong into a crime. It can threaten to brand legitimate businessmen criminals, and most of them will back down meekly in fear. Federal power thus keeps expanding. The losers are not always those who are most culpable or cause the most harm, but those who dare to buck the system.

– Mr. Bibas, a professor of law and criminology at the University of Pennsylvania, is the author of The Machinery of Criminal Justice.

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