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Crisis of Overcriminalization — The Hot Topic Rises from Regulatory Overreach

a photo of a businessman in handcuffs with a background of a city under dark clouds, thus depicting a crisis of overcriminalization

Mass incarceration has become a hot topic on both the Right and the Left. Apparently, everyone looked around and suddenly noticed that the number of people in prison has simply exploded. The Left are offended by mass incarceration because they believe the criminal justice system unfairly targets minorities and the poor. The Right are up in arms over the situation because prisons are terrifically expensive and needless incarceration is a waste of money. And the topic on a potential crisis of overcriminalization has risen from all these points.

Here at Bold Business, we try to get to the root causes of pressing problems. As Jim Copland points out in this interview, with 4,500 federal crimes on the statute books, and 300,000 regulatory rules and regulations—many of them contradictory—, it is impossible for a typical citizen to avoid breaking many laws every single day. No single person knows the entire federal law code, making it difficult to ensure that one’s actions are legal. This fact has led to a situation in which businessmen and women find themselves increasingly vulnerable to attacks from a variety of federal regulatory agencies. The explosion of regulations and laws has simply made it impossible for a typical business person to have any certainty that they are in compliance, even when performing the most mundane tasks.

On the Matter of Due Diligence and ‘Gotchas’

Due diligence cannot happen if the applicable law code is too large and complex. Many business people are forced to simply throw in the towel and purchase errors and omissions insurance to protect themselves. They strive for compliance with the law that is commonly known. But they are perfectly aware that buried in those hundreds of thousands of pages, there are more than a few “gotcha” clauses. And those gotchas can come with heavy fines or jail time. Such a scenario may produce a higher probability of a crisis of overcriminalization.

One notable example which has been in the news of late was the case of Elliot Spitzer’s attack on Hand Greenberg of AIG. Spitzer brought numerous charges against Greenberg during the ‘crusading’ years immediately post-Enron. Spitzer himself was unable to see the case through, due to his involvement in a prostitution scandal in which he was identified as ‘caller 9’. Yet, even after Spitzer’s departure, the case against Greenberg and AIG continued, for 12 years. In the end, the case was settled for a meager $9 million by the current board of AIG, which admitted to two non-material accounting errors. Note that this case was brought forward not under federal law, but under the much-reviled Martin Act of New York—which allows the conviction of fraud without demonstrating the intent to deceive.

Avoiding a Crisis of Overcriminalization

Intention is at the heart of the Judiciary subcommittee led by Representative Goodlatte, R-Virginia. Many citizens from the business and academic communities are concerned that the sheer scope of the federal regulatory code leaves business management vulnerable to onerous fines and even jail time. The regulatory environment is such that they are frequently unaware that they are in violation at all. In addition, the regulations that carry these severe penalties are often not in the least bit obvious to any “normal” person. In other words, they cannot be intuited from best practices or common sense. Many are calling for a return to the former intention standards, known as mens rea, for at least some regulations. For violations that have little or no public impact and were simply errors without any intention to do harm, criminal prosecution is simply inappropriate.

a photo portrait of Jim Copland from the Manhattan Institute amid discussions on a crisis of overcriminalization
Jim Copland from the Manhattan Institute

It is a dangerous situation when ordinary citizens can be jailed for violations of rules and regulations that seem pointless and overblown to the average person. Failure to stop at a red light is one thing, public safety is at issue; failure to fill out “line 42 on page 74 of the special form for what-not” is hardly the type of thing that presents an imminent threat to the public. Yet, with 300,000 regulations, there is a “line 42” out there for everyone. In addition, these regulations can be used capriciously and vindictively, undermining the very notion of law and justice as commonly understood in the United States.

As Jim Copland notes, Chairman Goodlatte and his committee are doing yeoman’s work, performing the unglamorous task of rolling back arcane, needless, and burdensome regulation. Sometimes the most important service doesn’t get the headlines it deserves. Goodlatte’s committee can bring much-needed sanity and predictability back into the American regulatory system. Thus, perhaps, we can avoid a crisis of overcriminalization in the future.

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