The Dichotomy Between Overcriminalization and Underregulation

70 Am. U. L. Rev. 1061 (2021).

* Gary R. Trombley Family White Collar Research Professor and Professor of Law, Stetson University College of Law. The author thanks the participants in the Southeast Association of Law Schools (SEALS) discussion group titled, Three Felonies a Day?: Is There a Problem of White Collar Overcriminalization, and the participants in the faculty speaker series at the American University Washington College of Law. The author also thanks Professors Hilary J. Allen, Jonas Anderson, Susan Franck, Lewis A. Grossman, Cynthia Jones, Eliezer Lederman, Binny Miller, Jeffrey Lubbers, Erin Okuno, Jenny Roberts, and Louis Virelli, as well as Stetson University College of Law and Cheryl L. Segal.

The U.S. Securities and Exchange Commission (SEC) failed to properly investigate Bernard Madoff’s multi-billion-dollar Ponzi scheme for over ten years. Many individuals and charities suffered devastating financial consequences from this criminal conduct, and when eventually charged and convicted, Madoff received a sentence of 150 years in prison. Improper regulatory oversight was also faulted in the investigation following the Deepwater Horizon tragedy. Employees of the company lost their lives, and individuals were charged with criminal offenses. These are just two of the many examples of agency failures to properly enforce and provide regulatory oversight, with eventual criminal prosecutions resulting from the conduct. The question is whether the harms accruing from misconduct and later criminal prosecutions could have been prevented if agency oversight had been stronger. Even if criminal punishment were still necessitated, would prompt agency action have diminished the public harm and likewise decreased the perpetrator’s criminal culpability?

Criminalization and regulation, although two distinct systems, can be evaluated from the perspective of their substantive structure—a universe of statutes or regulations—as well as their enforcement procedures, the prosecution of crimes, or enforcement of regulatory provisions. The correlation between criminalization and regulation is less noticed, however, as the advocacy tends to land in two camps: (1) those advocating for increased criminalization and regulation or (2) those claiming overcriminalization and overregulation.

This Article examines the polarized approach to overcriminalization and underregulation from both a substantive and procedural perspective, presenting the need to look holistically at government authority to achieve the maximum societal benefit. Focusing only on the costs and benefits of regulation fails to consider the ramifications to criminal conduct and prosecutions in an overcriminalized world. This Article posits a moderated approach, premised on political economy, that offers a paradigm that could lead to a reduction in our carceral environment, and a reduction in criminal conduct.

Introduction

Overcriminalization¹ has been identified in legal literature as a growing problem plaguing the United States criminal justice system.² As a recognized problem across the political spectrum,³ overcriminalization has been defined as “the overuse and abuse of criminal law to address every societal problem and punish every mistake.”⁴ Scholars have blamed overcriminalization as one of the causes of the United States’ position as the global leader in mass incarceration.⁵ From accused individuals housed in local jails to prisoners incarcerated in state and federal prisons, mass incarceration presents a civil rights issue that is in dire need of correction.⁶ Although the coronavirus (COVID-19) has caused temporary relief in the prosecution and incarceration of some individuals,⁷ there is a pronounced disparity in that relief,⁸ and it is uncertain if this unfortunate pandemic will have a lasting effect on criminal justice in the United States.⁹

In addition to driving mass incarceration, overcriminalization has also been faulted for allowing increased prosecutorial charging discretion. The increasing number of federal criminal statutes, especially in the last forty years,¹⁰ provides increased choices to prosecutors when proceeding against individuals. Overfederalization,¹¹ an outgrowth of overcriminalization, allows prosecutors to stretch criminal statutes,¹² use “shortcut offenses,”¹³ stack multiple charges for the same crime,¹⁴ and proceed against individuals who may be unaware of the criminality of their conduct.¹⁵ Discretion can result in disparities, especially to poor and minority members of society.¹⁶

Thus, in looking at overcriminalization, one needs to look at two separate tiers of this issue: (1) the growing number of federal statutes that allow for increased prosecutions; and (2) the increased discretion provided to prosecutors in enforcement practices that results in heightened prosecution and incarceration. The growth of federal statutes is not limited to crimes in Title 18, the volume containing the federal criminal code,¹⁷ as there also are regulatory statutes that have criminal provisions. These regulatory criminal offenses are apparent in areas such as environmental and health law, where the agency regulation will include a criminal provision for extenuated circumstances of misconduct or recidivist activity.¹⁸ But it is important to note that the growth and number of statutes, whether they be found in the federal criminal code or attached to regulatory statutes, present a distinct consideration from the prosecutor’s enforcement role and discretionary powers. That said, there is a symbiotic relationship between overcriminalization and the prosecutor’s discretionary role in enforcing the law, as the number, breadth, and opaque language of the statute can increase the prosecutorial charging power.

While overcriminalization and its subsidiary—overfederalization—are focused on criminal prosecutions and the increased number of statutes and resulting prosecutorial discretion, another aspect of our enforcement mechanisms is seen in the agency regulatory system that can result in holding individuals and companies administratively accountable.¹⁹ In contrast to overcriminalization, with its increase in new statutes, in the regulatory sphere we currently see a scaling back of administrative regulations.²⁰ This is equally as problematic as mass incarceration has been to society, since government underregulation can lead to societal problems, especially in areas of food, drugs, environment, health, and welfare. Underregulation can be blamed for fostering an environment that allowed for the savings and loan debacle²¹ and later the mortgage fraud fiasco.²² Failing to provide sufficient administrative oversight is seen in examples such as the U.S. Securities and Exchange Commission (SEC) initially not halting Bernard Madoff’s Ponzi scheme,²³ as well as regulatory oversight failures that may be tied to major oil spills.²⁴

Looking at the government regulatory system, here again there are two separate categories to consider: (1) the decreasing number of regulations and (2) the under-enforcement of remaining regulations.²⁵ These two tiers in the regulatory sphere present separate considerations in that the first examines the substantive regulatory regime, while the second focuses on procedural concerns in looking at agency enforcement mechanisms.

In examining the regulatory structure, the focus here is on the agency or administrative complement to the criminal justice system and not the literature discussing the propriety of “administrative crimes”²⁶ or replacing criminal court actions with regulation.²⁷ The distinction between criminal statutes that initially are investigated by agencies and then turned over to the Department of Justice (DOJ) versus those that have their inception in the DOJ is unimportant to this Article’s discussion. The line here is not the different forms of criminal statutes or their location within the federal code, but rather the criminal statutes themselves, whether they be administratively based or not, as forming one side of the discussion, while the civil agency structure that provides agency enforcement in a pre-criminal or civil posture is the other side. Thus, this is not a conversation about the propriety of the nondelegation doctrine or the appropriateness of allowing agencies to create criminal provisions. It is also removed from the scholarly literature pertaining to how the use of lower level agency crimes can be a move to foster a rehabilitative approach to criminal law.²⁸ This is also not a discussion of whether agencies should be given discretion in their interpretations of ambiguous statutes.²⁹ Nor is the issue here the “[m]iddleground” between criminal and civil law that has been claimed by some to blur the distinction.³⁰ These are all important topics that are discussed in the regulatory-criminal world, but they are not what is being considered here.

Rather, this Article focuses on the relationship between overcriminalization and underregulation. It examines what happens when an overcriminalized system operates in an underregulated environment. In concurrently examining the criminal and regulatory structure, it is important to note that criminal activity in many instances will not have a correlation to regulation. Although possible, it would be rare to see, outside perhaps the administration by a police agency, that common law crimes such as rape, robbery, arson, or murder are directly tied to agency failures.³¹ On the other hand, federal environmental, financial, food and drug, and other white-collar crimes³² are apt to have agency regulations and oversight directly associated with the conduct or industry. Criminal matters that operate with federal parallel proceedings, like those investigated by both the DOJ’s Criminal Division and administrative agencies such as the SEC or the Internal Revenue Service (IRS), are likely to see both criminalization and agency regulation as dual components in the government process.³³

In the federal sphere where the criminal and regulatory processes thrive, there is incongruity between overcriminalization and underregulation, and they are seldom examined together, as most seeking decriminalization are also seeking deregulation, and those seeking increased criminalization are likewise seeking increased regulation. Thus, there is a desire by some groups to eliminate government oversight, whether it be by laws or regulation, or whether it be in advocating a laissez faire policy.³⁴ And on the opposite side, one finds claims that the government needs to create more laws to stop criminality and increase the regulatory state to enhance security among the citizenry.³⁵ This creates a polarized approach to criminal justice, from the substantive, procedural, and regulatory perspectives.

These two positions of either decreasing or increasing government involvement are simplistic and present a stark approach that fails to fully reflect the uniqueness of criminalization and agency regulation and the purposes behind these different government systems. It fails to subdivide the analysis of overcriminalization and underregulation beyond its rudimentary social construct.

This Article advocates considering the deficiencies of each system and provide a paradigm that offers a progressive model that can curtail criminal prosecution while also correcting wrongdoing through a forceful administrative agency approach. In that regard, this Article suggests a moderated approach that will reduce our carceral environment yet also reduce criminal conduct. The avenue to accomplish this is through a heterodox methodology that uses political economy theory in moving beyond a narrow law and economics approach.³⁶

Part I of this Article considers overcriminalization, including the increased number of statutes and the problems that are an outgrowth of increased federalization of criminal conduct.³⁷ It then examines the enforcement side of this issue by looking at prosecutorial discretion and how this discretion has assisted in moving the criminal justice process to a carceral system.³⁸ Also noted here is the underenforcement aspect of this problem that causes disparities among disadvantaged populations.³⁹

Part II looks at the other side of the coin in examining the past administration’s agenda to decrease regulations. It considers the accompanying enforcement mechanisms and the effect of deregulation on oversight and accountability.⁴⁰ Past problems accruing from a lax regulatory system also are discussed.⁴¹

Part III of this piece promotes a less polarized approach to curbing criminality by focusing on key principles embodied in political economy theory that will decrease improper conduct more efficiently and effectively. The all-or-nothing conflated approach, arguing for decreases in overcriminalization and regulation or alternatively increasing criminalization and regulation, fails to recognize the line between the criminal and regulatory structure and how they work, and should work, in tandem.⁴²

A market-driven analysis of regulation, devoid of transaction costs, fails to capture inherent disparities in society, or for that matter offer a utilitarian model that values dignity and equality. Societal reform needs to move beyond deregulation as a mere cost-benefit and accept political economy theory in developing an architecture that considers how regulation and criminal prosecution are connected. When coupled together, they can provide a robust structure that reduces overcriminalization while assuring a reduction in criminal activity.

I. Overcriminalization and Prosecutorial Discretion

A. Federal Statutes

1. Generally

Professor Francis A. Allen called criminal law “the heavy artillery of society.”⁴³ Yet despite its powerful and unique role in curtailing improper conduct, its growth in the United States has proceeded relatively unchecked.⁴⁴ It has been reported that there are currently over 4,400 federal criminal statutes and some have claimed that there are as many as 300,000 federal regulations with accompanying criminal provisions.⁴⁵ This increase in the criminal legislative structure has created an overcriminalization problem that has been identified by movements such as “Right on Crime”⁴⁶ and “Smart on Crime,”⁴⁷ calling for re-examination of how new legislation is passed, so as not to overburden the criminal justice system.⁴⁸ Up until recently, the DOJ’s “Smart on Crime” initiative also focused on how to be more effective in its prosecution strategy.⁴⁹

Overcriminalization issues are not limited merely to increased federalization, but they have also included arguments about the vagueness and breadth of some federal criminal statutes. This allows for prosecutorial stretching of existing criminal statutes,⁵⁰ something that occurs in many white-collar cases. For example, one finds not only the growth of new fraud, false statements, and obstruction statutes, but also many examples of prosecutors stretching these statutes beyond their initial design.⁵¹ This provides prosecutors an increased ability to charge individuals with criminal conduct in instances that might have previously been the basis for civil actions. Thus, overcriminalization is not limited to the number of statutes but also includes the sheer breadth of the language used in the creation of some federal offenses. One studied observation is the increased number of federal statutes that omit specific mens rea terms, allowing for prosecutions without the government proving that the accused acted with criminal intent.⁵² In cases of strict liability offenses that might carry fines or small penalties, this approach is clearly warranted. But one finds today statutes written with severe criminal imprisonment ramifications being allowed when the perpetrator may not have intended the consequences of the act or may have been unaware that the acts would result in criminal charges, often with significant terms of imprisonment.⁵³

Calls to reform federal criminal statutes are not new.⁵⁴ For example, in the 1970s, the Brown Commission, an outgrowth of President Johnson’s 1966 National Commission on Reform of Federal Criminal Laws,⁵⁵ unsuccessfully attempted to revise the federal criminal code.⁵⁶ The Commission’s 1970 Study Draft of a New Federal Criminal Code provided a detailed analysis for redoing federal criminal law as a comprehensive and organized body of law.⁵⁷ There were repeated attempts to pass this legislation, but all failed.⁵⁸

More recently, a Congressional Task Force on Overcriminalization, comprised of equal members of each political party, was created by the House Judiciary Committee on May 7, 2013, to “conduct hearings and investigations and issue a report on overcriminalization in the federal code, as well as possible solutions.”⁵⁹ The Overcriminalization Task Force held ten hearings to examine the problem of overcriminalization,⁶⁰ which resulted in several bills being proposed to address the growing overcriminalization concerns.⁶¹ From legislation calling for adoption of a default mens rea⁶² to legislation to remove criminal penalties for statutes such as the “Smokey Bear” emblem,⁶³ few were successfully adopted.

One area where there may be an executive push to limit criminalization is with the Foreign Corrupt Practices Act⁶⁴ (FCPA). The FCPA is an outgrowth of the Watergate scandal,⁶⁵ when it was discovered that many companies were bribing foreign officials to secure benefits for their companies.⁶⁶ Passed in 1977 and later amended in 1988 and 1998, it serves as an anti-bribery initiative to curtail foreign bribery by public companies.⁶⁷ In addition to anti-bribery provisions, it also provides accounting mandates for public companies to “make and keep books, records, and accounts” in certain instances.⁶⁸ Although the FCPA carries criminal penalties, a significant segment of this statute is regulatory in nature.⁶⁹ When initially passed, it was met with concern by the business community, which argued it would decrease the ability of U.S. businesses to be competitive in international markets.⁷⁰ Amendments were eventually adopted to ease its effect on the business community, including amendments such as allowing companies to have “reasonable and bona fide expenditures” and make “grease payments.”⁷¹ The eventual adoption of the Organisation for Economic Co-operation and Development (OECD) Anti-Bribery Convention eased some of the tension by offering a more level playing field for businesses operating abroad.⁷² In 2012, Donald Trump, prior to becoming President, criticized the FCPA, calling it a “horrible law.”⁷³ The Washington Post reported that in 2017 President Trump “ordered his then-Secretary of State Rex Tillerson to do away with it.”⁷⁴ Although the number of FCPA cases has diminished during his presidency,⁷⁵ the Act remains in existence.

In addition to being the subject of many congressional hearings, there have also been many symposia and law review articles that have wrestled with issues related to overcriminalization.⁷⁶ Many of these scholarly works address the need to move from an approach of “tough on crime” to a more economically feasible approach of being “smart on crime.”⁷⁷ The “politics of crime” has been a continued theme in many of these symposia.⁷⁸

2. Examples of the exponential growth of federal statutes

Three examples of the growth of federal criminal statutes can be seen in the creation of new fraud statutes, the development of obstruction of justice statutes, and the addition of criminal penalties to existing administrative regulations. Mail fraud and obstruction of justice each started with a single statute and later became a part of a constellation of a larger number of statutes that were the progeny of the initial mail fraud or obstruction statutes.⁷⁹ Mail fraud and obstruction of justice are not unique examples to the growth of federal statutes as we see the multiplication of federal offenses in many areas such as environmental crimes.⁸⁰ Some of the new additions are outside the criminal code and target recidivist or willful activity in the regulatory arena.

It should be noted that this Article does not advocate for a halt in the passage of new statutes that might specifically address wrongful conduct or in some cases, like computer crimes, new activities that might have been unknown in the past. Sometimes specific statutes can offer a more focused approach and a better model for deterrence than generic statutes. But it is important to examine this growth to ascertain whether statutes were passed to reflect a political “crime-control” model or were sincerely needed because they were not encompassed in the original legislation.

a. Mail fraud and its progeny

Mail fraud was part of an 1872 recodification of the Postal Act.⁸¹ As one section (§ 301) of the 327-section Postal Act, its focus was not on “scheme[s] to defraud” but rather the use of the mails and the need to protect the “post-office establishment of the United States.”⁸² Some of the early cases following its passage affirmed that this statute was aimed at fraudulent schemes via the mails, as opposed to fraudulent schemes that merely used the post office.⁸³

Over the years mail fraud became an expansive statute that provided prosecutors with a tool to use for a wide array of criminal activity.⁸⁴ Judge Jed S. Rakoff noted that for prosecutors, mail fraud “is our Stradivarius, our Colt 45, our Louisville Slugger, our Cuisinart—and our true love.”⁸⁵ Judge Ralph K. Winter, in referring to mail and wire fraud, stated that “[w]ith regard to the statutory weapons available to prosecutors, they rank by analogy with hydrogen bombs on stealth aircraft.”⁸⁶ Over time, mail fraud lost its emphasis on the post office and instead became a statute that was concerned with fraudulent activity that merely had a mailing as one “step in a plot.”⁸⁷ Chief Justice Burger called mail fraud a “stopgap device to deal on a temporary basis with the new phenomenon, until particularized legislation can be developed and passed to deal directly with the evil.”⁸⁸ The statute has been modified by Congress several times, including an amendment to make it more accessible to prosecutors by expanding it beyond mails to include items that were “sent or delivered by any private or commercial interstate carrier,”⁸⁹ thus including FedEx and UPS.

In more recent years, new fraud statutes have been created with many of them based upon the mail fraud statute. For example, Congress passed the wire fraud statute in 1952,⁹⁰ bank fraud statute in 1984,⁹¹ health care fraud statute in 1996,⁹² and the securities and commodities fraud statute in 2002.⁹³ Each replicates the mail fraud statute in requiring a “scheme or artifice to defraud,” although each focuses on a different type of fraudulent conduct.⁹⁴ The conduct of individual defendants often can fit the generic mail fraud statute as well as one of the newer more specialized statutes.

One statute that has remnants of the mail fraud statute but also has very distinct qualities is found in the 1984 computer fraud statute.⁹⁵ Unlike many of the statutes that emanate from the mail fraud statute, the computer fraud statute is not limited to “schemes to defraud.”⁹⁶ Rather, the statute covers conduct such as espionage, extortion, and trafficking in passwords.⁹⁷ Where the mail fraud statute has broad open-ended terminology, the computer fraud statute provides a list of specific conduct encompassed in the statutory provision. But even here, the Supreme Court has found it necessary to set the contours of the terms used in the legislation.⁹⁸

The passage of the Racketeer Influenced and Corrupt Organization Act⁹⁹ (RICO) in 1970 also expanded the statutory base of mail fraud and other fraud offenses as some of these offenses are listed as predicate acts that allow the charging of RICO.¹⁰⁰ In 1986 Congress passed the federal money laundering crime statutes,¹⁰¹ and one finds money laundering charges accompanying cases of mail and wire fraud.¹⁰² The ramifications of this increased number of statutes, oftentimes covered by existing criminal laws, are discussed in examining the power provided to prosecutors to choose their preferred statute in a criminal prosecution.¹⁰³

b. Obstruction of justice and its progeny

A second example of an older statute that in recent years has multiplied into new specific statutes focused on the same general form of conduct, is seen in examining obstruction of justice crimes. The initial obstruction of justice statute comes from an attempt by Congress to fill a gap in the contempt statute.¹⁰⁴ It was questionable whether contempt conduct that occurred outside the courtroom could be prosecuted under section 17 of the Judiciary Act of 1789. To rectify this omission, Congress in 1831 passed a statute that in section one allowed judges to hold parties liable for in-court misconduct, and in section two, “punish individuals both for in-court and out-of-court [conduct] that [was] against the ‘due administration of justice.’”¹⁰⁵ In 1948, this initial obstruction of justice statute was split into two offenses, one for contempt conduct¹⁰⁶ and the other for obstruction of justice.¹⁰⁷

Today there are many different obstruction of justice criminal statutes. These include specific obstruction conduct in government proceedings,¹⁰⁸ such as legislative bodies and agencies.¹⁰⁹ One also finds statutes criminalizing investigations, such as obstruction of a criminal investigation of health care and offenses,¹¹⁰ and destruction of corporate audit records.¹¹¹ Two key statutes passed in 1982, as part of the Victim and Witness Protection Act,¹¹² (§§ 1512 and 1513), focused on obstructions involving witnesses.¹¹³ These are typically described as crimes for tampering with a witness, victim, or informant¹¹⁴ or retaliating against one of these parties.¹¹⁵ Chapter 73 of the criminal code currently has over twenty obstruction statutes.¹¹⁶

Defendants have raised concerns as to whether prosecutors can continue to charge the generic obstruction crime found in 18 U.S.C. § 1503¹¹⁷ when the conduct more appropriately fits one of the newer and more specific offenses. For example, this arises when the conduct could be charged under § 1512 or § 1513 for tampering or retaliating against a witness, but the prosecution instead decides to proceed under the generic provision found in § 1503. Prosecutorial discretion typically gives the government the power to proceed with the older generic statute despite the existence of a newer more specific offense.¹¹⁸ This, of course, raises questions as to whether the addition of specific obstruction offenses was truly needed for prosecuting the alleged misconduct.

c. Regulatory crimes

Overcriminalization is not limited to the growth of criminal statutes found in Title 18 of the U.S. Code. Although subject to scholarly criticism,¹¹⁹ it can also include regulatory statutes that have criminal penalties.¹²⁰ For example, four-time winner of the Indianapolis 500 Bobby Unser was prosecuted¹²¹ for violating a federal regulation that prohibited the use of a motorized vehicle on National Forest Wilderness lands.¹²² Unser, who testified at one of the overcriminalization hearings before a subcommittee of the House Judiciary Committee, explained how he and another individual were lost and stranded in a sudden blinding snowstorm while on their snowmobiles.¹²³ Although they lived to tell the details of this frightening event, the U.S. Forest Service eventually recovered the snowmobiles on federal lands and charged Unser with a criminal offense that came from a regulation of the Department of Agriculture, carrying a penalty of up to six months imprisonment.¹²⁴ Although Unser did not receive a sentence of imprisonment, he noted in his testimony that he never intended to be on federal property and was unaware that he had entered federal lands when he entered the unmarked wilderness area during a blizzard.¹²⁵ This argument did not carry weight as the mens rea of the individual violating the regulatory crime was irrelevant for this offense.

The incredible number of regulatory crimes, coupled with the impetus of federal agencies to undertake these prosecutions, presents an enormous depth to overcriminalization beyond the mere increase in federal offenses.¹²⁶ Although the exact number of criminal regulations has never been ascertained, there have been statements saying that there may be as many as 300,000.¹²⁷

The agency role in the creation of the rules that then become part of the criminal structure has been challenged in courts as a violation of the nondelegation doctrine. For example, the drugs that might be included on a specific Controlled Substances Act schedule may be determined by the Attorney General in conjunction with the Drug Enforcement Agency, thus providing agency power to designate what becomes criminalized. The Supreme Court in Touby v. United States¹²⁸ upheld this agency authority as not violating the nondelegation doctrine.¹²⁹ In Touby, the accused were convicted of “manufacturing and conspiring to manufacture” a drug that was “temporarily designated as a schedule I controlled substance” as part of the Controlled Substances Act.¹³⁰ They raised the issue of whether the “legislative power to the Attorney General” and his “subdelegation to the Drug Enforcement Agency (DEA) was authorized by statute.”¹³¹ The Court allowed this temporary scheduling, a process that remained only for a limited period of time.¹³²

Likewise, in Gundy v. United States,¹³³ the Court reaffirmed that Congress can delegate its power “as long as Congress ‘lay[s] down by legislative act an intelligible principle to which the person or body authorized to [exercise the delegated authority] is directed to conform.’”¹³⁴ In Gundy, the Court held constitutional a delegation to the Attorney General to determine the Sex Offender Registration and Notification Act (SORNA) applicability to pre-Act offenders.¹³⁵

But the ability of Congress to delegate its power to agencies that have regulations with criminal penalties remains controversial.¹³⁶ When looking at the criminal law and regulatory state, Professor Rachel E. Barkow aptly notes the deficiencies in the existing approach, which she argues is reflective of being victim to a “greater relaxation of the separation of powers.”¹³⁷

3. Beyond overfederalization

The problems inherent in overcriminalization are not limited to the increased number of statutes and regulations, as there are concerns beyond overfederalization. As noted by Professor Stephen F. Smith, the central issue with overcriminalization is not the number of criminal offenses (“quantitative”), but rather the construction of these crimes (“qualitative”).¹³⁸ Overcriminalization presents obstacles to statutory interpretation, as well as confrontations to constitutional rights. For example, a growth of federal offenses that usurp the state policing powers can affect an appropriate federal-state balance. Likewise, statutes that are poorly worded can raise issues of vagueness, ambiguity, and overbreadth. Also, failing to insert appropriate mens rea terms in a statute can have due process implications. In addition to these considerations being beyond overfederalization and testing constitutional values, these overcriminalization arguments question whether punishment theory that serves as the heart of criminal law is being circumvented.

Federal statutes that encroach on states’ rights in criminal prosecution can shift community oversight of misconduct to the federal arena that may not be attuned to the players or issues specific to that community. This can clash with constitutional rights authorized to the states as part of their policing powers.¹³⁹ Professor Sara Sun Beale notes that the passage of the federal carjacking statute resulted from a “high profile carjacking in a suburb near Washington, D.C.”¹⁴⁰ But the question that comes from this addition to the federal code is whether carjacking that does not involve multiple jurisdictions warrants federal resources and attention. As discussed later, even if a prosecutor does not regularly use the carjacking statute,¹⁴¹ the prosecutorial discretionary choice to do so raises concerns, especially in a world dominated by pleas as opposed to trials. More importantly, the infringement on state terrain can alter the appropriate federal-state balance.¹⁴²

In addition to a federal invasion of state criminal justice, the opaque statutory language used in some federal offenses radiates legal confusion. Issues of vagueness, ambiguity, and overbreadth arise when there are statutes that seek to criminalize large swaths of conduct without specifying explicitly what constitutes criminality.¹⁴³

For example, in looking at the history of the mail fraud statute, its ambiguous language has provided several instances requiring Supreme Court clarity, two of which are discussed here. For years, prosecutors proceeded on mail fraud cases premised on “intangible rights” or “good government” despite no explicit language in the statute providing for this form of conduct. First, in a devasting decision for federal prosecutors, the Supreme Court in McNally v. United States,¹⁴⁴ held that “intangible rights” were insufficient to meet the required “money or property” element of the mail fraud statute. Many lower court cases were overturned as a result of this decision, vacating prosecutions that, in many instances, could not be retried.¹⁴⁵ Second, Congress responded following McNally with a definition statute that would permit the government to continue prosecuting fraud cases premised on “intangible rights.” The new definition statute found in 18 U.S.C. § 1346 provided that “the term ‘scheme or artifice to defraud’ includes a scheme or artifice to deprive another of the intangible right of honest services.”¹⁴⁶ Following the passage of this new statute, arguments were made questioning the vagueness and ambiguity in the statutory language of the “intangible right to honest services.”¹⁴⁷ The Supreme Court eventually stepped in to clarify the meaning of this term, and in so doing, restricted it to “bribery and kickback[s].”¹⁴⁸ But from 1988 until the Court’s 2010 decision in Skilling v. United States,¹⁴⁹ overcriminalization reigned in the form of uncertain statutory language with little recourse to those accused of fraud offenses. Even today, many questions remain in interpreting the language used in the mail fraud statute.

Advocates against overcriminalization have flagged the harmful effects of omitting explicit mens rea terms within a criminal statute. New statutes that have a weak mens rea or no requirement of intent are rampant in the federal criminal code, especially in offenses outside of Title 18.¹⁵⁰ Criminal law is founded on the requirement of a guilty mind. Although strict liability is warranted for violations such as traffic offenses, it becomes inefficient when there is no mens rea requirement for wrongful conduct. After all, if one does not know the illegality of the conduct, conformity with the law is less likely to occur.¹⁵¹ Harvey A. Silverglate’s book, Three Felonies a Day,¹⁵² and his work after the publication of this book,¹⁵³ highlight how federal prosecutors have used federal criminal statutes to prosecute individuals who may be unaware of the criminality of their conduct.¹⁵⁴ This can be particularly true with regulatory crimes that are not malum in se but rather creations of legislative bodies. In recognition of overcriminalization, some have argued that there is a need for a default mens rea in order to assure prosecutions are against individuals who are aware that their conduct is wrong.¹⁵⁵ Others call for a greater acceptance of an ignorance or mistake of law defense.¹⁵⁶

B. Prosecutorial Discretion

1. Generally

Overcriminalization exacerbates prosecutorial discretion.¹⁵⁷ Increased federalization provides prosecutors with increased choices in selecting charges for prosecuting individuals and corporations. Poorly worded statutes allow prosecutors increased power to place alleged misconduct into the loosely fitting statutory framework. With both this “quantitative” increase in statutes and the “qualitative” statutory language failures, descriptive terms used by Professor Stephen Smith,¹⁵⁸ vast prosecutorial power becomes evident. Prosecutors’ massive enforcement power contributes in several ways, including the ability to stretch criminal statutes,¹⁵⁹ charge “shortcut offenses”¹⁶⁰ as opposed to the actual wrongdoing, stack multiple charges for the same crime,¹⁶¹ and coerce plea bargains.¹⁶² Discretionary discovery practices used by federal prosecutors can also affect how a case proceeds against the accused.¹⁶³ A prosecutor’s discretion for the most part is allowed, as there are few limits to the government’s charging power.

There is minimal coordination in the use of this discretion, and the little guidance that is provided is seen in internal guidelines that are unenforceable at law.¹⁶⁴ The first formal guidance on general principles of prosecution can be traced back to Attorney General Benjamin Civiletti’s Principles of Federal Prosecution, which, in their current form, can be found in the Justice Manual.¹⁶⁵ Throughout the years, Attorneys General have also provided to United States Attorneys and their assistants, memoranda on charging principles and their priorities for the DOJ, although these memos have not been consistent throughout the different Attorneys General.

Some administrations have taken the position that “the most serious, readily provable” offense should control in selecting the appropriate charges to bring against the accused.¹⁶⁶ For example, a two-page memo issued by Former Attorney General Jeff Sessions takes this position in stating explicitly that “prosecutors should charge and pursue the most serious, readily provable offense,” although allowing for “circumstances in which good judgement would lead a prosecutor to conclude that a strict application of the above charging policy is not warranted.”¹⁶⁷ This policy marked a shift in the posture taken during the Obama Administration, when Attorney General Eric Holder recognized that charging drug crimes that could result in mandatory minimum sentences could have undue consequences.¹⁶⁸ To alleviate these concerns, Attorney General Holder provided criteria such as drug trafficking organizations for the use of these charges.¹⁶⁹

Memoranda of Attorneys General, and, in some instances, the Deputy Attorneys General, are not limited to the charging of individuals, as there are memoranda that advise attorneys how and when to charge corporations and other entities.¹⁷⁰ For example, the Holder,¹⁷¹ Thompson,¹⁷² McNulty,¹⁷³ Filip,¹⁷⁴ and Yates¹⁷⁵ memoranda presented different considerations when charging corporations, as well as the criteria that would be used by the DOJ for companies wishing to obtain a non-prosecution agreement (NPA)¹⁷⁶ or deferred prosecution agreement (DPA)¹⁷⁷ from the government. While the Holder and Thompson memoranda focused on achieving corporate compliance by incentivizing the entity to cooperate with the government, the Yates memorandum went a step further in requiring that individual culpability be acknowledged and presented by the corporation to the government prior to the entity receiving a government benefit such as a NPA or DPA.¹⁷⁸

Government memoranda also provide advice for sentencing. Professor Kate Stith notes the growth of these “system-wide” charging sentencing policies as “stimulated by the emergence of the Sentencing Guidelines.”¹⁷⁹ For example, Attorney General Jeff Sessions’s Memo required that “prosecutors must disclose to the sentencing court all facts that impact the sentencing guidelines or mandatory minimum sentences, and should in all cases seek a reasonable sentence under the factors in 18 U.S.C. § 3553.”¹⁸⁰ Others allowed the specific facts presented to the court to be negotiated as part of a plea, allowing for a streamlined sentencing approach. The varying practices of allowing pre-charging plea agreements narrows what is presented to the court, in that the charging information filed by the government is limited to what has been agreed to by the parties.¹⁸¹

Federal guidance on charging individuals can also be found in specific enforcement policies of different divisions of the DOJ, and these too have changed under different administrations. For example, the DOJ’s Environment and Natural Resources Division’s (ENRD) enforcement priorities differed depending on the executive administration.¹⁸²

But even with internal federal guidance provided to Assistant United States Attorneys (AUSAs), prosecutorial discretionary power remains strong. Many scholarly works have reflected on the harms of prosecutorial discretion, including the seminal article by Professor James Vorenberg¹⁸³ and book by Professor Angela J. Davis.¹⁸⁴ Particularly noteworthy here is how discretion can cause disparate harms to minority communities. In this regard, this discretion should not be seen exclusively as overcriminalization. As noted by Professor Alexandra Natapoff, underenforcement also remains a concern when certain groups are targeted for criminality while others remain immune.¹⁸⁵ It is important to consider both the act and actor, acknowledging that a focus on just one of these two parts or players of the process may provide distinct consequences in use of the prosecutor’s discretion.¹⁸⁶

2. Prosecutorial charging power

When focusing on the relationship between overcriminalization and prosecutorial discretion, an example that unites these two themes is when prosecutors stretch criminal statutes to encompass conduct that is perceived by them to be improper but is actually more fitting in another realm—such as a prosecution that belongs under a state’s police powers. In Jones v. United States,¹⁸⁷ the Court examined a federal prosecution of an alleged home arson to ascertain whether it was properly brought under the federal arson statute.¹⁸⁸ In reversing the conviction, the Court highlighted that this type of prosecution could alter the appropriate federal-state balance in the federal system.¹⁸⁹ The Court found that a home arson was not meant to be included in the federal arson statute, a statute enacted as part of the Organized Crime Control Act of 1970.¹⁹⁰ The prosecutor’s stretching of this statute to include an arson of a private, owner-occupied dwelling house would allow a common law crime that was not attenuated to interstate commerce to be federalized. Had the federal arson statute not existed, this case could not have been indicted by the federal government and would have been left for state prosecution.

Overcriminalization also gives prosecutors an increased statutory choice of charges to bring against an accused. Shortcut offenses are particularly prone to possible misuse.¹⁹¹ As a result of overfederalization, what may have initially been charged as a classic fraud case may instead be brought using charges of perjury, obstruction of justice, or false statements. In technical, white-collar, document-driven cases, the government may prefer to use a statute that is easily understandable by the jury—a shortcut offense—such as perjury or false statements.¹⁹² For example, in United States v. Stewart,¹⁹³ the government did not bring charges of insider trading, despite this being the conduct initially investigated. Instead, Martha Stewart was prosecuted for lying at a SEC hearing.¹⁹⁴

From an efficiency standpoint, the use of a short-cut offense may appear as a prosecutorial strength in that the use of these crimes allows for an easily proved case that will assure a conviction. From the perspective of deterrence and legitimacy, however, this is less appealing. Will the public be deterred from committing the improper conduct if the charges do not mirror the most obvious criminality, and instead the prosecution is premised on less onerous, but more easily provable, conduct?¹⁹⁵ The public learns that the perpetrator of a crime is being punished but does not see or understand the real underlying criminality committed by that individual.

Prosecutorial discretion as an outgrowth of overcriminalization is also demonstrated in the use of plea bargaining.¹⁹⁶ This is particularly important as our criminal justice process is one of pleas, as only a small percentage of cases in the federal system actually proceed to trial. With 97.6% of the federal cases resolved via a plea agreement,¹⁹⁷ it is important to consider the effect of overcriminalization on this process and the significance of the prosecutorial role in this context.¹⁹⁸ Prosecutors have the discretion to not only pick and choose the charges against the accused but also to determine who shall receive a plea agreement and what the terms of that agreement will be. Prosecutors have the added ability to threaten new charges in order to secure a plea from the accused. For example, money laundering charges are often tacked onto white collar offenses if a defendant declines to accept a plea agreement to the charge.¹⁹⁹ With the increased number of charges available for selection by prosecutors, and enormous penalties in cases when the accused is facing a mandatory-minimum penalty, the ability of the prosecutor to secure a plea is made easier, even in situations when the accused may be innocent.²⁰⁰

Overcriminalization also allows a prosecutor to overcharge and, in some instances, stack multiple charges²⁰¹ against the accused for the same conduct. One government benefit to overcharging is that the accused is more apt to negotiate a plea that will eliminate some of the charges and possibly provide a lower sentence. A second government advantage occurs here when the defendant does not plead guilty but instead proceeds to trial. Having multiple counts for the same conduct offers the possibility that the jury will convict of some charges through a compromised jury verdict.

Discretion also becomes a concern when the system is improperly politicized.²⁰² Although the appointment of the Attorney General and U.S. Attorneys has a political component in the selection process because they are appointed by the President of the United States,²⁰³ those serving within the office are non-political civil servants operating under the Hatch Act.²⁰⁴ There are past reported instances of political influences being raised within the DOJ and reviewed by Inspectors General.²⁰⁵ When the system is overcriminalized and the government has strong discretionary powers, adding in the possibility of the decision making being influenced by political motives remains a concern.

In addition to the prosecutor’s discretion regarding who to charge, when to charge, what to charge, and who will receive a plea agreement,²⁰⁶ one should note that prosecutors have the discretion of not bringing charges in cases they deem appropriate.²⁰⁷ When a prosecutor brings a case and then decides to nolle prosequi²⁰⁸ the case prior to a resolution on the case, it is typically the prosecutor who has this sole power of dismissal.²⁰⁹ Unlike some countries, the United States does not allow private prosecutors to participate in the prosecution.²¹⁰ Even the legislature is limited in reversing a failure to charge if they decide to pass new laws to permit a prosecution because of no existing statutory base. The ex post facto provision of the U.S. Constitution precludes charging an individual if the legal prohibition did not exist at the time of the crime.²¹¹

3. Charging power limitations

The wide discretion afforded prosecutors in their decision making role has been noted in several Supreme Court decisions,²¹² which have also noted that such discretion is not “unfettered.”²¹³ That said, selective prosecution and prosecutorial misconduct are two arguments that defendants make when they believe that prosecutors have abused their prosecutorial power by either uniquely selecting a specific defendant to proceed against or using an improper motive for charging the accused.²¹⁴ These arguments are seldom successful.

Limits to prosecutorial discretion are found in court opinions,²¹⁵ ethics rules,²¹⁶ presidential pardons,²¹⁷ and statutory mandates such as the statute of limitations for an offense.²¹⁸ Obviously if there is no crime available for charging, a prosecutor has no basis for proceeding. But as previously noted, prosecutors will often resort to generic statutes such as conspiracy, mail fraud, or “shortcut offenses” like perjury and false statements, when the defendant’s activities do not fit neatly into the offense most closely aligned to the conduct. That said, absent a statutory basis for the prosecution, even prosecutors’ discretionary powers cannot succeed in bringing a criminal charge.²¹⁹ Likewise, if the prosecutor fails to adhere to the statutory time limits set forth in the statute of limitations for the crime, the prosecution will likely be precluded.

The federal prosecutor also needs to proceed through a grand jury when processing criminal felony charges. The grand jury can be considered a limit to the prosecutorial power in that felony charges require an indictment by a grand jury²²⁰ unless this is waived by the accused, something that regularly occurs when the parties negotiate a plea and an information is filed in place of an indictment. But the reality is that few grand juries will stop the prosecution’s choice of charges as there are few runaway grand juries,²²¹ and the common parlance is that the prosecutor could indict a ham sandwich if he or she wanted to do so.²²²

There are, however, remedies found in appellate decisions when the prosecutor has stretched a statute beyond its original statutory bounds.²²³ For example, the Supreme Court reversed the government’s attempt to use a federal obstruction of justice statute that was part of the Sarbanes-Oxley Act to charge a fisherman who failed to return undersized fish back to shore.²²⁴ The Court, in Yates v. United States,²²⁵ refused to allow prosecutors to stretch an obstruction statute,²²⁶ which was intended for prosecuting improper destruction of documents.²²⁷ The Court found that a fisherman catching undersized grouper and not following the instructions of a Florida Fish and Wildlife Conservation Commission officer, who had instructed the fisherman to bring the fish that had been caught back to shore, was not within the scope of this obstruction of justice legislation that was “designed to protect investors and restore trust in financial markets following the collapse of Enron Corporation.”²²⁸ Although the dissent preferred a literal approach to the statute’s use of the term “tangible object,” finding that fish could be such, they did note their concern with “overcriminalization and excessive punishment in the U.S. Code.”²²⁹ This case is not an anomaly as there have been many other cases in which the Supreme Court or lower courts have held that prosecutors exceeded their discretion in proceeding with conduct beyond the statutory language.²³⁰

A final limitation to prosecutorial discretion is seen in the President’s use of the pardon power, which provides the “Power to grant Reprieves and Pardons for Offences against the United States, except in Cases of Impeachment.”²³¹ Although many presidential pardons have been seen as controversial,²³² there are few limits to this presidential power.²³³ As such, valued or not, the presidential pardon power can serve to reduce prosecutorial discretion.

II. Underregulation and Underenforcement

A. Reducing Regulations

1. Generally

There is a flip side to the growth and extension of criminal legislation, that being, a decrease in regulation and underenforcement by agencies. The unitary executive theory,²³⁴ as presented by the Trump Administration, highlights the key participatory role the executive is playing in the regulatory structure. To some it is reminiscent of the Lochner Era when government regulation was limited.²³⁵ The past administration’s deregulation was deliberate. President Trump’s Executive Order 13771 on Reducing Regulation and Controlling Regulatory Costs of January 30, 2017 highlighted his intent to remove regulations faced by businesses.²³⁶ As of March 2019, the Trump Administration had “514 deregulatory rulemakings” across several agencies.²³⁷

This Executive Order reducing regulation focuses on controlling regulatory costs²³⁸ and requires that if an executive department or agency “publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed.”²³⁹ There was also a fiscal constraint for 2017 that required that the “total incremental cost of all new regulations” had to “be no greater than zero.”²⁴⁰ Thus, if proposing a new regulation, not only was the requirement to remove two prior regulations, but also, absent special permission, to assure that the costs of the new regulation would not exceed the costs of the eliminated regulations. The rulemaking requirements of the Administrative Procedure Act (APA) applied throughout this process with guidance to heads of agencies on implementation.²⁴¹ Exemptions were provided, including “regulations issued with respect to a military, national security, or foreign affairs function of the United States.”²⁴²

The Brookings Institution, inspired by Executive Order 13771, created a regulatory tracker that, allowed one to follow regulatory changes including “notable guidance and policy revocations, and important court battles” across several major categories,²⁴³ including, agriculture, “children, youth, and families,” education, environmental, financial, health, housing, labor, telecom, transportation, and “other.”²⁴⁴ Media outlets²⁴⁵ and scholars²⁴⁶ have also followed deregulation initiatives, sometimes with differing perspectives of its values. In some instances, groups have developed websites with a focus on specific activities such as financial²⁴⁷ or environmental²⁴⁸ regulatory activity. Some, of course, look to the Office of Information and Regulatory Affairs for reporting on regulatory actions.²⁴⁹

The financial effect of deregulation has been applauded by some, and it has been noted that “[i]n 2017, the Trump [A]dministration added 3,281 rules to the Federal Register, the fewest since records began in the 1970s.”²⁵⁰ The Trump Administration touted this “historic deregulation” as having “slashed regulatory costs by nearly $50 billion, with savings reaching $220 billion once major actions are fully implemented.”²⁵¹

But others question the benefits of this deregulation, noting that the status of our environment, individual rights, and existing disparities can be pushed aside in a strict cost-benefit analysis.²⁵² Also noted is that the federal decrease in regulatory function has resulted in states playing an increased role in the regulatory sphere.²⁵³ In addition to an increased cost to states, there can be unique challenges to businesses that now have multiple constituencies they need to monitor for compliance.²⁵⁴ Even before the Trump Administration came to office, federal oversight of state enforcement may have proven weak, as was found in a 2011 Report on the Environmental Protection Agency’s (EPA) oversight of state enforcement.²⁵⁵ On the other side, a failure of the federal system to exert control may result in focused regulation by a state to serve its localized constituency, and in that regard the state stepping up to the plate may be welcomed.²⁵⁶

It is important to note that some of the recent agency deregulation is tied to new legislative initiatives as opposed to being acts solely from the executive.²⁵⁷ For example, the passage of the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act²⁵⁸ (EGRRCPA) had the effect of revising financial regulations resulting from the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).²⁵⁹ Although this modification to the regulatory structure came from a legislative-statutory base,²⁶⁰ the Executive plays a role in accompanying rule-making that emanates from this Act.²⁶¹ When discussing regulatory activity, one needs to consider the source of the action—whether it be the agency or the legislature²⁶²—as even though the connection between the two exists, some argue agency action is necessary to avoid “congressional gridlock.” In a politically polarized society, an agency’s ability to act can be less contentious than getting agreement among elected legislators, who are directly answerable to voters. Others, however, argue that this presents delegation issues in that unelected administrative officials are legislating without appropriate authority.²⁶³ Although this Article does not consider issues of delegation or voice an opinion on this debate, it notes that these separation of powers concerns have been raised.²⁶⁴ Equally consequential when examining agency activity is whether the activity comes under the adjudicative or rulemaking aspects of the agency,²⁶⁵ as well as the deference that courts should give in interpreting agency action, but again, these important topics are beyond the scope of this Article.

But for the matters at hand, it is necessary to consider an examination of the regulatory process as looking at “the role of politics and the role of the law,” as Dean Daniel Rodriguez so aptly stated.²⁶⁶ Within the political-legal structure, the focus here is on the criminal-agency tie, and there are many dimensions when examining agency regulation and criminal punishment at the same table. The use of civil penalties is applauded by some as a contrast to the criminal process in that it can remove imprisonment and reduce the resulting criminal stigma to individuals and entities.²⁶⁷ There are strong arguments for use of civil penalties as accomplishing deterrence without the social harms and collateral consequences that might occur with imposing a criminal penalty.²⁶⁸ On the other side, however, the expressive function of billboarding conduct as improper is argued as the best method and something only achieved through a criminal indictment and conviction.²⁶⁹ These two perspectives, along with a laissez faire approach of elimination of government oversight, letting the market self-regulate, are often debated.²⁷⁰ But looking beyond these questions and focusing on the symbiotic but distinctive roles played in the criminal and civil systems offers a political stage for curtailing criminal misconduct.

2. Examples of reduction of agency regulation

Examples of the reduction of agency regulations present a stark contrast to the growth of federal criminal statutes, and this deregulation has been explosive in certain specific areas, namely the environmental and financial sectors. But these two areas are not alone in feeling the effects of reduced agency regulation.²⁷¹

a. Environmental agency deregulation

According to reports, it has been contended that the environmental sector, one of the major areas subject to deregulation under the Trump Administration,²⁷² has had one hundred environmental rules and regulations rolled back or is in the process of being deregulated as of October 2020.²⁷³ The breadth and depth of these rollbacks include areas of “air pollution and emissions,” “drilling and extraction,” “infrastructure and planning,” “animals,” “toxic substances and safety,” and “water pollution.”²⁷⁴ The decrease in agency regulations is not limited to extinguishing current regulations but also comes about with a decrease in new initiatives, which has happened in the Trump administration.

Some of the attempted environmental deregulatory actions have not been successful and in some instances have been met with delay. This has been in part due to both procedural and substantive failures. In some instances, such as with climate change rollbacks, courts have interceded.²⁷⁵ Again, the merits of this judicial response are beyond the scope of this Article.

But other changes have been implemented. For example, regulatory safety measures put into place following the 2010 Deepwater Horizon catastrophe to prevent a similar blowout were modified to loosen the safety restrictions.²⁷⁶ The ban on “importing sport-hunted trophies of elephants from certain African countries” was lifted.²⁷⁷ And in the area of coal waste, the EPA “relax[ed] rules that govern how power plants store waste from burning coal and release water containing toxic metals into nearby waterways.”²⁷⁸

In some instances, the federal government, through its agencies, restricted states’ abilities to control and regulate their environmental concerns. For example, the EPA “revoke[d] California’s authority to set its own vehicle emissions standards that are more climate-protective than federal requirements.”²⁷⁹

b. Financial industry rollbacks

Similar rollbacks of agency regulations can be seen in the financial sector.²⁸⁰ The arguments for this deregulation have included claims that “[r]egulation can stifle the creative juices in people,” and that there is a need to attract investors operating in international markets.²⁸¹ Critics also claim that the regulations have been “overly burdensome,” hindering the growth of the economy and placing community banks at a disadvantage.²⁸²

One example is President Trump’s May 2018 signing of the EGRRCPA that modified some of the regulations from the Dodd-Frank Wall Street Reform and Consumer Protection Act²⁸³ (Dodd-Frank). With claims that this would “lift burdens unnecessarily put on small and medium-sized lenders,”²⁸⁴ arguments in favor of this deregulation were often focused on the EGRRCPA’s removal of regulatory requirements by lenders allowing for greater “consumer access to mortgage credit” and “expand[ing] consumer access to credit through ‘regulatory relief’ to financial services firms.”²⁸⁵ Smaller banks were relieved from some of the restrictions put in place following the financial crises of 2008.²⁸⁶ Others, however, argued that “the changes could open taxpayers to more liability if the financial system collapses . . . .”²⁸⁷ It was also noted that removing some of the Dodd-Frank regulations would increase discrimination in mortgage lending.²⁸⁸ In this regard, a cost-benefit analysis may be taking a heightened role, thus limiting important considerations such as dignity and equality.

B. Agency Enforcement

1. Generally

One can get lost in the morass of legal scholarship discussing the causes of regulatory failures, the role of organizational structure on regulation,²⁸⁹ or public choice theory²⁹⁰ as an analyzing force for regulatory decision making. A pure economic structure that looks at costs and benefits absent transaction costs is the flavor of some analyzing the regulatory structure.²⁹¹ Dean Daniel B. Rodriguez, in examining law and government, remarks that “[p]ositive political theory provides frameworks for thinking about the dynamics of regulatory policymaking in a system comprised of competing institutions and loci of power.”²⁹² Additionally Professor Cass Sunstein pointed out the “paradoxes of the regulatory state” when a regulatory strategy has the opposite outcome of what was intended,²⁹³ or what he calls a “self-defeating regulatory strategy.”²⁹⁴ He advocates that when the regulation fails in its goal, the answer “is not to return to a system of ‘laissez faire,’ but to learn from past failures.”²⁹⁵ One of the paradoxes he discusses is how “[o]verregulation [p]roduces [u]nderregulation,” in that an overregulated structure or one with “draconian standard[s]” may result in the agency regulators not providing the enforcement structure needed to cover the administration of the regulations.²⁹⁶

Some may argue that inherent in regulation is a cost, the value of which is debatable, with some arguing the need for deregulation to diminish that cost. At the center of the decision making here are politicians, specifically executive and legislative members who determine what gets regulated and more importantly the amount of funds provided to administer and enforce those regulations.

Irrespective of whatever theory one accepts, it is important to recognize the relationship between the regulation and the enforcement role.²⁹⁷ Like criminal cases that provide extensive discretion to prosecutors,²⁹⁸ agencies also have enormous discretion in their enforcement actions,²⁹⁹ oftentimes limited by agency financial constraints. The ability to review this decision making process, however, differs. Some argue that agencies receive less deference than found in criminal law in that the APA does not apply in the criminal context, and therefore prosecutorial discretion is not subject to the limitations found in the administrative process.³⁰⁰ Others also note that there is judicial oversight of agency decisions under the APA that permits the agency action to be held “unlawful and set aside” when it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”³⁰¹

The role of courts in reviewing agency decisions cannot be distilled into a single principle, and one could easily get lost in the labyrinth of decisions and scholarly works that examine this area of law. In essence, courts can review a discretionary agency decision,³⁰² but success may be limited, unless, for example, there is a blanket agency policy declining enforcement.³⁰³ In Heckler v. Chaney,³⁰⁴ the Court considered whether the Food and Drug Administration (FDA) had acted improperly in refusing “to exercise its ‘discretion’ not to undertake certain enforcement actions” and whether this was “subject to judicial review under the Administrative Procedure Act.”³⁰⁵ Respondents in Heckler v. Chaney were prison inmates contesting the use of lethal injection drugs in capital cases, claiming that these drugs violated the Federal Food, Drug, and Cosmetic Act³⁰⁶ as not being approved for use in human executions.³⁰⁷ The FDA refused to enforce this administrative request, claiming a difference in the scope of FDA jurisdiction and that “in any event [it] should not be exercised to interfere with this particular aspect of state criminal justice systems.”³⁰⁸

Writing for the Court, Justice Rehnquist focused on the “question of the extent to which determinations by the FDA not to exercise its enforcement authority over the use of drugs in interstate commerce may be judicially reviewed.”³⁰⁹ The Court held that there was a presumption that agency decisions would not be reviewable under this portion of the statute,³¹⁰ except in very narrow instances. The Court stated that it was “essentially leav[ing] to Congress, and not the courts, the decision as to whether an agency’s refusal to institute proceedings should be judicially reviewable.”³¹¹

More recently, however, in Department of Homeland Security v. Regents of the University of California,³¹² the Court noted the differences when considering agency action that is “more than a non-enforcement policy.”³¹³ Examining Deferred Action for Childhood Arrivals (DACA), the Court held that “the DACA Memorandum does not announce a passive non-enforcement policy,” as this was not a refusal to act as seen in Heckler v. Chaney, but rather the creation of a program, followed by a rescission, which therefore was an “action” that was subject to judicial review.³¹⁴

In United States v. Armstrong,³¹⁵ a criminal case examining the ability of an accused to raise a selective prosecution claim and receive discovery from the government to pursue the matter, the Court referenced the Heckler v. Chaney decision in noting that “[a] selective-prosecution claim asks a court to exercise judicial power over a ‘special province’ of the Executive.”³¹⁶ So in regard to discretionary powers, there are some similarities between the agency and criminal processes.³¹⁷

2. Agency ineffectiveness

In the federal agency context, there is another aspect to enforcement that is important for this discussion: agency inaction, incompetence, and/or ineffectiveness.³¹⁸ A failure to enforce regulations may not only be a function of deliberative action but also result from a deficiency caused by mere ineptness in handling the regulatory terrain.³¹⁹

For example, Professor Lloyd Hitoshi Mayer asks whether the “Varsity Blues” college admissions scandal could have happened if there had been better IRS enforcement.³²⁰ Would a proper IRS investigation have stopped criminal activities well before many individuals were facing prosecution, well before celebrities may have participated in the activities that resulted in their indictment, and well before students across the country faced not getting into the colleges or universities of their choice because others who used fraudulent means took their slots in the admissions process?³²¹

A promising approach to agency effectiveness is seen in Professor Rory Van Loo’s extensive studies showing the growth of “[m]onitoring authority” by a variety of agencies.³²² Backed by statutes, he notes that “[t]he laws are in place for a formidable regulatory-monitor state.”³²³ He also highlights the beneficial role that regulatory monitors serve in assisting with creation and revision of agency policy.³²⁴ Although empirical evidence provides the existence of these monitors, anecdotal evidence shows some of the deficiencies. The focus here is on the ramifications when there is a deficiency and the conduct moves from the civil to the criminal system.

For example, the failure of the SEC to recognize Bernard Madoff’s Ponzi scheme demonstrates both ineffectiveness to catch blatant misconduct and also underenforcement of agency regulations.³²⁵ The 457-page August 2009 Report, titled Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme (Investigation Report), reviews the SEC’s failure to act on Madoff’s multi-billion dollar Ponzi scheme until December 11, 2008.³²⁶ The Investigation Report found that:

the SEC received more than ample information in the form of detailed and substantive complaints over the years to warrant a thorough and comprehensive examination and/or investigation of Bernard Madoff and BMIS for operating a Ponzi scheme, and that despite three examinations and two investigations being conducted, a through and competent investigation or examination was never performed.³²⁷

The Investigation Report also notes that “the Enforcement staff’s investigation was much too limited.”³²⁸ For example, “they never verified Madoff’s purported trading with any independent third parties.”³²⁹ The Investigation Report further states that “[a] simple inquiry to one of several third parties could have immediately revealed the fact that Madoff was not trading in the volume he was claiming.”³³⁰ Had this been done, Madoff’s Ponzi scheme “could have [been] uncovered . . . well before Madoff confessed.”³³¹

Agency underenforcement is also a reoccurring problem. For example, agency scrutiny of misconduct occurring within Wells Fargo is troublesome.³³² As noted by one newspaper report:

Federal regulators were aware of wrongdoing at banking giant Wells Fargo & Co. as early as March 2012 and issued a string of supervisory letters ordering changes over the next three years, holding off on penalties while the creation of phony bank accounts and falsely issued credit cards to pad employee bonuses continued.³³³

Failures in agency enforcement are also seen in other areas, in some instances because of the lack of clear regulations or an inability to monitor the situation effectively.³³⁴ For example, in the Deepwater Horizon tragedy, the 124-page Report, Investigation of the Macondo Blowout Disaster, examining agency and other conduct, noted that “[t]his catastrophic failure appears to have resulted from multiple violations of the laws of public resource development, and its proper regulatory oversight.”³³⁵

Some of the agency investigative function has moved into the private sector, placing the entity violating the regulation in a position to control the remedy. As opposed to an agency conducting extensive investigations rooting out corporate misconduct, it is common for the government to have a corporate entity produce its internal investigation and provide the names and conduct of wrongdoers within the entity.³³⁶ When the misconduct becomes subject to criminal scrutiny, the result is often a NPA³³⁷ or DPA.³³⁸ These agreements typically involve a fine to the entity and a promise by the company to correct the situation by putting in place a robust compliance program. The government also retains its right to proceed with the criminal action should there be noncompliance by the entity. The use of NPAs has also recently been adopted by the SEC in resolving agency actions.³³⁹ Part of these negotiated settlements include putting in place a monitor to provide oversight of the compliance efforts by the company and to assure no further misconduct.³⁴⁰ The growth of internal investigations and monitorships can move some agency oversight into the private sector, with the costs being borne by the entity.³⁴¹ The role of non-governmental individuals is also seen in the rise of qui tam and whistleblower actions that provide monetary rewards to those who offer information to the government concerning ongoing misconduct.³⁴²

III. Political Economy Theory and the Balance Between Criminalization and Regulation

Offered here is a sharp dichotomy between the legislative and executive approach of passing new laws and having prosecutors stretch new and existing laws, while agency regulations are being removed or underenforced. Many reasons can be offered for the difference between these two approaches. Politicians who are running for political office may feel the need to show that they are being “tough on crime.” Agencies, on the other hand, may face budget constraints keeping them from properly enforcing existing regulations, not to mention the diminishing number of regulations. Possible reasons for the differences seen here include poor funding of agencies and the fact that there may be less political capital for agency action than for passing new criminal legislation. After all, appointed agency personnel, even when receiving congressional scrutiny, are not facing an upcoming election, and these activities are seldom highlighted as key issues in the executive’s re-election.³⁴³

Whatever the rationale attributed to how criminal laws versus agency regulations are approached, it is important to recognize the unique constructs of criminalization and regulation and the necessity to look holistically at the correlation between these two bodies of law and the political structure in which they are encompassed. On a ground level, we see “parallel proceedings” with the DOJ and another agency working together on the criminal prosecution, while the agency alone may also be proceeding with a civil action.³⁴⁴ For example, the IRS and DOJ may have involvement in a criminal tax case, while the IRS may also be proceeding to secure back taxes.³⁴⁵ Although there are restrictions surrounding these parallel proceedings, including a prohibition of using a civil investigation to circumvent a completed grand jury process, it is clear that there is an alliance between a specific civil agency and the DOJ’s criminal division.³⁴⁶

But when moving to a higher level, one that looks at policy perspective, overcriminalization and underregulation are separate constructs, with no recognition of how underregulation will exacerbate overcriminalization. Professor Rachel Barkow, focusing on the criminal system, offers useful lessons on redesigning criminal law to use some administrative law doctrines.³⁴⁷ But the point of this Article is not to restructure criminal law but rather to recognize the current dichotomy between the two systems and effectuate change by having the criminal and regulatory policy joined together. As opposed to a polarized approach of calling for increased criminalization and increased regulation, or alternatively, decreased criminalization and deregulation, a moderated architecture premised on political economy offers an improved model.

Arguably one could say that the decrease in regulation has not led to an increased prosecution in, for example, the area of environmental crimes. This is true, as statistics demonstrate that for 2019, there were only 302 prosecutions, a decrease from five years ago by 9.9%, ten years ago by 38.5% and twenty years ago of 64.5%.³⁴⁸ This is perhaps more indicative of an entire reconfiguration of priorities within the DOJ that now highlights “violent crimes, drugs, immigration, and national security” as its focus.³⁴⁹ A decrease in the number of prosecutions does not, however, minimize the fact that overcriminalization can still occur when misconduct causes a major catastrophe and prosecutions are the reactive response.³⁵⁰ In this circumstance, one moves from minimal regulatory oversight directly to criminal prosecution. The failure to have had a proactive approach here does not bode well for the environment, for victims, or for society. More importantly, refocusing energies into agency action will provide the mens rea for the federal crimes that are eventually prosecuted. After all, the agency will alert the individuals to the misconduct that if uncorrected will result in criminal prosecution.

Some may argue that financial constraints can only offer partial agency enforcement and oversight as opposed to full review of all activities. The uncertainty of being regulated may in fact produce some compliance as the fear of getting caught may cause closer adherence to the regulation.³⁵¹ But over time this economic approach fails as catastrophes can still occur absent robust agency enforcement. Others may contend that the errors lie exclusively within the agency that uses data-based “scorecards,” which are a “sub-species of cost-benefit analysis,” in testing government regulation.³⁵² Also it has been argued that the stealth use of science strategies by the agency working with the White House to advocate for deregulation lacks validity and that this should be handled by scientific agency staff within the agencies.³⁵³ These points, most likely accurate, support the need to provide a universal platform to consider prosecution and regulation together.

By examining government prosecution and agency regulation holistically, there is less likelihood that the passage from the agency to becoming a criminal case will be as abrupt as it currently exists. It is also less likely to be a simple reactive model in proceeding criminally when the conduct rises to the highest of levels and is more likely to provide notice to perpetrators of what constitutes misconduct, thus mitigating the damages to victims.³⁵⁴ After all, if Bernard Madoff’s Ponzi scheme had been caught earlier then fewer victims would have fallen prey to his criminal conduct.

Political economy theory recognizes the importance of collaboration as opposed to competition to achieve maximum efficiency.³⁵⁵ It also recognizes the need to move beyond mere costs and benefits and to examine not only the transaction costs, but also that “economic and political life are inextricably intertwined.”³⁵⁶ As opposed to looking at criminal harms from a monetary perspective,³⁵⁷ human dignity plays a prominent role.

Looking at overcriminalization and underregulation with a political economy lens allows one to infuse the inherent inequality in society into the mix. It recognizes the role of politics in framing criminal justice and regulation, something seen repeatedly in the approaches to prosecutions by different presidential administrations, as well as in the reduction of administrative regulations. Looking only at a one-dimensional cost-benefit analysis that reduces regulations to save government funds fails to provide a morally sound approach, not to mention one that achieves effectiveness when examined against the eventual increase in criminal activity.

Conclusion

The late-Professor William J. Stuntz aptly noted that “criminal law does not drive criminal punishment.”³⁵⁸ He stated that “[t]he definition of crimes and defenses plays a different and much smaller role in the allocation of criminal punishment than we usually suppose. In general, the role it plays is to empower prosecutors, who are the criminal justice system’s real lawmakers.”³⁵⁹ With increased statutes as choices for the prosecutorial power and loose statutory language that can be manipulated to proceed against unknowing individuals, the criminal system has become an albatross to a dysfunctional legal process.

When coupled with failing and overlooked administrative oversight, one can easily move from administrative failure to criminal indictment. Society becomes burdened with increased incarceration and befuddled defendants who failed to see themselves as perpetrators of criminal conduct. The unnoticed misconduct in the agency regulatory realm becomes lost in the norms of usual business until a catastrophe happens or it reaches the public, and criminal action is necessitated as the only viable way to appease society.

Overcriminalization has its failings in placing undue power in the hands of the government. But equally offensive is the government’s failure to use its power in a proactive constructive manner by placing resources into increased agency oversight as opposed to the eventual prosecution. The glamour of the indictment and courtroom plea or trial may provide a superior news item for deterrence, but it loses the importance of achieving the punishment theory goal when the victims and perpetrators both suffer harsher consequences than they would have if the agency action had successfully rooted out the misconduct sooner. Lost also is the government’s failure to prioritize dignity and inclusion as key components in eradicating misconduct, letting disadvantaged communities suffer. Looking beyond mere costs and benefits, to include political economy theory as a component offers a construct that fosters collaboration and allows for a higher efficiency in maximizing resources to the benefit of society.

The Dichotomy Between Overcriminalization and Underregulation

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