According to a professor who has studied white-collar crime and sentencing guidelines, prison terms handed down last week to two former healthcare executives may not deter similar criminal conduct by their peers.
A Columbus, Ohio, judge last week sentenced Sherry Gibson, former executive vice president of compliance for Dublin, Ohio-based healthcare financial firm National Century Financial Enterprises, to a four-year prison term. A Chicago judge sentenced Robert Krasnow Sr., former vice president and director of marketing for Doctors Hospital of Hyde Park in Chicago, to 37 months in prison. U.S. District Judge George Smith is expected to order Gibson to liquidate her assets to pay restitution to NCFE investors, while U.S. District Judge Elaine Bucklo required Krasnow to complete his payments of $5 million in restitution, $1 million of which he has already paid. Both privately held, for-profit companies closed after filing for bankruptcy in the wake of federal fraud investigations that resulted in other federal criminal pleas and prison sentences.
Professor Marianne Jennings, who teaches law and ethics in the master of business administration program at Arizona State University in Tempe, said the debate about whether to send nonviolent, white-collar criminals to prison has raged for decades. "But if the last few years are any indication, it just seems to get worse, not better," said Jennings. Prison sentences may not stop this behavior but may motivate subordinates to blow the whistle on executive wrongdoing, she said.
A decade ago, these executives probably wouldn't have received prison terms, Jennings said. The harsher sentencing guidelines that went into effect this year are meant to send a message, she added. "The message is, `Don't even come close to the line. If you do, our hands are tied,' " she said.
Gibson pleaded guilty to a single count of securities fraud in August 2003, admitting to conspiring with NCFE officials in a $2.1 billion accounting fraud that spurred the bankruptcies of dozens of healthcare providers in 2002.
In her plea, Gibson admitted that beginning in 1995 she prepared false investor reports and maintained separate sets of books. She said that NCFE executives improperly withdrew money, concealing shortfalls by moving cash back and forth. Former NCFE Compliance Director Brian Stucke pleaded guilty in December 2003 to one count of conspiracy to commit securities fraud; he has yet to be sentenced.
In the Chicago case, Krasnow admitted to paying kickbacks to seven doctors who referred patients to 200-bed Doctors Hospital for hospitalization and unnecessary tests and procedures. The hospital filed for Chapter 11 bankruptcy protection in April 2000 and closed shortly thereafter. Krasnow pleaded guilty to racketeering and tax charges in January 2001, but sentencing was delayed nearly 31/2 years. Assistant U.S. Attorney Jacqueline Stern said Krasnow has been a cooperating witness in the case.