“Prosperity is the result of matching brains with capital and holding both sides accountable,” writes McGill University’s Reuven Brenner. Prosperous though it is, America might do better still by Brenner’s standards. The problem isn’t with matching brains with capital, which is what the finance industry does with stunning efficiency, but with accountability. In American criminal law, there is too much criminal accountability and there are too many prosecutions.

That’s something the anti-corporate Occupy Wall Street movement would dispute, for it yearns for Wall Street perp walks, where police parade bankers in handcuffs before the television cameras. There were 1,100 criminal prosecutions after the savings-and-loan scandals of the 1980s, but only one banker did jail time after the Great Recession. There’s certainly been enough public outrage of late, and for populists of the left that’s enough to make a case for criminal prosecutions.

If there haven’t been prosecutions, however, it’s not because American criminal law is too soft on defendants, whether white- or blue-collar. Compared to the rest of the First World, America has an extraordinarily punitive criminal justice system. With 5 percent of the world’s population, America holds nearly 25 percent of its prisoners. In addition to the 2.3 million prisoners, a further 5 million people are on parole or probation, about 3 percent of American adults. That’s more than any other country, and it’s not something to be proud of.

Many of the prisoners were convicted of drug crimes. The U.S. Sentencing Guidelines recommend harsh penalties for drug offenders, including one year for possession of marijuana and five years for growing one plant, and a life sentence for third-time meth dealers. Drugs aside, however, there are an untold number of regulatory crimes that businessmen might unknowingly commit. Consider, for example, the plight of Krister Evertson (as related by Jeffrey S. Parker in The American Illness):

Evertson never had so much as a parking ticket prior to his arrest. … An Eagle Scout, National Honor Society member, science whiz, clean energy inventor, and small business entrepreneur, Krister is now a felon. The nightmare that took two years of his freedom and hundreds of thousands of dollars … began when he made a simple error: he failed to put a “ground” sticker on a package that he shipped. Despite his clear intention to ship by ground—as evidenced by his selection of “ground” on the shipment form and payment for “ground” shipping—the government prosecuted him for his error anyways.

When the jury acquitted Krister, the government turned around and charged him again, this time for alleged abandonment of toxic materials. Krister had securely and safely stored his valuable research materials in stainless steel drums, at a storage facility, while he fought for his freedom in trial over the missing shipping sticker. He ultimately spent two years in a federal prison for his mistake.

Sixty years ago, one in 20 Americans required a license to carry on business. The Institute for Justice tells us it’s now one in three Americans, an absurd barrier to starting a business. Worse still, licensing requirements have been turned into licenses for heavily armed policemen to raid honest businesses and treat entrepreneurs like criminals. In 2010 two inspectors from the Florida Department of Business and Professional Regulation (DBPR) visited the Strictly Skillz Barbershop in Orlando and confirmed that all of the barbers were properly licensed. The DBPR is authorized to conduct such visits only once every two years, but two days later the inspectors called again with eight to ten heavily armed and masked policemen, who handcuffed the barbers and told the customers to leave. The police didn’t have search warrants and claimed that they didn’t need one when investigating licensing laws. When a barber said he had done nothing wrong, the officer responded, “It’s a pretty big book, I’m pretty sure I can find something in here to take you to jail for.” All that was too much for a panel of federal judges, who noted that they had twice before admonished the police for conducting illegal searches. “We hope that the third time will be the charm.”

A “federal criminal code” would indeed be a pretty big book. No one knows just how many federal criminal offenses there are, and trying to assemble them all in one place would be a daunting task. One commentator described federal criminal law as “an incomprehensible, random and incoherent, duplicative, incomplete, and organizationally nonsensical mass of federal legislation.” Here are some of the evils that are proscribed: transporting alligator grass across a state line, unauthorized use of the slogan “Give a Hoot, Don’t Pollute,” and wearing a postal worker’s uniform in a theatrical production that tends to discredit the postal service.

What makes it worse is that the crimes often dispense with the requirement of a criminal intention or guilty mind (the lawyer’s mens rea). That’s a throwback to the strict liability of the Anglo-Saxon period, when the act (actus reus) alone was enough to convict. If one serf killed another, it didn’t matter whether he did it on purpose or whether it was a sheer accident. In the Middle Ages, however, mens rea was imported into the criminal law through the influence of Canon lawyers who argued that criminal wrongdoing, like sin, assumed moral guilt. “God considers not the action, but the spirit of the action,” said Peter Abelard, which meant there was no place for Anglo-Saxon strict liability criminal offenses.

That was a signal advance in personal and political liberty, but more recently strict liability has made a comeback, in the form of “public welfare crimes.” These are regulatory offenses that seek to protect the public’s welfare by dispensing with the accused’s defense that he didn’t mean any harm. Very early on, Oliver Wendell Holmes foresaw the new direction the law would take. “while the terminology of morals is still retained … the law … by the very necessity of its nature, is continually transmuting those moral standards into external and objective ones, from which the actual guilt of the party concerned is wholly eliminated.” In other words, mens rea was getting in the way of securing convictions, when public welfare was at issue. The problem, however, was that the return to strict liability puts well-meaning people such as Krister Evertson at risk of the most severe restrictions on liberty the state can impose. With a mens rea requirement, a person knows when he’s doing wrong, but not when intention is irrelevant and the criminal offenses are technical and numberless. That’s today’s America, where the law on the books can make every American a felon.

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American criminal procedure tilts the balance of power even more strongly towards the prosecution. A criminal case might begin with a grand jury, where the prosecutor makes his case in secret in the absence of a judge. The normal courtroom rules of evidence, meant to protect the accused, don’t apply, and the prosecutor can present almost any evidence he wants, including hearsay. Prosecutors can call witnesses (including the target of the investigation) without revealing the nature of the case, and the proceedings can last for years. Not surprisingly, the grand jury seldom fails to provide an indictment. As Tom Wolfe wrote in The Bonfire of the Vanities—quoting Sol Wachtler, chief judge of New York state—“a grand jury would ‘indict a ham sandwich,’ if that’s what you wanted.”

More than other First World countries, America tries corporations as criminals. Ordinarily, firms are quick to settle, since they suffer an enormous reputational loss when charged with crime. For example, a grand jury’s indictment effectively destroyed the Arthur Andersen accounting firm and left its 28,000 employees jobless. Three years later the Supreme Court overturned the conviction, but at that point the firm was dead as a doornail. The trial judge had improperly instructed the jury that it could convict even if Arthur Andersen honestly and sincerely believed its conduct was lawful, and that was too much for the Supreme Court. But if the indictment is the death sentence, a posthumous finding of innocence comes too late.

More often than not, the real target is the firm’s top executives, for the mere hint of a prosecution is enough to bring the firm to its knees and to cooperate in going after its managers. Under the “Holder memorandum” (named after Eric Holder), federal prosecutors are encouraged to base their discretion on the degree to which the target firm cooperates with the investigation. The firm can thus be expected to sign a “deferred prosecution agreement” in which it agrees to help convict its executives. This might include waiving the attorney-client privilege and letting the Justice Department see the correspondence with their lawyers; and what that means is that firms can’t assume they can get confidential legal advice. Until the Supreme Court stepped in, prosecutors also asked firms not to pay for their executives’ defense lawyers, even where the firm was obligated by contract to do so.

When pursuing the executives, prosecutors have enormous bargaining leverage. They can buy favorable testimony by selectively granting or threatening to deny immunity from prosecution and can coerce a guilty plea to a lesser charge by threatening to indict on a more serious one. Prosecutors can also bring multiple charges, under different theories of criminal liability. The prosecutor need win a conviction on only one count, while the defense must win them all. A jury, minded to split the difference, might easily acquit on 99 counts and convict on one. For sentencing purposes, however, there is generally no difference between a conviction on one count or many. The inequality in bargaining power is magnified by the “trial penalty” courts impose—in the harsher sentences they inflict on defendants who refuse to plead, go to trial, and are convicted.

As a consequence, nearly everyone caught in the maw of the federal criminal system pleads guilty. In recent years, prosecutors have secured guilty pleas from 96 percent of the defendants, and for the remaining 4 percent who went to trial prosecutors won convictions against 3 percent. Less than 1 percent were acquitted, and that was only after they had spent years fighting the case and seen their reputations tarnished and their business damaged or destroyed. These are staggering numbers, when one considers that a third of Canadian criminal defendants are either acquitted or emerge victorious after Crown Attorneys decide to abandon the prosecution.

Once convicted of a white-collar crime, a corporate executive is often looking at a lengthy prison term. The U.S. Sentencing Guidelines ask judges to take into account the amount of the financial loss in computing the sentence. For crimes that result in a large firm’s bankruptcy, then, the jail time for a first offender might easily exceed that given multiple offenders for rape or murder. For Enron CEO Jeffrey Skilling, for example, it was 24 years (later reduced on appeal to 14 years).

Then there’s the matter of prosecutorial ethics, or the lack thereof. There is enormous pressure on American prosecutors to rack up convictions and little by way of sanctions should they cut corners to do so. Prosecutors are said to rely on notoriously unreliable jailhouse snitches and routinely to withhold evidence that might assist the defendant. They can also cut highly favorable plea bargains with lower-down rogues in order to secure the conviction of their higher-up bosses. That rarely happens in other First World countries, where most prosecutors are lifetime civil servants who are not pressured to secure convictions and who are expected to abandon a prosecution when the interests of justice so demand. They’re not aspiring politicians and have no interest in trying a case before the press or playing to the television cameras, in the manner of a Rudy Giuliani or Eliot Spitzer.

With the extraordinary expansion in the number of federal crimes, and with the enormous discretion and threat advantages of prosecutors, American criminal law poses a serious threat to liberty. If we all commit “three felonies a day,” as Harvey Silverglate claims, and if prosecutors can indict almost anyone they want, we’ve taken a step toward the country that Soviet NKVD head Lavrentiy Beria described when he said “Show me the man, and I’ll show you the crime.” The threat is particularly serious to business executives, in a country with politically ambitious prosecutors.

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Administrative sanctions, though not as threatening as a prosecution, can also cripple an entrepreneur. When Catherine Engelbrecht, a Texas businesswoman, formed a Tea Party group in 2009 to investigate voter fraud by Democrats, the group’s request for tax-exempt status was held up by Lois Lerner’s IRS. Given how politicized the IRS has become, that’s not surprising, but then Engelbrecht, her husband, and their company were all audited by the IRS. In short order the business was visited by other federal agencies: the FBI, the Bureau of Alcohol, Tobacco, and Firearms (ATF), and the Occupational Safety and Health Administration (OSHA).

Since Engelbrecht was an opponent of the administration, that was perhaps to be expected, but even a proudly apolitical executive can find himself rapped sternly on the knuckles. Michael Milken thought that, in his splendid isolation at the corner of Wilshire and Rodeo Drive, he didn’t need allies back East. But that was before he was railroaded into a guilty plea. Bill Gates was similarly misinformed. Out in Redmond, Wash. he thought Microsoft immune from attack and he himself more important than the politicians in D.C. That changed when Microsoft’s success invited an antitrust prosecution and Gates’s display of arrogance at trial led to an order that the company be split in two. That decision was reversed on appeal, but since then Microsoft has assembled one of the biggest government relations offices in D.C., and a chastened Gates has retreated into the world of philanthropy. That was good news for the activities supported by the Gates Foundation, but less good for Microsoft shareholders, for the company has fallen flat in every one of its projects since then. It was worse still for the American economy, if the lesson to be taken is that, in a crony-capitalist nation, every business is in partnership with the federal government, and woe to those who forget it.

thisarticleappears julaug16It’s difficult to measure the cost that overzealous prosecutors impose on the economy. The target will always be the rule-breaker, the innovator, Nick Taleb’s “antifragile,” the person who bucks the trend and leaves the protective shell of a comfortable and well-connected establishment. Such people were once seen as heroes, but now they’re potential criminal defendants. They’re the engines of growth in the economy, but they’re asked to navigate the shoals of a million laws and regulations. Somehow that can’t be a good way to run a railroad.

There is one winner, however, and that is the legal profession. The number of regulatory crimes is so great, and the penalties are so severe, that firms must invest heavily in regulatory compliance experts. Often these are the same people who drafted the rules while working for government, and now are cashing in in the private sector. The rules can actually get in the way of safety, for at some point more regulations makes them harder to process. For regulatory lawyers, however, more is always better.

F.H. Buckley is a Foundation Professor at Scalia Law School, and the author of The Way Back: Restoring the Promise of America, from which this article was excerpted.