White collar crime and strict liability: A pathway to the new American debtors prison

Abstract

Presently, citizens who become personally indebteA to other citizens and who are unable to repay their debts due to a business failure are being prosecuted and incarcerated. These business transactions are being prosecuted as a "sale of unregistered securities" and the "sale of securities by unlicensed dealers." The fact that the accused did not know he or she was selling securities nor with the exercise of due diligence could he or she be expected to know the transaction was the sale of securities is not a defense to the charges. This paper is a case study. The thesis of which proposes that the prosecution, conviction, and incarceration of citizens for the violation of these strict liability securities laws are creating a subtle and new form of American debtor prisons. In ancient times, a debtor was handed over to the mercy of his creditors to become a slave. This was true in Greece and Rome, among the Hebrews, and among the Saxons in England. During Feudal times, however, every man was first a soldier. Armies would have broken up if overlords jailed their men for debts they owed. Beginning about the 1100's in Europe, people could send persons who owed them money to special institutions called debtors' prisons, in many cases, the debtor could have his family with him in a prison. While the family could come and go freely, the prisoner could not leave until his debts had been setded. As feudalism declined and trade and industry rose, harsh treatment of debtors was intensified. Although prison terms were still the usual punishment, the recovery of money was not required. Early American settlers included many fugitives from debtors' prisons (McKelvey, 1977:30). hnprisomnent for debt was considered an ethical problem during the American Revolution and received much attention. The failure to pay debts was regarded as immoral and imprisonment was considered necessary to persuade people to meet their obligations. Thus, debtors usually comprised the majority of the jail population. A further purpose of imprisonment was to protect the creditor by forcing him to reveal any concealed assets. The irony was that in jail he had no means of earning money. Thus, if he were truly insolvent, he was in theory confined forever. Debtors' prisons' laws have operated mainly against the poor who were o[ten imprisoned for nonpayment of petty sums. Such laws also affected a small number of bankrupt merchants and businessmen, tf they were eventually released from prison, they were not absolved of their debts and were, therefore, prevented from raising capital to restart their business (McKelvey, 1977:56). Debtors' prisons' laws persisted until long after the Colonial period largely due to the community belief that insolvent debtors should be penalized and that prison was a necessary deterrent. In practice, however, the rigidity of the laws was greatly relaxed. Instead of being confined in jail, debtors were kept in the community, provided they did not attempt to leave. After serving a short term, they were released upon taking a "pauper's oath" that they were truly destitute. Thus, while debtors' law constantly menaced the poor, their severity was mitigated. The struggle for the abolition of imprisonment for debts intensified in the late 1830's. There was a resurgence in the labor movement with many civic leaders pressing for abolition of debtors' prisons. Abolition effort were initially successful in Michigan, Alabama, New Hampshire, and Tennessee. By 1857 debtor's prisons were eliminated in practically all states (Ferguson, 1979: 56). Eventually, state Constitutional provisions were enacted to eliminate debtors prisons. Article I, Section I1 of the Florida Constitution is typical of most states: "No person shall be imprisoned for debt, except in cases of fraud." Flor ida v I senhour (1988)1 l~ spite of the fact that debtors