The "Deterrence Trap" In The Federal Fining of Organizations: A Research Note

Abstract

In 1981, John Coffee, Jr. hypothesized a "deterrence trap" associated with the fining of organizations, whereby the maximum meaningful fine that can be levied against any organization is necessarily bounded by its wealth. Thus, it would be of no concern to a potential offender whether a threatened fine is $25,000 or $25 million if both sums are beyond the potential offender's ability to pay. Section 8C3.3 of the U.S. Sentencing Guidelines for organizations allows for a reduction or elimination of the Guideline-prescribed fine if the organization is unable to pay it. Using more than 400 organizational sentencing events during 1994-1996 as units of analysis, logistic regression indicated that an organization falling under §8C3.3 had 123 times greater odds of not receiving a fine. Moreover, an organization falling under §8C3.3 is likely to receive a fine reduction from that minimally prescribed by statute which is, on the aver age, about 17 times greater than an organization that does not fall under §8C3.3. Implications of these findings are discussed in terms of general ly deterring organizational agents and owners, specifically in light of Coffee's "trap."