Do Execs Who Commit White-Collar Crime Do the Time?

When Sam Bankman-Fried was sentenced to 25 years in prison for fraud, conspiracy and money laundering related to the collapse of his cryptocurrency exchange, FTX, the message was clear: white-collar crime carries severe consequences.

The case seemed to rebut the familiar lament that “nobody goes to jail” after corporate scandals.

Yet for every high-profile conviction such as Bankman-Fried, Elizabeth Holmes, or Bernie Madoff, a persistent public debate lingers: are these exceptions to the general perception that  corporate executives evade accountability for financial crimes?

This question lies at the heart of a new working paper, “Are the scales of justice tipped? Criminal penalties for corporate executives,” which examines whether corporate executives face lower legal penalties, including jail time and fines, than others for white-collar crimes. The paper is authored by Justin J. Hopkins, the J. Harvie Wilkinson Jr. Associate Professor of Business Administration in the accounting area at the University of Virginia’s Darden School of Business, and his co-authors Dain C. Donelson and Andrea Tillet of the University of Wisconsin-Madison.

“There’s a perception that corporate executives escape punishment, that they have a get-out-of-jail-free card, hide behind the corporate veil, and are never held accountable,” says Hopkins.

But is that true? Or is it a myth perpetuated by the media and pundits?

Anecdotally, few Wall Street bankers, traders and executives were held accountable for the 2008 financial crisis. But there have been high-profile convictions in recent years. Most recently, Charlie Javice was sentenced in September to more than seven years in prison for defrauding JPMorgan Chase in the $175 million sale of her fintech start-up.

“The truth about the white-collar crime is somewhere in the middle,” says Hopkins. “It's a very nuanced story.”

The common belief that executive defendants get a leg up throughout the criminal defense process “is at least partially misguided,” according to Hopkins.

How the Researchers Studied Executive Prosecution

To cut through the myth about executives “getting away with it,” Hopkins and his co-authors analyzed legal outcomes for executives in two settings: For the first, they used the Department of Justice’s national caseload data and looked at legal penalties for executives relative to non-executive defendants across various white-collar crimes.

When federal agencies, such as the Securities and Exchange Commission (SEC) and the Internal Revenue Service (IRS) uncover cases they believe merit criminal prosecution, they refer the cases to the Department of Justice (DOJ), which must then decide whether to prosecute.

The researchers studied this setting because it allowed them to see the prosecutor’s decision, observing both cases that were prosecuted, and cases that rose to the level of credible allegations, but were declined for criminal prosecution. They analyzed a relatively large sample of more than 7,000 alleged cases, controlling for characteristics of the defendant, case, time period and geographic district.

In the second setting, they leveraged resources from Darden’s Office of Research Services and collected complaints filed by the SEC for insider trading from 2003 to 2022 and examined whether outcomes differed for cases involving executives and directors relative to cases involving other defendants.

What They Found

The research yielded three key findings:

First, executives are less likely to face prosecution.

Corporate executives are less likely to be criminally prosecuted compared to non-executives who commit similar white-collar crimes. In fact, executives are 23% less likely to face criminal prosecution.

Why?

It has to do with what the authors call the “executive charging theory.” Simply put, landing a “Big Fish” corporate executive requires more work and more risk.

U.S. Attorneys know that successfully prosecuting executives will be more challenging and require more resources than other defendants, and will require stronger evidence. So they choose their cases wisely.

“If they go up against the Big Fish, they know that it's going to make headlines and it's going to be very embarrassing to lose a case like that,” says Hopkins. “The U.S. Attorney’s office isn’t going to pursue a case unless they’ve got very strong evidence — whistleblowers, emails, a paper trail. And very few of these high-profile cases actually reach that level.”

The research supports this. Executive cases tend to be significantly more complex: they are twice as likely to go to trial, last 341 days longer, and involve far more administrative records. This added complexity raises the bar for prosecutors, who must balance limited resources and conviction-rate pressures.

Because prosecutors are conscious of both conviction rates and limited budgets, they are less likely to charge executives.

Second, executives face harsher punishments when charged.

When an executive is successfully prosecuted, they face harsher punishments than non-executives.

When prosecutors charge high-profile defendants, they anticipate a strong defense and heightened scrutiny. As a result, they tend to bring stronger cases and allocate more resources, which leads to higher conviction rates and penalties.

The data bear this out: among prosecuted cases, executives are 12% more likely to face a jail sentence, receive sentences nearly eight months longer and face higher fines.

The authors say this is consistent with the “executive penalty theory,” which predicts that prosecutors are likely to bring stronger cases and apply greater resources to high-profile defendants, leading to higher conviction rates and penalties compared to other defendants.

Third, executives face the same total expected legal costs as other defendants.

The executive charging theory suggests executives face lower legal costs overall compared to non-executives because they are charged less often, while the executive penalty theory suggests higher costs.

To test total costs, the researchers measured criminal penalties for all potential defendants, including those charged and not charged, and refer to this as the “holistic cost analysis.”

What they find is that the two effects “largely cancel each other out” and that “executives face the same total costs as other defendants. In other words, if 100 executives and 100 non-executives get caught committing white-collar crimes, more non-executives will be prosecuted but roughly the same number will ultimately receive a jail sentence.”

“We think that's important because it directly contradicts this idea that executives have a get-out-of-jail-free card,” says Hopkins.

The Takeaway

The authors suggest that these outcomes are consistent with prosecutorial incentives and discretion. Executives are formidable defendants — they often have greater resources, legal sophistication and organizational insulation, making them harder to prosecute — and so fewer cases are filed. And because executives are high-profile defendants, once prosecutors do bring a case, they typically marshal more resources, which contributes to harsher outcomes upon conviction.

In short, the system neither coddles executives nor comes down uniformly harder on them. Instead, it treats them differently at different stages — they are less likely to be charged, but will be more severely punished if they are.

Importantly, the research directly challenges the commonly repeated notion that corporate executives are virtually immune from criminal prosecution and that this affects their behavior.

“We find such immunity does not in fact exist,” the authors say.

Professor Justin J. Hopkins is co-author of the working paper, “Are the scales of justice tipped? Criminal penalties for corporate executives,” along with Dain C. Donelson and Andrea Tillet of the University of Wisconsin-Madison.