Dec. 13 (Bloomberg) -- Sixty-one percent of defendants sentenced in the Bush administration's crackdown on corporate fraud spent no more than two years in jail, escaping the stiff penalties given WorldCom Inc. and Enron Corp. executives.

In the past five years, 28 percent of those sentenced got no prison time and 6 percent received 10 years or more, according to a review of 1,236 white-collar convictions. Former WorldCom Chief Executive Officer Bernard Ebbers is serving 25 years and ex-Enron CEO Jeffrey Skilling 24.

``Sentencing white-collar defendants to two years or less does not send a strong deterrent message,'' says Joshua Hochberg, who ran the U.S. Justice Department's criminal fraud section from 1998 to 2005. ``On the other hand, convicting a lot of defendants sends the message that you will be caught and there are consequences.''

A wave of corporate corruption marked by Enron's collapse in 2001 and an accounting scandal at WorldCom led Congress to enact harsher penalties. President George W. Bush signed the Sarbanes-Oxley Act to reform governance and named a Corporate Fraud Task Force to push ``significant'' prosecutions.

``This broad effort is sending a clear warning and a clear message to every dishonest corporate leader: You will be exposed and you will be punished,'' Bush told hundreds of prosecutors and agents in a speech on Sept. 26, 2002. ``We will deter corporate crimes by enforcing tough penalties.''

Lighter Sentences

Defendants got reduced jail time when they helped prosecutors investigate frauds, served as low- or mid-level executives, or committed crimes that were less sophisticated than complex accounting conspiracies, the review by Bloomberg News found. The list includes embezzlers such as a credit union teller who stole less than $20,000.

Of the 1,236 convictions from 2002 to 2007 in the review, 1,133 defendants were sentenced. Forty-seven percent of those got a year or less in prison.

Direct comparisons of sentences before and after 2002 can't be made because the Justice Department added a corporate fraud category in 2003 and the U.S. Sentencing Commission stiffened advisory guidelines.

Median sentences for white-collar crime changed little in the 1990s, holding in a range of 12 to 13 months, commission data shows. That number increased to 15 months in 2001 and reached 18 months last year, reflecting the new guidelines.

No Conviction List

The Justice Department claimed credit for 1,236 convictions in the crackdown on corruption. The department says it doesn't have a comprehensive list. Bloomberg assembled a comparable list based on more than 350 cases from task force annual reports, lists of executives, and press releases on the department's Web site.

The review includes 981 cases coded by prosecutors as corporate frauds and obtained electronically under the Freedom of Information Act by Syracuse University's Transactional Records Access Clearinghouse, a nonprofit research center that analyzes government data. Some of the 981 cases overlapped with the 350 convictions compiled from Justice Department documents.

The sentences include the 6 1/2 years imposed on Conrad Black, the former Hollinger International Inc. chairman convicted of mail fraud and obstructing justice, on Dec. 10.

Steven Dodge, a former Converse Inc. executive, got 18 months probation for misleading auditors after helping prosecutors investigate an athletic-shoe retailer. Anu Saad, former CEO of Impath Inc., a provider of cancer diagnostic services, was sentenced to three months for lying about her pay, after more serious charges were dropped.

`Very Strong Deterrent'

``Anything under two years is not significant, unless somebody is a cooperator,'' says Kirby Behre, a former prosecutor and co-author of ``Federal Sentencing for Business Crimes,'' published by LexisNexis in 2002.

Joan Meyer, who oversees the task force as senior counsel to the deputy attorney general, argues that any prison sentence can serve as a deterrent.

``Every case can't be an Enron,'' Meyer says. ``The question is, do we give a pass to white-collar defendants because their crimes are non-violent and result in lesser sentences? That would be an abdication of our responsibilities.''

Prosecutors who built the cases involving Enron, WorldCom, HealthSouth Corp., Computer Associates International Inc. and Homestore Inc. recommend to judges that defendants get lighter terms for providing evidence against colleagues.

U.S. District Judge Jed Rakoff in New York says cooperators are a ``necessary evil'' in tying frauds to top executives.

``The great majority of judges give very substantial weight to cooperation, and that usually translates to very substantial reductions in sentences,'' Rakoff says.

`They Were Minions'

Sixteen HealthSouth employees pleaded guilty and helped prosecutors unravel a $2.7 billion accounting fraud that surfaced in 2003. Eleven got no time in prison. Former HealthSouth CEO Richard Scrushy was acquitted of accounting fraud charges.

``There's going to be a certain number that will get very little time or no time because they were minions within the relative scheme, or they were cooperating,'' says former federal prosecutor William Mateja, who directed the task force's daily operations in 2003 and 2004.

At least 129 defendants cooperated with prosecutors, court records show. The number may be higher, lawyers say, because public files don't always reflect whether a judge credited a defendant for helping the government.

Randi Collotta, a former Morgan Stanley compliance officer, received 60 days in custody on nights and weekends, six months of home confinement and four years probation for leaking inside information. Former Aspen Technology Inc. CEO David McQuillin, who pleaded guilty to securities fraud, got four weeks in a halfway house.

`A Nice Kid'

Gertie Boswell, 61 when she pleaded guilty in 2006, got one year in prison for embezzling $259,856 from her Michigan business, the Virginia Farrell Beauty Schools. Sarah Matanich, who her lawyer says was a teller, spent a day in jail for embezzling $19,669 from St. Cloud Federal Credit Union in Minnesota.

``She was a nice kid who got a little underwater with her bills, and she took some money she shouldn't have,'' says Matanich's attorney, Paul Engh.

Judges weigh a crime's nature, the amount of financial loss and a defendant's circumstances in sentencing. Offenders who plead guilty tend to get less time than those who go to trial. Defendants are penalized for not accepting responsibility for their crime, while those convicted at trial may be held accountable for the full loss in a fraud. Of 193 defendants convicted at trial, 38 got 10 years or more.

`A Conscious Decision'

``The idea that somebody who goes to trial and gets hammered while people who plead guilty get far less time smacks of the Inquisition,'' says defense attorney John Keker of Keker & Van Nest in San Francisco. ``I think it's a disgrace. The going-to-trial penalty should be an embarrassment to judges everywhere.''

Keker represented Frank Quattrone, the former Credit Suisse Group banker whose obstruction-of-justice conviction was reversed, and Andrew Fastow, the ex-Enron finance chief serving six years after pleading guilty and testifying against Skilling.

The Justice Department widened its net after Enron, charging more corporate defendants who may have previously faced only civil sanctions, says Andrew Hruska, a former prosecutor who helped run the fraud task force in 2002 and 2003. Prosecutors also filed cases faster.

``There was a conscious decision to speed up the tempo of these investigations,'' Hruska says. ``We tried to work up the chain within a company.''

`A Hammer'

Mateja, while acknowledging he was in regular contact with the White House, says he felt no political pressure.

The task force ``was a kind of a hammer to make sure these cases got made or declined quickly, to make sure people were doing their job,'' he says.

Mateja and Hruska say the task force closely tracked cases, advising on tactics and sending Justice Department prosecutors from Washington to help U.S. attorneys nationwide. The effort reached beyond offices of U.S. attorneys in Manhattan, Brooklyn, Chicago, Miami and Los Angeles to less common places like Detroit and Birmingham, Alabama.

The task force claimed 250 convictions by March 2004, and 500 five months later. It touted 700 convictions in August 2005, and 1,000 a year later.

Gonzales Announcement

On July 17, the task force's five-year anniversary, then- Attorney General Alberto Gonzales announced that the department had obtained 1,236 corporate fraud convictions. That included 214 CEOs and presidents, 129 vice presidents, 53 chief financial officers and 23 corporate counsels, Gonzales said.

The department won't identify those convicted because it compiled nationwide statistics without gathering names, Meyer says. The department's count included cases that the 93 U.S. attorneys had coded as corporate frauds, she says. The task force also canvassed prosecutors by e-mail or phone to collect statistics.

Prosecutors were told to count four types of corporate fraud: falsifying financial information; self-dealing, such as insider trading or embezzlement; mutual fund or hedge fund fraud; and perjury or obstructing investigations.

Without a centralized database for all cases, generating a list of names of corporate fraud defendants would be ``an incredible task,'' Meyer says.

Some districts coded embezzlements as corporate frauds that may not have been counted as such elsewhere.

``What constitutes a major fraud in one district may not be a big deal in another,'' says Leslie Caldwell, a former prosecutor and supervisor of the Enron Task Force.

To contact the reporters on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net; Bob Van Voris in New York at rvanvoris@bloomberg.net.

Last Updated: December 13, 2007 00:12 EST