The alleged architect of a Philadelphia-area Ponzi scheme has been sentenced on federal fraud charges. The sentence raises questions about restitution, and how people convicted of a white-collar crime could possibly pay back the victims.
Founder of Mantria Sentenced to Jail and Restitution
We've covered the ongoing case before in our blog.
In short, Mantria was a company run by graduates of Temple University. They claimed to have discovered a way of turning trash into energy by converting it into “biochar.” They aggressively solicited investments and gathered $54 million.
But “biochar” was just something they made up. Mantria was a Ponzi scheme. They were arrested for investment fraud and they pled guilty.
Now, the founder of the company has had his sentence issued by the court: 22 years in jail and $54 million in restitution payments to the investors he allegedly defrauded.
Restitution: A Common Penalty in White-Collar Crime
Precisely because white-collar crime is money-centric, restitution is a common sanction issued by the court upon a conviction. By forcing people who have been convicted of a white-collar crime to pay back the people they have defrauded, courts try to right their wrongs.
Demanding Restitution is Often Out of Touch With Reality
Unfortunately, restitution as a penalty for white-collar crime – or for any type of crime, for that matter – is optimistic and out-of-touch with reality.
A criminal conviction is a huge blow to most career prospects. Even entry-level positions require job candidates to go through an extensive background check. And in a still-competitive job market, anyone with a blemish on their background is going to lose the job to someone with similar credentials and a clean record.
Simply put, people who have been convicted of a crime are going to struggle to make very much money in the future. Making them pay restitution after a conviction that dooms their ability to earn a living seems optimistic, at best.
Unfortunately, courts are so confident that restitution can somehow work as a penalty for a criminal conviction that they have prohibited alternative measures.
An infamous case came from New Mexico and the 10th Circuit Court of Appeals. In U.S. v. Sample, an investment advisor solicited investments in a company he ran by issuing false earning reports. He pocketed most of the proceeds. He was convicted of various types of fraud after pleading guilty and faced over 6.5 years in jail.
The district court that issued the sentence decided that putting him in jail would keep him from paying restitution. The judge even said, “I want you to keep your job because I want you to have a good job to pay these victims back.” Because that job was fairly lucrative and afforded a way to pay back Sample's victims, the judge issued a sentence of five years on probation, with no jail time.
The appeals court overturned the sentence and demanded a new one. There was not enough jail time in it, and the appeals court frowned upon a decision that seemed to “rely on a defendant's wealth in fashioning a sentence.”
Criminal Defense in Philadelphia with Joseph D. Lento
The federal court judge that sentenced the founder of the Mantria Ponzi scheme has made the same mistake. He told a 37-year-old to spend the next 22 years in jail, and also to pay back $54 million.
One of those penalties is not going to happen.