Friday, August 05, 2005

"Full Restitution"

As one who favours restitution as part of the consequence for financial impropriety, I was grateful to see that justice was being done in the recent case of Kirk Shelton, former vice-chairman of Cendant Corporation.

According to a recent Associated Press story U.S. District Judge Alvin Thompson not only sentenced Mr. Shelton to 10 years in prison he also ordered him to make “full restitution.”

The unique feature of the story is that the accounting scandal that Mr. Shelton has now been found guilty of perpetrating was, at the time the charges were laid, believed to be the largest case of accounting fraud in the country. The total damages for which Mr. Shelton was found to be liable amounted to a whopping 3.27 billion dollars.

Without batting an eyelash the Associated Press reported that “Judge Alvin Thompson ordered Shelton to pay $3.27 billion to Cendant, including an initial payment of $15 million by October and $2,000 a month once he is out of prison.”

While the restitution may be "full" the payment plan is surely the easiest one ever devised. Assuming that Mr. Shelton meets his $18 million installment in October he then has relief until his jail term is over. Hopefully he will get out a bit early so that he can get on with the "full restitution" part of things. At $2,000 a month he will only be paying back $240,000 a decade. At that rate, with well over $3 billion to pay back by installments, the full restitution will not be complete until sometime well past the year 3250 A.D. (and that's without interest).

Now the article didn’t happen to mention Mr. Shelton’s age but I hardly think that he is going to live long enough to make the final payment. What’s wrong with this story? Are the figures cited in the AP story wildly inaccurate? Did I get confused in the decimal places in trying to figure it all out? Or, is even to mention the words “full restitution” in the context of this case to turn the whole proceeding into a mockery of justice?

(This AP story was carried in the August 4, 2005, edition of the Hamilton Spectator.)

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