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Comment by wtf92345923 | Hacker News Reader

Am I crazy, or do fines never come close to matching damages? Or jailtime? I'm constantly seeing rulings or indictments where an article says "defendant faces $1500 in fines or two years jail time", as if those are in any way equivalent. Were all the fine quantities written up in 1875 and just never got updated?

In this case, defendants are accused of conning "at least 11,000 income share loans" "carrying an average finance charge of around $4,000", but their fine is $164,000? A fraud of $44M just for the financing charges produces a fine of $164K? As I missing something?

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The US justice system and regulatory agencies treat corporations with kid gloves. They often get many strongly worded letters and many chances to correct their bad behavior before regulatory action happens, and then when it does happen, it's slow and the corporation usually continues to operate, and then when penalty comes, it's some ridiculously small fraction of the gains that came from the bad behavior, which the corporation usually appeals and gets reduced or thrown out.

There are almost never company-killing fines. There are almost never consent decrees with stipulations that change the company's behavior. There are almost never instances of piercing the corporate veil and going after executives or shareholders. It's a total joke.

There's an incentive problem here because litigation is so expensive. If the fine is large enough, it becomes more and more worth it for the company to fight it in court - and therefore more expensive to the regulatory agency's legal budget. The only folks who benefit from it going to court are private lawyers.

Whereas, settling meets the company's incentives (eliminating uncertainty), meets the regulator's incentives (bad behavior is stopped locally). The moral hazard created by making fraud seem less risky (because the punishments aren't that bad) is born by the public.

The solution here would be to limit the possible legal shenanigans that companies can use to increase the cost of taking a case to trial.

Generally, yes fines are a fraction of damages; fines are meant to deter, and are paid to a regulator not the damaged party. Payout from a lawsuit is meant to capture damages, and pay to the damaged party directly.

In this case, the 'stick' is that CFPB is preventing the company from issuing new loans, de facto forcing them to cease operation. (Or I guess charge regular tuition, like a normal school?) That's a pretty big deal.

Forcing somebody to cease committing a specific form of fraud is a "big deal"?

According to The Verge [0] "None of this puts BloomTech out of business, by the way — it can keep operating with third-party loans instead."

And to make matters even more depressing the CEO just tweeted [1] that it's no biggie for him:

> BloomTech continues to focus on its core mission: improving the lives of students and enabling them to fulfill their economic potential. While it’s been frustrating, we’re glad to put this behind us.

[0] https://www.theverge.com/2024/4/17/24133577/lambda-school-bl...

[1] https://twitter.com/Austen/status/1780770303406403701

> Am I crazy, or do fines never come close to matching damages?

Fines aren’t intended to replace damages. If they are criminal fines, criminal restitution is also available through the same process. Even where criminal restitution isn’t available or, for whatever reason, pursued, or where the fines are civil, civil damages for those harmed are not precluded by the fines, they are on top of the fines. Fines are punishment, not compensation.

Those articles you are reading are just poorly worded. For any criminal case, it is a matter of fines AND jail time. You could be sentenced to jail time and no fines, or fines and no jail time (though this is rare), but the majority of the time you get fines and jail time. Generally, for criminal issues, the punishment is really in the jail time, the fine is just extra.

It was a hell of a con!

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