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You've Got Jail

It's the summer of white-collar crime. But if the latest miscreants think a spell in jail means catching up on the classics and refining their backhand, they should think again. Club Fed is dead, and hard time is harder than ever.


Clockwise from top left, Taubman, Ebbers, Fastow, Sullivan.  

Last December, after a four-hour van ride of unrelenting discomfort -- his hands cuffed, his feet in manacles, his waist cinched by an iron chain -- Dr. Niels Lauersen was led, his wrists still bound, to the Special Housing Unit of Allenwood prison. The Bureau of Prisons refers to this place by its acronym, the SHU, pronounced "shoe." The inmates, however, refer to it by a slightly more evocative term. They call it the hole.

Later, Lauersen would hear many stories, some apocryphal, about offenses that landed men in the hole -- like screaming at your unruly kids on visiting day, for example, or mentioning to your wife over the phone that you'd just eaten a nice piece of cheesecake. (Cheesecake is not available at Allenwood, and therefore contraband.) But at this point, the Danish-born obstetrician knew none of them. All he knew was that a mere eighteen months earlier, he'd been practicing medicine in a lush Park Avenue office where pictures of him with celebrities and both Clintons lined the walls. In the evenings, he returned to the Fifth Avenue duplex of his then-girlfriend, Denise Rich.

Now, convicted of filing fraudulent insurance claims for fertility treatments, he was standing in a shrunken cell containing nothing but a bunk bed, a toilet, and a sink. He slipped his hands through the meal chute in the cell door. The guard undid his handcuffs.

"The hole is the worst," Lauersen says four months later, in an alcove off the Allenwood visiting room. His pale features, accentuated by blond eyelashes, give him a look of incongruous delicacy in this setting, and his hair, once an asterisk of cider-red curls, has turned gray. Like all prisoners in low-security federal facilities, he's wearing a khaki uniform with his ID number ironed onto his breast pocket. "You're kept in there 24 hours a day," he continues. "And there's a window looking into the cell, so the guards can see you going to the bathroom. That was the worst -- the bathroom inside the cell. You share that cell with another man."

Prison officials explained to Lauersen that he'd been sent to the hole because the dormitories were teeming beyond capacity. He had to remain there for two weeks, waiting for one of the 1,000 beds in the regular facility -- tucked in the Susquehanna Valley of central Pennsylvania -- to open up. I ask how he managed. He gives a faint shrug. "I have always been a positive person," says Lauersen, 65. "I used to deliver babies for a living. I made my patients feel positive. I made them feel hope."

He shifts slightly in his plastic chair. Lauersen still has 70 months of his seven-year sentence to go. "But I would have liked long sleeves," he says. "It was winter when I was in the hole. It was very, very cold."

Jeff Skilling, Andrew Fastow, Dennis Kozlowski, Bernie Ebbers, Scott Sullivan. Enron, Tyco, Global Crossing, WorldCom, Merck. This summer, we've been bombarded with stories of spectacular corporate malfeasance, once again raising the possibility (indeed, the hope, on the part of bitter stockholders and employees) that the executives who used creative accounting to enrich themselves during the boom-boom nineties might soon be trading their cuff links for handcuffs.

As it happens, the business pages of the New York Times already read like a crime blotter. In the past month alone, Sam Waksal, CEO of ImClone, was arrested for insider trading; Fred Schultz, éminence grise of the art market, was sentenced to 33 months for conspiracy to sell stolen antiquities; and Alan Bond, former president of Albriond Capital Management, was found guilty of investment-advisory fraud. In May, Martin Frankel, wayward banker and unlikely overlord of his own sex colony, pleaded guilty to money laundering. This week, former Sotheby's chairman Alfred Taubman is scheduled to appeal his recent conviction (price-fixing, sentence: one year). And in three weeks, Steve Madden, the knockoff-shoe king, will be heading off to Eglin, a prison camp in the Florida panhandle (money laundering, sentence: three years).

Ever since Mike Milken was shipped off to Pleasanton -- a facility whose very name is more reminiscent of a spa than of a prison -- the conventional wisdom has been that white-collar criminals don't suffer very much when they go to jail. Most prominent offenders wind up in prison "camps," the least restrictive institutions within the federal prison system, where there are no barbed-wire fences. Hence the myths: The men live in bungalows! Bring their own golf clubs! And laze on the lawns, reading Stendhal!

But the amenities of federal prison camp have always been exaggerated. And today, not even a particle of folklore about the camp experience remains true. "I have a client who double-dipped," says David Novak, a white-collar-prison consultant. "He went to Eglin twice -- once in 1988, and once in 2001. He was shocked, and I mean shocked, when he went back."

Fourteen years ago, furlough privileges at Eglin were somewhat liberal; now they've vanished. Family visits could be flexible, even off-site; now they're strictly monitored. Men could occasionally wear their own clothes; now they can't. Nor can they move as freely, or spend more than 300 minutes per month on the telephone.

But perhaps the most dramatic changes in federal prison camps have been in their demographics. True, camps have never been strictly white-collar havens; they have always been used as decompression chambers for more serious criminals who are about to be released. But ever since the United States federalized its narcotics laws, the national prison system has been overwhelmed with drug offenders. The result has been a radical transformation in the sociology of the inmate population -- especially in camps.

In 1988, for example, Eglin was 62 percent white. Today, it is 33 percent white. Its Hispanic population, meanwhile, has jumped from 24 to 37 percent, and its black population has more than doubled, from 14 to 29 percent.

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