Robert Brennan, former head of the infamous First Jersey Securities brokerage, passed before news cameras earlier this month on his way to court. It was a familiar scene for anyone who’s followed the fortunes of this penny-stock promoter over the past two decades, but with one remarkable difference: This time the Northern New Jersey financier wore handcuffs.

Brennan, 56, has long battled federal and state securities regulators who claimed he used squads of boiler-room brokers to peddle worthless stocks, bilking small investors out of millions of dollars. But until 1995, Brennan could accurately claim he had never been convicted of any kind of fraud. That changed five years ago when a federal judge concluded at the end of a lengthy, non-jury trial that Brennan had masterminded a “massive” fraud. The judge ordered Brennan to “disgorge” more than $70 million.

But Brennan remained free – that order was the result of a civil suit brought by the Securities and Exchange Commission and a prison term was not an option. Even the string of state and federal indictments brought against Brennan last week, while they were criminal charges that could bring a prison term, did not directly involve securities fraud. Instead, they alleged that Brennan, who had filed for personal bankruptcy shortly after the 1995 verdict, had concealed assets that should have been turned over to satisfy the judgment in the SEC case. Brennan has entered a plea of not guilty and is free on bail.

Why has Brennan never faced criminal charges for securities fraud? Indeed, his case is not unique.

“Only a small fraction of all securities fraud cases are handled as criminal cases,” notes Wharton legal studies professor William S. Laufer. One reason for this, Laufer says, is that even when criminal convictions are obtained, prison sentences for these non-violent, white-collar crimes are not common. At the same time, studies have shown that civil fines often match or exceed those levied in criminal cases. Hence, prosecutors find there is little to gain in exchange for the extra effort it takes to bring criminal cases.

In a criminal case, prosecutors must prove the defendant intended to commit a crime, Laufer says, while this isn’t required in a civil case. A criminal case requires proof beyond a reasonable doubt, while proof in a civil case requires only a preponderance of the evidence. Moreover, he adds, many well-heeled defendants in securities cases can afford teams of lawyers, many of whom are former prosecutors or regulators adept at finding the holes in the prosecutors’ cases.

“U.S. Attorneys don’t like to indict [on criminal charges] unless they are 95% sure of getting convictions,” adds John C. Coffee Jr., a law professor at Columbia University who studies securities cases. “They have to pick and choose which cases to prosecute, and typically they give priority to cases involving organized crime or violence.”

Laufer and Coffee note that securities cases can be extremely complex and difficult to explain to juries. In fact, it took a six-month trial for the SEC to make its civil case against Brennan, even though there was no jury that needed to be led by the hand. The evidence was heard by a federal judge knowledgeable about securities law and accustomed to convoluted cases.

Among the SEC allegations, for instance, was a claim that Brennan’s firm had manipulated the price of virtually worthless shares in an obscure company called Sovereign Chemical & Petroleum Products. In November 1982, First Jersey underwrote the initial public offering of one million Sovereign “units,” each composed of three shares of common stock and a warrant giving its owner the right to buy another share later. The SEC said First Jersey sold the units to its customers for $3 on Nov. 9, then bought them back over the next few weeks by offering $3.25 to $3.75, for an average of less than $1.25 per share. This maneuver got the shares into circulation, clearing the way for the rest of the scam, the SEC said.

First Jersey then broke the units apart and sold the shares to other customers for $2.25 to $3, realizing a 140% profit, according to the SEC. This was illegal, the SEC said, because securities law limits markups to 10%. SEC lawyers said First Jersey used teams of brokers to sell the stock in high-pressure phone solicitations, ignoring regulations that say brokers must tailor recommendations to investors’ individual needs.

Brennan’s lawyers argued that the Sovereign price increase was simply the result of ordinary market forces of supply and demand. But the SEC said that routine trading of this stock was virtually non-existent, and that First Jersey, which controlled nearly all the outstanding shares, manipulated the price by orchestrating trades of small blocks at higher and higher prices.

Each side produced mountains of documents and brought in expert witnesses for a lengthy and arcane discussion of the workings of the “inter-dealer market,” where shares pass back and forth between firms, sometimes at prices different from those on the regular market used by ordinary investors. The debate was made more complicated by the incompleteness of many records and the sparse evidence that Brennan took any direct role, even though it was clear he ran the company.

By comparison, the typical bank robbery or murder is simple and straightforward.

It’s not just juries that have trouble understanding securities cases, Coffee says. Most U.S. Attorneys offices don’t have expertise in such matters, either. Indeed, the U.S. Attorney in New York City is the only one in the country with a standing securities fraud team, he notes, adding that even a prosecutor who has the skills for such a case may be reluctant to devote the resources required for a trial that can take months.

Moreover, securities cases that go to prosecutors often need additional investigative work, since the SEC and state securities regulators have very limited investigative operations. With only about 3,000 employees, the SEC is miniscule next to the FBI, Drug Enforcement Agency or Bureau of Alcohol, Tobacco, and Firearms – agencies that present cases for prosecution “on a platter,” Coffee says.

Laufer said prosecutors are swamped with more cases than they can handle, and therefore choose the ones that make the best use of resources. Securities fraud cases often don’t seem worth the trouble given the uncertain prospects.

Despite these obstacles, SEC Chairman Arthur Levitt has met with U.S. Attorneys around the country to urge more criminal prosecutions, according to spokesperson Chris Ullman. Levitt has argued that the victims of securities fraud are “real people losing real money,” Ullman says. But so few cases receive criminal prosecution that the SEC doesn’t even have a tally, he adds.

Not having the authority to bring a criminal case itself, the SEC can only file civil cases. At worst, a defendant will receive a fine, a black mark on his record and a suspension or ban from the securities industry. Most SEC cases end up with out-of-court settlements in which the defendant pays a fine or endures a temporary suspension without admitting guilt. Firms and individuals who accept such settlements typically maintain in public that they did nothing wrong, claiming that they settled just to get the cases behind them and to save legal costs.