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THE NEW GET OUT OF JAIL FREE CARD (PART I)

June 25, 2016

 

THE NEW GET OUT OF JAIL FREE CARD (PART I)

The get out of jail free card is very appropriately integrated into the old board game of Monopoly, probably in consonance with the Sherman Anti-Trust and Clayton Anti-Trust Acts of 1890 and 1914, respectfully. Jesse Eisinger in the Summer Edition (2015) of the American Prospect writes in a scathing report that the new “card” involves a collusion between the prosecutors and the courts to keep executives of corporations from doing prison time.

My followers will recall that I have repeatedly written over the years that we will see no reform in executive corruption until we hear the jingle of handcuffs in the boardroom, and Eisinger agrees with me. Another and far more influential voice agrees, one Elizabeth Warren, my favorite senator, who constantly asks why such criminals are not sent to jail. Why indeed?

Why is it that a corporate executive who commits criminal acts of corruption within a major corporation walks while an executive who commits such acts in a small corporation in South Omaha goes to jail? What distinguishes the acts from one another? Why, for instance, is admitted bribery of Chinese officials (a clear violation of the Federal Corrupt Practices Act by the largest bank on Wall Street) not punished by more than mere fines and the CEO of the bank not only going unpunished with jail time but instead is given a raise by the bank’s board, presumably for his adroit handling of the crisis. Why?

Does it matter WHO is bribing, stealing or whatever? Is that the test? Banking executives are to go free because of who they are rather than what they did? Is that the new test for criminal responsibility, which establishes tiers of punishment dependent upon who rather than what? Let’s hope not!

Eisinger reports that corporate criminals are getting away with their crimes, but that while there are plenty of laws on the books, they aren’t being put to effect for the one percent. Thus no major executive went to jail in the wake of the 2008 financial crisis, no top executive of BP went to prison in the wake of the Deepwater Horizon disaster, and indeed a jury even acquitted a BP executive for lying about the spill.

What is happening to white collar justice is nicely covered in a book (Too Big to Jail: How Prosecutors Compromise with Corporations) written by Brandon L. Garrett, a University of Virginia law professor. The Department of Justice has perfected the art of settling with corporations, but the Department doesn’t call them settlements; they are instead known as “deferred prosecution agreements,” (DPA) or its poor cousin, the “non-prosecution agreement” (NPA). Instead of being indicted, these corporations reach an agreement, offering payment of a fine and some pledges to behave better in the future. Since 2001 more than 250 federal prosecutions have involved the likes of AIG, Google, JP Morgan Chase Bank (the Chinese bribers) and Pfizer.

It seems that prosecutors have become preoccupied with changing the culture of corporations rather than punishing them. So how did prosecutors become interested in changing institutions? Is that their role, and if so, just how successful has such a program been? I will discuss corporate recidivism later.

Corporations are legal concepts with “no body to kick, no soul to damn,” as noted by Edward, First Baron Thurlow, and you can’t put a concept in jail. Corporations do not and cannot commit crimes; only humans commit crimes. (As I have often written, that if so, then why is it that the corporation pays the fines in these prosecutor-accused-court approved “settlements”?) Garrett notes that laws are broken by executives, not fictitious persons. He is right to a fault, and far too often both individuals and corporations to the extent that one or both of them are accountable are let off the hook. There is no jingle of handcuffs in the boardroom, giving rise to recidivism in addition to distortion of the market.

So what of corporate recidivism? The DOJ frequently makes the accused and convicted sign on to a promise to do better, but the DOJ is not set up to monitor compliance, so they farm  out such jobs to former prosecutors (their old buddies) to do the monitoring, opening up the process to cronyism. Little of the work monitors do is made public, and sometimes even the agreements are kept secret. Garrett rightly notes that the deterrent effect is lost when such a punishment is kept from the public eye. As to recidivism by the numbers, over 50 percent of the most serious fraud and larceny culprits were recidivists, about the same rate as robbery and firearms offenders and far higher than drug traffickers.

The list is shocking. Take BP, which before the Deepwater Horizon disaster had the Texas City refinery catastrophe. Then there is Exxon Mobil, which has been convicted four times since 2001 for environmental crimes (remember the drunk skipper incident in Prince William Sound in Alaska?). Next is Pfizer, the pharmaceutical giant which, along with its subsidiaries, have had two convictions, two deferred prosecution agreements, and a non-prosecution agreement. Garrett asks: “What’s a guy gotta do around here to face some actual consequences?” What indeed!

I will discuss the history of the evolution of how we came to where we are in dealing with corporate corruption in Part II. Stay tuned.    GERALD    E

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