Will Justice Prioritize Corporate Wrongdoers?
by Jessica Schieder, 9/24/2015
The Department of Justice has been heavily criticized in the wake of the financial crisis for not doing enough to put the executives behind irresponsible corporations behind bars. In a memo last Wednesday, the Department signaled a change in tone, announcing that the prosecution of individual employees of corporations—as opposed to the financial entities—should be prioritized in the event of wrongdoing. Holding individuals accountable for wrongdoing, as opposed to merely the companies they represent, could more effectively discourage future misconduct, making American workers and consumers safer.
Fewer individuals have been held accountable for corporate wrongdoing in recent years.
Individual executives were prosecuted in as few as 34 percent of U.S. settlements with corporations between 2001 and 2014, including in the wake of the 2007-2008 financial crisis. This stands in stark contrast to the treatment of corporate employees in previous down turns. For example, during the savings and loan crisis of the 1980’s, savings and loan regulators made more than 300,000 criminal referrals that resulted in over 1,000 major felony convictions.
Deferred prosecution agreements—supported and frequently utilized by Attorney General Loretta Lynch’s predecessor, Eric Holder— are largely responsible for this change in how corporate wrongdoing has been addressed in recent years. These agreements, which had been used with individuals in the past, essentially allow corporations to largely get away with wrongdoing in exchange for cooperating with investigators, usually paying a fine, and promising reforms. As the Department of Justice’s memo points out: “One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing.”
Many are suggesting the changes are too little, too late.
In response to the memo, Robert Weissman of Public Citizen said in a press release, “It would have been nice if the Department of Justice had evinced any interest in prosecuting corporate executive wrongdoers after the 2008 financial crash and ensuing Great Recession (and even better if the agency had prosecuted wrongdoing before it led to the crash).”
In the wake of the financial crisis, a body of research has developed that documents the seeming leniency with which corporate wrongdoers were treated in the shadow of the financial meltdown. The work highlights both the seemingly lenient treatment of executives behind firms that were found to have acted wrongly (see Andrew Ross Sorkin’s Too Big To Fail), as well as the apparent unfairness of these individuals’ treatment when contrasted with the stringency of minimum sentencing laws and the unfairness of racially biased policing (see Matt Taibbi’s The Divide: American Injustice in the Age of the Wealth Gap).
While the Department of Justice’s memo is a step in the right direction, there is skepticism that corporate criminals will see their day in court, especially as much of what the memo describes are practices that are already on the books.
Last week, the Department of Justice announced a settlement with General Motors, concluding a criminal investigation into a safety defect in the company’s cars that led to at least 174 deaths. While the feds announced a fine of $900 million on the company, no executive will face criminal charges. There is a real concern that by failing to hold individuals accountable corporations will see fines for consumer deaths, injuries, illnesses, and financial harm as merely the costs of doing business.
Americans should be able to trust that the law is applied equally and fairly across all socioeconomic groups and all people.
Perceived leniency on Wall Street executives is incredibly dangerous because it appears there are two systems of justice – one that lets white collar executives off the hook after their firms pay financial fines and another for the rest of us. This unfairness further erodes the public’s faith in the courts to act as a fair arbiter of justice, while also failing to discourage wrongdoing by corporate executives in the future.
For Future Reading:
Creating a Monster? Proposed Monsanto Merger with Swiss Chemical Giant Raises Troubling Questions, The Fine Print, 8/21/2015
UPDATE: Freedom Industries Executives Plead Guilty to Criminal Charges for West Virginia Chemical Leak, The Fine Print, 8/19/2015
Airbags Have Saved Tens of Thousands of Americans… and Industry Obstruction Cost Three Times As Many, The Fine Print, 8/5/2014