No Comment — April 9, 2008, 7:39 am

Justice Tackles the Corporate Offenders, Or Perhaps Not

In one case I have been studying for some time, the Bush Justice Department had ramped up to begin a large-scale prosecution of two financial-services companies involved in what prosecutors concluded was a serious swindle. Suspicious financial deals had produced enormous losses for policyholders and state oversight authorities. In addition to jail time for a group of executives, the complaint, which was prepared and ready to file, sought $400,000,000 in damages for the alleged misconduct. One of the targets, knowing it was in the crosshairs, put a settlement deal worth “a nine-figure sum” (so at least $100,000,000) on the table, together with a monitored compliance program. Career prosecutors rejected it as too little.

Then strange things started happening. Control over the case passed entirely to political appointees in Washington, Criminal Division head Alice Fisher and her seniormost subordinates. The prosecutor was told that his boss “was concerned about his health.” He was dropped from the case. And the team learned from his greenhorn replacement that the whole prosecution was over. It was being dropped.

The move became public and produced arched eyebrows and rude inquiries in the local press which started asking questions Justice didn’t want to answer. The reaction from main Justice? Suddenly an order went out to collect all the documents from the case and have them immediately incinerated. Someone was extremely nervous about having the decision not to prosecute studied. They wanted to ensure that no prosecution would ever happen.

More details on this case will be emerging soon in a long-form piece. I’ll let you know when it’s out. But for the moment, the New York Times’s Eric Lichtblau is on to the phenomenon more broadly.

The Bush Justice Department has been portrayed as a group of hyperaggressive mean-ass prosecutors, determined to enforce the law with a vengeance. But it seems we’ve really misunderstood them. When the wrongdoing is done by corporate entities, they’re all sweetness and light, and eager to see reason. They’re particularly reasonable in dealing with companies which have the right political ties, it seems. “Boys will be boys” seems to be a guiding principle. Lichtblau writes:

In a major shift of policy, the Justice Department, once known for taking down giant corporations, including the accounting firm Arthur Andersen, has put off prosecuting more than 50 companies suspected of wrongdoing over the last three years. Instead, many companies, from boutique outfits to immense corporations like American Express, have avoided the cost and stigma of defending themselves against criminal charges with a so-called deferred prosecution agreement, which allows the government to collect fines and appoint an outside monitor to impose internal reforms without going through a trial. In many cases, the name of the monitor and the details of the agreement are kept secret.

Deferred prosecutions have become a favorite tool of the Bush administration. But some legal experts now wonder if the policy shift has led companies, in particular financial institutions now under investigation for their roles in the subprime mortgage debacle, to test the limits of corporate anti-fraud laws. . .

Some lawyers suggest that companies may be willing to take more risks because they know that, if they are caught, the chances of getting a deferred prosecution are good. “Some companies may bear the risk” of legally questionable business practices if they believe they can cut a deal to defer their prosecution indefinitely, Mr. Khanna said.

Legal experts say the tactic may have sent the wrong signal to corporations — the promise, in effect, of a get-out-of-jail-free card. The growing use of deferred prosecutions also suggests one road map the Justice Department might follow in the subprime mortgage investigations. Deferred prosecution agreements, or D.P.A.’s, have become controversial because of a medical supply company’s agreement to pay up to $52 million to the consulting firm of John Ashcroft, the former attorney general, as an outside monitor to avoid criminal prosecution. That agreement has prompted Congressional inquiries and calls for stricter guidelines.

I’m a corporate attorney who’s worked on the commercial side, i.e., not as a litigator. In fact at one point I advised a number of the European affiliates of Arthur Andersen, and spent many hours explaining to Europeans why their flagship business was being driven out of business based on allegations—that later proved unfounded—of a corporate decision to destroy evidence. The Andersen case was a wonderful demonstration of the ability of prosecutors gone wild to do serious damage to the livelihood of tens of thousands of innocent people and to destroy the nation’s economy in the course. So in fact my attitude is very sympathetic to the posture taken by the Justice Department on this front.

But Lichtblau is right to be asking questions, because there are some serious issues with the way this is being applied by the Bush Justice Department. The most fundamental questions go to equal and fair application of the rules. While Lichtblau starts his analysis of the Monsanto case, for instance, I have been studying a Foreign Corrupt Practices Act prosecution of corporate executives in New York in which prosecutors are advancing borderline preposterous arguments in a case in which the claims are far more modest and more doubtful than those involving Monsanto. Why the different standards?

In the end all of this raises the old question of “Who guards the guardians?” The possibility that prosecutorial discretion will be used to cloak intrigue and corruption inside the Justice Department is severe, and the use of monitor positions as sweetheart deals for political lackeys departing service—as demonstrated by the obscene gigs landed by John Ashcroft—is more than just a little troubling. Indeed, a number of deals that Justice has struck, and some of its non-prosecute decisions, reek of corruption and are at a minimum extremely unseemly.

The premises the Justice Department is operating on are reasonable. But the implementation raises no shortage of questions. This calls for sanitizing sunlight. Congress needs to take a deep look, including a careful examination of some of the specific deals that Justice has struck, and some of the cases in which it has stopped prosecutions in the tracks.

Share
Single Page

More from Scott Horton:

From the April 2015 issue

Company Men

Torture, treachery, and the CIA

Six Questions October 18, 2014, 8:00 pm

The APA Grapples with Its Torture Demons: Six Questions for Nathaniel Raymond

Nathaniel Raymond on CIA interrogation techniques.

No Comment, Six Questions June 4, 2014, 8:00 am

Uncovering the Cover Ups: Death Camp in Delta

Mark Denbeaux on the NCIS cover-up of three “suicides” at Guantánamo Bay Detention Camp

Get access to 164 years of
Harper’s for only $45.99

United States Canada

CATEGORIES

THE CURRENT ISSUE

May 2015

Displaced in the D.R.

= Subscribers only.
Sign in here.
Subscribe here.

The Quietest Place in the Universe

= Subscribers only.
Sign in here.
Subscribe here.

Black Hat, White Hat

= Subscribers only.
Sign in here.
Subscribe here.

Beyond the Broken Window

= Subscribers only.
Sign in here.
Subscribe here.

In Search of a Stolen Fiddle

= Subscribers only.
Sign in here.
Subscribe here.

view Table Content

FEATURED ON HARPERS.ORG

Article
In Search of a Stolen Fiddle·

= Subscribers only.
Sign in here.
Subscribe here.

“To lose an instrument is to lose an essential piece of one’s identity. It brings its own solitary form of grief.”
Violin © Serge Picard/Agence VU
Post
Driving the San Joaquin Valley·

= Subscribers only.
Sign in here.
Subscribe here.

“Don sucked the last of his drink through his straw and licked his lips. 'The coast, to me, is more interesting than the valley.'”
Photograph by the author
Article
Othello’s Son·

= Subscribers only.
Sign in here.
Subscribe here.

Fred Morton, who died this week in Vienna, at the age of 90, was a longtime contributor to Harper's Magazine and a good friend. "Othello's Son," which was listed as a Notable Essay in Best American Essays 2013, appeared in our September 2013 issue.
Photograph © Alex Gotfryd/CORBIS
Article
Beyond the Broken Window·

= Subscribers only.
Sign in here.
Subscribe here.

“By the time Bratton left the department, in 2009, Los Angeles had quietly become the most spied-on city in America.”
Illustration by Taylor Callery
Article
Displaced in the D.R.·

= Subscribers only.
Sign in here.
Subscribe here.

“How is it possible that my birth certificate is invalid if I was born here?”
Photograph by Pierre Michel Jean

Number of African countries with vaccination rates higher than that of the United States:

16

Iowa urologists reported that only a minor portion of locker-room teasing arises from “the presence of excess foreskin”; most teasing targets small penises.

A farmer in Surrey, England, was ordered by the Reigate and Banstead Borough Council to tear down his cannon-equipped castle, which he had built secretly and then concealed behind hay bales.

Subscribe to the Weekly Review newsletter. Don’t worry, we won’t sell your email address!

HARPER’S FINEST

Subways Are for Sleeping

By

“Shelby is waiting for something. He himself does not know what it is. When it comes he will either go back into the world from which he came, or sink out of sight in the morass of alcoholism or despair that has engulfed other vagrants.”

Subscribe Today