White Collar Crime and the Trump Administration

by Rena Steinzor

April 27, 2017

Cross-posted by permission from the Columbia Blue Sky Blog.

The Obama administration had a mixed record on white collar crime. On one hand, it extracted $4 billion and a guilty plea from BP in the wake of the Deepwater Horizon spill. On the other hand, it allowed HSBC, then the fourth largest bank in the world, to sign a deferred prosecution agreement (DPA) over charges of laundering money for a Mexican drug cartel and serving as a banker for illicit regimes in Burma, Cuba, Iran, Libya, and Sudan. The bank paid $1.256 billion in penalties, but because it never admitted its crimes and controlled such vast amounts of money, the payment looked more like a cost of doing business than punishment. In fact, the Obama administration Department of Justice (DOJ) under the leadership of Attorney General Eric Holder and Criminal Division chief Lanny Breuer used DPAs more often than did any other administration. Holder and Breuer repeatedly explained such settlements as necessary to avoid putting corporations out of business and inflicting collateral damage on innocent employees and shareholders. Holder told senators who questioned the HSBC settlement that he thought some institutions were, in effect, too big to jail. When the statute of limitations ran out in 2015 for indictments arising out of the 2008 financial crisis, DOJ’s reputation as an even-handed prosecutor suffered major damage.

Holder’s successor, Loretta Lynch, and her deputy, Sally Yates, moved decisively to change these perceptions. “Stung by years of criticism that it has coddled Wall Street criminals, the Justice Department issued new policies on Wednesday [September 9, 2015] that prioritize the prosecution of individual employees — not just their companies — and put pressure on corporations to turn over evidence against their executives,” the New York Times reported.

The Yates Memo set forth what some attacked as radical and unfair changes and others dismissed as business as usual. In a nutshell, Yates and a task force of career prosecutors mandated that corporations hoping to get credit for cooperating with the government in criminal cases turn over all the information available to them regarding illegal acts by individual employees. If prosecutors do not develop charges against individual corporate officials in any given case, they must justify the omission in the materials they forward up the DOJ decision-making chain for approval. The Yates Memo reasoned that “[o]ne of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing. Such accountability is important for several reasons: it deters future illegal activity, it incentivizes changes in corporate behavior, it ensures that the proper parties are held responsible for their actions, and it promotes the public’s confidence in our justice system.”

A handful of former prosecutors announced that the Yates Memo merely formalized long-standing practice. But it caused a small tsunami of alarm among many members of the defense bar, a handful of academics, and influential industry trade associations, including the Chamber of Commerce. They were still whinging when Donald Trump won the election and arrived in Washington, ...

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