In an op-ed published in The Hill on Friday, CPR President Rena Steinzor makes the case that in appointing a successor to Attorney General Eric Holder, President Obama needs to find a prosecutor tough enough to go after corporate malfeasance with more than a series of comparatively weak deferred prosecution agreements.
Of course, prosecutors can’t send corporations to jail — they are inanimate paper entities. But forcing them to acknowledge that they broke criminal laws is more than a symbolic gesture, which is why corporate lawyers work so hard to avoid such outcomes. The stigma of such guilty pleas lasts, rightly spooking existing and would-be investors.
Holder’s record in this area is tainted by his embrace of the “too big to jail” argument that the collateral damage from going after even the most serious corporate malefactors is intolerable. She writes,
This egregious off-ramp was spawned by the distorted fable the Fortune 100 have spun to explain the demise of Arthur Andersen, which followed its gigantic client, Enron, out of business within months after the sham finances they had erected together hit the press. The fable attributes Andersen’s collapse to a criminal indictment lodged by Justice Department prosecutors. In truth, its clients had deserted the firm in droves when it was first implicated in the scandal, and the disclosure that employees had shredded tons of paper as soon as Enron was discredited hastened this exodus.
As a practical matter, the collateral damage exception means that lawyers for Fortune 100 companies accused of committing unforgivable crimes — from fraud and bribery to egregious environmental violations — routinely troop over to the Justice Department to explain how they might go out of business if indicted. This bizarre system means that all corporate executives really need to do when contemplating cutting corners in a criminal mode is to weigh the benefits of such misdeeds against the costs of doing business they might have to pay if federal prosecutors catch them in the act. They might suffer one bad day when prosecutors announce such settlements with great fanfare. But they can go on about their business without worrying about probation, much less parole.
Steinzor will take a thorough look at the issue in her forthcoming book, Why Not Jail: Industrial Catastrophes, Corporate Malfeasance, and Government Inaction. That won’t be out for a couple months, so in the meantime, Check out her piece in The Hill.