One of the more frustrating aspects of the prosecutions related to the Great Cheat that led to the Great Recession was that many of those perpetrating the fraud got off scot-free while their companies were simply levied fines, often a fraction of the profits they received from their cheating.
While it is important to seek penalties and restitution so that those harmed by high level corporate crimes can be made whole again, it has always seemed wrong that the people who devised and promoted the fraudulent schemes are rarely charged. Some faceless corporation pays a fine equal to 1/1000000th of its annual revenue and those behind the scenes are left in place to come up with a new ways to defraud consumers.
On Thursday, the Justice Department announced a new policy on individual liability for corporate crimes that seeks to address that concern.
Deputy Attorney General Sally Yates spoke at the New York University School of Law:
Crime is crime. And it is our obligation at the Justice Department to ensure that we are holding lawbreakers accountable regardless of whether they commit their crimes on the street corner or in the boardroom. In the white-collar context, that means pursuing not just corporate entities, but also the individuals through which these corporations act. […]
In modern corporations, where responsibility is often diffuse, it can be extremely difficult to identify the single person or group of people who possessed the knowledge or criminal intent necessary to establish proof beyond a reasonable doubt. This is particularly true of high-level executives, who are often insulated from the day-to-day activity in which the misconduct occurs. […]
Americans should never believe, even incorrectly, that one’s criminal activity will go unpunished simply because it was committed on behalf of a corporation. We could be doing a bang-up job in every facet of the department’s operations – we could be bringing all the right cases and making all the right decisions. But if the citizens of this country don’t have confidence that the criminal justice system operates fairly and applies equally – regardless of who commits the crime or where it is committed – then we’re in trouble. […]
Effective today, if a company wants any consideration for its cooperation, it must give up the individuals, no matter where they sit within the company. And we’re not going to let corporations plead ignorance. If they don’t know who is responsible, they will need to find out. If they want any cooperation credit, they will need to investigate and identify the responsible parties, then provide all non-privileged evidence implicating those individuals. […]
We are going to continually reexamine our practices to ensure that we’re doing everything we can to hold corporate wrongdoers accountable. Despite this, there will still be cases where we don’t have the evidence necessary to establish an individual’s criminal intent beyond a reasonable doubt. And regardless of public demand, we will never bring charges against anyone unless we are satisfied that the individual is in fact guilty of a crime. That is the core of our responsibility and promise to the American people. And I should be clear: while these policy shifts are effective immediately, the public won’t see the impact of these steps over night. […]
We make these changes recognizing the challenges that they may present. Some corporations may decide, for example, that the benefits of consideration for cooperation with DOJ are not worth the costs of coughing up the high-level executives who perpetrated the misconduct. Less corporate cooperation could mean fewer settlements and potentially smaller overall recoveries by the government. In addition, individuals facing long prison terms or large civil penalties may be more inclined to roll the dice before a jury and consequently, we could see fewer guilty pleas.
Only time will tell. But if that’s what happens, so be it. Our mission here is not to recover the largest amount of money from the greatest number of corporations; our job is to seek accountability from those who break our laws and victimize our citizens. It’s the only way to truly deter corporate wrongdoing.
Bolding and underlining added
Full transcript below the fold.
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