Elizabeth Warren And The New Fearmongering

While Michael Dukakis was stuck in a photo op with an ill-fitted helmet, the opposition trotted out Willie Horton. Fear kicked Dukakis’ butt, and George H.W. Bush became the nation’s 41st president. Fear works.

But given that the usual tough-on-crime fearmongering of the past isn’t in vogue at the moment, with neither street crime nor terrorism playing well in Peoria, it’s tough to find a bogeyman scary enough to light a fire under the faithful and generate enough fear and loathing to make people give a damn.  Enter Elizabeth Warren, Senator from Massachusetts and former Harvard prawf, as attack dog of the downtrodden.

In a single year, in case after case, across many sectors of the economy, federal agencies caught big companies breaking the law — defrauding taxpayers, covering up deadly safety problems, even precipitating the financial collapse in 2008 — and let them off the hook with barely a slap on the wrist. Often, companies paid meager fines, which some will try to write off as a tax deduction.

Curious that the metaphor has gone from “slap on the wrist” to “barely a slap on the wrist.”  Perhaps Warren should be writing a letter to former AG Eric Holder about what the hell he was thinking. And what constitutes a “meager fine” is a relative thing, since many of us would struggle to pay off a few hundred million and find it slightly greater than “meager.”

But is Warren criticizing the conduct of the Department of Justice under President Obama for its massive failures?  Not exactly.

The Obama administration has a substantial track record on agency rules and executive actions. It has used these tools to protect retirement savings, expand overtime pay, prohibit discrimination against L.G.B.T. employees who work for the government and federal contractors, and rein in carbon pollution. These accomplishments matter.

So the problem isn’t that the Obama administration, over two terms, hasn’t done great, but they couldn’t get around to doing all the important prosecuting they needed to do because they were so busy accomplishing other stuff?

Whether the next president will build on them, or reverse them, is a central issue in the 2016 election. But the administration’s record on enforcement falls short — and federal enforcement of laws that already exist has received far too little attention on the campaign trail.

I just released a report examining 20 of the worst federal enforcement failures in 2015. Its conclusion: “Corporate criminals routinely escape meaningful prosecution for their misconduct.”

Well, that’s pretty darned scary. And while it wouldn’t do to point at the evils that have worked so well at scaring people to vote, since it could be perceived as implicating communities of color or attacking Muslims, “corporate criminals” are the perfect target, fair game for any identitarian group to hate and fear.

The failure to adequately punish big corporations or their executives when they break the law undermines the foundations of this great country. Justice cannot mean a prison sentence for a teenager who steals a car, but nothing more than a sideways glance at a C.E.O. who quietly engineers the theft of billions of dollars.

A well-tuned analogy, for sure, but a teen who steals a car is a rather obvious malum in se crime.  Is it comparable to the corporate criminal? Is that nasty C.E.O. sneaking into someone else’s bank vault at night and stuffing billions of dollars in his pockets?

When the Education Management Corporation, the nation’s second-largest for-profit college, signed up tens of thousands of students by lying about its programs, it saddled them with fraudulent degrees and huge debts. Those debts wrecked lives. Under the law, the government can bar such institutions from receiving more federal student loans. But EDMC just paid a fine and kept right on raking in federal loan money.

So the claim was the EDMC students got sucked into taking out federal student loans to pay tuition for college degrees, then couldn’t get jobs afterward and were saddled with debt.  The public was out the student loan money, and the solution was to get EDMC to pay it back. Kinda makes sense, no?

But at the same time, it’s rather disingenuous to cry sad tears for the students crushed by student loan debt which, even though EDMC settled by paying it back, the government refuses to forgive. Is there a call for the government to relieve these poor students of their burden in there, Liz?  Or just to send some executive to prison for over-selling the value of a college education?

When Novartis, a major drug company that was already effectively on federal probation for misconduct, paid kickbacks to pharmacies to push certain drugs, it cost taxpayers hundreds of millions of dollars and undermined patient health. Under the law, the government can boot companies that defraud Medicare and Medicaid out of those programs, but when Novartis got caught, it just paid a penalty — one so laughably small that its C.E.O. said afterward that it “remains to be seen” whether his company would actually consider changing its behavior.

But drug companies are selling cool new illnesses to the public on TV (restless legs syndrome, anyone?), which their pill can magically cure. And reps have been visiting doctors’ offices forever to hand out samples and trips to Hawaii to learn the benefits of their very expensive magic potions. When a drug is prescribed, and the maker wants a pharmacy to use its flavor rather than the other guy’s, this “undermined patient health”? Would Medicare and Medicaid patients be better off without any of the drugs Novartis offers?

As Warren makes clear, this all goes back to the appointed heads of federal agencies charged with regulating a capitalist system, its stated purpose to scare the public into voting for the candidate whose appointees will rid us of these corporate criminals by throwing C.E.O.s in prison with the teens who steal cars for selling their products too well.

Some will question the regulatory state, a curious mix of good and bizarre, which occasionally levels the playing field between the individuals and huge corporations, and other times micro-manages business to create some faux sense of fairness to pander to one interest group at the expense of another.

But to make “corporate criminals” the new Willie Horton because they’re the only target of fear that can be safely sold to the public, as if corporate presidents are out on the street wearing masks and pointing guns, is nonsense.

If you want a reason to hate Novartis, look to Obamacare’s failure to address big pharma costs to buy its love and support for passage. Now that was a crime worthy of redress, but it’s hard to blame Novartis for doing what was in its corporate interests. And calling out the real criminals wouldn’t make for a compelling target of fear and loathing for Senator Warren.  And what is it with restless legs syndrome, anyway?

 

23 comments on “Elizabeth Warren And The New Fearmongering

  1. QN

    So sad to see a woman I used to really admire (back before her political career) stoop this low.

    The fact of the matter is, corporate crime is just different. Most corporate crime isn’t committed by CEOs or high-level managers – it’s committed by low level employees and middle management. And the consequences imposed on corporations for violations of the law don’t always fall on the shoulders of management; actually, most of the cost is born by shareholders, who are even more removed from wrongdoing.

    Sure, I can agree with her that corporations have a unique position in our state and that we need to be aware of their tremendous influence, their capacity to do wrong and cover it up, and so on. But we also need to be aware that comparing corporate crime to street crime is just a stupid thing to do!

    I guess railing about it without any sense or sophistication is a good way to get votes though…

    1. SHG Post author

      Cool story, bro. Except the cost isn’t necessarily borne by the shareholders, but the customers/users. A few pennies more, an ounce or two less, and boom, the government gets paid, the corp meets its numbers, the consumer is screwed. And life goes on.

      1. QN

        Maybe. It depends on whether you think that corporate punishments are actually doing enough to deter future wrongdoing. Your comment seems to be assuming that each instance of corporate criminality is a one-off moment, where everyone involved (besides, apparently, the consumer) walks away more or less in the same situation they were in before the crime occurred.

        But that assumes that corporations don’t change their behavior after a criminal case is closed / pleaded out. I’m not sure that assumption is quite correct. For one thing, DPAs (from what I have seen) routinely require independent monitoring of corporate behavior for a period of time (similar to probation), which one would reasonably expect to deter corporate behavior. Plus, reputational costs to corporations might lead them to avoid future criminal acts, etc. etc.

        But your post seems more concerned with bloodlust / revenge. And on that count, my point stands: calling for corporations to be held responsible does satisfy the public’s desire to see large, corporate entities whipped in the public square. But the cost of that whipping isn’t typically borne by 1) the actual malfeasors within the corporate structure (be they middle management or lower level employees) or 2) corporate leadership (i.e., executives). I’ll grant you an exception in cases brought against small businesses for regulatory violations, which, really, are pseudo-criminal in nature anyway.

        But back to my point: the costs to a corporation typically come in the capital markets, where innocent shareholders are the ones truly paying the price for corporate crimes. In other words, even if you accept that it is legitimate to seek revenge for corporate crimes, prosecutions often result in dealing damage to the wrong parties.

        Which leads me to, again, simply agree with the basic point in your post: that Warren (who is a smart lady and must know about all this) is cynically exploiting the public’s fears for political gain.

        Sad.

        1. SHG Post author

          You’ve assumed too much. There are usually a couple bodies thrown under the bus, and while there are often DPAs requiring monitors, they’re really not as significant as an outsider might think. As for reputational costs, seriously? And yet, your “one-off” sentence misses an important point: for every corp that becomes subject to an investigation, it is one-off to them (and in reality). Just because the public sees it as one big, amorpous “corporate crime” problem (just like everyone arrested for drugs is a guilty drug dealer), each situation is different, and each rises or falls on its own facts and law. It’s just that corporate crime is the last bastion of mindless, clueless hatred and blind generalization of evil.

  2. Jay

    So in response to Warren’s pandering, you decided to write your own piece lauding your corporate overlords? One that lacks any real research, ignores context, and uses a frankly silly analogy? Tsk tsk Greenfield.

      1. Dan

        I agree with Jay. Classy sarcasm Scott.

        And yeah I’d struggle to pay a few hundred million but she specifically referenced “big companies.” A few hundred million is a meager fine for a scheme that netted billions. If the fine is less than the profits there’s not much deterrence, is there?

        Is it possible, just possible, that YOU are the one who didn’t think this through? I like your articles but I don’t understand why you’re such a sarcastic, dismissive asshole in the comments.

        1. SHG Post author

          The problem, Dan, is that people who have no clue what they’re talking about assume that these schemes netted “billions,” because to every clueless dumbass, every scheme nets “billions,” some amorphous sum of money based upon a regulatory violation that many would argue shouldn’t exist in the first place (and certainly aren’t malum in se), or which never happened but a company makes a business decision to settle rather than spend billions fighting, even though there was no violation, regulatory or otherwise, at all.

          As if the corporations have no expenses, overhead, legitimate revenues, profits, industry practice, or competition, both domestic and foreign. And then there are the “billions” in profits of the scheme, based upon the same facile financial guesstimates that the government uses to come up with thousand of kilos of drugs for a guy who never touched a gram. But dumbasses don’t need to understand any of this, because corporations are all inherently evil to blindly liberal idiot children

          And why am I such a “sarcastic, dismissive asshole in the comments”? Because I have to deal with clueless dumbasses all the time, Dan. Like you and Jay, neither of whom have ever been within a hundred mile of a corporate or financial crime investigation or prosecution, but think their infantile political opinions of evil corporations are so valuable that they need to let the world know all about their brilliance. Hope that answers your question. Happy now?

            1. wild bill

              Somebody mention my name? No, I’m not mad. Just angry and happy not to be the moving target of the day. You cannot win with SHG; he will not let you win. That is what we admire the most, a CDL who won’t give up.

            2. SHG Post author

              It’s not a fair fight, Bill. I’m constrained by knowledge and experience. They have no similar constraints.

      2. Mort

        You shall have to seek comfort in the large check your Corporate Overlords send you every month, you sellout.

  3. paul

    Hi Scott.

    Are you saying the GM cover up and the bank Libor fixing are not mala in se? Or even EDMC’s conduct. You make a good point that she falls well short of providing relief for those effected, but that doesn’t erase the allged fraud and exploitation. In another comment you point out that regulations might not always be what should exist or that settling doesn’t indicate guilt…but the examples provided seem to be the least egregious from the document.

    While corporations may not be willie horton as you say, they make a good whipping boy for income inequality and sticking it to the republicans. Seems to be a very savvy political move.

  4. Anon

    Good to see that young lawyers don’t let their ignorance get in the way of their prejudice. How nice that they want the presumption of innocence for their clients, but businesses deserve to be burned at the stake. Who will make their shiny toys if not business?

    1. SHG Post author

      They can’t, and don’t, see it at all. If nothing else, young lawyers are consumed by their brilliance, self-importance and politics. Imagine how bad it will be ten years from now. And the problem isn’t them, but that we’re “dismissive.” Unbelievable.

    2. Patrick Maupin

      > but businesses deserve to be burned at the stake.

      One of the reasons this pandering works is that, as SHG has noted before, corporate punishment is perceived to be bloodless. There is seldom charred, burning flesh. The old saw around here is “I’ll believe corporations are people when Texas executes one.”

      The focus of the pandering on big corporations probably works because the public is subliminally aware (partly based on anecdotal individual outcomes) that the largest corporations, like the wealthiest individuals, have access to legal representation (and even to the lawmakers themselves) that the average schmuck can’t even dream of.

      But when this anger is tapped by opposing any and everything the Koch brothers might do “on principle” rather than, e.g., by providing more funding for public defenders, it’s just stupid (political) party tricks.

      1. SHG Post author

        There are a number of principles at stake here, but many people, including CDLs who really ought to know better, switch from principle to the end justifies the means because they have no sympathy when the target of prosecution isn’t someone or something about whom they give a damn. Not only is that a slippery slope, but it’s false.

        Businesses have employees, hire and pay them, make stuff that we use, etc. These all involve people on both sides, just like real people everywhere else. The overall entity may be on paper, but the offices and hallways and factories are filled with people. Even if you can’t find it in your head to support the principle, then do it for the individuals who will get thrown under the bus, lose jobs, pay twice as much for a good or services than they should. But if people can’t muster the principle to defend any accused, given the regulatory state and due process, then it will fail for everyone.

        And whether it’s the Koch Bros. or mom and pop on the corner, we don’t pick and choose principle based on how much we like the target of popular anger.

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