On the one hand, Americans are so naively jingoistic as to believe we can dictate how a corporation should play fair when seeking a deal with some third-world grand poobah in competition with other corporations who labor under no limitations as to how many Bentley’s they’re allowed to offer the poobah’s twelve wives after the sumptuous luncheon paid for by some French company.

On the other hand, Americans naively believe that a bunch of kid prosecutors are so bizarrely brilliant that they can reform what our laws state are acceptable business practices for multinational corporations and dictate how the corporation is to thrive in the jungle of competition.

On the third hand (or are we down to foot?), we can pull the guy out of his CEO chair and throw him in a prison cell, but we can’t toss a corporation into the hoosegow because it’s not really a physical entity, no matter what the Supremes say.

And on the fourth hand (or other foot), there has to be some means by which corporations who engage in criminal conduct are subject to sanctions.  So the law provides for fines, which corporations address as business decisions, another expense to be paid, in the conduct of whatever business it does, carrying no moral shame or consequence that can’t be subsumed on the balance sheet.

It’s a complete botch, in every respect.

At the New York Times Room for Debate, the question is posed:

When corporations are accused of misdeeds, federal officials frequently reach deferred prosecution agreements with them. The government suspends charges and the company pays a fine and agrees to do right.

But some of the world’s biggest banks are suspected of having broken promises they made in those agreements, and it’s not clear what the government can or will do about it.

Should the government reconsider its use of deferred prosecution agreements?

The responses, each of which is reminiscent of the story of the blind man describing an elephant, fail to address the question posed.  Should the government reconsider its use of deferred prosecution agreements?

Gratuitous cute kitten pic to make this post less boring.

Or what? What alternative is there that would better serve a useful purpose?  As noted in the Times’ Dealbook, the government is largely shooting blanks:

When punishing banks, prosecutors have favored so-called deferred-prosecution agreements, which suspend charges in exchange for the bank’s paying a fine and promising to behave. Several giant banks have reached multiple deferred or nonprosecution agreements in a short span, fueling concerns that the deals amount to little more than a slap on the wrist and enable a pattern of Wall Street recidivism.

Even now that prosecutors are examining repeat offenses on Wall Street, they are likely to seek punishments more symbolic than sweeping. Top executives are not expected to land in prison, nor are any problem banks in jeopardy of shutting down.

They can throw the book at top executive, but boards of directors will name new names to sit in the chairs.  The government can force the banks to close, putting tens of thousands of people out of work, creating a panic and sinking the nation into financial chaos, but most of us would prefer the government to not to turn our world into any greater misery than it already does.

So what do you plan to do?

Among the “debaters,” Debra Wong Jang, a partner at Gibson Dunn and former U.S. Attorney for the central district of California, seems to come closest to recognizing reality.

Prosecution agreements can be overly broad, or take too narrow a view, when it comes to compliance directives, leaving murky guidelines for the corporate monitor who must put them in place. Meanwhile, a monitor has to balance the requirements of the government against the practicality of running a corporation. Having worked as a corporate monitor, I can attest to the difficulty of its position. But there are aspects of deferred or nonprosecution agreements that can allow parties who have competing interests to work well together. Having in place a well-drafted and thought out deferred or nonprosecution can make a monitor’s job much more defined and clear-cut.

Maximizing profits for shareholders isn’t exactly the best incentive to behave according to the government’s dictates.  Nor does the government, particularly as viewed through the eagle-eyes of its worker bees in the DoJ, always demonstrate a firm grasp of sound, customary and successful business practices, finding that business reality doesn’t necessarily comport with what a prosecutor thinks is the way she would do things if she wasn’t a baby prosecutor but the CEO of a major multinational corporation.

But as Jang says, if there are discrete wrongs that can be identified, then maybe there’s a chance that a federal monitor can oversee them, address them, ride herd on the corporation at issue and, should the corporation blow off the deferred prosecution agreement and make the monitor sit in the hallway, get the government to give the corporation another firm smack.

The problem here isn’t that corporations don’t engage in some very bad, very dishonest, very dangerous business dealings. Indeed they do, with the banks being particularly bad about such things.  The problem is that there is too often no viable mechanism to fix the problems.

Another fine? Raise the fees to pay it. A dirty CFO? Throw him under the bus and get a new one. As long as there are people buying the product or using the service, and the money keeps flowing in, who cares?  The business survives, even if they have to change the names on the front door from time to time.

A monitor watching carefully for transgressions seems like such a nice idea, but how do they distinguish between real harm being done from the demands of business efficacy? They aren’t schooled in running businesses, but in billing by tenths.  And even if they find malfeasance, what are they going to do with it?  Who feeds the children of the 100,000 out of work former employees of a corporation fined into oblivion?  Who fixes the refrigerators still on warranty?

Our system of corporate criminal liability ranges from a fiasco to a joke. While corporations and the government do their pas de deux, the only assured outcome is that the public suffers, no matter what choices are made.