Prosecution and Press Releases

Lawprof Doug Berman immediately saw the problem.

New Justice Department sound and fury about white-collar prosecutions signifying….?

Deputy Attorney General Sally Yates took to the podium to make one of the silliest announcements ever by the Department of Justice, that a memo had issued to instruct their various divisions that it would now hold individuals “accountable” for crime.

No, she didn’t say some United States Attorney indicted anyone. Not someone from a big bank, or a major brokerage house. No one.  Rather, this was to announce that the DoJ has figured out that it need only say that it was going to do something rather than actually doing something.

Stung by years of criticism that it has coddled Wall Street criminals, the Justice Department issued new policies on Wednesday that prioritize the prosecution of individual employees — not just their companies — and put pressure on corporations to turn over evidence against their executives.

The key word is “prioritize,” which apparently means that the DoJ had been shrugging off prosecuting corporate criminals up to now, because their resources were better used for manufacturing crimes they could easily prosecute, like stash house stings, and ridding the nation of demon weed.

“Corporations can only commit crimes through flesh-and-blood people,” Sally Q. Yates, the deputy attorney general and the author of the memo, said in an interview on Wednesday. “It’s only fair that the people who are responsible for committing those crimes be held accountable. The public needs to have confidence that there is one system of justice and it applies equally regardless of whether that crime occurs on a street corner or in a boardroom.”

Nothing ironic about Sally repeating back the words that many have screamed at the deaf ears of the Attorney General.  The weirdness of the Deputy AG, earnest look on her face, saying the obvious that DoJ has studiously ignored will pass. After all, “it’s only fair,” and don’t we want fair?  Didn’t we want that since 2007?  And hell, it’s only eight years later and already the DoJ is on it.

Except this is pandering.  If you want to prosecute the “flesh and blood” individuals responsible for corporate crime, you do so. You investigate. You indict. You prosecute. What you do not do is write a memo of obvious fluff that can be handed out to newspapers.

But even if the DoJ means it, this time, and cranks up the Rube Goldberg machine to take down some warm bodies to prove that they’re worth their budget, it will just be a dog and pony show for public consumption.  Yes, we want real people to hate, to blame, to waste away in prison so that we can feel confident that it’s not just us groundlings getting ground up by the machine.

Make the rich corporate guys hurt just like you make us hurt. Make someone pay!

Except inside the bowels of the DoJ, where they only speak to each other in hushed tones, they know that this is the sort of stupid stuff spewed for the benefit of the newspapers and the angry riff-raff.  You see, corporate crime doesn’t work the way people think it does. Corporate crime doesn’t happen like a drug deal or a bank robbery.  There will be no video of the murder of debentures.

The people want blood, and the DoJ wants to pander to the people. But there’s no blood to be had from a corporation.

Nobody likes the fact that corporate crime ends up with the payment of a big fine and a deferred prosecution agreement.  It’s so unsatisfying, there being no perp walk, no face to hate and ridicule, no physical embodiment of corporate evil to name and shame.

That the problem might have more to do with the poor fit of criminal laws to corporate conduct doesn’t soothe the townspeople holding torches and pitchforks. They want blood, dammit, and don’t they deserve it?

Corporate decision making and execution is diffuse. It happens at differing levels of authority, in various locations, from people with limited responsibilities, and ends up with an outcome that can be readily explained via the twisted jargon of business as a reasonable course of conduct, which happens to end poorly for someone because there is no one person who actually knows how all the moving parts would eventually fit together.

What there will not be is a memo coming from the CEO’s office at Goldman Sachs commanding, “package all our underwater deadbeat mortgages with a good one on top so that it will look kinda legit, then lie about them and sell them to anyone stupid enough not to look beyond the meaningless crappy name we give it. And get it done by next Tuesday.”  If you think too hard about it, financial instruments are all a Ponzi scheme of one stripe or another. We just pick which ones to make legal.

But what if there is such a memo? What if there was a secret meeting of individuals, corporate titans earning multi-gazillion dollar bonuses, who decided that they would wreak havoc with people’s lives, destroy their savings, their futures?  And the Department of Justice did nothing about it.

Having finally come to the epiphany that the public, not to mention the New York Times, wants blood, they have done what smart government officials do these days to stroke the fevered brow of the disapproving. They have announced that they are going to put on a play.  Without actually putting on a play.

Or, as noted by Doug’s hanging question, will they use their power and the home field advantage of the courthouse to actually make this happen, holding hated corporate executives culpable for their hand in the decisions that ultimately proved disastrously bad, even though there isn’t anyone who held a gun and told the bank teller, “put the money in a bag”?

“We mean it when we say, ‘You have got to cough up the individuals,’ ” Ms. Yates said, a day before she was to address the policy in a speech at New York University School of Law.

And let’s be real, you don’t give a damn which individual they nail.


8 thoughts on “Prosecution and Press Releases

  1. mb

    The only real legal work I ever did was writing some appeals. Some of them were about mortgage backed securities. I don’t know or care how any of them came out, but I remember I was grasping at straws just to make it look like the defendants had anything to do with those cases. And as much as I wanted to feel bad for the plaintiffs, they all borrowed money and didn’t pay it back. Sometimes stuff sucks, but it isn’t worth the government doing anything about it.

    1. SHG Post author

      Unempathetic as it was, I saw it the same way.

      People bought houses they couldn’t afford, agreed to mortgages they couldn’t repay, and did so under the assumption that the housing market would continue to increase, allowing them to refinance when their adjustable rates increased to a more acceptable mortgage rate, or sell and enjoy the windfall profits. In a housing boom, you can’t lose.

      I realize that this seems heartless, but for most of the people who find themselves in default or foreclosure, they haven’t actually lost much, if anything. They put little or no money down on their homes, paid the sucker rate while enjoying the benefit of a roof over their heads as they would had the rented the house for a term, and are now no worse off then they were when they started. They have neither home nor equity, but they didn’t have that when they started. The loss of theoretical equity, like the loss of theoretical profit, isn’t a loss at all. It’s simply not a gain.

      1. mb

        Some of these had a little more of a case than that, but not much. Basically, it wasn’t always clear who had the right to enforce the mortgage, between the eight different companies that said they had an interest in the debt. The belief that the market would go up forever was shared by the lenders, and they set the whole thing up without regard for the need to foreclose on anyone.

        1. SHG Post author

          Lies and fraud? Sure, but at the bottom line, there was one number, the monthly nut, they knew they would have to pay and similarly knew they couldn’t. Everyone lied to everyone, because there was no way anyone could lose.

          1. mb

            Yeah, that’s about the size of it, unclean hands pointing fingers and we should totally hate those other people more coz 1) they have more money than me and 2) they were reckless with other people’s money by giving it to me, so . . . make them give me more money?

  2. John Barleycorn

    The DOJ handing out hair cuts at the penny arcades of Wall Street is about as probable as an escort getting busted on embassy row in DC.

    Impunity/Immunity call it whatever you want…

      1. John Barleycorn

        Strange how that works isn’t it…You should have provided a link or two, to your past comments on that subject for your casual readers to ponder.

        Institutional guilt messes with people in the most fascinating sort of ways.

        I gotta update my tux one of these days and start crashing these cocktail parties. I just have to witness one of these absolving mirrors of fantasy lean in conversations for myself before I get too old to give a damn about my party etiquette.

Comments are closed.