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It Takes a Plan (To End 'Too Big to Jail')

The Huffington Post The Huffington Post 15/10/2015 Brandon L. Garrett
FOREST © Jordan Siemens via Getty Images FOREST

"If you only look at the big banks, you will be missing the forest for the trees," said Hillary Clinton in the debate Tuesday night, responding to calls to break up the major banks. Corporate crime is a broader problem touching every industry and not just Wall Street. Clinton has proposed for the first time a top-to-bottom plan for policing and preventing corporate crime and financial misconduct. We have not seen the likes of it in this campaign or elsewhere. The plan addresses systemic risk in financial institutions, or "too big to fail," but my interest is in "too big to jail": the way the plan carefully addresses concerns that companies and banks commit massive crimes but receive mere slaps on the wrist.
We are experiencing a corporate crime wave. Billion-dollar fines are now common in industries ranging from Big Pharma to the largest banks to energy companies. Yet we just saw GM receive an out-of-court deal for concealing defects that cost over a hundred people their lives -- and no charges for any employees. We have seen banks like AIG, Barclays, Credit Suisse, HSBC, JPMorgan, Lloyds, UBS and others prosecuted over and over again -- typically with no charges for any employees. After the financial crisis, we saw compromised deals with banks, failures to prosecute individuals and legislation that did not generate serious accountability.
While there have been critics of those developments on both sides of the aisle, some good proposals for legislation, concerns raised by judges, and saber-rattling statements from the Department of Justice, what we have not seen is a plan for action that fundamentally rethinks how financial offenses are handled. The Clinton plan would do, among its recommendations, four key things to tackle too big to jail.
1. Corporate deals should not be out of court. The plan clamps down on the non-prosecution and deferred prosecution agreements that have become all-too-common even for the most serious corporate misdeeds. The plan calls out the "overuse" of these agreements but also calls for clear guidelines stating that those agreements should "be used in only limited circumstances." Banks and corporations should know that they cannot count on kid-glove settlements out of court for the most serious crimes. They should be typically convicted for serious crimes.
2. Corporate deals shouldn't be kept secret. We should know what fines companies are really paying and what is tax-deductible or taken off through "credits." The plan endorses legislation proposed by Senators Elizabeth Warren and James Lankford to address transparency in corporate settlements. Entire agreements with corporations have been hidden (University of Virginia law students have filed FOIA cases to obtain them) and this plan says that all such corporate agreements must be publicly disclosed.
3. Individuals should be held accountable too. I have found that far more often than not, when corporations and banks are prosecuted and receive non-prosecution and deferred prosecution agreements, no individuals are prosecuted. When they are, they are typically low-level employees, not higher-ups, and they do not receive jail time. The proposal to extend statutes of limitations for major financial fraud may help to make these complex prosecutions practical.
4. Prosecutors need far more enforcement resources. Most fundamentally, enforcers and prosecutors need the resources to tackle cases involving hundreds or thousands of employees at major companies. This is the first serious plan to bolster enforcement. When German multinational corporation Siemens was investigated for foreign bribery, it cooperated, and spent over a billion dollars hiring attorneys and investigators to represent it. Can you imagine what prosecutors and regulators could do if they could spend hundreds of millions of dollars themselves investigating corporate crime, and not just depending on what the company offers to them?
Merely calling for the scalps of Wall Street executives is not constructive and it isn't serious. We have needed a real plan for action. This plan would bolster enforcement resources, systematize civil disbarment, raise civil fines, better reward whistleblowers and reinvigorate prosecution priorities for the most serious offenders. Executives who break the law should know that their bonuses are at risk, their jobs are at risk, and that corporations cannot shield them from accountability for crimes. Corporate fraud enforcement needs more powerful teeth. I hope we see this comprehensive plan carried out in all of its details.

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