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Maybe Too Big To Jail, But Never Too Small

The Huffington Post The Huffington Post 7/03/2016 Gordon Schnell
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The jury is still out on whether the Department of Justice will follow through on its recent pledge to amp up its crackdown on corporate fraudsters. Too big to jail is not in our playbook, the agency has taken pains to assure us. Going after the top-dogs is our number one priority the agency has trumpeted in its newly minted policy of holding the high-ups accountable for the sins of their company.
However, with DOJ's continued failure to bring criminal charges against any executives involved in the financial crisis, many are questioning whether it is just business as usual in Washington and the C-suite. The recent $2.6 billion payout by Morgan Stanley for its massive mortgage machinations is just the latest example. Heavy monetary fines for sure. Just a cost of doing business. But no jail time for this latest colossal cheat on consumers. It is the big Wall Street hustle all over again.
But a closer look at what our chief regulator has been up to over the past year tells a very different enforcement story. DOJ has sent packing a surfeit of scofflaws up and down the corporate and government ladder -- doctors, nurses, physician assistants, therapists, medical directors, medical billers, hospital administrators, investment advisors, army soldiers, intelligence officers, national guardsmen, scientists, IT managers, construction bosses, and a bounty of business owners, presidents, CEOs, and senior executives. Even a former governor is doing time for his dishonorable dealings.
And these have not been just token sentences. DOJ has sent most of these malefactors away for years. Some for more than a decade. Several for almost half a century, including hospital president Earnest Gibson for billing Medicare for unnecessary or non-existent services, and the now infamous Dr. Farid Fata for endangering his patients with false cancer diagnoses and unwarranted treatments. No matter the individual and where they stood in their respective pecking order, if the fraud was big enough and bad enough, DOJ did not hesitate to put them away for a very long time. The top ten worst offenders this year alone chalked up more than 200 years of prison time.
And all this was before Deputy Attorney General Sally Yates came out with her game-changing memo on how DOJ is going to revamp its approach to corporate wrongdoing by going after the individuals responsible. In a bold promise to the American people, she vowed to hold "lawbreakers accountable regardless of whether they commit their crimes on the street corner or in the boardroom." Mighty words from an enforcer that continues to be questioned on its commitment to policing the kings of commerce.
Which brings us back to the government's seeming soft-pedaling with Morgan Stanley and its fellow members of the billion-dollar mortgage fraud club. Along with its continued failure to go after any bank executives despite the industry's enduring string of billion-dollar financial frauds. Time will tell if DOJ's tough talk on corporate accountability will result in more industry big-wigs doing time. It is an outcome for which many are certainly rooting and now expecting if the DOJ is true to its word.
But then again maybe that is missing the point. Perhaps it has never been about the size of the company and the seniority of the transgressors. Maybe it was simply about the difficulty of pinning on any one person or group the criminal blame for the mammoth frauds that have plagued us and which show no sign of ebbing.
As Ms. Yates explained in trying to temper expectations on the government's new policy, "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 so, she stressed, with the top executives of today's largest companies where responsibility is diffuse and the misconduct occurs many level down the reporting chain.
Whatever happens going forward with DOJ's professed policy shift, one thing seems for certain. Whether a too big to jail policy still rules the day, be it from issues of proof or politics, the DOJ has made it very clear you are never too small. And those considering a dalliance with the Dark Side of corporate playmaking should pay particularly close attention. Do not be emboldened by the much ballyhooed notion that corporate criminals do fines not time. It just is not so. Just ask the litany of fraudsters currently behind bars.
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*Mr. Schnell is a partner in the New York office of Constantine Cannon, specializing in the representation of whistleblowers reporting fraud under the False Claims Act and Dodd-Frank Act.

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