The Year of Bank Prosecutions

In a new piece in Slate, here, I describe how "Fines in the millions and billions of dollars made headlines again and again in 2015, as the Department of Justice set new records in prosecutions of wrongdoing corporations."  Below is a figure showing the dramatic rise in corporate penalties imposed by federal prosecutors.  What I describe in this piece is where much of the corporate prosecution penalties in 2015 came from: how "what was different in 2015 was that so much of the money paid by corporate targets came from banks: almost $7 billion of the $9 billion in total penalties paid by prosecuted companies." Do these cases answer concerns that financial institutions have been "too big to jail"?  They show that banks can be prosecuted, and in large numbers, and paying record fines.  Whether individuals will be held accountable in these cases and whether meaningful changes will occur at the banks to reduce recidivism---that is another question entirely.


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

“If you only look at the big banks, you will be missing the forest for the trees,” said Hillary Clinton in the debate last 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...

More on Clinton's plan at : http://clsbluesky.law.columbia.edu/2015/10/14/it-takes-a-plan-to-end-too-big-to-jail/

VA Festival of the Book Panel on Government and Corruption

Authors Zephyr Teachout, Brandon Garrett, and Charles Lewis participated in a panel discussion on government and corruption. Zephyr Teachout is the author ofCorruption in America: From Benjamin Franklin’s Snuff Box to Citizens United. Brandon Garret is the author of Too Big to Jail: How Prosecutors Compromise with Corporations. Charles Lewis is the author of 935 Lies: The Future of Truth and the Decline of America’s Moral Integrity.

This event was part of the 21st annual Virginia Festival of the Book, held on March 18-23, 2015, in Charlottesville.

http://www.c-span.org/video/?324981-1/panel-discussion-government-corruption

Listen to the Virginia Insights Show on WMRA

Rehabilitation... Really?

By TOM GRAHAM

To some, a justice system approach that includes efforts at rehabilitation may seem reasonable; especially when dealing with first offenders guilty of small crimes.

But why have rehabilitation-strategies become a significant tactic for federal prosecutors who chase after corporate crime of massive scale?

We get details on how this new way of responding to corporate lawbreaking got started.  Plus an assessment of how well it is, or isn’t, working.

Book Talk at ACS

At this week's ACS Book Talk:

Too Big to Jail

by Brandon L. Garrett, Professor of Law, University of Virginia School of Law. Since the 2011 publication of Convicting the Innocent: Where Criminal Prosecutions Go Wrong, Professor Garrett has written widely on issues of criminal procedure, scientific evidence, corporate crime, and the law. This fall, Harvard University Press published his new book, Too Big to Jail: How Prosecutors Compromise with Corporations.

Prominent cries of “too big to jail” greeted the decision by federal prosecutors in 2012 not to convict HSBC, the international bank headquartered in London.  When HSBC was investigated for violations of international sanctions with countries like Cuba, Iran, Libya, Sudan and Burma, and, if that were not enough, facilitating the laundering of “at least $881 million in drug proceeds,” it paid a then-record penalty of $1.4 billion.  The scale of the violations was shocking.  And prosecutors described concerted efforts to help dirty money transactions avoid detection, with internal notes like:  “care sanctioned country,” “do not mention our name in NY,” or “do not mention Iran.”  Drug cartels usedcash boxes “designed to fit the precise dimensions of the tellers’ windows in HSBC’s Mexico branches.”  When HSBC’s compliance officers raised alarms, they were “discouraged” and ignored.

“We accept responsibility for our past mistakes,” said the bank’s CEO at the time HSBC settled the case.  A corporate monitor would supervise a revamping of compliance.  The bank had hired hundreds of compliance employees and spent millions improving anti-money laundering programs.  But the bank was not convicted of any crime.  This galledadvocateseditorial boards, members of Congress, and the public.  The same day prosecutors filed their case, they asked the judge to approve what is called a deferred prosecution agreement.  The case would be put on hold to give the bank a chance to show good conduct.  A money laundering conviction could have resulted in termination of the bank’s U.S. charter.  Yet no employees or officers were prosecuted either.  At the time, Assistant-Attorney General Lanny Brueur explained: “Our goal here is not to bring HSBC down, it’s not to cause a systemic effect on the economy, it’s not for people to lose thousands of jobs.”  And upon announcement of the settlement, HSBC shares rose

Such deals are now quite common. In my new book, Too Big to Jail: How Prosecutors Compromise with Corporations, I examine the rapidly evolving world of corporate prosecutions.  I assembled a vast database with information from corporate prosecution agreements and plea agreements from the past decade and beyond, all of which is available online. A decade ago, federal prosecutors adopted an approach favoring such out-of-court agreements. To be sure, my data shows how penalties in corporate prosecutions haveexploded in recent years. But too often, I argue, prosecutors do not insist on punishments that are truly criminal. 

Companies cannot literally be put in jail, of course. And that is why adequately holding them accountable for crimes is so important.  Responsible officers and employees can be targeted. Firms can be structurally reformed.  Firms can pay deterrent fines and compensate victims. I found that many companies pay no fine, and even the biggest payments are typically greatly discounted. I describe how victims have intervened, like in the BP Texas City Refinery explosion case, to seek greater corporate accountability only to have their voices ignored. 

Real changes to end “too big to jail” are much needed. I suggest concrete improvements such as more stringent prosecution agreements, judicial oversight, and greater transparency.  I tell the success stories of companies like Siemens, which responded to the largest foreign bribery penalty of all time by totally transforming its leadership, compliance, and approach towards doing business. I describe how some judges have intervened. The judge in the HSBC case, noting “heavy public criticism” of the agreement, insisted on being kept apprised of the company’s compliance.  I tell the story of the KPMG tax shelter prosecutions, and describe the challenges faced by prosecutors pursuing individual wrongdoers. And I tell the story of the corporate criminal trial of the century, the Arthur Andersen trial, and how the very complexity of corporate crimes can obscure fault.

From the ongoing suffering caused by the last global financial crisis, to environmental disasters like the Gulf spill, to the harmful flow of dirty money to cartels, terrorists, and totalitarian regimes, corporate crimes impact us all.  That is why corporate prosecutions are themselves too important and too big to fail.

 

Recidivist Banks

In today's New York Times, Ben Protess and Jessica Silver-Greenberg described new investigations of banks that had already settled prosecutions in the recent past - or they thought they had.  New investigations raise a looming question whether recidivist banks will be treated differently or will have prior prosecution agreements scrapped.  So far, that has not happened. On Tuesday, UBS, which has settled three agreements with prosecutors in the past five years, had its non-prosecution agreement related to the Libor probe extended for another year - UBS was apparently not found to have violated its terms.  Which banks have been repeatedly prosecuted over the last decade?  The Times cited to some of my data, developed in Too Big to Jail, describing how since 2001, "at least eight banks" have committed further offenses having entered an agreement with prosecutors.  

Below is a list of those financial institutions that have entered more than one agreement with federal prosecutors from 2001 - present, with the type of agreement (deferred or non-prosecution or plea) and year in parenthesis.  You can view the entire collection of such prosecution agreements here and here.  Or click below on the links to read these particular prosecution agreements :

AIG (2 subsidiaries entered DPA/NPAs in 2004) (NPA 2006)

Barclays (DPA 2010) (NPA 2012

Credit Suisse (DPA 2009) (Plea Agreement 2014)

HSBC (NP 2001) (DPA 2012)

JPM (NP 2011) (DPA, 2014)

Lloyds  (DP 2009) (DPA, 2014)

UBS (DPA 2009) (NPA 2011) (NPA 2012 - now extended for another year)

Wachovia (DPA 2010) (NPA 2011