Posted by: Shaun | April 9, 2008

Department of (In)Justice easy on corporate offenders

The annals of the Bush Department of Justice run rife with shocking legal abuses far graver than ineffectual enforcement of corporate laws and regulations.  (Remember John Yoo’s torture memo?)  Still, today’s New York Times report about the use of so-called “deferred prosecution agreements” in lieu trials for corporate law breakers leaves me somewhat indignant, especially given the number of potential cases on the horizon stemming from the subprime mortgage debacle.

It seems that since at least 2005, the DOJ has been fining corporate offenders and mandating unspecified internal reforms supervised by government officials rather than dragging a company’s good name through mud by bringing their case to trial.  Hence, deferred prosecution.  The fines quoted in the story are in the range of a million to a few tens of millions of dollars; chump change for companies like American Express or Merrill Lynch…ok, well, maybe not this year for Merrill Lynch.  All this is meant to avoid potentially disastrous criminal litigation that has wrecked companies in the past.

But isn’t that what it’s supposed to do?  The point of having any type of criminal law with an attendant punishment for violators is to create a substantial enough risk to deter companies or individuals from breaking the law in the first place.  Ideally, eviscerating one wayward corporate giant in a courtroom battle will make others think twice before repeating the mistake and prompt industry to police itself (remember Jeff Skilling?).  Garnishing their allowance and putting them in time out will not.  It seems to me this a pretty clear case of the DOJ creating a moral hazard for breaking the law.

But of course, the partisan hacks at the apex of Justice already know this.  After all, they have to keep the campaign donations flowing to political masters.


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