Rich People Don’t Go To Jail

Wall Street

Corporations have pulled some pretty dick moves, what with the Financial Crisis and all.

How come no one goes to jail for this stuff?

Because corporations have money, and it serves the public interest to negotiate a big fine rather than throw someone in prison.

Wait, why not both? Jail and fine?

Corporate cases frequently involve a deferred-prosecution agreement or non-prosecution agreement.

It is difficult for underfunded government agencies to police giant corporations, so they work together to find a solution. In exchange for lenience, the corporation institutes reforms to monitor its future behavior.

But what about the execs running the criminal enterprise? What happens to them?

Usually nothing. How do you pin corporate wrongdoing to an individual1?

After BP exploded an oil rig and dumped 36 million gallons of oil into the Gulf of Mexico, most people agreed that Tony Hayward was kind of a dick and should probably be punished.

"I want my life back." I hear ya, Tony Hayward. And so do all your employees who died in the explosion.
“I want my life back.”
I hear ya, Tony Hayward. And so do all your employees who died in the explosion.

The standard for a criminal charge is guilt beyond a reasonable doubt. Easy to prove for crimes like drug possession or loitering, harder for things like selling bad mortgages.

Can we prove, beyond reasonable doubt, that Tony Hayward personally caused an oil rig to explode? Probably not. So prosecutors go after low-level workers. That’s why two of the guys aboard the oil rig are still being tried for involuntary manslaughter. Everyone else walked.

There’s enough evidence for billion-dollar fines, but not enough evidence to convict the people in charge?

We’ve tried.

In 2005, KPMG got a deferred prosecution deal for some accounting fraud. Nineteen former executives were charged. KPMG offered to pay their legal fees, capped at $400,000.

Thirteen of the indictments were thrown out on Sixth Amendment grounds. The judge ruled that the defendants had effectively been denied counsel, because $400,000 is nowhere near enough to pay for white-collar defense, silly2.

With Enron, Kenneth Lay’s defense cost $25 million and Jeffrey Skilling’s cost $70 million.

Salary for SEC enforcement lawyers, by the way, range from $117,568 to $184,097.

You get what you pay for3.

From Matt Taibbi:

In other words, we’ve got a limited budget, and there’s a bigger degree of difficulty in going after big banks with powerful lawyers. Therefore the SEC shouldn’t give in to the “temptation” of tangling with big banks because, rhetorically speaking, those shots are harder to make. Better to go for uncontested dunks and lay-ins than heave deep threes at the buzzer.

This is coward’s language. No true cop would ever think like this.

1Sometimes it’s easy, like when the corporation is called “Bernard L. Madoff Securities LLC”.

2There are more technicalities. KPMG attorneys allege that prosecutors pressured the firm into capping the fees. The prosecution denied this, either way it was a display of incompetence.

3Court-appointed attorneys make $94 an hour, with max pay of $7000. That’s way less than I paid my lawyer.

Books I Read Over Labor Day Weekend:
For sensationalized stories, read Matt Taibbi’s The Divide. For data and case studies, read Garrett’s Too Big to Jail.

Too Big to Jail
Brandon L. Garrett. Too Big to Jail
Matt Taibbi. The Divide: American Injustice in the Age of the Wealth Gap
Matt Taibbi. The Divide: American Injustice in the Age of the Wealth Gap

See Also:
Overcriminalization of the 99%, Undercriminalization of the 1%

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