In the June 30th – July 6th Bloomberg Business Week article, “How to Go After White-Collar Crime,” the editors of Bloomberg lament the fact that in the 90 years since the Great Depression, the 2008 financial crisis is the only scandal where no corporate executors were prosecuted. We have spoken about this before and the fact that Sarbanes Oxley, a statute that is estimated to cost corporations $12 million a year to comply with and enriches accountants and lawyers, was supposed to criminalize reckless corporate behavior. Despite that statute we have seen that corporate executives do not go to jail but rather pay blackmail (called a settlement) to cash strapped attorney generals. The latest story is that while operating in the US, BNP agreed to make a settlement of $8.8 billion for carrying on money laundering for Mexican Drug Cartels, Sudan, Iran and Cuba in violation of US banking laws. The bank was so brazen that the transaction continued even while the US government was carrying on their investigation. The bank hoped the US would not figure out its concealment. The worst punishment meted out was the firing of thirteen employees. The employees probably received golden parachutes as they left. Even though all agree that BNP conducted a criminal enterprise the justice department, which is keeping half of the $8.8 billion, thought the payment of settlement money obviated the need to criminally prosecute anyone.
So, who suffers here? The executives who committed these crimes are using money they would have paid out as dividends to pay the settlements, so they are ok. They get to keep their bonuses, retirement accounts etc. The justice department is ok because it receives $4.4 billion to run their offices better. That buys lots of bonuses, new office furniture and a resume booster for the Justice Department when they are cashed strapped. Whether you are British Petroleum dumping tens of millions of barrels of oil and deliberately ignoring protocol , or Countrywide Mortgage committing fraud, the message is loud and clear: in the US if you are a large corporation you can get away with anything if you pay enough money.
We need to hold executives accountable for their crimes. The Justice Department should put the best interest of the country first and not act like mobsters, shaking down corporations. If executives do the CRIME, make sure they do the time!
