When government regulators and prosecutors fail to pursue big corporations or their executives who violate the law, or when the government lets them off with a slap on the wrist, corporate criminals have free rein to operate outside the law. They can game the system, cheat families, rip off taxpayers, and even take actions that result in the death of innocent victims—all with no serious consequences.
The failure to punish big corporations or their executives when they break the law undermines the foundations of this great country: If justice means a prison sentence for a teenager who steals a car, but it means nothing more than a sideways glance at a CEO who quietly engineers the theft of billions of dollars, then the promise of equal justice under the law has turned into a lie. The failure to prosecute big, visible crimes has a corrosive effect on the fabric of democracy and our shared belief that we are all equal in the eyes of the law.
Rigged Justice: 2016
How Weak Enforcement Lets Corporate Offenders Off Easy
prepared by the Office of Senator Elizabeth Warren
http://www.warren.senate.gov/files/documents/Rigged_Justice_2016.pdf
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Warren Releases Rigged Justice Report Detailing Lax Corporate Crime Enforcement
by Editor, Corporate Crime Reporter
http://www.corporatecrimereporter.com/news/200/warren-release-rigged-justice-report-detailing-lax-corporate-crime-enforcement/
The report, the first in an annual series on enforcement, highlights 20 of the most egregious civil and criminal cases during the past year in which federal settlements failed to require meaningful accountability to deter future wrongdoing and to protect taxpayers and families.
“Much of the public and media attention on Washington focuses on enacting laws,” the report states. “And strong laws are important – prosecutors must have the statutory tools they need to hold corporate criminals accountable. But putting a law on the books is only the first step. The second, and equally important, step is enforcing that law. A law that is not enforced — or weakly enforced — may as well not even be a law at all.”
“When government regulators and prosecutors fail to pursue big corporations or their executives who violate the law, or when the government lets them off with a slap on the wrist, corporate criminals have free rein to operate outside the law. They can game the system, cheat families, rip off taxpayers, and even take actions that result in the death of innocent victims-all with no serious consequences.”
“Under the current approach to enforcement, corporate criminals routinely escape meaningful prosecution for their misconduct,” the report finds. “This is so despite the fact that the law is unambiguous: if a corporation has violated the law, individuals within the corporation must also have violated the law. If the corporation is subject to charges of wrongdoing, so are those in the corporation who planned, authorized or took the actions. But even in cases of flagrant corporate law breaking, federal law enforcement agencies – and particularly the Department of Justice – rarely seek prosecution of individuals. In fact, federal agencies rarely pursue convictions of either large corporations or their executives in a court of law. Instead, they agree to criminal and civil settlements with corporations that rarely require any admission of wrongdoing and they let the executives go free without any individual accountability.”
The report singled out the Securities and Exchange Commission (SEC) as “particularly feeble, often failing to use the full range of its enforcement toolbox.”
“Not only does the agency fail to demand accountability, the SEC frequently uses its prosecutorial discretion to grant waivers to big companies so that those companies can continue to enjoy special privileges despite often-repeated misconduct that legally disqualifies them from receiving such benefits. Lax enforcement at other agencies, such as the Occupational Health and Safety Administration (OSHA), stems primarily from a lack of important legal tools and persistent underfunding by Congress that often turn the legal rules into little more than suggestions that companies can freely ignore.”
The report found that “the contrast between the treatment of highly paid executives and everyone else couldn’t be sharper.”
“The U.S. has a larger prison population than any nation in the world. People are locked up for long stretches for crimes that involve thousands — or even hundreds — of dollars. Even the settlement process is different. For most people accused of a crime, prosecutors may be willing to plead out the cases, but they typically require admission of guilt and, if the crime involves more than a trivial amount of money, time in jail. Various three-strikes rules frequently put people away for life for non-violent crimes involving modest amounts of money. Politicians routinely get elected promising to be ‘tough on crime,’ and both federal and state governments devote immense resources to put and keep criminals in prison.”
The twenty cases highlighted in Rigged Justice illustrate problematic enforcement patterns by federal agencies across a range of areas, from financial crimes to student loan rip-offs to auto safety violations to environmental disasters.
In many of the cases described in the report, corporations reached settlements with the federal government that required no admission of guilt and held no individual executives accountable.
The cases include Standard & Poor’s, The Cartel — Citigroup, JP Morgan Chase, Barclays, UBS, and Royal Bank of Scotland, Deutsche Bank, General Motors Ignition Switch, Honda Airbag, Graco Children’s Products, Dupont Methyl Mercaptan, ExxonMobil Pegasus Pipeline Spill, Massey Energy Upper Big Branch, BP Deepwater Horizon, and Novartis false claims.
The criminal and civil cases identified include:
• Education Management Corporation (EDMC). In November 2015, DOJ settled a civil case with EDMC, the second-largest for-profit education company in the country. EDMC illegally paid high-pressure recruiters to enroll students and violated the False Claims Act by falsely certifying that it complied with Title IV of the Higher Education Act. EDMC received $11 billion in payments (90% of it via federal student grants and loans) from 2003-2011 as a result of these efforts. But the settlement recovered only $95 million – less than one percent of this total. The DOJ settlement did nothing to resolve federal student loan debts owed by those who were victims of the illegal recruitment, held no individual executives at EDMC accountable, required no admission of wrongdoing, and did nothing to prevent EDMC from receiving federal funds in the future.
• Standard & Poor’s (S&P). In February 2015, S&P agreed to pay a $1.375 billion civil settlement to the DOJ, 19 states, and the District of Columbia. The settlement came in response to charges that the ratings agency engaged in a scheme to defraud investors when it issued inflated ratings that misrepresented the true credit risks of residential mortgage-backed securities and collateralized debt obligations – one of the chief causes of the 2008 financial crisis that cost the economy trillions of dollars. This settlement was less than one-sixth the size of the fine DOJ and the states originally sought. The government did not require that S&P admit to breaking the law, and it failed to prosecute a single individual.
• “The Cartel”: Citigroup, JPMorgan Chase & Co, Barclays, UBS AG, and Royal Bank of Scotland. In May 2015, Citigroup, JP Morgan Chase & Co, Barclays, UBS AG, and Royal Bank of Scotland (RBS) agreed to pay a combined $5.6 billion settlement to the DOJ. Bank traders from Citicorp, JP Morgan, Barclays, and RBS created a secret group known as “The Cartel,” which for more than five years manipulated exchange rates in a way that made the banks billions of dollars at the expense of clients and investors. And, the fifth bank, UBS separately agreed to plead guilty to wire fraud charges in connection with interest rate manipulation. Although DOJ required admissions of guilt as part of the settlement – a reflection of the severity of the charges – not one single individual has yet faced any DOJ criminal prosecution. Moreover, the SEC granted waivers to each bank so that the banks could avoid the collateral consequences that were supposed to accompany a guilty plea. Those waivers meant that the banks’ much-hyped guilty pleas were ultimately “likely to carry more symbolic shame than practical problems.”
• The Upper Big Branch Mine Disaster. Donald L. Blankenship, former CEO of Massey Energy Company, was convicted in December 2015 of only one misdemeanor (conspiring to willfully violate mandatory mine safety and health standards) in the Upper Big Branch mine explosion that resulted in 29 deaths – despite the fact that his company had a years-long history of safety failures, including 2,400 safety violations in 2009 alone. The penalty in this case was so small because federal mine safety laws allow only a misdemeanor charge – not a felony – even for deadly violations of safety regulations.
• General Motors (GM). GM’s years-long cover-up of ignition switch problems in its vehicles resulted in at least 124 deaths and 275 injuries. But the DOJ deferred prosecution agreement in this case included a fine for GM ($900 million) that amounted to less than one percent of the company’s annual revenue, held no individual accountable for the cover-up, and suspended the criminal charges against GM – wire fraud and false statements – to be dismissed if the company complied with the agreement.
• Trade Law Enforcement. In 2015 the United States Trade Representative (USTR) failed to enforce key environmental and labor requirements in trade agreements with Guatemala, Colombia, and Peru, despite substantial evidence of violations. The lack of enforcement sends a dangerous signal to our trade partners that they need not honor their promises on improving labor and environmental standards.
• Novartis. In November 2015, DOJ announced a $390 million settlement of a civil lawsuit with Novartis Pharmaceuticals over allegations that the company engaged in a kickback scheme with pharmacists to increase sales of their drugs to Medicare and Medicaid patients. These kickbacks allegedly were paid even as Novartis was already under a corporate integrity agreement for previous violations of the law. The $390 million represented just over 10% of the damages sought by the government. It placed no further restrictions on Novartis’ participation in federal government healthcare programs, included no admission of wrongdoing, did not include an indictment of any individual responsible for the kickbacks, and was so paltry that after the settlement, Novartis’s CEO claimed that “whether we change our behavior …[in response to the settlement] remains to be seen.”