DoJ’s ‘Too Little Too Late’ Memo

In a move that can only mean a presidential election campaign is upon us, the Justice Department said it is finally going to pursue individual white-collar criminals.

As the New York Times reported, the Justice Department “issued new policies on Wednesday that prioritize the prosecution of individual employees — not just their companies — and put pressure on corporations to turn over evidence against their executives.” The policies are contained in a memo written by Deputy Attorney General Sally Q. Yates. They will be discussed in greater detail today at theNew York University Program on Corporate Compliance and Enforcement.

Pardon my cynicism, but after so much failure to prosecute, I remain doubtful that much if anything has changed. The onus is on the Justice Department to show that it’s serious by way of actions, not words in a memo.

After the most target-rich environment for white-collar prosecution ever, the nation’s top prosecutors have suddenly realized that “Hey, crimes! We should do something about that!” By what must be the sheerest of coincidences, almost all statute of limitations on the oodles of white-collar misdeeds committed during the financial crisis have expired.

This is a subject I have visited repeatedly, both recently (see thisthis,thisthis, and this), and in the immediate aftermath of the crisis (see thisthisthisthisthisthis and this).

As I observed several years ago, “The greatest triumph of the banking industry wasn’t ATMs or even depositing a check via the camera of your mobile phone. It was convincing Treasury and Justice Department officials that prosecuting bankers for their crimes would destabilize the global economy.”

It has been my steadfast view that this simple explanation is why no one of any consequence was prosecuted for the many obvious and easily pursued crimes of the era. It hasn’t been much of a mystery, and there haven’t been any plausible explanations offered that withstood even the slightest scrutiny. The evidence of criminality was clear and overwhelming. But instead of prosecutions and trials, we watched as the Justice Department under former Attorney General Eric Holder decided that certain financial institutions were too big to jail, and that prosecuting senior executives would damage the financial system.

Understand what this meant: The nation’s top prosecutor failed to perform his official duties because he was worried about the theoretical economic harm caused by going after top financial managers. The alternative explanation is that he was grossly incompetent.

To be fair, there is a new sheriff in town: Loretta E. Lynch has been attorney general since April, and she seems to be departing from the course steered by her predecessor, now comfortably ensconced at Covington & Burling, which is where he worked before becoming attorney general. That Washington-based law firm represents many white-collar criminals. The revolving door lives, as Holder and five of his deputies, including Lanny Breuer, former Southern District U.S. attorney, ended up there. Breuer’s responsibilities were supposed to include policing Wall Street, where he managed to avoid prosecuting anyone for much of anything. Now, he gets to defend anyone who faces the remote odds of being charged with wrongdoing. A number of observers have critically commented on Breuer’s lack of prosecutions, including former banking regulator William Black and former New York Attorney General Eliot Spitzer. A few years ago I got the chance to ask Breuer a question at an NYU symposium; his answer reveals everything you need to know about why prosecuting financial crimes wasn’t a priority.

I remain skeptical about whether anything is going to happen. The cynic in me expects a few junior brokers to be arrested and a handful of unimportant, politically unconnected bankers to be fined. I would be surprised if the Justice Department announcement of a white-collar crime crackdown is anything other than just business as usual.

While you ponder the new memo, consider a report by the Government Accountability Institute. It will make you extremely skeptical about the new initiative for prosecuting Wall Street. The Justice Department so totally failed in its duties during the crisis that one has to consider it guilty until it demonstrates otherwise.

Here we are seven years after the crisis, and only now is the Justice Department getting serious about prosecuting individuals? It’s almost enough to make one wonder if an election is coming up or something.

Originally published as: Keep Waiting for Wall Street Crime Crackdown


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  1. rd commented on Sep 10

    The banks biggest triumph wasn’t convincing people they were too big too jail; it was getting their defense counsel appointed Attorney General of the United States. Presumably, that job came with an implicit expectation he could work for them again if things worked out appropriately.

  2. James Cameron commented on Sep 10

    > Pardon my cynicism, but after so much failure to prosecute, I remain doubtful that much if anything has changed.


  3. Molesworth commented on Sep 10

    Lynch vs Holder
    IMHO Holder was a disaster.
    * Couldn’t close Guantánamo.
    * Signed off on expanded electronic surveillance of citizens.
    * Never held bank executives accountable. Wall Street execs slept easy with him in charge of DOJ.
    USA became less equal under Holder.
    Can not understand why Obama kept him on as long as he did.

    • rd commented on Sep 10

      Clearly, you are not running in he GOP primary. I think that list makes up a bunch of their platform.

  4. BennyProfane commented on Sep 10

    Middle to upper level managers in the banks should lawyer up. The big guys are probably going through a list right now of who to sacrifice to the DOJ gods, now that some “employees” are going to be “prosecuted”.

    • rd commented on Sep 10

      A safer bet will be to include high-ranking executives as ccs on their e-mails.

  5. RW commented on Sep 10

    Before there is prosecution there must be investigation and referral but the political will to initiate the process didn’t seem to exist anywhere: Where were the congressional commissions, the FBI and SEC task forces? So I guess the lack of prosecution was not a total surprise even if it remains inexplicable overall.

    That’s what I’d really like to see: A well-researched explanation including key players. Pallid “we’re going to do better or be tougher from now on” nostrums from DOJ does nothing to cure cynicism and the only thing I’d really like to see at this point is something like a Pecora Commission with an extended mission: (1) Investigate the financial crisis itself and (2) the lack of legal response to its perps (in these days of SarBox there can’t be much doubt that would include the CEOs of every major financial institution).

    • willid3 commented on Sep 11

      such a commission would end up looking like the warren one. unless we luck out and politicians get out of the way.

      what are the odds of that happening?

  6. grimreaper commented on Sep 10

    Might be time to re-watch the 2919 Academy Award Documentary winner, Inside Job, being shown on PIVOT TV. (Next showings Wed., 9/16. 3:45 pm., and Thurs., 9/17, 1:30 am.) At least set the DVR.

    And I once wondered why my old man swore at the T.V….

    Santayana anyone?

  7. GeorgeBurnsWasRight commented on Sep 11

    I’d love to see them prosecuted, but I think conviction was never likely for two reasons.

    First, it would be an unequal contest between the government lawyers and the CEO’s lawyers, at least as bad as the first OJ trial.

    Second, it’s almost impossible to impanel a jury who can understand a complex case. I’ve been on two juries and both of them contained people who I was amazed had managed to find the courtroom.

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