The failure to prosecute corporate crime undermines U.S. justice

April 30, 2013

Imagine you are driving down the highway at 90 mph where the posted speed limit is 55 mph. As a result of your speeding, you lose control of your vehicle. And you cause a wreck that kills people.

Here’s a sure bet ‑ you will be convicted of a crime. You will admit wrongdoing. And you will be punished.

Now suppose a corporation engages in illegal activity while operating a coal mine. And that illegal activity leads to the death of 29 of its workers.

Here’s another sure bet ‑ that corporation will not be convicted of a crime. And it will not be punished.

The reality is that we live in a two-tier criminal justice system in America, with one level for corporations and one for living, breathing humans.

It’s a system that undermines deterrence and allows corporate criminals to inflict their damage ‑ pollution, corruption, fraud, worker and consumer injury and death ‑ unchecked.

The coal mine corporation is a real one, Massey Energy. In April 2010, a huge explosion at Massey’s Upper Big Branch mine in West Virginia killed 29 workers.

In December 2011, the U.S. Labor Department issued a 972-page report concluding that “unlawful policies and practices” were the “root cause of this tragedy.” The company had a long history of skirting the law and in the Upper Big Branch case kept two sets of books ‑ one for internal use, which identified workplace hazards at the mine, and one to show law enforcement, which didn’t.

David Uhlmann, a former chief of the Justice Department’s Environmental Crimes Section and currently a professor of law at the University of Michigan Law School, says Massey should have been criminally charged in the Upper Big Branch case. Uhlmann says that while at the Justice Department, his unit criminally prosecuted hundreds of corporations in cases that were arguably less serious.

But on the same day that the Labor Department issued its report,  the Justice Department decided to instead enter into a “non-prosecution agreement” with the company. The company was not required to admit to wrongdoing.

The two most important law enforcement entities in Washington ‑ Justice and the Securities and Exchange Commission ‑ have taken a kid-glove approach to the corporate criminal activity that arguably inflicts far more damage on society than all street crime combined.

For years the SEC has allowed major corporations to settle cases of serious wrongdoing with consent decrees in which they “neither admit nor deny” violating the law, agree to obey the law in the future  and consent to sanctions, including multimillion-dollar fines.

A number of federal judges ‑ most notably Jed Rakoff, Richard Leon and Victor Marrero ‑ have recently challenged the SEC’s neither-admit-nor-deny settlement practice. A group of law professors has weighed in on the side of these judges, arguing that judges have the authority to challenge the SEC’s “practice of settling enforcement actions alleging serious fraud without any acknowledgment of facts, on the basis of a pro forma ‘obey the law’ injunction, a commitment to undertake modest remedial measures and insubstantial financial penalties.”

Dennis Kelleher, president of the Washington-based nonprofit advocaty organization Better Markets, says the SEC’s neither-admit-nor-deny settlement practice has had the effect of enshrining a “double standard where the law is aggressively enforced on Main Street and the wealthy and well-connected of Wall Street get away with meaningless slaps on the wrist.”

“This SEC practice only rewards, incentivizes and guarantees more crime on Wall Street,” he said. “That must end.”

Over the past 20 years the Justice Department has slipped down the slope of corporate crime deterrence, from guilty pleas to deferred prosecution agreements to non-prosecution agreements to “declinations.”

Twenty years ago, when a major corporation engaged in criminal wrongdoing, a good bet was that the company would plead guilty, admit wrongdoing and be punished.

In 2000, my publication Corporate Crime Reporter went through our files and compiled a list of all major corporations convicted of criminal activity and ranked them according to the amounts of their criminal fines and cut the list off at the top 100.

We released a report titled “The Top 100 Corporate Criminals of the 1990s.”

It’s an open question whether there were 100 major convicted corporate criminals from 2000 to 2009.


Around 2000, in the wake of the criminal prosecution and the demise of Arthur Andersen, the Justice Department decided that it would begin to lean toward not criminally prosecuting major corporations. Instead, it instituted a policy of resolving such crimes with deferred and non-prosecution agreements.

In a deferred prosecution agreement, the company is criminally charged. But if the company abides by the agreement ‑ pay the fine, appoint the monitor, enhance the company’s compliance program ‑ then after a period of time ‑ usually three years ‑ the criminal charges will be dropped.

No crime. No admission of wrongdoing.

A non-prosecution agreement ‑ the kind Massey Energy got ‑ is an even better deal for the company. Under that kind of agreement, there is no criminal prosecution. The company agrees to pay the fine, appoint the monitor and enhance the compliance program.

But there is no criminal charge. And no admission of wrongdoing. And no threat that it will ever be prosecuted for that wrongdoing.

At the bottom of the slope are declinations.

And here, the record is murky, because the Justice Department has no obligation to make public declinations. Lanny Breuer, the Justice Department’s former chief corporate crime law enforcement official, is now back at Covington & Burling, taking down a reported $4 million defending accused corporate criminals.

While in office, Breuer was the target of two broadcast newsmagazine pieces — one by 60 Minutes titled “Prosecuting Wall Street” and one by PBS’s Frontline titled “The Untouchables.” These brought into sharp focus arguably his most important decisions, in which he chose to not criminally prosecute any big Wall Street banks or high-level executives for the 2008 financial meltdown.

These were bottom-of-the-slope declinations.

On May 3 at the National Press Club, top SEC and Justice Department officials will be featured speakers at a conference titled “Neither Admit Nor Deny: Corporate Crime in the Age of Deferred Prosecutions, Consent Decrees, Whistleblowers & Monitors.”

They will be pressed to dismantle our two-tier justice system. And replace it with a system that embodies what Attorney General Eric Holder calls “our nation’s enduring pursuit for equal justice for all.”

PHOTO: Mourners comfort each other during a candle light vigil in Montcoal, West Virginia April 10, 2010. REUTERS/John Gress


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We seem to have a number of federal agencies that work at cross purposes to their charter. The SEC is supposed to be the policeman for investors but must trust the Justice Department to prosecute.
I’d bet that if those cases were turned over to any of the “strong arm” law practices advertising on TV and they were paid 33% of the fines collected and a bounty for each executive sent to jail corporate behavior would change dramatically.

Posted by Pilgrim1620 | Report as abusive

> For years the SEC has allowed major corporations to
> settle cases of serious wrongdoing with consent
> decrees in which they “neither admit nor deny”
> violating the law
Exactly correct. Because corporate America now owns the government, not the citizens, and this is just one more sure sign of it.

Posted by UScitizentoo | Report as abusive

You should not have led your essay with a coal mine as an example. That cut your readership way down. You lost 90% of your readers there.

You should have led with a financial crime. That is the tender spot where anger will linger a whole generation.

Posted by AdamSmith | Report as abusive

The US Justice Department and the SEC are standing jokes when it comes to going after the banksters and other corporate criminals in this country. They prefer to chase Mom and Pop Pot dispensaries than take on the real criminals. They have also lost the war on drugs at a cost of hundreds of billions to the taxpayer. I have lost most of my respect for our criminal justice system over the last decade. We now have a corrupt non legal system for the rich and a failed and punitive legal system for the poor. Its a sad product of crony capitalism and the return of the plantation economy. As an old school liberal patrician who believes in social justice and a fair legal system for all, I find the current system shamefully corrupt in every respect to such a degree that it makes the gangster dominated prohibition years look like the soul of integrity.

Posted by ghenny | Report as abusive

I have to agree. In a time when the best interests of non-profit and for profit Hospitals, insurance companies, and “big Pharma seem to receive a lot more consideration than those of “we, the people”, perhaps it is time to cut the lobbiests and that whole “system” off at the pockets.

Oh, I forgot. That’s where most of “our” elected representatives drift when they “retire” on taxpayer money. Not gonna be easy…!

Posted by OneOfTheSheep | Report as abusive

The SEC should be regulating corporations from an accounting/business perspective.

They have instead become a business friendly substitute for Federal Court. It’s something I have ranted about on Reuters since the financial collapse of 2008.

We should not have had to wait until 2012 for the press to finally address the issue head-on, but I’m glad that the National Press Club finally thinks it is up to the task.

Posted by breezinthru | Report as abusive

Sorry, 2012 was a typo; I, of course, meant 2013.

Posted by breezinthru | Report as abusive

When the top law official in the US, Eric Holder, refuses to prosecute lawbreakers, there is something drastically wrong in our country. Obama has said many times that we are a nation built on the “rule of law”, but then allows his Attorney General to ignore the law and, in the case of illegals, actually rewards lawbreakers.

Posted by AZreb | Report as abusive

It’s all about the money that politicians receive from major corporations, unions, lobbyists and their management. Campaign donations skew the landscape in favor of the financially powerful–in Congress, the Senate and at the White House.

Until you eliminate the ability of any corporations, 527’s, PACs, unions lobbyists, and other “impersonal” entities to contribute to political campaigns, and place strict limits on individual contributions, nothing will change. Follow the money, and you will find the corruption.

Interesting that the author went into great detail to attack a corporation, yet failed to even mention John Corzine.

Posted by COindependent | Report as abusive

ya think….? The President just named a Lobbyist as head of the FCC…!

Posted by rikfre | Report as abusive

The guys in positions of responsibility are in bed with this criminal class and just want to get their cut – simple as that.

Posted by keebo | Report as abusive

Wowzer. Love this guy. Immediately found his organizations and will donate when I can. Meanwhile agree with every comment so far. Although Adamsmith maybe doesn’t conclude author was illustrating physical harm in the mining “incident”.

Goes to show the criminal behavior we all know so well also kills and maims citizens. It may not be murder but it sure is criminal manslaughter.

Once again, a progressive shows the way. If only we could find a way around the money, as Coindependent says. Now even the courts are being turned against us.

Posted by Mac29 | Report as abusive