“…a close reading of the Yates memo and her remarks at NYU have us wondering if the point of this exercise is not better targeting of prosecutions but simply a desire to take more corporate scalps to appease the progressive left. This crowd has never forgiven former Assistant Attorney General for the Criminal Division Lanny Breuer for not jailing more bankers after the financial crisis…

…The truth is that responding to ill-conceived government incentives to take on mortgage risk is not a crime. But the Elizabeth Warren crowd wants to see the suits in shackles. Ms. Yates also says that the government will demand tougher settlement terms from both individuals and companies, and the result may be “fewer settlements” and “fewer guilty pleas.” That would be good if trials establish what really happened and whether it was illegal. But without a clear statement that Washington is going to stop extracting cash from innocent shareholders, it’s hard to see Justice’s new guidance as anything more than a new phase of banker scapegoating to appease the mob.”, The Wall Street Journal Editorial Board, September 16, 2015

Opinion

More Defendants Wanted

Justice aims to prosecute more people for white-collar crime.

Deputy Attorney General Sally Quillian Yates testifies before the Senate Judiciary Committee hearing on July 8, 2015.

Deputy Attorney General Sally Quillian Yates testifies before the Senate Judiciary Committee hearing on July 8, 2015. Photo: mandel ngan/Agence France-Presse/Getty Images

The Justice Department on Wednesday is hosting a conference in Washington on “individual accountability for corporate wrongdoing.” Deputy Attorney General Sally Quillian Yates will instruct colleagues on how to prosecute human beings—not just organizations—for white-collar crime. But if you prosecute the offenders, why do you need to charge organizations?

In a departmental memo last week and a subsequent speech at New York University’s law school, Ms. Yates laid out new guidance for prosecutors intended to ensure “best efforts” to hold accountable the individuals responsible for corporate and financial malfeasance.

Upon seeing this news, we were initially tempted to cheer. These columns have long urged prosecutors to punish employees who break the law, rather than demanding cash settlements from their employers, which really means punishing shareholders who are often victims unaware of wrongdoing.

But a close reading of the Yates memo and her remarks at NYU have us wondering if the point of this exercise is not better targeting of prosecutions but simply a desire to take more corporate scalps to appease the progressive left. This crowd has never forgiven former Assistant Attorney General for the Criminal Division Lanny Breuer for not jailing more bankers after the financial crisis.

The truth is that responding to ill-conceived government incentives to take on mortgage risk is not a crime. But the Elizabeth Warren crowd wants to see the suits in shackles. And the new guidance from Justice suggests that the goal is not so much to charge alleged criminals instead of the shareholders who had the misfortune to employ them, but in addition to the investors who may have been victimized.

In her NYU speech Ms. Yates said that when wrongdoing occurs, Justice doesn’t want “only the company’s employees and shareholders to pay the price.” She said Justice’s approach “means pursuing not just corporate entities, but also the individuals through which these corporations act.”

But corporate decisions are made by individuals who use the corporate structure to do good or ill. Ms. Yates says that “once a case is underway, the inquiry into individual misconduct can and should proceed in tandem with the broader corporate investigation.” Are the bad acts of individuals merely a subset of corporate wrongdoing? Besides the human employees, we’re wondering who else commits fraud.

Ms. Yates also says that the government will demand tougher settlement terms from both individuals and companies, and the result may be “fewer settlements” and “fewer guilty pleas.” That would be good if trials establish what really happened and whether it was illegal.

But without a clear statement that Washington is going to stop extracting cash from innocent shareholders, it’s hard to see Justice’s new guidance as anything more than a new phase of banker scapegoating to appease the mob.

Posted on September 16, 2015, in Postings. Bookmark the permalink. 1 Comment.

  1. Continuing steps down the path that leads to central takeover of private enterprise as otherwise talented execs will avoid exposures associated with leading businesses (why take on the risk of personal ruin and economic devastation if you’re smart and have other options?), leading to weaker management, more failures and more annexation of shareholder assets by the government via massive settlements….the path is not good.

    Mark Nelson 3256 Sitio Tortuga Carlsbad, CA 92009 760.473.7558 mnelson.doit@gmail.com

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