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  • The New York Times' Latest Swipe at the Justice Department

    Despite Eliot Spitzer’s recent fall and the partial exposure of his hypocrisy in strong-arming businesses and business leaders under investigation, one of Spitzer’s chief enablers – the New York Times – apparently still has never seen a corporate prosecution it hasn’t liked. On its front page today, the NYT takes the Justice Department to task for supposedly letting corporations “off easy.” Nothing could be further from the truth.

    The NYT alleges that instead of prosecuting corporations like it did in the good old days, Justice has been giving corporations sweetheart deals called deferred prosecution agreements. This is just another NYT dog-bites-man story impugning the integrity and effectiveness of the Bush Justice Department (and everything else about this administration). The story also has the analysis exactly wrong.

    By almost any measure, this Justice Department has been more aggressive than any of its predecessors in pursuing allegations of corporate crime. As Department officials regularly point out, they have obtained over 1,200 convictions and guilty pleas of white-collar employees. This is a huge number given the enormous resources consumed by any large white-collar investigation and prosecution.

    The Enron and WorldCom scandals super-heated the environment for white-collar investigations and prosecutions. The Department has fashioned and put into practice some hyper-aggressive policies for investigating and prosecuting white-collar crime. (See, for example, this op-ed here.) Entering into deferred prosecution agreements rather than indicting and prosecuting every time there is some evidence of criminal conduct is one of the more prudent and measured white-collar policies the Department has pursued the last few years.

    Crowing that the Justice Department was “once known for taking down corporations” (as if every corporation is essentially a Mafia family), the NYT article casually mentions the Department’s destruction of “big five” accounting firm Arthur Andersen. The short story is that Justice indicted Andersen, the indictment killed the firm, and it no longer existed by the time the Supreme Court reversed the Department’s hard-won conviction. The firm’s 28,000 employees – at least 99% of whom were not even implicated in the alleged wrongdoing – had to find new careers. The firm’s partners lost everything they had built over the years and had to start over from scratch.

    Not only can indictment alone destroy a business well before it gets a chance to defend itself in court, it isn’t clear that justice is accomplished by prosecuting a business. All that is needed to prosecute a business is some evidence that one employee engaged in criminal conduct. Even if that employee was violating every single company policy, the company can still be indicted.

    Deferred prosecution agreements do not preclude Justice from indicting and prosecuting any individuals – employees or not – who engaged in criminal conduct. On the contrary, companies almost uniformly agree to cooperate fully with Justice in investigating alleged wrongdoing. As part of almost all deferred prosecution agreements, companies conduct additional internal investigations and turn all of the information and evidence they find over to the Department to use against any employee who might have engaged in wrongdoing. Some companies pay enormous fines, including almost a half-billion dollars paid by accounting firm KPMG alone. Many allow the Justice Department to appoint a so-called corporate monitor who oversees much or all of the company’s business and effectively dictates business decisions and practices.

    The NYT’s pathological cynicism toward American business and the Bush Justice Department is evident in today’s article. Apparently making the most of every opportunity it has to slap around either or both, the NYT completely distorts the reality of current federal practices for enforcing the law on white-collar crime.

    Posted in Legal [slideshow_deploy]

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