Justice Department Targets Wall Street…the Wrong Way

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The Obama administration has been criticized for not punishing executives who were involved in the recent major financial scandals despite securing record fines. This September, the U.S. Department of Justice responded to this criticism by announcing new policies that prioritize the prosecution of individual employees and put pressure on corporations to turn over evidence against their employees.

Deputy Attorney General Sally Q. Yates / via
Deputy Attorney General
Sally Q. Yates / via

Are these new policies an about-time change of direction of prosecutorial policies or, in the words of Lt. Col. Frank Slade in the movie Scent of a Woman, the building of “a vessel of seagoing snitches”?

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The devil, of course, is in the details, and enforcement of these new policies, which are found in a seven-page memo authored by Sally Q. Yates, the Deputy Attorney General, that tells civil and criminal investigators to focus on individuals from the beginning. In settlement negotiations, companies cannot obtain credit for cooperating with the government unless they identify employees and turn over evidence against them.

In an interview at the same time she issued the new policies, Yates made it sound like the Justice Department would not allow companies to foist the blame on low-level officials. “We’re not going to be accepting a company’s cooperation when they just offer up the vice-president in charge of going to jail,” she said.

Yates’ assurances in this regard may prove to be difficult to enforce. Most criminal investigations of corporate wrongdoing originate from an internal investigation by the company itself. The individuals, investigators and lawyers hired by the corporation to perform the investigation already didn’t have a lot of incentive to discover wrongdoing by the people paying their bills. Now the incentive is even less, if it means that upper-level management might be indicted. These new policies will also provide a deterrent to doing an internal investigation at all.

Another concern about these policies is that they all but force criminal investigators to go after individual scalps, regardless of whether they find there is any criminal intent. Found deep in the policies is the following language: “If a decision is made not to bring … charges against individuals … that determination must be approved by the US Attorney or Assistant Attorney General….”

Such a decision not to charge is called a declination, and making it difficult, if not impossible, to decline a prosecution all but guarantees that every time the government investigates a corporation, individual indictments will follow.

Al Pacino as Frank Slade in Scent of a Woman
Al Pacino as the anti-snitch Frank Slade
in Scent of a Woman.

For years, prosecutors have promised leniency to low-level drug offenders if they help prosecutors go up the chain-of-command to a targeted drug lord. This technique pits brother against brother, wife against husband, and even parents against their children or vice-versa. What did Frank Slade say in Scent of a Woman: “… inform on your classmates, save your hide. Anything short of that, we’re going to burn you at the stake.”

Justice is seldom done when we target people rather than wrongdoing. These new policies have a similar scent. Justice also is seldom done when promises of leniency force individuals to turn snitch. Yes, financial destruction and time in jail are huge incentives that will force people to turn on their friends or coworkers, but they are no guarantee of producing the truth, in lots of cases just the opposite. In a few cases, this technique also fails because someone’s “soul remains intact” and they refuse to become state’s evidence against their friends.

Ms. Yates correctly said, when she announced these policies,

It’s only fair that people who are responsible for committing these crimes be held accountable. The public needs to have confidence that there is one system of justice and it applies equally regardless of whether that crime occurs on a street corner or in a boardroom.

The spirit of that “one system of justice,” however, doesn’t need to be built on a system that relies on policies that encourage the “naming of names” and discourages declinations where the evidence doesn’t support charges being brought. Otherwise, that “one system” is not worthy of being called “Justice.”