Attorney General Loretta Lynch says she wants to nail more white-collar criminals because, in the words of one of her deputies, “corporations can only commit crimes through flesh-and-blood people.”
Thanks for that insight, Mrs. Attorney General! While you’re at it, could you please educate the masses as to why your boss, President Obama, and your immediate predecessor, Eric Holder, failed to grasp that simple concept in the seven years since the 2008 financial crisis? Why did they fail to nail a single major CEO for a wrongdoing that led to one of history’s greatest financial catastrophes?
The answer is that for all President Obama’s tone deaf economic policies, and Holder’s penchant to use the DOJ to carry out the president’s domestic agenda, failing to realize that “people not corporations” commit white-collar crimes isn’t one of this administration’s problems.
More concerning at least for anyone who believes in both the rule of law and that real white-collar crooks need to be held accountable is what’s behind Lynch’s new “Individual Accountability For Corporate Wrongdoing” guidelines: a noxious blend of class-warfare politicking and prosecutorial overreach that won’t do much to stem white-collar crime and might put a few innocent people behind bars.
First, a little background. Since the financial crisis, and despite the fact that the DOJ has plenty of other priorities (i.e. terrorism), the Obama DOJ has spared little expense going after white-collar bad guys. Bank executives have been hounded and interrogated before congressional committees and by everyone from the FBI to the Securities and Exchange Commission to various local and state prosecutors.
Yes, none of the major Wall Street figures who ran the banks at the center of the crisis have gone to jail, but this not for lack of trying. The evidence simply wasn’t there. These guys were greedy and dumb, but being greedy and dumb isn’t against the law. Under our system of justice, it takes more than that to put someone away.
Let’s be clear about one other thing: Plenty of Wall Street guys (and a few gals) have gone to jail in recent years. Since 2008, our vast and powerful federal law enforcement apparatus has spent untold millions of dollars to crack down on insider trading. And this is despite the fact that insider trading had nothing to do with the 2008 crash, and its victims are hard to identify other than something amorphous like “market integrity.”
One of the world’s biggest hedge funds, SAC Capital, was closed down in this insider trading probe. Its chief, Steven Cohen, was never convicted of a crime—but, again, not for lack of trying. The FBI and DOJ spent nearly a decade interrogating witnesses, squeezing their informants and using wiretaps to snare what the agency chiefs called their “white whale.” All this got them was a flimsy charge of failure to supervise his allegedly wayward traders, which he continues to fight.
So what is Lynch doing by issuing a memo that basically says all her deputies get brownie points when the send some guy from Corporate America to jail?
Most obviously, she’s playing the class warfare card as the 2016 election approaches, something the Obama administration—and Democrats in general these days—have turned into a science. Attacking “fat cats” has been part of the Obama election playbook for years now—even if he leaves out the messy details of how he was supported by the Fat Cat elite at Goldman Sachs during the 2008 presidential election.
Even Democratic frontrunner Hillary Clinton—who has probably never turned down a paid Wall Street speech in her life—can’t resist jabbing her old friends in the banking business for their greed, “short termism” and, of course, their low marginal tax rates.
But scoring cheap political points is the least odious part of what the Lynch DOJ may accomplish with all of this nonsense. With this edict just about every bank, hedge fund, and corporate executive outside the C-suite has a target on his or her back, even though the corporate culture that leads to alleged wrongdoing almost always comes from the top.
What most people (even those in government law enforcement) don’t realize is that big companies are set up like Mob families; the guys up top make all the money and set the agenda, while the soldiers carry out the dirty deeds. Top executives, like Mob bosses, don’t speak directly to the people carrying out company business. They rarely send emails about deals or trades, as these often get subpoenaed as evidence when the Feds come knocking.
But unlike the Mob, many low-level executives who get snared in white-collar crackdowns don’t even know that they’re doing something illegal. Many believe they are following orders that were approved by higher-ups and their lawyers—a situation I have seen throughout my career covering various scandals. And because they have little direct contact with the guys up top, these underlings take the fall for whatever criminality is taking place that made guys at the top enormously rich.
So let’s hand down Loretta Lynch’s latest crusade against Wall Street the verdict it deserves; at best it scores cheap political points, and at worst lots of nobodies will end of in jail.