In the midst of the bankruptcy reform debate, Senator Dick Durbin flatly stated that when it comes to Capitol Hill, the banks "frankly own the place." They might as well have said the same thing about federal prosecutors and regulators with responsibility over the financial sector. Starting in 2005, The New York Times reports, the Justice Department opted for "deferred prosecution agreements" with banks and mortgage companies in lieu of actually prosecuting them. According to the Times, "The guidelines left open a possibility other than guilty or not guilty, giving leniency often if companies investigated and reported their own wrongdoing."
Many well-known companies have benefited. In 2004, the American International Group, the giant insurer, paid $126 million when it entered a deferred prosecution agreement to settle investigations into claims that it had helped clients improperly burnish financial statements.
Deals over accounting improprieties also were struck that year by Computer Associates International, a technology company, and in 2005 by Bristol- Myers Squibb, a pharmaceutical concern. Prudential Financial entered into a deferred prosecution in 2006 over improper mutual fund trading.
No such prosecution deals for large banks have yet arisen out of the financial crisis. Some bank analysts say they may be coming. The government may eventually strike one with Goldman Sachs, which it continues to investigate for its mortgage securities dealings, Brad Hintz, a securities analyst at Sanford C. Bernstein & Company, wrote recently. “If an alleged violation is identified during a Goldman investigation, we expect a reasoned response from the Justice Department,” he added.
Worse, prosecutors seem ill-equipped to pursue these cases when compared to how well prepared the companies are to paper over their transgressions. The Times writes that "some defense lawyers say it is easier to make a persuasive case because prosecutors, having becoming more dependent on companies for investigative legwork, are less knowledgeable and thus less likely to counter with evidence they have uncovered."
There is, essentially, a parallel, incredibly lenient system of justice for the wealthy that contrasts starkly with the kind of zero-tolerance enforcement that has led to the U.S. imprisoning more than 2 million people. Try to think about how people in this country would react if the government took this approach to any other crime: Unauthorized immigrants avoiding deportation if they only admit to being in the country illegally. Instead of drug users or dealers facing draconian prison sentences, they can pay a fine as long as they say sorry and promise not to do it again. It's unimaginable.
