Lenin Nolly/NurPhoto via AP
Attorney General Merrick Garland testifies before the House Judiciary Committee, September 20, 2023, on Capitol Hill in Washington.
Former cryptocurrency oligarch Sam Bankman-Fried is on trial for alleged wire fraud and defrauding the customers of his former exchange FTX, and he recently chose to take the stand. Given how comically blatant the accused crimes were, this went about as well as could be expected. “At various points during Sam Bankman-Fried’s cross examination, I saw jurors shake their heads, frown so hard their lips disappeared, and make prolonged eye contact with each other,” writes Elizabeth Lopatto at The Verge. “On the stand, Bankman-Fried’s demeanor suggested a spoiled child complaining he didn’t get the biggest scoop of ice cream at his birthday party.”
As Jesse Eisinger describes in his book The Chickenshit Club, during the Obama and Trump administrations the prosecution of corporate criminals (that is, bringing charges against companies, like when the accounting firm Arthur Andersen was charged as part of the Enron case) plummeted. The SBF story—an extremely high-profile prosecution of a formerly celebrated oligarch, who had spread vast sums around the liberal media and Democratic Party—would seem to suggest that things have changed, and the party is over for scofflaw corporations.
But this is not the case. At Public Citizen, Rick Claypool has written a report demonstrating that corporate prosecutions have not increased at all relative to the Trump years. On the contrary, there were slightly more of them in 2017 and 2019 than in either 2021 or 2022, though neither of those are close to the peak years of the Bush or Clinton administrations. Once again, Attorney General Merrick Garland is simply not cutting the mustard.
This chart from the report makes the trend clear:
I have previously written about Garland’s disgraceful dithering over imposing consequences for Donald Trump’s attempted putsch. The guy attempted to end democracy and install himself as dictator, all carried live on national television, and yet somehow the Garland Justice Department treated the situation like some thorny metaphysical quandary. And while the current federal prosecutions of Trump are highly welcome, by all accounts they only happened because Garland was shamed into appointing a special prosecutor by the January 6th Committee, nearly two years after Biden took office. But even if you believe that Garland was appropriately careful with a bombshell prosecution of a former president, the evidence on corporate crime suggests that his lack of swift accountability is rather endemic.
Claypool’s report identifies a couple of probable reasons why Garland’s DOJ hasn’t been reinvigorated. The first is that they simply aren’t bringing many prosecutions. During the Obama and Trump years, a favorite method for letting corporate criminals skate was the deferred prosecution agreement (DPA). Typically, these involve the company admitting to some wrongdoing, paying a nominal fine, and promising not to do it again. Sometimes they don’t even have to admit anything.
DPAs have fallen substantially during the Biden years, but prosecutions have not risen. In fact, if you add corporate prosecutions and DPAs together, fiscal year 2022 saw the lowest number of criminal cases of any year since 1994. Given Garland’s usual procrastination habit, it’s plausible to suspect that fewer corporations are being investigated.
Even those companies that are prosecuted are primarily small fry. The DOJ’s annual report shows that 81 percent of corporate prosecutions in fiscal year 2022 involved companies with fewer than 50 employees. Only 7 percent involved large companies with over 1,000 employees. Leniency agreements went to large firms like Credit Suisse, Uber, and Stericycle.
A second possible factor is the “declination,” which is when the government formally agrees not to prosecute someone. During the Obama and Trump years, corporations could often get these for self-reporting violations of the Foreign Corrupt Practices Act. Now, thanks to an unbelievable new order, under Biden corporations are potentially eligible for a declination for self-reporting any criminal violation. Just one declination has been publicly reported over the past two years—but they do not have to be made public.
Only 7 percent of the Justice Department’s corporate prosecutions in fiscal year 2022 involved large companies with over 1,000 employees.
Ken Polite, who until recently was the assistant AG for the Criminal Division, said the quiet part loud in a January speech, stating that if a company self-discloses and cooperates, “there is a presumption that we will decline to prosecute absent certain aggravating circumstances.” And even if there were aggravating circumstances, Polite continued, “prosecutors may nonetheless determine that a declination is the appropriate outcome.” Polite’s now a corporate defense lawyer, in case you had to guess.
While it has only recently come into effect, a third DOJ innovation shows the mindset of the agency as it relates to corporate crime. As outlined in a speech by Deputy Attorney General Lisa Monaco, a “safe harbor” standard for mergers allows purchasing companies to be excused from the misdeeds of the company being acquired, so long as they admit to them.
Obviously, these rules are vulnerable to abuse. A company could do gobs of crimes, and merely keep an eye on the government in case it needs to suddenly “discover” the wrongdoing and be absolved. Or as Sen. Elizabeth Warren (D-MA) pointed out in a letter to Garland and Monaco, “this approach would incentivize corporations to engage in illegal activity of all kinds—knowing that they could simply wipe the slate clean during a merger.”
Monaco has previously told prosecutors to hold corporations accountable, and to “be bold” in doing so. If the safe harbor is what she meant by that, she has a different definition of bold than I do.
The SBF prosecution is highly welcome, but quite unrepresentative of the average case of corporate lawbreaking. Most big companies will not be so preposterously blatant as to keep a spreadsheet cell titled “Hidden poorly internally labeled ‘fiat@’ account” with negative $8 billion in it, and most big-company executives will not be so arrogant or dimwitted they’ll take the witness stand and immediately faceplant. Prosecuting the median corporate criminal is difficult and complicated.
The Trump years were a culmination of a culture of elite impunity that developed over many years. He never would have even become a billionaire if he had not escaped punishment for serial misdeeds, like serially stiffing his contractors, or allegedly defrauding the IRS, or the numerous credible accusations of sexual assault, or the dozens of cases of alleged bank fraud outlined in the ongoing civil trial in New York.
When a country has a festering case of criminal oligarchy, a hard-bitten legal brawler is called for. We need an attorney general wielding a meat cleaver, ready to hack the rot out of the national elite. Instead we have a quavering, timid lifelong insider, obsessed with appearances and decorum, ready to seize on any excuse to avoid the tough battles. It’s unacceptable.
