Andrew Harnik/AP Photo
Swedish telecom firm Ericsson, along with British bank NatWest, has been informed that it is in violation of a leniency agreement made with the U.S. Department of Justice.
The failure of accountability for elite wrongdoing has been a signature catastrophe for America over the past two decades. From the Bush administration’s torture program to the Catholic Church pedophilia scandal to the cacophony of malfeasance in the Trump administration, crime has not been a deterrent to prospering in America. And in the corporate realm, practically nobody—from the bankers who caused the mortgage crash to the engineers who lied about Volkswagen’s environmental capabilities to the airbag makers at Takata to a seemingly limitless number of others—has seen the inside of a prison cell for major violations of law. Federal white-collar prosecutions plunged to a 25-year low in 2020.
That’s why it wasn’t that surprising to me that Deputy Attorney General Lisa Monaco’s announcement of a new approach to tackling corporate crime attracted relatively little attention among the public. We’ve heard these kinds of statements from Democratic Justice Departments before; in the fall of 2015, the so-called “Yates Memo” staked out similar territory on targeting individuals involved in corporate violations, yet this did not meaningfully alter the trajectory in the final years of the Obama administration. We’ve reached a point where there won’t be any credibility to DOJ’s promises until action is actually taken.
To that end, Public Citizen has produced a new report offering a road map on where to start with this new aggressiveness. Some of the biggest companies in America are currently under official settlement agreements over past offenses. The Justice Department has said it would rededicate itself to monitoring these agreements. They now have a cheat sheet.
The Monaco announcement had three prongs. First, she restored the elements of the Yates Memo which required companies to provide the names of all individuals involved in a particular corporate violation as a condition for the corporation getting credit for cooperating. Second, she said that the DOJ will review prior overall misconduct when setting penalties for corporations; this is new, because previously only misconduct in the particular type of offense at issue was taken into account—which is crazy if you think about it (does an individual criminal suspect in a robbery with a prior record of drug possession not have that record taken into account?).
The third piece involves deferred prosecution or non-prosecution agreements (DPAs or NPAs), in which companies can avoid criminal prosecution for crimes in exchange for a fine and changes in practices through a monitoring period over a number of years. It was the hope of some that DOJ would end these so-called leniency agreements, given the wildly inappropriate use of a tool first put in place to deal with juvenile delinquents in need of rehabilitation. Instead, Monaco vowed to actually enforce the agreements. She re-emphasized the use of independent monitors to scrutinize whether companies comply with their end of the bargain. And she vowed that “we will hold accountable any company that breaches the terms of its DPA or NPA,” with “serious consequences for violating their terms.”
This would be a very new development. Public Citizen previously surveyed over 500 leniency agreements, and found only seven out of the 500 instances where there was even a notification of a breach of the agreement, and only three in which there was a resumption of prosecution.
As Public Citizen outlined in a report made available exclusively to the Prospect, that would put 20 major companies currently bound by leniency agreements under the microscope. The list includes such major banks and financial operations as Merrill Lynch, HSBC, Wells Fargo, JPMorgan Chase, Goldman Sachs, and Credit Suisse. It includes top airplane makers Boeing and Airbus, and top airline United. Monsanto’s DPA expires in just a couple of weeks, on November 21; other leniency agreements are with Walmart, Microsoft, Chipotle, Novartis, Ticketmaster, and FirstEnergy.
“So much of [Monaco’s] speech was focused on companies in leniency agreements,” said Rick Claypool, author of the report. “And we know who they are. It’s these big companies that should be held to the actual standard of their agreements.”
According to Bloomberg, in recent weeks Swedish telecom firm Ericsson and British bank NatWest have been informed that they are in violation of their leniency deals. This provides a good test case for Monaco’s proposition that a DPA or NPA cannot be a get-out-of-jail-free card. Will these breach notifications be followed by some accountability?
The only way the Justice Department can gain any credibility on its record on corporate crime is to actually penalize it.
Monaco also mentioned in her speech that “between 10 and 20 percent of all significant corporate criminal resolutions involve companies who have previously entered into a resolution with the department.” This is consistent with an estimate Claypool made in an earlier report of 15 percent, and it reveals a serious problem of corporate recidivism, precisely what the leniency agreement framework is supposed to prevent. You can see this specific epidemic illustrated at Good Jobs First’s Violation Tracker.
Indeed, all 20 of the companies under leniency agreements in the Public Citizen report had prior government enforcement actions against them, from as few as three for Microsoft to as many as 533 for United Airlines (the majority of them Federal Aviation Administration actions). If the Justice Department is serious that past performance will determine future resolutions of corporate criminal cases, then Boeing’s 84 prior enforcement cases, Wells Fargo’s 92, Merrill Lynch’s 97, and Walmart’s 330 will have to be put on the table.
The Justice Department still has a long way to go. Some leniency agreements aren’t even made available to the public; Claypool was unable to locate the NatWest agreement, for example. The most robust accounting of corporate prosecutions comes from a private database managed by two law professors, one of whom is suing DOJ to force the release of all settlement information.
The department has also promised to assemble an internal corporate crime advisory group, the details of which have not been revealed. This group is tasked with making a broader assessment of corporate crime enforcement, and some recommendations. Claypool hopes that the advisory group will recommend a specialized corporate prosecution division. “It’s true that these cases are big and complex and have moving parts,” he said. “It makes sense to have expertise to be concentrated in a way.”
But ultimately, the only way the Justice Department can gain any credibility on its record on corporate crime is to actually penalize it. Too many companies in America are run as transnational crime rings for the benefit of major shareholders and executives. We are constantly told by municipal and national politicians that more police and swift punishment can tamp down crime sprees. That cannot only hold on city streets and not in corporate boardrooms.
“The more attention this gets, and the more people that are aware that DOJ is taking this stand, the more pressure [DOJ is] going to feel that they keep their promises,” said Claypool. “At some point, they are going to have to start prosecuting these companies.”
