Cross-posted on the New York Law Journal
The United States houses more people in prison than any nation on the planet, incarcerating 716 people for every 100,000 residents. In fact, our incarceration rate is more than five times higher than most of the countries in the world. Minorities are impacted by our nation's policies the greatest. For African American males in their 30s, one in every 10 is in prison or jail. The impact of the "war on drugs," has resulted in a disproportionate impact on minorities, as two-thirds of those in prison for drug offenses are minorities.
In the United States, many would argue that there are two justice systems: one for the poorest citizens, many of whom are minorities, and one for the wealthy who can afford attorneys to negotiate their way out of spending time behind bars. For example, in the prosecution of former executives of Enron, Kenneth Lay's defense cost $25 million and Jeffrey Skilling's cost $70 million. Many have pointed to the fact that no banking executives have been criminally prosecuted for their role in causing the biggest financial disaster since the Great Depression as evidence of a tiered justice system. In "Too Big to Jail: How Prosecutors Compromise with Corporations," University of Virginia School of Law professor Brandon L. Garrett opens a window and sheds light on the seldom explored world of what happens when criminal charges are brought against a major company in the United States, pointing out throughout the pages of his text that prosecutors fail to effectively punish the most serious crimes.
It is not that prosecutors are not attempting to take on major financial institutions and large companies. In fact, the last decade has seen prosecutors attempt to prosecute some of the nation's largest powerhouses such as: AIG, Google, Halliburton, HSBC, JPMorgan, KPMG, Merrill Lynch, and Pfizer. It is Garrett's study of their case outcomes that is sometimes disconcerting.
Garrett's title plays on the popularized phrase "too big to fail," which was commonly used after the recent financial crisis to describe the fear that the biggest banks are so critical to the global economy that the government has no choice but to save them from total collapse. This idea resonates within the walls of the Justice Department as well, argues Garrett, as some prosecutors are not holding large corporations accountable for crimes because of their importance to the worldwide financial system. But Garrett's book doesn't only focus on banks. He makes a compelling argument that the "too big to jail" concern spreads beyond the banks. It applies to many other large corporations such as pharmaceutical companies, oil and gas companies, and consulting companies. He also argues that the concern "extends to whether officers and employees are held accountable; they can literally be put in jail."
Garrett's theme echoes Glenn Greenwald's exploration of the two-tiered system of justice in America that safeguards that the country's political and financial elite is virtually immune from prosecution in his 2011 book, "With Liberty and Justice for Some." Greenwald wrote that, "the United States has become a nation that does not apply the rule of law to its elite class, which is another way of saying that the United States does not apply the rule of law." He traces back our nation's reluctance to prosecute the elite and the powerful to the 1974 pardoning of Richard Nixon for his role in the Watergate scandal by Gerald Ford "for the good of the country" as it was thought that the president should not be subjected to prosecution for his crimes because he resigned and already suffered reputational damage.
Exploring the delicate dance around prosecuting large companies for alleged criminal acts, Garrett explains how current day prosecutors are transforming their approach to take legal action against corporate wrongdoers. Over the past decade, he points out, prosecutors have embraced deferred prosecution agreements. These permit many corporations to avoid a conviction but usually require hefty fines and the imposition of an independent monitor who helps to reshape the corporate culture and governance of the institution. "The big story of the twenty-first century," writes Garrett, "is not corporate fines or convictions but prosecutors changing the ways that corporations are managed." Analogous to how federal judges oversaw school desegregation in the 1960s and 1970s, prosecutors are playing a role in ensuring that compliance with ethics and integrity is achieved. However, Garrett points out that the overwhelming majority of these deferred prosecution "agreements rely on voluntary compliance by companies rather than on monitoring."
Garrett argues that corporate convictions should be the norm and urges prosecutors to get tougher with deferred prosecution agreements. Even with the requirement of independent monitors to supervise compliance, many of agreements last only two years, hardly enough time for prosecutors to effectively supervise the rehabilitation of some of the nation's largest corporations. And, in most cases, no judge is reviewing the monitor's progress or whether the corporation is complying with the monitor's reforms.
Can large corporations go to jail? Legally, corporate persons cannot be imprisoned, but they can be convicted of serious felony offenses, sometimes based on the criminal conduct of a single employee. And, they can be required to pay devastating fines and suffer the resultant reputational harm.
So, what is a prosecutor to do? Garrett suggests that Congress could provide greater investigative resources so that federal prosecutors can "tackle large companies, which can outgun prosecutors with massive spending." He points to the savings and loan scandal of the 1980s as a noteworthy model where Congress not only passed legislation providing for tens of millions of dollars to investigate and prosecute banking crimes but also extended the statute of limitations for bank fraud to provide prosecutors with additional time to investigate and bring charges. Additionally, Garrett notes that judges ought to play a stronger role in evaluating whether internal compliance measures agreed upon in deferred prosecution agreements are working in practice. Judges could also not let companies "off the hook" until they have carefully reviewed compliance reports, spoken to regulators and prosecutors, and "decided it is in the public interest to conclude a case." And, he argues that judges and prosecutors could require large corporations to issue an apology as a routine matter.
The book grapples with complicated issues, problems of resources and political will, and the power of money. However, it is hard to walk away from this text without the sense that with some small reforms, more large corporations could be held both financially and morally accountable for their behavior.