The Bush administration not only has trouble following the law, it also doesn’t seem especially fond of enforcing the law, either. Through something called “deferred prosecutions,” the administration is neglecting to prosecute corporate crimes that that would have resulted in indictments in previous administrations.
In a major shift of policy, the Justice Department, once known for taking down giant corporations, including the accounting firm Arthur Andersen, has put off prosecuting more than 50 companies suspected of wrongdoing over the last three years.
Instead, many companies, from boutique outfits to immense corporations like American Express, have avoided the cost and stigma of defending themselves against criminal charges with a so-called deferred prosecution agreement, which allows the government to collect fines and appoint an outside monitor to impose internal reforms without going through a trial. In many cases, the name of the monitor and the details of the agreement are kept secret.
Deferred prosecutions have become a favorite tool of the Bush administration. But some legal experts now wonder if the policy shift has led companies, in particular financial institutions now under investigation for their roles in the subprime mortgage debacle, to test the limits of corporate anti-fraud laws.
Of course companies are testing what they can legally get away with — they know they have a Justice Department that doesn’t mind taking a pass when confronted with evidence of corporate bribery, fraud, and other crimes. Offered a chance at “deferred prosecution” agreements, companies jump at the chance, because, as law professor Vikramaditya Khanna noted, “clearly it avoids a bigger headache for them.”
The Bush administration didn’t invent this legal option, but the New York Times added that while “deferred prosecution” agreements were “once rare,” they have “skyrocketed in the current administration.”
It’s one thing to avoid regulating businesses; it’s another to make it easier for them to get away with alleged criminal activity.
I realize that “deferred prosecutions” are billed as a way to save time and money for federal prosecutors, and prevents companies suspected of wrongdoing from going under.
But as the NYT noted in an editorial today, “The cost to the public and the rule of law is too high.”
If corporations believe that they can negotiate their way out of a prosecution, the deterrent effect of the criminal law will inevitably be weakened.
The deals also leave a clear impression that an administration that prides itself on being pro-law-and-order — and on appointing federal judges who are tough on ordinary criminals — is tilting the justice system in favor of the wealthy and powerful.
There also are worrying signs that some prosecutors may be using these agreements for political patronage. Congress has been investigating the decision by Christopher J. Christie, the United States attorney for New Jersey, to award John Ashcroft, the former attorney general, a multimillion-dollar contract to monitor a medical supply company accused of fraud. He also gave a valuable contract to another former official, Debra Wong Yang.
Now that the F.B.I. is investigating mortgage lenders in the subprime scandal, the issue of deferred prosecution agreements takes on even more urgency. If any of these lenders have committed fraud, the Justice Department must prosecute them vigilantly. What it should not do is work out another cozy deal and hand another rich monitoring contract to a political friend.
Remember, back in the day, when Republicans presented themselves as the “law and order” party? Good times, good times.