Obama's legacy: eight years of not holding executives criminally responsible for their companies' misdeeds

The most remarkable criminal justice story of 2017 is that the FBI has arrested a real corporate criminal, a VW executive who tried to engineer a coverup of the Dieselgate scandal, and that he might go to jail — it's remarkable because the Obama administration spent eight years resolutely not sending criminal executives to jail, preferring instead to let their corporations buy their way out of criminal sanctions with huge fines, a doctrine pioneered by Obama Attorney General Eric Holder back when he worked for Bill Clinton's administration. But while Clinton rejected this idea, Obama put it into practice.

Holder believes that jailing executives — and exacting other forms of significant criminal justice against criminal corporations — is fundamentally unjust, because of all the collateral damage to investors, employees and customers. Instead, Holder preferred to fine companies very large sums (but not so large that the companies were jeopardized), effectively turning criminal lawbreaking into a predictable line item, one of the costs of doing business. Meanwhile, the collateral damage from the jailing of poor people — damage to their families and their communities — was considered an unavoidable and tolerable result of a functional criminal justice system.

It's thanks to Holder than not one banking exec went to jail for the mass fraud that led to the collapse of the global economy in 2008 — ironically, the Holder doctrine's rise coincides with the peak of extreme prison sentences for minor crimes — as Matt Taibbi documents in his amazing book The Divide, which begins with two sentencing hearings, in the same building, on the same day: in the first, a man gets years in prison for possessing a small amount of marijuana; in the second, HSBC executives are allowed to walk free after being convicted of laundering literally billions of dollars for barbaric Mexican drug cartels — despite having ordered the construction of wider teller-windows to accommodate the enormous sacks of cash that drug cartel bagmen brought into HSBC branches (that's not a metaphor — that actually happened).

The Too-Big-To–Fail bankster is a creation of the Obama DoJ, and it's a significant contributor to the widespread perception that the "system is rigged," and the election of Donald Trump — who knew exactly how rigged the system is, because he is a major beneficiary of that rigging.

Holder left the DoJ job in 2015 and started drawing a $3M/year salary as a finance exec; it was his successor, Loretta Lynch, who began jailing executives for ordering crimes. Her Deputy Attorney General Sally Yates, author of the "Yates Memo," advocated for the zealous prosecution and jailing of executives, and the prosecution of VW executive, Oliver Schmidt, is a case study in how devastatingly effective the application of normal criminal justice procedures to big companies can be.

To secure their indictment against Schmidt, the company first indicted an engineer who was immediately involved in the crime. After securing a plea bargain from him, they used his testimony to secure an indictment against Schmidt. The indictment also names even higher-ranking executives who conspired with Schmidt to cover up the crime, putting them on notice that they are next in line, and dangling a lifeline for Schmidt if he wants to turn on his colleagues to make things easier on himself.

Since September, we've chronicled the Wells Fargo scandal, in which the bank defrauded millions of Americans, costing some of them their homes and jobs by staining their credit records, for which the responsible executives were paid huge bonuses, even when they resigned over their culpability in the lawbreaking. Meanwhile, the company also conspired to blacklist employees for refusing to participate in the fraud, ending their careers by libelling them in secret accusations of wrongdoing that were circulated to other banks.

The willingness of Wells Fargo to commit these crimes can surely be attributed in part to the Holder doctrine: after all, the bank received a $36B bailout from Obama, after it was established that the bank knowingly contributed to the crash by committing another series of frauds.

Jeff Sessions, Trump's next Attorney General, is a terrible person and will be terrible for America, but one minute and rather dim bright spot is that he has a reasonably good record when it comes to calling for criminal prosecutions of corporate executives — though I am very skeptical that Trump will allow him to go after the businesses he favors, it may be that Trump will give him rein to go after the ones he wants to scapegoat (this being the era of rule of man, rather than rule of law). It's an indictment of Obama's corporate criminal justice legacy that this would be an improvement on the status quo since 2008.

There is no reason that the same process could not have been used for Bank of America, JPMorgan Chase, Goldman Sachs and many other institutions that played a role in the financial crisis. We had the names of the traders who marketed and sold dodgy mortgage securities to investors without disclosing the risks. We had millions of false documents issued to courtrooms and county offices nationwide, with forged signatures attached to them. That's a wealth of raw material from which to begin an effort to locate who authorized the fraudulent materials, and who directed those people to authorize them, and so on, until law enforcement reached every C-suite at every major financial institution in America.

Waiting nearly eight years to put this detective work into practice begs the question of why it laid dormant for so long. Moreover the buzzer-beating conduct in the Volkswagen case could go for naught. Within weeks, Alabama Sen. Jeff Sessions will likely take over running the Justice Department. There's no guarantee he will follow through with Volkswagen executive criminal indictments; in fact, senators on the Judiciary Committee should ask him that question at his confirmation hearings, which begin today.

For what it's worth, Sessions did say in 2010 that DoJ shouldn't hesitate to charge companies that break the law, and Volkswagen actually wants to close its settlement with the current administration rather than facing the unknown with the new attorney general. But off-the-cuff statements in the Senate and actual responsibility at Justice are two different things. We simply don't know how Sessions will act and whether the Yates memo will have any meaning.

Obama's Legacy on Corporate Criminals: Too Little, Too Late
[David Dayen/The Fiscal Times] [Warning: this site autoplays video and displays pop up notices that repeatedly crashed my browser]

(via Naked Capitalism)