by Russell Mokhiber and Robert Weissman
July 26, 2003
President Bush's man in charge of the Corporate Fraud Task Force, Larry Thompson, went to the White House this week to let the world know that Bush was cracking down on corporate crime.
Thompson, who is the second in command under Attorney General John Ashcroft, told the assembled reporters that in the year since the task force was created, it had obtained over 250 corporate fraud convictions or guilty pleas, including guilty pleas or convictions of at least 25 former CEOs, and that it had charged 354 defendants with some type of corporate fraud in connection with 169 cases.
"We have over 320 investigations pending, involving in excess of 500 individuals and companies as subjects of these investigations," Thompson said.
That's a pretty impressive accomplishment for one year.
But forcing corporate criminals and their executives to plead guilty is only half the game. The other half is punishment.
What Thompson didn't say is that only one high-level corporate executive has gone to jail in that year.
That was Sam Waksal, the former ImClone CEO, who reported yesterday to Schuylkill Federal Correctional Institution in Minersville, Pennsylvania. Waksal was sentenced last month to seven years and three months in prison and ordered to pay about $4.3 million after pleading guilty to insider trading.
What Thompson also didn't tell reporters -- why would he? -- was that he has helped rig the system so that corporations have a way to get out of a criminal jam once they commit the crime.
Thompson says that he wants to hold corporations accountable for the criminal culture and conduct they promote.
Yet in a memo issued under his name in January 2003, Thompson opened a loophole for corporations to get away with criminal behavior without effective criminal sanction.
The memo, titled "Federal Prosecution of Business Organization," gives prosecutors discretion to grant corporations immunity from prosecution in exchange for cooperation.
These immunity agreements, known as deferred prosecution agreements, or pre-trial diversion, were previously reserved for minor street crimes.
They were never intended for major corporate crimes.
In fact, the U.S. Attorneys' Manual explicitly states that a major objective of pretrial diversion is to "save prosecutive and judicial resources for concentration on major cases."
Since Thompson's memo, there have been a rash of deferred prosecution agreements in cases involving large corporations, including a settlement with a Puerto Rican bank on money laundering charges and a Pittsburgh bank on securities law charges.
And some corporate crime defense attorneys believe that it is possible to enter these agreements with the Justice Department so as to avoid any publicity.
"This is a favorable change for companies," said Alan Vinegrad, a partner at Covington & Burling in New York. "The memo now explicitly says that pre-trial diversion, which had been reserved for small, individual, minor crimes, is now available for corporations."
Vinegrad said that while there have been a handful of publicized pre-trial diversion cases by corporations, it is conceivable that the Justice Department can cut these kind of deals with companies without filing a public document -- and therefore without any publicity to the case.
Vinegrad said that one such case has been handled by his office.
"Sometimes the agreement does not require -- depending on how they get done -- the filing of any public documents in court," Vinegrad said. "There wouldn't be that relatively easy means of finding out what happened."
Larry Thompson argues that corporations must be criminally prosecuted if they commit crimes. At the same time, he says that if they commit crimes, but cooperate with the government, they can wipe the slate clean, settle the case -- maybe even without public notice -- and avoid punishment without admitting criminal wrongdoing.
The Justice Department also allows corporations to plead out minor units to major crimes when the parent companies should be held responsible. The reason the parent companies aren't forced to plead guilty is because they then would lose federal contracts. Real punishment for real crime. Can't allow that to happen.
The fines imposed in connection with such cases generally are minor wrist slaps.
Corporations most fear losing government contracts, major adverse publicity and their executives going to jail.
Little of that happens with this Justice Department.
Corporate crime and violence inflicts far more damage on society than all street crime combined.
Corporate criminals should not be given a special pass.
Make them admit guilt.
Impose tough sanctions.
Publicize the cases.
Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime Reporter (http://corporatecrimereport.org). Robert Weissman is editor of the Washington, D.C.-based Multinational Monitor (www.multinationalmonitor.org). They are co-authors of Corporate Predators: The Hunt for MegaProfits and the Attack on Democracy (Monroe, Maine: Common Courage Press; http://www.corporatepredators.org).