Justice pledging white-collar crackdown

The Department of Justice (DOJ) is pledging to crack down on white-collar crime following a historic decline in law enforcement efforts during the Trump administration. 

In a series of speeches since November, top DOJ officials have warned white-collar defense attorneys that prosecutors will be less willing to offer leniency to repeat corporate offenders and more aggressive in investigating wrongdoing. 

“Corporate crime weakens our economic institutions by undermining public trust in the fairness of those institutions,” Attorney General Merrick Garland said in a speech last month to the American Bar Association’s Institute on White Collar Crime.

“Failing to aggressively prosecute such crimes weakens our democratic institutions by undermining public trust in the rule of law,” added Garland, who said the essence of the law was to treat cases equally so there was not one rule for the rich and powerful and another for the poor and powerless.

“To fail to aggressively prosecute corporate crime leads citizens to doubt that their government adheres to this principle. The Justice Department does not intend to fail,” he said.

The DOJ’s new commitment has been encouraging to advocates, though many remain skeptical that the DOJ will put muscle and money behind its rhetoric.

“There’s been a meaningful shift in the way DOJ talks about corporate crime,” said Rick Claypool, the research director for the nonprofit advocacy group Public Citizen. “But what they can do [to show they’re serious] is start prosecuting cases.”

Claypool said the Trump administration was “bending over backward” to avoid cracking down on corporate America, which will make the new DOJ’s job tougher.

“They have got quite a hill to climb,” he said. “And it’s likely the case that because of the Trump administration’s policies, they’re even further behind than they seem because these cases take a long time to investigate and prosecute.”

Deputy Attorney General Lisa Monaco issued a memo in October announcing policy changes for charging and punishing corporate crime. It largely restored late Obama-era practices that placed a greater emphasis on seeking individual accountability in cases of corporate wrongdoing.

Those practices, implemented by Monaco’s predecessor Sally Yates in 2015, went largely untested as the Trump administration revised them.

Monaco, who helped lead the federal prosecution of Enron executives, said she learned from that experience the need for prosecutors to seek individual accountability at the top when they encounter corporate cultures of “greed and hubris.”

“Accountability, in the form of bringing individuals to justice and prosecuting senior leaders, I think, is very, very important because it goes to the core of faith in our system of justice,” she said last week in a virtual discussion with the Ethics & Compliance Initiative.

Researchers have struggled to accurately and comprehensively quantify federal law enforcement’s white-collar prosecutions. Part of the difficulty is that the DOJ does not have a designated category for “white-collar crime,” and such cases can involve violations of a wide range of law, including environmental, labor, tax, antitrust, fraud and bribery.

The Transactional Records Access Clearinghouse (TRAC) at Syracuse University, which has been measuring the DOJ’s efforts, has registered a steady decline in white-collar prosecutions since a recorded high of more than 10,000 in 2011.

According to TRAC’s data, the yearly total dipped below 6,000 for the first time in 2017, the first year of the Trump administration, and has yet to reach that level again since.

Brandon Garrett, a law professor at Duke University, found a sharp decline in the total amount of fines and the number of prosecutions against financial institutions and publicly traded companies from the last 20 months of the Obama administration to the first 20 months of the Trump administration. 

Garrett said the Biden administration’s new policies alone won’t do much to reverse recent trends and that a serious effort to impose accountability will require resources and a shift in priorities.

“The letter of the policies don’t matter quite as much as just the dedication and resources that are put into corporate prosecutions,” he said.

“Building a serious unit creates the kind of resources you need to do long-term and complex investigations,” Garrett added. “And it also means that you’re going to have cases that progress for years and you’re going to be more insulated from the sort of passing of whims of the politically appointed leadership from one term to the next. And so expanding long-term hires and building a larger, more serious group of people who focus on corporate cases is much needed.”

Still, those who believe the government needs to be more aggressive in investigating and punishing corporate crime see encouraging signs.

Jennifer Taub, a law professor at Western New England University and the author of the book “Big Dirty Money: The Shocking Injustice and Unseen Cost of White Collar Crime,” said she welcomes the Justice Department’s recognition that corporate prosecutions are “ebbing and flowing” and how that damages faith in its efforts to uphold the rule of law.

“The proof will be in the prosecutions,” Taub wrote in an email. “I trust their good intentions and look forward to seeing bold action.”

Claypool added that he’s been encouraged by signs that the department is serious about going after corporate repeat offenders. He conducted a study in 2019 that found that prosecutors rarely prosecute companies for violating previous settlements with the DOJ to avoid criminal charges or even admitting guilt.

He noted that the current DOJ has already gone after several high-profile companies that have been found to violate such agreements, including Deutsche Bank, Monsanto, NatWest and Ericsson.

And Garrett said he found it promising that the department is soliciting advice from legal scholars on how to move forward.

“I have no particular sense of what they plan to do with it, but it’s the first time I’ve been asked,” he said. “There have been prior administrations that have met only with corporate and industry groups. And this is the first time that I’m aware that the Department of Justice has actually talked to corporate crime experts. So I think that’s a positive development.”

But the Justice Department’s public commitment to cracking down on white-collar crime will likely also foster high expectations at a time when progressives are pointing to corporate greed as a major contributing factor to inflation, climate change and inequality.

And the success of the administration’s effort will likely be assessed not only in the number of prosecutions and the size of fines but also whether it sets its sights on C-suites.

“I’m quite confident that if there were a focus on holding powerful people accountable for law breaking, many prominent business people would end up ultimately indicted,” said Jeff Hauser, a former DOJ antitrust attorney and the director of the progressive Revolving Door Project, which has been lobbying the Biden administration to appoint officials willing to crack down on corporate wrongdoing.

Hauser said that there is a moral and political imperative for the administration to show it’s serious about the undertaking.

“If we want to rebuild faith in the Department of Justice and the notion of equal justice under law, we need to see the Justice Department eagerly seeking out powerful law breakers to bring to account,” he said.

“The politics of the moment demand accountability,” Hauser added. “There’s a lot of populist anger, a lot of sense that people are getting away with it. And Biden needs to show what side he’s on.”