Jail Them or Nail Them—Was Justice Served on the Banks?

January 31, 2013 by Fiscal Times

Lanny A. Breuer, the outgoing head of the Justice Department’s criminal division, can boast of a number of prominent notches in his belt after years of government service.

He extracted guilty pleas on 14 criminal counts in the BP Deepwater Horizon oil spill case. He nailed over 100 people in a celebrated Medicare fraud case. He prosecuted members of La Costra Nostra in one of the largest takedowns of organized crime in U.S. history. And he prosecuted banks involved in rigging the global interest rate known as Libor that so far has led to almost $2 billion worth of settlements and fines.

But Breuer and his lawyers have almost nothing to show for what some say was at best a half-hearted probe of perhaps the most shameful and tawdry performance ever by Wall Street in the run-up to the 2008 financial collapse.

Breuer has argued in effect that it is difficult to prove fraudulent intent beyond a reasonable doubt in cases like this, which makes any criminal case against a high ranking corporate executive a legal high-wire act. He said the government must weigh the value of waging a long and costly criminal investigation that might not pay off against the possibility it would destabilize a financial institution, to the detriment of the employees and investors.

He noted during a speech before the New York Bar Association last September that since the 1990s, the Justice Department has had better success by agreeing to defer prosecution against corporations in exchange for an admission of wrongdoing, cooperation with the government’s investigation, including against individual employees, and payment of monetary penalties. “The result has been, unequivocally, far greater accountability for corporate wrongdoing – and a sea change in corporate compliance efforts,” Breuer said. “Companies now know that avoiding the disaster scenario of an indictment does not mean an escape from accountability.”