Sunday, May 6, 2012

Too Big to Jail?

My spouse, Mary Kreiner Ramirez, recently posted an important law review article that every lawyer, law student and citizen should read, about a new lawlessness taking hold in our society that is yet another symptom of life in a crony capitalism state or our corporatocracy. Entitled Criminal Affirmance: Going Beyond the Deterrence Paradigm to Examine the Social Meaning of Declining Prosecution of Elite Crime, here is the abstract:

Recent financial scandals and the relative paucity of criminal prosecutions against elite actors that benefited from the crisis in response suggest a new reality in the criminal law system: some wrongful actors appear to be above the law and immune from criminal prosecution. As such, the criminal prosecutorial system affirms much of the wrongdoing giving rise to the crisis. This leaves the same elites undisturbed at the apex of the financial sector, and creates perverse incentives for any successors. Their incumbency in power results in massive deadweight losses due to the distorted incentives they now face. Further, this undermines the legitimacy of the rule of law and encourages even more lawlessness among the entire population, as the declination of prosecution advertises the profitability of crime. These considerations transcend deterrence as well as retribution as a traditional basis for criminal punishment. Affirmance is far more costly and dangerous with respect to the crimes of powerful elites that control large organizations than can be accounted for under traditional notions of deterrence. Few limits are placed on a prosecutor’s discretionary decision about whom to prosecute, and many factors against prosecution take hold, especially in resource-intensive white collar crime prosecutions. This article asserts that prosecutors should not decline prosecution in these circumstances without considering its potential affirmance of crime. Otherwise, the profitability of crime promises massive future losses. 

Prof. Ramirez persuasively argues that pursuing elite crime vindicates far more weighty interests than mere street crime entails. Elite crime simply garners more attention than a typical grand theft auto or possession of marijuana. By definition elites hold more power than street criminals, meaning their continued incumbency at the apex of our financial system promises more harm than the continued freedom of, say, a shop lifter. As such, traditional notions of deterrence fail to account for the unique compulsion in favor of punishing elite crime.

The party line here from the administration is: "We’ve found that much of the conduct that led to the financial crisis was unethical and irresponsible, but we also have discovered that some of this behavior, while morally reprehensible, may not necessarily have been criminal." Yet, Goldman Sachs settled securities fraud claims with the SEC for $550 million--the largest securities fraud settlement in the SEC's history. Other banks also paid hundreds of millions to settle securities fraud charges brought by the SEC. Angelo Mozilo paid a settlement of $67 million (the most ever by an officer of a pubic firm) to the SEC for his role in securities fraud at Countrywide. The DOJ could have pressed criminal charges of securities fraud in any of these cases, and allowed a jury to determine if criminal securities fraud had occurred.

Instead, the message of the Obama Department of Justice is that crime does pay. Further, these firms my have paid large fines, but they otherwise retain the profits of their crimes and their positions of power in our economy. For example, Angelo Mozilo paid $67. 5 million; but, his firm paid $45 million and he made over $500 million from 2003 to 2008 while at the helm of Countrywide. Yet, the DOJ declined to prosecute.

This historic run of lawlessness at the heart of our economy means that for first time ever in our history a class of individuals stands immune to criminal sanctions.

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