Tuesday marks the seventh anniversary of the huge Lehman Brothers crash that nearly took down America’s financial system. It’s a shame, really, that it has taken the federal government this long to make a priority of prosecuting individual corporate executives who flout the law.
Last Wednesday, the U.S. Justice Department announced a new policy to go harder after individual employees when a financial crime takes place rather than go after just the company. The Justice Department also will demand that corporations cough up any evidence that implicates executives in a crime.
For years, too many big banks and other corporations have behaved as though paying fines for breaking regulatory laws is just a cost of business, and it is easy to see why. They have had little to fear. It’s not like anybody has had to worry much about going to jail.
This was the case after the financial crash of 2008, of course, when average Americans lost their jobs, homes and nest eggs. No top executives were hauled into court for the widespread financial fraud. Instead, we witnessed a run of deferred prosecutions and nonprosecution agreements.
And now, just last week, United Airlines CEO Jeffrey Smisek and two other top execs quit their jobs as federal investigators probed a possible case of favor-trading at the airport in Newark, N.J. But no one has been charged, and it’s not known whether any crime actually took place.
In previous financial meltdowns, authorities were more quick to seek out culprits. After the stock market crash of 1929, the head of the New York Stock Exchange wound up in prison. Even Chicago utilities magnate Samuel Insull was dragged into court, though he beat the charges.
More than 1,000 people, including top executives, were prosecuted for misdeeds during the savings-and-loan scandals of the 1980s. When the dotcom bubble burst in the 1990s, top people at such companies as WorldCom, Enron, Qwest and Tyco went to prison.
But after the huge 2008 crash, the Justice Department contented itself with collecting billions in civil-court fines and getting banks — not people — to plead guilty to criminal charges.
The new Justice Department policies consist of guidelines, not hard-and-fast rules, so it remains to be seen just how tough prosecutors really will be.
But the Justice Department’s shift in focus is a good one. A crook is a crook, whether he works a street corner or a board room.
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