Common vs. Corporate Criminals

Little vs. Big Crime

U.S. District Judge Amos L. Mazzant in Sherman Texas, a Dallas suburb, recently sentenced Thomas W. Lucas Jr., 35, to 17 ½ years in prison for criminal fraud and lying to the FBI. Lucas had dishonestly taken money from 280 people who thought they were buying land to be used in a new Disney Park. Judge Mazzant, who also ordered Lucas to pay $8.4 million in restitution, said upon sentencing that Lucas "caused a lot of damage to a lot of people." True, for sure.

Lucas committed a "little personal crime" and thus gets personal punishment. If Lucas had committed a "big corporate crime," however, he would still be free and the likely penalty would be some public shaming, a fine paid by his stockholders, and maybe some civil lawsuits against the corporation. Prison time would have been off the negotiating table.

Viewed from a different perspective, federal prosecutors' de facto policy for crimes by big corporations -- "big crimes" -- is to bargain away executives' jail time for big corporate fines paid into the U.S. Treasury. Thus, federal prosecutors are now a major source of federal revenues.

Prime examples of this "corporate crimes pay" policy are the five top U.S. banks whose criminal acts crashed the world economy 7 years ago. All paid billions in fines and not a single bank executive was jailed, let alone indicted. Indeed, none of these banks or their officials even admits any wrongdoing. They do, however, regularly get invitations to State Dinners at the White House, along with Congressional leaders from both Parties.

U.S. policy on big crime, therefore, is secondarily about deterrence and increasingly about the federal government receiving big revenues through negotiated fines and candidates for federal office receiving massive PAC donations. In any other context, the practice would be called a "shakedown."

The pattern is clear. Consider these recent cases in the auto industry.

1. Hyundai Motor Company and Kia Motors Corporation, which are part of the Hyundai Motor Group, one of the world's largest automakers, were fined a $100 million civil penalty in 2014 to resolve their Clean Air Violations on more than 1 million vehicles sold in the U.S. Executives of these companies had certified that these vehicles met EPA standards when they do not -- a criminal act.

According to the EPA, these vehicles will collectively spew into the U.S. atmosphere an excess of 4.75 million metric tons of greenhouse gasses.

Punishment consisted of the $100 million fine, forfeiture of Greenhouse gas emission credits, and a consent agreement in which the corporations promised not to repeat such criminal activity. No corporate executives were indicted.

2. Toyota paid the federal government a $1.2 billion fine in 2014 to resolve its criminal act of concealing from safety regulators about engineering defects in various 2009 and 2010 models that experienced sudden acceleration and are linked to 5 deaths. Again, no corporate executives were indicted.

3. In the summer of 2015, General Motors admitted that for a decade it had knowingly defrauded customers when it marketed as safe millions of vehicles that had a defective ignition switch. The defect led to the deaths of at least 120 people and injuries to more than 1,385. GM knowingly concealed this default from federal officials and filed false documents -- both of which are criminal acts.

The Justice Department settled with GM for a $900 million fine. GM pleaded not guilty. The Justice Department also announced it had filed criminal charges against GM, but they would be dismissed in 36 months if the corporation "fixed" its recall processed. Yet again no GM executives were indicted for what was a decade of deadly criminal acts.

4. Now comes Volkswagen. In late September 2015, Volkswagen acknowledged that it had committed diesel fraud in 11 million cars worldwide, including more than 500,000 in the United States. VW installed software in its engines that would detect emissions tests and rig the outcomes to appear in compliance with environmental laws. In reality, the VW engines were emitting 10 to 40 times the amount of gasses permitted under U.S. law. As with the other cases described herein, VW's deception, false reporting, and scheming to conceal its acts are criminal violations. Fines, shaming, and civil lawsuits are almost certain for VW. So too is the probability -- indeed almost certainty -- that no VW executive will ever serve a day of jail time for massively polluting the world and U.S. atmospheres.

The lesson here is that "little crime" carries a personal liability while "big crime" does not. Any reform of the U.S. criminal justice system needs to correct this inequity.

More to the point, the prospect of 17 ½ years in jail, as with Mr. Lucas, just might carry more of a deterrent effect with corporate leaders than a massive fine paid by their stockholders.