There's One Thing Missing From The Plan To Prosecute Big Banks


About five years too late, federal prosecutors are talking tough about cracking down on crimes by big banks. But their boasting so far leaves out one important thing: people.

Federal prosecutors are thinking real hard about filing criminal charges against U.S. units of French bank BNP Paribas and Swiss bank Credit Suisse, the New York Times reported on Wednesday. But unless some actual human beings are frog-marched out of those or other banks in handcuffs, criminal charges probably won't do much to deter more crimes or make the public feel like justice is really being served.

Nowhere in the NYT's 1,600-word story do the words "executive" or "individual" or "people" or "person" appear. The word "employees" shows up once, in a vow by New York financial regulator Benjamin Lawsky to "impose steep penalties against BNP and its employees." That does not quite sound like frog-marching or jail time. Also, the word "jail" only appears once, in the phrase "too big to jail." The word "prison" makes no appearance.

A spokesman for the office of Preet Bharara, the U.S. Attorney in Manhattan and the leading prosecutor in the story, declined to comment on the article or on the question of whether Bharara was looking into charges against any individuals. So we're left to comb the NYT article for context clues.

Such words are sprinkled throughout this ProPublica piece by Jesse Eisinger (which will also appear in the New York Times magazine), explaining why just one unlucky banker has gone to prison for the financial crisis.

In that piece, Eisinger details the blunders, mishandled cases, resource starvation and careerism that help explain how we got from the early 2000s -- when corporate executives regularly went to jail -- to the current state of affairs, in which the feds seem terrified to take any person to trial. The pace of white-collar prosecution generally has been cut in half since the mid-1990s.

The goal of prosecutors seems to be to dispel the notion that some banks are just too big to prosecute, according to the NYT story. That's a great goal, because no bank or company should feel like it can get away with repeated crimes, which is pretty much where things stand today.

Banks right now are able to simply sign deferred-prosecution agreements, pay huge fines and move on, even when the evidence of their wrongdoing is stark, as in the case of HSBC, which in 2012 admitted to looking the other way as drug cartels and outlaw states like Libya and the Sudan laundered money for years.

We don't know yet how bad the evidence is in the Credit Suisse and BNP Paribas cases, but the charges are similar. A unit of Credit Suisse is accused of helping customers shelter taxes illegally. A unit of BNP Paribas is accused of doing business with blacklisted countries. These would seem to be easier cases to prosecute than financial crisis cases. Unlike, say, collateralized debt obligations, tax-dodging and money laundering are arguably easier for juries to understand. Bharara and his colleagues have been scrambling to figure out if they can bring charges against offending units of those banks without bringing down the entire banks or the financial system, according to the NYT.

But a criminal charge that meant few serious consequences to the bank wouldn't be much different than the usual wrist-slapping settlement agreement. It would be semantics, mainly.

And somewhere along the line, human beings were involved in these alleged crimes, unless they were committed by a ghost in the machine. Contra Mitt Romney, corporations in toto are not one person, but they are full of people with agency, who should be accountable for their actions. As U.S. District Court Judge Jed Rakoff wrote last year:

"[U]nder the law, you should not indict or threaten to indict a company unless you can prove beyond a reasonable doubt that some managerial agent of the company committed the alleged crime; and if you can prove that, why not indict the manager?"

As Rakoff also wrote, simply indicting the company makes everybody happy, but "happiest of all are the executives, or former executives, who actually committed the underlying misconduct, for they are left untouched."

"I suggest that the future deterrent value of successfully prosecuting individuals far outweighs the prophylactic benefits of imposing internal compliance measures that are often little more than window-dressing," he added.

A couple of other neat things about prosecuting people, in addition to making future executives think twice before committing crimes: You can send a person to jail without risking a company's future or the global economy. And the sight of executives going to jail again might help reverse the growing suspicion that our justice system, along with everything else in the country, is rigged to favor the wealthy and privileged.

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