Justice Department Moving Cautiously to Charge Large Banks Criminally

Recent reports state that the U.S. Department of Justice is primed to charge two of the world's largest banks with violations of U.S. criminal law.  News sources have reported that Credit Suisse and BNP Paribas are targets of Justice Department criminal investigations.  Please see the article in The New York Times about the investigations into these banks, http://dealbook.nytimes.com/2014/04/29/u-s-close-to-bringing-criminal-charges-against-big-banks/.  If accurate, the move by DOJ is a change in strategy and focus by the Department.

Since the conviction of the defunct accounting giant Arthur Anderson for obstruction of justice, federal prosecutors have become reluctant to charge large institutions with criminal conduct.  Arthur Anderson failed after its conviction, costing countless innocent people their jobs and creating a ripple effect of pain.  As a result, federal prosecutors have been "gun shy" about charging large companies criminally due to the potential for collateral effects on innocent employees and others.  Instead, the Department has increasingly obtained deferred prosecution agreements.  Under these agreements the company is not charged criminally but admits to wrongdoing, pays a substantial penalty, and takes remedial action often under the supervision of the Justice Department.

In the aftermath of the financial crisis of 2008 critics have complained that the Justice Department has been lax in bringing criminal charges against large financial institutions involved in questionable financial activities leading to the crisis.

As federal prosecutors begin to ponder the bringing of charges against large financial and other institutions, the prosecutors will try to walk a fine line of bringing the institutional defendants to justice without unleashing the collateral harm to innocents.  Due to the size and reach of some institutions and the interplay of state banking laws, there could be consequences that are unforeseen by the federal prosecutors grappling with the issues.

One possible avenue for the prosecutors is the bringing of criminal charges against the bank officials responsible for the allege criminal wrongdoing.  Unless the wrongdoing of the individual or individuals charged was so pervasive that it became endemic to the institution, the indictment and conviction of those responsible for the institution's wrongdoing should not endanger its continued existence.

This promises to be an interesting area of prosecution policy in the coming months.

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