Wednesday, June 18, 2014

Corporate Prosecution: Double Standard or Government Weakness

In an interesting article in The New York Times, dated today, writer Jesse Eisinger discusses the Justice Department's recent efforts to prosecute wrongdoing by large banks.  Specifically, Credit Suisse and BNP Paribas have been charged criminally with violations of federal criminal statutes.  While no large American banks or bankers have been charged since the financial crisis of 2008, the first two efforts by the Department of Justice to move criminally against large financial institutions have involved foreign banks (Credit Swuisse - Switzerland, BNP Paribas - France).
The question is whether there is a double standard in the DOJ white collar prosecution of foreign banks as opposed to the use of deferred prosecution agreements with large American financial institutions.  A deferred prosecution agreement usually results after a financial institution retains a white collar criminal defense firm to conduct an internal investigation.  The results of the internal investigation are revealed to the Justice Department.  The bank and DOJ then enter into a deferred prosecution agreement, which requires that bank to pay monetary penalties, institute or improve internal controls, and not commit further violations.  For its part the Department of Justice refrains from prosecuting the bank or its employees.
The Times article suggests that the real issue may not be a double standard applied by DOJ to domestic and foreign financial institutions but instead weak enforcement and a reluctance to bring white collar criminal prosecutions by the Department of Justice.  Whether characterized as a deferred prosecution agreement as is typical with the American banks or a criminal prosecution as with Credit Suisse and BNP Paribas, the final sanctions look very similar.  Moreover, the banks involved do not face having criminal charges brought against any individuals.  They pay monetary penalties; none face the prospect of ongoing financial harm.
Finally, the article argues that the Justice Department should move away from settlements and try to begin taking to trial large white collar criminal cases against banks.  For more, please link to the article from the Times,

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