Category: Book Quotes of the Day

K. Sabeel Raman, a scholar at Brooklyn Law School, writes:

Successive waves of liberal governance reform–from the Clinton administration’s “reinventing government” initiative, to the Obama administration’s emphasis on cost-benefit analysis and transparency–share a common problem: they prioritize “good” government over “democratic” government. This liberal vision of governance reform does not address the root challenge raised by critics on both the left and right today: the fear that government is ineffective, unresponsive, or unduly influenced by business and economic elites.”

White-collar prosecutions suffered from not just a leadership vacuum but also a resource drain. During the years after 9/11, the Department of Justice took money and people away form white-collar investigations, and that shift continued through Gonzales’s tenure. The FBI transformed from a domestic investigative body to an international intelligence agency, focused primarily on terrorism.

Research suggests jurors make up their minds in the first moments of a trial and then interpret the remaining evidence in a way that confirms their initial impression.

Aggressive prosecutors, however, believe that the practice of firms underwriting legal fees is a form of hush money. Former deputy attorney general Larry Thompson told me, “If you sit there and think these corporations are paying for the employees’ choice of lawyer, and not sometimes simply to keep the employees quiet, then you believe in the tooth fairy.”

“Collateral consequences” was, and remains, an ill-defined concept. How worried should the government be if a punishment causes the company to go out of business? Should regulators worry about the cashiering of innocent employees? What about customers, suppliers, or competitors? Should they fret about financial crises? From this rather innocuous mention, the little notion of collateral consequences would blossom into the great strangling vine that came to be known after the financial crisis of 2008 by its shorthand: “too big to jail.”

The company had countered the government with an argument that companies continued to make over the next century whenever they faced legal jeopardy: to “punish the corporation is in reality to punish the innocent stockholders, and to deprive them of their property without opportunity to be heard, consequently without due process of law.”

If one witness says something, don’t call a second to say the same. Don’t get bogged down in minutiae. If a case is overly complicated, it requires weeks of evidence and a parade of witnesses that alone create reasonable doubt in the minds of jurors.

Defense lawyers often contended that accountants couldn’t be held responsible for frauds. They could be duped as easily as anyone. Accountants were supposed to make sure that the books were consistent with the accounting principles.

The agency seemed incapable of getting an admission of guilt and unwilling to go to trial except in the easiest cases. By the 2000s, no-admit, no-deny settlements would be both habitual and toothless. Arthur Andersen entered into one but continued its lax practices.

Companies habitually entered into agreements with the SEC without being forced to admit anything. They were insignificant punishments, and they didn’t change the conduct. The prosecutors had realized: fines are just a cost of doing business.