20 Things You Should Know About Corporate Crime

Twenty-eight years ago, Corporate Crime Reporter, a weekly print newsletter, was launched. The Harvard Law School Library was one of our first subscribers. From the beginning, the most popular feature of Corporate Crime Reporter has been a weekly question/answer format interview. Over the years, we’ve interviewed hundreds of prosecutors, defense attorneys, law school professors, reporters, and activists. Our first interview, which appeared in Volume One, Number One on April 13, 1987 was with the premier corporate crime prosecutor of his day.

That was Rudolph Giuliani, then U.S. Attorney in the Southern District of New York. At the time, he was prosecuting the likes of Michael Milken, Ivan Boesky and Marc Rich. President Bill Clinton later pardoned Marc Rich. Apparently Marc Rich’s wife was dumping big cash into the Clinton library. Rudy is now solidly in the hands of the corporate crime lobby. He prosecuted corporate crime as a way to achieve higher office. Then he learned one of the key lessons of corporate crime prosecution.

You can achieve higher office by prosecuting corporate crime. But as you move up the ladder, you have to make nice with the corporate powers that be. And so you turn your attention and rhetoric to various forms of street crime.

Corporate crime lesson number one – prosecute corporate crime to achieve higher office, then get tough on street crime to protect your political position.

Or to simplify it, corporate crime is all about power politics.

Number 20

Corporate crime inflicts far more damage on society than all street crime combined. Whether in bodies or injuries or dollars lost, corporate crime and violence wins by a landslide. Last year, Credit Suisse pled guilty to helping thousands of Americans file false income tax returns. The company was fined $2.6 billion. Last year, BNP Paribas pled guilty to violating trade sanctions and was forced to pay $8.9 billion.

The costs of just those two crimes dwarf the yearly out of pocket yearly costs of all the burglaries and robberies in the United States ($4.5 billion in 2014 according to the FBI).
Health care fraud alone costs Americans $100 billion to $400 billion a year. (For more on this, check in with your neighbor, Harvard’s own Malcolm Sparrow and his corporate crime classic — License To Steal: How Fraud Bleeds America’s Health Care System (Westview Press, 2000).

The savings and loan fraud – which former Attorney General Dick Thornburgh called “the biggest white collar swindle in history” – cost us anywhere from $300 billion to $500 billion. And then you have your lesser frauds: auto repair fraud, $40 billion a year, securities fraud, $15 billion a year – and on down the list.

No comparison.

(For an incisive analysis on the double standard embedded in the U.S. criminal justice system — street crime versus corporate crime – check out — The Divide: American Injustice in the Age of the Wealth Gap by Matt Taibbi (Random House, 2014)).

Number 19

Corporate crime is often violent crime.

Recite this list of corporate frauds and people will immediately say to you: but you can’t compare street crime and corporate crime – corporate crime is not violent crime.

Not true.

Corporate crime is often violent crime. The FBI estimates that, 14,000 Americans are murdered every year. Compare this to the 54,000 Americans who die every year on the job or from occupational diseases such as black lung and asbestosis and the additional tens of thousands of other Americans who fall victim every year to the silent violence of pollution, contaminated foods, hazardous consumer products, and hospital malpractice. These deaths are often the result of criminal recklessness. Yet, they are rarely prosecuted as homicides or as criminal violations of federal laws.

The April 2010 Upper Big Branch mining disaster in West Virginia – cost 29 lives. A Labor Department report found that the company’s unlawful policies and practices were the root cause of the disaster. Yet, the company was given a non prosecution agreement. (More on deferred and non prosecution agreements to settle corporate crime cases below.)

The company’s former CEO, Don Blankenship, is currently facing federal criminal charges in West Virginia in connection with the deaths of the miners. (For the best coverage of his trial — and the politics of corporate crime in West Virginia, follow Charleston Gazette reporter Ken Ward Jr. (Twitter handle: @kenwardjr)

Number 18

Corporate criminals are the only criminal class in the United States that have the power to define the laws under which they live.
The mafia, no.

The gangstas, no.

The street thugs, no.

But the corporate criminal lobby, yes. They have marinated Washington –from the White House to the Congress to K Street – and all fifty state capitals — with their largesse. And out the other end come the laws they can live with. They still violate their own rules with impunity. But they make sure the laws are kept within reasonable bounds.

Exhibit A – the automobile industry.

Over the past 30 years, the industry has worked its will on Congress to block legislation that would impose criminal sanctions on knowing and willful violations of the federal auto safety laws. Today, with very narrow exceptions, if an auto company is caught violating the law, only a civil fine is imposed.

Number 17

Corporate crime is under-prosecuted by a factor of say – 100. And the flip side of that – corporate crime prosecutors are underfunded by a factor of say – 100.

Big companies that are criminally prosecuted represent only the tip of a very large iceberg of corporate wrongdoing.

For every company convicted of health care fraud, there are hundreds of others who get away with ripping off Medicare and Medicaid, or face only mild slap-on-the-wrist fines and civil penalties when caught.

For every company convicted of polluting the nation’s waterways, there are many others who are not prosecuted because their corporate defense lawyers are able to offer up a low-level employee to go to jail in exchange for a promise from prosecutors not to touch the company or high-level executives.

For every corporation convicted of bribery or of giving money directly to a public official in violation of federal law, there are thousands who give money legally through political action committees to candidates and political parties. They profit from a system that effectively has legalized bribery.

For every corporation convicted of selling illegal pesticides, there are hundreds more who are not prosecuted because their lobbyists have worked their way in Washington to ensure that dangerous pesticides remain legal.

For every corporation convicted of reckless homicide in the death of a worker, there are hundreds of others that don’t even get investigated for reckless homicide when a worker is killed on the job. Only a few district attorneys across the country have historically investigated workplace deaths as homicides.

White collar crime defense attorneys regularly admit that if more prosecutors had more resources, the number of corporate crime prosecutions would increase dramatically. A large number of serious corporate and white collar crime cases are now left on the table for lack of resources.

Number 16

Beware of consumer groups or other public interest groups who make nice with corporations.

There are now probably more fake public interest groups than actual ones in America today. And many formerly legitimate public interest groups have been taken over or compromised by big corporations. Our favorite example is the National Consumer League. It was created to eradicate child labor.

But in the last twenty years or so, it has been taken over by large corporations. It now gets the majority of its budget from big corporations such as Pfizer, Bank of America, Pharmacia & Upjohn, Kaiser Permanente, Wyeth-Ayerst, and Verizon.

Number 15

It used to be when a corporation committed a crime, they pled guilty to a crime.

So, for example, so many large corporations were pleading guilty to crimes in the 1990s, that in 2000, we put out a report titled The Top 100 Corporate Criminals of the 1990s. We went back through all of the Corporate Crime Reporters for that decade, pulled out all of the big corporations that had been convicted, ranked the corporate criminals by the amount of their criminal fines, and cut it off at 100.

So, you have your Fortune 500, your Forbes 400, and your Corporate Crime Reporter 100.

With the advent of deferred and non prosecution agreements, corporate guilty pleas are down significantly. But corporate crime, by all reports, is up significantly.

Number 14

Today, corporate criminals don’t have to worry as much about pleading guilty to crimes. Three new loopholes have developed over the past five years – the deferred prosecution agreement, the non prosecution agreement, and pleading guilty a closet entity or a defunct entity that has nothing to lose.

Number 13

Corporations love deferred prosecution agreements.

In the 1990s, if prosecutors had evidence of a crime, they would bring a criminal charge against the corporation and sometimes against the individual executives. And the company would end up pleading guilty.

Then, the Justice Department said – hey, there is this thing called a deferred prosecution agreement.

We can bring a criminal charge against the company. And we will tell the company – if you are a good company and do not violate the law for the next two years, we will drop the charges. No harm, no foul. This is called a deferred prosecution agreement.

And most major corporate crime prosecutions are brought this way now. The company pays a fine. The company is charged with a crime. But there is no conviction. And after two or three years, depending on the term of the agreement, the charges are dropped.

Number 12

Corporations love non prosecution agreements even more — like the one that Massey Energy got.

In 2007, I was sitting my office in the National Press Building. And into my e-mail box came a press release from the Justice Department. The press release announced that Boeing will pay a $50 million criminal penalty and $615 million in civil penalties to resolve federal claims relating to the company’s hiring of the former Air Force acquisitions chief Darleen A. Druyun, by its then CFO, Michael Sears – and stealing sensitive procurement information.

So, the company pays a criminal penalty. And I figure, okay if they paid a criminal penalty, they must have pled guilty.

No, they did not plead guilty.

Okay, they must have been charged with a crime and had the prosecution deferred.

No, they were not charged with a crime and did not have the prosecution deferred.

About a week later, after pounding the Justice Department for an answer as to what happened to Boeing, they sent over something called a non prosecution agreement.

That is where the Justice Department says – we’re going to fine you criminally, but hey, we don’t want to cost you any government business, so sign this agreement. It says we won’t prosecute you if you pay the fine and change your ways.

Corporate criminals love non prosecution agreements. No criminal charge. No criminal record. No guilty plea. Just pay the fine and leave.

(For a book length analysis of the trend toward deferred and non prosecution agreements, check out a corporate crime classic –Too Big to Jail: How Prosecutors Compromise with Corporations by law professor Brandon Garrett (Harvard University Press, 2014.)

Number 11

In health fraud cases, find an empty closet or defunct entity to plead guilty.

The government has a mandatory exclusion rule for health care corporations that are convicted of ripping off Medicare.

Such an exclusion is the equivalent of the death penalty. If a major drug company can’t do business with Medicare, it loses a big chunk of its business. There have been many criminal prosecutions of major health care corporations for ripping off Medicare. And many of these companies have pled guilty. But not one major healthcare company has been excluded from Medicare.

Why not?

Because when you read in the newspaper that a major healthcare company pled guilty, it’s not the parent company that pleads guilty. The prosecutor will allow a unit of the corporation that has no assets – or even a defunct entity – to plead guilty. And therefore that unit will be excluded from Medicare – which doesn’t bother the parent corporation, because the unit had no business with Medicare to begin with.

In May 2007, federal prosecutors brought a criminal prosecution of Purdue Pharma, the Stamford, Connecticut-based maker of OxyContin.

It was reported in the press that the company pled guilty to pushing OxyContin by making claims that it is less addictive and less subject to abuse than other pain medications and that it continued to do so despite warnings to the contrary from doctors, the media, and members of its own sales force.

In fact, Purdue Pharma – the company that makes and markets the drug –didn’t plead guilty. A different company – Purdue Frederick pled guilty. Purdue Pharma actually got a non-prosecution agreement. Purdue Frederick had nothing to lose, so it pled guilty.

Number 10

Corporate criminals don’t like to be put on probation.

Very rarely, a corporation convicted of a crime will be placed on probation. Many years ago, Consolidated Edison in New York was convicted of an environmental crime. A probation official was assigned. Employees would call him with wrongdoing. He would write reports for the judge.

The company changed its ways. There was actual change within the corporation.

Corporations hate this.

They hate being under the supervision of some public official, like a judge.

We need more corporate probation.

Number 9

Corporate criminals don’t like to be charged with homicide.

Street murders occur every day in America. And they are prosecuted every day in America. Corporate homicides occur every day in America. But they are rarely prosecuted.

The last homicide prosecution brought against a major American corporation was in 1980, when a Republican Indiana prosecutor charged Ford Motor Co. with homicide for the deaths of three teenaged girls who died when their Ford Pinto caught on fire after being rear-ended in northern Indiana.

The prosecutor alleged that Ford knew that it was marketing a defective product, with a gas tank that crushed when rear ended, spilling fuel.

In the Indiana case, the girls were incinerated to death.

But Ford brought in a hot shot criminal defense lawyer who in turn hired the best friend of the judge as local counsel, and who, as a result, secured a not guilty verdict after persuading the judge to keep key evidence out of the jury room.

It’s time to crank up the corporate homicide prosecutions.

If you would like to know more about criminal prosecutions for workplace and marketplace deaths and illnesses, check out a recent book by University of Maryland Law Professor Rena Steinzor. It’s called Why Not Jail?: Industrial Catastrophes, Corporate Malfeasance, and Government Inaction (Cambridge University Press, December 2014).

Number 8

There are very few career prosecutors of corporate crime. This despite the fact that universally, white collar lawyers would prefer to work in the public sector than in the private sector. They will tell you this straight up. And they have.

For years, I would raise the then rare example of Patrick Fitzgerald as a career corporate and white collar prosecutor. For more than 20 years, he was U.S. Attorney in Chicago. He put away Scooter Libby. He put away the Canadian media baron Conrad Black. He prosecuted powerful corporations and public officials alike.

But then alas, in 2013, Fitzgerald succombed to seductions of the criminal defense bar and joined his colleagues at Skadden Arps.

Number 7

Most corporate crime prosecutors see their jobs as a stepping stone to greater things.

Some, like Giuliani, prosecuted corporate crime as a way to move up the political ladder and then into private practice.

Most young prosecutors prosecute corporate crime as a step up into the lucrative corporate crime defense bar.

Number 6

Corporate criminals often turn themselves into the authorities.

The vast majority of corporate criminal prosecutions are now driven by the corporations themselves. If they find something wrong, they know they can trust the prosecutor to do the right thing. They will be forced to pay a fine, maybe agree to make some internal changes.

But in this day and age, in all likelihood, they will not be forced to plead guilty.

So, better to be up front with the prosecutor and put the matter behind them. To save the hide of the corporation, they will cooperate with federal prosecutors against individual executives within the company. Individuals will be charged, the corporation will not.

Number 5

The market doesn’t take most modern corporate criminal prosecutions seriously.

Almost universally, when a corporate crime case is settled, the stock of the company involved goes up.

Why? Because a cloud has been cleared and there is no serious consequence to the company. No structural changes in how the company does business. No monitor. No probation. Preserving corporate reputation is the name of the game.

Number 4

The Justice Department needs to start publishing an annual Corporate Crime in the United States report.

Every year, the Justice Department puts out an annual report titled “Crime in the United States.”

But by “Crime in the United States,” the Justice Department means “street crime in the United States.”

In the “Crime in the United States” annual report, you can read about burglary, robbery and theft.

There is little or nothing about price-fixing, corporate fraud, pollution, or public corruption.

A yearly Justice Department report on Corporate Crime in the United States is long overdue and long resisted.

Number 3

We must start asking – which side are you on – with the corporate criminals or against?

Most professionals in Washington work for, are paid by, or are under the control of the corporate crime lobby.

Young lawyers come to town, fresh out of leading law schools, 25 years old, and their starting salary is $150,000 a year. And they’re working for the corporate criminals.

Young lawyers graduating from the top law schools have all kinds of excuses for working for the corporate criminals – huge debt, just going to stay a couple of years for the experience.

But the reality is, they are working for the corporate criminals.

What kind of respect should we give them? Especially since they have many options other than working for the corporate criminals.

Time to dust off that age-old question – which side are you on?

(For young lawyers out there considering other options, check out Alan Morrison’s book – Beyond the Big Firm: Profiles of Lawyers Who Want Something More (Aspen Publishers, 2007))

Number 2

We need a 911 number for the American people to dial to report corporate crime and violence.

If you want to report street crime and violence, call 911.

But what number do you call if you want to report corporate crime and violence?

We propose 611.

Call 611 to report corporate crime and violence.

We need a national number where people can pick up the phone and report the corporate criminals in our midst.

What triggered this thought?

I attended the press conference at the Justice Department in 2007 announcing the indictment of Congressman William Jefferson (D-Louisiana).

Jefferson was the first U.S. official charged with violating the Foreign Corrupt Practices Act.

Federal officials alleged that Jefferson was both on the giving and receiving ends of bribe payments.

On the receiving end, he took $100,000 in cash – $90,000 of it was stuffed into his freezer in Washington, D.C.

The $90,000 was separated in $10,000 increments, wrapped in aluminum foil, and concealed inside various frozen food containers.

At the press conference announcing the indictment, after various federal officials made their case before the cameras, up to the mike came Joe Persichini, assistant director of the Washington field office of the FBI.

“To the American people, I ask you, take time,” Persichini said. “Read this charging document line by line, scheme by scheme, count by count. This case is about greed, power and arrogance.”

“Everyone is entitled to honest and ethical public service,” Persichini continued. “We as leaders standing here today cannot do it alone. We need the public’s help. The amount of corruption is dependent on what the public with allow.”

The amount of corruption is dependent on what the public will allow.

“If you have knowledge of, if you’ve been confronted with or you are participating, I ask that you contact your local FBI office or you call the Washington Field Office of the FBI at 202.278.2000. Thank you very much.”

Shorten the number – make it 611.

Number 1

And the number one thing you should know about corporate crime?

Everyone is deserving of justice.

So, question, debate, strategize, yes.

But if God-forbid you too are victimized by a corporate criminal, you too will demand justice.

We need a more beefed up, more effective justice system to deal with the corporate criminals in our midst.

Russell Mokhiber is editor of Corporate Crime Reporter and author of Corporate Crime and Violence: Big Business Power and the Abuse of the Public Trust.