A Philosopher's Blog

Too Big to Jail

Posted in Ethics, Law, Philosophy, Politics by Michael LaBossiere on June 7, 2013

English: A photo of former Deputy Attorney Gen...

Back during the bailout, the phrase “too big to fail” was used to refer to corporations that were regarded as too important to the economy to allow them to fail. To prevent these failures (or so it was claimed) public funds were deployed. While it seems blindingly obvious that a multitude of misdeeds lay behind the meltdown, the federal government has not engaged in a single prosecution. More recently, Holder’s Department of Justice decided not to prosecute HSBC despite the fact that they had apparently been engaged in rather serious money laundering. This created a new phrase, “too big to jail.”

Interestingly, the legal trail of “too big to jail” can be traced back to a 1999 memo by Eric Holder entitled “Bringing Criminal Charges Against Corporations.” While the memo does not assert that executives cannot be prosecuted, it does provide an excellent escape hatch for big corporations. To be specific, Holder contends that the state should consider “collateral consequences” when making decisions about prosecuting corporate crimes.  Holder seems to still hold to the principles of the memo and while Obama has been attacked as being an anti-business socialist, the Department of Justice has been extremely gentle in its response to white collar crimes committed by the top folks in big corporations.

On the one hand, the idea of considering consequences does make sense from a utilitarian standpoint. If, for example, prosecution would create more harm than good, then it could make excellent moral sense not to prosecute. However, there is is the utilitarian concern that the practice of  allowing corporate criminals to avoid prosecution on this principle would do harm to the legal system as a whole by undermining public faith in its justice. On the other hand, the idea that people (and corporations are legal people) can avoid prosecution because applying the law to them would result in collateral consequences seems rather contrary to the idea that no one is above the law. While I do believe that justice can involve considering the consequences, justice also seems to require consistency in the law-and allowing corporate criminals a special out seems to be unfair and inconsistent.

In 1999 Holder also advanced the notion of deferred prosecution for corporations. Under this principle, corporate defendants can be given what amounts to amnesty in return for a fine (usually small relative to corporate earnings), reforms and cooperation. This principle is connected to the principle about consequences in that a plausible reason for allowing this deferred prosecution is to keep a corporation going-and thus keep people employed. During the Arthur Anderson incident, the state brought criminal charges against the company and this resulted in the loss of about 28,000 jobs when the company failed.

On the one hand, this principle does have appeal. After all, prosecution could result in the destruction of a corporation and this could harm people who are actually innocent of wrongdoing. Deferred prosecution would, in theory, allow the problems to be addressed while avoiding the destruction of the corporation. On the other hand, there is the obvious concern that prosecution might be “deferred” forever. Even if the deferment is not eternal, there is the concern that the punishment will not be serious enough to deter future behavior.  So far, the fines that have been paid by corporations tend to be small relative to their yearly profits and it seems unlikely that such punishments will have a significant deterrence value. After all, if a corporation can make massive profits doing illegal things like money laundering and then  pay what is, to them, a moderate fine, then there is little incentive to avoid such illegal activities. To use an analogy, if I took up robbing banks and my punishment was that I had to pay a fine equal to a modest percentage of my stolen money, then I would have little incentive to stop robbing banks. As might be guessed, this is a problem.

Overall, the principles of considering collateral consequences and allowing deferred prosecution are not without merit, at least on the surface. However, while the application of these principles might result in short term goods (like preserving corporate jobs), they seem likely to create long term evils-namely a situation in which corporations are ever more likely to engage in misdeeds because they know that the punishments will be fairly minimal. However, the overall consequences of this will be rather bad, such as companies destroying themselves and the economy. Too big to fail and too big to jail are bad ideas and it is far past the time that the approach to corporations be changed.

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  1. ajmacdonaldjr said, on June 7, 2013 at 1:57 pm

    The Noble Lies – OK City and 9/11

    New York Times – August 22, 2012 – The National Security Agency’s Domestic Spying Program [i.e., Stellar Wind: September 2001 – Present]

    “It took me a few days to work up the nerve to phone William Binney. As someone already a “target” of the United States government, I found it difficult not to worry about the chain of unintended consequences I might unleash by calling Mr. Binney, a 32-year veteran of the National Security Agency turned whistle-blower. He picked up. I nervously explained I was a documentary filmmaker and wanted to speak to him. To my surprise he replied: “I’m tired of my government harassing me and violating the Constitution. Yes, I’ll talk to you.”

    “Two weeks later, driving past the headquarters of the N.S.A. in Maryland, outside Washington, Mr. Binney described details about Stellar Wind, the N.S.A.’s top-secret domestic spying program begun after 9/11, which was so controversial that it nearly caused top Justice Department officials to resign in protest, in 2004.

    Source: The Program – http://www.nytimes.com/2012/08/23/opinion/the-national-security-agencys-domestic-spying-program.html?_r=0

    “The Noble Lie is necessary, Plato argues, in order to keep a stable social
    structure. In Plato’s mind The Noble Lie is a… lie that’s fed to the masses to keep them under control and happy with their situation in life.
    Plato did not believe most people were smart enough to look after their own and society’s best interest. The few smart people of the world needed to lead the rest of the flock, Plato said. And The Noble Lie had to continue.”

    PLATO’S “NOBLE LIE” – http://socsci.gulfcoast.edu/rbaldwin/NobleLie.htm

    Wrongful Death Case Reveals Eric Holder’s Role In OKC Bombing Cover-up

    “You need to know that Eric Holder…played a key role in covering up the torture-murder death of my brother, Kenneth Michael Trentadue.”

    This is what Salt Lake City attorney Jesse Trentadue wrote in December 2008 to prospective incoming chairman of the Senate Justice Committee, Patrick Leahy. The newly elected Barack Obama had made Holder his choice for Attorney General and Trentadue was going to do everything in his power to stop this shameful appointment from going forward.”

    Source: Wrongful Death Case Reveals Eric Holder’s Role In OKC Bombing Cover-up – http://www.westernjournalism.com/wrongful-death-case-expoes-eric-holders-role-in-okc-bombing-cover-up/

    AUDIO – Red Ice Radio – Holland Vandennieuwenhof & James Lane – Hour 1 – A Noble Lie: Oklahoma City 1995 – http://youtu.be/rnQK8zJeawg

    PAPER – THE OKLAHOMA CITY BOMBING CASE REVELATIONS – http://www.scribd.com/doc/80189384/Patrick-B-Briley-The-Oklahoma-City-Bombing-Case-Revelations

    Black Eagle Trust Fund: The 9/11 Attacks and the Black Eagle Trust Fund

    “On that fateful day, the Securities and Exchange Commission declared a national emergency, and for the first time in U.S. history, invoked its emergency powers under Securities Exchange Act Section 12(k) easing regulatory restrictions for clearing and settling security trades for the next 15 days. These changes would allow an estimated $240 billion in covert government securities to be cleared upon maturity without the standard regulatory controls around identification of ownership.”

    Source: Black Eagle Trust Fund: The 9/11 Attacks and the Black Eagle Trust Fund – http://www.wanttoknow.info/911/black_eagle_trust_fund

    AUDIO – Red Ice Radio – Richard Grove – Hour 1 – 9/11 Insider Trading Whistleblower & Voluntary Servitude – http://youtu.be/bFJwVxqD4A4

    AUDIO – Red Ice Radio – Mark H. Gaffney – Hour 1 – Black 9/11: Money, Motive and Technology – http://youtu.be/JoqA1Vj2Nn4

    On September 11, 2001,the US Securities and Exchange Commission was located in WTC 7, on the floors that were set on fire. WTC 7 was never hit by a hijacked airliner.

    See: List of Tenants in Seven World Trade Center – http://en.wikipedia.org/wiki/List_of_tenants_in_Seven_World_Trade_Center

    The US government’s National Institutes of Standards and Technology stated – officially – that office fires – alone – brought down WTC, which is physically impossible (= another Noble Lie).

    “The extensive three-year scientific and technical building and fire safety investigation found that the fires on multiple floors in WTC 7, which were uncontrolled but otherwise similar to fires experienced in other tall buildings, caused an extraordinary event. Heating of floor beams and girders caused a critical support column to fail, initiating a fire-induced progressive collapse that brought the building down.”

    Source: NIST Releases Final WTC 7 Investigation Report – http://www.nist.gov/el/wtc7final_112508.cfm

    VIDEO – 9-11 WTC 7 Demolition – Penthouse Collapse Close Up, Flashes, And Gas Ejections [WCBS2] – http://youtu.be/9VHZf9uyIJk

    VIDEO – Architects & Engineers – Solving the Mystery of WTC Building 7 – http://youtu.be/4eKt4IJFsO4

    9/10/2001 – “According to some estimates we [DoD] cannot track $2.3 trillion in transactions,” Rumsfeld admitted.

    VIDEO – The day before 9/11- $2.3 trillion “lost” by the Pentagon – http://youtu.be/SqHIPzTACrM

    VIDEO – 9/11 Commissioner Bob Kerrey claims 9/11 was a 30 year conspiracy – http://youtu.be/wDfm3NroVG8

    See: 9/11, Iran-Contra, and Treason – http://wp.me/pPnn7-1rg

    VIDEO – Architects and Engineers for 9/11Truth: Experts Speak Out – http://youtu.be/YW6mJOqRDI4

    A Marine Corps Vietnam veteran and a 1986 graduate of the U.S. Army War College, Dr. Sabrosky’s teaching and research appointments have included the United States Military Academy, the Center for Strategic and International Studies (CSIS), Middlebury College and Catholic University; while in government service, he held concurrent adjunct professorships at Georgetown University and the Johns Hopkins University School of Advanced International Studies (SAIS).

    PAPER – US Military Knows Israel Did 9/11 – Alan Sabrosky (USMC) – http://www.scribd.com/doc/58318030/US-Military-Knows-Israel-Did-9-11-Alan-Sabrosky-USMC

    VIDEO – Col. Alan Sobrosky PhD USMC (Ret.) – Israel Did 9/11 – 100% Certain – http://youtu.be/mQk4jOcV8RA

    See: Catholics who did 9/11 – http://wp.me/pPnn7-1GY

    18 USC Chapter 96 – RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS – http://www.law.cornell.edu/uscode/text/18/part-I/chapter-96

    18 USC Chapter 115 – TREASON, SEDITION, AND SUBVERSIVE ACTIVITIES – http://www.law.cornell.edu/uscode/text/18/part-I/chapter-115

    See: The Noble Lies – OK City and 9/11 – http://wp.me/pPnn7-2ll

  2. WTP said, on June 8, 2013 at 7:10 am

    How ironic…or not. Perhaps Holder now sees himself as too big to jail.

    Note again how Mike never misses, and often creates, opportunities to bash “big corporations” regarding their scandals, but his BFFs in govt garner his protection. It’s not hypocrisy TJ, it’s sophistry.

  3. T. J. Babson said, on June 8, 2013 at 9:51 am

    In my view Mike needs to think carefully about why the stock market is soaring while most of the U.S. economy is stuck in the doldrums.

    The fact of the matter is that big business and big government are natural allies against the little guy. This situation will only change when people stop asking government to be all things to all people.

    • Michael LaBossiere said, on June 8, 2013 at 11:11 am

      I’ve thought about that. The stock market is something of a mystery-although if I could get access to the code in the programs used to automate buying and selling I could give you a decent answer.

      But, in general terms, there seem to be many factors favoring the stock market. One cynical answer is that the financial realm is largely disconnected from the actual world, so profits can be generated in various ways that have nothing to do with what is actually happening in areas like manufacturing. After my race last week, I had an interesting talk with a PhD student who had spent 10 years as a player on Wall Street. According to him, some rather crazy stuff goes on there. I’m no expert on the matter, but I do have the good fortune to have running friends who are finance professionals (professors, professionals and both).

      Also, as you note, the laws strongly favor the stock market system. This is not surprising given that congressmen are free to invest in the market using their inside information. We do need a change in the laws-not to “punish” the corporations but to balance things out. For example, it is absurd that there are different tax rates for capital gains tax and for wage income. Because of this, you and I probably pay a higher percentage of our income in taxes than does Mitt Romney, even though he makes in a day what I make in a year. I do endeavor to get as much income as possible from capital gains, but I think that this system “punishes” people who earn a wage or salary.

    • T. J. Babson said, on June 8, 2013 at 11:43 am

      Corporate profits of the Fortune 500 are strong, and this mostly explains the rising Dow.

      The people getting hurt are the ones trying to run small businesses. Who do you think can most easily cope with the 1000 (or is it 2000?) pages of the ACA? Is it Exxon, with $100 billion of income and an army of lawyers on retainer, or the guy running the local pizza joint who employs a bunch of teenagers and if he is lucky clears $1000 on a good week?

  4. WTP said, on June 8, 2013 at 1:29 pm

    There are many factors that drive a rising market. profits may be rising, but P/E ratios are rising faster. Anticipation of inflation is also one of many factors.

    Discussing economics and/or business with Mike is like discussing astrophysics with a flat earther. Though your point about excessive and complex regulation hurting small business is an important one. There have been indications, however, that such is starting to expand and drive a black market economy. Witness bitcoin, for one.

  5. WTP said, on June 8, 2013 at 1:34 pm

    OMG, just read this..

    The stock market is something of a mystery-although if I could get access to the code in the programs used to automate buying and selling I could give you a decent answer.

    No f’n way I believe mikey could even begin to decipher such code, even assuming it was properly documented (that’s a joke only TJ and I could possibly appreciate). Notice the presumption on mike’s part that something nefarious is going on, sans any evidence beyond his uneducated hunch. Which fallacy is that?

    But it gets better…

    • WTP said, on June 8, 2013 at 1:39 pm

      financial realm is largely disconnected from the actual world, so profits can be generated in various ways that have nothing to do with what is actually happening in areas like manufacturing.

      The financial realm does go off the tracks on occasion, but it is nowhere near as disconnected with reality as Mikey’s academic realm.

      I could go on and on here, but “The Man Who Shot Liberty Valance” is on. A movie about philosophy that mike is incapable of understanding.

  6. […] Too Big to Jail (aphilosopher.wordpress.com) […]

  7. […] Too Big to Jail […]

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