Selling Justice: Too Big To Jail
this is the first in a series of videos exploring the codification of corruption in the U.S legal system since about the 1980s and aims to show how the Department of Justice and the nation's legislature have been compromised by business interests and private influences or in short how money has rotted the Bedrock of America boom day bow bow in this episode we're looking at why no one from Big corporations ever seems to go to jail the term too big to fail came into use in the mid-1980s during the Savings and Loans crisis that was a slow-moving Financial catastrophe that occurred from 1986 to 1995 and resulted in the failure of about a third of all Savings and Loans associations or S and L's in the United States essendales are basically membership-based banks that accept saving deposits and give out loans especially mortgages to their members in the UK they're called building societies the crisis occurred over several years as a result of many complicated factors but the short of it is that banking deregulations implemented by President Reagan in 1982 combined with taxpayer guarantees provided by the Federal Savings and Loan Insurance Corporation helped create an environment where banking institutions became willing or felt the need to take much bigger risks meanwhile we had an industry that had 700 billion dollars of deposits its social function was shrinking because others were going to provide a lot of the mortgage we grew it up to 1.4 trillion we're lucky that the losses are only 170 billion it was a mistake you should not have tried to grow this industry out of its problems it had to shrink in a capitalist system you couldn't grow an industry that was failing but we don't have a capitalist system in banking we have a government guaranteed system through Deposit Insurance therefore the government could structure things so that these guys could grow by saying that we will we will guarantee whatever interest you promised they could grow they began investing in Risky financial instruments like junk bonds using federally insured deposits they sold risky mortgages fueling a real estate bubble there was also plenty of outright fraud in some of the institutions too you know how that goes the damage was deep the stock market crashed people lost their homes and their life savings when the inevitable crash occurred the Federal Savings and Loans Insurance Corporation was left insolvent and taxpayers ultimately paid somewhere around 130 billion to bail out these institutions that were deemed too big to fail but a third of them shut down anyway and about a thousand Bankers were convicted for their roles in the crisis with about 800 doing jail time got two minutes for a story 60 seconds 60 seconds this is this is this is about a guy who said to me that when he went to work on Wall Street sometimes people would say to him we don't do that that's what that's a deal we don't do he said it's been 20 years since I've heard anybody said say we don't do that we've got to get back to a sense of for my self-respect I don't do that maybe you can find somebody else to do it maybe it isn't illegal but I don't do it I have too much pride to to we're doing losing that is the really dangerous thing and that's really what this is about criminal punishments with people actually going to jail became rarer and rarer after the SNL crisis in 1999 Eric Holder then Deputy Attorney General of the United States wrote what came to be called the holder memo or less commonly the holder Doctrine it's a memorandum that was sent out to all U.S attorneys AKA Federal prosecutors with the intention of providing guidance on what factors they should consider in deciding whether or not to press charges on a corporation holder has said that at the time there wasn't any uniform guidance for how prosecutors should decide whether to indict a corporation or not so he put together a group of people from various parts of the justice system to help come up with these guidelines anyway the memo is written with a distinct tone of let's get tough on white collar crime in fact during Bush Junior's presidency later on the holder memo would be frequently referred to as an anti-business document the memo goes on to list benefits of indicting a corporation for one it can act as a deterrent to other companies engaging in illegal activities there may be industry-wide secondly it can force the indicted company to clean up its Act and third certain crimes that have the risk of causing great public harm like environmental crimes or financial fraud are by their nature most likely to be committed by businesses which therefore makes it of substantial Federal interest to indict them it also goes on to explain how a corporation can be determined criminally liable for the illegal acts of its employees the memo goes on further to list some different tools prosecutors can use in pursuit of Corporations some of those Provisions ended up having a major impact on the future of white-collar prosecution here's a list of different factors that prosecutors were recommended to consider when weighing up whether or not to indict a corporation two of these points ended up being pretty controversial number four is the government saying if you cooperate we might go easy on you and if you want us to believe you are cooperating don't hide your culpable employees behind your company lawyers this provision is essentially telling Federal prosecutors that they can consider this when deciding whether to prosecute the company keep this in mind for later the second controversial point is number seven collateral consequences including disproportionate harm to shareholders and employees not proven personally culpable the memo further delineates what is meant by this it's basically saying that if the corporation is really big and has lots of innocent shareholders and employees who may suffer from Prosecuting the corporation I.E losing their jobs shares losing value then the prosecutor
can take that into account and consider using a non-penal punishment instead the memo goes on to suggest that any non-criminal alternatives should be weighed in terms of whether the punishment is likely to deter or rehabilitate the corporation and that criminal prosecution may be more appropriate for a corporation that presents an egregious violation a pattern of wrongdoing or a history of non-criminal sanctions without proper remediation so all of this boils down to if the criminal prosecution of the corporation could result in lost jobs or lost shareholder value you can consider instead something like a deferred prosecution agreement where the prosecutor agrees to dismiss all charges once certain conditions are met by the corporation these conditions usually include agreeing to making reforms within the company and or paying a fine after holder left his position as Deputy attorney general Larry Thompson took his place he wrote his own Thompson memo but very little changed in the wording regarding criminal prosecution of Corporations a bigger change would occur in 2006 when Paul McNulty was Deputy attorney general and wrote his own McNulty memo the biggest change in the new guidelines is that part about asking corporations to waive attorney-client privilege in order to be considered cooperative the McNulty memo added a new procedure a prosecutor must follow before asking a company to waive privilege they must establish a legitimate need for the materials they are requesting for example internal Communications that may contain proof of the corporation's criminal Behavior and most importantly if a company still refuses to waive privilege that choice cannot be used against them in making a later decision about whether to prosecute by the time the McNulty memo removed this powerful tool for federal prosecutors the holder memos guidelines concerning collateral consequences had become an Unwritten rule the effects of these changes are seen easily with the financial crisis of 2007 to 2008 or if you're British 2007 to now in many ways the 2007-2008 financial crisis was similar to The Savings and Loans crisis there was banking deregulation that encouraged riskier Investing For example the repeal of parts of the glass-steagall act in 1999 which allowed Banks to combine their commercial and investment operations over time Banks began pumping out riskier mortgages fueling a real estate bubble many of these mortgages weren't as risky but predatory targeting low-income Borrowers the banks also sold risky financial instruments like mortgage-backed Securities by chopping up poor quality mortgages and selling them to investors as AAA rated Investments the damage was deep the stock market crashed people lost their homes and their life savings there were massive bailouts about 498 billion dollars in total to prevent the collapse of the Global Financial system best Stearns Bank of America Citigroup and AIG were all considered too big to fail the U.S government has reportedly made a profit from some of those bailouts but the crisis itself cost the United States an estimated 12.8 trillion dollars in terms of its impact on the economy or about 566 times the budget of modern day NASA or around the same economic cost of World War II for all nations combined so how many people went to jail over the 2007-2008 crisis I hear you ask is that a dog worldwide there were 47 Bankers jailed for the crisis about half were in Iceland only one was in the United States ground zero for the crisis credit Swiss Trader Kareem Sarah geldin who received 30 months in prison for artificially inflating the price of subprime mortgages that's it there were plenty of finds though about 243 billion dollars worth mostly for misleading investors about the quality of mortgage-backed securities I would argue this moment in modern American history is more important than the crash itself from 2008 the banks and many others have seen the writing on the wall no one from the Executive Suite is going to jail fines of the cost of doing business here are some examples after the 2008 crisis JP Morgan Chase the largest bank in America repeatedly signed deferred prosecution agreements and non-prosecution agreements to resolve Federal Criminal investigations in 2011 they admitted to bid rigging and signed a two-year non-prosecution agreement with the justice department one year after that JP Morgan Chase paid a 1.7 billion dollar fine for its role in The Bernie Madoff scheme and signed another two-year deferred prosecution agreement seven months before the end of that agreement the bank pleaded guilty to conspiring to manipulate the U.S and foreign currency rates and they were given three years of probation while on probation they paid 72 million dollars to settle charges for a corrupt hiring scheme in China and entered into yet another non-prosecution agreement in the 2008 crisis Deutsche Bank was one of the biggest purveyors of the mortgage-backed Securities that helped cause the market crash the bank settled with U.S authorities in 2017 for a total of 7.2 billion nobody went to jail in 2013 Deutsche Bank was fined 2.5 billion by British and U.S authorities for interest rate manipulation
plus 725 million euros by the European Commission nobody went to jail in 2015 according to investigators the bank used stock transactions to launder 10 billion dollars worth of Russian rubles into US dollars they entered into a settlement with New York's Department of Financial Services for 485 million dollars and promised to bolster their compliance efforts nobody went to jail in 2015 Deutsche Bank paid 260 million dollars in fines for violating the U.S embargo on Iran nobody went to jail in 2020 the New York State Department of Financial Services find Deutsche Bank 150 million dollars for not investigating suspicious transactions made by Jeffrey Epstein millions of dollars connected to sex trafficking even though they knew his criminal history nobody at Deutsche Bank went to jail and the worst thing is HSBC is worse in 2003 U.S authorities were suspicious that HSBC was engaged in money laundering and entered into an agreement in which HSBC promised to fix their anti-money laundering program and provide better tools to company compliance officers who are on the lookout for money laundering activities in 2012 HSBC admitted to U.S prosecutors that the bank had helped launder money through its branches around the world including at least 881 million dollars controlled by the Sinaloa cartel headed by the coward El Chapo Colombia's Norte Del Valle cartel and other groups related to drug trafficking and terrorism including the Taliban the cartels even design specially shaped boxes that fit hsbc's tele windows in order to better fit the massive amounts of cash they deposited hundreds of thousands per day in cash prosecutors prepared a list of 175 criminal charges against the bank but in the end declined to press those charges instead allowing HSBC to enter a deferred prosecution agreement where they would pay a fine of 1.92 billion dollars about five weeks profit
and serve five years probation during which time a court-appointed watchdog would monitor its efforts to combat money laundering they directly supported and facilitated drug trafficking and terrorism nobody went to jail in 2016 HSBC was fined 470 million dollars for abusive mortgage practices during the 2008 crisis as part of a settlement with the U.S justice department and 49 states the allegation was that HSBC had Robo signed thousands of foreclosure documents without reviewing the paperwork as part of the settlement HSBC was required to change its policies and take corrective action nobody went to jail in 2017 the justice department declared that HSBC had been reformed and the bank's probation would be allowed to lapse but an investigation in 2020 by the international Consortium of investigative journalists found that from 2013 to 2017 HSBC continued to provide banking services to drug traffickers Ponzi schemas shell companies tied to looted government funds and other known criminals all of this occurred while HSBC was on probation and under the eyes of the court appointed Watchdog at least 900 million dollars was laundered by shell companies related to criminal Networks throughout this time HSBC employed compliance officers who are meant to report transactions and accounting that they suspected of money laundering the icij interviewed more than a dozen former compliance officers for HSBC who claimed that the bank didn't give them enough time to investigate problematic accounts they also say their requests for information on the suspicious accounts from hsbc's International branches were ignored internal documents show that these officers flagged over 4.4 billion dollars worth of suspicious transactions between 2012 and 2017. in so many individual transactions that it would be
impossible for the officers to investigate them all so far there isn't any information about how the justice department will handle the new allegations Unearthed in the icij investigation but I wouldn't be surprised if no one goes to jail and that is just a tiny sample of Crimes by just those three Banks they don't get right back at it they never stop as I said over the years following the holder memo this idea of collateral consequences and declining to prosecute corporations has become less of a suggestion and more of an unspoken rule for example between 2004 and 2014 the Justice Department's criminal prosecution of Corporations dropped by about 29 percent however during the same time period the number of referrals of Corporations to Federal prosecutors went up by about 2.7 percent so it isn't that corporations were committing less crime during this period but were simply being prosecuted less corporate crime went up or corporate prosecution went down I've used these Banks as examples because they've caused such tremendous damage and have such a well-documented history of criminal wrongdoing if you look at the list of the most monetarily penalized companies in America about half of the top 20 and many lower on the list Are banks but plenty of other businesses that dominate their sectors also seem too big to not only fail but even touch recently propublica reported that Microsoft shielded around 40 billion dollars from tax by moving it to Puerto Rico and committed long-term organized fraud from 2005 on the publication says Microsoft has been fighting with the IRS since then about Audits and that subsequently for the last decade the IRS has been unwilling to take on large corporations Johnson knew as far back as 1971 that their talcum powder had asbestos in it and they didn't remove it they just covered it up decisions were made by individuals that caused cancer and death they may have been sued and fined for a total of around 15 billion dollars over the years not just for tainted baby products but all their other egregious perennial Behavior but no one went to jail their current assets amount to 189 billion dollars were they really punished at all that's not right the way the holder and now McNulty memos have been and are being interpreted and applied let's big business that commit crimes off the hook but did Eric Holder intend for his memo which on the surface looks pro-enforcement to end up facilitating all of this given the statutes that we had to work with the burdens of proof that we had to meet it was simply uh we were simply unable to do that if we could have made the cases we certainly would have it as well after writing his report and leaving the D.A in 2001. holder represented Purdue farmer in 2004 in West Virginia against accusations of deceptive marketing of Oxycontin then after that he became U.S attorney general for Obama and that's nothing remarkable at all it's very difficult to find a politician or lawmaker that at some point in their careers doesn't take on a corporate sponsor if they weren't one themselves to begin with in the next episode should we all still be alive we'll be talking about just that by going through the revolving door into the brass rimmed realm of lobbying bring a change of socks and possibly something to eat just just a sandwich or something we will stop but there'll be a period in the middle might not be able to stop depends on the day depends on the weather so
2022-07-10 20:47
