The actions that put in motion the worst economic collapse since the Great Depression were not solely those of a middle-tier Wall Street executive. And yet, according to a new report by ProPublica and New York Times Magazine, he was the only executive sentenced to any prison time for his role in the crisis.
Miami foreclosure defense lawyers believe certainly, that he deserved to be held accountable for his crimes. It’s just that there were many others who should have been sitting in the defendant’s chair. After all, while the former Credit Suisse employee did approve an effort to hide hundreds of millions in losses suffered by the bank’s mortgage-backed securities portfolio, he didn’t create toxic products or sell them, which was the crux of what spurred the housing market bubble and ultimately led to the recession.
Executives who played that role – those at the top of the chain – were never brought to justice, and it’s unlikely they ever will be.
Many asserted the U.S. Justice Department lacked the gumption to go after large, deep-pocketed corporate bigshots. But the reality seems to be more complicated than that, as the report indicates.
Initially, government prosecutors voiced every intention of pursuing a crackdown against those who had created this mess. After all, the Pecora Hearings following the 1929 stock market crash resulted in the head of the New York Stock Exchange behind bars. The savings-and-loan scandals of the 1980s resulted in the criminal prosecutions of 1,100 people, including high-level executives at some of the biggest failed financial institutions. Then in the 90s and early 00s, a number of widespread corporate accounting scandals resulted in the prison sentences of top-level CEOs and executives from Tyco, Qwest, Enron and WorldCom.
The 2008 credit crisis was bigger than any of it. It seemed only logical that a massive crackdown would follow. The Obama Administration appointed a new criminal justice division leader, who recruited highly-experienced, elite lawyers from big corporate firms. They seemed ready to pounce.
But they never did.
According to the ProPublica report, the Justice Department underwent a transformation in its approach to white-collar crimes in the wake of a number of high-profile prosecutorial missteps. One of those involved Michael Chertoff, the criminal division chief under George W. Bush, who spearheaded a case against Arthur Anderson, an accounting firm that gave Enron fake balance sheets and shredded numerous documents shortly before Enron was targeted for illegal actions. Arthur Anderson officials attempted to dispose of the case by negotiating a settlement. This was the way it had handled previous corporate dust-ups. One high-ranking executive reportedly said during a meeting with prosecutors that these settlements were simply “the cost of doing business.”
The comment infuriated Chertoff, who then aggressively pursued the firm under an almost-never-used, 100-year-old U.S. Supreme Court ruling that allowed prosecutors to file criminal charges against entire corporations. Arthur Anderson was convicted in 2002, and within several months, was forced to close. This might not have been a bad thing, but for the fact that the closing also resulted in tens of thousands of people suddenly out of work.
The plan backfired, prompting prosecutors to instead be more inclined to pursue settlements, as opposed to prison sentences. White-collar prosecutions dropped from an average of 18 percent of all federal cases in the mid-1990s down to just 9.5 percent by the end of 2012.
Between 2004 and 2012, there were 242 deferred and nonprosecution agreements negotiated between the Justice Department and numerous corporations. In the dozen years prior to that, there had been jut 26.
The latent effect of this was that the lawyers working for the government were unable to sharpen their skills. They failed to gain the experience necessary to beat legal powerhouses representing the banks.
So when the Credit Suisse executive’s case came around, the U.S. attorney’s offices had largely shifted focus away from trial. His case was the exception. It seems, at least for now, it will remain so.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.
The Rise of Corporate Impunity, April 30, 2014, By Jesse Eisinger, ProPublica
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