This trend to negotiated settlements has developed and accelerated over the last 10 years. As recently as 2002, then-Deputy Attorney General Larry Thompson made clear the still-prevailing view of corporate accountability:
"Large corporations develop their own methods and culture that guide employees thoughts and actions. That culture is a web of attitudes and practices that tends to replicate and perpetuate itself beyond the tenure of any individual manager. That culture may instill respect for the law or breed contempt and malfeasance. The organization itself must be held accountable for the culture and the conduct it promotes. Without this tool, the public would have no adequate deterrent to corporate criminal conduct because the culture that condoned, or at least acquiesced in, that behavior would be beyond the criminal law's power to correct. Only by prosecuting the corporation itself can we insure systemic reform."
Since that time, however, the Department of Justice (not forgetting the SEC, as well) seems to have lost its fervor for the power to correct and reform, and now employs two important alternatives to corporate accountability -- the deferred prosecution agreement and the non-prosecution agreement.
In the first, corporate crimes are stayed, pending the company's fulfillment of agreed undertakings such as the payment of fines and improved behavior for a specified time period, after which the charges are quietly dropped. Under the non-prosecution agreement, charges are not pursued at all, in exchange for fines, some form of limited monitoring and a promise of institutional change (which is never enforced, by the way). These alternatives have become the settlements of choice in corporate cases where, of course, no one ever admits wrongdoing.
The justifications for this change in corporate accountability are -- and this is generous -- tortured. One argument says that the cases are too complex to unravel and prosecute -- too big to convict. Another holds that since the corporation is just a bundle of legal contracts, it has no will and cannot commit a crime, an unfortunate channeling of the NRA slogan "guns don't kill people, people kill people." And yet another says that to indict a company is to inflict enormous damage on its share price, and unjustly harm all its stakeholders, leading perhaps to the firm's demise.
On this last assertion, the evidence is not supportive. None of the firms convicted of serious offenses, the Top 100 Corporate Criminals of the 90's for example, have gone out of business because of criminal conviction. The example most often cited is the accounting firm Arthur Anderson; but it failed in 2002 during the Enron scandal because its brand had been fatally damaged six years before, a time when it had already accepted a deferred prosecution agreement. No, the change in corporate accountability reflects the best regulatory and legal system money can buy.
The JP Morgan settlement illustrates the prevailing business environment where corporations are held harmless for the culture and conduct they promote, and where insignificant fines and promises of better behavior displace meaningful sanctions and the prospect of real reform.
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