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U.S. Makes Deals With Corporate Criminals Instead of Prosecuting

A report released yesterday found that under a new policy implemented by the Justice Department in 2003, a number of major corporations caught committing serious crimes have not been prosecuted or convicted by the U.S government. The report, titled, "Crime without Conviction: The Rise of Deferred and Non-Prosecution Agreements" by the watch-dog group, Corporate Crime Reporter, named 34 major corporations that have entered into special deals with the U.S government.

Under these deals, prosecutors agree not to criminally prosecute the corporation in exchange for cooperation against executives, implementation of corporate monitors and fines. In fact, the report finds that no major corporation caught engaging in accounting or securities fraud has been convicted since the Arthur Andersen conviction in June 2002.

• Russell Mokhiber, editor of Corporate Crime Reporter.

AMY GOODMAN: We’re joined in our Washington D.C. studio by Russell Mokhiber. He’s editor of Corporate Crime Reporter. Welcome to Democracy Now!, Russell.

RUSSELL MOKHIBER: Good morning, Amy.

AMY GOODMAN: It’s good to have you with us. Well, why don't you talk about your report, “Crime Without Conviction”? Talk about these deals.

RUSSELL MOKHIBER: Well, Amy, if you and I engaged in a fraud against the government that cost the government $2.5 billion, as KPMG did, then you and I would be criminally prosecuted and sent to prison. I went to the press conference where the Attorney General of the United States announced this prosecution of KPMG, and he started off the press conference by saying, “Today, KPMG admits its criminal wrongdoing in this tax shelter fraud that cost the government $2.5 billion.” And then there was a pause, and he started talking about what was going on. The head of the I.R.S. comes on, and he details the criminal activity.

Was there a conviction? No. The company was charged with a felony, and then the government gave the company a deferred prosecution agreement. This is an agreement that was intended – these kinds of agreements were intended for juvenile delinquents, to clear the courts of minor issues. But now they are being used in cases like KPMG to relieve the company of its criminal liability.

And in our report, which is on our website, CorporateCrimeReporter.com, we list 34 of these cases -- fraud cases, bribery cases -- where the company engaged in egregious criminal activity, where in some cases, like KPMG, the Attorney General of the United States stands up before the nation and says the company admits to its criminal wrongdoing, but there's no conviction.

And so we think that this sets a double standard, that for you and I, for ordinary Americans, when we commit crimes, even minor crimes, we’re prosecuted, criminally convicted and sent to jail, but for major American corporations, like Monsanto and KPMG and the rest named in this report, they get these special deals. We think it’s unfair. And this just switched over the last couple of years since the Arthur Andersen conviction.

AMY GOODMAN: We’re talking to Russell Mokhiber. He’s editor of Corporate Crime Reporter. So, Russell, if you could name some names, if you could talk specifically about some corporations, what they were charged with, and where they stand today.

RUSSELL MOKHIBER: Well, let's take, for example, Monsanto. The government had evidence that Monsanto was engaged in a bribery scheme in Indonesia. The government of Indonesia had a rule, saying that if you are going to use genetically modified crops, you’re going to have to have an environmental impact statement, so a bribe was paid in an effort to change that rule. The government came across this. It’s illegal for any U.S. citizen, any U.S. corporation to bribe a foreign government. They had this information. It was a clear case. Why wasn't there a criminal prosecution? Why did they get the special deal? That's the kind of issue that we want to raise.

Also, Amy, even if there are some close cases here, one thing federal prosecutors will tell you is that if it’s a close case, but if the company engages in obstruction of justice, that tilts the decision over to a prosecution. And in many of these cases, like Computer Associates, which is a serious accounting fraud there in New York, like KPMG, like Monsanto – or not Monsanto, but like a number of these other cases, there was evidence of obstruction -- serious evidence of obstruction of justice, so much so that in the KPMG case, the U.S. Attorney in the Southern District of New York, David Kelley, who was prosecuting that case, reportedly wanted to take KPMG, because of the obstructive conduct of the one of the four major accounting firms in the world, wanted to take and criminally prosecute that case and convict that case and convict that company of those crimes, but he was overruled by Main Justice.

So, we’re raising the flag here and saying, “Okay, in some of these cases, maybe a deferred prosecution or a non-prosecution agreement is legitimate, but not in these number of cases.” One of the things the report found that this is an accelerating trend, that of the 34 cases that we could identify, 23 of them have come in the last three years. And so, that’s twice as many in the last three years as in the previous ten years. Corporate defense counsel really like these kinds of cases, because it let's the corporation off the hook. And what's happening is the corporate defense counsel is calling up the prosecutor and saying, ‘Look, we’ll turn over everything. We’ll give you the executives. We’ll give you all the information about what happened here in exchange for this kind of deal of not having a criminal record.’

Now, what's the benefit of not having a criminal record to a major American corporation? One benefit is they – it’s a backdoor way of getting around the stigma. There’s major stigma, there’s major adverse publicity if you’re a convicted company. In the 1990s, we put out a report called “The Top 100 Corporate Criminals of the 1990s.” There were so many criminal prosecutions of these companies, which I think has an educational effect. It sends the message that the major criminal actors in our society are these major corporations, that corporate crime and violence inflicts far more damage on society than all street crime committed by individuals. That’s just a slam dunk. It’s all over the paper.

Look at the Washington Post just this morning, our local paper, a huge headline on the Abramoff scandal, and this is unbelievable what’s going on here. What 2006 is going to show is members of Congress being criminally prosecuted for corruption. I think Senator Harry Reid called Congress the most corrupt Congress in history. So this is all over – this is the major story, it’s going to be the major story of 2006: corporate corruption, corporate crime and corruption.

And how are we treating it? We're treating it with double standards with these special deals. And the result is -- I think the press is doing a good job in exposing these crimes, but the public impression still is that street crime inflicts far more damage than corporate crime and violence, and we have to change that. If you ask the average person to give -- if you say “looting” to the average person, the first thing that comes to their mind are the black kids in New Orleans stealing the DVDs and wading through the water, not Conrad Black, who looted a Hollinger International Corporation of millions of dollars and currently being prosecuted by U.S. Attorney Fitzgerald.

AMY GOODMAN: We are talking to Russell Mokhiber, editor of Corporate Crime Reporter, just released his report yesterday, “Crime Without Conviction.” The report details 34 special deals with major corporations. Can you talk about how this idea of deferred prosecution, what is it modeled on?

RUSSELL MOKHIBER: Well, it was started to -- I mean, even the U.S. Attorneys -- it was started for juvenile delinquents. It was started for minor cases. The idea was the federal courts are flooded with these minor cases, so if it’s not a serious -- I mean, a minor crime was committed; if it’s not a serious crime, say to the individual, ‘Okay, you made a mistake here. We’re going to charge you with a crime. But if you agree that over two years to be clean, to not engage in any other criminal activity, if you do that, if you agree to do what we tell you to do, that is, don't engage in other criminal activity, pay a fine, whatever, then after two years we’ll drop the charge, you won't have a record.’ And the U.S. Attorney's manual said -- makes it explicit that that’s its purpose.

It’s not for major multimillion dollar crimes. And so, but creative corporate defense attorneys and prosecutors took this and said, ‘Hey, here’s a way where we can settle these cases quickly, where we can give the corporation what it wants, which is no criminal prosecution, and where we can get out of these cases and not spend a lot of time on them.’ Well, there's another way to do it. Another way to do it is to criminally prosecute – and the other thing was the prosecutors want to go after the individual executive, so if you have the corporate attorney working with the prosecutor to go after the executives, you’re more likely to get a lot of individual convictions.

This is what happened, for example, in the HealthSouth case. HealthSouth was a major corporation in Alabama, nationwide corporation, healthcare corporation. And the defense attorney for the company called up the prosecutor, Alice Martin, who’s the U.S. Attorney in Alabama, and said, ‘Here’s my cell phone number. I’ll give you whatever you want on these executives, just leave our corporation alone, because we’re starting new.’ And she got like 16 convictions, and I think 15 of them got home detention. The C.E.O. of the company, you know, did the idiot C.E.O. defense, went the to trial and got off. That’s what Ken Lay is doing. He’s doing the idiot C.E.O. defense, saying, ‘Andy Fastow did it, I didn’t know anything about it, even though I was the C.E.O.’ And sometimes the idiot C.E.O. defense works, as it worked for Scrushy in the HealthSouth case. But that’s what’s happening.

Ten years ago, it was the company protecting the individual executives and pleading the company guilty. And so what would happen is you get a guilty plea against the company, the executives would get off, and the company would pay a fine. And there was a stigma against the company. I think that had real – a general deterrence. Now what you have is the corporate attorneys and the prosecutors working together to turn on the executives. To me, the ideal case is you prosecute both the corporation and the executives, and you put the company on corporate probation.

This is what happened in the Consolidated Edison case there in New York 15 years ago. I don't know if you remember this, Amy, when there were explosions in downtown New York and Con Ed was convicted of environmental crimes, because of stuff that was spewing out of the manholes. And the company was convicted, put on four years probation. There was a judicial monitor. The monitor reported from the company to the judge to make sure that the corporation rehabilitated itself. And after four years, the probation was lifted. So that’s what we have to do. We’ve got to take control of these companies through judicial process and make sure that there's real rehabilitation, not these fake debarments and fraudulent kinds of changes, fig leaf kinds of changes that are happening as a result of these agreements, and make sure there’s real change.

AMY GOODMAN: Russell, can you talk about the contrast of the actual cost of street crime versus corporate crime?

RUSSELL MOKHIBER: Well, I think there’s -- one of the problems is the F.B.I. doesn't have a corporate crime database. You can go to the F.B.I. and get detailed information on robbery and burglary and murder and homicide and rape and so forth, but when you go to the F.B.I. and ask them “Do you have statistics on white collar and corporate crime?” they have very little. They have no comprehensive database on corporate and white collar crime.