Why aren’t more major corporations being criminally prosecuted for their crimes?
The answer you hear most often is that if you criminally prosecute a major American corporation, you risk collateral damage to innocent parties, including shareholders.
But now comes former New York Attorney General Eliot Spitzer with a new book titled Protecting Capitalism Case by Case.
And in it, Spitzer argues that the collateral damage answer is “overrated.”
“Almost all entities have the capacity to regenerate — even if under a new name, with new ownership and new leadership — and forcing them to do so will have the deterrent effect we desire,” Spitzer writes.
“Most companies would have no trouble continuing in operation once charged. They might suffer reputational harm, perhaps lose contracts, have certain loans be declared to be in default, and lose some personnel and public support. But that would probably be the proper price to be paid in the context of the violations of the law they committed.”
“Companies can and should be charged more often,” Spitzer writes. “‘Charge them!’ should be the rallying cry of those who want justice. Fear not the myth of collateral damage.”
Spitzer says that since you can’t jail a company and since money sanctions often don’t get the job done, an alternative that he finds useful is creative injunctive relief.
“Creative sanctions that fit the problem, address the structural issue and result from our using criminal and civil cases as a way to leverage reform is what we should aspire to,” Spitzer writes.
“Imagine if the prosecutorial response to the subprime crisis had been to force real reform on that sector in terms of how subprime loans were marketed and sold. Imagine if major banks had been forced by prosecutors to change the way they handled all securitization. Imagine if prosecutors had really forced the ratings agencies to grade honestly — by putting structural relief in place, instead of just asking for some money back. Those would have been meaningful remedies.”
“The range of injunctive relief we impose when corporations have been involved in structural wrongdoing must be greatly expanded,” he concludes. “Jail and money only go so far. Creative injunctive relief can change things more dramatically.”
Spitzer would also get rid of “neither admit nor deny” settlements.
“I hope that the new leadership at the Securities and Exchange Commission will mandate that an admission of guilt is a necessary part of future settlements in cases of this stature or magnitude. The law and justice require such an acknowledgement — or else nothing has been accomplished.”
“Corporations want the rights of personhood,” he writes. “Let’s also give them the sanctions that accompany personhood.”