Jennifer Taub’s first run in with white collar crime came when she was 16 and attending an elite Michigan prep school.

“My first boyfriend was a white collar criminal,” Taub writes in her new book Big Dirty Money: The Shocking Injustice and Unseen Cost of White Collar Crime (Penguin, 2020).

“I came to find out within weeks of our dating, he got suspended from school,” Taub told Corporate Crime Reporter in an interview last week. “I wanted to know why. He wouldn’t tell me at first. This was before email. We exchanged numerous letters. Finally, he admitted to me that he had been kicked out of school because he had embezzled from the school store.” 

“I found that out and my parents said – you have to break up with him. They said – anyone who would cheat this way would also lie to you. But I didn’t see the connection.” 

A big question in her book is – why aren’t high ranking executives criminally prosecuted? 

But your boyfriend in school actually paid a price.

“He was suspended. But that didn’t involve the legal system. This is how wealthy people handle their problems. He was suspended. He was let back into school. Then he was caught smoking in the dorm and then was expelled. He had to go to public school.”

“The police were not called. If he were in a public school situation, there might have been a different outcome. And this is just one example.” 

“Ivan Boesky was expelled from that same school – the same one I am talking about. Being expelled from school is sometimes an early sign that these kids have trouble. That’s just one little bump on the road for them. It’s not the kind of consequence where their life, liberty or property are taken away. They just go to some other school. They still have their lives ahead of them.”

After her first boyfriend came Cendant.

“After I left law school, I went to work at Weil Gotshal & Manges in New York on regulatory compliance. One of my clients was involved with direct marketing. And I became involved with advising that client on direct marketing regulation. I hit it off with that client and went to work in-house with that client. That was the happy part of that story. The sad part of that story is that that company was engaged in fraud.”

“After a merger, the company that bought us discovered the accounting fraud and several members of the management team went to prison for white collar crime. That company was Cendant. It’s a famous case.”

“I stayed around for a year while the forensic audit took place. Ironically, the accounting firm that conducted the audit was Arthur Andersen. This was all coming down in 1998. After a number of years, Arthur Andersen was no more.”

“I was at the firm at the height of the pre-Enron accounting fraud era. I went from Cendant to Fidelity Investments. That was such a breath of fresh air. I enjoyed working there. They had a compliance oriented culture.” 

“I was at Fidelity from 1999 to 2004. While I was there, the Enron scandal broke. I became more and more interested in this subject and became interested in teaching business students about how to avoid doing the wrong thing and going to jail. It seemed like that might be interesting. I ended up teaching at UMass Amherst, where I was head of the business law program. I then went to Vermont Law School where I was until this fall. Now I am at Western New England School of Law.”

So why aren’t high level executives criminally prosecuted?

Taub says – it’s not like we don’t know how to do this.

“Let’s go back to Cendant. The chairman of our company, Walter Forbes, was tried three times. There were two hung juries. Then they tried him a third time and he went to prison.”

“We tell people – here is a fine, which is a lot less than what you made – here is a slap on the wrist, no one goes to jail, and the penalty is to enter into a consent decree that says – follow the law. Any business person will tell you – that’s just like a traffic ticket. That’s the mindset.”

“It’s about mindset more than anything. You can say there were not enough resources. But the mindset is that it is scary and dangerous and career ending to go after powerful people.”

“There is a fear of taking on the most powerful in this country. It wasn’t always this way.” 

“I mentioned that I worked at a company where people went to prison during the accounting scandals. And during the accounting scandals, after Enron, during that whole period of the late 1990s and early 2000s, many CEOs and CFOs at major firms were prosecuted and many served prison time.” 

“Why did no bankers go to jail? That question needs to be asked of Eric Holder and people below him. I don’t know why.” 

“There were several cases against bank executives but they were civil charges brought by the Securities and Exchange Commission. But cases were not brought by prosecutors. Lanny Breuer went on television and said that these cases couldn’t be brought criminally because it was hard to prove that anyone relied on the misrepresentations of these bankers. That was totally wrong.” 

They don’t have to prove reliance, Taub says.

“That tells me they were looking for excuses. No one wrote him a legal memo saying – sir, you are wrong. Judge Jed Rakoff wrote a scathing article in the New York Review of Books about this.” 

“They didn’t have the mindset to do it. And if you don’t have the mindset, you don’t devote the resources to it.” 

Jesse Eisinger, the author of The Chickenshit Club, says it’s less mindset and more power dynamics. It has to do with the incentives baked into the system. The young law graduates come out of the top law schools. And even if they become prosecutors, it’s a greased track to the big money at the big corporate law firms.

“I love Jesse’s book and agree with a lot of it,” Taub says. “I want to be clear. When I use the word mindset, encompassed in that is that fear that he talks about. They lost their ability to bring these cases because there was this trend beginning in the 1990s to bully corporations to enter into deferred prosecution agreements and non prosecution agreements.”

“On the government side is a young career prosecutor who wants to move up to the corporate law firm and make millions of dollars every year. They want to do well. If they can wrap up a case and get a payment of hundreds of millions of dollars for the government, that’s good for your career.”

“What is bad for your career is to try and pursue individual executives. They are going to fight. The executives are often are very distant from the actual day to day operations. And it could be time consuming.”

You would limit the use of deferred and non prosecution agreements. Why? 

“I have looked at the research done by Brandon Garrett, a law professor at the Duke Law School. Prosecutors were looking for a middle ground between indicting a corporation and only doing civil enforcement. The prosecutors thought – let’s use these deferred and non prosecution agreements and save the corporation. They thought this was an ideal middle ground.” 

“But there are some bad results. Prosecutors learn to be negotiators instead of investigators and prosecutors. They should be bringing these cases. Brandon Garrett is looking at the rise of these agreements and the lack of individual prosecutors. It’s very rare that a very high level executive gets criminally prosecuted when the firm enters into one of these agreements. If a CEO is charged, it’s a former CEO, or a rogue CEO.” 

Taub proposes six fixes to the current corporate criminal justice system.

First, create and fund a new division within the Justice Department to focus on detecting,  prosecuting, convicting, and incarcerating big money criminals. This elite crime division should monitor the usual suspects so as to prevent crime where the incentives and opportunities are  most prevalent. 

Taub says it’s absurd that the same corporations face serious criminal or civil investigations and then reoffend again and  again – often under the same leadership. A high priority of this new division should be to end the dependence on deferred prosecution and non prosecution agreements.

Second, empower and encourage law enforcement to take on those difficult and  time-consuming cases involving elite offenders and large businesses. Amend some of the federal laws that have been weakened by the courts. This includes our anti-bribery statute. The law prohibiting bribery of public officials must be updated to create an outright ban on any gift giving to or acceptance of gifts by members of Congress above a specific low-dollar threshold. 

Third, create more visibility and protections for victims of white collar crime. Toward this goal, create a nationwide registry for white collar criminal offenders.

Fourth, protect journalists and whistleblowers. Taub would expand the qui tam provisions of the False Claims Act to cover all major corporate wrongdoing – not just wrongdoing committed by government contractors.

Fifth, restore funding to the IRS so it can recover money that goes uncollected due to understaffing. Taub says the IRS must close the estimated $800 billion “tax gap”– the difference between what the IRS believes it is owed and the tax receipts it actually collects.

And sixth, improve data collection across all law enforcement agencies nationwide. There needs to be one centralized database to track to their final disposition, the numbers and types of all charges and settlements by all federal agencies.

Taub has set up a web site – bigdirtymoney.com – to track the progress of these and other reforms.

“Crime is hiding in plain sight,” Taub writes. “Now we need to use our voices. As abolitionist Frederick Douglass proclaimed in 1857 – ‘Power concedes nothing without a demand. It never did and it never will.’”

“It’s time to demand an end to this elite crime spree. We must act, and not for us, but for the society that will be here generations to come. We owe it to our children and grandchildren.”  

[For the complete q/a format Interview with Jennifer Taub, see 34 Corporate Crime Reporter 38(13), October 5, 2020, print edition only.]