PBS Frontline Asks — Why No Criminal Prosecution of Wall Street Executives?

Last night, PBS Frontline’s The Untouchables raised the question of the moment in corporate and white collar crime — why no criminal prosecution of Wall Street executives or major Wall Street firms for activities related to the financial crisis?

The Untouchables focused on accusations raised by former Senator Ted Kaufman and his staff director — Jeff Connaughton — author of The Payoff: Why Wall Street Always Wins — and former New York Governor and Attorney General Eliot Spitzer.

Their bottom line — the Justice Department should have criminally prosecuted big Wall Street banks and their executives.

But the Department didn’t seriously pursue evidence laid out in more than a dozen private lawsuits indicating that the big banks knew that underlying loans they were repackaging were fraudulent.

PBS correspondent Martin Smith interviews the usual suspects — including Kaufman, Spitzer, Connaughton and industry whistleblowers that lie at the heart of the civil cases.

But the case against the Justice Department’s failure to prosecute won’t go anywhere without Justice Department whistleblowers stepping forward and telling what they know about why high ranking Justice Department officials — including Attorney General Eric Holder and Criminal Division Chief Lanny Breuer — didn’t bring these criminal cases.

And here, PBS began to touch on a nerve.

Smith reports that PBS spoke to two former high-level Justice Department prosecutors who served in the Criminal Division under Breuer.

“In their opinion, Breuer was overly fearful of losing,” Smith reported.

“We spoke to a couple of sources from within the Criminal Division, and they reported that when it came to Wall Street, there were no investigations going on,” Smith said. “There were no subpoenas, no document reviews, no wiretaps. These sources said that at the weekly indictment approval meetings that there was no case ever mentioned that was even close to indicting Wall Street for financial crimes.”

When Smith asked Justice Department Criminal Division chief Lanny Breuer about this, Breuer responded — “Well, I don’t know who you spoke with because we have looked hard at the very types of matters that you’re talking about.”

Could it be that the Justice Department didn’t pursue the cases because they feared that a criminal prosecution against the Wall Street banks or high ranking Wall Street executives would have caused serious collateral consequences?

In a speech last year at the New York City Bar Association, Breuer addressed the question of collateral consequences.

“I personally feel that it’s my duty to consider whether individual employees with no responsibility for, or knowledge of, misconduct committed by others in the same company are going to lose their livelihood if we indict the corporation,” Breuer said. “In large multinational companies, the jobs of tens of thousands of employees can be at stake.  And, in some cases, the health of an industry or the markets are a real factor.Those are the kinds of considerations in white collar crime cases that literally keep me up at night, and which must play a role in responsible enforcement.”

Kaufman tells PBS that the Breuer speech disturbed him.

“That was very disturbing to me, very disturbing,” Kaufman told PBS. “That was never raised at any time during any of our discussions. That is not the job of a prosecutor, to worry about the health of the banks, in my opinion. Job of the prosecutors is to prosecute criminal behavior. It’s not to lie awake at night and kind of decide the future of the banks.”

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