Department of Justice Taking a Softer Approach to White Collar Crime

The federal government has changed its approach to white collar crime, resulting in fewer criminal prosecutions in the corporate world. The Department of Justice has adopted new guidelines that support “deferred prosecutions”: instead of going after a company immediately for wrongdoing, government prosecutors inform the company of the wrongdoing and make them clean it up first. This means that companies do an internal investigation, punish criminal conduct, pay fines, and “achieve these results without causing the loss of jobs, the loss of pensions and other significant negative consequences to innocent parties” in the company.

Though the Department of Justice has shied from aggressive prosecution since 2005, deferred prosecution agreements were not an official alternative until 2008. Naturally critics view it as a way for corrupt corporations to evade punishment. Some claim that it promotes an overly cozy relationship between the government and companies: the companies hire law firms to conduct the investigation and the firms report to the government. They point to one case involving Beazer Homes USA, where the zeal to make a deferred prosecution agreement led the Department of Justice to forcefully end another department’s investigation. The Department of Justice first demanded that the Department of Housing and Urban Development not interview anyone at Beazer until its hired law firm had completed its investigation. Then it halted the HUD’s investigation once a deferred prosecution agreement had been reached. Others argue that deferred prosecutions aren’t useful for cleaning up companies when the executives being asked to investigate are themselves corrupt. Finally, even if the government does decide to prosecute, federal criminal defense attorneys find the charges easier to defend because the government lawyers often lack a thorough knowledge of the evidence, so dependent are they on the companies to investigate.

These are all serious issues, if they represent the norm and not the exceptions. An experienced criminal defense attorney always tries to prove that the evidence does not support a client’s conviction; at the same time, it doesn’t serve the justice system when the client wins because the government is too incompetent to prosecute a case. Still, the deferred prosecution arrangement as a whole sounds promising. Most people think that those caught up in a white collar crime investigation are already guilty. Cries of “Throw them in jail!” grow louder as the extent of the financial meltdown becomes known. Yet many people charged with a white collar crime are innocent of the charges, or not nearly as guilty as the government contends. But even though their involvement is minor and not worthy of a severe punishment, a government investigation can tie up their lives for months or even years. A system that allows a company to rid itself of corruption is probably more efficient and much less painful.

Of course it depends on company executives at the top being honorable and taking the investigation seriously. When they don’t, the government ought to have the independence to step in and do its own investigation. If they can achieve a balance, we just might have a system in place where real corruption is rooted out, while good people are spared from having to spend months in legal limbo.

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