White-collar crime

  • January 23, 2015
    Guest Post

    by Rena Steinzor, Professor of Law, University of Maryland Carey School of Law, and President of the Center for Progressive Reform. Steinzor is also author of the new book, Why Not Jail? Industrial Catastrophes, Corporate Malfeasance, and Government Inaction from Cambridge University Press.

    Candice Anderson was 21 when she lost control of her Chevrolet Cobalt in a moving stall caused by a defective ignition switch, drove into a tree, and killed her fiancĂ©. Two years later, in 2006, Texas police charged her with reckless homicide. Her parents liquidated their retirement account to pay for her defense. She pled guilty, spent five years on probation, paid $10,000 in fines, and had to live with the shame of the crime on top of the grief of the accident. In 2014, General Motors (GM) sent Anderson a letter explaining that her accident was the company’s fault. A judge in Texas cleared her criminal record a few weeks ago.

    The Department of Justice has opened a criminal investigation into GM’s conduct and the next attorney general will decide whether and how to charge the company. President Obama’s nominee, Loretta Lynch, will need to make a break with the misguided policies of her predecessor, Eric Holder, when the GM case hits her desk.

    Under Holder, the Justice Department has handled white collar criminal cases involving the largest companies in the world with “deferred prosecution agreements,” a form of settlement that does not require the defendant to acknowledge any criminal culpability, no matter how heinous the crime. Instead, these special deals require the defendant to pay large sums of money in civil penalties. Given their ample financial resources, such sums end up being an affordable cost of doing business. 

    Deferred prosecution agreements undermine the straightforward application of white collar criminal laws that punish everything from racketeering and fraud to deadly violations of health, safety, and environmental laws. The Obama Justice Department has entered roughly twice the number of deferred prosecution agreements as the George W. Bush administration and has been rightly criticized for embracing the corrupt notion that some firms may be “too big to jail.” 

  • December 16, 2014
    BookTalk
    Why Not Jail?
    Industrial Catastrophes, Corporate Malfeasance, and Government Inaction
    By: 
    Rena Steinzor

    by Rena Steinzor, a Professor at the University of Maryland Carey School of Law and the president of the Center for Progressive Reform. For two decades, she has written dozens of articles and two previous books about the regulatory system that protects public health, worker and consumer safety, and the environment. She has testified repeatedly before Congress and has been quoted extensively in a wide range of mainstream media outlets. Cambridge University Press published her latest book Why Not Jail? Industrial Catastrophes, Corporate Malfeasance, and Government Inaction in December 2014.

    One subtle and too often ignored symptom of the fundamental bias in America’s criminal justice system is its feathery embrace of white collar crime. Failure to prosecute the banks in the wake of the 2008 crash gets consistent media attention and disgusts many people, but these reactions have yet to motivate a concerted response by the Obama Justice Department. The parallel failure to prosecute the corporations and executives that kill and injure people through reckless practices in industrial contexts is barely discussed.

    Just in the last few years, hundreds have died and thousands have been injured. Causes include contaminated food (think listeria in cantaloupes and salmonella in peanut paste), infected drugs (steroid injections tainted by meningitis), defective products (for example, Toyota sudden acceleration, General Motors ignition switches, Takata airbags), tainted drugs (consider meningitis-laden steroid injections administered at hospitals nationwide but manufactured by a nightmarishly inept pharmacy in Massachusetts), and absolutely preventable industrial catastrophes (oil rigs, refineries, coal mines, sugar plants, and construction sites). Less obvious is the egregious malfeasance at executive levels that enabled these outcomes. 

    The cantaloupes were washed in a machine designed for potatoes, with a disconnected rinse mechanism needed to kill the listeria. The peanut paste was shipped despite a positive test for salmonella. The managers of the “clean room” used to process injectable drugs shut off the air conditioning at night, allowing fungi and bacteria to fester. At the very least, senior car company executives failed to disclose defects to federal regulators promptly, as required by the law. They dragged their feet for months on recalls and, as the GM investigation deepens, evidence is even emerging that engineers fixed the defect in 2005 without informing dealers who had stockpiles of the defective parts, many of which ended up in cars still on the road. In the workplace, employers are quick to blame line workers for human errors regardless of thousands of pages of expert reports explaining that cost-cutting, delayed maintenance, lack of trained supervisory personnel, poor safety cultures, and manic haste to extract natural resources and build structures created intolerable risk. To their credit, U.S. attorneys are just beginning to bring such cases, and recently secured felony convictions against the owner and senior managers of the peanut plant.

  • August 4, 2014
    Guest Post

    by Reuben A. Guttman, Director, Grant & Eisenhofer; Member, ACS Board of Directors

    *This post originally appeared on The Global Legal Post.

    The ‘Hide No Harm Act’ is to be welcomed but why should corporate offenders be treated any differently from street criminals.

    'The Hide No Harm Act' puts a duty on a corporate officials not to knowingly conceal a corporate action that would pose a danger of death or injury to consumers and workers. United States Senators Richard Blumenthal (D-Conn), Tom Harkin (D-Iowa) and Bob Casey (D- Pennsylvania) have introduced legislation that, according to their press statement, 'would  make it a crime for a corporate officer to knowingly conceal the fact that a corporate action or product poses a danger of death or serious injury to consumers and workers.' The Senators call the Bill the 'Hide No Harm Act.' According to Senator Blumenthal 'this measure would criminally punish corporate officials who conceal that a product is dangerous.'  The proposed legislation would impose penalties of up to five years in prison because – as the Senators noted in their press statement – concealment by corporations has 'resulted in deaths and injuries.'

    Kudos to the three Senators for introducing this legislation. But wait just a second – I thought it was already a crime to intentionally injure or even negligently kill someone. Do not most, if not all, of the State penal codes make negligent homicide a crime? Surely the three Senators do not mean to say that absent this legislation, there is no vehicle – at least for some state prosecutors – to initiate a criminal prosecution of corporate officials who place revenue over safety and cause injury or death?  

    Do not misunderstand what I mean; the Hide No Harm Act is needed. In an age where we depend on corporations to provide the basic necessities of life, including food, health care, transportation and energy, the proposed legislation is an attempt to punish those who – perhaps for direct, or even indirect, economic gain – have compromised the delivery of life’s essentials and placed workers and consumers at peril. This legislation will be a powerful tool for federal prosecutors. And like any new tool, someone may pick it up and try it.  

    Corporations are fictions

    Yet, while the legislation is a positive step, it is thought provoking. Corporations, of course, are what lawyers call fictions; it is those individuals who control them that steer these global enterprises toward wrongdoing. Often these titans of capital do so because it is in their own economic interest. In an era where multinationals from drug companies to auto makers have knowingly concealed the risks of their products or the deficiencies of their services, why have state prosecutors been reluctant to pursue individual culprits with zeal? It is almost as if there is an unwritten rule that those who commit crimes in the course of their employment should be treated differently from the street criminal whose crime is so transparent that there actually may be a 'smoking gun'.  

  • May 24, 2012

    by Jeremy Leaming

    JPMorgan Chase CEO Jamie Dimon has been a loud, at times obnoxious, critic of serious efforts to strengthen regulations of the financial industry. Specifically he has fought the Volcker rule, which would bar federally insured banks from risky trading ventures, similar to the ones that Dimon’s bank engaged in that led to a multi-billion dollar loss.

    Dimon is also on the board of the Federal Reserve Bank of New York, which is instrumental in supervising and regulating financial institutions. A growing number of people, including Treasury Secretary Timothy Geithner, are suggesting that Dimon is unfit to serve on the board of an institution that is charged with checking the actions of JPMorgan, which as The New York Times has noted emerged from the Great Recession as “the nation’s biggest bank.”  

    Simon Johnson, former chief economist of the International Monetary Fund, is the latest influential voice to call for Dimon to go.

    Writing for The Baseline Scenario, Johnson noting that the NY Fed is a “key part of our regulatory and supervisory apparatus,” concludes that it makes no sense for Dimon to remain a part of the apparatus that “oversees his activities, decisions, and potential losses.” Johnson is asking others to join the effort urging Dimon to resign from the board.

    The JPMorgan debacle centers on a trader in London dubbed the “London Whale,” apparently for playing a central role in a risky hedging strategy that led to the announcement of a $2 billion, likely far higher, trading loss.

    In a post for his Rolling Stone blog, Matt Taibbi says, “If you’re wondering why you should care if some idiot trader (who apparently has been making $100 million a year at Chase, a company that has been the recipient of at least $390 billion in emergency Fed loans) loses $2 billion for Jamie Dimon, here’s why: because J.P. Morgan Chase is a federally-insured depository institution that has been and will continue to be the recipient of massive amounts of public assistance. If the bank fails, someone will reach into your pocket to pay for the cleanup. So when they gamble like drunken sailors, it’s everyone’s problem.”

  • May 8, 2012
    Guest Post

    By Reuben Guttman and Traci Buschner. Mr. Guttman is a Senior Fellow and Adjunct Professor at the Emory Law School Center for Advocacy and Dispute Resolution, and a partner at the firm of Grant & Eisenhofer where he heads the firm's whistleblower practice. He is a founder of the website, Whistleblowerlaws. Ms. Buschner is a Senior Counsel with Grant & Eisenhofer. Mr. Guttman and Ms. Buschner were lead counsel for the lead whistleblower, Meredith McCoyd, in U.S. ex rel. McCoyd v. Abbott Labs.


    Abbott Labs has agreed to pay $1.6 billion dollars to settle criminal and civil allegations that it engaged in the unlawful marketing of its anti-epileptic drug Depakote.

    The settlement arose out of a False Claims Act (FCA) case filed in the fall of 2007.  Whistleblower or "Relator" Meredith McCoyd, alleged that the company marketed Depakote to elderly nursing home patients and to children for purposes that had not been approved by the Food and Drug Administration (FDA).  Ms. McCoyd also alleged that Abbott made misrepresentations about the safety and efficacy of the drug and paid kickbacks to doctors and others.

    This case was not just about lost government dollars. It was about a company that placed money over medicine by marketing unlawfully to vulnerable patient populations. And we still don't know what the long-term consequences are for those patients who took Depakote as a result of marketing improprieties.

    Unfortunately, Abbott is not the first pharmaceutical company to face allegations of unlawful marketing tactics. Astra Zeneca, Johnson & Johnson and Pfizer have all paid hefty fines following allegations of marketing derelictions.