Volume 57

Declining Corporate Prosecutions

by Brandon L. Garrett

In the aftermath of the Global Financial Crisis, people across the United States protested that “too big to jail” banks were not held accountable after the financial crisis. Little has changed. Newly collected data concerning enforcement during the Trump Administration has made it possible to assess what impact a series of new policies has had on corporate enforcement. To provide a snapshot comparison, in its last twenty months, the Obama Administration levied $14.15 billion in total corporate penalties by prosecuting seventy-one financial institutions and thirty-four public companies. During the first twenty months of the Trump Administration, corporate penalties declined to $3.4 billion in total penalties, with seventeen financial institutions and thirteen public companies prosecuted. These trends build over time. In each year, blockbuster cases come and go, creating swings in fines. However, consistent with these data, this Article describes changes in written policy, practice, and informal statements from the Department of Justice that have cumulatively softened the federal approach to corporate criminals. This Article also describes continuity between administrations. A rise in corporate declinations, for example, represents a continuation of Obama Administration policy. A decline in use of corporate monitors similarly reflects prior policy. The steady and low level of individual charging in corporate cases reflects an ongoing lack of success in efforts to prioritize individual prosecutions, exemplified by the 2015 “Yates Memo.” That policy, like others, has been formally relaxed. The series of DOJ corporate prosecution policy changes has also been accompanied by institutional shifts. For example, high-level vacancies within the DOJ and other enforcement agencies may compromise ability to coordinate resolution of complex cases. This Article concludes by proposing structural changes, such as independent corporate enforcement functions, to enhance capacity and prevent pendulum shifts in enforcement. How we handle corporate crime goes to the root of power imbalances in the economy that produced the financial crisis. If we still have not learned the lessons of the last financial crisis, the next one cannot be far ahead.

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