No One Ever Goes to Jail in Corporate America

The U.S. composes 4.4 percent of the world’s population, but is home to a quarter of its known prisoners. With spending more than $80 billion a year on the approximate 2.4 million inmates, you would think that the hurdle for imprisonment in this country must be pretty low, and it is — if you are an individual.

Large and connected corporations in America operate under a completely different set of rules from the average American. Management in this day and age has no fear of ever doing hard time. For them, legal ramifications of criminal action equates to mere fines, and just another cost of doing business. Jail? Well, that’s only for the real criminals.

Large corporate “rules” allow for those responsible for life-and-death decisions to get away with inflicting damages beyond anything the corner hustler in Baltimore could ever muster. Steal a loaf of bread . . . go to jail. Steal from hundreds of millions through manipulation, and fraud . . . pay a fine. Seems fair and just, right?

The proportion of societal damage is so unbalanced relative to the penalties that it makes one question whether the rules are even a deterrent to corporate criminal behavior. The only variable for the guilty is the size of the check.

Deutsche Bank is the latest in a long list of large firms that are facing multi-billion dollar fines for employees who knowingly broke the law, but will receive no prison time for their actions. The bank is but one example among many that demonstrate just how far our justice system has run amok. Deutsche Bank’s punishment for taking part in the manipulation of the most important interest rate in the world will cost them $2.5 billion (which works out to about $25,000 per employee), a fine imposed without any jail time for any of its perpetrators.

Get out of jail free card

This two-tiered judicial system functions like a corporate “Get out of Jail, Free” Monopoly card, allowing those in charge to skirt the law even when the evidence of their crimes is incontrovertible. The recent sentence of people like General Petraeus proves that the political arena is also infected with this growing cancer.

Once a business rises above a certain threshold — be it in size or in number of employees — it becomes “too big to jail” and the fines imposed are nothing but bumps in the road for the next quarter’s earnings. Companies are setting aside billions for future litigation costs, yet management remains firmly in place because shareholders (who are made up of large management firms like Fidelity) are unwilling to clean house. Just as with the epic government failures that allowed the tragedies of 9/11 to occur, incredibly no one loses their job.

Three years ago, if someone pulled you aside and told you that nearly 20 of the largest financial institutions on earth were rigging the most important interest rates in the world you would have probably chalked it up to just another “conspiracy theory.” Over the last year evidence has emerged that these large financial institutions did indeed conspire to stack the deck on assets worth over hundreds of trillions of dollars. It’s no longer conspiracy theory, but instead conspiracy FACT . . . yet the press’ coverage has been conspicuously minimal, given the severity and breadth of the crimes. Even many informed political and business types appear to be in the dark regarding these fraudulent machinations.

LIBOR, TIBOR, and IBOR are interest rates that the world uses each day upon which to base financial decisions. Few people pay close attention to these foundational rates. Just to demonstrate my point, these rates typically appear on the fine print of your credit card or loan statements. Their manipulation by these “too big to jail” banks has possibly been going on for decades, but the regulators were either complacent or incompetent in enforcing what is outright fraud perpetrated against over a billion people across the globe.

You can be certain that if any of these crimes were committed by the local small- to medium-sized business, their CEO and top management would be doing perp walks on the local news just like those indicted in the S&L Crisis of the ’80s. Perversely, the most important decision for criminals today seems to be, how big of a corporation do you have to work for in order to be effectively shielded from the long arm of the law?

The Justice Department, which one might say has an oxymoronic name, has made some rather poor “too big to jail” decisions. Below are some of the most egregious examples of these by none other than Eric Holder (and his recent successor, Loretta Lynch)

  • • Deutsche Bank $2.50 billion — rigging interest rates . . . No jail
  • • HSBC $1.92 billion — tax-evasion and money-laundering . . . No jail
  • • Glaxo $3.00 billion — healthcare fraud and safety violations . . . No jail

In the above examples it is imperative to note that the people involved made conscious decisions to commit known crimes, skirt existing rules, and/or manipulate and falsify information. In all of these cases the evidence was both overwhelming and concrete.

It is comforting to know, however, that our courts are working hard to keep society safe from some of the following high level crimes that truly threaten the integrity of our American way of life:

The conclusion from all of this is that there needs to be a political awakening, and an implementation for serious structural reform of our broken justice system. This quote from attorney David Feige, sums it up best:

“White-collar crimes are about greed and self-aggrandizement, and while those things may be deeply compelling, they are fundamentally different from hunger, addiction or desperation. Unlike them, greed responds to fear, and fear is more about the conditions of confinement than its duration. The truth is that to most people, the prospect of even a short stint in a maximum-security prison is far more frightening than years in Camp Fed.”

  • Jason Scheurer
  • Jason Scheurer is a Financial Advisor, former US Senate Candidate, Eagle Scout, radio talk show host and columnist.

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