Jesse Eisinger: Senior Editor at ProPublica on Why the Justice Department does not Prosecute CEOs Anymore

Photo by Anna Sullivan on Unsplash

Matty Kerr is co-creator with John Brancaccio of The Working Experience. He is also a filmmaker and published author. Listen to our podcast on iTunes and Spotify and visit our website: theworkingexperience.com for videos, merchandise and more. You can also find us on Facebook, Linked In, Instagram, and Twitter.

You can listen to the full interview on The Working Experience Podcast.

“The Justice Department has lost the will and ability to prosecute top level executives. We don’t put CEO’s in prison for their crimes anymore. Instead, we settle with them for money.”

Twenty years ago, Kenneth Lay and other top level executives at Enron went to jail for fraud and other crimes, crimes which really hurt people by decimating their life savings. They lied, they cheated, they stole, and they were punished for it; they were held accountable.

So why doesn’t the Justice Department do that anymore?

Jesse Eisinger has worked in journalism for the past twenty five years and has been an investigative journalist with ProPublica for over ten years, focusing on business and financial issues. He started out working as a stringer (a reporter who gets paid piecemeal for each story, not a salary) for a Japanese newswire service in Chile, where he was living at the time, reporting on the Chilean bond market. When he returned to the U.S., he got a job with the Dow Jones News Wire Service which was the premier financial reporting outlet at that time. This was his path to staying in business and financial journalism and eventually led him to reporting for the Wall Street Journal and then to ProPublica.

Eisinger has always had a clear and definitive idea of what the role of a journalist should be.

“Most of what journalists should do when they are covering city hall or the police beat or some other institution, is think about the larger mechanisms for why something is happening, whose interests are being served and whether that is actually good for society or not. The mandate of ProPublica is to spur change, to have an impact. We want to identify people who are abusing power and help the downtrodden. Comfort the afflicted and afflict the comfortable.”

So what is going with the Justice Department not prosecuting wealthy CEOs who commit crimes?

“The Justice Department has lost the will and ability to prosecute top level executives. We don’t put CEO’s in prison for their crimes anymore. Instead, we settle with them for money.”

The Justice Department uses a relatively new legal mechanism called Deferred Prosecution Agreements. This means that they will put off prosecuting a corporation for a crime until an unspecified time in the future if the company (think JP Morgan, Goldman Sachs, BP), forks over some money and pretends they’re sorry for whatever crime they committed (defrauding investors, dumping oil into our waters etc.), admits to some degree of wrongdoing, and promises most sincerely to never do it again. The corporation, meaning the executives, can essentially buy their way out of being prosecuted and going to jail.

According to Eisinger, this isn’t an effective policy.

“My argument is this doesn’t work. Corporations are recidivists. They just keep doing things that are wrong and these fines are just a cost of doing business. Prosecuting executives individually would be a much more effective deterrent.”

So why doesn’t the Justice Department do that?

It is because they have become part of what James Comey (former FBI Director who fired by Donald Trump) calls The Chickenshit Club.

“It comes from line from a Jim Comey speech when he was the US Attorney for the Southern District of New York. The Southern District is the most prestigious office of the Department of Justice in the country, and they think of themselves as the biggest hotshots, the best of the best, and Comey comes in as the US Attorney and gathers them all together for a speech and asks, ‘How many of you have never lost a case?’ And a bunch of the hands shoot up because they are so proud of their undefeated records. And he says, “Me and my buddies have a name for you guys. You’re The Chickenshit Club.”

What he meant was that they were only prosecuting cases that were easy to win. They were more worried about having a winning record than holding people with money and power accountable. The members of The Chickenshit Club don’t want to take risks on losing trials which means that they avoid prosecuting individual CEOs, which are very difficult cases. They first need to prove that a crime was committed, which is not always obvious with white collar cases (as opposed to a murder, where the crime is pretty clear). Second, they need to be able to prove that the individual executive was responsible for the crime. Due the essential nature of a corporation, responsibility is diffused. It can be very easy for a CEO to obfuscate and claim ignorance, that he or she had no idea what was happening in the accounting department or the legal department. There is also a tremendous amount of complicated financial material that the prosecution needs to present to a jury in a way that they can understand. It is very hard to prove culpability beyond a reasonable doubt which does not make these cases attractive to a prosecutor who wants to maintain a perfect record.

It can work. Kenneth Lay and other executives from Enron were punished, they did go to prison. But now it seems that there is too much at stake for many prosecutors to pursue these cases and potentially lose and seem incompetent The Deferred Prosecution Agreements are an easy way out.

There is another, perhaps more disturbing reason for this lack of will to prosecute financial criminals. The prosecutors do not want to hurt their future careers in the private sector.

“The vast majority of these prosecutors spend eight or nine years at the DOJ and then become corporate defense lawyers and that’s a big problem.”

The legal profession is a cozy world. People working at the Justice Department want jobs in the private sector. They want a job at a private law firm where they are going to be pulling in big salaries, a lot more than they make as public servants. Fair enough. But this a creates a conflict of interest. The corporations and the CEOs they should be prosecuting are being defended by the very same people from whom they want a job in a few years.

That is not an incentive for a prosecutor to vigorously pursue a corporate criminal. It is an incentive to take the path of least resistance.

“They don’t want to make waves. They don’t want to be viewed as cowboys who make trouble for people because that’s not the way to get the job at the big law firms. The system is pretty corrupt. It’s a racket.”

With a Deferred Prosecution Agreement, the corporation pays, no one individual person is being held accountable. But human beings make up corporations. Human beings are making decisions to lie to the public, evade taxes, defraud investors, pollute the environment etc.

It is the human beings making these decisions and profiting from these crimes that need to be held accountable. If they are not, they will just continue committing crimes for which the rest of us pay.