Justice Defends Record On Prosecuting Financial Entities

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By Richard Hill

The Justice Department said in a Feb. 27 letter to two senators that it is prepared to bring criminal cases against banks and financial corporations “when we have the evidence, no matter the crime.”

At the same time, it defended the use of non-prosecution agreements and deferred prosecutions as “an important middle ground” between taking no action at all and pursuing cases “where harm to innocent parties is likely to result.”

In January, Sens. Charles Grassley (R-Iowa) and Sherrod Brown (D-Ohio) asked DOJ whether some institutions were so systemically important they were “too big to jail.”

In a response released by Grassley March 1, Judith Applebaum, principal deputy assistant attorney general, said that Justice's decision-making on prosecuting entities is guided by the United States Attorney's Manual--particularly its Principles of Federal Prosecution of Business Organizations.

“The USAM principles dictate that corporations should be treated neither more leniently nor more harshly due to their artificial nature,” she said. “No corporate entity, no matter how large, is immune from prosecution.”

At the same time, Applebaum said the USAM “explicitly notes” that in some cases, it is appropriate to use means other than indictment to resolve alleged criminal matters. In some instances, she added, negotiated settlements can result in sanctions being imposed on an institution that may not be available in court.

Several Factors
The USAM, Applebaum said, sets out several factors prosecutors must consider in deciding whether to prosecute a corporation. One such factor is the “collateral consequence of prosecution.”

She said prosecutors “must determine whether there would be disproportionate harm to investors, pension holders, customers, employees, and others who were not personally culpable, as well as impact on the public.” Prosecutors also may consider a corporation's willingness to make financial restitution or to take remedial actions. At the same time, Applebaum clarified, neither a corporation nor an individual may avoid prosecution “merely by paying a sum of money.”

In a March 1 statement, Brown and Grassley called Justice's letter “aggressively evasive.”

“We want to know how and why the Justice Department has determined that certain financial institutions are 'too big to jail' and that prosecuting those institutions would damage the financial system.”

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