The conventional wisdom states that prosecuting corporations can subject them to terrible collateral consequences that risk putting them out of business and causing massive social and economic harm. Under this viewpoint, which has come to dominate the literature following the demise of Arthur Andersen after that firm’s prosecution in the wake of the Enron scandal, even a criminal indictment can be a “corporate death penalty.” The Department of Justice (“DOJ”) has implicitly accepted this view by declining to prosecute many large companies in favor of using criminal settlements called deferred prosecution agreements, or “DPAs.”
1adam12: If you want to make sure that this kind of junk doesn't happen again, the only way to do it is to take money away from natural persons, ...
In regard to bonuses, the rumour is that the deal will provide that the HSBC's top executives are to defer a portion of any bonuses that they are awarded for the next 5 years. This is another example of the US regulators trying to sheet home responsibility to individuals and those financial measures are, with the exception of custodial sentences or removal of authorisation, the most chilling sanction available. Again, the UK regulators are following this approach. Andrew Bailey, head of the Financial Services Authority's prudential business unit, wrote to bank chief executives in late October ahead of this year's bonus round warning them that the watchdog would be looking for evidence they had "clawed back" deferred bonuses from people involved in scandals.
Ad hominem: Are the shareholders ultimately responsible here?
Some perspective: HSBC sent more than $800 million in bulk cash from Mexico to the United States, a good chunk of which apparently represented proceeds from some of the most notorious Colombian drug cartels. As someone who tried the first narcotics money laundering case involving extradition from Colombia, let me assure you that this is a lot of money, the discovery of which usually generates vigorous prosecutions and lengthy prison sentences. And it wasn’t HSBC’s only dirty business: There were also hundreds of millions of more dollars of illegally disguised transactions with rogue nations such as Iran and Sudan.
Why no criminal charges? Why instead only some remedial measures and a “historical” fine that can be measured in weeks — not years — of earnings? It certainly wasn’t for lack of evidence. No, instead the government determined that HSBC is not only too big to fail, but also too big to jail. As the New York Times first reported, even though there were strong voices within DOJ pushing for criminal charges, the big banks’ best friends within the government (the Treasury Department, of course, and other unnamed regulators) were too fearful that an indictment could destabilize the global financial system. Yes, it’s 2008 all over again. In the name of systemic stability, a megabank again escapes accountability for its actions, rescued by compliant officials.
There is, of course, a solution for our emerging two-tier system of justice. The largest banks need to be broken up, the only realistic way to truly end both too big to fail and too big to jail. But since our government has demonstrated a reluctance to do so, perhaps the next time a megabank presents HSBC’s argument that it should not be criminally charged because it would destabilize the financial system, instead of capitulating to this threat, DOJ should require at a bare minimum that in return for allowing the bank to survive, it must break itself up, ensuring that it could never hold the justice system hostage again.
There is a growing groundswell of informed opinion among modern commentators and even some politicians that financial regulators should be far more willing to bring criminal charges against those financial practitioners whose actions should be construed as more than just negligent or incompetent.
Mr Cameron, unless I am completely mistaken, Mr Bailey seems to be telling us that banks, and therefore bankers, are now officially considered to be above the law in this country and that, in the interests of confidence in the banking industry (which is already at rock bottom among the British public, and therefore can hardly sink any lower), they cannot be prosecuted.
I am writing to ask you, as Prime Minister, for some clarification.
Does your government endorse the notion that banks and bankers should be given a licence to commit criminal acts without any fear of prosecution? Is this now official government policy? Are the British public now being asked to accept that, despite incontrovertible evidence of multiple criminal acts by banks, including money-laundering, drug-money-laundering, Libor rigging, multiple frauds and assorted Ponzi schemes, bankers are considered to be immune from prosecution? And if so, can I ask on what grounds your government, or indeed the government of any democratic country, can justify such a policy?
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