John Ashcroft says hang ’em high, but only if it doesn’t cost us jobs:
Bailout Justice, by John Ashcroft, Commentary, NY Times: …[N]o one has discussed the inherent conflict of interest that the government created when it infused large sums of money into [banks]. The government now has an extraordinarily high fiduciary duty to safeguard the stability and health of companies that received hundreds of billions of bailout money. At the same time, the Justice Department has the duty to indict a corporation if the evidence dictates such severe action — and an indictment is often a death sentence for a corporation. The quandary is obvious. How, then, does the Justice Department bring charges against a corporation that is now owned by the government?
The tsunami of corporate scandals that shook our economy in 2001 — Enron, WorldCom, Adelphia and others — provides us with an instructive example. The Justice Department moved swiftly to bring corporate wrongdoers to justice. But we also learned that when dealing with major companies or industries, we had to carefully consider the collateral consequences of our prosecutions.
Would there be unintended human carnage in the form of thousands of lost jobs? Would shareholders, some of whom had already suffered a great deal, lose more of their investment? What impact would our actions have on the economy? We realized that we had an obligation to minimize the harm to innocent citizens.
Among the options we pursued were deferred prosecution agreements. These court-authorized agreements … offered more appropriate methods of providing justice… In September 2007, for instance, the Justice Department and the nation’s five largest manufacturers of prosthetic hips and knees reached agreements over allegations that they gave kickbacks to orthopedic surgeons. Think of the effect on the community if these companies had been shuttered: employees would have lost their jobs, shareholders and pensioners would have lost their savings and countless people in need of hip and knee replacement would have been out of luck… In these types of circumstances, a deferred prosecution agreement is clearly better for everyone.
The government must hold accountable any individuals who acted illegally in this financial meltdown, while preserving the viability of the companies that received bailout funds or stimulus money. Certainly, we should demand justice. But we must all remember that justice is a value, the adherence to which includes seeking the best outcome for the American people. In some cases it will be the punishing of bad actors. In other cases it may involve heavy corporate fines or operating under a carefully tailored agreement.
In 2001,… we learned that there was often a better solution than closing … companies. …
I’m not a big fan of delaying justice even if it means closing a company. And if we started a prosecution today, how long would it be before it would actually came to trial? Years? Isn’t that enough of a delay? I certainly don’t think anyone should escape justice or be treated less severely because they are too big to prosecute.
[He also says, “I can imagine the attorney general facing not too subtle pressure from the president’s economic team to go easy on such companies.” Not too subtle pressure from the president’s team? I bet he can imagine that.]
Here’s the program he is talking about:
In Shift, Ashcroft to Testify on Oversight Deal, by Carrie Johnson, Washington Post, February 26, 2008; D01: Former Attorney General John D. Ashcroft agreed last night to appear at a House hearing to discuss his lucrative arrangement overseeing a medical equipment company, averting a showdown with committee members who had planned to meet today to authorize a subpoena.
The move marks an about-face for Ashcroft, who told lawmakers earlier this month that “discussing the details of my legal responsibilities, as requested, in this pending criminal case and related ongoing criminal investigation would violate my ethical obligations.”
Ashcroft, who left public service three years ago to start a private consulting firm, won the contract under a settlement the company reached with federal prosecutors in New Jersey. Under a recent government policy, companies facing criminal investigation can accept such outside supervision to avoid indictment.
Ashcroft’s consulting firm stands to collect between $28 million and $52 million over 18 months for reviewing the operations of Zimmer Holdings, an Indiana company that makes replacement hips and knees. Zimmer last year settled government charges over kickbacks it allegedly provided doctors in exchange for using its products. …
Zimmer paid the Ashcroft Group $7.5 million between last September and January… Ashcroft and about a half-dozen senior staff members of his firm are covered under a flat $750,000 monthly payment from Zimmer. …
No wonder he likes it so much.
Originally published at the Economist’s View and reproduced here with the author’s permission.