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CounterPunch
August
13 / 19, 2002
Corporate
Crime Time
by Russell Mokhiber
and Robert Weissman
In signing corporate reform legislation on July
30, President Bush said that the new law "says to every
American: there will not be a different ethical standard for
corporate America than the standard that applies to everyone
else."
The corporatists apparently took this
as a challenge from their fearless leader.
Since the signing, they are working overtime
to prove him wrong.
Let's start with the editorial page of
the Wall Street Journal.
In an editorial on August 8 titled "Corporate
Crime Blotter," the Journal justifiably ripped into Adelphia's
Rigas family, ImClone's Samuel Waksal, Martha Stewart, and former
Tyco boss Dennis Kozlowski for inflicting  "enormous harm"
on "the markets and the cause of liberty."
But then get the conclusion: "The
faster individual law-breakers can be punished, the sooner any
public taint over honest business will be lifted."
Note the focus on individual law-breakers.
What about the corporate criminals?
Leave it to the Journal editors to write
a column about "corporate crime" and then leave out
any discussion of corporate crime.
Bob Bennett, brother of the ethicist
and better known Bill, is a leading inside-the-beltway corporate
criminal defense attorney.
He's Enron's lead attorney.
Bennett's job: makes sure Enron, the
corporation, doesn't get indicted.
If he has to offer up to prosecutors
Enron executives in lieu of the corporation, so be it.
At the National Press Club this week,
Bob floated the idea that we should seriously question the whole
idea of corporate criminal liability.
"The concept of corporate criminal
liability has not gotten enough attention," Bennett said.
"When you indict a company, you are doing enormous damage
to its stock. You are doing enormous damage to innocent people.
When a company gets indicted, it has a real impact on them. I
really question the value of that. Why you would hobble a company
trying to come out of bankruptcy? What do you get from that?
Is it just this macho -- we indicted so and so? Why do that harm?"
Bennett made clear that, as Enron's attorney,
he was cooperating with federal prosecutors to make sure that
responsible Enron executives were brought to justice.
"We are fully cooperating with the
Justice Department, we have waived the attorney/client privilege,"
he said. "And some damaging memos have come out that have
impacted individuals."
In June 1999, when he was with the Justice
Department prosecuting crime, Eric Holder wrote a memo (known
as "the Holder memo") to give guidance to prosecutors
on when and when not to indict a corporation.
Citing that memo, Holder, now in private
practice defending corporations, last month argued that "on
balance, and based on what is at least publicly known, it is
difficult to see the case for WorldCom being charged." ("Don't
Indict WorldCom," by Eric Holder, Wall Street Journal, July
30, 2002).
As Holder knows better than most, what
is publicly known of a criminal investigation of this magnitude
before a decision is made on whether or not to charge a company
is virtually nothing.
According to the Holder memo, in deciding
whether or not to criminal indict a corporation, prosecutors
must consider the pervasiveness of the wrongdoing within the
corporation, including the complicity in, or condonation of,
the wrongdoing by corporate management. They must also consider
whether the corporation cooperated with prosecutors, the adequacy
of a corporation's compliance programs, and the corporation's
remedial actions.
There is virtually no public information
on any of these factors, and yet Holder finds it difficult to
see a case for criminal prosecution of WorldCom.
Holder argues today that if the Justice
Department indicts the culpable individuals at WorldCom ? which
it did just days after Holder's article appeared in the Journal,
the case for bringing charges against the company is greatly
weakened.
Why?
"Because under the guidelines, the
degree to which current management has cooperated with the government
and dealt with those who engaged in wrongdoing must be factored
in," Holder writes.
But in his own June 1999 memo, Holder
writes that: "a corporation should not be able to escape
liability merely by offering up its directors, officers, employees,
or agents in lieu of its own prosecution."
This is a practice that is common among
corporate defense counsel ? offer up the executives to save the
company's hide. Is this the strategy we are now seeing put into
place by Bennett for Enron, and by defense attorneys for WorldCom
and Adelphia? (In the Adelphia case, the executives were charged
with crimes and arrested at their homes before a media mob ?
and with the arrests announced at a White House press briefing
-- while the corporation was only charged by the SEC with civil
fraud.)
In making his case against a criminal
charge against WorldCom, Holder says that he focused on collateral
consequences ? the workers who will be thrown out of work and
the innocent shareholders who will lose money ? if as a result
of an indictment, the company is put out of business.
First of all, whether the shareholders
are innocent in these cases is an open question. After all, they
are the owners of the company and they have nominal control.
Second, it is not clear that a criminal conviction would put
WorldCom out of business.
But if it might, the question about workers
is a good one. Perhaps where companies face extinction as a result
of a corporate criminal prosecution, the companies should be
thrown into public receivership--as happens with criminal unions--or
assigned a corporate appointed monitor -- as was the case when
Consolidated Edison was convicted of environmental crimes in
November 1994.
Corporations, their defense attorneys
and lobbyists are swarming all over Washington seeking to save
their collective hides.
They wish to preserve the double standard
that President Bush says the new law will eliminate.
Russell Mokhiber
is editor of the Washington, D.C.-based Corporate Crime Reporter.
Robert Weissman is editor of the Washington, D.C.-based
Multinational
Monitor, and co-director of Essential Action. They are
co-authors of Corporate
Predators: The Hunt for MegaProfits and the Attack on Democracy
(Monroe, Maine: Common Courage Press, 1999.)
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