Some corporate criminologists, like John Braithwaite, believe that the most effective way to attack corporate crime is with the regulatory pyramid model of enforcement — with compliance programs at the bottom of the pyramid, followed by regulation and then criminal prosecution at the top.
University of Maryland School of Law Professor Rena Steinzor has spent much of her career trying to make regulation work.
But now she sees the bottom of the pyramid crumbling.
Get rid of deferred and non prosecution agreements.
Criminally charge corporations and their top executives.
The book is just out and it’s titled — Why Not Jail?: Industrial Catastrophes, Corporate Malfeasance, and Government Inaction (Cambridge University Press, December 2014).
“The bottom of the pyramid is crumbling away,” Steinzor told Corporate Crime Reporter last week.
Why not reconstruct the regulatory bottom of the pyramid?
“I’ve been making that argument for more years than I can count,” Steinzor said. “I have shifted my focus because I don’t see reconstruction of the bottom happening anytime in the foreseeable future.”
What makes you think that reconstruction at the top is going to be any more fruitful?
“Criminal investigations scare people to death,” Steinzor said. “And when you are able to bring it home to managers who are responsible for creating these conditions, you will really make them pay attention and change the relentless cost cutting, the reward of speed no matter what hazards are encountered, the browbeating of employees to cut corners on safety.”
“I base a lot of this on my own personal experience. When I was in private practice, one of the main things we did was compliance audits. And anyone in private practice will tell you this is true. I was amused this morning to be reading an article by lawyers who represent food companies. And they were saying — tell the client about criminal prosecutions and they want you to come in immediately and check their compliance.”
“We used to write a memo every August — and this was at a time when there were many investigations of publicly owned utilities. And they would hire a team of lawyers and engineers to come in and straighten out their situations. And when we went in, we often found dangerous conditions. Any industry lawyer knows that nothing motivates compliance programs better than the possibility, however remote, of a criminal investigation.”
“It’s a class issue. If you are a white collar executive, the last thing you need is the FBI rolling into your driveway.”
Steinzor completed her book before Booth Goodwin, the U.S. Attorney in West Virginia, announced the indictment of former Massey Energy CEO Don Blankenship.
Was Steinzor surprised by the indictment?
“I was not surprised,” Steinzor said. “We were delighted. He is a bad guy. But he is not an exception. He’s just the worst example along a continuum of this kind of behavior.”
“Blankenship is a good first case,” Steinzor said. “He was obsessively controlling of what went on in the Upper Big Branch mine. There were such fundamentally bad practices there. They allowed coal dust to accumulate. They did not monitor for methane. Their ventilation system was terrible. Parts of the mine were flooded at the time of the accident. All of these problems had come to the attention of the regulator. They had been cited for these incidents hundreds of times. Then this terrible explosion happened. Twenty nine people were killed in an explosion that moved two miles in all directions throughout the mine. There were grotesque outcomes. People were found blown to bits, impaled on walls and ceilings. It was just horrific for everyone who had to go in there afterwards. And the families were just waiting and watching as the U.S. Attorney climbed the corporate ladder. He made it very clear that is what he was doing.”
“The U.S. Attorney is a son of West Virginia coal country. And so is Blankenship.”
What was it about the Massey case that made the Blankenship indictment possible?
“The grit, determination and courage of the U.S. Attorney, Booth Goodwin,” Steinzor said. “I give him a lot of credit. He also has Steve Ruby working for him — and he is undoubtedly extremely hard working and relentless.”
“Blankenship himself is like a character out of a John Grisham novel. He’s kind of ludicrous. He has been such a loud mouth for so many years. He has pranced about the countryside, advertising himself as a boss who was ready to ignore everything but production. He was profiled in Rolling Stone under the headline — The Dark Lord of Coal Country. He made Goodwin’s job easier.“
“The families have been calling Goodwin’s office repeatedly over the past couple of years, urging him to indict Blankenship. There was a lot of popular support for this indictment.”
“The circumstances were ripe. The prosecutor had grit. And the defendant is a blowhard who has been mocking the value of miners’ lives for a long time. It was a perfect storm.”
The former environmental prosecutor David Uhlmann wrote an article for the New York Times in December 2011 titled – For 29 Dead Miners, No Justice. Uhlmann was upset at the time with a non prosecution agreement with Alpha Natural Resources. Could the U.S. Attorney have been justified in cutting that kind of deal if it meant cooperation from the company to get to Blankenship?
“I don’t think so,” Steinzor said. “He may have gained the cooperation of the company. Although, Blankenship was not working for Alpha. He retired with an $86 million golden parachute. I don’t necessarily see the two things as related. They might have given the Justice Department documents, but surely they would have had to do that anyway. Conceivably, some of the executives that Alpha hired were encouraged to turn on Blankenship. But I am hesitant to endorse this kind of non prosecution or deferred prosecution agreement in almost any context. It is eroding our perceptions of what is appropriate.”
“A deferred prosecution agreement says you are allowed to pay what essentially boils down to a civil penalty. And if you misbehave again, you can be charged criminally. That almost never happens – although the Justice Department now has become sufficiently embarrassed about how it almost never circles back to repeat violators that it is now starting to reinvestigate some of those settlements in the financial area.”
“Of course, it has come under heavy criticism for settlements such as HSBC, which was laundering money for the Mexican drug cartels. Your readers are certainly aware of all of those examples. But this is not a good practice. These deals have skyrocketed under Obama. And it should be ended. I would just point to the work of Robert Weissman, President of Public Citizen, and Ralph Nader, who have written extensively on this issue. And I agree with them.”
In death cases, Steinzor says she prefers that local and state prosecutors bring manslaughter charges.
“Manslaughter charges because I don’t believe executives go to work intending to kill other people,” Steinzor says. “Although there is a fine line between intending to kill someone and creating circumstances that are so dangerous that their deaths become inevitable.”
“But yes, I wish state and local prosecutors were far more active. At the Center for Progressive Reform, we have written a manual for state and local activists to advocate changes that would make workers safer. And one of the things we advocate is enhanced criminal authority for local prosecutors. Generally, the federal government cannot prosecute for people killing people. They did it in the BP case, using the Seaman’s Manslaughter Act. But it is unusual.”
“There is a tremendous mismatch of resources between the corporations and the prosecutors. Prosecutors have enormous legal power. It is political in the sense that local prosecutors are motivated by people’s outrage in response to this kind of episode. There is a lot in it for prosecutors to pursue. People are furious about all of this, especially bank wrongdoing, which is much better publicized than these other episodes.”
“Local and state prosecutors could get a lot of benefit by focusing on these cases.”
“The big cases we have been talking about — the Gulf Oil spill, Texas City, Massey Energy — these were investigated very thoroughly afterward,” Steinzor says. “There are hundreds of thousands of pages of reports, which I have spent a lot of time reading — they provide the evidence that I think a prosecutor would need. But I don’t know what the problem is. These reports set forth the evidence that you need, just like the Valukas report should get you started on a criminal investigation of General Motors.”
“There is an argument that says that it is counterproductive to do criminal investigations because you want to make everyone feel comfortable so they can share with you what the root causes were. The minute prosecutors come along, everybody clams up. Therefore, criminal prosecutions are counterproductive if you want to get the problem fixed. And this is a thread that runs throughout the literature and in the public debate.”
“For example, several members of the Chemical Safety Board have taken this position and I strongly disagree with it because I do not see any evidence that if you publish a detailed report on root causes that the corporations respond in any kind of responsible way — see for example, BP. What you end up with is sacrificing your opportunity to create an incentive to motivate people. But there is that argument. That and the argument — don’t mistreat white collar criminal defendants because then street crime defendants will be mistreated. Those are the two arguments made against criminal prosecution that are raised by people in the middle and to the left end of the spectrum.”
Russell Mokhiber edits the Corporate Crime Reporter.
[For the complete q/a transcript of the Interview with Rena Steinzor, see 28 Corporate Crime Reporter 46(11), December 1, 2014, print edition only.]