Corporate crime time
by Russell Mokhiber and Robert Weissman
(FinalCall.com) -- 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
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 Aug. 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
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: make sure Enron, the corporation, doesn’t get
If he has to offer up to prosecutors Enron executives in lieu of the
corporation, so be it.
At the National Press Club, 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, has 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
criminally 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 program,
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
Holder argues today that if the Justice Department indicts the
culpable individuals at World-Com—which it did just days after Holder’s
article appeared in the Journal—the case for bringing charges
against the company is greatly weakened.
"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
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, with the arrests announced at a White House press
briefing—while the corporation was only charged by the SEC with civil
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.
They must be defeated.
(Russell Mokhiber, editor of the Washington, D.C.-based Corporate
Crime Reporter, and Robert Weissman, editor of the Washington,
D.C.-based Multinational Monitor, are co-authors of "Corporate
Predators: The Hunt for MegaProfits and the Attack on Democracy."(c)
Russell Mokhiber and Robert Weissman)