There’s a lot more than this in the article (at zerohedge) which suggests that the government’s role in creating the conditions which propagated the financial crisis helps to explain why we haven’t been seeing criminal prosecutions of senior financiers. But part of the story Judge Rakoff tells is of a prosecutorial environment which focused more on corporate than on individual responsibility:
if your priority is prosecuting the company…Early in the investigation, you invite in counsel to the company and explain to him or her why you suspect fraud. He or she responds by assuring you that the company wants to cooperate and do the right thing, and to that end the company has hired a former Assistant U.S. Attorney, now a partner at a respected law firm, to do an internal investigation. The company’s counsel asks you to defer your investigation until the company’s own internal investigation is completed, on the condition that the company will share its results with you. In order to save time and resources, you agree. Six months later the company’s counsel returns, with a detailed report showing that mistakes were made but that the company is now intent on correcting them. You and the company then agree that the company will enter into a deferred prosecution agreement that couples some immediate fines with the imposition of expensive but internal prophylactic measures. For all practical purposes the case is now over. You are happy because you believe that you have helped prevent future crimes; the company is happy because it has avoided a devastating indictment; and perhaps the happiest of all are the executives, or former executives, who actually committed the underlying misconduct, for they are left untouched…. Just going after the company is ..both technically and morally suspect. It is technically suspect because, under the law, you should not indict or threaten to indict a company unless you can prove beyond a reasonable doubt that some managerial agent of the company committed the alleged crime; and if you can prove that, why not indict the manager? And from a moral standpoint, punishing a company and its many innocent employees and shareholders for the crimes committed by some unprosecuted individuals seems contrary to elementary notions of moral responsibility.
Meanwhile, the SEC just announced its first deferred prosecution agreement with an individual. And, as Brandon Garrett and David Zaring note here, the UK has adopted a regime for deferred prosecution agreements which differs in some important respects from the US approach:
Britain’s impending adoption of the agreements, on the other hand, exemplifies the cautious embrace offered by good administrative law.
Britain’s proposed program comes with a code governing its use, and a requirement that a court conclude that the agreement is both “in the interests of justice” and “fair, reasonable, and proportionate.” Moreover, the proposal itself has been opened for comment from the public.