Attorney General Eric Holder has efforts and achievements to be proud of, no doubt, but will probably be remembered above all for something he didn’t do: prosecute top executives for their role in the 2008 financial crisis.
He declined to hold senior executives accountable not because he wished to be soft on financial crime but because of a strategic error. In a 1999 memo written when he was deputy attorney general under President Bill Clinton, he’d explained how prosecutors could charge corporations as criminal enterprises. In 2002, the testing of that doctrine on Enron Corp. auditor Arthur Andersen LLP caused the company to fold, and thousands of innocent people lost their jobs.
During and after the financial crisis, Holder kept the focus on corporations, but moved more cautiously. Fearing a repeat of the Arthur Andersen debacle, prosecutors were careful to leave companies standing, even as they extracted tens of billions of dollars from banks for transgressions ranging from mortgage-related fraud to laundering money for drug cartels.
The inhibition was understandable. Yet it arose because, under Holder’s leadership, prosecutors lost sight of what mattered most: holding individuals, not companies, accountable for crimes. Of 21 separate actions against major financial companies from 2009 through May 2014, only eight were accompanied by charges against individuals, and none of them were high-level executives. The authors of any offenses related to the 2008 financial crisis can relax: In most of the cases, the statute of limitations now applies.
Could it be that nobody went to prison because no crimes were committed? This seems unlikely, at the very least.
Holder’s successor should strive to put this right. First, insist that prosecutors taking action against companies charge individuals, too. Second, eliminate non-prosecution agreements, in which prosecutors settle without pressing charges. These make it too easy to hide bad behavior or subject companies to shakedowns. Third, ask Congress or the Judicial Conference which drafts changes to the rules of criminal procedure — to give judges power to review deferred prosecution agreements, in which prosecutors file and settle charges, to make sure these serve the public interest.
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