Peak Everything, Overshoot, & Collapse

[ This is a book review with excerpts of “The Chickenshit club: Why the justice department fails to prosecute executives”.  Here is how the author Eisinger summarizes the problem and consequences:

“Businesses now have privileges not seen since the Gilded Age. Executives make more money than ever. Corporate profits are at record highs. The courts are expanding corporate rights, as companies exert great political power and dominate our policy discourse. But the most valuable perquisite corporate officers possess is the ability to commit crimes with impunity. Such injustice threatens American democracy. Today the justice system is broken.”

Eisinger takes the reader on a journey of the good old days, when S&L, insider traders, Enron, and other white collar criminals went to jail, and how this was done, the expertise the Justice department used to have and why they’ve now become timid and soft on corporate crime.

Now there’s no trial, no jail, just a settlement amount.  The only payment is a fine – money subtracted from the shareholders, reduced wages, and increased consumer prices.  This does absolutely nothing to reform business, quite the opposite.  Not only is there no jail time, but executive retirement packages remain intact, there are no claw backs, no reason not to get even more greedy, and the company can write off some of the fine, since it’s tax deductible, and banks could earn credits for building affordable housing or helping mortgage holders, subtracting from the fine owed further.

Nor are there more regulations, or licenses pulled to enforce good behavior in the future.  

I think this is an important book because corruption will accelerate the consequences of declining oil and in and of itself makes it more likely that another crash and the end of democracy will happen sooner rather than later.

Here are some, but not all, of the reasons why CEOs and other high-level executives didn’t go to jail:

1. Lack of staff, time, and expertise to flip lower level employees upward to the top
2. The lack of technology made the DOJ far less effective and productive. The DOJ was woefully behind private industry. In 2003, the DOJ had old computers, no blackberries, no document management system, and no way even to email the FBI agents assigned to the investigation. With this pathetic setup, they were taking on the infernally complex company Enron in the most important corporate fraud case in memory, against a legion of defense lawyers from the best firms in the world.
3. The decisions that led to getting a fast enormous monetary award being better than a slow many years-long trial
4. The FBI used to help the Justice department, now their main focus is Homeland Security; a huge loss of expert investigative staff
5. Of the 94 offices, the Southern District of New York, has the smartest and ablest prosecutors in the land. The other 93 are less competent.
6. The rich and powerful are able to hire better paid and prepared lawyers than Department of Justice lawyers
7. Banks and Wall Street increasingly rewrote financial rules for politicians to enact into law that made what were once illegal acts legal or arguable
8. More was discussed live and less in emails to evade leaving a trail for the prosecution
9. Public Relations firms were paid huge sums to spin positive news on the “bad” corporation.
10. Prosecutors who took a hard line risked never getting more lucrative jobs in industry. Sheila Bair, who had headed up the FDIC and challenged the Obama administration over its bank bailouts, could not land a prominent corporate or administration position.
11. Large fines did little to deter corporations from breaking the law. “Over 50% of the most serious fraud and larceny culprits were recidivists, about the same as robbery and firearms offenders and far higher than drug traffickers.”
12. Settlements have another downside: they weaken prosecutorial skills, which over time becomes lost knowledge. Settlements breed investigative laziness and erodes trial skills.
13. Many prosecutors are wealthy and were in their class, perhaps even their friends or in school together
14. It’s risky to go to trial and have a hung jury
15. Corporate responsibility is diffused; the top leadership of giant corporations make few day-to-day decisions and none without the advice of lawyers and accountants.
16. Time and again, the government went after only one low-level employee.
17. Proposals to expand prosecutorial power over white collar crime, extend the statute of limitations, expand the criminal code, expand the ability to punish corporate officers who harmed public health and safety, bank failures and their consequent job losses and economic devastation. None of these proposals were ever enacted.
18. The justice department set up a new layer of bureaucracy, a compliance office, to evaluate corporate cooperation. Sounds good, but this extra layer made it even harder to bring cases against corporations or high-level individuals.
19. A broad coalition of corporate interests led a fight against prosecutorial power. They forced the Department of Justice to stop using their tools and techniques to investigate companies.
20. Trump made matters worse. He fired Sally Yates, the architect of the DOJ’s attempt to improve its prosecution of corporate crime. He appointed men who would eviscerate the Consumer Financial Protection Bureau and get rid of Dodd-Frank
21. Senior officials take a pass on indictments because they are too inexperienced to judge the evidence. As the abilities of the FBI, SEC, and Justice Department corrode, they make blunders. The blunders make them more reluctant to pursue riskier paths such as prosecutions of powerful and well-defended individual corporate executives, which leads to more mistakes
22. Corporate whistle-blowers had it even worse. Their lives were never the same. They faced divorce, financial ruin, and joblessness. They wondered whether it had been worth it. They wondered why they had been disbelieved so often by government investigators—when they had been interviewed at all.
23. The Justice Department has been hurt by budget constraints and less help from the FBI, which used to conduct investigations for the department, but after 9/11 focuses on antiterrorism. The Justice Department has kept track of white-collar cases only since the early 1990s.
24. Judges all over the country made generous interpretations of the law, broadening corporate and executive rights and privileges, narrowing white-collar criminal statutes, and repeatedly overturning federal prosecutors in notable white-collar cases. Over the last decadethe courts have repeatedly decided in favor of corporate top executives over the government.
25. Large and powerful corporations, under the advice of their expensive defense lawyers, were eager to appear cooperative and wrap up investigations quickly, before prosecutors uncovered more damning information.
26. The culture of the Justice Department changed. They came to view the highly successful Enron prosecutors as reckless and abusive, when in fact it requires being sufficiently aggressive to flip each rung in the corporate hierarchy. This was once a basic tool of prosecutors that are now rarely used, in favor of speedy fines.
27. Big Law corporatized white-collar criminal defense, working more often in symbiosis with prosecutors than as adversaries. These lawyers, not the government, conducted extensive and lucrative investigations, delivering their findings to the government and moving on to the next.
28. In the four years from 1992 through 1995, white-collar cases averaged 19% of overall cases. In the four years from 2012 to 2015, that number had fallen to just under 9.9%. And the Department of Justice wasn’t just going after fewer cases, but easier cases. In 2016 the Department of Justice brought the lowest number of white-collar cases against individuals in twenty years, on track for just 6,200 cases, down more than 40% from 1996—despite population and economic growth.
29. I have a friend who was a white collar defense attorney. He told me their clients had enormous amounts of money, and could hire the best lawyers. They usually weren’t even paying the fees out of their own pocket – the company covered their legal expenses. His defense firm was one of the best in the Bay Area, and easily beat the prosecution, over and over again.  The money also paid for mock trials where fake juries were paid to vote on which arguments worked the best

Alice Friedemann   www.energyskeptic.com  author of “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer and “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts: Derrick Jensen, Practical Prepping, KunstlerCast 253, KunstlerCast278, Peak Prosperity , XX2 report ]

Jesse Eisinger. 2017. The Chickenshit club: Why the justice department fails to prosecute executives. Simon & Schuster. 400 pages

The Department of Justice is a loose federation of 94 offices around the country, each a realm unto itself, run by a US attorney who is almost untouchable by headquarters in faraway Washington, DC. Of all those offices, the Southern District of New York, located at the bottom tip of Manhattan, has the smartest and ablest prosecutors in the land. Any alum of the office will be happy to verify that.

The Department of Justice does not merely struggle to prosecute top bankers. The problems go beyond the financial crisis and beyond the financial sector.

Walmart found through its own internal investigation at least $24 million in suspicious payments. The lead agent on the probe determined that American and Mexican laws had probably been broken. Then, the report went on to demonstrate, Walmart’s leaders, including then CEO H. Lee Scott Jr., kiboshed the investigation. Barstow won a Pulitzer for the stories the following spring.

After the New York Times approached Walmart but before the story came out, the company reported itself to the Department of Justice for possible violations of the FCPA. The retail giant had known about the bribery allegations but had shown little inclination to reveal itself to the government until the Times forced the matter. The Feds initiated an investigation. The Walmart investigation generated a cornucopia for law firms. The retailer spent upward of $700 million on legal advice and compliance improvements. All that money was well spent. The Justice Department’s probe proceeded slowly. The government was frequently stymied. Many of the allegations involving Mexico were old. The statute of limitations had run out. The Mexican government barely cooperated, ignoring the Department of Justice’s official requests for assistance for years. Walmart seemed to have had troubled operations in other countries as well. Justice Department officials investigated its activities in India, China, and Brazil. The department tried to put resources into the case. There were two prosecutors from the Eastern District of Virginia and three from Main Justice. But early on, prosecutors couldn’t get the FBI or the IRS engaged. The agencies did not prioritize the case.

After two years, Walmart eased out at least eight executives who had been involved in the suspicious activities or had been alerted to them. Their retirement packages, however, remained intact. The Department of Justice probe lasted years but slowed dramatically by 2015. In October of that year, the Wall Street Journal reported that the federal investigation found no serious violations. That Walmart made its changes and avoided any charges or even a deferred prosecution settlement suggested that the gentle farewells had been carried out with at least the tacit approval of the government. One of the biggest corporate scandals in years faded away to nothing.

After two years, Walmart eased out at least eight executives who had been involved in the suspicious activities or had been alerted to them. Their retirement packages, however, remained intact. The Department of Justice probe lasted years but slowed dramatically by 2015. In October of that year, the Wall Street Journal reported that the federal investigation found no serious violations. That Walmart made its changes and avoided any charges or even a deferred prosecution settlement suggested that the gentle farewells had been carried out with at least the tacit approval of the government. One of the biggest corporate scandals in years faded away to nothing.

Similar problems plagued the corporate investigations into Toyota (for the unintended acceleration problems with its cars) and General Motors (faulty ignition switches). Toyota did not cooperate fully with the Southern District’s investigation. As for GM, the Department of Justice could not identify any executives who had the full picture of the carmaker’s problems and responsibility for fixing them.

Even dedicating resources does not bring success. After the Deepwater Horizon platform exploded in 2010, killing 11 people and causing the largest oil spill off the US coast in history, Lanny Breuer gathered together a task force to investigate. BP paid $4 billion in criminal penalties and pled guilty. But by early 2016, the task force had come up almost entirely empty against individuals. It had started by charging low- and midlevel executives with a variety of crimes, but began withdrawing charges and dropping executives from its cases as courts ruled against it. The government ended up withdrawing manslaughter charges against two midlevel supervisors. Some of the cases were dismissed. Finally, the Justice Department lost three trials against executives.

Even supposed triumphs against corporate executives often underwhelm. In late 2015, the Justice Department brought coal baron Don Blankenship, CEO of Massey Energy Company and a power in West Virginia, to trial for his role in creating unsafe conditions at the Upper Big Branch mine, the site of a terrible explosion that killed twenty-nine miners in 2010.

The jury found Blankenship guilty, the first conviction of a top executive for a workplace safety violation. But the success was tempered. Massey was not in the Fortune 500 and presented an easier target than, say, a Goldman Sachs or JPMorgan executive. More troublingly, the jury found Blankenship guilty only on one count of conspiracy, a misdemeanor for breaking federal safety rules, and exonerated him on two other felony counts. Even with a local jury made up of people supposedly sympathetic to dead miners, such cases don’t go smoothly. The judge sentenced Blankenship to one year in prison, the maximum allowed by law. People hailed the result, relieved that at least yet another CEO wasn’t getting off. But for a man who had been so cavalier about jeopardizing the lives of his employees, one year seems paltry.

Defenders of the Department of Justice maintain that these failed corporate investigations did not indicate a lack of will or skill. They highlighted the inherent difficulties with prosecuting corporate crime. Corporate responsibility is diffused; the top leadership of giant corporations make few day-to-day decisions and none without the advice of lawyers and accountants. They say that prosecutors didn’t make cases because there were not cases to make. But then the Department of Justice started changing its corporate investigative practices and policies. In making these shifts, the department tacitly admitted that its past actions were indeed wanting. The age of deferred prosecution agreements gave way to what we have today: prosecutors and the SEC, responding to criticism from Judge Jed Rakoff, academics, the media, lawmakers, and activists, made companies admit wrongdoing and plead guilty.

The government now assigns corporate monitors to oversee its settlements more frequently. By early 2016, the 2008 crisis had resulted in nearly $190 billion in fines and settlements from 49 separate financial institutions. These new arrangements are no more satisfying than the previous period’s. The fines continued to hit the shareholders, not the wrongdoing executives. Prosecutors almost never named any individuals. Portions of the penalties often were tax deductible (since they were partially disgorging profits). All the big banks lined up to make mea culpas over mortgage securities misdeeds. For mortgage securities abuses, JPMorgan paid $13 billion, Bank of America paid $8.5 billion, and others paid giant sums. The big banks paid up for foreclosure abuses; for manipulating interest rates and foreign exchange rates; for trading with sanctioned countries; for money-laundering-monitoring failures; and for conflicts of interest in their research activities.

But many of these settlements became less impressive once the particulars came out. The banks could earn credit for building affordable housing or helping mortgage holders, earning bonus dollars for each dollar actually spent. Perhaps worst of all, the department’s statements of fact that went along with these settlements were terse documents that contained little detail about who did what to whom and when. The banks wrote checks and in exchange won the ability to shield their executives from punishment and the specifics of their activities from the public eye.

Prosecutors took extreme measures to minimize the regulatory consequences for a guilty plea. Regulators did not pull licenses. They did not ban them from government programs. The guilty pleas had only symbolic value. They lacked force just as much as the old settlements did.

The Yates memo was seen for what it was: an implicit critique of the previous Holder administration and a tacit admission that it had not done enough to prosecute top executives. Yates created new policy: the department had to go after individuals again. The key element of a corporation’s cooperation, the memo stated, was to identify individuals who had done something wrong. Without naming the people responsible, a company could not get credit for cooperation and softer penalties. Some critics welcomed the new policy but with caution. What individuals would corporations be required to finger? How would the Justice Department prevent a company from scapegoating some low-level schnook? In the SEC case on Abacus, the agency had been satisfied to go after Fabrice Tourre and no one else. Time and again, the government went after only one low-level employee, a “lone gunman theory” of corporate crime. Would the Yates memo change this practice? Would the department’s investigations go high enough, to the boardroom and the top corporate offices? Would prosecutors still be overly reliant on Big Law’s internal investigations of its clients?

The department even undermined these minor improvements. At the same time that it issued the Yates memo, Main Justice also set up a compliance office to vet corporate cooperation. The ostensible aim was to determine whether companies were cooperating or not and whether they were receiving due credit. The effect would be to add to the bureaucracy. The move added yet another layer of evaluation for investigations, making it harder to bring cases against either corporations or high-level individuals.

The Yates memo suggested that the Justice Department’s policy had changed, but had it altered the way the department conducted business? The answer soon appeared to be no. In the first year of the Yates memo, the DOJ scored few obvious successes. When it brought a civil action against Goldman Sachs in 2016 for mortgage-related wrongdoing in the lead-up to the financial crisis, the Department of Justice named no individuals. The government charged individual executives from Volkswagen for having faked its emissions tests, but it did not appear likely to charge top officials at the German carmaker.

BACKLASH.  A broad coalition of corporate interests had led a fight against prosecutorial power in the post-Enron period. After Enron, Arthur Andersen, WorldCom, Adelphia, and Tyco, corporations, their lobbyists, and the white-collar defense bar revolted. They forced the Department of Justice to roll back the Thompson memo, depriving the government of tools and techniques to push corporate investigations. Over the decade, these interests changed the way the government enforces the corporate criminal code.

Now the same forces gathered again to fight the Obama administration’s initiatives. Modest as the corporate guilty pleas and the Yates memo were, the corporate lobby recognized a new danger: the government understood how inadequate its corporate investigations were. And so, in response to the reforms of the post-financial-crisis era, the same interests tried to roll out the same campaign from more than a decade earlier. Why shouldn’t the defense bar go back to the exact same playbook it had employed then? It had worked.

Former members of the Obama administration, now working for corporations, attacked the Yates memo.

Some reformers hoped to expand prosecutorial power when it came to white-collar crime. They discussed extending statutes of limitations and expanding the criminal code. In health and public safety, prosecutors can charge responsible corporate officers criminally (with a misdemeanor). It does not matter if they were not aware of the problems. Some argued to expand that into other sectors, such as finance. Bank failures could cause job losses and economic devastation. Perhaps bankers who drove their institutions to disaster merited such punishment. None of these proposals made progress.

With Donald Trump in office, corporations have an even friendlier Washington despite his populist rhetoric and pitch as the champion of the working class. He fired Sally Yates, the architect of the DOJ’s attempt to improve its prosecution of corporate crime.

His appointees came from corporate boardrooms and Wall Street, especially Goldman Sachs. Meanwhile, Republicans moved to gut regulations, especially those reining in the banks, seeking to eviscerate the Consumer Financial Protection Bureau and roll back Dodd-Frank.

Jefferson “Jeff” Sessions III took over the DOJ, promising to pull back on its aggressive civil rights enforcement and go after voter “fraud,” a Republican obsession and vehicle for voter suppression. The incoming SEC chairman, the Sullivan & Cromwell partner Walter J. “Jay” Clayton, boasted Goldman Sachs as a loyal client and had few public views on securities enforcement, except that the government had gone too far in pushing the FCPA anti-bribery law, passed in the wake of Stanley Sporkin’s enforcement push in the 1970s. Any hope for tougher corporate enforcement appears laughably misplaced.

Breuer and his supporters believed he had overseen a significant upgrade in talent, recruiting a class of attorney that Main Justice hadn’t been able to secure in the past. He had commanded the first guilty pleas from banks in decades, overseen investigations into currency and interest rate fixing, guided major public corruption cases, and set up the BP Task Force in the wake of the Deepwater Horizon disaster, which supporters praised for having won a guilty plea and large fine from the company itself. He received little credit for any of those measures, however. In a maddening turn of events for him and his loyalists, Breuer left the Justice Department having become the face of the department’s inability to bring cases against Wall Street. That was unfair. The problem was much greater than one man.

In September 2013 James Comey, who had talked so bravely about not being chickenshits at the beginning of the century, took a job as Obama’s FBI head. His interventions during the 2016 presidential campaign soiled his hard-won reputation, perhaps permanently. In July of that year, he gave an unusual press conference chastising Hillary Clinton for her handling of her email scandal, while explaining why he wasn’t recommending criminal charges in the matter. Prosecutors were appalled, viewing it as a grandstanding spectacle. Good prosecutors do not explain their declinations publicly. To smear the subject of an investigation while passing on charges is regarded as unethical.

Then Comey reopened the Clinton email investigation 11 days before the election, after the FBI had found new emails—which were not even on her computer, but disgraced former Congressman Anthony Weiner’s, who was married to Huma Abedin, a Clinton aide. Comey alerted Congress before agents had reviewed the emails, violating long-standing FBI and Justice Department policy not to go public about investigations right before elections. The FBI closed the matter soon after as the email trove contained nothing new. But the damage to the Clinton campaign was done.

Bad judgment, acts of prosecutorial abuse, fears of losing—all could be seen as products of the eroded investigative skills. A senior official goes rogue, as Comey did, because he doesn’t have enough faith in the customs of his institution. Abuses happen when a prosecutor doesn’t have a strong enough case but goes forward anyway. Senior officials take a pass on indictments because they are too inexperienced to judge the evidence. As the abilities of the FBI, SEC, and Justice Department corrode, they make blunders. The blunders make them more reluctant to pursue riskier paths such as prosecutions of powerful and well-defended individual corporate executives, which leads to more mistakes. Those who fought hard against the large corporations incurred costs, not rewards. They often left with diminished status and did not alight on such prominent perches as Breuer’s. The people who broke with the prevailing culture, such as Paul Pelletier and James Kidney, were pains in the ass and made life difficult for their bosses. Often the people who do so—the whistle-blowers at companies and the prosecutors who take on the powerful—share a character flaw: they don’t play exactly by the unwritten rules, they lack diplomatic skills, and they don’t understand how to preserve their viability, either within the bureaucracy or for their next job. Their righteousness offends others. Most people act in their own self-interest. They do not. A reputation for toughness was not its own reward.

Justin Weddle, who had suffered public criticism from a judge in the KPMG case, struggled to find work in private practice. Stanley Okula, also a key prosecutor in the KPMG case, stayed at the Southern District—a lifer whom defense attorneys felt free to criticize because he had been assailed by judges. Shirah Neiman, the long-serving and unrelenting government lawyer, was pushed out of the Southern District of New York.

Corporate whistle-blowers had it even worse. Their lives were never the same. They faced divorce, financial ruin, and joblessness. They wondered whether it had been worth it. They wondered why they had been disbelieved so often by government investigators—when they had been interviewed at all.

Those who took on the large financial institutions from other government roles also suffered. Sheila Bair, who had headed up the FDIC and challenged the Obama administration over its bank bailouts, could not land a prominent corporate or administration position.

Ben Lawsky, the former Southern District prosecutor who had risen to become the head New York State financial regulator and had miffed his fellow regulators and the banks with his aggression, did not take a job at a top law firm. One chairman of a major New York firm said the New York bar had blackballed him.

Judge Jed Rakoff had a tough time as well. His rulings faced legal setbacks. In 2016 a panel of the Second Circuit Appeals Court threw out a verdict in a civil fraud trial that Rakoff had presided over. The Southern District had brought charges against Countrywide Home Loans, the mortgage bank, for deceptive mortgages it had sold to mortgage giants Fannie Mae and Freddie Mac. The government had also brought charges against one midlevel executive. The jury found the company, now owned by Bank of America, and the executive liable. In reversing the jury, the appellate panel criticized Rakoff’s jury instructions. It determined that the judge had erred in his definition of fraud. The panel wrote that since Countrywide had not intended to commit fraud at the time the contracts with Fannie and Freddie were written, the government had not met the standard of proof. Countrywide had intentionally breached its contracts, but that did not constitute fraud.17 Prosecutors at the Southern District and Rakoff found the decision ridiculous. The Southern District petitioned the panel to review it, a request the higher court rejected.

The Southern District’s founding, in 1789, predates that of the Department of Justice itself. The office held its first criminal trial in 1790, which lasted a day. The first US attorney convicted two men of conspiring to destroy a brigantine and murder its captain and a passenger. The second US attorney simultaneously served as mayor of New York City. Today the office specializes in the most complex and difficult criminal cases: corporate white-collar fraud, often securities law violations. Insiders relish its nickname: the “sovereign” district, for its penchant for claiming jurisdiction over any such case from any corner of the United States, the other 93offices be damned.

But it takes something even more to get to the Southern District; something more personal. Someone somewhere—a top partner at a law firm, a respected judge or professor—had to send the signal. That sign indicated the candidate wasn’t just special; he or she was a superstar in the making. The Manhattan US Attorney’s Office launched the careers of judges and legal giants of every kind; politicians (New York City mayor Rudolph Giuliani and Representative Charles Rangel); cabinet secretaries (Henry Stimson, the US secretary of war under presidents William Howard Taft, Franklin Delano Roosevelt, and Harry Truman); a US attorney general (Michael Mukasey); FBI directors (Louis Freeh); and two Supreme Court justices (Felix Frankfurter and John M. Harlan II).

America’s economic history has unfolded in a series of booms followed by busts followed, crucially, by crackdowns. After the stock market crash of 1929, congressional hearings channeled public outrage and resulted in landmark laws regulating Wall Street and creating the Securities and Exchange Commission in 1934. A few years later, the new SEC helped put the head of the mighty New York Stock Exchange (NYSE) in prison. Though inconsistent, the SEC over the intervening decades emerged as one of the most respected government regulatory bodies. The SEC is the country’s most important corporate regulator, overseeing publicly traded companies and the nation’s capital markets.

After the savings and loan scandals of the 1980s, when hundreds of small banks across the country failed due to reckless real estate loans, the Department of Justice prosecuted over 1,000 people, including top executives at many of the largest failed banks.

After the Michael Milken–run junk bond boom and blow-up of the late 1980s, prosecutors spent years digging up evidence of stock manipulation and insider trading at major investment banks and law firms, prosecuting some of the most powerful Wall Street figures of the era.

In the early 2000s, the burst Nasdaq bubble revealed a corporate book-cooking pandemic. Top officers from giants such as Enron, WorldCom, Qwest Communications, Adelphia, and Tyco International ended up in prison.

By contrast, after the 2008 financial crisis, the government failed. In response to the worst calamity to hit capital markets and the global economy since the Great Depression, the government did not charge any top bankers. The public was furious. The bank bailouts and lack of consequences for bankers radicalized both ends of the political spectrum and gave rise to two of the most potent social movements of our time: the Tea Party and Occupy Wall Street. Anger about the lack of Wall Street accountability seeded disenchantment with Obama.

According to a Wall Street Journal analysis of 156 criminal and civil cases brought by the Justice Department, the Securities and Exchange Commission, and the Commodity Futures Trading Commission against 10 of the largest Wall Street banks since 2009, in 81% of the cases, the government neither charged nor even identified individual employees. In the remainder, the government only charged 47 low and midlevel employees with just one boardroom-level executive, whom the SEC charged civilly.

In his own incoherent and superficial way, Donald Trump rode anger about Wall Street throughout his campaign, railing at bank power. He closed his campaign by hinting poisonously about a cabal of global bankers rigging the system. He assailed politicians who were “owned” by Goldman Sachs: first Ted Cruz in the primary and then Hillary Clinton in the general. The Republican platform called for breaking up the big banks by returning to the Glass-Steagall Act, the Depression-era law that split commercial banking from investment banking, a reflection of resentment about the government bailout of the financial system as bankers wriggled free. No sooner had Trump taken office then he rushed to stuff members of that cabal into his White House and cabinet. He and the Goldman alumni who advised him moved within days of taking office to unravel Dodd-Frank and loosen restrictions on corporations generally.

Today’s Department of Justice has lost the will and indeed the ability to go after the highest-ranking corporate wrongdoers. The problem did not begin in the aftermath of the 2008 crash—and it has not ended. Prosecutors don’t simply struggle to put executives for “Too Big to Fail” banks in prison. They also cannot hold accountable wrongdoing executives from a gamut of large corporations: from pharmaceuticals, to technology, to large industrial operations, to retail giants.

A little-understood shift in how the government prosecutes white-collar corporate crime has happened. After the post-Nasdaq-bubble prosecutions of the early 2000s, the Justice Department began to suffer fiascos, losses in court, damning acts of prosecutorial abuse, and years of intense lobbying and pressure from corporations and the defense bar to ease up. Prosecutors lost potent investigative tools and softened their practices, changes that have made it harder to gather evidence and conduct even the most basic investigations.

Compounding this issue, the Justice Department has been hurt by budget constraints. The FBI, which usually conducts investigations for the department, shifted resources to anti-terrorism efforts in the wake of 9/11. The Justice Department has kept track of white-collar cases only since the early 1990s. In the four years from 1992 through 1995, white-collar cases averaged 19 percent of overall cases. In the four years from 2012 to 2015, that number had fallen to just under 9.9 percent. The Department of Justice wasn’t just going after fewer cases, but easier cases.

Judges all over the country embarked on newly generous interpretations of the law, broadening corporate and executive rights and privileges, narrowing white-collar criminal statutes, and repeatedly overturning federal prosecutors in notable white-collar cases. The Supreme Court has expanded the rights of corporations in the most potent, visible fashion, but lower courts have contributed to the trend. Over the last decade, while draconian when it came to street criminals, the courts have repeatedly read the US Constitution expansively when the government tried to charge corporations or their top executives.

To compensate for these changes, the Department of Justice shifted from targeting individual corporate executives with trial and imprisonment. Instead, prosecutors switched to a regime of almost exclusively settling with corporations for money.

Since 2001, more than 250 federal prosecutions have involved large corporations. These include some of the biggest names in corporate America: AIG, Google, JPMorgan Chase, and Pfizer among them. The majority of these have been negotiated deals, not indictments. From 2002 through the fall of 2016, the Justice Department entered into 419 such settlements, called deferred prosecutions and non-prosecution agreements, with corporations.

Meanwhile, corporate prosecutions fell. The Justice Department prosecuted 237 companies in 2014, 29% below the number in 2004.These prosecutions tended to be of tiny, inconsequential companies.

Large and powerful corporations, under the advice of their expensive defense lawyers, were eager to appear cooperative and wrap up investigations quickly, before prosecutors uncovered more damning information. They could pay settlements with other people’s money: that of their shareholders.

Big Law corporatized white-collar criminal defense, working more often in symbiosis with prosecutors than as adversaries. These lawyers, not the government, conducted extensive and lucrative investigations, delivering their findings to the government and moving on to the next.

Prosecutors, for their part, could generate headlines with eye-popping dollar amounts and set themselves up for lucrative careers in the private sector. And they hadn’t had to go to court to prove their case. The bigger the penalties, the more headlines they grabbed, and the more appealing they became to the prosecutors who could name their price.

These settlements did little to deter corporations from breaking the law. “Over 50% of the most serious fraud and larceny culprits were recidivists, “about the same as robbery and firearms offenders and far higher than drug traffickers.

Corporate settlements were easier to reach than indictments of individuals, particularly top executives.

In 2016 the Department of Justice brought the lowest number of white-collar cases against individuals in twenty years, on track for just 6,200 cases, down more than 40% from 1996—despite population and economic growth.

Investigations and prosecutions of people are much more difficult than going after corporations. Prosecutors began to see probes of single human beings, one by one by one, as a slog; nasty trench warfare that carries a risk of humiliation if they lose. Investigations of individuals consume more time. Investigators must work slowly, first going after lower-level employees and then flipping them against their bosses. To their bosses at the Department of Justice, prosecutors who pursue individuals appear less productive. Investigating top executives at large corporations is more difficult because they insulate themselves from day-to-day decision making. Prosecutors find it harder to accumulate the evidence necessary to prove their cases beyond a reasonable doubt. And individuals have greater incentive to fight prosecutors.

Defaulting to a settlement with a corporation without prosecuting individuals corrodes the rule of law.

Companies argue that the government has extorted them into forking over money for unproven crimes.

The public, meanwhile, sees corporations writing checks to make charges disappear.

Settlements have another downside: they weaken prosecutorial skills. Over time, prosecutorial aversion turns into lost knowledge. Settlement culture breeds investigative laziness and erodes trial skills.

Businesses now have privileges not seen since the Gilded Age. Executives make more money than ever. Corporate profits are at record highs. The courts are expanding corporate rights, as companies exert great political power and dominate our policy discourse. But the most valuable perquisite corporate officers possess is the ability to commit crimes with impunity. Such injustice threatens American democracy.

Today the justice system is broken.

The Justice Department succumbed to pressures, avoided the biggest cases. It became fearful of losing and lost sight of its fundamental mission to make this country a just place.

The lack of technology made the DOJ far less effective and productive. The DOJ was woefully behind private industry. In 2003, the DOJ had old computers, no blackberries, no document management system, and no way even to email the FBI agents assigned to the investigation. With this pathetic setup, they were taking on the infernally complex company Enron in the most important corporate fraud case in memory, against a legion of defense lawyers from the best firms in the world.

Speculation dominated the company’s culture and contributed an outsized portion of its profits. Once, after a trader had lost close to a half billion in one day, Skilling came down to the trading floor and exhorted the traders to “man up.” Get back out there and make more trades. Win it back.

Instead of having Enron disclose trading profits, Delainey and his executives hid them. They stashed the millions of dollars of earnings, in what prosecutors figured out was actually a “cookie jar,” that set aside profits for a possible legal settlement, was a lie. Poring over the company’s intentionally complicated and messy financial statements one more time, they’d noticed that a year after creating the reserve, Enron had lost millions in another division and dipped into that money—reserved for legal costs—to cover the losses and make it look like it had made money that quarter. That accounting hocus-pocus was illegal.

Enron executive Delainey could explain that little scam, but that’s not why they needed to flip him. Complex white-collar investigations required finding “rabbis” to guide you through the transactions.

They were conducting an old-fashioned investigation. They needed someone on the inside. If they could flip Delainey, they could take the prosecution all the way to the top. They could begin to build a case that Jeff Skilling had lied to investors and the public.

Most white-collar criminals are “individuals who find themselves involved in schemes that are initially small in scale, but over which they quickly lose control.

Few corporate white-collar fraudsters—not egregious Ponzi schemers or boiler room operators but perpetrators at large, respectable companies—start out thinking they will commit a crime.

They tell themselves, “I’ll just do it this quarter so we don’t miss the number, and then I’ll stop it and undo what I’ve done.” They don’t think of themselves as crooks. It’s just a short-term fix. Then they use the device again and again until they have no choice but to keep up the charade. They start rationalizing what they’re doing. It may be aggressive, but it’s not wrong. It’s not theft. The bad guys aren’t lying just to prosecutors. They are lying to their shareholders, their colleagues, and their families.

The prosecutor’s job is to crack through that self-justification and self-delusion.

When Enron filed for bankruptcy in December 2001, the implosion devastated a major US city, Houston, both economically and psychologically.

Ken Lay, Enron’s founder, was a longtime Bush family friend and major Republican donor.

Over the next few years, new companies reported accounting problems with alarming regularity: Tyco, Adelphia, HealthSouth, WorldCom.

Enron’s significance would recede, however, and the lessons it holds for white-collar enforcement would be forgotten. Despite Enron’s political might, the US government aggressively investigated the fraud at the energy trading company and prosecuted dozens of individuals, including the top officers of the company. Lay, Skilling, and Andrew Fastow, the chief financial officer, were all found guilty. Skilling and Fastow went to prison; Lay would have gone, too, but he died of a massive heart attack in 2006,

In all, the government charged thirty-two people associated with the Enron frauds, including Wall Street bankers who’d facilitated the deceptions.

The crimes were so egregious that the prosecutions were thought to have been easy. But that’s not at all true. What persecutors on the Enron Task Force did was not simple and never inevitable. If the task force hadn’t had resources, time, intelligence, and patience, Lay and Skilling may not have been prosecuted at all or could have easily been acquitted. Lay and others were hard to prosecute because they never or rarely used.  So the government lacked direct, incriminatory evidence of their guilt.

Despite their success, the Justice Department took the wrong lesson from Enron. The defense bar and Justice Department officials came to view the Enron prosecutors as reckless and abusive rather than sufficiently aggressive to meet the prosecutorial challenge. Today it’s an open question whether the Justice Department would be capable of taking on Enron the same way the task force did.

White-collar cases could languish for years, a poor way of conducting any investigation. The evidence trail grows cold, memories fade, and defense lawyers have time to formulate their client’s stories and tactics. Prosecutors needed to maintain momentum. Thompson and Chertoff understood that with the Enron debacle, the public would be bothered with slow justice. That there might be no justice—no prosecutions at all—never even occurred to anyone.

The Enron defense would point out that lawyers and accountants blessed the company’s actions. Indeed, that was true. Prosecutors needed to move cautiously. They had to sift through the complexities to find the potential crimes. However, the public and the press did not understand or sympathize. The press assailed the government for moving too slowly and letting the perpetrators walk.