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Why It's Wrong When Wrongdoers are Allowed to Admit No Wrongdoing
By Arianna Huffington, Tribune Media Services
"The struggle of man against power is the struggle of memory against
forgetting."
So wrote Milan Kundera in "The Book of Laughter and Forgetting." It is one of my favorite quotes and it popped into my head as I was reading about the recent settlement between JPMorgan and the SEC in which the banking giant agreed to pay a $25 million penalty and cancel $647 million in fees owed by Alabama's Jefferson County as the result of a complicated derivatives deal that blew up in the county's face.
As part of the settlement, JPMorgan neither admitted nor denied wrongdoing -- despite ample evidence that it had engaged in plenty of wrongdoing. Things like paying off local officials with millions to win no-bid contracts worth billions and convincing county officials to switch from fixed-rate bonds to bonds hedged with risky derivatives -- a switch that has driven Jefferson County to the brink of bankruptcy. "We have been victimized by our creditors," said a county official.
JPMorgan released a statement that it was "pleased to have reached a settlement with the SEC," and acted as if it was practically a disinterested party: "The charges relate principally to municipal transactions that occurred six and seven years ago. JPMorgan has since discontinued that business, and the employees in question are no longer employed by the firm."
So no wrongdoing admitted, and time to move on to the next lucrative money-printing scheme. How tidy. This is what passes for justice on Wall Street these days. If you commit a petty crime and hammer out a plea bargain, you'll have to admit wrongdoing as part of the agreement. But put on a suit and commit a billion dollar crime and you won't even have to admit you did anything wrong. It'll be as if it never happened. Which, of course, makes it much more likely that it will happen again.
We saw the same dynamic played out earlier this year in the legal saga surrounding the $3.6 billion in bonuses that was awarded to
It appears that
Many thought the matter was closed back in August when the SEC reached a settlement with
Of course, lots of wrong was done in that case, too -- something that was implicit in the bank's willingness to pay the multimillion-dollar fine. Specific people had made very specific decisions surrounding the
But, instead of going after them, regulators went after the company, gave it a minor ding to its bottom line, and were ready to forget the whole thing.
Last year, the total of amount of fines levied by the SEC was the lowest since the corporate scandals of 2002 led to stricter enforcement regulations. So while the financial system was on a fast track to near-collapse, the SEC was taking its hand off the brake. And the perpetrators of that near-collapse are being allowed to avoid accountability. When crimes are uncovered then resolved with no acknowledgment that a crime was ever committed, that's a recipe for anarchy -- not for a healthy democracy.
It's really not that complicated: if you do the crime, you do the time. But the people who run the show like to make it seem like it is very complicated -- all the better to obscure the simple moral principle of right and wrong. Why should it matter whether you commit your crimes in a fancy boardroom or on the street? If you were reaping the (often enormous) benefits of your crime, why don't you have to admit wrongdoing when you're caught, and pay a commensurate -- not a token -- penalty?
As it happens, there are some heroes out there who have noticed that the ambiguous way our laws are being enforced has diverged from the unambiguous morality the laws are based on.
In the
And Judge Rakoff demanded to know who exactly were the executives who knew about the bonuses and decided not to disclose them. Instead of a faceless company, shouldn't the culpability, Rakoff asked at a hearing, be on "the individuals who were responsible?"
But rather than naming those responsible,
Judge Rakoff wasn't buying it -- he saw the slippery slope that thinking would lead to: "It would seem that all a corporate officer who has produced a false proxy statement need offer by way of defense is that he or she relied on counsel," he said.
Rakoff has a history of actually applying the law. Back in 2003, he rejected a settlement with WorldCom because the fine was too low.
When he first became a judge, prosecution used to focus more on individuals instead of companies. "The feeling then," he said, "was if a crime had been committed, it was important to discover who the persons were who made the wrongful decisions."
Judge Rakoff's display of spine appears to have rubbed off on the SEC, which now says it will aggressively pursue its case, taking
Of course, it's not just our "too big to fail" banks that have been allowed to do wrong without having to admit to any wrongdoing. The pharmaceutical industry and health insurance companies have been doing the "pay the fine but admit nothing" dance for years--- chalking up the millions (and sometimes billions) they have been fined as the cost of doing business.
But with the banking, drug and insurance industries all finding themselves at a crossroads, now is a very good time to revoke the Get Out of Jail Free card those at the helm of these companies have been given for far too long.
We all know that there was a great deal of wrongdoing that led to the near-collapse of our financial system and to our badly broken health care system. The first step to reforming each of them is to acknowledge that wrongdoing -- and to seek the real punishment of the wrongdoers.
========
Arianna Huffington's e-mail address is arianna@huffingtonpost.com.
(c) 2008 Arianna Huffington. Distributed by Tribune Media Services, Inc.
This news arrived on: 11/11/2009
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Posted Comments:
11-16-2009 21:54
JCE wrote:
Actually, you could, if you got control of the local politicians, and had them do it. It would work up to the top. If you had control of the states, they could force congress to do a lot of things, as long as the people were behind them. That is the key, cooperation of the people, and states solidly working together. So it isn't that congress can't be controlled, it is that the people choose not to exercise that control.
11-16-2009 12:33
casey42 wrote:
We will never have term limits for congress, why? Because congress would have to vote them in, they ain't that stooopid.
The best thing we could do about congress pay is to let each state set the pay for their senators and congress men, and pay it free the taxpayers from other states from the burden of paying for one states mistakes.
The best thing we could do about congress pay is to let each state set the pay for their senators and congress men, and pay it free the taxpayers from other states from the burden of paying for one states mistakes.
11-15-2009 02:57
JCE wrote:
Ronald Robin Hood Reagan was right. Reaganomics works. For the rich. But not for the rest. Why fools who aren't rich want to believe in that is beyond me. I understand kids wanting to believe in the tooth fairy. But we grow up. Some of us. Then some don't, and believe in Reaganomics. You know, even tho I don't believe in term limits, but only one term, then a vote of confidence of 2/3s, and if no 2/3s, no more public office. And I think they should get paid like other government employees, health care and pensions the same. But I forgot about voting pay raises. I think that they should have to ask the people for a raise, and get a 2/3s vote to okay it. Make them beg for it, and earn it. I bet they wouldn't get a lot of raises while things stood as they are. The democrats are so slow and stupid. Now that everyone is learning the truth about the republicans, and not wanting to be one, the democrat politicians want to be republicans, and get their lobbies while they can. Who would Lou Dobbs replace on Fox? The life support that the Russians were on was coming from the US. And if they hadn't blown their money on oil, and taking on Afghanistan, they might have wheezed out a few more years. I always say that Bush will go down in history as our worst president, but only because so many know he was a war criminal. Reagan was just a criminal with our money and overseas policy. Bush was criminal in everything. But if the people weren't fooled so much by the right wing propaganda machine, they would admit the truth about Reagan, and some would say he was the worst.
11-15-2009 01:45
WCM wrote:
old cowboy
You're right on the money.Maybe someday history will show the idiots just how big of a showman Reagan was.The only thing he was good at was SMOKE and MIRRORS.He was great at making people feel good with his Hollywood speeches but did very little for the good of common people. It amazes me that his disciples still think he brought down the Soviet Union.They were already living on life support long before he became President.The neo-conservatives never mention Iran-Contra or how his trickle down economics never made it past his upper class buddies.They don't want to talk about, how his policies brought on, the corporations taking American jobs out of this country,so the shareholders and executives could make obscene profits either. Our country is still paying dearly for his botch ups.
11-14-2009 02:36
old cowboy wrote:
Blasphemy
Redneck, congratulations you have committed the sin of blasphemy. How dare you criticize Reagan, The God of the Right. In my opinion the most important thing he ever did was "Bedtime for Bonzo" The only problem with it was is trying to figure out which was the monkey. During his term I lost my fair sized ranch due largely to Reaganomics of giving breaks to the rich and taking from the middle class and the poor. My former father in law had a big farm (different from ranch) and came out like a bandit.
Then came the Bush group who had their ties to the big oil in the Middle East and that sunk a lot of other folks. Now the Dems are in and protecting the insurance companies, doctors and lawyers with this new health bill.
It is time for us to rise up and get rid of these crooks.
Then came the Bush group who had their ties to the big oil in the Middle East and that sunk a lot of other folks. Now the Dems are in and protecting the insurance companies, doctors and lawyers with this new health bill.
It is time for us to rise up and get rid of these crooks.
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