Brandon L. Garrett
Roy L. and Rosamond Woodruff Morgan Professor of LawUniversity of Virginia School of Law
Charlottesville, VA
Re: Too Big To Jail
Dear Professor Garrett:
You have done an immense service with your research and the writing of your 2014 book Too Big To Jail: How Prosecutors Compromise With Corporations.
Your book jacket provides this synopsis:
American courts routinely hand down harsh sentences to individual convicts, but a very different standard of justice applies to corporations. Too Big to Jail takes readers into a complex, compromised world of backroom deals, for an unprecedented look at what happens when criminal charges are brought against a major company in the United States.
Federal prosecutors benefit from expansive statutes that allow an entire firm to be held liable for a crime by a single employee. But when prosecutors target the Goliaths of the corporate world, they find themselves at a huge disadvantage. The government that bailed out corporations considered too economically important to fail also negotiates settlements permitting giant firms to avoid the consequences of criminal convictions.
Presenting detailed data from more than a decade of federal cases, Brandon Garrett reveals a pattern of negotiation and settlement in which prosecutors demand admissions of wrongdoing, impose penalties, and require structural reforms. However, those reforms are usually vaguely defined. Many companies pay no criminal fine, and even the biggest blockbuster payments are often greatly reduced. While companies must cooperate in the investigations, high-level employees tend to get off scot-free.The problem of corporate wrongdoing looms large for the American people. It spills into the political arena, where there is increasing noise about a "rigged economy" and "corruption of government." and "why aren't corporate officer and director malefactors going to jail."
The practical reality is that when prosecutors face Hydra-headed corporate defendants prepared to spend hundreds of millions on lawyers, such agreements may be the only way to get any result at all. Too Big to Jail describes concrete ways to improve corporate law enforcement by insisting on more stringent prosecution agreements, ongoing judicial review, and greater transparency.
I think your book is superlative in laying out the great complexity of the corporate wrongdoing problem and the great difficulties encountered by society in lessening the same.
The law, developed in simpler times, has principles that liability or criminality should attach if and when members of society commit wrongful or criminal acts that harm other members of society. The law sometimes ascribes relevance degrees of culpability (e.g., willful, gross negligence, negligence, no fault, etc.), and to the perpetrator of the acts benefitting from the acts that have harmed others. The law, developed in simpler times, carries out two objectives of (i) deterrence through punishment and (ii) justice that those who have been harmed should be compensated by those whose acts caused the harm, which second objective also supports the first objective.
The principles, developed in simpler times, become horrendously muddled in our extremely complex times of corporations.
We sort of know that acts of corporations are done as a result of acts of human beings, deterrence can operate only if those human beings are deterrred from doing the acts, and any relevance of perpetrators benefitting from wrongful acts should properly be traced to the human beings who are benefitted.
I think it is a great understatement to say society is having immense difficulty in figuring this out.
Let's say, however, that your prescription for "concrete ways to improve corporate law enforcement by insisting on more stringent prosecution agreements, ongoing judicial review, and greater transparency" is the way our country should go regarding this exceedingly difficult problem.
My question for you is, "From whence will come the needed will and motivation for the country to carry out your recommendations?"
First, you are likely to have great difficulty in developing a great consensus of your fellow academics that such is the way our country "should go" on the exceedingly difficult problem at hand. I think that is probably not going to happen, and I am going to jump over what might happen if all of academia agreed with you.
Jumping over that, I wish to turn to consideration of the important actors in our country who have significant powers and influence to act on your prescritpions. These actors include lawmakers, judges, regulators, state attorneys general, criminal prosecutors, corporate management, ethics and compliance officers, corporation lawyers, plaintiffs' lawyers, defense lawyers, tort reform organizations, and consumer protection organizations.
My experience in dealing with these actors is that they are impaired in their will and motivation for carrying out steps to advance the public interest, because they have private interests relative to the subject matter which prevent them from acting solely with consideration of the public interest.
I learned this, in part, through my efforts at a project which I denominated as Project to investigate diverse perspectives on entity vs. individual liability.
I made an attempt to summarize what I learned at Interim project report (draft).
Relative to those private interests, here is what I said:
While many interested parties have declined to comment or take a position on the issue, I don't think anyone has taken the position that entity level liability is sufficient by itself for trying to deter corporate wrongdoing and that officer and employee individual liability should be dispensed with as a tool.Back to my question to you:
There is a constituency in the ethics community that would prefer no intrusion of the law and regulators into corporate affairs and that would like self-policing alone to suffice. Some of this constituency may have such a strong preference and belief that they would advocate relying entirely on self-policing. Currently, it seems clear that lawmakers, regulators, prosecutors, judges and others are not going to go along with that.
While no interested party seems to be prepared to take the position that entity level liability is adequate by itself, there are reputable commentators who are clear in a belief that entity level liability alone is not sufficient and are open advocates of individual liability. For example, see the March 21, 2009 email here in response to this email inquiry I made regarding the Vioxx litigation of several years ago.
Gretchen Morgenson, the author of Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon, has been very vociferous in complaining about officers, directors and employees not being held accountable for things that went on during the financial crisis. See this entry.
Last May I started raising the question whether the Obama administration was shifting to targeting individuals. See this entry. Three Wall Street Journal articles at the time were suggestive that this was the case. See this, this, and this.
The Ethics Resource Center endeavored in 2010 to engage with federal enforcement officials related to the ERC's white paper Too Big To Regulate: Preventing Misconduct in the Private Sector . This white paper was predicated on a view that recent events had raised "significant" questions about the effectiveness of government regulation and the ability of regulators to prevent misconduct. The paper listed eight such questions, the last of which was one of possible resignation, to wit: "Have we simply reached the point where regulating corporate conduct is an impossible job?"
The paper did a lot of circling around the government's enforcement approach and the corporation's self-regulatory approach. The paper covered numerous points and issues, variously supportive of and questioning of the two sides. The paper acknowledged that differences persisted and called on the two sides to continue to try to bridge the gap.
I wrote this email to the Ethics Resource Center and this email to the government officials that urged consideration of the issue of entity level versus officer and employee liability as means to try to deter corporate wrongdoing. These emails produced no response.
Generally, I have encountered widespread disinterest.
In some cases, it seems clear that parties who should have an interest in my project are not interested in responding to me, because it does not entirely suit their interest to respond or because they have other more important interest.
For example, in the case of state attorneys general, entity level liability has important publicity value to them, and I believe that reduces their interest in determining their position on the issue of entity level liability versus officer and employee individual liability as a means to deter corporate wrongdoing. State attorneys general also have significant "turf" issues vis a vis the United States Justice Department that are of much greater priority for them. See this link and this link (no response received to the email in the latter link).
Corporate management I am quite sure has little interest in responding to a project like mine that asks questions that may lead to suggestions for altering the legal machinery to increase officer and employee individual liability in connection with corporate wrongdoing.
Plaintiffs' lawyers have a huge financial interest in entity level liability, so much so that, thus far, I have made little effort to contact them regarding my project. Defense lawyers rake in millions of dollars defending against the plaintiffs' lawyers, and it is not in the interest of the defense lawyers to scrutinize the deterrence value of entity level liability.
I think corporate ethics officers, including the Ethics & Compliance Officer Association, are not able to respond very well, because they cannot diverge publicly from views of their corporate management bosses who, as mentioned above, want to stay away from anything that might lead to increasing officer and employee liability.
Consultants in the business ethics field have been non-responsive to my project. This is probably due to there being little revenue potential for them from my project and follow up that might grow out of my project, such as efforts to educate and persuade lawmakers, judges, and state attorneys general regarding the subject matter.
Lawmakers, regulators, and prosecutors are a chief source of power to implement your prescriptions.
I think they, however, are bought, compromised, or other otherwise impaired, and they will not have the will to exercise their power to implement your prescriptions.
What do you think?
