Eisinger Discusses Justice Deparment’s Failure to Prosecute Executives


When it comes to implicating the DOJ in the failure to punish white-collar criminals at the top of the corporate food chain, Jesse Eisinger is no chicken. On March 22, Eisinger spoke at Fordham Law about his recent book, The Chickenshit Club: Why the Justice Department Fails to Prosecute Executives. The event was hosted by the Law School’s Compliance Programs, in partnership with the Corporate Law Center and the Stein Center for Law and Ethics, and was sponsored by Ernst & Young.

“The Department of Justice has lost the will and the ability to bring justice to a certain class of people: top corporate executives at the biggest companies in the country,” said Eisinger, who is a senior reporter at ProPublica, and who won the 2011 Pulitzer Prize for his investigative journalism covering the questionable Wall Street practices which led to the financial crisis. “The Department of Justice has become the Chickenshit Club.”

Eisinger explained how his book’s title comes from a quote by James Comey, the former FBI director recently dismissed by President Trump. In 2002, while serving as a prosecutor for the Southern District of New York, Comey applied the punchy phrase to describe prosecutors who never lost a case. Comey had suggested that this high rate of success stemmed from cowardice: the prosecutors refused to pursue the tougher cases for fear of losing, and for fear of how such a loss might negatively impact their careers.

Jesse Eisinger

Jesse Eisinger

Recounting the prosecutorial history of the last few decades, Eisinger explained how, after the fall of Arthur Andersen, the Justice Department began to prefer settlements to prosecutions. Because of the public backlash against the collateral consequences of Arthur Andersen’s demise, resource shifting, and a lack of trial expertise on the part of new prosecutors joining the department, settlements emerged as the preferred tool of enforcement.

“The dirty little secret of corporate law enforcement in America today is that we have outsourced and privatized it to the companies themselves,” said Eisinger. He explained how companies who police themselves tend to hire prestigious law firms to conduct investigations. To point out the irony of this, he drew a comparison to the Medellín cartel bringing in its own attorney to investigate whether or not it is a drug trafficking organization. According to Eisinger, the law firm’s incentive is not to root out executive wrongdoers but rather to insulate them and secure more of this lucrative investigative work for the future.

Eisinger pointed to a “two-tiered justice system,” in which rich members of society are held at lower legal standards than middle- and lower-class citizens, as the heart of the problem. “There is a class of people who are not punished in this country,” said Eisinger, who noted how wealthy and powerful citizens can commit crimes with impunity. “I think it is a threat to American democracy.”

After describing his book and its thesis, Eisinger partook in a Q&A with Alice BrightSky, senior director of Fordham Law’s compliance programs, and Aaron Mendelsohn, adjunct professor at Fordham Law. Audience members also offered thought-provoking inquiries.

Mendelsohn, who served as a federal prosecutor and regulator for more than a decade and is now a member of Ernst & Young’s Fraud Investigations team in New York, challenged Eisinger’s comments on prosecutorial cowardice. He stated that, from his personal experience, he has seen prosecutors diligently strive for justice in white-collar settings, pursuing cases as far as the evidence, legal statutes, and resources would permit. Mendelsohn emphasized that countless factors influence a prosecutor’s decision to investigate a case, including DOJ-wide priorities, the resources necessary and available to pursue a case, and the risk-reward and cost-benefits of settling versus taking a case to trial.

“The purported dearth of post-financial crisis prosecutions of corporate executives is due, in part, to the complexity of white-collar cases, which take years to develop, whereas drug cases you can do in a couple months,” said Mendelsohn. He added that settlements force companies to reform their internal cultures and their compliance efforts, which are important outcomes when compared with simply jailing executives who may be replaced and their crimes replicated.

Eisinger conceded with Mendelsohn that prosecutors’ hearts and minds are usually in the right place. He said, however, that the people who make the prosecutorial rules and allocate government resources are to blame for the failure to bring more white-collar criminal prosecutions. He reiterated his thesis that settlements don’t work, as evidenced by all the repeat offenses. Mendelsohn retorted that banks and corporations are enormous entities, with potentially hundreds of thousands of employees globally, and, given the scale of these entities, it is not at all surprising that they may be subject to multiple enforcement actions for completely unrelated activities.

“I do not think it’s acceptable to say, one, that we have this settlement regime and that, two, it’s OK if we have companies repeatedly running into regulatory problems because they’re so big and sprawling,” said Eisinger.

One audience member turned the group’s attention to the role of compliance and the impact of settlements on that function. Eisinger seemed to put compliance in the same category as the law firms conducting internal investigations, indicating that it often ends up insulating top executives against culpability. BrightSky countered that officers, whose job it is to identify potential wrongdoing, are getting caught in the crosshairs of the renewed regulatory focus on individuals, which is having an unfortunately chilling effect on the field. She cited the Moneygram and Brown Brothers Harriman cases as examples of that and asked Eisinger if he thought compliance officers were the rightful targets of enforcement’s zeal for accountability.

“It’s very difficult to imagine that compliance officers are the architects of fraudulent schemes,” said Eisinger, agreeing that compliance professionals should not be enforcement targets. “I don’t think they are responsible for covering them up by and large.” And, while he reiterated his focus on the key decision-makers, he also mentioned that the compliance officer might be a good candidate for “flipping” to help enforcement get to the top of the chain of culpability.

Eisinger stressed that, at the end of the day, we should target the individual criminal perpetrators. “The first biggest deterrent for corporate crime is putting executives in prison,” he said.


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