Comment by jfasi | Hacker News Reader

Comment by jfasi | Hacker News Reader

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As of my writing this we're six top-level comments in and already a full third of them miss the point of the article, going on to complain about The Economist advocating not punishing companies for malfeasance. For their benefit as well as for the benefit of this comment section as a whole, here's a quick summary of some of the article's central points:

* The article compares the practice of public attorneys demanding settlements in place of public indictment to extortion:

"The formula is simple: find a large company that may (or may not) have done something wrong; threaten its managers with commercial ruin, preferably with criminal charges; force them to use their shareholders’ money to pay an enormous fine to drop the charges in a secret settlement (so nobody can check the details)."

* It points out that this process bypasses the regular justice system, which ought to progress by both legislation and precedent-based case study:

"Perhaps the most destructive part of it all is the secrecy and opacity. The public never finds out the full facts of the case, nor discovers which specific people—with souls and bodies—were to blame. Since the cases never go to court, precedent is not established, so it is unclear what exactly is illegal."

* It further argues that this government-dominated settlement process places all power in the hands of the attorney, thereby undermining the rule of law by introducing an element of arbitrariness and politics to what should be governed by blind justice:

"This undermines the predictability and clarity that serve as the foundations for the rule of law, and risks the prospect of a selective—and potentially corrupt—system of justice in which everybody is guilty of something and punishment is determined by political deals."

* It does not argue that companies should not be liable for misdeeds, in fact it acknowledges the fact:

"In many cases, the companies deserved some form of punishment:...[followed by some examples]"

You say "miss the point," I say "read between the lines."

When they make specific recommendations at the end, those recommendations are: 1) let some cases go to trial 2) handle "most cases" of corporate wrongdoing in civil courts 3) cut down on the number of things that are illegal.

These are pretty weak recommendations to start with. And then you compare them against the examples they use at the beginning of the article. They paint these examples as massive overreach. The implication is that companies should be allowed to do more and punished less compared to now, when their examples are ones where companies did pretty awful things and then basically got away with it. The punishment was close to zero. Combined with the recommendation for more civil trials and they're basically saying that the government should cut back on investigating and punishing corporate crime, and that the victims should just sue directly. Nobody would recommend that for, say, a car thief, but a big company steals your house and suddenly you have to hire your own lawyer?

So, I agree with the idea that more of this stuff should be brought to trial. But I disagree that these settlements are "mind-boggling", and I disagree that the solution is to move more activity to civil courts.

You didn't understand what the article is advocating. The thesis lays it out:

   The increasing criminalisation of corporate behaviour in America is bad for 
   the rule of law and for capitalism.

The author then uses the fact that punishment for the criminal activities by corporations has been privatized through civil courts instead of performed publicly by regulation and prosecution to attempt to gin up outrage. Yes, private enforcement instead of public enforcement is less efficient in many ways. But given the deluded republican ideology and their band of useful idiots (corporations are people, my friend! [1]) it isn't the case that we are choosing between private enforcement and public enforcement of our laws, but rather between private enforcement and no enforcement. The goal is clear: to allow corporations to not be punished.

Note also the cute aside where the author attempts to shift blame for corporate activities to individual managers, who can then be charged (in lieu of any punishment of the corporation for acts done by the corporation). The modern version of "Will no one rid me of this meddlesome priest?"

[1] https://www.youtube.com/watch?v=KlPQkd_AA6c

The thing this article misses is that the companies push for these settlements. If anything you could make a case that the prosecutors have more leverage than they are using and getting smaller settlements than they could have in court. That the threat of damaging the economy from a negative market reaction to a large punishment has caused the justice system to go easy on companies.

These (somewhat) reasonable points are lodged in between a bunch of horribly biased wording, words like "shakedown", "supposed misdeeds", etc.

If people are having a hard time getting past that to the author's point, I'd put the blame on the author.

As far as I know, all of these companies have the option to have their day in open court.

I think the likes of JPMorgan can handle defending themselves legally without falling into commercial ruin.

Usually, with extortion, these kinds of options are not available.

While they may have that option in theory, it apparently isn't viable in practice:

Financial firms rarely survive being indicted on criminal charges. Few want to go the way of Drexel Burnham Lambert or E.F. Hutton. For their managers, the threat of personal criminal charges is career-ending ruin. Unsurprisingly, it is easier to empty their shareholders’ wallets. To anyone who asks, “Surely these big firms wouldn’t pay out if they knew they were innocent?”, the answer is: oddly enough, they might.

First, note "indicted" not "convicted". Second, note the difference between paying with someone else's money vs risking imprisonment/etc yourself (and no, our criminal courts don't have a zero false-positive rate).

'Apparently'.

It isn't the indictment that causes financial institutions to collapse, it is the exodus of clients.

For this 'death blow indictment' theory to hold water you'd have to assert that many more people would stop dealing with these firms if indicted than have left them after hearing about these alleged misdeeds for years from the media.

Yes, Arthur Andersen collapsed but their charges were a big surprise and hinted at something much bigger.

So you're buying the line that BoA or BNP Paribas would go into bankruptcy if charges were filed? Even the author knew he couldn't make that case and resorted to a weasel-worded implication.

The problem is not that the company would go bankrupt if charges were filed, in fact the author argues that it would be less costly for the companies to go to court. The problem is that the company's officers and employees would lose their jobs, and likely become unemployable at their previous level. Because of this personal cost to the officers and employees, settlement becomes their only viable option.

So we're talking about cases like threatening the world financial system, polluting the whole gulf of mexico, helping the sudanese government while the're committing an actual genocide.. and you're saying the legal system shouldn't act because what if some CxO who profitted from those actions loses their job? Am I misreading you?

My personal opinion is that it does not make much sense to lay criminal charges against a corporation, especially if what "The Economist" is describing is true. I would prefer that the individuals (such as the CxO) responsible for crimes be charged with any relevant civil or criminal laws, and that the corporation only be charged with civil suits.

The problem described here appears to be that no one is truly representing the interests of the shareholders, who are absorbing the losses; one of the questions the author(s) present(s) is whether it is even possible for any employee or officer of the corporation to represent the shareholders' interests if there is a conflict.

The shareholders absorb the profits, as well.

If a CEO messes up at his job in a purely business sense and the shareholders lose money, that's ok, right? I mean it's the whole idea of having shareholders.

I'd include "broke federal laws and exposed the company to serious financial liability" in the same (or a worse) category.

One has an especially significant right to representation when they are subject to an adverse judgement by a court. This is not about whether the CxO has done something wrong, it is about who should be held responsible, and what process will lead to a just result.

In addition, if someone "broke federal laws and exposed the company to serious financial liability", the corporation(s) should be subject to civil judgement, and the individual(s) should be subject to civil and criminal penalties.

To be clear, I do not object to adverse judgments, I only object to unjust procedures.

But is that what the government was gunning for them about or were they doing an 'Al capone' and targeting tax fraud? Without details of the settlement, it's just projection to say that's what the settlement concerned. The argument isn't that the legal system should act, the argument is that the justice system should be transparent--especially when the people issuing the punishment are collecting the payout. Without transparency you create a perverse incentive for the bureaucratic agencies to hunt for targets, drum up charges, and collect windfalls. That's not in the interest of justice or a equitable legal system.

The AG doesn't walk home with an extra B in the bank after a settlement. He's not collecting the payout.

As far as drumming up charges and collecting windfalls.. you think these companies with their legal departments would just hand that money over if they liked their position in court? You think things like "polluted the whole gulf of mexico" is a case of charges being drummed up?

I would have liked to see these cases go to trial, too. But, from the DoJ's perspective, with the manpower they have, if they can wrap up a settlement and move on to the next case, that's a case they wouldn't have investigated if they were busy with litigation.

If you really want to be upset about this type of thing, you should look into how often it affects normal people with normal criminal charges.

Or that settling out of court shouldn't be an option. Since if it is, everyone will take it and the system will attempt to corrupt itself.

If settling shouldn't be an option, and indictment is unthinkable, what's that leave for enforcement?

I'm unhappy with the settlements and would have liked to see a big trial, it would have resulted in much bigger fines IMO for these deplorable actions. But that takes a lot more money from the government side. I wonder how the article author feels about "more federal spending".

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