There are a lot of comments along the lines of "why are the fines so low" or "why is nobody doing jail time?" And the answer to both those questions is: stiffer punishment would require stronger proof. Cartel activity, like much white collar crime in general, is extremely difficult to prosecute, because the difference between totally legal conduct and illegal conduct comes down to what people are thinking. Instead of being able to point to a huge stash of drugs, cases come down to the fine points of "who knew what when" and "who talked to who and about what."
To impose punitive fines or jail time, you need to bring criminal actions where you need to prove beyond reasonable doubt cases where the proof is in peoples' heads. Civil fines, on the other hand, have a much lower burden of proof: more likely than not.[1] That's why civil penalties and deferred prosecution agreements,[2] have become the tool of choice for regulators.
Frankly, you don't really want to live in a world where the government can impose criminal penalties on businesses for such loose facts as these. Understandably, banks aren't the most sympathetic defendants, but extrapolate this reasoning to the tech industry. Should Bill Gates be in jail for his role in the Microsoft antitrust activity? Should Eric Schmidt be in jail for his role in the employee wage suppression collusion?
[1] This description is America centric but the operative law is roughly similar in Europe.
[2] A deferred prosecution agreement is a settlement where a company pays a fine, agrees not to do whatever bad thing it did, usually agrees to some number of years of monitoring, in return for which the government defers charges and eventually drops them if the monitoring period ends without incident.
> Should Eric Schmidt be in jail for his role in the employee wage suppression collusion?
Er, why shouldn't he be? I can think of three main likely arguments why he shouldn't:
i) what he did breached civil but not criminal law: if so then obviously he shouldn't be in jail. I don't know whether that's the case though. I also don't know if he is personally liable for civil damages, and if so why he hasn't been chased for those. (And that's not going into the question of whether his actions should have been made criminal offences by law, and why they haven't been.)
ii) the higher standard of evidence in criminal prosecutions, the first issue you raised. This is of course a real issue in criminal cases, but—speaking as a non-lawyer, non-expert who hasn't been following the story very closely—the evidence on this matter doesn't look at all lacking to me. AFAICS, if Eric Schmidt had been discussing a murder rather than salary collusion in the communications discussed by http://www.businessinsider.com/apple-google-recruitment-emai... no-one would be likely to suggest that the evidence was too weak for a criminal prosecution.
iii) Eric Schmidt is a nice person like us, and jail isn't really for nice people like us. I hope the egregiousness and total unacceptability of this argument is clear to everyone without any need for explanation.
So, yes, why shouldn't Eric Schmidt be in jail?
As to the financial sector, while it is obviously difficult to prosecute many financial crimes, I am not convinced that this is the primary explanation for the shortage of convictions lately. I am reasonably convinced by the argument http://neweconomicperspectives.org/2014/10/liars-loans-aint-... that similarly complex cases were successfully prosecuted in the S&L scandal in the '80s, and that the primary difference between then and now is lack of resources and political will.
> As to the financial sector, while it is obviously difficult to prosecute many financial crimes, I am not convinced that this is the primary explanation for the shortage of convictions lately.
One of the primary explanations is that banks have become "too big to fail", and if you criminally charge a bank, you effectively make it fail. Basically, banks are powerful enough to get away with murder.
"Had the US authorities decided to press criminal charges, HSBC would almost certainly have lost its banking licence in the US [...] The bank processed cash for Mexico's Sinaloa cartel, regarded as the most powerful and deadly drug gang in the world, among others."
> One of the primary explanations is that banks have become "too big to fail", and if you criminally charge a bank, you effectively make it fail. Basically, banks are powerful enough to get away with murder.
So give the FDIC more power and a larger fund to draw on for bank failures. They already handle bank failures very very well, they'd be fantastic at spinning down banks accused and convicted of criminal activities.
We dismantled Arthur Anderson for their complacency in the Enron criminial enterprise. Why not banks?
> We dismantled Arthur Anderson for their complacency in the Enron criminial enterprise. Why not banks?
And that was a terrible outcome. A huge, $10 billion a year corporation came crashing down, with tons of people losing their jobs, all because of the conduct of one team within the company that the rest of the enterprise had no knowledge of or control over. For a conviction that was overturned on appeal!
If dismantling the organization isn't an option, and punishing individuals isn't an option due to corporate liability limitations, where does that leave us?
That doesn't explain the non-prosecution of individual bank employees and officers though. In fact, if one accepts the TBTF argument, then the prosecution of individuals becomes even more important: because it is still perfectly possible to prosecute individual members even if the institution is (we assume for the sake of argument) untouchable, then it is the only way remaining to restrain the behaviour of the institution.
> Eric Schmidt is a nice person like us, and jail isn't really for nice people like us.
Well, in theory, your sarcasm is correct: this is a ridiculous statement. In practice our jail system is fucked as is evidenced by the rate at which going to jail turns you into more of a criminal, and so yes, jail is not for "nice people like us". Of course, it's also "not for not nice people not like us", and Martha Stewart didn't seem to be turned into more of a criminal, so at his level of wealth maybe he would go a jail "for nice people like us."
Annnd maybe I'm also totally wrong on this too; call me on it how you see fit.
Your [1] sounds odd to me, I haven't heard of this "more likely than not" type of standard in civil fines.
I also find statements like the following in papers that touch on the matter: "Unlike Common Law, Continental European Civil Law does not generally
distinguish between standards of
proof for civil and criminal matters. (15)" (http://www.coll.mpg.de/pdf_dat/2013_12online.pdf)
Stronger proof? One of the banks turned in the others in exchange for immunity. You don't think there was any documentation? Perhaps email or witnesses? Your points about burden of proof may be valid, but your case for a lack of evidence is itself lacking evidence.
There's plenty of proof (maybe not in this particular) case, but in a lot of these cases to put people in jail, extract fines that are punitive (and not merely rounding errors), and at the very least pin the wrong doings on people (and not faceless companies).
My experience in the US (having worked directly with regulators) is that they are afraid to regulate. The literal tail is waggging the dog. As to the root cause of this (many blame the public/private revolving door), I am not entirely certain. I just wish in the US, at least, the regulators would not be such wussies and stand up for the consumer/voter and stop worrying about push back.
My criticism of this view is that the proof is probably there, but the agencies responsible for obtaining it are likely corrupted as well. I'm not well versed in the intricacies of EU banking, besides the IMF/World Bank, but at least in the States, a good example of regulatory capture and corruption is the SEC.
It's not that the proof isn't there, it's that the SEC itself has become corrupted by the people it's supposed to enforce laws against.
On a side note, I am still livid about the Libor scandal. Why the hell is a rate set in London allowed to influence the American dollar so greatly?!
My understanding is that the purpose of LIBOR is to be free of US regulations on interest-rate setting and be closer to a 'free market' rate on the USD. The irony of the situation is left as an exercise to the reader.
London is also a bit more reluctant to clamp down on finance--they are the only region doing well in a struggling England, and unlike, say, the NYC finance industry, much of the money in London is free to go somewhere else.
> Why the hell is a rate set in London allowed to influence the American dollar so greatly?!
Because banks are not independent from each other, and they frequently borrow from each other if they lack a certain quantity of a certain currency.
The problem with the Libor scandal is that the bankers conspired to set interest rates by gaming the blind process they have for coming up with those rates in a fair way (all vote, top 4 and bottom 4 bids are removed, rest is averaged).
This is true, undeniable banking conspiracy at work. And governments still trust them with our money.
The government has no problem with civil forfeiture -- seizing (with no refund) $10K from an individual on mere suspicion. Why should bank managers and shareholders be immune from this?
>>Understandably, banks aren't the most sympathetic defendants, but extrapolate this reasoning to the tech industry. Should Bill Gates be in jail for his role in the Microsoft antitrust activity? Should Eric Schmidt be in jail for his role in the employee wage suppression collusion?
Neither has been charged (much less convicted by evidence showing guilt beyond a reasonable doubt) with any crime, and most crimes don't require incarceration on conviction (and even when they do, there are pardon/clemency provisions in the law specifically because of a societal decision that even guilt of a crime that, on the books, requires a certain punishment does not always meet the needs of society), though most crimes include incarceration as a potential punishment. So, it is neither is it well established that either committed any crime, nor is it the case that "X committed a crime" (without additional information about the particular crime and circumstances) is sufficient to establish "X should be in jail".
To the contrary, the facts in that case are a slam dunk. You have a box full of hard evidence, and the crime of selling counterfeit goods has no particularly onerous intent requirement. The crime is predicated on an objectively verifiable fact: are the goods licensed or not? Meanwhile, what's the difference between a legitimate financial transaction and a fraudulent one? You can't tell just by reading the deal documents. Ideally someone slips up in an email that reveals their knowledge and intent, but usually you're stuck building a case on circumstantial evidence.
To impose punitive fines or jail time, you need to bring criminal actions where you need to prove beyond reasonable doubt cases where the proof is in peoples' heads. Civil fines, on the other hand, have a much lower burden of proof: more likely than not.[1] That's why civil penalties and deferred prosecution agreements,[2] have become the tool of choice for regulators.
Frankly, you don't really want to live in a world where the government can impose criminal penalties on businesses for such loose facts as these. Understandably, banks aren't the most sympathetic defendants, but extrapolate this reasoning to the tech industry. Should Bill Gates be in jail for his role in the Microsoft antitrust activity? Should Eric Schmidt be in jail for his role in the employee wage suppression collusion?
[1] This description is America centric but the operative law is roughly similar in Europe.
[2] A deferred prosecution agreement is a settlement where a company pays a fine, agrees not to do whatever bad thing it did, usually agrees to some number of years of monitoring, in return for which the government defers charges and eventually drops them if the monitoring period ends without incident.