Addict (drugaddict) wrote,

Well, Shell Oil was engaged in -- it had to do with their reserves, their oil reserves, and they wer

Crime without Conviction: U.S. Makes Deals With Corporate Criminals Instead of Prosecuting

Thursday, December 29th, 2005

Corporations that commit securities and accounting fraud can now expect to get sweetheart deals from the Justice Department, and they don't face public exposure for their misdeeds. We speak with Russell Mokhiber of Corporate Crime Reporter. [includes rush transcript]

A report released yesterday found that under a new policy implemented by the Justice Department in 2003, a number of major corporations caught committing serious crimes have not been prosecuted or convicted by the U.S government. The report, titled, "Crime without Conviction: The Rise of Deferred and Non-Prosecution Agreements" by the watch-dog group, Corporate Crime Reporter, named 34 major corporations that have entered into special deals with the U.S government.

Under these deals, prosecutors agree not to criminally prosecute the corporation in exchange for cooperation against executives, implementation of corporate monitors and fines. In fact, the report finds that no major corporation caught engaging in accounting or securities fraud has been convicted since the Arthur Andersen conviction in June 2002.

AMY GOODMAN: Well, Russell Mokhiber, I want to thank you very much. For this report, for Corporate Crime Reporter -- Russell Mokhiber speaking to us from Washington D.C. -- the website,

Washington D.C. studio by Russell Mokhiber. He’s editor of Corporate Crime Reporter. Welcome to Democracy Now!, Russell.

RUSSELL MOKHIBER: Good morning, Amy.

AMY GOODMAN: It’s good to have you with us. Well, why don't you talk about your report, “Crime Without Conviction”? Talk about these deals.

RUSSELL MOKHIBER: Well, Amy, if you and I engaged in a fraud against the government that cost the government $2.5 billion, as KPMG did, then you and I would be criminally prosecuted and sent to prison. I went to the press conference where the Attorney General of the United States announced this prosecution of KPMG, and he started off the press conference by saying, “Today, KPMG admits its criminal wrongdoing in this tax shelter fraud that cost the government $2.5 billion.” And then there was a pause, and he started talking about what was going on. The head of the I.R.S. comes on, and he details the criminal activity.

Was there a conviction? No. The company was charged with a felony, and then the government gave the company a deferred prosecution agreement. This is an agreement that was intended – these kinds of agreements were intended for juvenile delinquents, to clear the courts of minor issues. But now they are being used in cases like KPMG to relieve the company of its criminal liability.

And in our report, which is on our website,, we list 34 of these cases -- fraud cases, bribery cases -- where the company engaged in egregious criminal activity, where in some cases, like KPMG, the Attorney General of the United States stands up before the nation and says the company admits to its criminal wrongdoing, but there's no conviction.

And so we think that this sets a double standard, that for you and I, for ordinary Americans, when we commit crimes, even minor crimes, we’re prosecuted, criminally convicted and sent to jail, but for major American corporations, like Monsanto and KPMG and the rest named in this report, they get these special deals. We think it’s unfair. And this just switched over the last couple of years since the Arthur Andersen conviction.

AMY GOODMAN: We’re talking to Russell Mokhiber. He’s editor of Corporate Crime Reporter. So, Russell, if you could name some names, if you could talk specifically about some corporations, what they were charged with, and where they stand today.

RUSSELL MOKHIBER: Well, let's take, for example, Monsanto. The government had evidence that Monsanto was engaged in a bribery scheme in Indonesia. The government of Indonesia had a rule, saying that if you are going to use genetically modified crops, you’re going to have to have an environmental impact statement, so a bribe was paid in an effort to change that rule. The government came across this. It’s illegal for any U.S. citizen, any U.S. corporation to bribe a foreign government. They had this information. It was a clear case. Why wasn't there a criminal prosecution? Why did they get the special deal? That's the kind of issue that we want to raise.

Also, Amy, even if there are some close cases here, one thing federal prosecutors will tell you is that if it’s a close case, but if the company engages in obstruction of justice, that tilts the decision over to a prosecution. And in many of these cases, like Computer Associates, which is a serious accounting fraud there in New York, like KPMG, like Monsanto – or not Monsanto, but like a number of these other cases, there was evidence of obstruction -- serious evidence of obstruction of justice, so much so that in the KPMG case, the U.S. Attorney in the Southern District of New York, David Kelley, who was prosecuting that case, reportedly wanted to take KPMG, because of the obstructive conduct of the one of the four major accounting firms in the world, wanted to take and criminally prosecute that case and convict that case and convict that company of those crimes, but he was overruled by Main Justice.

So, we’re raising the flag here and saying, “Okay, in some of these cases, maybe a deferred prosecution or a non-prosecution agreement is legitimate, but not in these number of cases.” One of the things the report found that this is an accelerating trend, that of the 34 cases that we could identify, 23 of them have come in the last three years. And so, that’s twice as many in the last three years as in the previous ten years. Corporate defense counsel really like these kinds of cases, because it let's the corporation off the hook. And what's happening is the corporate defense counsel is calling up the prosecutor and saying, ‘Look, we’ll turn over everything. We’ll give you the executives. We’ll give you all the information about what happened here in exchange for this kind of deal of not having a criminal record.’

Now, what's the benefit of not having a criminal record to a major American corporation? One benefit is they – it’s a backdoor way of getting around the stigma. There’s major stigma, there’s major adverse publicity if you’re a convicted company. In the 1990s, we put out a report called “The Top 100 Corporate Criminals of the 1990s.” There were so many criminal prosecutions of these companies, which I think has an educational effect. It sends the message that the major criminal actors in our society are these major corporations, that corporate crime and violence inflicts far more damage on society than all street crime committed by individuals. That’s just a slam dunk. It’s all over the paper.

Look at the Washington Post just this morning, our local paper, a huge headline on the Abramoff scandal, and this is unbelievable what’s going on here. What 2006 is going to show is members of Congress being criminally prosecuted for corruption. I think Senator Harry Reid called Congress the most corrupt Congress in history. So this is all over – this is the major story, it’s going to be the major story of 2006: corporate corruption, corporate crime and corruption.

And how are we treating it? We're treating it with double standards with these special deals. And the result is -- I think the press is doing a good job in exposing these crimes, but the public impression still is that street crime inflicts far more damage than corporate crime and violence, and we have to change that. If you ask the average person to give -- if you say “looting” to the average person, the first thing that comes to their mind are the black kids in New Orleans stealing the DVDs and wading through the water, not Conrad Black, who looted a Hollinger International Corporation of millions of dollars and currently being prosecuted by U.S. Attorney Fitzgerald.

AMY GOODMAN: We are talking to Russell Mokhiber, editor of Corporate Crime Reporter, just released his report yesterday, “Crime Without Conviction.” The report details 34 special deals with major corporations. Can you talk about how this idea of deferred prosecution, what is it modeled on?

RUSSELL MOKHIBER: Well, it was started to -- I mean, even the U.S. Attorneys -- it was started for juvenile delinquents. It was started for minor cases. The idea was the federal courts are flooded with these minor cases, so if it’s not a serious -- I mean, a minor crime was committed; if it’s not a serious crime, say to the individual, ‘Okay, you made a mistake here. We’re going to charge you with a crime. But if you agree that over two years to be clean, to not engage in any other criminal activity, if you do that, if you agree to do what we tell you to do, that is, don't engage in other criminal activity, pay a fine, whatever, then after two years we’ll drop the charge, you won't have a record.’ And the U.S. Attorney's manual said -- makes it explicit that that’s its purpose.

It’s not for major multimillion dollar crimes. And so, but creative corporate defense attorneys and prosecutors took this and said, ‘Hey, here’s a way where we can settle these cases quickly, where we can give the corporation what it wants, which is no criminal prosecution, and where we can get out of these cases and not spend a lot of time on them.’ Well, there's another way to do it. Another way to do it is to criminally prosecute – and the other thing was the prosecutors want to go after the individual executive, so if you have the corporate attorney working with the prosecutor to go after the executives, you’re more likely to get a lot of individual convictions.

This is what happened, for example, in the HealthSouth case. HealthSouth was a major corporation in Alabama, nationwide corporation, healthcare corporation. And the defense attorney for the company called up the prosecutor, Alice Martin, who’s the U.S. Attorney in Alabama, and said, ‘Here’s my cell phone number. I’ll give you whatever you want on these executives, just leave our corporation alone, because we’re starting new.’ And she got like 16 convictions, and I think 15 of them got home detention. The C.E.O. of the company, you know, did the idiot C.E.O. defense, went the to trial and got off. That’s what Ken Lay is doing. He’s doing the idiot C.E.O. defense, saying, ‘Andy Fastow did it, I didn’t know anything about it, even though I was the C.E.O.’ And sometimes the idiot C.E.O. defense works, as it worked for Scrushy in the HealthSouth case. But that’s what’s happening.

Ten years ago, it was the company protecting the individual executives and pleading the company guilty. And so what would happen is you get a guilty plea against the company, the executives would get off, and the company would pay a fine. And there was a stigma against the company. I think that had real – a general deterrence. Now what you have is the corporate attorneys and the prosecutors working together to turn on the executives. To me, the ideal case is you prosecute both the corporation and the executives, and you put the company on corporate probation.

This is what happened in the Consolidated Edison case there in New York 15 years ago. I don't know if you remember this, Amy, when there were explosions in downtown New York and Con Ed was convicted of environmental crimes, because of stuff that was spewing out of the manholes. And the company was convicted, put on four years probation. There was a judicial monitor. The monitor reported from the company to the judge to make sure that the corporation rehabilitated itself. And after four years, the probation was lifted. So that’s what we have to do. We’ve got to take control of these companies through judicial process and make sure that there's real rehabilitation, not these fake debarments and fraudulent kinds of changes, fig leaf kinds of changes that are happening as a result of these agreements, and make sure there’s real change.

AMY GOODMAN: Russell, can you talk about the contrast of the actual cost of street crime versus corporate crime?

RUSSELL MOKHIBER: Well, I think there’s -- one of the problems is the F.B.I. doesn't have a corporate crime database. You can go to the F.B.I. and get detailed information on robbery and burglary and murder and homicide and rape and so forth, but when you go to the F.B.I. and ask them “Do you have statistics on white collar and corporate crime?” they have very little. They have no comprehensive database on corporate and white collar crime.

And one of the things that should happen is we should have a federal law, and it would be real easy to implement -- you wouldn't need a federal law. The S.E.C. could do it. Require all public companies to report on a yearly basis their criminal and wrongful activity to the S.E.C., and that could be easily compiled in a public database. Right now, it’s really hard to get a handle on, but every corporate criminologist, every criminologist who looks at this says there's absolutely no question, corporate crime and violence inflicts far more -- in fact some of these individual crimes inflict far more damage on shareholders and employees than all the burglaries and robberies in America in one year. So it’s just slam dunk, no question that this is the most serious kind of crime, and there should be a laser focus on how to bring this under control.

One other thing about deferred prosecutions that we mention in our report, and by the way, on our website where the report is, we collected 27, now, of the 34 actual agreements, so you can go in and read the agreements that were cut between the corporate counsel and the prosecutors. And one of the things we found, for example, is I think this is an area that’s ripe for corruption, because what do you say? The company really wants no conviction on its record, and it says to the prosecutor, ‘Okay, we don't want a conviction. What can we give you?’ So that opens the door to, I think, some shady deals.

Here’s a couple. Bristol-Myers Squibb, accused of a major accounting fraud by the U.S. Attorney in New Jersey, so Bristol-Myers’s attorney goes to the U.S. Attorney and says, ‘Okay, we don't want a criminal conviction. What can we give you?’ The U.S. Attorney says ‘Well, how about a chair in business ethics at my alma mater, Seton Hall Law School?’ That's what he got. The Attorney General of Oklahoma goes to M.C.I. and says, ‘Okay, we’ve got the goods on you. We’ll give you a deferred prosecution. What are you going to give us?’ ‘We’ll give you 1,600 jobs over ten years in Oklahoma.’

So these are the kinds of deals that are being cut, all available on our -- you can look at them. I think it’s one-stop shopping for prosecutors, defense attorneys, citizen activists to go and read these agreements and see the kinds of deals that are being cut. I think we have to move away from them. We have to move away and start criminally prosecuting the company and start getting convictions and bring some real -- this is the big stick against corporate crime, criminal prosecutions.

AMY GOODMAN: Russell Mokhiber, one of the companies you name is Shell Oil. Why?

RUSSELL MOKHIBER: Well, Shell Oil was engaged in -- it had to do with their reserves, their oil reserves, and they weren’t telling the truth about their oil reserves, so the U.S. Attorney brought a case against them. We tried to get that agreement from the U.S. Attorney in Manhattan. They wouldn't turn it over. And in a number of these agreements, they put out a press release and say, ‘This is what happened, but we’re not going to give you the agreement.’ I think that – I mean, even defense attorneys say that should change. If you’re going to announce an agreement, you should make it public. And in a number of these -- I think seven of these agreements we weren’t able to get them. In some of the agreements, there wasn't even a press release, and I think, even though we found 34 of them, I think there’s probably more out there, but because the government didn’t make an announcement, and defense attorneys have told us that sometimes as part of the deal, you can get the government not to tell the public about the agreement.


RUSSELL MOKHIBER: Sears was a case dealing with – again, I don't have the exact details, but it was a case dealing with the selling of tires that were defective and some money that was passing hands from a unit. This is one of the cases where there was very little information on it. I don't believe there was a press release on it. This is like ten or fifteen years ago. And so, we didn't get the agreement in Sears, and so we don't have a lot of details on it. But we did have the report on it, and we did publish some of details on it, but we don't have the actual agreement, so we don't know exactly what went down on this.

AMY GOODMAN: Tommy Hilfiger, you say, in August 2005, Tommy Hilfiger got a sweetheart deal from the U.S. Attorney in the Southern District of New York, David Kelley. Tommy Hilfiger is the clothing giant, the company under criminal investigation for avoiding income tax. But Kelley granted the company a non-prosecution agreement. That means no indictment, no conviction.

RUSSELL MOKHIBER: No indictment, no charge. Well, see, that was another one where we couldn't get a copy of it, and they put out a press release, and there was a little publicity on it, but we couldn't get a copy of the agreement.

But I think things are now going to change. This report is getting a lot of play among prosecutors and defense attorneys. We got a number of calls yesterday from people in the know who say they agree with the conclusions of the report, and they think things are now going to change, where prosecutors are going to start looking carefully at criminally convicting the companies.

Eli Lilly just two weeks ago pled guilty to a -- and when they plead guilty, by the way, when they plead guilty, sometimes they plead out a defunct unit, you know, a subsidiary of the company, so the parent company doesn't have to take the hit. Other times -- one of the things they are fearful of is they lose government business. A convicted felon cannot get contracts with the federal government. So, often there are fake debarments where the company’s, you know, some subsidiary that’s based in its closet or something, that doesn’t have any money, they plead that company out, and that company is excluded from doing business with the U.S. government. That’s sort of like -- debarment now has become fraudulent, where these companies aren’t going to be excluded from federal contracts, the big companies. They never have, and they always find ways around it.

AMY GOODMAN: Russell Mokhiber, as we wrap up not only this program, but this year, you are known for going to the White House as the editor of Corporate Crime Reporter, asking questions at the White House press conferences, the press briefings with Scott McClellan. You did it with Ari Fleischer and with Scott McClellan. I’m looking at February 1, 2005. You said, “Scott, last night in an amicus brief filed before the U.S. Supreme Court, the Justice Department came down in favor of displaying the Ten Commandments at courthouses and state houses around the country. My question is: Does the President believe in Commandment number six, ‘Thou shalt not kill,’ as it applies to the U.S. invasion of Iraq?” And Scott McClellan said, “Go ahead. Next question.” You haven’t asked many questions since. What’s happening at the White House?

RUSSELL MOKHIBER: Well, I mean, one of the problems was Corporate Crime Reporter is a one-person organization, me, and here’s what was going on. I was going over and I had my press pass, they would make me wait at the gate. I would wait for like a half an hour. They would let me in. You know, you would wait like for an hour for the thing to start. Then you would -- then he would skip -- there was a period of time where he wasn’t calling on me. He said he was going in order and that he would go order by order. And he’d come to me, skip over me, so he wasn't allowing me to ask questions. When I was asking questions, he wasn’t answering them. I was spending like three or four hours a day at the White House and not getting any questions answered, and so I had to pay attention to Corporate Crime Reporter and start dealing with these issues again. But it doesn't mean I'm not going back. I’m going back. I just had to pay more attention to Corporate Crime Reporter.

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