How do you tell if someone’s a white collar criminal? He’s not in jail. We’re talking about securities fraud (including insider trading), bribery, money laundering, various ponzi schemes and scams, tax evasion, cybercrime, counterfeiting, influence peddling, and these days election tampering.
The billionaire rogues’ gallery of the Trump administration is a reminder of just how prevalent flouting the law is in political and corporate circles, but how rarely the perps are successfully prosecuted. It includes fortunes built on pyramid schemes, abuse of bankruptcy laws, predatory lending, housing discrimination, money laundering and so on. Many have been engaged in their legally questionable behavior for decades, including the family of Secretary DeVos, Wilbur Ross, and the many Goldman alums.
The Special Counsel’s investigation has brought to light actions by Kushner of dubious legality (like his jailbird father before him), the Trump’s organization’s connections to money laundering and tax scams, and the tax evasion and other crimes of Paul Manafort.
In the aftermath of the 2008 Wall Street meltdown, many firms that were conducting criminal conspiracies or corrupt practices paid large fines or ceased to exist, other were judged too big to fail and survived under new management. Together, Countrywide, Washington Mutual, Lehman, Citi, AIG, Bank of America, Merrill Lynch, Morgan Stanley and friends ruined tens of millions of lives, lost people their homes, fortunes and jobs.
The criminality ushered in a lost decade for a whole generation due to a damaged economy. Yet there were no indictments, trials or jail time for any bad actors. The guilty corporations paid a fine which came out of the hide of shareholders, but not out of the guilty executives’ golden parachutes.
How is this possible? Warren Buffett has wittily said, “You don’t know who’s swimming naked until the tide goes out,” as it does in a downturn. That is, criminality, mismanagement, and financial weakness aren’t always apparent until a faltering economy reveals the rot. But that’s why there are supposed to be rules to limit criminality, systemic risk, and to deter misbehavior, by the threat of punishment. No punishment, no deterrence.
Some crookedness is blatant enough to attract attention. In the 1980s, Wall Street malefactors like Michael Milken and Ivan Boesky were prosecuted and served time. In the case of the S&L scandal, 1,100 bankers were brought to trial; and 800 jailed. In 2002, Enron went belly up, a few of its managers were incarcerated, and the company and its complicit accounting firm ceased to exist.
Yet even in these cases, the transgressions were going on for years before the crooks were caught. In this war, the lawmen are outgunned. White collar crimes are hard to detect, complicated to explain to juries, time consuming to prosecute and embarrassing to lose, so only open and shut cases go to trial. The state has finite resources to deploy, while vast corporations operate across many jurisdictions, are defended by phalanxes of legal talent who obfuscate, delay, plead and appeal And they pay for it all with the profits resulting from the crimes in question.
The result is a case like that of HSBC, the world’s seventh largest bank wth assets of $2.4 trillion. In the past decade it has laundered millions for the murderous Sinaloa drug cartel, profited from business with corrupt politicians, dictators, tax evaders, dealers of blood diamonds and arms, laundered KGB-related funds, set up offshore accounts for drug-dealers and other criminals, engineered a $3.5 billion scheme to manipulate the foreign exchange markets, and violated sanctions on doing business with Iran, Libya, Sudan, Burma and Cuba.
Since all of this has come to light, HSBC has obviously been punished severely. Right? Au contraire. The DOJ decided not to pursue criminal penalties, perhaps because the CEO said he was “profoundly sorry” for the bank’s past “mistakes.” Well, that’s comforting. But no employee of the corporation lost a dime or spent a day in jail, and the seemingly large fine of $1.9 billion amounted to about 12% of the company’s annual profits. That’s what’s called a cost of doing business.
Is it possible that there’s a further reason for the impunity with which white collar criminals commit their crimes? Maybe. They do belong to the donor class, and the legislators who write the laws affecting them, and conduct investigators into them are on their payroll. Too cynical?
Well, since the Citizens United decision in 2010 created a flood of corporate money to politicians, the purchasing of elections has increased and the number of prosecutions have dropped. The Trump administration and the Republican Congress have weakened the Consumer Financial Protection Bureau, and just this week they began to roll back the safeguards against financial industry malpractice in Dodd-Franks.
Perhaps it takes a satirist like Kurt Vonnegut Jr. to capture a reality this grotesque. In “God Bless You, Mr. Rosewater” from 1965, he described an America where “a handful of rapacious citizens…controlled all that was worth controlling.” Meanwhile, “honest, industrious, peaceful citizens were classed as bloodsuckers, if they asked to be paid a living wage. And they saw that praise was reserved henceforth for those who devised means of getting paid enormously for committing crimes against which no laws had been passed. Thus the American dream turned belly up….”
If that sounds eerily like the Gilded Age oligarchy of Trump, the time is probably overripe for another Progressive Era of reform, trustbusting, muckraking and equal justice under law. But so long as the money power is the only power that counts, with control over every important institution, the citizenry is stuck with tarnished idealism, disappointed hope, fake news, and a rising tide of unfocused anger that could lead to something even worse.