I once heard a federal judge talk about sentencing disparities between those convicted of simple robbery ( say snatching a purse containing $5.00 from an old woman) and a multi-million dollar corporate fraud case; the purse-snatcher goes to prison, and the business guy (or women) doesn’t. I suppose the immediate fear and uncertainty of pending violence rings close in the mind of the woman, and in the corporate world, there is not a direct perception of harm to any particular individual- losses tend to be spread out. Another problem emerges when the government bases prosecution decisions concerning corporations on “disproportionate harm” to innocent shareholders analysis. Such practices appear to be both unfair to the public because they fail to generate good behavior from corporate executives because they think they can “cooperate” their way out of any problems they face if they get caught, and it just is not shareholders who suffer when corporations break the law- all of us do. Related issues can arise when U.S. companies do business with (or own) entities in foreign lands that sometimes operate without regard to our ethical codes or laws.

Without attaching fault or blame to any corporate entity, I wonder how it is that a giant investment firm like Goldman Sachs Group, Inc., with a market capitalization of approximately $84.69 billion, along with other equity firms, can ethically sell a company like Biomet (a medical devices company) for massive profits when it is believed that Biomet assisted in the bribery of government officials in foreign countries such as Brazil and Mexico. As a matter of decency and good corporate citizenship, should U.S. companies avoid even an appearance of impropriety when it comes to such things? I realize we are talking about billion-dollar deals here, but really, wasn’t Biomet the target of similar accusations in 2012, and doesn’t this impute knowledge of their misconduct to others? And doesn’t such alleged repeat conduct suggest some people are not amenable to warnings? Would it be appropriate to have federal officials question all executives involved about any possible knowledge they might have concerning such alleged criminal matters? We all know you have to be truthful to the feds (ask Martha Stewart). It certainly doesn’t seem right to extend any deferred prosecution offers to entities (or individuals) with a history of similar misconduct. Again, I am not attaching blame or fault to anyone; instead, I feel we should be on the safe side here and ask some questions to all those executives who stand to profit immensely. On their web page, Biomet states: “Biomet prides itself on its unconventional profile”- maybe they have to be more conventional- perhaps they don’t- but it’s worth asking some questions.

UPDATE: 3/15/15

I recently read the book, “Too Big to Jail – How Prosecutors Compromise With Corporations”, and came away with a slightly different opinion on the way the government is prosecuting corporations. My primary concern deals with a corporation’s constitutional rights. While I do not have a problem with the firm enforcement of our criminal laws that pertain to corporate entities, I believe strongly that our constitutional protections should apply to all “individuals” that are included in the criminal process whenever possible. This belief does not stem from any high opinion I hold for corporations in general, quite the opposite. As a rapidly growing number of consumers, I cringe when I pay the artificially high premiums for cell phones, cable, and insurance- services that are virtually necessary to function in life. I am equally disturbed by the ever-increasing size of administrative agencies. I hope that corporations will heed the average consumer’s discontent and start policing themselves although I am not holding my breath. I include my review of the book below.


This book attacks the way and manner in which corporations are prosecuted. The central theme is that prosecutors are not holding corporations accountable through the use of “deferred prosecution” or “non-prosecution” agreements that have been utilized in the prosecution of more than half of the large corporations (58%) between 2001 and 2012. He thinks that corporate crime “deserves more public attention.” He highlights several prominent corporate criminal cases and explains how the corporation and government usually settle the cases by either having the matter not prosecuted in exchange for various types of payments, including restitution, costs of cleanup operations, damages and changes in the particular corporate culture; in the latter area, he explains how the companies can be required to pay for “monitors” who are entrusted with the responsibilities of ensuring corporate compliance with the negotiated changes that need to be made in those areas where the company has acted criminally. Some monitors have seized on to the power of their positions and have been accused of demanding staggering fees for their services that the companies are forced to deal with; he writes about how John Ashcroft, the former U.S. Senator from Missouri, and former U.S. attorney general, landed a monitor position (he was recommended by the U.S. attorney from New Jersey, Chris Christie), and then “showed billings of more than $7.5 million for the first five months of the monitorship, with a fixed monthly bill of $750,000 and hourly billings for additional team members”. Ashcroft tried to justify the “fixed” costs and fees. However, some legislators called Ashcroft’s deal a “no-bid” contract. The author says “One congressman commented: ‘In the Zimmer case [the company that was being monitored by Ashcroft], it is my understanding that Mr. Ashcroft’s firm was paid $52 million. To me, that is outrageous. I don’t care what you did. It is not worth $52 million. Even if you took steroids and hit 70 home runs, it is not worth $52 million’”. “In response to the outcry, the Justice Department changed the rules to require central review of the hiring of corporate monitors,” the author reports.

The author explains the difference between individual people charged with a crime, and corporations that are charged, and the variance in constitutional protections afforded to the two; individual citizens enjoy greater protection as “legal persons,” but corporations have many of the same rights. The trend seems to be that the courts are limiting the vast powers of the government- especially when it comes to “property” versus “liberty” issues- but even in matters more closely associated with “personal rights”, a concept not usually equated to corporations, the courts are starting to voice disapproval of genuine over-reaching and “shocking” behavior on the part of the government. In short, corporations are beginning to receive fairer trials. This is a good thing. I don’t think this nation is made better by further limiting our Constitutional protections in any case. The author would probably disagree with me on this point, but I believe he ignores the fact that victims can always proceed through civil court proceedings. And God knows, enough civil lawyers are lingering around disaster locations, even before the fires are entirely distinguished, ready to offer their services. I can recommend this book, but only if you have an interest in this subject.


In 2004, the New Jersey Department of Environmental Protection filed a lawsuit against Exxon for $8.9 billion over an allegation that the company had polluted and contaminated over 1,500 acres of wetlands, marshes, meadows, and water in the northern part of the state. When it appeared this year, that a judge was ready to arrive at a damage figure (Exxon’s liability having been established), the Chris Christie administration twice asked the court to hold off because a settlement was close. The case was subsequently settled for a proposed $225 million subject to the court’s approval. The Republican governor has been criticized by Democrats who by a vote of 24 to 0 in the state Senate approved a resolution urging the judge to reject the settlement figure. According to the NY Times, Exxon contributed $500,000 to the Republican Governor’s Association in 2014 when Christie was chairman of the organization. Exxon denies any connection between the donation and the proposed agreement. Many citizens of New Jersey are outraged with some saying “It is a betrayal of the public trust,” and the “deal stinks.” Others are disturbed by Christie’s apparent intended use of the funds- the bulk going towards the general fund as opposed to costs needed to restore the environmental damage.

UPDATED: 4/12/16– Quote from Reuters

“Goldman Sachs Group Inc (GS.N) has agreed to pay $5.06 billion to settle claims that it misled mortgage bond investors during the financial crisis, the U.S. Department of Justice said on Monday.

The settlement, which Goldman disclosed in January, stems from the firm’s conduct in packaging, securitization, marketing and sale of residential mortgage-backed securities between 2005 and 2007, the Justice Department said.

Investors suffered billions of dollars in losses from the securities bought during the period; the department said.”

We think this is a good start. However, it is sometimes difficult to grasp the government’s policies regarding criminal prosecution versus civil pursuit against these kinds of activities.



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