by Charles Hugh Smith from Of Two Minds
Today we publish the second half of an important essay by C.D., a correspondent in law enforcement. Part one is here
It's up to us to refuse to participate in a criminal financial system: we should not be doing business with businesses that are repeat offenders.
We could expand this example of vested interests suppressing prosecution of white collar crime to the financial system, more particularly, the stock and bond markets. The majority of the adults in our country are invested either directly or indirectly in the stock market via trading accounts, pension funds, 401Ks, etc. and have a vested interest in making sure that it rises higher and higher.
How many people would be willing to get rid of all of the drug money in the stock market, if they knew their 401K would decrease by 10%? How many people would get rid of all of the various types of fraud in our system, if they knew their pension fund would lose half or more of its value or the interest rate on their Aadjustable rate mortgage (ARM) skyrocketed? How many politicians are going to refuse bailouts of the banksters or call for their prosecution if the banksters can take down the stock market?
When TARP was being voted on the first time, the overwhelming majority of the population was against it. The day after the first vote, the market tanked. Guess what, the next day it was about 50/50 in who wanted TARP to pass vs. those that didn't.
White collar criminals in our big banks and corporations have turned otherwise legitimate businesses into vehicles to commit numerous crimes. They use the corporation or other business entity as both a sword and a shield. The entity is used to help commit the crime and then used to protect them personally from any criminal or civil liability. In my experience, more often than not, a prosecutor will forego charges against an individual and just charge the business entity, because it's a stronger case.
If CEOs started going to jail for long stints, that would be very helpful in cleaning up things in a hurry. If the only downside to a CEOs behavior is that he may have to leave his job and suffer some temporary embarrassment, that's not much deterrent to him engaging in activity where he can make large sums of money. While fines can have some deterrent effect on a company's behavior, their effect is often muted by the fact that the fines are less than the profit from the activity, the cost of the fines can be passed on to customers, and in the case of the banks, the fines are subsidized by the government itself or the Federal Reserve.
It's important to bring individuals to account for their behavior. Company policies and activities were directed by someone or group of people; they don't just happen in a vacuum.
The criminal justice system can't effectively handle a large case load without a tremendous amount of manpower, so it's important to have a good regulatory system in place that can prevent many problems. It's also important to realize that prosecuting someone criminally requires a lot of resources and a significant amount of proof (which can be difficult to obtain) and in the absence of a good regulatory scheme, it can be extremely difficult to stop criminal behavior.
White collar criminals can use any number of excuses to cover up their criminal acts (e.g. miscommunication, misfeasance/malfeasance by subordinates/consultants, ignorance/misinterpretation of the law, bad legal advice, administrative errors, stress, etc.). With many crimes, a prosecutor needs to be able to prove the WCC knew what he was doing or intended to do something, as opposed to negligence or recklessness. Again, that can be difficult.
One often overlooked aspect of WCC is the use of lawyers by White collar criminals to commit their crimes. For instance, WCCs may ask lawyers ahead of time about how to change the system, so that their illegal activities become legal or they'll ask the lawyers how to avoid getting prosecuted for their anticipated or current illegal activities. Then the WCCs can hire connected attorneys who may try to bring political pressure to nix a case, if they can't win the case using the law or the facts. Or attorneys can try to win the case in the court of public opinion, which may help nix a case or at least mitigate the punishment.
The widespread amount of fraud and all of the resulting tangential crimes could not have been committed without the assistance, wittingly or unwittingly, of various attorneys. Numerous attorneys have helped to foreclose on homeowners when they KNEW the foreclosure paperwork was not right in one way or another. Every one of them should be sanctioned up to and including the revocation of their law licenses.
It's interesting to see the different types of language used in describing White collar crime vs. blue collar crime. The press and the advocates for the WCC use various phrases like "too big to fail", "it will damage the market or the economy", "we can't regulate ethical behavior," "we need a truth commission, rather than a criminal investigation," etc. With the first argument the management of a company is perceived as being inextricably linked to the company and that the company is indispensable to the country (e.g. The big Wall Street banks). This is a case where the actors are confused with the play and many people fall for it. The other arguments deal with downplaying the crimes of the higher classes to turn them into lapses in ethics or judgment.
The damage that these criminals inflict on society is typically diffuse over a great many people or area and is often indirect. Other types of crime (e.g. assault, rape, murder, arson) are very direct and discrete. If you steal a little from a great number of people, especially using a company to do it, the likelihood of you being caught is small and if you are caught, it's difficult to prove intent, and if that can be proved, then your punishment is typically relatively light, as opposed to someone who robs a bank.
Look at the number of corporations that have been caught repeatedly and they only pay a small fine, promise not to do it again, and admit to nothing. If you pollute the air illegally, it will diffuse over a wide area and most likely will lead to chronic, as opposed to acute, effects on people. The same can be said of the impacts on fish and wildlife. However, there are times when there are serious acute effects on people and our natural resources.
Ultimately, we should not be doing business with businesses that are repeat offenders; it's kind of like Stockholm syndrome. We keep on allowing ourselves to be abused and even protect our abuser. Unless and until the business changes their ways and assists in the prosecution of White collar criminals, we're going to keep on having problems in how our society functions.
Why our local governments continue to do business with the big Wall Street banks is beyond me. In many cases, it appears that the management decided to incorporate fraud into their business models. No reasonable person would knowingly do business with the Mob, but we continue to do business with these banks which have been run just like organized crime.
We can either live by the rule of law or the law of the jungle. I prefer the former.
(Copyright 2012 C.D.)
Thank you. C.D., for sharing the perspective of someone working within law enforcement. Once we accept organized, systemic financial fraud and crime as somehow serving our interests, we have made it "the New Normal." Our complicity will not go unpunished. CHS