The failure to prosecute white-collar executives might be more justifiable if there were any indication that fines and deferred-prosecution agreements deterred corporate wrongdoing. The evidence, however, is not promising. Pfizer has been hit with three successive deferred-prosecution agreements, for illegal marketing, bribing doctors, and other crimes. On each occasion, the company paid a substantial fine and pledged to change—then returned to the same type of behavior. You might think that the price for flouting a deferred-prosecution agreement would be prosecution. But after offering Pfizer a second chance, only to have misconduct continue, the government was apparently happy to offer a third.
Jed Rakoff, the prosecutor who indicted United Brands, became a judge, and he has emerged as an outspoken critic of the prevailing approach to corporate crime. He has argued that companies may come to view even billion-dollar fines as a “cost of doing business.” In an article in The New York Review of Books, titled “The Financial Crisis: Why Have No High Level Executives Been Prosecuted?,” he highlights the farce of obliging a corporation to acknowledge criminal wrongdoing without identifying or prosecuting the managers who were responsible. Rakoff is dubious of obligatory promises from companies to change their corporate culture, and suspects that “sending a few guilty executives to prison for orchestrating corporate crimes might have a far greater effect.”
In recent years, the Department of Justice, sensitive to criticism of its kid-glove approach to corporations, did actually indict a string of banks, including Credit Suisse, BNP Paribas, J. P. Morgan, and Barclays. The banks pleaded guilty and, despite all the alarmism about “collateral consequences,” they all stayed in business, and there were no major shocks to the global economy.
In “Why They Do It: Inside the Mind of the White-Collar Criminal,” the Harvard Business School professor Eugene Soltes points out that, in the 2015-16 academic year, ten companies recruiting for new hires at Harvard had recently been convicted of a federal crime or entered into a deferred-prosecution agreement. By now, Soltes suggests, corporate deviance may have become so routine that even pleading guilty to a felony is no big deal. What had once been described as a badge of ignominy that could put a company out of business was now just a bit of unpleasantness: a passing hassle, like a parking ticket.