John Ashcroft wrote and Op-Ed article for the NY Times titled 'Bailout Justice'. I consider to be one of the most educative articles I have read on the subject by his eminently readable style. He writes: "I CAN imagine the Treasury secretary’s face turning pale as he is told by the attorney general that one of the financial institutions on government life support has been indicted by a grand jury. Worse, I can imagine the attorney general facing not too subtle pressure from the president’s economic team to go easy on such companies.
This situation is hypothetical, of course, but in March, the F.B.I. director, Robert Mueller, warned Congress that “the unprecedented level of financial resources committed by the federal government to combat the economic downturn will lead to an inevitable increase in economic crime and public corruption cases.” Yet no one has discussed the inherent conflict of interest that the government created when it infused large sums of money into these companies.
The government now has an extraordinarily high fiduciary duty to safeguard the stability and health of companies that received hundreds of billions of bailout money. At the same time, the Justice Department has the duty to indict a corporation if the evidence dictates such severe action — and an indictment is often a death sentence for a corporation. The quandary is obvious. How, then, does the Justice Department bring charges against a corporation that is now owned by the government?
The tsunami of corporate scandals that shook our economy in 2001 — Enron, WorldCom, Adelphia and others — provides us with an instructive example. The Justice Department moved swiftly to bring corporate wrongdoers to justice. But we also learned that when dealing with major companies or industries, we had to carefully consider the collateral consequences of our prosecutions.
Would there be unintended human carnage in the form of thousands of lost jobs? Would shareholders, some of whom had already suffered a great deal, lose more of their investment? What impact would our actions have on the economy? We realized that we had an obligation to minimize the harm to innocent citizens.
Among the options we pursued were deferred prosecution agreements. These court-authorized agreements were not new but under certain circumstances offered more appropriate methods of providing justice in the best interests of the public as well as a company’s employees and shareholders. They avoid the destructiveness of indictments and allow companies to remain in business while operating under the increased scrutiny of federally appointed monitors.
In September 2007, for instance, the Justice Department and the nation’s five largest manufacturers of prosthetic hips and knees reached agreements over allegations that they gave kickbacks to orthopedic surgeons who used a particular company’s artificial hip and knee reconstruction replacement products. The allegations meant that the companies faced indictment, prosecution and a potential end to their businesses.
Think of the effect on the community if these companies had been shuttered: employees would have lost their jobs, shareholders and pensioners would have lost their savings and countless people in need of hip and knee replacement would have been out of luck, as these five companies accounted for 95 percent of the market. The Justice Department could have wiped out an entire industry that has a vital role in American health care.
Instead, the companies paid settlements to the government totaling $311 million. They agreed to be monitored by private sector individuals and firms with reputations for integrity and public service, with the necessary legal and business expertise and the institutional capacity to do the job. The monitoring costs were borne exclusively by the companies, saving taxpayers tens of millions of dollars that could be then used for other investigations and law-enforcement priorities. (I was a paid monitor for one of these companies, Zimmer Holdings.) In these types of circumstances, a deferred prosecution agreement is clearly better for everyone.
The government must hold accountable any individuals who acted illegally in this financial meltdown, while preserving the viability of the companies that received bailout funds or stimulus money. Certainly, we should demand justice. But we must all remember that justice is a value, the adherence to which includes seeking the best outcome for the American people. In some cases it will be the punishing of bad actors. In other cases it may involve heavy corporate fines or operating under a carefully tailored agreement.
In 2001, we did not know the extent of the corporate fraud scandals. Every day seemed to bring news of another betrayal of trust by top executives of another company. But we learned that there was often a better solution than closing those companies. I believe that if we apply to this current crisis the lessons learned a few short years ago, we can achieve the restoration of trust in the financial system and the long-term vitality of the American economy."
John Ashcroft was the United States attorney general from 2001 to 2005.
The simple lessons he repeats is that decisions to bring justice may have 'collateral' damage that he explains with the prosthetic hips and knees. Each of the saved giants presented this problem but the media never made it clear to the public. Rather, they allowed them to focus on a distraction such as the bonuses...for whom it was the entire years salary and far from the millions of dollars being bandied out, at least for the majority of employees.
The loudest people are often the ones who have thought about and understood the least of the whole situation. They are the impulsive ones who look for someone to blame and think that punishment will solve all problems. Why are these so often the folk chosen to represent the common man by the media? They are far from the majority.
It really seems time to let the man we elected as President to have the opportunity to run the country. Transparency is just that, it does not mean I will ask your opinion before I make any decisions. It also does not mean we will run this country by a committee of all citizens.
No comments:
Post a Comment