The Justice Department has given another financial institution a "get-out-of-jail-free card" after it pleaded guilty to criminal conspiracy for helping wealthy Americans evade U.S. taxes for decades. Credit Suisse agreed to pay $2.6 billion in penalties for its actions, but the same policy that has let other major financial institutions get off without prison time was used once again here.
As noted in the May 8 issue of Federal Taxes Weekly Alert, Attorney General Eric Holder said that "a company's size will never be a shield from prosecution or penalties," but he then added that "it would be irresponsible not to consider the fact" that a financial institution's regulators or even its own company charter might prompt actions that could jeopardize the institution's future. Those last nine words are critical.
As documented in Matt Taibbi's book, "The Divide, American Injustice in the Age of the Wealth Gap," a memorandum entitled "Bringing Criminal Charges Against Corporations" was published in 1999 by Eric Holder, then a little-known official in President Clinton's White House. At the time it appeared to be a "get-tough-on-white-collar-crime" document by a former U.S. attorney who had successfully prosecuted Congressman Dan Rostenkowski for corruption.
But, as Taibbi's book points out, Holder's memo also suggested that "collateral consequences" should be considered. As Taibbi put it, collateral consequences included "the shareholders who would lose their shirts when a stock plummeted, the innocent line employees who would lose their jobs, the lawyers and executives whose careers would wrongfully be tainted. All of these people should figure into the prosecutor's calculations."
It is the "collateral consequences" portion of that memo that has been used time after time in the prosecution of white collar criminals, especially major financial institutions, that have been caught in criminal enterprises. This includes Hong Kong and Shanghai Banking Corporation, better known as HSBC, which, among other things, admitted laundering billions of dollars for drug cartels in Mexico and Colombia, for Russian mobsters and terrorist-connected organizations in the Middle East.
Perhaps the biggest and most accessible bank in Asia, Africa, Central America and the Middle East, which according to former Senate investigator Jack Blum "violated every goddamn law in the book," HSBC was fined $1.9 billion. Nobody went to prison.
There are a number of other well-known "prosecutions" that can be added to that list (see What A Great Country. You Can Pick Your Own Reality.), but the outcome remains the same. A financial slap on the wrist and, if you're lucky, a promise "not to do it again."
As long as no one does "time," these penalties will just be seen as the cost of doing business. And, for the most part, the profits over time far exceed the penalties.