By Robert R. Thomas
My wife, a retired librarian, came across a blurb for this book, of which she said, “This looks to be right up your alley.” She was correct, as usual, on many levels.
I am hardly the only American who has never been satisfied by any answers as to why no banksters went to jail in the aftermath of the 2008 global financial malfeasance. In The Chickenshit Club: Why the Justice Department Fails to Prosecute Executives, Jesse Eisinger offers the most cogent and cohesive history I have read to date.
Describing American economic history as a sequence of “boom, bust and crackdown,” he addresses the Department of Justice’s recent prosecutorial history against that backdrop. Using the examples of the aftermath of the savings and loan scandal and the Michael Milken-run junk bond boom and bust of the 1980s, the DOJ prosecuted thousands of big shots from the financial industry and put several Wall Street lights in jail. With the burst Nasdaq bubble of the early 2000s revealing “a book-cooking pandemic,” top executives from several large corporations like ENRON and TYCO went to jail.
“Recklessness and stupidity fuel booms,” writes Eisinger, “but usually so do crimes.” To which he adds, “By contrast, after the 2008 financial crisis, the government failed. In response to the worst calamity to hit capital markets and the global economy since the Great Depression, the government did not charge any top bankers. The public was furious.”
The 2008 crash defined the seismic shift in government’s approach to prosecuting white-collar crime at the highest echelons. The shift had a lot to do with the growth of the Chickenshit Club and the interlocking causes of that growth, Eisinger contends.
The book’s provocative title comes from a 2002 speech by James Comey, then the newly appointed U.S. Attorney for the Southern District of Manhattan, exhorting his staff to prosecute for the right reasons based on evidence–not the fear of failure or losing a case.
“We have a saying around here, he said. “We do the right things for the right reasons in the right ways.”
“The Chickenshit Club,” said Comey, are those who feared career failure at the expense of evidence and righteousness. Times looked good for prosecutors at DOJ’s prestigious Southern District.
But the lack of corporate prosecutions worsened. Eisinger cites a Wall Street Journal analysis of 156 criminal and civil cases brought by the DOJ, the SEC and the Commodities Futures Trading Commission against 10 of the largest Wall Street banks since 2009: “In 81% of the cases, the government neither charged nor even identified individual employees. In the remainder , the government only charged 47 low level and midlevel employees.”
Eisinger concludes that the DOJ “has lost the will and indeed the ability to go after the highest ranking corporate wrongdoers.”
What happened between Comey’s exhortation and the DOJ is the heart of Eisinger’s narrative. Why the DOJ fails to prosecute executives of white-collar crime has much to do with “too big to fail,” which entails, it turns out, “too big to jail.”
A key element was shifting focus away from prosecuting individuals to suing corporations for settlements, Eisinger argues. The prosecutor does not have to prove his case in court. Instead he negotiates with Big Law’s highly lucrative white-collar defense bar, a giant growth industry of white-collar crime attractive to lawyers on both sides. When emphasis shifted from prosecuting executives to negotiating and settling with corporations, prosecutors learned they had great leverage in settlements while prosecuting individual executives in court was a much more precarious “legal” avenue to successful court victories.
Part of that problem, says Eisinger, is that the court has not been helpful with “its generous interpretations of the law,” the kingpin being the Supreme Court’s “Citizen United” decision.
Eisinger enlightens the shifty legalese embodied in settlement terms like DPA and NPA—Deferred Prosecution Agreement and Non Prosecution Agreement. When you successfully prosecute people, they are often fined and go to jail. But when you successfully prosecute a corporation, a settlement is reached because you cannot put a corporate entity in jail. So a criminal conviction becomes a financial settlement, a settlement in which both sides win and nobody goes to jail. The prosecutors win and the corporations pays a fine, which, as Eisinger substantiates, becomes nothing more than the corporation’s cost of doing business.
Aided and abetted by several interlocking key events like Big Money and its powerful influence on Big Law defense bars, Eisinger demonstrates that the prosecution of executives and the prosecution of corporations have become very different legal and criminal animals.
When Comey gave his speech, the DOJ was successfully prosecuting executives for their corporate crimes. Today the corporation is fined and executives who caused the criminality are neither prosecuted nor even identified by name.
From the turf battles within the bureaucracy to the pressures from the outside political appointees, Eisinger peppers his narrative with telling events like Enron, peopled by executives like Dave Delaney, the head of Enron’s energy trading unit. When flipped by the Feds, Delaney, by way of explanation, said, “It was all bullshit.” Factor in Enron’s cooked books thanks to collusion with the Arthur Andersen accounting corporation, another can of white-collar worms that Eisinger dissects with the expertise of the Pulitzer-Prize-winning journalist he is.
There are the usual bankster suspects like Goldman Sachs, often referred to as Goldman Sachs Government because of the constant shuttle that goes on between their executives and government service. The Trump administration, as Eisinger points out, is the epitome of this shuffle between the financializers and the federal government that has been bought and is currently being sold. And how it has all happened is the art of the deal. In Dave Delaney’s concise description, “It’s all bullshit.”
The author’s research and development concludes, “Today the justice system is broken. Over the decade after Jim Comey’s speech, his words failed. The Justice Department succumbed. The department avoided the biggest cases. It became fearful of losing and lost sight of its fundamental mission to make this country a just place.”
The Chickenshit Club not only survives; it now thrives. Eisinger’s journalism showcases a real story that is far from being concluded and affects all who believe in the truth and justice of the American democratic ideal.
Are we equal or are we not under the law?
Jesse Eisinger weighs in swinging.
EVM book reviewer, occasional commentator and East Village sage Robert R. Thomas can be reached at email@example.com.