White-collar crime prosecutions are at a 33-year low. Corporate leaders can cause environmental disasters, economic crashes, and the deaths of thousands and still walk free. But there’s a way out.
Story Transcript
MARC STEINER: Welcome to The Real News, folks. It’s Marc Steiner. Great to have you all with us once again.
You know when you hear the word white collar crime, at least for me, it conjures up images of crusading investigators and prosecutors going after corrupt corporations. It works great as a Hollywood script, but the reality we face is that white collar prosecutions could end up at their lowest percentage of federally prosecuted crimes since 1986. Those prosecutions went up in 2011, they still went down collectively under Obama, but if you take immigrant cases out of the picture, it’s plummeting even more precipitously under Trump. I mean only 3% of over 170,000 federal prosecutions were for white collar crimes under him, and most of those were not business leaders. So what is happening here? What is going on?
Well, the man who wrote the book The Best Way to Rob a Bank is to Own One is joining us once again. He’s a formal federal financial regulator, white collar criminologist, and associate professor of economics and law at the University of Missouri Kansas City and is a continuing guest here at The Real News. Bill Black, welcome back.
BILL BLACK: Thank you.
MARC STEINER: So what is happening here? I think most people look at this and they just take it for granted that if you are a member of a corporation, that if you violated the public trust, that if you have caused the housing markets to plummet, if your bank is money laundering for criminals and terrorists around the globe; it’s okay, we’ll get a fine. But you’ve got to keep on going. What is happening now that’s different from before?
BILL BLACK: Well part of the answer is if it is going like before, in other words, we’re looking at a very long term trend. And the very long term trend is we’ve decided as a society implicitly that elite white collar crimes will pay. And they’ll pay spectacularly well, with incredibly low and ever diminishing risk of prosecution. And even if you’re prosecuted, it won’t be you, the CEO that’s prosecuted, it will be the corporation. What do you care in those circumstances? And even if they go after the corporation, the additional thing that happened is that fines have dropped completely off the board in terms of the trend line under the Trump administration. So A) Trump is like his predecessors, including Obama, in the sense of having extremely low priority in prosecution. But B) he’s even worse than the people who have come before. And the results are horrific for the nation.
Of course, Trump wouldn’t be president if we had effective white collar prosecutions. He would have been in prison decades ago and that would’ve been the end of it, of the most corrupt administration. So it’s demonstrating implicitly the costs of not prosecuting these people. And you’re seeing it isn’t just him, he’s got a whole cabinet of corrupt officials. Right? Yeah. And as Sunderland testified famously, they were all in on it. Everybody in the leadership of the Trump administration was involved in the latest crimes involving Ukraine. But well before that, more traditional white collar crimes, that’s what Trump’s been committing for over 40 years. And his father was a white collar criminal.
MARC STEINER: His pedigree is clear, at least to some of this stuff is a pedigree is very clear.
BILL BLACK: Well, and his son-in-law’s father was a white collar criminal.
MARC STEINER: Exactly.
BILL BLACK: They’re breeding to create the more efficient white collar criminals in the future.
MARC STEINER: So what I’m really curious about from your perspective is how we got here. I mean, whether you would take a look at under Obama, there was $14 billion in fines levied against 71 institutions and 34 public companies under Trump. And his first 20 months, that’s down to $3.4 billion and only 17 institutions and 13 public companies. And if the trends continue at least with these lack of white collar prosecutions, this’ll be the lowest percentage since 1986. So what has happened in that time since 1986 and before that’s allowed this to take place, where they just get away with everything, with the prosecutions. What are we missing here? What is missing here?
BILL BLACK: Okay, so the missing two things in the statistics that you cited were correct and important, but not as definitive as I hope what I’m going to say.
MARC STEINER: Okay.
BILL BLACK: So first thing is, a prosecution is not a prosecution. A prosecution of a corporation versus a prosecution of the officer. A prosecution in the corporation is almost worthless. So those Obama prosecutions were great for the numbers, they racked up lots of dollars, had absolutely no deterrent effect. Were designed to have absolutely no deterrent effect. Were designed to achieve exactly what they achieve. No banker who had any material role in causing the great financial crisis and thousands of them did, none, zero were prosecuted successfully. Two were prosecuted at all and they were not tangential, but relatively minor officials. The others involve things like Libor, a cartel thing too complex for this particular talk. And again, that’s a handful of folks, and Libor didn’t cause the great financial crisis. So that’s the first thing.
The second thing is some of your statistics do at least emphasize the important thing. How many of them are prosecutions of elites? Now, as I say, it’s really critical that those prosecutions, if you want them to be effective, be against the senior officers, the C suite, the CEO, the CFO, the chairman of the board, those types of things. And that’s not happening. But on top of that, under the Trump administration, there’s an almost complete unwillingness to take on big corporations even. So they’re not even willing to do the large fines. Right? So even the pretense of prosecutions is going away under the Trump administration. And in that sense it’s so blatant that it opens up part of what’s going on.
Now, what was really interesting to me as a criminologist was the CBS story, which is the bigger one on this issue. So first credit to them to at least talking about those issue, which the vast number of folks, including most democratic politicians running for president, have not spent nearly enough time on. But here’s the absolute loony tune part of this. So they could of course go, and they asked the experts, but of course why this is happening. But of course they don’t ask criminologists. They ask people who teach in law schools criminal law of white collar crime, which I do as well. So they come up with answers like, well, the great financial crisis has passed and public demand for prosecutions is reducing, right? And then the reporters translate that to us as, “Oh, they must be saying crime is down.” So white collar crime must be down and therefore prosecutions are down that that’s completely nonsensical, right?
We have so much white collar crime during this entire period, the 38 plus years, you could extend it 80 years back, that we prosecute a teeny tiny percentage. Even 38 years ago, when the numbers were at their peak, we prosecuted a teeny tiny percentage of these elite. So this has nothing to do with how much crime there is. It has everything to do with how much do we demand as a people that other elite, call it elected officials, do something they hate to do, which is prosecute people that look just like them in a mirror. People that make massive political contributions to them, that belonged to the same clubs that they knew in many cases growing up or that at least they have Fred in common. Once they start talking. So that is not an natural act. You know when you said that your vision was these crusading prosecutors, not so much.
MARC STEINER: That was the little tongue in cheek.
BILL BLACK: I understand, but it’s important because Rudy Giuliani, non-random person in white collar crime at the moment, of course only became mayor and only became famous because he was treated as a Crusader against white collar crime. The truth is that when he came into the U S attorney’s office, he publicly stated they get too many prosecutions of white collar criminals and he doesn’t pursuing it. He wasn’t doing an investigation. He wasn’t some tough cop. A whistleblower, yes. A whistleblower sent information across this desk and it made him famous.
MARC STEINER: And those are some of your favorite people. But let’s take a very quick, and I mean quick, definition here, because white collar crime can mean a lot of things and most white collar criminals, people who are prosecuted for what we call white collar crimes are not corporate executives. They can be immigrants who fake documents. They can be people who, none of the things that they weren’t… They’re not people at the top of corporations who we should be pretty clear when we talk about white collar crimes. It’s a much larger pool of things we’re looking at. And the smallest part of that pool ever getting prosecuted are the folks who actually own the businesses.
BILL BLACK: Right. And we have virtually no statistics on the commission of white collar crimes in the blue collar sphere. One is the uniform criminal report data from all the police all over America. The other is a really sophisticated victimization survey. Guess what? It doesn’t ask questions about elite white collar crime. And in part for good reasons, because the most important crimes that were subject to in the white collar world, we’re not ever aware that we were even the victim. Right? So environmental crimes. So when the Exxon and others cover up climate science and do things that are going to kill eventually hundreds of thousands of people annually and millions of species will be exterminated. That never shows up anywhere.
So you’re quite right, a white collar crime is more common than blue collar crime and it causes more physical losses, more economic losses. And in most countries, it kills and maims more people than blue collar crime. And nowhere in the world do we bother to count it. And in Washington, I can tell you from being in the government, if you don’t count it, it don’t exist. And therefore there is vastly less pressure. In fact, during the great financial crisis, both the Bush administration and the Obama administration put out press releases that said property crime had fallen to all-time lows when in fact it had reached all-time highs. Why? Because we don’t count the really huge crime.
MARC STEINER: So kind of wrapping this up a little bit here, because ,I mean the question is I think for a lot of people are hearing this, watching this is what do you do about it? I mean one of the things I read, I guess Samuel Buell’s one of your colleagues in this field, has written some of about this like limited liability corporations themselves are designed in part to protect people from going to jail and compels [inaudible 00:13:06] corruptors we don’t know anything about that, these complex areas. So it seems to me the fix is not a simple fix, it’s a complex fix, but there is a fix.
BILL BLACK: Yes. And we try in these things to do a whole series on the point. He’s quite correct. One of the things we’ve done institutionally over the last 45 years is for example, get rid of true partnerships where general partners had unlimited liability. That means if the accounting firm engaged in fraud, Fred did it and I had nothing to do of it, but I’m a general partner, they can take everything from me. I mean everything, the house, the car, everything. And in those days, that fear of Fred was a restraint that caused people to patrol their firms and they were less unethical. I don’t want to make that they were pure things, there were lots of verbatious things that happened in wall street 50 years ago, but that wasn’t the absolute norm in which the compensation system combined with the death of true partnerships has created what we call a criminogenic environment.
The third shoe to drop is when you stop prosecuting, right? So deterrence is essentially eliminated in these circumstances. The private sector discipline is essentially eliminated, and you can now through modern executive compensation… And you’re seeing this in a number of these crimes. You can if you’re smart, and CEOs are smart, you can avoid the conversation that sends you to jail. You don’t have to say, “Hey, quid pro quo. I want you to do the following sleazy thing. And in return I’ll give you all this money.” The compensation system says that for you, Hey, you do anything that boosts reported income. And you make a fortune. Hey, it’s up to you.
MARC STEINER: I think it’s up to us here at The Real News to continue this conversation and have a real look at white collar crime, and get under it and expose it for all of our viewers and the rest of the nation and see what’s really going on here because there are these crimes being committed right under our nose and people just walk away and we suffer the burden.
BILL BLACK: I would say white collar crime and predation, which is what we’re in both in white collar world and economics now starting to emphasize. Because in addition to this general targeting of the public, specific targeting of the elderly, of people of color and such is also a major part of this story.
MARC STEINER: Then we’ll get back to that. Bill Black, I appreciate the work. I appreciate you always being open to being with us here on The Real News, and we’ll talk very soon.
BILL BLACK: Thank you.
MARC STEINER: And folks, if you have ideas and thoughts about white collar crime and this kind of area, please write to us here at Real News and let us know. Get in touch with us. This is something we really have to see exposed, and it is undermining our nation and our democracy. And we’ll continue to look at this. And I’m Marc Steiner here for The Real News network. Thank you all for joining us. Take care.
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