By Haddon Libby
Massachusetts Democratic Senator Elizabeth Warren released a report showing how law enforcement is rigged such that white collar crime by large corporations seldom leads to even an admission of guilt. Warren states that this “failure to prosecute big, visible crimes has a corrosive effect on the fabric of democracy and our shared belief that we are all equal in the eyes of the law.” Warren called out the Obama Administration for their failure to enforce laws and gave examples:
In November 2014, DuPont released the toxic gas methyl mercaptan into the air killing four people. Despite 11 violations of Occupational Safety laws, OSHA fined DuPont only $372,000 and held no one accountable.
In February 2015, Standards & Poor’s paid $1.375 BILLION to settle claims that they inflated debt ratings of residential mortgage-backed securities. This activity is one of the primary reasons for the 2008 financial crisis that caused TRILLIONS in economic damage. The fine did not require that the company admit that they broke the law and no one was indicted.
In May 2015, “The Cartel” which consisted of Citigroup, JPMorgan Chase, UBS and Royal Bank of Scotland paid $5.6 billion in fines for five years spent manipulating exchange rates on currencies. None admitted guilt and no one was prosecuted.
In August 2015, Citgroup paid another $180 million for selling risky bonds to investors from 2002 to 2008 with false assurances that the bonds were safe. No one was prosecuted.
A month later, General Motors paid a $900 million fine to settle charges that they had covered-up ignition switch problems for years. Those switch problems led to 124 deaths and 274 injuries. Once again, no one was prosecuted and no admission of guilt was required.
In November 2015, Novartis paid $390 million in fines for an illegal kickback scheme with pharmacists that increased the sale of certain drugs to people on Medicare and Medicaid. Novartis admitted no wrongdoing and no one was indicted. Worth noting, Novartis had already been under a ‘corporate integrity agreement’ with regulators for this activity and their CEO was quoted afterwards as questioning whether the settlement would change their behaviors going forward.
Also in November, Education Management Corporation (EDMC) settled a False Claims Act charge with the Department of Justice where EDMC had received $11 billion in payments from students for education that failed to meet the standards of statements made to those students by EDMC. EDMC paid a $95 million fine and did not have to admit guilt despite thousands of examples of fraud.
If these corporate crimes are not concerning enough, let’s look at violations of free trade agreements in South America where US trade officials have chosen not to act: Columbia’s assassination of 105 union activists; Guatamalan worker exploitation and Peruvian violation of environmental laws related to their logging industry.
In response to criticism for their lenient stance against white collar crime, the Obama justice department has made countless statements declaring that this double standard is unacceptable.
The immediate concern as voiced by Warren is that Republicans want to further weaken enforcement. She states that they are doing this through a bipartisan bill that reduces mandatory sentences for low-level drug offenders. Tucked inside of that bill is an amendment that will make it harder for prosecutors to enforce hundreds of different laws on white collar crime. Warren says that “this amendment would severely weaken the already anemic enforcement of federal white-collar crime laws.”
This general failure to enforce laws against the mighty and powerful makes it clear that most of those running this country, whether they be Democrat or Republican, do not see all Americans as equals in the eyes of the law. Remember that next time that you go into a voting booth.
Haddon Libby is Managing Director of Winslow Drake, an investment advisory firm and can be contacted at 213.596.8399 or hlibby@winslowdrake.com.
