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“It’s The People Stupid”: The Way To Stop Corporate Lawbreaking Is To Prosecute The People Who Break The Law

Today General Motors announced that it has fired 15 employees and disciplined five others in the wake of an internal investigation into the company’s handling of defective ignition switches, which lead to at least 13 fatalities.

But who’s legally responsible when a big corporation breaks the law? The government thinks it’s the corporation itself.


“What GM did was break the law … They failed to meet their public safety obligations,” scolded Sec of Transportation Anthony Foxx a few weeks ago after imposing the largest possible penalty on the giant automaker.

Attorney General Eric Holder was even more adamant recently when he announced the guilty plea of giant bank Credit Suisse to criminal charges for aiding rich Americans avoid paying taxes. “This case shows that no financial institution, no matter its size or global reach, is above the law.”

Tough words. But they rest on a bizarre premise. GM didn’t break the law, and Credit Suisse never acted above it. Corporations don’t do things. People do.

For a decade GM had been receiving complaints about the ignition switch but chose to do nothing. Who was at fault? Look toward the top. David Friedman, acting head of the National Highway Traffic Safety Administration, says those aware of the problem had ranged from engineers “all the way up through executives.”

Credit Suisse employees followed a carefully-crafted plan, even sending private bankers to visit their American clients on tourist visas to avoid detection. According to the head of New York State’s Department of Financial Services, Credit Suisse’s crime was “decidedly not the result of the conduct of just a few bad apples.”

Yet in neither of these cases have any executives been charged with violating the law. No top guns are going to jail. No one is even being fired.

Instead, the government is imposing corporate fines. The logic is that since the corporation as whole benefited from these illegal acts, the corporation as a whole should pay.

But the logic is flawed. Such fines are often treated by corporations as costs of doing business. GM was fined $35 million. That’s peanuts to a hundred-billion-dollar corporation.

Credit Suisse was fined considerably more — $2.8 billion. But even this amount was shrugged off by financial markets. In fact, the bank’s shares rose the day the plea was announced – the only big financial institution to show gains that day. Its CEO even sounded upbeat: “Our discussions with clients have been very reassuring and we haven’t seen very many issues at all.” (Credit Suisse wasn’t even required to turn over its list of tax-avoiding clients.)

Fines have no deterrent value unless the amount of the penalty multiplied by the risk of being caught is greater than the profits earned by the illegal behavior. In reality, the penalty-risk calculus rarely comes close.

Even when it does, the people hurt aren’t the shareholders who profited years before when the crimes were committed. Most current shareholders weren’t even around then.

Calling a corporation a criminal is even more absurd. Credit Suisse pleaded guilty to criminal conduct. GM may also face a criminal indictment. But what does this mean? A corporation can’t be put behind bars.

To be sure, corporations can effectively be executed. In 2002, the giant accounting firm Arthur Andersen was found guilty of obstructing justice when certain partners destroyed records of the auditing work they did for Enron. As a result, Andersen’s clients abandoned it and the firm collapsed. (Andersen’s conviction was later overturned on appeal).

But here again, the wrong people are harmed. The vast majority of Andersen’s 28,000 employees had nothing to do with the wrongdoing yet they lost their jobs, while most of its senior partners slid easily into other accounting or consulting work.

The truth is, corporations aren’t people — despite what the Supreme Court says. Corporations don’t break laws; specific people do. In the cases of GM and Credit Suisse, the evidence points to executives at or near the top.

Conservatives are fond of talking about personal responsibility. But when it comes to white-collar crime, I haven’t heard them demand that individuals be prosecuted.

Yet the only way to deter giant corporations from harming the public is to go after people who cause the harm.


By: Robert Reich, The Robert Reich Blog, June 4, 2014

June 7, 2014 Posted by | Auto Industry, Corporations, Financial Industry | , , , , , | Leave a comment

“The Rest Of The Story”: What’s The Deal With The Pennsylvania Voter-ID Law?

The Keystone State goes to court this week over its voter-ID law. So what is that again? And where does the Department of Justice fit in?

We get it. Real-life court dramas are not as exciting as Judge Judy (and definitely not as exciting as Judge Joe Brown). So we totally don’t judge you for not knowing why the hell Pennsylvania’s voter-ID law is suddenly in court.

Of course, you thought you’d covered your bases when you read our early explanation of voter-ID laws. (If you didn’t, well, you only need to be a little embarrassed.) You know there’s basically no evidence of in-person voter fraud where one person impersonates another—the only type of fraud voter ID guards against. You know that the big fights were in Texas and South Carolina. So why is everyone so worked up about some court case in Harrisburg?

Well let us be quick and leave you plenty of time for Court TV.

So a bunch of states have voter-ID laws—what’s the big deal about Pennsylvania?

Well, not shockingly in a presidential election year, a lot of it boils down to politics. Pennsylvania is a swing state in a close election, so every vote each side can pull counts big. Most people believe voter-ID laws help Republicans win elections, because poor and nonwhite voters tend to vote Democratic and also tend to be the populations less likely to have the necessary ID. In case there was any doubt about those intentions, the state House majority leader told an audience that passing voter ID was “going to allow Governor Romney to win the state of Pennsylvania.” (He evidently didn’t get the whole memo about pretending we need this to combat nonexistent voter fraud.)

But as it turns out, the number of voters in Pennsylvania who might get disenfranchised is huge. The state law requires a government-issued photo id with an expiration date. The law was geared toward voters using an ID issued by the state Department of Transportation. During the debates earlier this year, the governor’s office said that 99 percent of state voters already had such an ID. But when the secretary of the commonwealth did a study in early July, it showed that as many as 758,000 people—or 9 percent of voters—didn’t have an ID from the Department of Transportation. Other studies estimate that there could be a million Pennsylvania voters without ID. That’s more than the margin of victory Barack Obama had in 2008.

While some people are worked up about what this means for the presidential election, there’s also this little-bitty other detail: that the right to vote is a cornerstone of our democracy. In Philadelphia (you know, that place where the Declaration of Independence was signed) as many as 18 percent of voters lack the necessary identification. Democrat or Republican, the whole denying-tons-of-people-their-right-to-vote thing has got some pretty upset as well.

Is someone trying to fight the law?

Damn straight someone is. Wednesday is the first day of court for a lawsuit brought by the American Civil Liberties Union (ACLU), the Advancement Project, and other voting-rights groups. This lawsuit argues that the voter-ID law violates the “free and equal” elections clause in the state constitution and adds a new and unnecessary burden to voters. The case has some pretty sympathetic plaintiffs, including a 93-year-old civil-rights activist who marched with Martin Luther King Jr. Several of the plaintiffs are elderly women of color who cannot get a photo ID because they cannot get copies of their birth certificates.

“What they’re saying in Pennsylvania is that the fundamental right to vote in Pennsylvania is broader than the right to vote under the Constitution,” says Jon Greenbaum, the chief counsel at the Lawyers Committee. That means that even though the Supreme Court said voter-ID laws didn’t violate the 14th Amendment, which guarantees the right to vote, the ACLU and others claim that it does violate Pennsylvania’s guaranteed right to vote.

Greenbaum says that if the court agrees that the right to vote in Pennsylvania is broader than it is under the 14th Amendment, then the state will likely have to prove that the voter-ID law is necessary to prevent voter fraud. That’s going to be tough, because the state has already admitted that there are no known cases of in-person voter fraud.

However, if the state decides that the right to vote in Pennsylvania is no different than it is under the U.S. Constitution, then the burden will be on the plaintiffs. They will have to show that this is an extreme burden for voters and one that will result in many people losing their right to vote. That would be a harder case for them to prove. Either way, the case is supposed to last about a week.

Why isn’t the Department of Justice bringing them to court? Didn’t they stop Texas’s and South Carolina’s laws?

Chill out, Nancy Grace—the Justice Department isn’t just hanging around watching American Idol. As it turns out, not all states get the same treatment when it comes to the old D of J. Texas and South Carolina are both listed under Section 5 of the Voting Rights Act. That section specifically targets states with a history of voter discrimination, and for the nine states listed, the law requires the feds to approve all changes to election laws. (It’s pithily known as “preclearance.”) So before Texas and South Carolina could implement their voter-ID laws, they had to show the Department of Justice that the laws would not have a discriminatory impact. Neither state succeeded, and the Justice Department prevented the laws from being implemented. (Now both states are suing the department. Fun times in court dramas!) However, Pennsylvania is not listed under Section 5, so it did not need to get preclearance to implement the law.

But the Justice Department just announced that it’s investigating whether Pennsylvania violated Section 2 of the Voting Rights Act, which prohibits laws that have a discriminatory intent or effect.

So what are the grounds of the investigation, and how is it different from the state lawsuit?

While the state constitution case is about the fundamental right to vote, the investigation dealing with Section 2 of the Voting Rights Act will likely be all about racial discrimination. The section forbids any election law that is intended to cause discrimination or that will, in practice, result in discrimination. Greenbaum says that will be the main focus of the Justice Department effort: whether this law will make it disproportionately harder for nonwhite voters to cast their ballot. While in Section 5 cases, it falls to the state to show that it’s not discriminating, in Section 2, the burden is on the department to prove that the state is discriminating.

Right now, the Justice Department is just collecting evidence—it’s asked for tons of documents in 16 different categories. (The paper cuts alone will probably lead to some bitter Pennsylvania state employees.)

If the department winds up taking Pennsylvania to court, in some ways it will be in uncharted territory. Section 2 of the Voting Rights Act is usually used for “voter dilution” cases like redistricting. For instance, a state violates Section 2 when it spreads out minority voters into different districts where their votes are a small percentage, rather than keeping them in a district together where they can elect their candidate of choice. But until the voter-ID fad hit, there weren’t many cases of states trying to deny voters their right. According to Greenbaum, while there’s a lot of precedent to show what you have to prove in a “voter dilution” case, there’s not much to go on when it comes to showing that voters are getting denied the right to vote.

Both the state lawsuit and any potential Justice Department case face a similar hurdle: Trying to prove the impact of a law before an election is a whole lot harder than waiting until the election is over. But the groups cannot wait until afterward to litigate, since that would mean waiting until people were denied the right to vote and the election outcome would already be decided. But litigating the cases now is much harder.

The reasons are obvious. Before an election, you must show the effect of the law before it’s put in place. After the election, you can show exactly what happened and who was denied the right to vote. Before the election, evidence is harder to collect. For instance, many people who currently lack ID may still get one before the election. That’s why it’s good that the ACLU case has focused on several plaintiffs who cannot get an ID no matter how hard they try, for lack of documentation.

A pre-election Section 2 case would likely be an even greater challenge. But Wendy Weiser, the director of the Democracy Program at the Brennan Center for Justice, says it’s certainly worth pursuing, particularly if the Justice Department can gather a lot of evidence from the state. “If Section 2 could never be used preemptively,” she says, “it would not be a sufficient protection of voting rights.”

So scratch it. This drama may give Judge Judy a run for her money.


By: Abby Rapoport, The American Prospect, July 25, 2012

July 26, 2012 Posted by | Election 2012 | , , , , , , , , | Leave a comment


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