published Oct 14, 2018, 9:00:23 AM, by The Editors
(The Bloomberg View) —

This has been a banner season for punishing white-collar crime. Guilty pleas by Michael Cohen, President Donald Trump’s former longtime personal lawyer, and criminal convictions and additional guilty pleas in the case of former Trump campaign chairman Paul Manafort have drawn enormous attention.

Cohen admitted to bank fraud, tax evasion and campaign finance violations. Manafort, after having been convicted of tax fraud, bank fraud and failure to file a report documenting foreign bank and financial accounts, pleaded guilty to additional federal charges. It’s fair to assume, however, that neither man’s crimes would have come to light without the scrutiny drawn by their association with Trump. How many ordinary white-collar criminals expect to be found out?

The U.S. has never done an especially convincing job of policing and prosecuting white-collar crime. Complaints about the paucity of criminal prosecutions go back decades. The recent story of tax schemes engineered over many years by Trump’s family is an extreme instance of troubling and long-established pattern, showing little fear of legal consequences.

Since the financial crisis, the lack of criminal prosecutions has been widely deplored. Yet white-collar prosecutions are still on course to fall to their lowest level in at least 20 years, down more than 40 percent from 1998.

Why is this? After Sept. 11, 2001, the Federal Bureau of Investigation diverted personnel and resources to battling terrorism. The Internal Revenue Service is under constant assault, with congressional Republicans vilifying its personnel and gutting its budget. The Federal Election Commission has been all but incapacitated by those opposed to regulating politics. Civil investigations by the Securities and Exchange Commission rarely develop into big criminal cases. In 2013, then-Attorney General Eric Holder told Congress he was concerned that some financial firms had become so large that it makes it “difficult for us to prosecute them.” Lately, environmental crimes have been all but encouraged by the Trump administration.

All too often, even when companies have been punished, the people in charge have not. Deferred prosecution or non-prosecution agreements have reduced the risk. Duke University law professor Brandon Garrett’s data show that from 2001 to 2014, federal prosecutors entered into 306 deferred or non-prosecution agreements with companies. In only 104 of those companies were individuals charged with a crime.

In 2015, then-Deputy Attorney General Sally Yates explained why prosecutors struggle to hold individuals accountable. “In modern corporations, where responsibility is often diffuse, it can be extremely difficult to identify the single person or group of people who possessed the knowledge or criminal intent necessary to establish proof beyond a reasonable doubt,” she said. “This is particularly true of high-level executives, who are often insulated from the day-to-day activity in which the misconduct occurs.”

All of which is true, no doubt — but justice still demands that serious crimes earn serious punishments.

That would require more resources. According to Don Fort, the chief of IRS criminal enforcement, the agency has the same number of special agents — about 2,200 — as it did 50 years ago, despite huge increases in the number of tax filers and the complexity of financial crimes. The Department of Justice would have to attract and retain ambitious, competent prosecutors. Government agencies would need better ways, including financial incentives, to entice whistle-blowers.

Even then, it wouldn’t be easy. A skillful white-collar defense bar has arisen to defend executives and challenge prosecutors. Corporations have grown adept at shifting liability to shareholders. And the will to crack down has subsided. After the savings-and-loan scandal of the 1980s, more than 1,000 people were charged, and more than 100 company officers and directors served prison terms. A similar response is virtually inconceivable today.

This needs to change. White-collar crime is a menace, and the impunity of its ordinary perpetrators is intolerable.

Editorials are written by the Bloomberg View editorial board.
—Editors: Francis Wilkinson, Clive Crook.To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net .
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