Jessica Hill/AP
Justice Says It Will Get Tough on Wall Street Fraud
Per a new policy, the Department of Justice will go after individual wrongdoers instead of the companies that employ them.
On Wednesday, the Justice Department issued a new policy regarding the prosecution of white collar criminals. Amid post-recession complaints from the public that the Wall Street executives responsible for the crash escaped criminal charges and jail time—and that in these seven years Wall Street hasn’t cleaned up its act—the new policy prioritizes the prosecution of executives involved in fraud. In other words: More corporate wrongdoing cases will hold individuals accountable.
This move is being called Loretta Lynch's first major policy announcement since she took office as U.S. Attorney General in April. The new policy was detailed in a memo sent to attorneys at the Justice Department and the FBI on Wednesday. Deputy Attorney General Sally Yates will be speaking more on the new policy during her speech at New York University’s School of Law today.
In the memo, Yates writes: “Fighting corporate fraud and other misconduct is a top priority of the Department of Justice. Our nation’s economy depends on effective enforcement of the civil and criminal laws that protect our financial system and, by extension, all our citizens.”
The memo states that firms are now required to turn over evidence of wrong-doing by their executives and employees for criminal investigations to be eligible for cooperation credit—which firms seek in order to avoid “serious consequences”, which sometimes mean lesser fines and penalties. Additionally, criminal and civil corporate investigations will focus on individuals from the beginning, in the hope that the resulting convictions will deter future wrongdoers, alter a corporate culture that won’t budge, and restore public confidence in the justice system.
But the trouble with policing financial fraud is that it isn’t always so easy to determine who was at fault. As the memo details, executives are usually insulated from misconduct as they’re not involved .
The numbers on Wall Street attitudes are certainly calling for change: In a financial-industry survey earlier this year, 23 percent reported personally observing or having firsthand knowledge of misdeeds. The number jumps to 34 percent for those earning more than $500,000. In the coming years, it will certainly be interesting to see whether corporations will “cough up individuals” to be singled out or whether this change in policy will shake up the corporate world by incentivizing a much-needed culture change.
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