A new book makes a compelling case for how money is warping government and distorting democracy to the detriment of us all.
In 2020, the coronavirus pandemic confirmed a cruel form of American exceptionalism—the country’s exceptionally poor performance in handling the virus as measured in deaths and infections. Neither flag waving nor flyovers can mask other American failures, including climate change indifference, tolerance for gun violence, inadequate health care, gross income inequality, systemic racism and other ailments. We’ve got some serious issues to address.
Jennifer Taub points to another elephant in the room: white collar crime. In her new book, Big Dirty Money: The Shocking Injustice and Unseen Cost of White Collar Crime (Viking), Taub bluntly proclaims: “[T]he United States has a serious corruption problem, and most of us know it.” The examples she recounts will be familiar to regular news consumers and span most sectors, including the entertainment world, Wall Street, politics and business. “Cheating the public—and getting away with it— is the new normal,” she writes.
No, not all wealthy and powerful people are corrupt. Rather, as Taub, explains:
The extremely wealthy and well connected have incentives and opportunities for crime and corruption.… Extreme wealth is criminogenic and … the upper classes provide one another with a kind of mutually assured immunity … Prosecutors also have insufficient incentives to pursue complex and time-consuming cases against respectable high-status individuals and business entities. And the tools they have to detect and punish offenders have been dulled by the courts … [T]he urgency to prioritize white collar crime is low when it’s hard for the public to see the victims.
Immunity Breed Impunity
The wealthy and powerful rarely go to jail, and, when they do, it’s for relatively brief stays at “Club Fed.” The post-2008 economic crisis’s shoulder-shrug of “too big to fail” subsequently morphed into “too big to jail.” It’s not just that “[c]ivil settlements are easier” to obtain than prison sentences. From resource allocation to recognition for individual federal attorneys, large media-friendly monetary recoveries offer greater return on investment for the Justice Department, even if large corporations and wealthy elites are largely unaffected by the eye-popping sums. (Well Fargo CEO John Stumpf resigned in “shame,” comforted by a $134 million exit payment. The impressive $1.9B sum recovered from London-based HSBC for laundering drug cartel money “was equal to around one month’s profits.”)
More broadly, Taub painstakingly presents data to demonstrate that the self-serving and irresponsible actions of “trusted business and government leaders” inflict far more damage and harm than “street crime” or “property” crimes such as burglary, larceny, and theft. While the financial crisis of 2008 cost millions of Americans their homes and jobs, “behemoth banks received trillions in government bailouts and backstops, and bankers themselves went on to earn billions of dollars in personal bonuses.” The rich and the powerful become richer and more powerful, while the public loses trust in our institutions. The accumulation of wealth and power is divorced from the means and the cost of that wealth generation, such as public ills ranging from degraded air and water quality, food poisoning, inflated consumer prices, reduced pension funds, opioid addition, poverty, social stratification and even suicide.
In her lengthy preface (a fine piece of long-form journalism), Taub paints the current situation in stark relief:
The big-money crowd can … use plundered wealth to help ensure that those elected to positions of power … will protect them and further their interests. At the top of the list is cutting taxes, promoting industries they invest in or control, and keeping them (and their dear friends and offspring) out of trouble, out of prison, and in the money. This furthers the wealth divide in America and undermines notions of fairness and meritocracy, paving the way for kleptocracy—government by thieves.
Public Corruption: Eroding Public Trust
Amidst the tsunami of reprehensible behavior, Taub’s description of Republican Senators Richard Burr’s and Kelly Loeffler’s exploitation of public office for private gain is uniquely maddening. On January 24, 2020, Anthony Fauci privately briefed Senators before the World Health Organization declared a “global health emergency” and weeks before the name COVID-19 was bestowed upon the nascent pandemic. On February 7, Burr, of North Carolina, published a reassuring op-ed about public preparedness. A week later, he dumped a jaw-dropping amount of stock in, among other things, the hotel and extended-stay market. Meanwhile, Loeffler, of Georgia, and her spouse, the chairman of the New York Stock Exchange, unloaded millions of dollars in stock between the briefing and mid-February, while buying stock in companies that sell telecommuting software and personal protective equipment.
Taub, a law professor, carefully details why it is so difficult to punish wealthy, powerful officials. She poignantly contrasts this privilege with the treatment of Eric Garner, whom police killed with a chokehold while arresting him for the nominal tax avoidance associated with selling loose cigarettes to pedestrians.
Follow the Money
Having co-founded the April 15, 2017, Tax March, part of a movement to reform the tax code, Taub offers a compelling perspective on tax policy and enforcement. Wealthy-friendly loopholes must be closed, coupled with an effort to reduce rampant tax evasion, she writes:
The IRS should audit the rich, because that’s where the money is. The Justice Department should investigate and prosecute wealthy tax evaders, because that’s where the crime is …
Unbelievably, audits of the top earners, including those who bring in more than $5 million per year—the most cost-effective to audit—have fallen by around 80 percent. Pressure is off the wealthy.
Sadly, Taub’s book went to press before the extraordinary New York Times coverage of Donald Trump's sustained, systemic record of tax avoidance.
Taub also advocates for more progressive taxation, highlighting the 2017 tax cuts. The CBO estimates that what Taub dubs “the Trump Tax Scam” will increase the deficit by $1.9 trillion. “Promise tax breaks and prosperity for all. Instead, deliver trillions of dollars in cuts for billionaires and big business … [Don’t] hold [y]our breath waiting for that mythical trickle-down effect,” Taub writes.
Sadly, we’ve hamstrung ourselves with obtuse definitions of corruption, white collar crime, fraud, and victimless crimes. This, in turn, obfuscates their cumulative impact.
The unfortunate shift … to an offense-based definition of white collar crime has real-world implications ... [B]y ignoring an offender’s social or corporate status ... we are catching a lot of small fish … while letting giant individual and corporate predators swim free. This approach can pump up the enforcement statistics without actually making a significant dent on preventing, punishing, and redressing the most damaging criminal activity by the most capable and recidivist offenders.
Meanwhile, our country has become “a money laundering mecca. Our legal system, corporate law firms, and accountants are eager to turn blood money into gold…, real estate[, o]r shiny cars and yachts.” Late in 2019, GAO began to focus on one aspect of this: “opaque ownership structures that may conceal who owns, controls, or benefits from the company.”
A Call To Action
Taub prescribes empowering prosecutors, more focus on victims, better protections and support for whistle-blowers and investigative journalists, and investing in better data collection and transparency so we can better understand the true costs of white collar crime. That’s a tall order. The wealthy invest heavily to redirect the Justice Department’s focus away from “elite crime.” All of which makes the perverse effects of the U.S. Supreme Court’s decision in Citizens United and its progeny, which opened the floodgates of big money into political campaigns all the more disturbing.
The timing of Taub’s book is no mistake. She wants you to think about the distorting power of big dirty money as you contemplate your vote.
If we continue to serve as a popular haven for global kleptocrats, maintain weak bribery prohibitions, allow big dirty money to flood our elections, secure implicit immunity for the upper class, allow corporate executives to commit crimes and walk away with no or very, very light sentences, we will continue to be the petri dish for another future corrupt, organized crime tied, friend to all dictators, lying, cheating, megalomaniac American president.
A generation ago, following the Watergate scandal, Congress passed new laws aimed at addressing government corruption and the influence of money in politics. If 2021 offers a similar opportunity, Taub’s work may help begin to restore public trust.
Steven L. Schooner is the Nash & Cibinic Professor of Government Procurement Law at the George Washington University (GW) Law School.