Corporate Crime and Punishment

The 2008 financial crisis didn’t lead to senior executive prosecutions.

In the past, white-collar crime was straightforward. If a senior executive engaged in misconduct on behalf of a company, the employee and the company were guilty, and therefore liable. But in recent years, corporations typically evade responsibility for crimes their employees commit by entering into “deferred prosecution agreements” (DPAs). In such agreements, the company pays a fine, and cooperates with prosecutors in ways that might lead to employee prosecutions.

With DPAs, executives rarely face prosecution. No senior Wall Street executive faced prosecution, much less prison, after the 2008 financial implosion. The only people the courts went after were lower-level employees. Yet many people, including prosecutors, wanted to prosecute Wall Street executives. Prosecutions did occur in previous financial calamities, such as the 1980s savings bank collapse and the Enron scandal in 2001 and 2002.

Prosecutors face enormous obstacles when pursuing large corporations.

When large corporations engage in misconduct that affects people’s lives, victims...