white-collar-crime-accounability

Go Back to Normal After Trump? No Thanks

America produced a corrupt president. We can do better.

.. Elijah Cummings, the Oversight Committee chairman, pined for a return to a pre-Trump America. “We have got to get back to normal,” he said.

But Normal America produced Donald Trump, fueled his cult of personality and created the conditions for him to rise to the height of political power. If anything, Michael Cohen’s testimony was a devastating indictment of decisions that Normal America made over the past few decades that produced President Trump in 2016.

Most of the charges — proven or alleged — against those caught up in the Mueller investigation are not obviously related to treasonous collusion with Moscow. It’s proof, the president’s blinkered backers bray, that the whole inquiry is a waste of time.

Read another way, that set of facts shows how decades of declining prosecutions of white-collar crimes may have allowed Paul Manafort, a man guilty of tax evasion and bank fraud, to lead a presidential campaign. If the number of white-collar crimes prosecuted by the Justice Department had not fallen more than 40 percent in the past 20 years, perhaps Mr. Cohen, who committed tax fraud and bank fraud, might not have ascended to become deputy finance chairman of the Republican National Committee, a post he held until June 2018.

Then there’s the president himself, Exhibit A of what happens when a country spends decades treating crimes by the poor as felonies and crimes by the powerful as misdemeanors.

At the start of Mr. Trump’s career, he and his father were charged with discriminating against African-Americans in their apartment rentals. Father and son settled with the government and admitted no wrongdoing.

Later in life, Mr. Trump’s casino was charged with money laundering and got off with a fine. Just after Mr. Trump was elected, his cardboard castle of a university that bore his name settled a class-action lawsuit brought by from former students.

It took a shoe-leather investigation by The Washington Post to prompt authorities to assess that the Trump Foundation, founded in 1987, was being used as the family A.T.M. The New York State attorney general charged the foundation with “improper and extensive political activity, repeated and willful self-dealing transactions, and failure to follow basic fiduciary obligations or to implement even elementary corporate formalities required by law.” Imagine if the foundation had been scrutinized years before Mr. Trump ran for president.

Democrats, paging through the catalog of legal malfeasance connected to the president, worry that investigating too many of them will make the party vulnerable to claims of overreach. But exuberance in defense of justice is no vice, so as long as they don’t go full #Benghazi. After all, accountability has been in short supply of late.

It may well be a myth that no one was jailed after the 2008 financial crisis — 56 bankers and traders, including 13 C.E.O.s, were sent to prison. But none were prominent. And the boiling rage about the fact that mortgage owners got stuck with the bill for the sins of high finance was an animating factor for Trump voters. The Tea Party got its revenge on the system it saw as corrupt in 2016. Occupy Wall Street is now standing restlessly in the wings and calling for world revolution as it waits for its turn in 2020. Justice delayed, after all, is justice denied.

Democratic societies are the result of choices that voters make. Last year, more than 60 percent of federal criminal prosecutions came in immigration-related cases. That follows: The voters who put Mr. Trump in office wanted a crackdown on noncitizens making lives for themselves illegally in the United States. That’s happening. But it also means that the number of prosecutions for all other types of crimes — committed by citizens making their living illegally in the country — are way down.

When gobs of resources are directed at something like reducing violent crime, the amount of violent crime declines. When the Internal Revenue Service’s Criminal Investigation Division gets stuck with the same number of special agents it had 50 years ago, lots of tax cheating is going to go undetected and unpunished. If Congress decides not to properly fund the I.R.S., it wouldn’t be overreach for Democrats to look into the president’s tax returns. After all, Mr. Trump’s tax scheming over the years included outright fraud, according to a Times investigation.

Recent research suggests that the public is increasingly aware of the seriousness of white-collar crime and becoming more punitive toward those found guilty of it. Sentences for white-collar criminals are getting longer. But while Americans still feel that violent criminals warrant harsher sentences, they say they want equal or more resources devoted to white-collar crime control.

Harder still is deterring white-collar crime, wrongly perceived as victimless, in the first place. “Without the same psychological stop signs that signal that one is about to break the law, many white-collar criminals cannot identify in hindsight the moment they crossed the line,” wrote former federal prosecutor Nicolas Bourtin.

Mr. Cohen now says, after a decade of dutiful service including issuing an estimated 500 threats against those seen as somehow threatening to Mr. Trump, that it was Mr. Trump’s behavior in office that led to an epiphany about the weight of Mr. Cohen’s own guilt. But Mr. Cohen was no doubt hustled along to that realization when he was arrested and staring down the long corridor of a multiyear prison sentence.

Normal America gave white-collar criminals parking tickets, while sending SWAT teams after drug dealers because it viewed one type of criminal as a far greater threat to the republic. Now is not the time to return to what was normal. It’s a time to learn from past misjudgments.

Why Manafort and Cohen Thought They’d Get Away With It

The crimes of Paul Manafort and Michael Cohen are notable not just for how blatant they were but also for their lack of sophistication. The two men did little to hide their lying to banks and the Internal Revenue Service. One can almost sympathize with them: If it wasn’t for their decision to attach themselves to the most unlikely president in modern history, there’s every reason to think they might still be working their frauds today.

.. Are there legions of K Street big shots working for foreign despots and parking their riches in Cypriot bank accounts to avoid the I.R.S.?

Are many political campaigns walking felonies waiting to be exposed?

What about the world of luxury residential building in which Mr. Cohen plied his trade with the Trump Organization?

.. The answer is more disturbing than the questions: We don’t know. We don’t know because the cops aren’t on the beat. Resources have been stripped from white-collar enforcement.

.. The F.B.I. shifted agents to work on international terror in the wake of Sept. 11. White-collar cases made up about one-tenth of the Justice Department’s cases in recent years, compared with one-fifth in the early 1990s

The I.R.S.’s criminal enforcement capabilities have been decimated by years of budget cuts and attrition.

The Federal Election Commission is a toothless organization that is widely flouted.

.. How could they not? Any person in any bar in America can tell you who was held accountable for the biggest financial crisis since the Great Depression, which peaked 10 years ago next month: No one. No top officer from any major bank went to prison.

.. The Department of Justice — in Democratic as well as Republican administrations — has lost the will and ability to prosecute top executives across corporate America, at large industrial firms, tech giants, retailers, drugmakers and so on. Instead the Department of Justice reaches settlements with corporations, which pay in dollars instead of the liberty of their top officers and directors.

.. Robert Mueller, the special counsel, has fallen upon a rash of other crimes. In doing so, he has exposed how widespread and serious our white-collar-fraud problem really is, and how lax enforcement has been for years.

.. The Southern District of New York, to which Mr. Mueller referred the Cohen case, raided the offices of Mr. Cohen, President Trump’s former attorney, and fought for access to the materials, even as Mr. Cohen asserted attorney-client privilege. When federal prosecutors investigate large companies, out of custom and deference they rarely use such aggressive tactics. They place few wiretaps, conduct almost no undercover operations and do almost no raids. Instead government attorneys reach carefully negotiated agreements about which documents they can review, the product of many hours of discussion with high-powered law firms

.. The government has essentially privatized corporate law enforcement. The government effectively outsources the investigations to the companies themselves. The companies, typically trying to appear cooperative or to forestall government action, hire law firms to do internal investigations. Imagine if Mr. Mueller relied on Mr. Trump to investigate whether he colluded with the Russians or violated any other laws, and Mr. Trump hired Rudy Giuliani’s firm to do the inquiry.

.. Mr. Mueller isn’t looking to go soft to preserve his professional viability. I’m assuming that at age 74, he’s not going to go through the revolving door after this. That hasn’t been true for most top Justice Department officials in recent years. Many of them start out defending large corporations, and when they leave government they go back to the same work of defending large corporations.

America is swarming with Paul Manaforts

One possible lesson of the many brazen, conspicuous scandals related to President Trump and others in his orbit: The U.S. government has been massively underinvesting in enforcement and prosecution of white-collar crime.

.. There was the apparent treatment of the Trump Foundation as a personal checkbook, from which Trump used other people’s charitable donations to settle his for-profit businesses’ legal disputes and to purchase gigantic portraits of himself. The operation of Eric Trump’s personal foundation also has raised similar questions of self-dealing, according to Forbes.

.. Or there’s the fishy stock trades by Trump cronies, including Carl Icahn and even the current commerce secretary, Wilbur Ross. Ross shorted the stock of a Kremlin-linked company days after he learned journalists were reporting a potentially negative story about the firm.

Or former national security adviser Michael Flynn’s failure to register as a foreign agent working on behalf of Turkey.

There’s a clear reason so many Trump-related figures likely felt free to engage in dodgy behavior in broad daylight: They didn’t expect anyone to care. And absent the scrutiny that came with Trump’s political success, such activities probably would have gone ignored.

.. Federal prosecutions of white-collar crime — a category that includes tax, corporate, health-care or securities fraud, among other crimes — are on track this year to reach their lowest level on record.

.. But the downward trend in white-collar and official-corruption prosecutions predates the Trump presidency. The Barack Obama administration, you may recall, was often criticized for failing to hold corporations and executives accountable in the wake of the financial crisis.

Some argue that big corporations and the wealthy have become too politically influential. Jesse Eisinger, in his excellent book “The Chickenshit Club: Why the Justice Department Fails to Prosecute Executives ,” blames a culture of risk aversion in the ranks of the Justice Department. Eric H. Holder Jr., an attorney general under Obama, once suggested that corporate consolidation left some firms too big to jail.

But undoubtedly part of the issue is resources.

After 9/11, for instance, terrorism investigations became more of a priority, crowding out available dollars and personnel for white-collar investigations.

.. Astonishingly, this decline in enforcement is now being cited as evidence of innocence. Manafort’s lawyer, in his opening statement last week, shamelessly suggested that his client must not be guilty of tax fraud because he’d never been audited.

.. Joseph diGenova objected to Mueller’s criminal prosecution of Manafort in part because Manafort “has no criminal record.”

.. Manafort’s prosecution today is less a sign of Mueller’s overreach, and more a sign of the rest of our federal government’s decades of underperformance.