Wrist-Slaps

It seems that the new preferred method for bringing corporate lawbreakers under control is fines and supervision, known officially as "deferred prosecution agreements" (D.P.A.s). On the face of it, DPAs look like a reasonable alternative to, for example, the destruction of Arthur Andersen, which threw 28,000 people out of work. However, as we should all well know by now, where the possibility of abuse exists, abuse will happen:

Deferred prosecution agreements, or D.P.A.’s, have become controversial because of a medical supply company’s agreement to pay up to $52 million to the consulting firm of John Ashcroft, the former attorney general, as an outside monitor to avoid criminal prosecution. That agreement has prompted Congressional inquiries and calls for stricter guidelines.

Absent abuse, supporters claim that DPAs are the best way to go:

Paul J. McNulty, a former deputy attorney general who put new guidelines in place in 2006 for corporate investigations at the Justice Department, said in an interview, “There’s a fundamental misapprehension with D.P.A.’s to think that they’re a break for the company.”

With the imposition of fines and an outside monitor, “the reality is that for the government, it gets pretty much everything without the difficulty of going forward with an indictment,” said Mr. McNulty, who is now in private practice. “I think companies are beginning to wonder whether they ought to fight more, because they are pretty burdensome.”

Frankly, I question how "burdensome" a fine might be to a company taking in profits in the millions.

But critics of the agreements question that assertion. Charles Intriago, a former federal prosecutor in Miami who specializes in money-laundering issues, said that huge penalties, like the $65 million fine for American Express Bank International in 2007, were “peanuts” compared with the damage posed by a criminal conviction. The company was accused of failing to enact internal controls to guard against laundering of drug money and other reporting problems.

Let's face it, to AmEx, $65 million is nothing -- probably less than their CEO's separation package.

The big question now is the role DPAs will play in the subprime meltdown.

Michael McDonald, a former Internal Revenue Service investigator in Miami who is a private consultant and has given seminars on deferred prosecutions, said such deals “should not be on the board” in the subprime mortgage investigations.

“In light of what this did to our economy, people shouldn’t just be able to write a check and walk away,” Mr. McDonald said. “People should be prosecuted for it and go to jail.”

Timothy Dickinson, a lawyer in Washington who was the outside monitor for Monsanto, agreed. Corporate lenders caught up in the mortgage scandals should not assume they will be given the chance for a deferred prosecution, Mr. Dickinson said, and the Justice Department should “insist on a guilty plea” rather than offering a deal.

Considering the administration's reaction to the mortgage disaster -- relief for the lenders, nothing for the homeowners -- I would guess that any cases put together before next January will have DPAs in a prominent place among the remedies, considering what passes for a Justice Department these days. After all, when the Bush political appointees leave, who do you think they're going to work for? After January, don't necessarily expect them to be off the table -- whoever wins in November will not be rocking the boat all that much, and Justice is going to take a while to clean out -- and Congress has proven itself biddable.

And one question occurs to me -- are DPAs available to the rest of us?