According to Breuer, the reason for lack of criminal prosecutions at the top of the mortgage industry was inability to prove intent to defraud:
But in those cases where we can’t bring a criminal case — and federal criminal cases are hard to bring — I have to prove that you had the specific intent to defraud. I have to prove that the counterparty, the other side of the transaction, relied on your misrepresentation. If we cannot establish that, then we can’t bring a criminal case.
...“But when we cannot prove beyond a reasonable doubt that there was criminal intent, then we have a constitutional duty not to bring those cases,” Breuer said.
He also said:
In reality, in a criminal case, we have to prove beyond a reasonable doubt — not a preponderance, not 51 percent — beyond any reasonable doubt that a crime was committed. And I have to prove not only that you made a false statement but that you intended to commit a crime, and also that the other side of the transaction relied on what you were saying. And frankly, in many of the securitizations and the kinds of transactions we’re talking about, in reality you had very sophisticated counterparties on both sides.
Others have criticized Breuer for entering too many non-prosecution and deferred prosecution agreements of corporations. Brandon L. Garrett and Jon Ashley, of the University of Virginia School of Law, have compiled this database of corporate criminal plea agreements.
Deferred Prosecution agreements can be good things. The corporation admits it was at fault, there are usually big fines and monitors are placed with the corporation to avoid future misconduct. Also, corporations cannot be put in jail, and there is concern they can be forced out of business, which can cost a lot of innocent workers their jobs. Here is a series of posts at White Collar Crime Blog on deferred prosecutions of corporations.
On the other hand, in a recent law review article, Gabriel Marcus argues that from 2001 to 2010, no publicly traded corporation has failed after being convicted. He argues for more corporate criminal prosecutions.
The Department of Justice (“DOJ”) has implicitly accepted this view by declining to prosecute many large companies in favor of using criminal settlements called deferred prosecution agreements, or “DPAs.” Yet, there is no evidence to support the existence of the “Andersen Effect” and the much-hyped corporate death penalty. Indeed, no one has ever empirically studied what happens to companies after conviction. In this Article, I do just that.
Using the database of organizational convictions made publicly available by Professor Brandon Garrett, I find that no publicly traded company failed because of a conviction in the years 2001–2010. Moreover, many convictions included plea agreements imposing compliance programs that advocates have pointed to as a key justification for using DPAs.
Because corporate convictions do not have the terrible consequences they were assumed to have, and because they can be used to obtain compliance programs just as DPAs can, the DOJ should prosecute more lawbreaking companies and reserve DPAs for extraordinary circumstances. In the absence of some other justification for using DPAs, the DOJ should exploit the stronger deterrent value of corporate prosecution to its full capacity.
As a defense attorney, I don't think much will change whether Lanny Breuer or someone else occupies the position of Chief of the Criminal Divison. Anyone who is appointed to this postion will be a long-standing current or former prosecutor, and in my experience, they pretty much all share the same mindset.
