The 'Too Big to Jail' Effect and the Impact on the Justice Department's Corporate Charging Policy
53 Pages Posted: 31 May 2014
Date Written: May 27, 2014
In the wake of the 2008 financial crisis, the failure of the Department of Justice (“Justice Department” or “DOJ”) to bring criminal charges against any financial institutions prompted critics to question whether the DOJ maintained a policy that certain corporations are “too big to jail.” The criticism piqued after the DOJ announced that it had entered into a deferred prosecution agreement (“DPA”) with HSBC to resolve a massive money laundering and government sanctions investigation.
This wave of criticism is the backdrop for what the Authors call the “too big to jail” effect — two related developments, each of which has the potential to impact the future of DPAs in the corporate crime context. The first is a willingness on the part of at least one federal district court to inject a level of judicial intervention into the process of structuring DPAs. In approving the HSBC, Judge John Gleeson issued a groundbreaking opinion articulating, for the first time, a standard for district court review of the terms of a DPA. The second is an emerging willingness on the part of the DOJ to pursue criminal charges over DPAs in high-profile cases involving financial institutions. In a strong departure from past practice, the DOJ recently secured guilty pleas from the foreign subsidiaries of UBS and RBS, SAC Capital Advisors and three related entities, and the parent of Credit Suisse.
This Article examines the impact of the “too big to jail” effect on the Justice Department’s corporate charging practices. The Authors argue that DPAs should not be abandoned. Instead, Congress should amend the Speedy Trial Act to require substantive, judicial review of the terms of DPAs. To this end, the Authors propose a standard of review that is designed to maximize the benefits of DPAs, while minimizing the concerns that have historically accompanied their use.
Keywords: Too big to jail, corporate criminal liability, HSBC, S.A.C. Capital, Credit Suisse, DPA, Arthur Andersen, RBS, UBS, Judge John Gleeson, Judge Jed Rakoff
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