Feds Switch From Prison Terms To Deterrence In White-Collar Cases


In extracting multibillion-dollar fines from Citigroup, Inc., and other big banks, federal prosecutors say they are trying to deter future corporate wrongdoing by making shareholders angry enough to demand changes. The Wall Street Journal says it is a significant shift in tone for the Justice Department and FBI, which have argued for years that sending people to prison is the best way to prevent white-collar crime. FBI Director James Comey and Attorney General Eric Holder said future corporate misdeeds can be avoided by imposing large or record-breaking penalties on companies.

Yesterday, Associate Attorney General Tony West said one factor the Justice Department considers in imposing stiff penalties is whether the fine “could be regarded by shareholders and management as merely the cost of doing business.” Citigroup agreed this week to pay $7 billion to settle its mortgage-related probe. Bank of America Corp. is offering $13 billion in cash and consumer relief to resolve its mortgage investigation, with the U.S. pushing for billions more. “I would think that there is a deterrent impact from the very substantial and historic settlements that we have worked out,” Holder said Monday in announcing the Citigroup deal. The focus on investors rather than prison is a big switch for Comey, who defined deterrence as putting people in handcuffs as the federal prosecutor in Manhattan more than a decade ago.

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