Tax evasion, fraud, embezzlement and money laundering are still considered crimes in some countries but white-collar crime enforcement is declining fast in the U.S. under President Donald Trump, Project Syndicate reported.
White-collar prosecutions have been defunded. Here are five things you need to know.
The U.S. Justice Department is prosecuting fewer white-collar criminals than at any time in 30 years of record-keeping, according to a March 2020 report from Syracuse University. Federal prosecutions of white-collar criminals fell in January to the lowest level on record, down 25 percent from five years ago.
Law-enforcement action against corporations is down 76 percent from the Obama era, and down 26-to-30 percent for white-collar crime in general, John C. Coffee reported in his new book, “Corporate Crime and Punishment: The Crisis of Underenforcement“.
At the current pace, it won’t take long “for financial crime to be whitewashed completely,” wrote Katharina Pistor, a professor of comparative law at Columbia Law School, in a Project Syndicate column.
White-collar prosecutions hit a high after the financial crisis when massive frauds were exposed who had gone undetected by the federal government for years, such as Bernie Madoff, Marketwatch reported.
More than 1,000 white-collar criminals were prosecuted per month at the peak of 2010 and 2011 compared with 359 defendants charged in January 2020, according to Syracuse University’s TRAC Reports service, which monitors activity data at federal agencies.
“It’s a matter of concern that federal prosecutions of white-collar fraud have declined so precipitously,” said David Sklansky, a former assistant district attorney and co-director of the Stanford Criminal Justice Center. “When the U.S. Attorney’s offices file fewer of these cases, that slack is unlikely to be picked up by district attorneys or state prosecutors.”
Trump put out a statement in February promising to prosecute “bad actors seeking to harm and exploit honest and hardworking people through deception and other nefarious tactics.”
That was before the September New York Times bombshell investigation of 20 years of leaked tax returns that Trump fought to keep hidden from the public while he claimed to be a successful businessman.
The investigation showed that POTUS paid no federal income taxes for most of the past 20 years due, he said, to massive business losses. He paid $750 in 2016 and 2017 — less than most nurses, teachers and firefighters pay.
Trump granted clemency to high-profile white-collar criminal Michael Milken, the “junk bond king” and former Illinois Gov. Rod Blagojevich. Milken helped develop the market for high-yield bonds (junk bonds) and was convicted for violating U.S. securities laws. He is considered to have undermined the integrity of U.S. financial markets.
A 2008 investigation led to Blagojevich’s impeachment for corruption after he tried to solicit bribes to occupy the U.S. Senate seat vacated by then president-elect Barack Obama.
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Trump also pardoned Bernard Kerik, a close friend of Rudy Giuliani and former New York police commissioner who pleaded guilty in 2009 to tax fraud and to accepting gifts from a New Jersey firm accused of having mob connections.
“White-collar crimes, in Trump’s worldview, are not ‘real crimes,'” MarketWatch columnist Paul Brandus wrote.
White-collar crimes are expensive to police, according to law professor Pistor. Rather than fight crime that enriches offenders but is expensive to detect, law enforcement agencies in the U.S. and elsewhere have directed their limited resources against those trying to uncover these crimes and the state’s complicity in them, Pistor wrote for Project Syndicate.
Pistor discussed what happened when the U.S. Financial Crimes Enforcement Network (FinCEN) learned that the International Consortium of Investigative Journalists (ICIJ) was about to report on thousands of unanswered Suspicious Activity Reports (SARs) that had been filed by banks with the agency. FinCEN issued a statement warning that it’s a crime to publish unauthorized documents that might compromise national security.
The ICIJ went ahead and released the FinCEN Files anyway on Sept. 20, showing how big global banks including JPMorgan Chase, HSBC, Standard Chartered, and Deutsche Bank filed SAR after SAR and but continued to profit from the activities of suspicious clients who were moving around billions or trillions of dollars.
“Even if the latest scandals in banking reveal nothing new about the financial industry’s ethical standards, they have put a spotlight on a bigger emerging problem: the complicity of law enforcement agencies in white-collar crime,” Pistor wrote. “The watchdogs are not only shirking their duties; they have joined the other side.”
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