Thursday, January 16, 2014
Chasing MorganChase
Corporations have neither bodies to be punished, nor souls to be condemned; they therefore do as they like.
—Edward Thurlow, 1st Baron Thurlow, Lord Chancellor of Great Britain 1778 et seq
As a result of JPMorgan Chase’s reappearance in the news (thanks to its criminal activities,) a number of readers have written asking me to explain how deferred prosecutions work and what happens to a corporation that fails to follow the terms of its deferred prosecution.
Deferred prosecutions for individuals are, not surprisingly, different from those for corporations. In Colorado and many other states and some federal jurisdictions, deferred prosecutions of first time individual offenders who have engaged in certain types of criminal conduct are permitted. Defendants like deferred prosecutions. If a defendant successfully completes its terms the defendant will spend no time in prison and have no criminal record. Prosecutors like deferred prosecutions. Not only is a trial avoided and the burden on the criminal justice system reduced, but the prosecutor has given nothing up. If the defendant does not observe the terms of the deferred prosecution the prosecutor can proceed to trial. If the defendant is convicted the defendant will have a criminal record and may end up spending time in prison.
In the corporate world, of course, deferred prosecutions are somewhat harder to understand but increasingly used. In a short article in the New York Law Journal a few months back, two New York lawyers discuss deferred prosecutions in the corporate world and the reasons for their increasing popularity by the justice department and criminal corporate defendants. They are popular with defendants because, among other things, if the corporation can avoid a criminal conviction it makes stockholders happy and avoids the risks to the corporate welfare of the prospective defendant that would be posed by a criminal trial and a possible conviction. It makes the government happy because it is often able to impose more draconian provisions on how the corporation operates internally than the government might be able to impose following a conviction.
All these questions arise because observant readers have noticed that JPMorgan Chase Bank has entered into a 68 page Deferred Prosecution Agreement with the United States Government. It begins with a ten-page letter from the Department of Justice addressed to the bank’s lawyers outlining the terms of the agreement. It describes with specificity JPMorgan Chase’s criminal activities that gave rise to the proceedings. The bank agrees that a criminal information can be filed with the court by the government and recites that the bank agrees that the extensive enumeration of criminal activities by the bank that are described in a 19 page “Statement of Facts” are “true and accurate.” (One episode described in the Statement was that three months after Bernie Madoff was arrested, the bank’s compliance department sent a letter to the bank’s relationship manager for Mr. Madoff, asking him to certify that the client relationship the bank had with Mr. Madoff complied with all “legal and regulatory-based policies.” The bank’s compliance department had apparently not noticed that Mr. Madoff was in jail awaiting trial.}
The Deferred Prosecution Agreement further provides that the bank will pay $1.7 billion to the United States within three days after the agreement is signed and will not try to get any tax benefit from that payment. In the part of the settlement document that pertains to the bank’s agreement with the Comptroller of the Currency, the bank acknowledges 14 different ways in which it failed to do that which it was required to do and agrees to pay the Comptroller $350 million dollars.
What readers wonder is whether there is any kind of punishment other than an additional fine to which the bank would be subject were it to fail to honor the terms of the deferred prosecution go to trial and be convicted. The answer is probably not. That is because some years ago Pope Innocent IV outlawed a punishment that had theretofore been imposed on corporations that misbehaved.
In a footnote to an article appearing in the Michigan Law Review in 1980, John Coffee, Jr. observes that in days of yore, ecclesiastical courts would excommunicate corporations that had been found to engage in corporate misbehavior. Were that a possible punishment today one could almost be assured that the bank would honor its obligations under the Deferred Prosecution Agreement lest it find itself excommunicated. Lamentably, as Mr. Coffee observes, in the 13th Century Pope Innocent IV “forbade the practice of excommunicating corporations on the unassailable logic that, since the corporation had no soul it could not lose one.” As a result, JPMorgan Chase essentially gets off free even if it decides to ignore the deferred prosecution, goes to trial, is convicted and pays another huge fine. Most of my readers would, however agree, that based on the conduct of JPMorgan Chase as revealed over the past years, one thing is absolutely clear. Pope Innocent was right. Neither JPMorgan Chase nor its corporate officers has a soul to lose. Just ask those who, having dealt with it, have suffered financial hardship thanks to its criminal, fraudulent. and socially irresponsible activities.
Thursday, January 9, 2014
Legal, Transparent Detention
Oh, they’re taking him to prison for the color of his hair.
— Alfred Housman, Oh who is that young sinner
It’s 3 steps forward and 15 steps backwards at Guantánamo.
At the end of December it was reported that the last of three Uighurs being held at Guantánamo had been sent to Slovakia. They had been wrongfully detained at Guantánamo for 12 years. In 2001 they (and 22 other Uighurs who have been released) were captured by Pakistanis and turned over to the United States in exchange for bounty payments. As early as 2004 they had been cleared for release but there was no place to release them to. On October 7, 2008 a federal district court ordered them released into the United States. On February 18, 2009 a federal appeals court said that the courts lacked the authority to order the men released into the United States saying only the President had the authority to order them released into the United States. The president did not order them released, in part because the folks in Congress did not want them coming into the United States. They didn’t want them coming into the United States even though it was the United States that paid good money to get them out of Pakistan and even though it meant keeping them imprisoned for having done nothing more than being in the wrong place at the wrong time.
The United States is terribly sensitive to human rights when it pertains to how people are treated in foreign countries, as distinguished from how they are treated at Guantánamo. It did not want to send the Uighurs to China where they were from since it was feared they would be tortured upon their return. Of course the United States did not completely ignore the Uighurs. It tried to get other countries to accept the Uighurs but other countries wondered why they should do what the country that was wrongfully detaining them was unwilling to do and for many years no country could be found that would accept them. Since they were not United States citizens and not physically present in the United States, they had no rights. Given that history it was good news to learn on New Year’s Eve that the remaining three Uighurs had been transferred to Slovakia after having been wrongfully held for 13 years. Those were the three steps forward. Here are the 15 steps backwards.
As sorry as everyone is that there are people in Guantánamo who should not be there, it is understandable that those running the place get really tired of the bad press they receive when people’s attention focuses on the fact that people who are detained there who shouldn’t be detained are protesting their detention. That is why in early December it was announced that Marine Gen. John F. Kelly, commander of the U.S. Southern Command had ordered prison officials to quit reporting the number of prisoners who were on hunger strikes. In the summer of 2013, 106 of the 166 prisoners at Guantánamo were what were called “hunger strikers.” By November 15 there were only 11 hunger strikers but as of December 2 the number had gone up to 15. Of the 15, some were reportedly so thin that they were given the torture treatment that is considered humane because it forces those seeking death by starvation to receive nourishment through the nose using nasogastric tubes to keep them from accomplishing their goals of dying. Many of the hunger strikers were detainees who had not been charged with any crimes and had been cleared for release.
Navy Cmdr. John Filostrat is the chief of the Guantánamo public relations team that comprises 20 people. (It requires a 20-person public relations team since the entire Guantánamo operation has a cast of 2,127 troops and contractors whose job it is to manage the remaining detainees. According to a 2013 Democratic budget analysis it costs $2.7 million per prisoner per year to keep the detainees in Guantánamo). Explaining the reason for the embargo on reporting the number of hunger strikers Cmdr. Filostrat said disclosing their number is a disruption of prison-camp operations and is part of a new PR strategy (presumably devised by the 20 person PR team.) Since a number of those in Guantánamo are there only because the U.S. can’t figure out what to do with them, letting the public know how many are refusing to eat focuses attention on the fact they don’t belong where they are and on our inability to solve the problem we created. A spokesman said although peaceful protests are permitted at the camp, the operators of the prison “will not further their protests by reporting the numbers to the public. The release of this information serves no operational purpose and detracts from the more important issues, which are the welfare of detainees and the safety and security of our troops.”
It is not obvious how not letting the outside world know about the ongoing protests guarantees the welfare of detainees being force-fed. It is not obvious that if the civilian population knew how many prisoners were on hunger strikes they might become outraged and try to take it out on the “safety and security of the troops.” It is obvious that those in charge of Guantánamo are embarrassed over the internment and treatment of detainees. They should be.
Thursday, January 2, 2014
Pauley vs. Leon
If you want a picture of the future, imagine a boot stamping on a human face-forever.
— George Orwell, 1984
It was easier to write the opinion by ignoring history. And it was only one part of his opinion. Nonetheless, he thought it was so important that it became the first thing he said right out of the box, as it were.
Judge William H. Pauley III, a District Court Judge for the Southern District of New York, dismissed a complaint filed by the American Civil Liberties Union and others. The A.C.L.U. complaint alleged that what is known as the N.S.A.’s bulk telephony metadata collection program is unconstitutional. Judge Pauley found it was not and, in so finding, wrote an opinion that in all important aspects arrived at the opposite conclusion from an opinion issued 11 days earlier by Judge Richard J. Leon in Washington. Judge Leon said the N.S.A. program was “almost Orwellian” and was probably unconstitutional.
Judge Pauley begins his opinion with the following sentences: “The September 11th terrorist attacks revealed, in the starkest terms, just how dangerous and interconnected the world is. While Americans depended on technology for the conveniences of modernity, al-Qaeda plotted in a seventh-century milieu to use that technology against us. It was a bold jujitsu. And it succeeded because conventional intelligence gathering could not detect diffuse filaments connecting al-Qaeda. “
Judge Pauley discussed how the N.S.A. was unable to capture the phone number of one of the highjackers living in San Diego who the N.S.A. mistakenly believed was living overseas. With telephony metadata, the judge observed, the agency would have known the highjacker was living in San Diego and could have given that information to the F.B.I. Presumably, although not stated by the judge, that might have enabled it to thwart the 9/11 attack. Judge Pauley then observed that the government “learned from its mistake” and, among other things, launched “a bulk telephony metadata collection program” which, he said: [O]nly works because it collects everything.”
In concluding as he did that “conventional intelligence gathering could not detect diffuse filaments connecting al-Qaeda” Judge Pauley chose to ignore post 9/11 reports that the intelligence community had plenty of information to “detect diffuse filaments” without metadata collections. What was lacking was the competency citizens had a right to expect from those charged with protecting the country.
According to a report in the Washington Post, the F.B.I. had been aware for many years before 9/11 that suspected terrorists were receiving training in American flight schools. It took no action to apprehend or specifically identify them. According to a report in the New York Times, Abdul Hakim Murad (who was convicted in 1996 of conspiring and attempting to blow up 12 commercial airliners while flying over the ocean) confessed to authorities following his arrest in the Philippines that he planned to use his flight training to “fly a plane into C.I.A headquarters in Langley, Va. or another federal building.” Rodolfo Mendoza, a Philippine intelligence investigator, told CNN that that information was shared with the F.B.I. in 1995. A 1999 analysis prepared for the National Intelligence Council said: “Suicide bomber(s)belonging to al Qaeda’s Martyrdom Battalion could crash-land an aircraft packed with high explosives . . . into the Pentagon, the headquarters of the Central Intelligence Agency (CIA), or the White House.
In July 2001 an F.B.I. agent in Phoenix told F.B.I. headquarters it should investigate Middle Eastern men enrolled in American flight schools and mentioned Osama bin Laden by name. In his memo he suggested men in flight school might be planning terrorist attacks. A CBS report describes in considerable detail other clues the government had that terrorist attacks might be contemplated, giving specifics as to the kinds of activities contemplated. In a press conference following 9/11 Ari Fleischer, the press secretary said: “It is widely known that we had information that bin Laden wanted to attack the United States or United States interests abroad.”
What is now known is that it was not the absence of a program ignoring Americans’ constitutional rights that permitted 9/11. Collecting “bulk telephony metadata” does nothing to correct the intelligence failures that permitted 9/11 to happen. Those intelligence failures were failures by those in charge to do what citizens had a right to expect them to do.
Judge Pauley concludes: “No doubt, the bulk telephony metadata collection program vacuums up information about virtually every telephone call to, from, or within the United States. That is by design, as it allows the N.S.A. to detect relationships so attenuated and ephemeral they would otherwise escape notice. As the September 11th attacks demonstrate, the cost of missing such a thread can be horrific. . . . ” The judge could have simply observed that the cost of missing the other threads that have been widely discussed is equally horrific. Correcting the reasons for those failures can be taken without creating what Judge Leon so aptly described as “Orwellian.” As Judge Leon said in his ruling: “I have little doubt that the author of our Constitution, James Madison, who cautioned us to beware ‘the abridgement of freedom of the people by gradual and silent encroachments by those in power’ would be aghast.” So are many citizens. Whether members of the U.S. Supreme Court are aghast, only time will tell.