Finally, some progress. Over two years ago I called for the federal government to bring criminal charges against the executives at auto parts manufacturer Takata. What had those executives done? They destroyed evidence that showed their products weren’t safe. As the law mandated, they did testing. When their products failed the tests, rather than spend money fixing the problem they lied—and at least 11 people died. Almost 200 more people were injured.
I made a similar call after Volkswagen got caught cheating on its emissions testing—monkeying with results to make it look like their vehicles weren’t trashing our environment nearly as badly as they actually were. I said then that corporate criminals cheat because they don’t fear jail time. I stand by that assessment.
The progress mentioned above? As of last week, corporate executives at both Takata and Volkswagen now face criminal charges in the U.S. The Takata execs live in Japan, and Tokyo has cooperated in the past with extradition requests like the one required in this case, but we’ll see how this one plays out. The Takata company itself also agreed to plead guilty to wire fraud and pay a $1 billion fine. Volkswagen is paying a total of $4.3 billion in fines, and six of its executives face charges. One of them, Oliver Schmidt, got nabbed in a Florida airport, so we presume he will stand trial. The other five live in Germany, which typically refuses extradition requests.
These actions are not coincidences. They are the result of a shift in policy initiated in late 2015 by Deputy Attorney General Sally Yates. For years the Obama Department of Justice faced criticism—not unreasonable—that it did not seek to hold corporate executives responsible for the crimes they committed. The criticism focused in particular on the failure to punish financial industry big shots for fraud and other crimes that crashed our economy in 2008 and plunged us into the worst economic crisis since the Depression. The bad actors among big corporations as institutions also got off relatively light as well. Whatever the reasoning behind this approach, a tougher one might also have helped Democrats at the ballot box in 2016. This represents another mistake that contributed to the election of popular vote loser Donald Trump.
Sen. Elizabeth Warren encapsulated this criticism beautifully back in 2013. She was talking specifically about large financial institutions, but her argument applies to corporate crime across the board:
If they can break the law and drag in billions in profits, and then turn around and settle, paying out of those profits, they don’t have much incentive to follow the law….There are District Attorneys and U.S Attorneys who are out there every day squeezing ordinary citizens, on sometimes very thin grounds and taking them to trial in order to make an example, as they put it. I’m really concerned that too big to fail has become to big for trial. That just seems wrong to me.
Making an example out of corporate executives is vitally important if we want to protect ourselves from harm caused by greed, or even by the fear that if one’s company doesn’t cheat it won’t be able to compete against rivals who do. In commenting on the announcement of charges against the VW and Takata execs, Yates stated: “There’s a shift in focus here that is across the board in the department, and it’s starting to bear fruit.”
Here’s the big money question: What does Trump think of the fruit being borne? Is it juicy? Does he want another bite? Trump’s pick to be U.S. attorney general, Jeffrey Beauregard Sessions III, appeared to speak favorably at his confirmation hearings about the new policy—known as the Yates Memo—at least according to Jody Godoy at Law 360. However, the National Law Journal’s C. Ryan Barber said that Sessions “doesn’t have a reputation as a white-collar enforcer.” We’ll know more soon enough—if he’s confirmed, that is. After the election, Yates characterized herself as “optimistic” that the Trump DoJ would continue her policy. On the other hand, what else is she going to say?
Cases like Takata should be a no-brainer in terms of prosecution for any administration. But would Trump and Sessions push as hard on environmental crimes like Volkswagen’s, ones that don’t leave a trail of corpses? On a related note, Trump’s proposals to gut the Consumer Financial Protection Bureau—which just this week showed again why the American consumer needs it so badly—would make it even harder to rein in corporate wrongdoing, separate from the question of criminal prosecutions.
Personally, I’m not as optimistic as Yates. It’s pretty certain, however, that Elizabeth Warren and other progressives in Congress will be out there holding Trump and Sessions accountable if they fall short. This is just one more area where we progressives need to make our voices heard.
Ian Reifowitz is the author of Obama’s America: A Transformative Vision of Our National Identity (Potomac Books).