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Criminal Justice Magazine
Fall 2002
Volume 17 Issue 3

Thompson Addresses Terrorism, Fraud Issues

Editor’s Note: What follows are the remarks that Deputy Attorney General Larry D. Thompson addressed to the members of the Criminal Justice Section during its ABA Annual Meeting luncheon, August 10, in Washington, D.C.

It is always a pleasure to participate in an event hosted by my colleagues in the ABA Criminal Justice Section. Having served as both a prosecutor and a criminal defense lawyer for many years, I appreciate the work that you do here and the many members of this organization whom I have worked with and hold in high regard.

I have the privilege of serving as deputy attorney general in interesting and challenging times. The criminal law issues that have landed on my desk and on the front pages of the newspapers—hopefully not simultaneously—are some of the most compelling and profound in modern memory. Our war against terrorism has a substantial legal front on which Justice Department lawyers daily struggle to help keep our country secure. Our efforts to root out corporate fraud are continuing successfully, as each week has brought fresh evidence that criminal CEOs and CFOs will face relentless prosecution and stiff punishment. Among the many matters that I handle at the Justice Department, I would like to focus briefly this afternoon on an aspect of our war on terror and our battle against corporate fraud.

Enemy combatants

Let me turn first to the issues raised by the internment of enemy combatants against the United States.

We are a rich nation that has enjoyed many luxuries, not the least of which has been the peace that has prevailed within our borders for four generations even as combat flared and smoldered abroad. In this current war, that has brought the fighting and dying home to our cities, we have had to think carefully through the treatment of captured enemy combatants—and to think especially hard about U.S. citizens who have taken up arms against their own country. We are fighting a tenacious and devious enemy who seeks to use our own freedoms against us.

Although we are a rich and strong country, we cannot deceive ourselves that we are omnipotent and that our safety will always be secure.

It is a universal principle of warfare that enemy combatants may be detained outside the criminal justice system for the duration of hostilities. In every war since the founding of the Republic, the United States has detained, without legal recourse, captured enemy combatants—sometimes including U.S. citizens fighting for the enemy.

Down the hall from my office in the Justice Department, there hangs a plaque to commemorate the trial of Nazi saboteurs captured in the United States during World War II. Few would doubt that our detention and execution of these enemy combatants—one of whom claimed American citizenship—served a necessary purpose in prosecuting the war.

We need to detain enemy combatants because really it would be suicidal not to—they could otherwise resume their belligerent acts—and in order to gather information about the enemy and his plans. Such detention is entirely distinct from criminal punishment. It is a military imperative and an integral part of the president’s constitutional duty to defend our country.

Corporate fraud

As we are all aware from the business scandals of the past months, attack from foreign terrorists is not the only threat to our nation’s well-being. Our financial markets have been shaken by a wave of criminal conduct at the highest levels in some American corporations. While this conduct is shocking, it is not without precedent and the administration is taking swift and certain action to punish the wrongdoers and restore confidence to investors.

One month ago, the president appointed me chairman of the Corporate Fraud Task Force, an interagency group that represents the vast law enforcement resources of the Justice Department, the SEC, the Treasury Department, and others. We are coordinating and overseeing these efforts to root out fraud in corporate boardrooms and executive suites, and to put the wrongdoers in prison.

But there is a significant category of wrongdoers who cannot be imprisoned, but are nonetheless crucial targets of our efforts. Although it should be done sparingly, we should never hesitate to prosecute corporations themselves when the circumstances warrant it.

In making the decision to seek an indictment against a corporation we consider (1) the company’s history of wrongdoing, (2) its response to regulatory actions, (3) its reaction to the criminal conduct committed by its employees, (4) the level within the corporation at which the crimes were committed or condoned, and (5) the pervasiveness of the criminal behavior within the organization.

I would like to speak to a few of the reasons why it is imperative to continue to prosecute business organizations where appropriate:

First, corporations are economic and cultural facts in our society. Employees act on the corporation’s behalf and take on the corporation’s identity. Large corporations develop their own methods and culture that guide employees’ thoughts and actions. That culture is a web of attitudes and practices that tends to replicate and perpetuate itself beyond the tenure of any individual manager. That culture may instill respect for the law or breed contempt and malfeasance. The organization itself must be held accountable for the culture and the conduct it promotes. Without this tool, the public would have no adequate deterrent to corporate criminal conduct because the culture that condoned, or at least acquiesced in, that behavior would be beyond the criminal law’s power to correct. Only by prosecuting the corporation itself can we ensure systemic reform.

Let me say also that lawyers’ roles, both outside and in-house counsel, can play a major role in this corporate culture both for good and for ill. The attorney’s role is to take an independent look with some healthy skepticism at the corporation’s conduct—where it is right to keep it right, and where it is not, to make it right. The pressure can be intense to go along, as accountants have sometimes gone along, with a company’s improper practices on the theory that they are only "cutting corners." But, lawyers have a responsibility to their clients, to the profession, and to the public to view such practices in the cold light of reality with an eye toward how they may look spread out on the front page in the unforgiving glare of unfavorable public attention.

Second, in practice, "collective punishment" horror stories are not accurate. The corporations that are prosecuted have generally transgressed before and proven themselves immune to civil persuasion. The Justice Department has long recognized the principle that an employee’s criminal wrongdoing does not mean that the employing organization should automatically be charged with a crime, especially where it would not serve a substantial federal interest to prosecute and adequate noncriminal alternatives exist. In reality, the corporations that are criminally prosecuted—that is, for which the enforcement authorities choose to subject their cases to the criminal standard of proof beyond a reasonable doubt—are ones in which the company has flagrantly crossed the line in one or more ways that demonstrate that the guilty mind of individual actors was borne out of the guilty culture of the organization itself.

Third, civil regulatory regimes may do a good job sorting out the normal range of problems in an industry, but it takes criminal sanctions to deal with extreme cases of serious or repeated wrongdoing. Traditional civil remedies have proven ineffective against those companies that are the primary targets of criminal prosecution. Civil sanctions simply do not have the power of criminal penalties to concentrate the corporate mind and change corporate culture. Large business organizations, particularly public companies that are already regulated in myriad ways, sometimes have the disappointing tendency to view civil sanctions as merely the "cost of doing business"—a cost that can be passed on to customers and shareholders without lingering effect in the management suite and the boardroom. Civil sanctions are particularly impotent in combating crimes against society-at-large, such as regulatory reporting violations or obstruction of justice, that may undermine the legal system, but do not create easily quantifiable harm.

Without corporate criminal liability, there would be no effective deterrent to a corporate culture that—expressly or tacitly—condones criminal conduct. Instead, corporations could merely appoint a "vice-president in charge of going to jail" who would serve as a whipping boy for the collective acts of the organization. It should go without saying that the criminal law seeks to punish individuals who commit crimes. But the criminal law wisely seeks to punish and reform the corporation that fosters or condones its employees’ criminal behavior.

When asked why he robbed banks, Willie Sutton famously responded, "Because that’s where the money is." So, too, is the money in the corporation. In order to change corporate cultures that foster criminal conduct, it is sometimes necessary to punish the corporation itself through substantial fines and the associated collateral consequences of criminal convictions that not only have a direct impact on the bottom line, but also spur reforms in the way the business makes money.

Conclusion

I want to thank you for the contributions that each of you has made and give my encouragement to the work of this organization. I thank you for all that you have done and look forward to working with you to secure justice for our country.

I believe we are on the right track, but we will not be complacent. As Will Rogers once said, "Even if you’re on the right track, you’ll get run over if you just sit there." And we will not just sit there. We will move aggressively to defeat terrorism wherever it exists and to protect the nation from crimes that strike at the heart of our economy. I can assure you of that.


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