Blackwatergate

Mercenary scandal is only latest episode in unchecked corporate crime spree

“More than in most criminal law areas, prosecution of corporate criminals has a significant element of general deterrence,” the Department of Justice’s new strategic plan for 2007-2012 suggests.

Yet everyday we see more evidence that the Bush administration’s Department of Justice has no interest in deterring the ongoing epidemic of corporate crime.

During yesterday’s House Oversight and Government Reform Committee hearing on Blackwater, for instance, we heard about how a drunk Blackwater employee killed one of Iraqi Vice President Abdul-Mahdi’s bodyguards in the Green Zone on December 24.

Not only was the unnamed Blackwater employee almost immediately flown out of Iraq to avoid prosecution under the Iraqi legal system, but 10 months after the case was referred to the Department of Justice, he apparently has yet to face any charges. In fact, not one Blackwater or other private military contract employee has been charged for crimes committed in Iraq.

It’s obvious that problems like that are the inevitable result of the use of private contractors. And rather than try to regulate them (as Rep. Price has proposed in his bill — an approach that I previously endorsed but now do not because, as Jeremy Scahill has pointed out, the law would be virtually unenforceable), we need to push for a reversal of the privatization of war. More on that soon.

But what escapes this discussion so far, is how the Blackwater case fits the broader pattern of the Bush administration’s almost total failure to enforce the law against corporations.

Take the many False Claims Act cases filed by whistleblowers against the U.S. companies contracted in Iraq. As attorney Alan Grayson has testified numerous times before Congress:

“[T]he administration has not actively litigated one single case of fraud, or even breach of contract, against any contractor in Iraq. Iraqis have looked on in disbelief, and then in anger, as one botched Iraq reconstruction job after another has been paid in full, and they see that this Administration won’t even protect our own troops from cheating and overcharging. Many Americans feel the same anger.”

Indeed, David Rose reports in the November issue of Vanity Fair that whistleblowers have filed dozens upon dozens of lawsuits, trying to prod the Bush administration to fight contractor fraud. The response: The administration has obtained court order after court order barring the filers and their attorneys from even discussing the cases – i.e. to keep the American people from knowing how bad the cronyism and corruption really is.

Grayson, who has handled many of the cases says “the Defense Department itself has been vigorous in its efforts to protect its troops from war profiteering. … The problem has been that the Bush administration Justice Department won’t do anything to recover the stolen money, much less punish the wrongdoers.”

Grayson cited the role of Peter Keisler, Assistant Attorney General of the Civil Division, who not only stifled the cases, but was also responsible for reducing settlement payments with the tobacco industry from $130 billion to $10 billion.

The point is that when it comes to corporate crime, the Department of Justice has become a major sinkhole, where cases of alleged fraud and corruption are routinely referred, and where they often disappear or are “settled” for pennies on the dollar, ending any chance of bringing the war profiteers to justice. (After four years, the Bush administration recovered just $14 million through settlements of whistleblower cases — which will pay for about half an hour’s cost of the war).

The problem goes well beyond the war profiteers. Other corporate crime cases that have been tossed into the prosecutorial blackhole include:

The Department still has not cleared Halliburton of any charges resulting from a grand jury investigation into the company’s decision to conduct business in Iran in violation of Treasury Department regulations.

The Department has failed to complete an investigation into one of the biggest cases of corporate bribery in history — the Halliburton Nigeria case — which extends back to Dick Cheney’s tenure as CEO of the criminogenic company.

According to the Corporate Crime Reporter, the House Judiciary Committee has begun to ask why the Justice Department abruptly dropped a federal criminal probe into allegations of insurance fraud at Berkshire Hathaway’s General Reinsurance (Gen Re) unit.

Meanwhile, the Justice Department is rolling over as leading business groups push legislation that would weaken key enforcement tools against corporate crime. A campaign orchestrated by the Chamber of Commerce, the Business Roundtable, the Association of Corporate Counsel and their allies at the ABA and ACLU seeks to pass the so-called “Attorney-Client Privilege Protection Act,” which would limit the government’s power to pursue corporate fraud by prohibiting federal agencies (including the Department of Justice and the SEC) from demanding that companies cut off legal support for employees under investigation – a policy established by the Justice Department’s guidelines for corporate cases, a policy that was key to the prosecution of prominent corporate criminals such as WorldCom’s Bernie Ebbers. The Department of Justice has gone on record in opposition to this policy, but has done little to stop the legislation, which members of both parties are supporting.

It also appears that some U.S. attorneys who have tried to do their job and pursue corporate criminals have been subject to political retaliation. According to the Washington Post, for example, John Brownlee, the U.S. attorney responsible for handling the OxyContin case was called by Michael Elston, chief of staff to deputy attorney general McNulty (the person supposedly responsible for leading the Department’s efforts to crack down on corporate crime), the night before he secured a guilty plea from Purdue Pharma. Eight days later, Brownlee’s name appeared on a list compiled by Elston of prosecutors that officials suggested be fired.

It could be said that a few anecdotes don’t paint a complete picture, and I don’t doubt that there are still some sincere, adept people laboring long hours within the federal government to crack down on corporate crime. But their numbers are clearly dwinding and there has been little evidence that they have received much support, or that in the aggregate, the Department’s efforts are adequate to the scale of the problem.

Moreover, the few reports where the enforcement data has been crunched suggest that things are getting worse.

Experts at the Transactional Records Access Clearinghouse at Syracuse University track federal enforcement data, and say that white collar crime prosecutions credited to the FBI (the nation’s lead agency for cracking down on white collar crime) have dropped from 5,031 in FY 2001 to an estimated 2,693 for FY 2006.

And government employee watchdogs at Public Employees for Environmental Responsibility crunched the data and recently reported that EPA’s pursuit of criminal cases against polluters has dropped off sharply during the Bush administration, with the number of prosecutions, new investigations and total convictions all down by more than a third.

The same story has been told about occupational safety (OSHA), mine safety (MSHA), product safety (CPSC) and so forth. The cops are not only off the corporate crime beat. They’re at the bar getting wasted.

And those who follow the issue closely say weakened enforcement efforts have emboldened corporate criminals such as major polluters, who have begun to flout U.S. environmental laws, threatening progress in cleaning the air, protecting wildlife, eliminating hazardous materials, and countless other endeavors overseen by the EPA.

“You don’t get cleanup, and you don’t get deterrence,” says Eric Schaeffer, who resigned as director of the EPA’s Office of Civil Enforcement in 2002 to protest the administration’s approach to enforcement and now heads the Environmental Integrity Project, a watchdog group. “I don’t think this is a problem with agents in the field. They’re capable of doing the work. They lack the political support they used to be able to count on, especially in the White House.”

They say that “fish rot from the head” just like corporations and governments. The problem is that when the corruption becomes systemic as it has in recent years, simple decapitations are not enough.

A major overhaul is needed. Until we get that, Congress should be pressed to investigate the Department’s handling of the worst corporate crime cases, including Blackwater, and use his nomination process as an opportunity to grill Judge Michael MuKasey about what he will do to make corporate crime the priority it should be.

Charlie Cray is the director of the Center for Corporate Policy in Washington, DC. He helped establish Halliburton Watch, and is co-author of The People’s Business: Controlling Corporations and Restoring Democracy (Berrett-Koehler), and is a former associate editor of Multinational Monitor magazine.