The Front

A Policy of Conviction

Calling for "vigorous enforcement of the criminal laws against corporate wrongdoers," U.S. Deputy Attorney General Eric Holder issued a 15-page memo earlier this year advising federal prosecutors on when to bring criminal charges against corporations.

The June 16 memo, "Federal Prosecutions of Corporations," "provides guidance as to what factors should generally inform a prosecutor in making the decision whether to charge a corporation in a particular case."

"The idea is that these guidelines would then be utilized as an informative guide for federal prosecutors," says Assistant Attorney General for the Criminal Division James Robinson. "And we will assess through the course of the next year how they are working, whether they ought to be modified in any fashion."

The memo begins with a general principle that "corporations should not be treated leniently because of their artificial nature nor should they be subjected to harsher treatment."

"Vigorous enforcement of the criminal laws against corporate wrongdoers, where appropriate, results in great benefits for law enforcement and the public, particularly in the area of white collar crime," the memo states. "Indicting corporations for wrongdoing enables the government to address and be a force for positive change of corporate culture, alter corporate behavior and prevent, discover and punish white collar crime."

The bulk of the memo discusses in detail eight factors that a prosecutor should consider in deciding whether or not to prosecute a corporation:

• the nature and seriousness of the offense, including the risk of harm to the public;
• the pervasiveness of wrongdoing within the corporation, including the complicity in, or condonation of, the wrongdoing by corporate management;
• the corporation's history of similar conduct, including prior criminal, civil and regulatory enforcement actions against it;
• the corporation's timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents, including, if necessary, the waiver of the corporate attorney-client and work product privileges;
• the existence and adequacy of the corporation's compliance program;
• the corporation's remedial actions, including any efforts to implement an effective corporate compliance program or to improve an existing one, to replace responsible management, to discipline or terminate wrongdoers, to pay restitution and to cooperate with the relevant government agencies;
• collateral consequences, including disproportionate harm to shareholders and employees not proven personally culpable; and
• the adequacy of non-criminal remedies, such as civil or regulatory enforcement actions.

In the area of cooperation, the memo says, "In gauging the extent of the corporation's cooperation, the prosecutor may consider the corporation's willingness to identify the culprits within the corporation, including senior executives, to make witnesses available, to disclose the complete results of its internal investigation and to waive the attorney-client and work product privileges."

But it also argues that "a corporation should not be able to escape liability merely by offering up its directors, officers, employees or agents in lieu of its own prosecution."

"It is not intended," says Robinson, "that you can trade off either way: trade off individuals for a corporate pass, or trade off a corporation plea for individual passes. That is not considered an appropriate trade off to be made."

Instead, Holder's memo says, prosecutors should consider a corporation's willingness to cooperate as merely "one relevant factor, one that needs to be considered in conjunction with the other factors, particularly those relating to the corporation's past history and the role of management in the wrongdoing."

Perhaps the most controversial section of the memo deals with collateral consequences, which puts forth the general principle that "prosecutors may consider the collateral consequences of a corporate criminal conviction in determining whether to charge the corporation with a criminal offense."

"Virtually every conviction of a corporation, like virtually every conviction of an individual, will have an impact on innocent third parties, and the mere existence of such an effect is not sufficient to preclude prosecution of the corporation," the memo states.

"In evaluating the severity of collateral consequences, various factors already discussed, such as the pervasiveness of the criminal conduct and the adequacy of the corporation's compliance programs, should also be considered in determining the weight to be given to this factor."

"For instance, the balance may tip in favor of prosecuting corporations in situations where the scope of the misconduct in a case is widespread and sustained within a corporate division (or spread throughout pockets of the corporate organization). In such case, the possible unfairness of visiting punishment for the corporation's crimes upon shareholders may be of much less concern where those shareholders have substantially profited, even unknowingly, from widespread or pervasive criminal activity."

Robinson says that the collateral consequence factor will not improperly protect corporations.

"The more this is aberrational conduct by a rogue employee," he says, "which is being done despite the very best efforts at the highest levels of a corporation to prevent the corporation from engaging in criminal activity — that's the setting in which perhaps some of these collateral consequences might become more appropriate for consideration."

— Russell Mokhiber

Clinton's Lack of Convictions

Prosecution of environmental crimes in the United States has sharply fallen during the Clinton Administration, according to a compilation of court records released in November by Public Employees for Environmental Responsibility (PEER), a Boston Globe report and an Assistant United States Attorney who has suffered retaliation for pursuing pollution prosecutions under the Clinton Administration.

Comparing statistics from a three-year period in the Bush Administration (1989-91) with a similar period in the Clinton Administration (1996-98), the PEER review shows dramatic declines in criminal referrals, prosecutions and convictions:

• more than a one-quarter (27 percent) decrease in prosecutions;
• a greater than one-third (38 percent) drop in convictions; and
• a nearly 10 percent decline in the conviction rate.

Even though the Justice Department is pursuing fewer cases, it is also declining more cases (26 percent more) brought by referring agencies, such as the Environmental Protection Agency (EPA). While overall numbers for the second half of the Clinton Administration show some improvement, a key measure of enforcement -- the number of defendants sentenced to prison -- is down by one fourth in the last two years.

"The criminal environmental enforcement record of the previous incumbent was clearly better by virtually every measure of prosecutorial effort," comments PEER Executive Director Jeff Ruch, a former state prosecutor. "Maybe George Bush really was the Environmental President."

Bad for Business

In November, the Boston Globe reported another indicator that environmental criminal prosecution is on the wane. The paper reported on one of the country's largest environmental consulting companies, the International Technology Corporation of Pennsylvania, which said lax government enforcement of environmental laws is responsible for a downturn in its business.

"Demand for the company's services is heavily influenced by the level of enforcement of environmental laws and regulations," according to the company's 1997 annual report. "During the 1990s, spending by commercial clients has slowed primarily due to reduced implementation and enforcement activities by governmental regulatory authorities."

"In its 1998 annual report," the Globe reported, "the company again cited weakening enforcement by federal, state and local regulators. Environmental decisions by private industry in the United States, the company said, are now driven by economic concerns, and not regulatory and legal ones."

Harassing Prosecutors

An on-the-ground perspective on weak environmental criminal enforcement is provided by Gregory Sasse, a decade-and-a-half Assistant United States Attorney in Cleveland, who says he has suffered retaliation for pursuing pollution prosecutions under the Clinton Administration.

In a complaint filed in 1996, Sasse says that his superiors within the Department punished him for prosecuting polluters.

Justice Department spokesperson John Russell says that "when it comes to personnel matters, our official response is, ‘No comment.'"

Sasse says his supervisors liked his first case, "because it hit the press in a big way and they wanted it done well."

But he encountered a different response to his second prosecution, relating to discharged waste that blew out a water treatment plant -- with the result that raw sewage passed into a river that provided municipal drinking water.

"My boss was screaming at me," he says. "His point was, 'This is no big deal. Who cares?' He is extremely determined on the subject of not believing in the enforcement of pollution laws."

"It is quite odd: He's a Democrat and I'm a Reagan Republican," Sasse says, "but he is very much against criminally enforcing environmental laws."

Sasse says he had continuing run-ins with his supervisor over environmental prosecutions until, at the end of the Bush administration, he complained to the U.S. Attorney Joyce George. Then, he reports, his supervisor backed down.

But after Bill Clinton was elected president, Emily Sweeny was appointed U.S. Attorney for Cleveland.

"Once Sweeny got in," Sasse says, "my boss started a different form of harassment and retaliation against me. It was aimed at pretextual problems and trying to generate problems with my cases."

In 1995, Sasse began a long process of internal complaints, and eventually filed a complaint with the Department of Labor.

He received a favorable notice from the Labor Department in July 1998, ordering an end to retaliation for his environmental enforcement activity. A Justice Department appeal is pending in the case.

Sasse emphasizes that his situation is not unique and does not revolve around personality conflicts.

"The Clinton administration has gutted environmental enforcement," he says.

"Many people who prosecute these cases are being pressured into doing large numbers of other cases and not so many environmental cases. People who do environmental compliance at federal facilities complain about being brutally harassed by supervisors into falsely declaring that areas are not contaminated when in fact they are. And when they refuse, they are being retaliated against further."

— Russell Mokhiber

The Lawrence Summers Memorial Award

The December 1999 Lawrence Summers Memorial Award* goes to Sumner Redstone, chair of the media giant Viacom.

As they expand their global reach, media companies must be aware "of the politics and attitudes of the governments where they operate," Redstone said at a news conference of business leaders in China.

"Journalistic integrity must prevail in the final analysis. But that doesn't mean that journalistic integrity should be exercised in a way that is unnecessarily offensive to the countries in which you operate," he said.

Viacom, now in the midst of taking over CBS, has encountered resistance from Chinese regulators who object to programming on Viacom's MTV.

(Associated Press, "Viacom's Redstone: Journalism Shouldn't Offend Foreign Governments," September 28, 1999)

* In a 1991 internal memorandum, then-World Bank economist and current Deputy Secretary of Treasury Lawrence Summers argued for the transfer of waste and dirty industries from industrialized to developing countries. "Just between you and me, shouldn't the World Bank be encouraging more migration of the dirty industries to the LDCs (lesser developed countries)?" Summers wrote. "I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that. ... I've always thought that underpopulated countries in Africa are vastly under polluted; their air quality is vastly inefficiently low [sic] compared to Los Angeles or Mexico City." Summers later said the memo was meant to be ironic.