Supporters lauded Attorney General Eric Holder’s legacy on civil rights when he announced his resignation at the end of September. But his work—or lack thereof—going after the country’s biggest banks complicit in the recent financial meltdown has left many scratching their heads.

Holder took a hard line in refusing to back the Defense of Marriage Act in court and has won praise for his engagement during the riots in Ferguson, Missouri, earlier this summer. But his lack of response to the biggest financial crisis since the Great Depression could smear his glowing reputation in the history books. Policymakers have largely pieced together how the financial industry’s reckless lending destabilized the housing market and sent the economy reeling, but prosecutors have been slow to act in response.


The biggest banks—JPMorgan Chase, Bank of America, and Citigroup—have all recently paid multibillion-dollar fines stemming from the mortgage fraud perpetrated in the lead-up to and fallout from the crisis, but no top executives have gone to jail. Moreover, those companies copped to civil charges, but have not faced criminal prosecution. This marks a sharp departure from past banking scandals, such as the savings and loan crisis, where more than 1,000 bankers were convicted by the Justice Department through the late 1980s and early 1990s.

What’s changed in the past three decades? One clue might be the contents of a memo written by Holder in 1999, during his stint as deputy U.S. attorney general. The document, “Bringing Criminal Charges Against Corporations,” urged prosecutors to take into account “collateral consequences” when pursuing cases against companies, lest they topple and take the economy down with them. Holder also raised the possibility of deferring prosecution against corporations in an effort to spur greater cooperation and reforms—a policy, unsurprisingly, later supported by the Bush administration.

The attorney general angered many last year when he reiterated those concerns at a congressional hearing, admitting “that the size of some of these institutions becomes so large that it does become difficult for us to prosecute” because of the potential nasty economic effects of a major company failure. He walked back the statement a few months later, asserting that no company is immune from Justice Department prosecution, but the political damage had already been done.

Brandon Garrett, a law professor at the University of Virginia, details the rise of such agreements over the past decade in his new book, Too Big to Jail: How Prosecutors Compromise with Corporations. Despite its name, the book is not focused on the financial crisis; but it perhaps reveals some of the rationale behind prosecutors’ anemic response against the banks, and the deep disconnect with populist anger over the fact that no executives have ended up behind bars.

The real turning point for the enshrined policy of corporate leniency came after the implosion of the accounting firm Arthur Andersen. Thousands of innocent workers lost their jobs for the sins of a few who helped Enron cook its books. In the aftermath of that mess, President George W. Bush created a new task force to study corporate fraud, out of which emerged the strategy of delaying prosecution on the promise of reform—a sort of carrot-based approach, replacing the stick. “By 2003, the overriding goal of corporate prosecutions was to try to rehabilitate a firm’s culture, not to punish,” Garrett writes.

Notably, the strategy was based on a 1930s Brooklyn program that offered some young offenders leniency on the theory that jail time did more harm than good and the criminal system should focus on the most serious offenders. “The new approach suggested that corporations were more like juveniles—not entirely innocent, but mainly in need of guidance,” Garrett adds.

Perhaps Garrett’s most important contribution with this book is his comprehensive data gathering. He collects information on the 255 deferred-prosecution and non-prosecution agreements the Justice Department entered into between 2001 and 2012, along with details on more than 2,000 corporate convictions, mostly guilty pleas, over the same period.

There’s some compelling evidence that the largest, most established companies are more likely to win leniency with a delayed or canceled prosecution: 58 percent of the companies awarded such deals are public firms listed on a U.S. stock exchange, while publicly traded firms make up just 6 percent of those against whom the Department of Justice obtained convictions.

The author weaves his data together with detailed and compelling narratives of some of the highest-profile corporate cases from the past decade, including the bribery scandal at the German conglomerate Siemens, tax fraud charges against the accounting firm KPMG, and the Massey Energy coal mine explosion.

Garrett was initially supportive of the deferral strategy for corporations, but says he has become “more troubled” after examining how the approach is put into practice. His most concerning findings do not arise from specific cases or the broader data collected, but from how much remains unknown about corporate prosecutions. The Justice Department provides scant information about how many corporate cases it investigates and then drops, how fines and other punishments are determined, and how effective structural reforms at the companies actually wind up being. It’s a problem in need of more sunlight, as the lingering questions around the financial crisis make clear.

Prosecutors have also fallen far short where they’ve tried to put their deferred-prosecution policies into practice. Garrett notes, for example, that independent monitors are appointed in just one-quarter of the deals he examines, and they are often in place for just a few years. And there are no standards for how individuals are selected for the lucrative investigator positions. This has raised red flags at times, such as when Chris Christie, then a New Jersey prosecutor, appointed his former boss John Ashcroft to oversee compliance at Zimmer Holdings, a medical-supply company, for an eighteen-month contract worth as much as $52 million. Nice work if you can get it.

And what about the men and women at the helm of these companies? “The mustache-twirling villain is rarely to be found,” Garrett laments. He highlights how infrequently individuals go to jail under the Justice Department agreements. Employees were prosecuted just one-third of the time—despite the fact that cooperation is often a key tenet of the deals. Such cooperation would ideally shed light on who exactly is behind the firm’s wrongdoing. Prosecutors have argued that they reserve the right to go after bank executives in the civil cases they’ve settled, but evidence that they do so remains scant.

Of course, establishing cases against executives has proved exceedingly difficult given the time and resources available to state and federal prosecutors—a big problem cited in going after crisis-era criminal behavior, too. “Prosecuting interchangeable middle managers may not change anything where corporate culture is to blame, and while prosecuting higher officers may change the culture and affect industry practices, doing so is difficult and can take years,” writes Garrett.

But for critics, the question remains not how many strikes Holder and prosecutors racked up in their pursuit of justice, but why they have failed to even step up to the plate. Some, maybe even most, of the activity leading up to the financial collapse was just ill calculated or stupid, but that doesn’t excuse the outright fraud that also took place. Garrett’s examination pokes big holes in the assumption that deferred or canceled prosecutions are even having the intended effect of reforming these companies, which suggests that firms are simply getting off the hook for their bad behavior.

While the book offers some broad policy suggestions—such as reducing reliance on the agreements and having judges become more involved in overseeing deferred prosecutions on their dockets—Garrett does not go on to explain how such reforms might be implemented. That’s arguably a political question more than a legal one, and there’s some evidence that public outrage is influencing the Justice Department.

Swiss bank Credit Suisse pled guilty to tax fraud charges and agreed to pay $2.6 billion. French bank BNP Paribas soon followed, pleading guilty to sanctions violations in an $8.8 billion deal. High-profile guilty pleas have come outside of the banking industry as well, including the $4.5 billion agreement with BP in late 2012, resolving charges over the Gulf oil spill.

“There is no such thing as ‘too big to jail,’ ” Holder declared during a weekly video message this past May ahead of several of the high-profile bank convictions. “To be clear, no individual or company, no matter how large or how profitable, is above the law.” That’s a very different message than the one he gave lawmakers more than a year ago, as well as more than a decade ago. Whether Holder’s successor is able to pick up the mantle in any meaningful way with respect to the crisis remains unclear, especially as the clock runs out on an Obama administration seemingly focused on other priorities.

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Bailey Miller

Bailey Miller is a pen name for a Washington writer.