Working at the usual speed of government, the Justice Department has finally revised its rules on when to play extra tough with corporate criminals, reports the New York Times. You’ll remember that in the dim, distant past the government caught a lot of flak for actually indicting Arthur Andersen. It was one of the Big 5 accounting firms that suddenly became the Final Four when most large corporate clients that wanted to preserve their reputations decided they would prefer to be audited by a firm that was not under indictment.
Well, the rest is history. The firm collapsed and eventually (like quite a few years later) the Supremes decided that the judge had applied the wrong standard in explaining to the jury whether or not the firm had to be conscious of its guilt in telling the Enron folks to put the shredders into high gear.
The case actually shows the dilemma of trying to prosecute corporate entities. If companies are indicted because of what a few senior managers do, particularly if it’s one local branch of the operation, the whole entity can be destroyed. On the other hand, if senior managers were complicit or actively involved, as they were in the Houston office with their client Enron, then it seems way too easy for the corporation to throw a couple of executives to the prosecutorial wolves and get off scot free. It ought to be a salutary lesson in corporate ethics. Unfortunately, the memory is already failing.
Anyway, the government will now require a much higher official to sign off on its toughest tactics and will not go extra hard on companies that are paying the legal fees of senior executives who get in trouble doing the company’s business. That’s the pressure that K{MG faced when a dozen or more of its top brass were indicted for selling abusive tax shelters. More significantly, companies will not be faced with the implied threat that they will be indicted if they do not waive confidentiality and play along.
Despite this return to constitutional principles in the Justice Department, Jeffrey Skilling, reports the Associated Press, will still be fitted out Wednesday for an orange jump suit or whatever the standard issue is at the federal prison in Waseca, Minn. Sometimes justice prevails.
