<html><head><meta http-equiv="Content-Type" content="text/html charset=windows-1252"></head><body style="word-wrap: break-word; -webkit-nbsp-mode: space; -webkit-line-break: after-white-space; "><div class="header-image" style="margin: 0px; padding: 0px; font-family: georgia; font-size: 12px; text-align: left; "><a href="http://www.rollingstone.com/politics/blogs/taibblog" style="margin: 0px; padding: 0px; color: rgb(0, 51, 102); text-decoration: none; "><img alt="" height="70" width="608" id="6d0c5da8-753b-428b-80ee-32560aa8c7fd" apple-width="yes" apple-height="yes" style="margin: 0px; padding: 0px; border: none; " src="cid:E93699AF-372C-4B0D-8CA9-F96A6E86DCAF@att.net"></a></div><div id="teaser" style="margin: 0px 0px 10px; padding: 0px 0px 10px; clear: both; border-bottom-width: 1px; border-bottom-style: solid; border-bottom-color: rgb(126, 126, 126); font-family: georgia; font-size: 12px; text-align: left; "><div class="subcolumns" style="margin: 0px; padding: 0px; width: 2180px; overflow: hidden; background-image: url(http://assets.rollingstone.com/images/fe/divider/headerBoardDivider.png); background-position: 642px 0px; background-repeat: no-repeat no-repeat; "><div class="c65l" style="margin: 0px; padding: 0px; float: left; width: 1430px; "><div class="subcl" style="margin: 0px; padding: 0px 1em 0px 0px; position: relative; "><h1 style="margin: 0px 0px 0em; padding: 0px; font-family: Georgia, Times, serif; color: rgb(255, 255, 255); font-size: 33px; "><span style="margin: 0px; padding: 0px; ">Justice Department's New Get-Tough Policy Is, Well, Not</span></h1></div></div></div><p class="dateTime blogDetail" style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; ">POSTED: <span class="post-date" style="margin: 0px; padding: 4px 0px 12px; ">February 20, 4:24 PM ET</span></p></div><div class="socialActionsTopWrapper " style="margin: 0px; padding: 0px; font-family: georgia; font-size: 12px; text-align: left; "></div><div class="blog-post-content" style="margin: 0px; padding: 0px; font-family: georgia; font-size: 12px; text-align: left; "><div class="assetContainer imageStandard floatLt blogImageHorizontal" style="margin: 0px 10px 10px 0px; padding: 0px; float: left; display: inline; "><div class="image-holder" style="margin: 0px; padding: 5px !important; border: 1px solid rgb(127, 127, 127); height: auto; position: static; z-index: auto; "><img alt="department of justice gavel" id="bd567745-64fd-4d09-ba7f-9d71bfe94937" height="408" width="600" apple-width="yes" apple-height="yes" style="margin: 0px; padding: 0px; border: none; display: block; " src="cid:B7D026AA-ABBF-4EEB-BE06-5EA2984078DF@att.net"></div><div class="imageCredit" style="margin: 0px; padding: 6px 6px 6px 20px; background-image: url(http://assets.rollingstone.com/images/fe/copyCamera.png); color: rgb(51, 51, 51); font-family: Arial, Helvetica, sans-serif; font-size: 9px; line-height: 10px; width: 584px; border-left-width: 1px; border-left-style: solid; border-left-color: rgb(221, 221, 221); border-right-width: 1px; border-right-style: solid; border-right-color: rgb(221, 221, 221); border-bottom-width: 1px; border-bottom-style: solid; border-bottom-color: rgb(221, 221, 221); background-position: 5px 6px; background-repeat: no-repeat no-repeat; ">Tom Grill/Getty Images</div></div><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; "><br></p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; "><br></p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; "><br></p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; "><br></p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; "><br></p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; "><br></p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; "><br></p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; "><br></p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; "><br></p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; "><br></p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; "><br></p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; "><br></p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; "><br></p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; "><br></p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; "><br></p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; font-size: 16px; "><br></p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; font-size: 16px; ">I don't want to sound like a broken record, but . . . the latest ploy by the government to insist it is "getting tough" on Wall Street is beyond laughable.</p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; font-size: 16px; ">The tough new-and-improved regime, as described by the curiously credulous <em style="margin: 0px; padding: 0px; ">Dealbook, </em>is a policy of extracting criminal guilty pleas from foreign subsidiaries, as opposed to the "usual fines and reforms." This was the path chosen in the recent UBS deal (in which a Japanese subsidiary was charged while the parent company was given a complete walk, a non-prosecution settlement) and in the more recent deal with the Royal Bank of Scotland. Both of those banks were implicated in the LIBOR rate-fixing case, which is only maybe the most egregious and far-reaching financial scandal of our generation. <a href="http://dealbook.nytimes.com/2013/02/18/prosecutors-build-a-better-strategy-to-go-after-wall-street/?hp" target="_blank" style="margin: 0px; padding: 0px; color: rgb(0, 51, 102); text-decoration: none; ">Writes <em style="margin: 0px; padding: 0px; ">Dealbook</em></a><em style="margin: 0px; padding: 0px; ">:</em></p><blockquote style="margin: 0px 0px 1em 1.6em; padding: 0px; font-family: Georgia, 'Times New Roman', Times, serif; font-style: italic; color: rgb(102, 102, 102); font-size: 16px; "><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; ">Criticized for letting Wall Street off the hook after the financial crisis, the Justice Department is building a new model for prosecuting big banks.</p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; ">In a recent round of actions that shook the financial industry, the government pushed for guilty pleas, rather than just the usual fines and reforms. Prosecutors now aim to apply the approach broadly to financial fraud cases, according to officials involved in the investigations.</p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; ">Lawyers for several big banks, who spoke on the condition of anonymity, said they were already adjusting their defenses and urging banks to fire employees suspected of wrongdoing in the hope of appeasing authorities.</p></blockquote><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; font-size: 16px; ">The story was accompanied by a preposterous photo of Lanny Breuer angrily wagging a finger, suggesting a new, "get-tough" criminal division of the Department of Justice.</p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; font-size: 16px; ">The article worried desperately over the issue of whether or not the Japanese subsidiaries would keep their licenses after these guilty pleas. As is often the case – I've personally heard this excuse about a dozen times coming from DC types – regulators are terrified of repeating an Arthur Andersen situation, i.e. punishing a company and seeing massive job losses as a result:</p><blockquote style="margin: 0px 0px 1em 1.6em; padding: 0px; font-family: Georgia, 'Times New Roman', Times, serif; font-style: italic; color: rgb(102, 102, 102); font-size: 16px; "><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; ">Critics point to the UBS case. Before UBS signed the deal, Japanese authorities assured the bank that a guilty plea would not cost the subsidiary its license, a person involved in the case said. While the case has weighed on the stock price, the subsidiary is operating normally and clients have stayed put, according to people with direct knowledge of the case.</p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; ">Prosecutors defend their effort, saying it was born from painful experiences over the last decade.</p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; ">After Arthur Andersen was convicted in 2002, the accounting firm went out of business, taking 28,000 jobs with it. The Supreme Court later overturned the case, prompting the government to alter its approach.</p></blockquote><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; font-size: 16px; ">The Arthur Andersen case has become like Wall Street's magic mantra – you hear the name whispered anytime any company gets in trouble. This is a tactic straight out of <em style="margin: 0px; padding: 0px; ">Blazing Saddles</em>, with banks essentially taking themselves hostage, putting guns to their own heads as they creep sideways out the door: "Back off! Prosecute us and all these jobs will die!"</p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; font-size: 16px; ">And prosecutors, just like the idiot town leaders of Mel Brooks's Rockridge, are screaming, "They're just crazy enough to do it!"</p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; font-size: 16px; "><i>This isn't brain surgery.</i> <b>You know what an effective deterrent to crime is? Jail! And do you know what kind of criminal penalty actually makes people think twice about committing crimes the next time? The kind that actually comes out of some individual's pocket, not fines that come out of the corporate kitty.</b></p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; font-size: 16px; "><b>I get that regulators are worried about job losses. They should be. But the long-term job losses are going to be much greater when investors around the world lose confidence in the U.S. financial system because they recognize that individuals do not face punishment for criminal activity. The individual incentive not to commit crime on Wall Street now is almost zero. </b>Even the worst of the worst – like, say, a certain <a href="http://www.businessweek.com/news/2012-09-25/sac-capital-fund-manager-said-to-be-uncharged-conspirator" target="_blank" style="margin: 0px; padding: 0px; color: rgb(0, 51, 102); text-decoration: none; ">unindicted co-conspirator</a> in an evolving insider trading case – is only threatened with individual prosecution after years of monstrous and obvious market manipulation, resulting in massive profits that he'll almost certainly get to keep most of, by the way, if <a href="http://www.nytimes.com/2010/10/16/business/16countrywide.html?pagewanted=all" target="_blank" style="margin: 0px; padding: 0px; color: rgb(0, 51, 102); text-decoration: none; ">previous settlements</a> are any guide.</p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; font-size: 16px; ">It continually amazes, the way all of these law-and-order types are so willing to pontificate about the importance of taking individual responsibility for one's actions, until the guy in their crosshairs is someone he/she went to college with, or a former client of his or her law firm. Then, suddenly, their idea of drastic justice becomes <em style="margin: 0px; padding: 0px; ">maybe </em>yanking the license of a foreign subsidiary.</p><p style="margin: 0px 0px 1em; padding: 0px; line-height: 1.5em; font-size: 16px; "><b>Let's make a new rule: <i>The Department of Justice doesn't get to call itself "tough" until a) it puts someone from one of these companies in jail for at least 24 hours, or b) it extracts fines from either companies or individuals that represent at least slightly more than laughable fractions of their ill-gotten gains. That's setting the bar pretty low, but you have to start somewhere, right?</i></b></p></div><span style="font-size: 16px; margin: 0px; padding: 0px; font-family: georgia; text-align: left; "><br style="margin: 0px; padding: 0px; "><br style="margin: 0px; padding: 0px; ">Read more: <a href="http://www.rollingstone.com/politics/blogs/taibblog/justice-departments-new-get-tough-policy-is-well-not-20130220#ixzz2LZveb5M9" style="margin: 0px; padding: 0px; color: rgb(0, 51, 153); text-decoration: none; ">http://www.rollingstone.com/politics/blogs/taibblog/justice-departments-new-get-tough-policy-is-well-not-20130220#ixzz2LZveb5M9</a> <br style="margin: 0px; padding: 0px; ">Follow us: <a href="http://ec.tynt.com/b/rw?id=bbJxak64Kr4kEzacwqm_6l&u=rollingstone" target="_blank" style="margin: 0px; padding: 0px; color: rgb(0, 51, 102); text-decoration: none; ">@rollingstone on Twitter</a> | <a href="http://ec.tynt.com/b/rf?id=bbJxak64Kr4kEzacwqm_6l&u=RollingStone" target="_blank" style="margin: 0px; padding: 0px; color: rgb(0, 51, 102); text-decoration: none; ">RollingStone on Facebook</a></span></body></html>