Pulitzer Winner Jesse Eisinger On the Business People ‘too big to jail’

From the New York Post:

Arthur Andersen deserved to die.
In 2001, the accounting firm was one of the “Big Five” auditors in the country with around 85,000 employees and a thriving consulting business.

But while it was named for a prickly and principled Chicago accountant, by the turn of the century Arthur Andersen had become an accomplice to some of the biggest cases of corporate corruption the country had ever seen — including Sunbeam, Enron and WorldCom.

In the Enron case, court records show the accounting firm, while its clients were under investigation, deleted e-mails and shredded thousands of documents in a bid to cover up crimes. In June 2002, a federal jury found the firm guilty of obstruction of justice. The verdict was a fatal blow — and Arthur Andersen was forced to close.

But three years later, in 2005, when the Supreme Court overturned the verdict because of faulty jury instructions, Arthur Andersen was thought of as the victim. Federal prosecutors, meanwhile, were cast as the bad guys — overzealous and responsible for putting thousands of innocent people out of work.

That’s too bad, says Pulitzer Prize-winning journalist Jesse Eisinger, who argues in his new book, “The Chickenshit Club: Why the Justice Department Fails to Prosecute Executives,” that the prosecution of Arthur Andersen was “entirely justified.”

“The Department of Justice has mislearned the lesson of that prosecution — and not accidentally,” Eisinger told The Post in an interview.

A sustained public relations push by the company, Wall Street and the white-collar criminal defense bar cast the prosecution in a negative light, saying that government lawyers went too far and put innocent people out on the street, Eisinger said. No prosecutor, not even the high-flying big shots in the Manhattan US Attorney’s office, wants to risk losing another high-profile case.

Eisinger, in his dramatic and hard-hitting book, says the fallout from the Arthur Andersen case — and one or two other prosecutions — is the reason during the toxic mortgage fiasco no high-ranking banker or bank itself was prosecuted.

In the 1980s’ junk bond scandal, Eisinger writes, Michael Milken, the junk bond king, was investigated, found guilty and sentenced to 10 years in prison.

In the early 2000s, Ken Lay, in the wake of the Enron fraud, was also investigated, prosecuted and found guilty of securities fraud. Lay died before he was sentenced.

But that was then. In the mortgage scandal that grew out of the 2008 recession, no high-ranking bank executive was prosecuted — despite the fact that many banks paid billions of dollars to settle federal probes.
Wall Street executives, it has been written, have become “too big to jail.”

“I’m very angry about this,” Eisinger told The Post. “I’m outraged. The enormity of the rot in the system keeps me up at night.”

Corporate crime is rarely the provenance of high drama. And by the time most people hear the words “accounting scandal,” they’ve already tuned out....MORE