The Criminalization of American Business

Go Lean Commentary

Criminal Business

“Don’t throw out the baby with the bath water” – Old Adage

This old adage never encouraged infant abuse, but rather it illustrated the point that sometimes the whole eco-system can be preserved despite the extraction of bad actors.

After some decades of applying this strategy in the US Justice System, as regards to Big Business, it is the conclusion of this commentary that “No, this is wrong!”

In the words of Forrest Gump “stupid is as stupid does”.

The foregoing article/VIDEO looks at the trend of this double standard of the US Justice System as it applies to criminology of American business. The stakeholders in the Justice Department and the Securities & Exchange Commission (SEC) seems to have forgotten that we have seen this all before, just recently as the cause of the Great Recession, where the global economy was brought to the precipice (2008) due to defective oversight with American home mortgage financing and servicing. Now, the foregoing VIDEO alludes that the regulators and prosecutors have promoted  a “leaving the fox in the hen house” scenario under the guise of not curtailing industrial growth.

Subtitle: Companies must be punished when they do wrong, but the legal system has become an extortion racket

Who runs the world’s most lucrative shakedown operation? The Sicilian mafia? The People’s Liberation Army in China? The kleptocracy in the Kremlin? If you are a big business, all these are less grasping than America’s regulatory system. The formula is simple: find a large company that may (or may not) have done something wrong; threaten its managers with commercial ruin, preferably with criminal charges; force them to use their shareholders’ money to pay an enormous fine to drop the charges in a secret settlement (so nobody can check the details). Then repeat with another large company.

The amounts are mind-boggling. So far this year, Bank of America, JPMorgan Chase, Citigroup, Goldman Sachs and other banks have coughed up close to $50 billion for supposedly misleading investors in mortgage-backed bonds. BNP Paribas is paying $9 billion over breaches of American sanctions against Sudan and Iran. Credit Suisse, UBS, Barclays and others have settled for billions more, over various accusations. And that is just the financial institutions. Add BP’s $13 billion in settlements since the Deepwater Horizon oil spill, Toyota’s $1.2 billion settlement over alleged faults in some cars, and many more.

In many cases, the companies deserved some form of punishment: BNP Paribas disgustingly abetted genocide, American banks fleeced customers with toxic investments and BP despoiled the Gulf of Mexico. But justice should not be based on extortion behind closed doors. The increasing criminalisation of corporate behaviour in America is bad for the rule of law and for capitalism [a].

No soul, no body? No problem

Until just over a century ago, the idea that a company could be a criminal was alien to American law. The prevailing assumption was, as Edward Thurlow, an 18th-century Lord Chancellor of England, had put it, that corporations had neither bodies to be punished nor souls to be condemned, and thus were incapable of being “guilty”. But a case against a railway in 1909, for disobeying price controls, established the principle that companies were responsible for their employees’ actions, and America now has several hundred thousand rules that carry some form of criminal penalty. Meanwhile, ever since the 1960s, civil “class-action suits” have taught managers the wisdom of seeking rapid, discreet settlements to avoid long, expensive and embarrassing trials.

The drawbacks of America’s civil tort system are well known. What is new is the way that regulators and prosecutors are in effect conducting closed-door trials. For all the talk of public-spiritedness, the agencies that pocket the fines have become profit centres: Rhode Island’s bureaucrats have been on a spending spree courtesy of a $500m payout by Google, while New York’s governor and attorney-general have squabbled over a $613m settlement from JPMorgan. And their power far exceeds that of trial lawyers. Not only are regulators in effect judge and jury as well as plaintiff in the cases they bring; they can also use the threat of the criminal law.

Financial firms rarely survive being indicted on criminal charges. Few want to go the way of Drexel Burnham Lambert or E.F. Hutton. For their managers, the threat of personal criminal charges is career-ending ruin. Unsurprisingly, it is easier to empty their shareholders’ wallets. To anyone who asks, “Surely these big firms wouldn’t pay out if they knew they were innocent?”, the answer is: oddly enough, they might.

Perhaps the most destructive part of it all is the secrecy and opacity. The public never finds out the full facts of the case, nor discovers which specific people—with souls and bodies—were to blame. Since the cases never go to court, precedent is not established, so it is unclear what exactly is illegal. That enables future shakedowns, but hurts the rule of law and imposes enormous costs. Nor is it clear how the regulatory booty is being carved up. Andrew Cuomo, the governor of New York, who is up for re-election, reportedly intervened to increase the state coffers’ share of BNP’s settlement by $1 billion, threatening to wield his powers to withdraw the French bank’s licence to operate on Wall Street. Why a state government should get any share at all of a French firm’s fine for defying the federal government’s foreign policy is not clear.

I’ll see you in court—in another life

The best thing would be for at least some of these cases to go to proper trial: then a few of the facts would spill out. That is hardly in the interests of the regulators or their managerial prey, but shareholders at least should push for that. Two senators, Elizabeth Warren and Tom Coburn, have put forward a bill to make the terms of such settlements public, which would be a start. Prosecutors and regulators should also be required to publish the reasons why, given the gravity of their initial accusations, they did not take the matter all the way to court.

In the longer term, two changes are needed to the legal system. The first is a much clearer division between the civil and criminal law when it comes to companies. Most cases of corporate malfeasance are to do with money and belong in civil courts. If in the course of those cases it emerges that individual managers have broken the criminal law, they can be charged.

The second is a severe pruning of the legal system. When America was founded, there were only three specified federal crimes—treason, counterfeiting and piracy. Now there are too many to count. In the most recent estimate, in the early 1990s, a law professor reckoned there were perhaps 300,000 regulatory statutes carrying criminal penalties—a number that can only have grown since then. For financial firms especially, there are now so many laws, and they are so complex (witness the thousands of pages of new rules resulting from the Dodd-Frank reforms), that enforcing them is becoming discretionary.

This undermines the predictability and clarity that serve as the foundations for the rule of law, and risks the prospect of a selective—and potentially corrupt—system of justice in which everybody is guilty of something and punishment is determined by political deals . America can hardly tut-tut at the way China’s justice system applies the law to companies in such an arbitrary manner when at times it seems almost as bad itself.
The Economist Magazine (Posted 08-30-2014; retrieved 09-04-2014) –|hig|28-08-2014|53552127899249e1cc9ea210|NA

The issue in this foregoing article/VIDEO is another reflection of American Crony Capitalism – where public policy is set to benefit private parties. Consider:

Big Oil While lobbying for continuous tax subsidies, the industry have colluded to artificially keep prices high and garner rocket profits ($38+ Billion every quarter).
Big Box Retail chains impoverish small merchants on Main Street with Antitrust-like tactics, thusly impacting community jobs.
Big Pharma Chemo-therapy cost $20,000+/month; and the War against Cancer is imperiled due to industry profit insistence.
Big Tobacco Cigarettes are not natural tobacco but rather latent with chemicals to spruce addiction.
Big Agra Agribusiness concerns bully family farmers and crowd out the market; plus fight common sense food labeling efforts.
Big Data Brokers for internet and demographic data clearly have no regards to privacy confines
Big Media Hollywood insists on big tax breaks/ subsidies   for on-location shooting; cable companies conspire to keep rates high; textbook publishers practice price gouging.
Big Banks Wall Street’s damage to the housing and student loan markets are incontrovertible.

The book Go Lean…Caribbean asserts that the Caribbean region must not allow the US to take the lead for our own nation-building, that American capitalistic interest tends to hijack policies intended for the Greater Good. This assessment is logical considering that despite the reality of the 2008 Great Recession and the Wall Street complexity, no one has gone to jail, even now 6 years later! The “land of the free and home of the brave” is now too coward to prosecute Wall Street for “lying, cheating and stealing”, despite the millions of victims and $11 Trillion in economic setbacks.

According to the foregoing article/VIDEO, the Justice Department strategizes settlements, rather than convictions. This is American neo-Justice 2014, where the government is in cahoots with Big Business, maintaining a dual standard of justice for corporate criminals versus ordinary felons. The foregoing article posits that the practices of the US Federal Justice Department is representative of a lucrative shakedown operation, actions akin to organized crime and racketeering.

No wonder critics and advocates point to American Justice as divided: one standard for the rich and one for the poor.

The Go Lean book, and accompanying blog commentaries, go even deeper and hypothesize that beyond justice, the American economic models are dysfunctional for the Caribbean perspective. The American wheels of commerce stages the Caribbean in a “parasite” role; imperiling regional industrialization even further. This is due to globalization, in which the US is one of the biggest proponents; this policy trumpets free trade and assessing opportunity costs (through comparative analysis). Under this model the exporter benefits while the importer suffers; trade surpluses – good; trade deficits – bad. The US foreign policy for the Caribbean is to incentivize consumption of American imports, and to ensure that no other European powers exert undo influence in the region – Monroe Doctrine and Pax Americana (Page 180).

The disposition of a “parasite” is not the only choice, for despite American pressure, countries like Japan and South Korea have trade surpluses with the US. They are protégés, not parasites, and thusly provide a model for the Caribbean to emulate.

This broken system in America does not have to be modeled in the Caribbean. Change has now come. The driver of this change is technology and globalization. The Go Lean book posits that the governmental administrations must be open to full disclosure and accountability. The ubiquity of the internet has allowed whistleblowers to expose “shady” practices to the general public; think WikiLeaks.

This book Go Lean… Caribbean, serves as a roadmap for the introduction and implementation of the technocratic Caribbean Union Trade Federation (CU), which represents change for the region. The CU/Go Lean roadmap has 3 prime directives:

  • Optimization of the economic engines in order to grow the regional economy.
  • Establishment of a security apparatus to protect the resultant economic engines against “bad actors”.
  • Improve Caribbean governance to support these engines.

The Go Lean roadmap provides turn-by-turn directions on how to forge this change in the region for a reboot of these Caribbean societal systems, including justice institutions. This roadmap is thusly viewed as more than just a planning tool, pronouncing this point early in the Declaration of Interdependence (Page 13) with these statements:

xvi.    Whereas security of our homeland is inextricably linked to prosperity of the homeland, the economic and security interest of the region needs to be aligned under the same governance. Since economic crimes…can imperil the functioning of the wheels of commerce for all the citizenry, the accedence of this Federation must equip the security apparatus with the tools and techniques for predictive and proactive interdictions.

xxiv.  Whereas a free market economy can be induced and spurred for continuous progress, the Federation must install the controls to better manage aspects of the economy: jobs, inflation, savings rate, investments and other economic principles. Thereby attracting direct foreign investment because of the stability and vibrancy of our economy.

xxv.   Whereas the legacy of international democracies had been imperiled due to a global financial crisis, the structure of the Federation must allow for financial stability and assurance of the Federation’s institutions. To mandate the economic vibrancy of the region, monetary and fiscal controls and policies must be incorporated as proactive and reactive measures. These measures must address threats against the financial integrity of the Federation and of the member-states.

The Go Lean book purports that the Caribbean can – and must – do better. The vision of the CU is a confederation of the 30 member-states of the Caribbean to do the heavy-lifting of optimizing economic-security-governing engines. The Go Lean book details the policies and other community ethos to adopt, plus the executions of the following strategies, tactics, implementations and advocacies to elevate Caribbean society, and still mandate “justice for all”:

Community Ethos – Deferred Gratification Page 21
Community Ethos – Consequences of Choices Lie in the Future Page 21
Community Ethos – Privacy versus Public   Protection Page 23
Community Ethos – Whistleblower Protection Page 23
Community Ethos – Witness Security & Protection Page 23
Community Ethos – Anti-Bullying and Mitigation Page 23
Community Ethos – Intelligence Gathering Page 23
Community Ethos – Lean Operations Page 24
Community Ethos – Ways to Manage Reconciliations Page 34
Community Ethos – Ways to Impact the Greater Good Page 37
Strategy – Agents of Change – Technology Page 57
Strategy – Agents of Change – Globalization Page 57
Tactical – Separation of Powers – Homeland Security Page 75
Tactical – Separation of Powers – Justice Department Page 77
Implementation – Security Initiatives at Start-up Page 103
Implementation – Ways to Benefit from Globalization Page 119
Planning – Ways to Improve Failed-State Indices Page 134
Planning – Lessons Learned from 2008 Page 136
Advocacy – Ways to Grow the Economy Page 151
Advocacy – Ways to Create Jobs Page 152
Advocacy – Ways to Impact Student Loans Page 160
Advocacy – Ways to Improve Housing Page 161
Advocacy – Ways to Improve Governance Page 169
Advocacy – Ways to Better Manage the Social Contract Page 171
Advocacy – Ways to Impact Justice Page 177
Advocacy – Ways to Improve Homeland Security Page 180
Advocacy – Ways to Improve Intelligence Gathering & Analysis Page 182
Advocacy – Ways to Impact Main Street Page 201
Advocacy – Ways to Ways to Protect Human Rights Page 220
Appendix – Credit Ratings Agencies in 2008 Page 276
Appendix – New Student Loan Scandal – Rolling Stone Magazine Page 286

The foregoing article/VIDEO relates to topics that are of serious concern for Caribbean planners. While the US is the world’s largest Single Market economy, we want to only model some of the American example. We would rather foster a business climate to benefit the Greater Good, not just some special interest group.

The world is not fooled! “Tamarind, Sour Sap and Green Dilly, you mussee think we silly” – Bahamian Folk Song

There are many Go Lean blog commentaries that have echoed this point, addressing the subject of the Caribbean avoiding American consequences. See sample here: A Textbook Case of Industry Price-gouging Where the Jobs Are – Computers Reshaping Global Job Market Where the Jobs Are – One Scenario Caribbean loses more than 70 percent of tertiary educated to brain drain 5 Steps to a Bubble Traditional 4-year Colleges – Terrible Investment for Region and Jobs Health-care fraud in America; Criminals take $272 billion a year Aereo Founder on the future of TV – Fight Against Big Media Lessons Learned from the American Airlines merger America’s War on the Caribbean Open the Time Capsule: The Great Recession of 2008 Student debt holds back many would-be home buyers Indian Reservation Advocates Push for Junk-Food Tax Book Review: “The Divide – American Injustice in the Age of the Wealth Gap” Fed Releases Transcripts from 2008   Meetings to Save Big Banks Book Review: ‘Wrong – Nine Economic Policy Disasters and What We Can Learn…’ 10 Things We Don’t Want from the US – American Self-Interest Policies

The book Go Lean…Caribbean posits that many problems of the region are too big for any one member-state to solve alone, that there is the need for the technocracy of the Caribbean Union Trade Federation. The purpose of this Go Lean/CU roadmap is to make the Caribbean homeland, a better place to live, work, learn and play. This effort is more than academic, this involves many practical mitigations and heavy-lifting. While this charter is not easy, it is worth all effort.

In the Caribbean we need jobs; we need entrepreneurship; we need the business climate to grow the economy; we need to be able to compete with the rest of the world. We therefore need a level playing field. Go Lean is a different approach, especially from the foregoing American experiences. The roadmap posits that to succeed in the global marketplace, the Caribbean region must not only consume but rather also create, produce, and export/distribute domestics products (including intellectual property) and services to the rest of the world.

Optimized justice systems are not optional, as the Go Lean roadmap posits that “bad actors” will surely emerge to exploit the new Caribbean economic engines. The CU institutions must surely anticipate these scenarios and respond proactively and reactively. The charter is to marshal and prosecute all economic crimes at the federal (CU) level. There can be no “divide”, no compromise on right-and-wrong.

No justice, no peace!

Now is the time for all of the Caribbean, the people and governing institutions, to lean-in for the changes described in the book Go Lean … Caribbean.

Download the book Go Lean…Caribbean now!


Cited Reference:

a. “A mammoth guilt trip – Corporate America is finding it ever harder to stay on the right side of the law”. The Economist Magazine; posted August 30, 2014; retrieved September 4, 2014 from:


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