An Odd Timing for the Restraining of US Prosecutors

Since much of the corruption that has invaded Germany was inspired by the "Washington Consensus" model, this is a bizarre time for the US to be restraining its prosecutors in moving against dirty white collar crime. The New York Times (13/12,

"US Moves to Restrain Prosecutors" by Lynneley Browning) informs us: "The Justice Department placed new restraints on federal prosecutors conducting corporate investigations yesterday, easing tactics easing tactics adopted in the wake of the Enron collapse.

"The changes were outlined in a memorandum written by Paul J. McNulty, the deputy attorney general. Under the revisions, federal prosecutors will no longer have blanket authority to ask routinely that a company under investigation waive the confidentiality of its legal communications or risk being indicted. Instead, they will need written approval for waivers from the deputy attorney general, and can make such requests only rarely.

"Another substantial change introduced yesterday prohibits prosecutors from considering, when weighing the indictment of a company whether it is paying the legal fees of an employee caught up in the enquiry.

"The revised guidelines follow criticism from legal and business associations and from federal judges, senators and former Justice Department officials that the tactics used in recent years against companies like the drug maker Bristol-Myers Squibb and the accounting firm KPMG were coercive and unconstitutional.

"Mr. McNulty's document substantially revises and places curbs on guidelines written in January 2003 amid a wave of corporative scandals at companies including WorldCom and Adelphia Communications. The Justice Department had argued that the guidelines adopted then, in a document known as the Thompson memorandum, were essential in helping to grapple with the surge in corporate wrongdoing.

"In recent years, federal prosecutors have won more than 1,100 convictions in cases of corporative fraud."

The spread of American corporative ethics over much of the world should carry with it the responsibility of Washington to provide some legal assurance of acceptable behaviour of American corporations, and of foreign corporations who adopt what is done in the US as their model. Clearly the bizarre timing of Washington's restraint on its prosecutors suggest that here, too, something is badly out of sync.

from Economic Reform, January 2007