If only American CEOs saw justice beyond priced-in “fines.” Good for Germany
Most of what comes to my mind (e.g. Equifax) would be claims falling under civil law, for which we don't arrest people.
If their actions weren't worthy of jail, the law should be changed. They created an incentive system which guaranteed that lower-level employees would act badly.
Instead, even after clawbacks, they retired ahead of the game by 8-9 figure sums.
Quantitative hedge funds like Renaissance not paying their fair share of taxes (this effectively means they used unpaid taxes as arbitrage)
Wells Fargo executives institutionalizing fraud regarding fake accounts to pump up numbers, both an SEC violation and considered consumer fraud
And in general we as a country need more punishments when you defraud consumers other than “oops we’ll just pay you back after a class action lawsuit :)”. That’s not at all a reasonable deterrent - and as I alluded if a firm’s perceived chances of getting caught/ what they’ll have to pay are low enough and the rewards are sufficiently high, they may consciously find it more profitable to break the law. The same goes for fines.
It has been [1][2].
If senior management knew about the fake accounts and did nothing or worse, covered it up, they should go to jail. But we have no evidence of that. In fact, senior management had incentives to boost revenue and profit. Fake accounts don't increase revenue. Even before fines, they decrease profits. And we have no evidence of unusual insider sales or exercises while Wall Street was being duped.
Management instituted bad incentives and went up and down with everyone else. Lots of them were fired as the company faced civil consequences. It would be absurd to jail people for something they (a) did not know about and (b) had incentives to know about.
[1] https://www.nytimes.com/2018/05/04/business/wells-fargo-shar...
[2] https://www.nytimes.com/2018/04/19/business/wells-fargo-cfpb...
Even if we can't find a smoking gun email or audio recording, charges analogous to negligent homicide would be appropriate here.
Nobody died for having a fake checking account. (People have died because prosecutors overreached.)
Those extra charges did things like trigger defaults on car loans, cascading to vehicle repossession. For people who don't have large reserves, taking a vehicle away can lead to losing your job and sending you and your family into a downward spiral.
The second reason is a bit of informed speculation on my part. Our banks have a very symbiotic relationship with Washington, especially when it comes to RMBS. The role of the GSEs is especially important here since they in large part determine lending standards. And once you are there eventually there will be politicians involved. While I would have love to seen Barney Frank being called to testify at a trial it was never going to happen. Trying to cleanly slice off the prosecution of a few bank CEOs was always going to be impossible because of where it would lead.
RenTec is hardly the first people to have a dispute with the IRS. Berkshire Hathaway won a $500M dispute with them last year [2].
In general I agree with your last paragraph, I wish fraud was treated as an actual crime more often and people went to jail. HSBC should not be a going concern in the US after they knowingly laundered money for drug cartels. But alas that is not the world we live in.
[1] https://www.nytimes.com/2009/11/11/business/11bear.html [2] http://fortune.com/2015/01/27/berkshires-netjets-defeats-500...
https://www.channel4.com/news/factcheck/factcheck-how-many-b...
Also several high-profile executives such as Angelo Mozillo settled for high fines and bars from financial services as a result of SEC enforcement. You can find some of the relevant SEC enforcement actions and their outcomes here https://www.sec.gov/spotlight/enf-actions-fc.shtml although that page appears a little out of date.
There were to my knowledge prosecutions also for mortgage fraud etc but just in and of themselves ill-conceived securitizations constitute a fraud.
"Deutsche Bank and Barclays used the options structure to open accounts for their clients in their own names, creating the illusion that they owned the assets. But in fact, the hedge funds exercised complete control over the assets, executed all the trades and raked in all of the trading profits, according to the report.
The hedge funds exercised the options soon after the one-year mark and claimed that the trading profits were eligible for the 20 percent (previously 15 percent) tax rate that applies to long-term capital gains on assets held for at least a year. The report contends that those options were actually short-term trades that should have been taxed at the ordinary income rate of 39 percent, which would otherwise apply to investors in hedge funds engaged in daily trading" [1].
Market makers are taxed differently from other investors. Certain market makers tried to "rent" their low-tax status to hedge funds. All this resulted from a weird 1999 law trying to fix a loophole in some other arcane law [2].
Last I heard, the IRS charged the market makers for the investors' short-term gains [3], and did so retroactively.
[1] https://www.washingtonpost.com/business/economy/senate-repor...
[2] https://www.bloomberg.com/news/articles/2013-07-03/the-irs-c...
[3] https://www.nytimes.com/2015/07/09/business/dealbook/irs-cra...
The IRS’s wording suggests that other funds may have also been improperly using basket options. I’m admittedly not even close to being a tax law expert so I can’t really offer much more analysis
I’m pretty sure I was wrong that the taxes were being used as arbitrage, though. The allegedly unpaid taxes seem to be based on payments out of the fund to employees
[1] https://cleantechnica.com/2018/02/05/fiat-chrysler-facing-re...
[2] https://jalopnik.com/lawsuit-accuses-ford-of-cheating-diesel...
[3] http://money.cnn.com/2017/05/25/news/companies/gm-emissions-...
We’re one week out from Elizabeth Holmes’ criminal indictment.
The FBI arrested a VW executive in Florida in connection with this same scandal [1]. And last year, Insys’ CEO was arrested [2].
Watch your confirmation bias.
[1] https://mobile.nytimes.com/2017/01/09/business/volkswagen-di...
[2] https://www.google.com/amp/s/abcnews.go.com/amp/US/drug-comp...
Broadly speaking, you get fined for fucking up. You get jailed for covering it up.
American commercial law largely protects company Boards and executives from their own stupidity. This is necessary, since the difference between madness and genius can only be ascertained ex post facto.
Sadly, in the "Nash game" of international commerce a country wants to keep other countries' companies on check, while leaving its own free to pollute (elsewhere) and bend regulations.
That's the reason for having international regulations.