Tomorrow’ WSJ has an interesting story that sheds light both on why we haven’t seen prosecutions from the recent financial crisis, and why we saw so many before that.
The story discusses the decision not to prosecute AIG’s Joe Cassano – the “man who crashed the world.” I discussed this decision last April, noting how Cassano was saved by scribbled notes possibly indicating he had internally disclosed potential losses. Tomorrow’s story elaborates on what happened. In my previous post I contrasted Cassano’s luck in the “corporate crime lottery” with that of Greg Reyes, a big loser in the backdating so-called scandal.
The current WSJ story notes that
Unlike previous investigations, prosecutors haven’t found physical evidence of fraud, such as false documents designed to hide crimes. Nor have prosecutors been able to convince lower-level employees to plead guilty and testify against senior executives.
But witnesses’ unwillingness to testify hasn’t always stopped the government, as was clear in the infamous Broadcom case. The problem is that prosecutors have plenty of reason to ignore the problems with their case and move full steam ahead.
This was illustrated by a quote in today’s WSJ story:
“When you have so much anecdotal evidence of people engaging in fraud and no one’s going to jail, it’s very frustrating,” said Sen. Edward Kaufman (D., Del.), who has been pushing for more prosecutions.
U.S. Senators have ways of making their “frustrations” felt by prosecutors who let scruples stand in the way of politically motivated prosecutions.
Cassano could have been the Jeff Skilling or Greg Reyes of the financial collapse. But the prosecutors in the Cassano case may have been thinking more about Broadcom (or, for that matter, Skilling, who may soon end up walking out of jail) than Kaufman. Let’s hope they continue to do so.