With all of the talk about evil corporate agents, we tend to forget about the agents the public uses to try the cases and decide what cases to try. Although it may be difficult to think of these heroes as merely human, they are. For many of them, Enron is far from a disaster – it’s a launching pad into lucrative big firm practice or political career. Who knows, you might even get to be thought of as a presidential candidate some day. Prosecutors have little incentive to abort the launch by deciding not to prosecute. And of course when they do prosecute, they want to win.

That’s good, isn’t it? Yes, but just as we want them, and our corporate agents, to win, we also want them to play by the rules. All the more because the results of their mistakes are so much worse than dented portfolios.

The problem is that what makes criminalizing agency costs problematic for the criminal justice system also makes corporate crime trials challenging for prosecutors. They have to get the jurors to see the criminal conduct buried in the accounting and and distinct from the run-of-the-mill unfaithfulness of their colleagues.

Corporate employees have the relevant facts, but don’t have a lot of incentive to disclose them to the prosecutors. So highly motivated prosecutors would like some shortcuts to get them where they want to go. They want to be able to choose who says what at trial. It’s helpful to let a whole bunch of peripheral players know that they, too, are potential defendants. Don’t indict them, just yet. But also don’t give them immunity for testifying. In other words, shut them up. Of course you need some people in the company to talk. You might threaten employees, and maybe even their family members, with hard time.

None of these people are hardened criminals – even a day in jail will be a big deal. They scare easily – just the pliable sorts prosecutors love to deal with. We may never find out if they actually did anything wrong, because they don’t go to trial. But they will help the prosecutors get the big splashy Lay/Skilling fish they’re especially interested in hooking.

It’s also helpful if you can get the company to cooperate. Tell a still-thriving firm, we won’t prosecute you if you do what we say. Tell your employees to cooperate or else. Don’t pay defense costs. It’s all in the Thompson memo.

The result is a potential prosecutorial agency cost problem that threatens to rival the corporate agency costs they're prosecuting.

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