February 21, 2013
Guilty Pleas From Foreign Subsidiaries
Posted by David Zaring

Ben Protess reports that the government is increasingly looking for guilty pleas in misconduct that occured after the financial crisis.  But because some guilty pleas are company killers, they are getting them from foreign subsidiaries.  It's a strange compromise between imposing responsibilility and avoiding economic disruption.  Some thoughts:

  • This is a total adaption of the government's foreign corruption enforcement strategy, which has invovlved obtaining guilty pleas from foreign subs for a while now.  And that just shows how big a deal foreign corruption cases are right now.  They are literally setting the template for the regulation of the rest of Wall Street wrongdoing.
  • Company guilty pleas are strange things.  They  either mean nothing - corporate persons don't feel bad for being convicted, can't be put in jail, and absent alternative consequences, would you rather your closely held corporation paid a fine, or stood up in court and said "I did it"?  Or they mean far too much - an auditor like Arthur Andersen could literally no longer audit after it was convicted of a crime.
  • Which is why I think truly serious prosecution is all about individual responsibility.  This middle ground isn't quite the get tough attitude that insistence on pleas from natural, rather than corporate, persons would be.

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