A new report from Pro Publica claims that part of the reason none of the major Wall Street banks were prosecuted for their role in causing the 2008 financial crisis was a disinterest in taking on cases by the US Department of Justice. The disinterest reportedly led to prosecutors not pursuing winnable cases and coincided with other concerns such as the possibility of losing a case.
As a result no executives from the major Wall Street firms went to jail for causing the financial crisis despite the firms themselves paying out billions in civil fines. Instead “insider trading” became the focus of DOJ a chronic problem with no particular relevance to the financial crisis.
Bharara focused on insider trading, and his office has amassed a stunning 80-0 record of prosecutions, locking up the hedge-fund titan Raj Rajaratnam and Rajat Gupta, the former managing director of McKinsey & Company and a director at Goldman Sachs. They took down eight former employees of Steven A. Cohen’s notorious SAC Capital hedge fund. (Notably, however, they haven’t been able to bring charges against the man himself.) Time magazine put Bharara on its cover, with the bold headline: “This Man Is Busting Wall Street.” Yet Bharara didn’t touch Wall Street’s real players — top bankers. The former prosecutor was almost sheepish about the insider-trading cases when I spoke to him: “They made our careers, but they don’t change the world.” In fact, several former prosecutors in the office told me that going after bankers was never a real priority. “The government failed,” another former prosecutor said. “We didn’t do what we needed to do.”
According to another prosecutor former DOJ Criminal Division head Lanny Bruer’s staff did not want to “pursue cases where they feel the person is 100 percent guilty but they are only 70 percent sure they can win at trial.” Which is a pretty amazing standard. A standard likely to occur often with complex financial cases where a prosecutor runs the risk of having a jury not be able to understand the crime exactly.
Of course bringing cases to trial for people you believe are 100 percent guilty is not just about winning those cases, it also is supposed to send a message about the rule of law. And when prosecutors take a dive continually, for whatever reason, the opposite message is sent.