Trump Administration is Soft on White Collar Crime

question is law enforcement listening? A slew of insider trading convictions followed cementing Barrara's nickname as the Sheriff of Wall Street. But the sheriff is gone and the Trump administration is apparently not interested in filling the position. The prosecution of white collar crime has hidden all time low during the Trump administration, down thirty for Trump's first three years in office from the average under President Barack Obama, according to

data from Syracuse University. Joining me is John Coffee, a professor Columbia Law School. His new book is Corporate Crime and Punishment, The Crisis of Under Enforcement. Jack, how would you characterize the drop in the white color crime numbers. Well, I think it's the enforcement. Generally. You can look at

the number of dependants who are prosecuted way down. You can look at the fines that are imposed on corporations down by sevent You can look at new policies that say you don't have to do much to get credit for a compliance plan. It used to be, for example, that the Anti Trust pass in price fixing would only grant your leniency if you made a complete, in total confession and you were the first to confess. That's all

been thrown out recently by the Trump administration. And as long as you adopt a reasonably credible compliance plan, you can get very substantial sentencing leniency, even for a crime like price fixing, which is extremely hard to detect. I can give you examples on all kinds of areas in terms of the numbers or in terms of the policy changes. But the government is going much much easier and softer, both criminally and civilly against corporations to commit on lawcal conduct.

Do we blame the president for this or is it someone lower down in the chain? Well, that's a good question, man. I would tell you the first thing about organizational behavior corporations or other organizations is that the critical variable is tone at the top. And the United States governed today, the tone set by the top by the president is that law compliance isn't that important. It's a minor virtue at best, and don't get yourself hung up on it.

Get the job done. So I think that there is an implicit signal from the top which lower levels always copy that law compliance is not the government's first concern. Let's look at a few different areas of white color crime, starting with securities fraud cases. Well, we're saying them go down and understand, for the last six months there has been the COVID nineteen crisis and most court houses are shut.

So I do know that there are a number of cases, some of which I've worked with the prosecution on, which are delayed until the courts can reopen. That will create something of a statistical artifact. But in general, I think the government is reallocating troops away from securities fraud, any trust fraud, to things the government cares more about, such as immigration cases, alleged terrorism cases, other cases that they are concerned with the first three years of the Trump administration.

This comes from data assembled by a group of Syracuse University with the number of white color dependence during the first three years spelled by that's a real decline because there had been a significant increase for a while under the Obama administration. Now, the Justice Department has criticized that tract data, saying it routinely differs from other reporting, for example, from the U. S. Attorney's Office, And they say that

the Department hasn't eased up on white collar crime. Well, actually, the government's official statistics are only slightly different TRACK, which stands for Transactional Report Access Clearing Out. It's a watchdog looking at Justice Department, and they're not loved by Justice. No one loves to be watched. They say the number of dependents is down by and the studies by the attorneys say it's down by not a huge difference. So is it that the FBI is not investigating these crimes anymore,

they're just letting it go by. Well, I would say most of US attorneys use the FBI or other enforcement agencies, but they've got to allocate their own manpower. If at one point in time you had twenty people in the securities fraud Unit in the Southern District and you were to reduce it to ten, you're going to cut the manpower that can prosecute these cases by fifty percent, and there will be a decline, So it could be part of the FBI, but I think it's more the manpower

and what they're given is their priority. Some observers say that though there's a downturn in white collar prosecutions, there's an optick in immigration prosecutions. Well, I agree with that, but that's because you're allocating the truths differently if you take your man power. Let's suppose the U. S Attorney has a hundred lawyers under his command, and when he started he had twenty five with him in white collar crime, and after two years he shifts well with them out

and puts them over in immigration or terrorism cases. Are organized crime cases, you're going to have a consequent declimb because there are less people they're investigating, and you only prosecute what you investigate. What about money laundering, Well, there has been a decline of money laundering cases. Money laundering is unique because the prosecution can charge that pretty much

when it wants. It's a very easy crime to allege if you found other felonies, and by eliminating money learning prosecutions, you are again being more lenient on incorporation and why Well that's speculative. It could well be the Trump administration believes that the stock market is the most important achievement they have and they don't want to prosecute public corporations. And because the market go down, that's all speculative. What I can tell you is they've changed their requirements and

it is now much easier to get leniency. At the end of the Obama administration, they were somewhat embarrassed by the fact that no one at a senior level at a Wall Street firm was prosecuted during the two thousand eight or because of the two thousand eight What I can tell you is they've changed their requirements and it

is now much easier to get leniency. At the end of the Obama administration, they were somewhat embarrassed by the fact that no one at a senior level at a Wall Street firm was prosecuted during the two thousand eight

or because of the two thousand and eight crisis. So they adopted something called the Yates Memorandum, named after Sally Yates, who was the Deputy Attorney General, and it said we're no longer to give you a deferred prosecution agreement, which is a probation like discharge unless you do a complete study and identify absolutely everyone who was involved, so we'll know who the officers are that we can prosecute. And

this was an all or nothing policy, identify everyone. Well, the Trump administration comes in and they change it and they say, you only have to identify people who are

substantially involved in the crime. What does that mean. It means if there's an investigation by a private law firm hired by the company to see what happened and make a report to the government, they can say, well, the only people who paid the bribe for these assistant vice presidents overseas, and while maybe the CEO and maybe the chief financial officer knew something about this, they weren't substantially involved.

And that's a very easy rationalization by which you can exclude the most senior people and thereby make sure that justice will stop at a half white point. It's a significant change that the Trump administration put into effectively unwanted in the Eighth Memorandum. They've done this in other areas too. For the last seventy years, the US government has had a special policy towards any trust price fixing. Any trust price fixing is very hard to detect, but it always

involves the conspiracy. One firm can't do it alone. And so the positive for seventy years is we will give you leniency, but only if you make a complete confession, and you are the first to confess. The business community always disliked that, but companies did make those complete confessions and god immunity for themselves and their officers. Well, the

Trump administration has abolished that. They will now say that while you can still get complete credit, will give you substantial sentencing leniency, great credit if you just adopt a credible compliance plan, not the substantial watering down. It means that price fixing cases are less likely to begin with corporate confessions. We can go through half a dozen of these things. Just to give you one more. It used to be that there were deferred execution agreements, and the

defense bar wanted more. So they pushed for something called non prosecution agreements, under which no court is involved. You just agree with the prosecution that they won't prosecute you. And now they've gone one step further. There's something called declinations with discouragement. And here the government sort of salute you, y say, we think your cooperation was so terrific, so wonderful that we're going to decline to prosecute you. We will require you to pay back the ill, not gains

to discoorge them. But that's sort of a lesser disposition, which the government salute you for your cooperation. That's new with Trump. I can give you two or three more, but you're getting the picture. Yes, Absolutely, cracking down on financial fraud led to reforms and increase corporate compliance. What is this, uh, non prosecution leading to Well, again, there

were two steps to bird prosecution. Non prosecution, which has been around for six or seven years and not not unique to Trump, but Trump is using it much more. It's a lesser disposition under which you don't have to admit guilt, you don't have any public document, you have no court or judge involved, and both of those things

mean a little bit more accountability. Uh. It used to be under deferred prosecution agreements, it was normal that the government would require you to put to appoint a monitor, some outside expert who would review the area of misbehavior and constantly surveil and tell the government who found that there was any sign of continuing activity, that anyone illegal conduct or suspicious conduct. The Trump administration has said monitors

are no longer required, and they are disappearing. I don't think there ever were a perfect solution, but there were one more little step that's gone. I'm wondering, is there any effect to be seen yet our corporations engaging in more criminal behavior because there's no enforcement. No, of course, no one's going to confess to that. No one's going to say, of course, we're engaging a more criminal behavior.

But they think the government's behaving much more reasonably. And when dependants think the prosecutor is being reasonable, I think it means it's a very light touch and we're not getting the harder attitude that we saw at various points

back under the Obama administration. Now, how much is dependent on who the U. S. Attorney is in the Southern District, particularly where there's a lot of white color prosecutions, because of course, you remember pret Berrara, the sheriff, so called Sheriff of Wall Street, who cracked down on insider trading. Nothing did. We don't see anything like that anymore. He deserves great credit. But actually there's been a long tradition

in the Southern district. In fact, other use attorneys call them the sovereign District in New York because they always resisted main justice and followed their own very aggressive policies. But note that the last two duly appointed House Attorneys, both Preeperhara and his Republican successor, have been fired by President Trump. That's a pretty strong signal that you can't remain into and you can't go your own way. No, I don't know any place else where the government has

fired two successive U S attorneys. One of the former prosecutors in the Antitrust and Fraud Division said that a lot of this non enforcement is because veterans. Veteran attorneys have left that division, and then there are younger lawyers there who really don't know yet how to put a case together. Do you think that's a valid explanation. I

can't reject it. I don't know that do we have in the people in the Justice Department with the Usttorney's Office, they usually get the very best people, Supreme Court perks and the others. But it takes a while to learn your job. You can't do it fully on day one. But notice if they are leaving, why are they leaving? It might be they have been demoralized by the new policies, the new restraints, and the lack of commitment to strong enforcement.

I would think I wouldn't personally as a young aggressive U S attorney or says new attorney, I don't think I'd be happy working under the Trump leadership, and I might find other employment. What is the message of your book, Well, we need to be more aggressive in different ways. The number one problem is we don't have the resources to adequately investigate all these cases. That's the principal reason why people that Leahmen and other firms were not investigated. They

weren't just not prosecuted, they weren't investigated. And I think we've got to both get more resources and find ways to make the corporation much more eager to settle. Today, we have a system under which we sort of trade up. We start at the lowest level and find the lowest person and hope you'll implicate the next person, and we climb the ladder with everybody turning on the person above them. That works to a degree, but it never gets you

to the very top. I think one of the things we have to do is to start at the top and tell the board of directors or its art committee that they have to take control of this investor asient and its decisions, and we will threaten you with the equivalent of a bankrupting penalty unless you identify for us who were the responsible officers, going back to identify everyone. So I think you have to negotiate from both levels, from the top down in the bottom up, trying to

get the entity to identify their responsible officers. I'm a believer that we really have to get individuals held responsible and prosecuting. The corporation is a very second bad substitute. And you mentioned before the financial crisis, where you know, people kept saying and what are we going to see people in handcuffs who are really responsible? And we never did. Has there been a time in our history when's the

last time prosecutors have gotten to the top? Go back and think of and Run and Worldcome two thousand one to two th three. The CEOs of both of those firms we went to prison, and the CEO of World Come was only released after twenty five years. He was terminally ill about a couple of months ago. So we have often prosecuted senior executives and around the world common it does other companies and their CEO is criminally prosecuted in jail. And that's the same thing during the Savings

Bank crisis. Bank in the nineteen eighties, something like the five hundred senior bank officers went to prison for failures of small stating banks that took ridiculous risks. And in the details, the problem is the very large corporation. It's going to be a massive inqueror before you can get all the data. Sometimes thousands of people are involved in a broad policy, and that is forbidding to the government. They don't have the resources, and we've got to find

ways to give them resources. One of the things I propose, which the SEC won't like at all, is the SEC is also resource constraint, and sometimes they should hire private law firms, very good private law firms on a contingency the basis to sue the dependence because the SEC and

have enough manpower. But if you told a Planets law firm that they could handle this case under the direction of the SEC und the total control of the SEC, and they would get twenty five percent the recovery as their contingent fee, I think that would solve some of the resource constraints that we are now facing. That's just one of the examples. There are others. Thanks Jack. That's

professor John Coffee at Columbia Law School. His new book is entitled Corporate Crime and Punishment, The Crisis of under Enforcement. President Trump is facing a battle over a set of executive actions he issued on Saturday, providing economic relief measures during the pandemic, including weekly federal unemployment payments, student loan relief,

and efforts to protect tenants from eviction. With those actions, is Trump trying to rest core powers away from Congress after weeks of discussions over a second pandemic rescue package stalled. Joining me is Matt Dalla, a professor at Washington University's Graduate School of Political Management. Our President Trump's orders unprecedented in our history, Well, they're highly unusual. I wouldn't say that they're totally unprecedented in that, you know, Trump himself

has created a kind of precedent for them. So for example, when he is hued at one of his first executive orders out of Blue with the travel band early on into the so called Muslim Band, that was an executive order that actually he had to revise multiple times. And that's so chaoff at airports across the country. I think that there are also uh, He's also set a precedent when is a failure to reach an accommodation with Congress

on his wall. After weeks of trying to negotiate and then failing to reach an agreement, he issued an emergency declaration and tried to repurpose the money from the Defense Department in other places to build the wall. So, you know, even though the circumstances are a bit different, I think that what he's done with these four, both memos and executive orders, are of a piece of how he has

issued orders during his administration. But yes, before Trump, I think that, you know, as controversial as executive orders has been, you know, Trump has has really pushed the boundaries of them in ways that are highly a circumspect and unusual, and the courts haven't stopped him. The Supreme Court ended up approving the final Muslim ban, and and the Supreme Court has let Trump continue to use military funds to build the wall until that lawsuit reaches them. And we

don't know what they'll do with that suit. Yeah, so we don't we don't know what they're gonna do with shoot over the wall and It's true the Supreme Court did a pold but it was a much revised band and it took quite a long time for it to work its way to the courts. And I think the Muggle band had to be revised at least a couple of times. And remember it also evoked this withering descent

from Justice Sonia. So the Mayor too, I believe, likened it to the treatment of Japanese Americans during World War two, sort of a religious discrimination. Letting that stand. So you know, these are highly controversial and looks the executive orders having controversial in the past. I do think what Trump has done, in particular with the executive order about building the wall in the national emergency, and also with these recent orders and memos, is to start to infringe on the congressional

power of the purse. And Congress has the constitutional authority to appropriate money, and the Trump has begun to, I think, infringe on that when he's been unable to reach these fields. Has Congress over the decades, not just during Trump, has Congress been giving more and more authority to the executive by seating more of its authority. Is that how we got to this point? Well, yeah, that's a that's a

big and complicated question. But in an era of nuclear weaponry, and after two world wars, and during the Cold War, and then after nine eleven, certainly on matters of national security and foreign policy, the trend for many decades has been to seed to the president a much much greater authority and and even to the extent where Congress has voted on whether or not authorize a war, it has not been a formal declaration of war as the Constitution demands.

It's been a resolution, you know, a resolution, for example, to authorize the Youth of Force Interact in two thousand, in two four, after nine eleven, the resolution to authorize a Youth of Force against Terrorism, which I believe it's still enforced and has been used to justify all sorts

of military activities overseas. The other point I would make is it in a narror of partisan polarization, when Congress has been unable to reach deals, and when Congress's approval ratings are maybe at fifteen percent or sometimes even in the single digits, presidents have, you know, as Barack Obama said, after being frustrated repeatedly by Republicans in Congress, he's got a phone and a pen, and the pat of course

refers to using executive orders and other executive actions. So Congress, by defaults in a way, by being unable to enact or pass major legislation, has seeded I think, uh much of it unwittingly seated much of this authority to uh to presidents and has opened the door for the kind of misshif I think that uh, and and what I

think many are you unconstitutional actions by President plump. Republican Senator Ben Says said the pen and phone theory of executive lawmaking is unconstitutional slap, but he was one of very few Republicans to criticize this move. And so what are the Republicans saying by letting the president go ahead with moving military funds to a board a wall, and

here redirecting funds from FEMA. The first thing is that it's the height of hypocrisy, right that the Republicans spent many years railing a President Obama for acting like a king and issuing these sorts of unconstitutional orders that were supposedly destroying freedom and individual liberty. I think what we're seeing though, now, of course, is the shoes on the other foot, and and in particular, the Republicans are headed

into a very trust election year. The president is on the ballot, and I think most Republicans at the federal level feel like politically they have no choice, right that that their faith and really the power that they have in Washington and in the country. Uh and to point Supreme Court justices for example, that all that is riding on this election. And you know what, they come out like Ben Fast did and start criticizing Trump. I think that they worry that the party is going to be

even further divided and it will depress their votes. Then it's Fast. Interestingly, who's up for re election. I believe in November he's already won his primer, and you know, he doesn't have a even close to competitive race, so you know, he's a little bit more politically free to issue a criticism. But yeah, I mean Republicans have really and you can say that about you know, a hundred and one different issues over the past four years where

Republicans have just kind of washed their hands up. What they have said is there are their principles and seated the stage and the policies and programs the Trump even if it violates their own beliefs, we're President Obama's executive orders substantially similar to President Trump's. In other words, did he ever divert money in executive orders from one project to another, Not that I'm aware of, Not in the

way that Trump is using. Uh. These orders. Now, you know, almost alt executive orders require almost by definition, the use of some funds, because of course you're telling federal agency to prioritize one issue over another. So, for example, when President Obama think his first executive order, one of his first was to authorize the closure one ton of obey. Now that never happened, but certainly there was some funding involved, right, and getting the federal government to focus on that project.

Same thing one President Obama issued the DOCTA order. You're telling the immigration services in the federal government to focus on particular priorities and find being closed as a result

of that. What I think makes Trump's orders different is that, uh, and again with both the border wall and the avlates executive orders, is that after leaks of negotiations with Congress then failed over the power of the purse, which is constitutional powers that Congress has, Trump has issued an order to circumvent that and to change vending policy, and to appropriate essentially new funds for purposes not authorized by Congress, and also in this case, to change tax law unilaterally

and in a way not authorized by Congress. So, you know, these are I think there's a reason why so many constitutional scholars are looking at this and saying that this is dubious. Transactions are dubious at best. And you know President Obama is I would say most aggressive executive orders had to do with immigration, one of them DOCTA for the children who came to the country as undocumented immigrants, and then the other with a more sweeping executive order.

One of those withstood scrutiny in the courts, the other did not. But I don't think President Obama or other presidents have explicitly with their orders tried to stop invent the power of the person that Congress enjoyed. Well, when he was announcing these orders, President Trump said basically, well, we're going to be sued on this. I think the question is who would sue to stop these Well, yeah, that's what's That's always the question in these things, right,

who's going to do the stopping? And also how long will the stop and take? Even if the Democrats and Congress don't to. It's conceivable that some state and state attorney general will to because in this unemployment order or memo that Trump has issued, he has requiring the states I think, to shift in a hundred dollars to make it to four hundred dollars a week for people who are unemployment. And the States are saying, look, you know,

work and too bankrupt. We can't take on this added expenditure at a time when we're going to have to make these major cuts. So you could see the states doing. You could see nonprofit organizations that um in part to send Congress or or see their jobs. Is sort of

promoting the separation of powers. Trying to sue and the course, for course tapped aside who has standing, just as the court had to decide this question in the emoluments cases where President Trump was being sued about his properties and whether his government was unconstitutionally essentially accepting payments from foreign entities. The problem that that I think the Democrats have, of course, and that's been true with any number of cases with

Trump visit. You know, the courses we've seen are slow, and they're often divided, and even in this case of some tastes which have still never been revealed. So you know, we see the limits, uh, the from both Congress and the courts, I think in uh in this instance as well. At a press conference yesterday, Trump said that he was going to issue an executive order to ensure that insurance covers pre existing conditions, even though it was pointed out that that is already part of the law known as

Obamacare that his administration is fighting. So I'm wondering if all these things are just for show and he doesn't really care if it goes through or not. Yeah, well, let's yeah, I mean, let's just kind of cut to the chase, right. Um, Both that order right that he's going to use to protect pre existing conditions, and the other orders in demos about payroll taxes and unemployee insurance.

I mean, these are essentially efforts to call on people and to think that he's actually doing something, um, and to create the illusion that he is taking action now in the preexisting order prexisting conditions. Um. I mean it's absurd on its face because he aspects his entire presidency basically trying to abolish Obamacare and abolish that provision, which

is at the heart of Obamacare. And you know, remember he tried a couple of times through Congress to um to enact a law or well basically told defined and abolish Obamacare and to abolish the prexisting conditions. And his administration is still supporting a lawsuits uh, that would do exactly that. And so that executive order is really I think, um,

you know, it's gonna affect to reality. Uh. And then on these other orders, yeah, I mean this unemployment bump that he says that he's going to give, Um, the states are already saying it's unworkable. And apparently what he has done is he's trying to create a new kind of program. The funds apparently would only laugh for five weeks for people. Well, um, but it may take weeks for months to kind of stand up the program. And uh.

And the states, I think that it's just for a lot of states at least, think that it's just unworkable, right, that it's not it's not feasible. Uh. And and so it is unclear whether any money that he says he's gonna give to people are ever going to reach their hands. But it is a way of trying to cover up the reality that you know, Democrats have to fill in the House to continue the six hundred dollar a week supplemental unemployment insurance for people across the country hit by

the pandemic UM. The Republicans and Democrats failed to reach an agreement. The Senate Republicans couldn't past their own bill, and so Trump, I think, is trying to kind of cover up for that and cover up for this, you know, real political weakness that he has heading into the fall elections. Okay, cool, Well, before I let you go, what are executive order is supposed to be used for? We've seen a lot of misuse over the years. What are they supposed to be

used for? Well, look, there's no one definition. UM. Historically they have been used for issues such as promoting UM uh uh anti discrimination, putting an anti discrimination clauses, fighting racial discrimination in federal contracting UM, setting up for example, the Fair Employment Practices a Commission during World War Two for promoting a formative action UH and empty in the nineteen sixties, in particular with respect to federal contracting and

federal hiring. There has been also executive orders abridging civil liberties, directing creating security measures in the Departments, State, and the National Security apparatus. Uh. We have seen executive orders around public health, so stem cells research, which was a controversial issue, and remember President George W. Bush I think it was the first order he signed, or one of them, executive orders limiting stem cell research, and Barack Obama listed those

restrictions as soon as he got in the office. They are also generally a way the I mean more broadly, there's a way that the president can use these orders to attempt to tell the federal agencies and federal bureaucracy that the president runs uh how to prioritize the works that they do, and also how to interpret the laws that Congress has passed. So there are but there are

also significant limits on them. And what we have seen, UH is that executive orders are also pretty easy once the other party gets in the past to overturn unless

they're very popular. So President Obama used an executive order to create the h Deferred Action program for Dreamers, and President Trump presended that So, um, you know, they tend to lead to a far more chaostic approach to governing, and they tend to UH and and they're also vulnerable to being overturned by opponents once they get in the office. That's Matt Dalek of Washington University's Graduate School of Political Management. And that's it for this edition of the Bloomberg Law Show.

I'm June Grasso. Thanks so much for listening. Catch us every weeknight at ten pm Eastern on Bloomberg Radio.