Why Corporate Executives Can Commit Crimes Without Punishment
A criminal is a person with predatory instincts without sufficient capital to form a corporation.
-Clarence Darrow
This is the fourth article on the ineffectual criminal prosecution of Boeing arising out of the fatal crashes of two 737 max planes killing 346 people. The series starts here
Despite a judge of the Delaware court detailing evidence from Boeing internal documents implicating upper management in blatantly disregarding the risk from the faulty design of the 737 Max — and even after the crash of one plane -failing to prevent the crash of the second, the Department of Justice refused to prosecute any of the senior executives.
You can read a summary of that crucial evidence in my earlier post: Boeing: A Sociopathic Corporate Culture
J udge Them by Their Actions Not Their Words
“Our first priority has been — and will continue to be — individual accountability. Companies can only act through individuals.
The rule of law demands that those most culpable for a company’s misconduct are the ones being charged, prosecuted, and convicted.”
“ Prosecution of a corporation is not a substitute for the prosecution of criminally
culpable individuals within or outside the corporation.” Justice Manual 9–28.210.
While the deputy AG talked of continuing to prosecute individuals, that is a politician’s spin. Let’s look at the record.
● In the Savings and Loan crisis in the late 1980s over 1000 bankers were charged criminally. Some saw the inside of a jail cell for significant sojourns.
● However, in 2008 HSBC and Wachovia were caught laundering multi billions for the Sinaloa drug cartel (of Shorty Guzman fame). No executives were charged.
● In 2014 evidence surfaced of a memo written by a whistleblower, Alayne Fleischman, who had worked at JP Morgan Chase. It disclosed that JP Morgan executives knew It was including toxic mortgages in the mortgage-backed securities it was selling to investors as AAA safe. JP Morgan and 17 other banks (all the major banks) were fined in a civil lawsuit on the basis of fraud and given non prosecution agreements. No executives were charged or fined.
What changed between the time of the Savings and Loan crisis and the later events? Bill Black, who was in charge of the S&L prosecutions, took a teaching position at a University when he left government.
The AG at the time of the subsequent crimes, Eric Holder, had been at a law firm that represented banks and corporations against prosecutions by the Department of Justice. Using that metaphorical revolving door between the Department of Justice and corporate law firms, upon leaving the government, he returned there to his lucrative partners’ salary.
Encouragement to Charge the Executives
“When Boeing was granted a deferred prosecution agreement, I said that it would incentivize bad behavior and do nothing to change the rotten corporate culture that allowed Boeing to mislead and deceive regulators, because it held no one accountable.”
Additionally, the DOJ now had hard evidence of management involvement:
In spite of all the above, no charges against upper management were laid. The five-year limitation period has expired.
How Can This Be Happening?
What explains this inaction in full view of the public and in complete contradiction to stated policy? In a Wall Street journal article, Inside DOJ’s Wrenching Decision on Whether toProsecute Boeing, Andrew Tangel & Dave Michaels reported:
“Some prosecutors wanted to probe whether the company or its executives defrauded investors by denying problems with the 737 MAX’s safety, according to people familiar with the discussions, but supervisors told them to focus on Mark Forkner, a pilot in charge of dealing with certain Federal Aviation Administration officials on training matters.”
The mention of more senior members of the department overruling lower ranking ones suggests ‘regulatory capture’. Are these supervisors looking out for their future career when they leave the department?
The Pervasive Sociopathic Values
On reviewing the Boeing documents produced in the Delaware shareholder lawsuit, you might have expected to find some cost benefits analysis comparing the cost of doing the body redesign at 7 billion and paying damages for passenger deaths as was done in the Ford Pinto exploding gas tank situation. (From the settlement with the DOJ, we know the cost for killing 346 people is $500 million. Quite a savings from the 7 billion needed to do the redesign!)
But there were no such deliberations. In fact, the situation was a bit worse. Although Boeing was putting a product on the market that could result in mass deaths, Zurn found that the Board wasn’t concerned about safety at all. It was only concerned about profits-and Boeings’ focus on profits that continued after the Lion Air crash (October 29, 2018) and also after the Ethiopia air crash (March 10, 2019) until after the FAA investigated the Ethiopia crash and grounded the 737 Max.
The Delaware Court noted:
* A memo from the CEO to the Board on March 13, 2019, “…marked one of the first formal implementations of safety reporting to the Board”. (p49)
* On April 4, 2019, “The Board also initiated Board-level safety reporting for the first time”.(p52)
Additionally, the Court found “The Board publicly lied about if and how it monitored the 737 MAX’s safety” (p55) and gave a list of several false statements the Board made covering up its disinterest in safety.
One would think there was certainly enough evidence to also charge the members of the Board of Directors with manslaughter or criminal negligence.
The Board’s total disinterest in safety raises the question of what kind of human beings are making these important decisions in corporate boardrooms without consequences to them.
Acknowledgement: Plane image by Lee Rosario from Pixabay
Originally published at https://jandweir.substack.com.
