Elizabeth Warren 2020: Warren wants to imprison leaders for professional misconduct

Only one banker went to jail after the 2008 financial crisis. Wells Fargo's CEO and successor left the megabank with multi-million dollar payment packages after discovering that his employees had created millions of fake accounts. The same goes for the Equifax CEO after his data breach.

Senator Elizabeth Warren wants this to change. Instead of these executives disappearing after their businesses get caught, misbehave or remain without consequences, she wants them to go to jail.

The Massachusetts Democratic Party and the presidential candidate of 2020 on Wednesday adopted the Corporate Executive Accountability Act, a new law that would hold business leaders accountable for the misdeeds of their businesses, whether or not they personally approved actions that violated the law. The bill builds on existing laws to include careless executives of corporations generating more than $ 1 billion in business turnover. It says that if they or the companies that they run are misbehaving, they go to jail for a year.

This bill complements the law on incarceration, which Warren introduced in 2018 and reintroduced this Congress again. This proposal would require CEOs of major banks to certify that nothing illegal is being committed under their supervision and to establish a permanent government investigation unit to investigate financial crimes.

"They will probably allow prosecutors to hold bankers and other corporate executives guilty of misconduct in court," said Bart Naylor, a financial policy advocate at the Public Citizen Watch Group, which supports both parties. law projects. .

In an editorial published Tuesday evening in the Washington Post, Warren set out the case for his legislation. "If senior executives knew that they would be handcuffed for not having reasonably supervised the companies they run, they would have a real incentive to better monitor their operations and put an end to the wrongdoing before they even get into trouble. they do not become uncontrollable, "she wrote.

Warren, 69, is ahead of his 2020 Democrats in terms of deploying major policies to this election cycle. And many of his proposals are aimed directly at American companies and financial interests, whether it is to dismantle agricultural and technological conglomerates, impose a wealth tax, or reshape American capitalism and governance. business.

For years she has come up against the banking sector and corporate interests and initially devised financial reform Dodd-Frank. As a candidate for the White House, she makes Wall Street nervous.

Executive Accountability Act, briefly explained

The new legislation that Warren introduced would fundamentally facilitate the accountability of corporate executives to the wrongful acts of their companies. In general, it is difficult to prove a case against individual leaders for turning a blind eye to risky or suspicious activities, because prosecutors must prove the intent – basically, they were willing to do so.

This bill would change that, "said Heather Slavkin Corzo, senior researcher at the progressive non-profit American organization for financial reform. "It's easier to show a lack of caution than to show the mental state of the individual at the time the act was committed," she said. .

A summary of the legislation published by Warren's office explains that it would "broaden the criminal liability of negligent executives of companies with annual sales exceeding $ 1 billion" and that:

– Be found guilty, plead guilty or enter into a deferred agreement or non-prosecution for any crime.

– are found responsible or have entered into a settlement with a federal state or regulator for violation of civil law if the breach affects the health, safety, finances or personal data of 1% of the US population or 1% of the population State population.

– are found liable or guilty of a second civil or criminal offense for a different activity while they act under a civil or criminal judgment of a court, of a agreement to prosecution or deferred non-performance or settlement with a federal agency or state.

Leaders found guilty of these violations could be sentenced to one year in prison. And a second violation could mean up to three years.

This does not mean that leaders can be jailed for anything that happens in their business – there must be a concrete justification that they have been negligent or should have known what was going on. But in the example of Wells Fargo, for example, legislation like this could have made a difference. The company had an incentive system that pushed workers to create millions of fake accounts and ignored warnings about it.

"We have just seen case after case where the company and shareholders have been penalized and admitted wrongdoing, but there is no personal responsibility of the leaders," said Marcus Stanley, policy director at Americans for Financial Reform.

This builds on Warren's earlier legislation

The Corporate Executive Accountability Act is based on Warren's sentencing legislation, which was too heavy for incarceration.

This bill requires bank executives with more than $ 10 billion in assets to certify each year that they have initiated the due diligence process and have not found any criminal conduct or fraud in the institutions they serve. monitor. It may allow prosecutors to prosecute such leaders more easily if wrongdoing is discovered, because if leaders certify that all their ducks were aligned, but they are not, it would be easier to hold them for officials.

It would also create a permanent agency to investigate criminal activity in all national financial institutions. It would essentially be an extension of the SIGTARP program (Special Inspector General for the Disaster Relief Program) created after the crisis to ensure that financial institutions receiving money from government use it properly. SIGTARP has in fact succeeded in punishing the bad actors in the financial sector after the crisis, but its scope is limited and Warren's bill would expand it.

Brandon Garrett, a law professor at Duke University, told me that he thought the Endo Too Jail Act could be the most powerful of the two bills proposed by Warren because officials often do not have necessary resources respond to that.

"Especially with all the turmoil at the Department of Justice, you only have a lack of enforcement capacity," he said.

Through his research, Garrett found that prosecution and enforcement at the federal level had decreased under the administration of President Donald Trump. He said that in general, in about one third of cases in which SOEs enter into a plea agreement or deferred prosecution agreements, they are either found guilty or admit the existence of A crime, the people associated with the case are prosecuted.

Laws like these would be difficult to sell among moderate Democrats, let alone Republicans. Democrats should take over the Senate in 2020 and probably remove the buccaneer for something like that to be adopted, and even then there is no guarantee.

In addition, previous administrations have also pledged to crack down on financial crimes and US companies to adapt once they have control. Of course, Warren has bet a good deal of his career on companies and banks. It could be different.

The big American companies are being hurt … a lot

As a result of the financial crisis, many Americans were outraged by what they perceived as a facility for banks. Only one major banker, Kareem Serageldin from Credit Suisse, went to prison.

And since then, many players in the financial sector have always behaved badly. Wells Fargo has been the subject of a cascade of scandals; Equifax was the victim of a huge data breach and kept it secret for weeks.

It's not just the banking and financial sector. Facebook has seen successive scandals since its inception, ranging from data breaches to misinformation campaigns and beyond. The companies in the pharmaceutical industry that have perpetuated the opioid crisis and the leaders who have overseen them have hardly suffered the consequences of this crisis.

For many companies, especially large ones, breaking the law or acting unethically is only the cost of doing business. They may have a fine and a slap on their fingers, but as long as they make enough money, it's worth it.

Warren's legislation seeks to curb this behavior, and she bets that if there is a personal threat of imprisonment, leaders can think twice. The experts I spoke to said they hoped that laws such as this one would encourage more prosecutors to take up a case.

"Companies do not act on their own," said Slavkin Corzo. "So, if a corporation was engaged in criminal activity, there were clearly people in society who made those decisions, and those people should be held accountable."

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