IT WAS CINCO DE MAYO. May 5, 2011. “How fitting,” thought Paul Pelletier. The holiday commemorates the Mexican army’s 1862 victory over France at the Battle of Puebla during the Franco-Mexican War of the 1860s. Pelletier, of French and French-Canadian heritage, nursed his defeat. The Breu Crew had forced him out of his beloved Department of Justice. Tonight was the wake, a classic DOJ going-away party and roast. The turnout was so overwhelming that they spilled out of the restaurant and into an adjacent atrium. Maybe two hundred had come. “How amazing was that?” Paul marveled.
Pelletier looked up and saw people in the balcony. People gathered around the fountain. His family was there. His sister and her husband came. His old US attorney from Miami made the trip up. People flew in from all over the country. The party had maybe the broadest grouping of agents any prosecutor had ever managed to gather in one place—and those guys didn’t like mingling with one another. The FBI, the US Department of Health and Human Services Office of the Inspector General, the Postal Service, and the Secret Service all sent agents. Even Lanny Breuer, ever the politician, came.
Aside from Breuer, however, the front office and power class of DC had passed. The attendees weren’t looking to make an appearance to further their Washington careers. Though Pelletier’s going-away party wasn’t well attended from the top-down at the Justice Department, it was thronged by the bottom-up: secretaries, paralegals—anyone who had worked for him over the years. Guys who had put thirty years in at the department and knew what the government was losing came to see him off. These were people who felt love and loyalty toward Paul Pelletier.
It was a rousing night. One of the Miami mafiosi who had joined Pelletier up at Main Justice emceed the affair. Every time they anticipated profanity, the children were hustled out of the room. “Send the kids away for this one!” someone would say, to another round of laughter. The emcee started in with his PowerPoint presentation, with some innocuous pictures of the Pelletier brood. Then he showed a photo with the washed-out, overexposed colors of the 1970s: Paul with blond hair to his shoulders, in a green plaid tuxedo with black lapels as wide as vulture wings, awaiting his prom date. Still another had Paul in his cop’s uniform, giant mustache over a ridiculous grin, reaching for his gun. The presentation was peppered through with Pelletierisms: “Don’t be a p%$$y!”; “Do your J.O.B.!”; “Keep doin’ what you’re not supposed to be doin’!”
Speakers made paeans to his supervisory ability and his love of public service. One slide read: “There is a simple Paul Axiom—one that defies all other laws of physics and science: If Paul is on your side, anything can be accomplished. If he is not—you are screwed.”
Pelletier held off drinking too much. He wanted to take it all in and be lucid for his speech, which came at the end. At last, his friend handed Pelletier the microphone. He looked up to the balcony and around. He began by giving out presents to colleagues and supervisors. To Denis McInerney, the cautious head of the fraud section who had so tormented him with his passivity, he produced a white cue ball and told him, “Here. This is my left nut.” After the round of joke presents, he launched into his farewell speech.
“The best piece of advice my father ever gave me,” he began, “was: ‘Never argue to crazy people.’ ” Everyone laughed. “That really prepared me to work at Main Justice . . . particularly the front office.”
But Pelletier had some serious points to make. “Everyone talks about wanting to do the right thing,” he said. Whenever there was a tough decision around these hallways, that was the mantra. Every prosecutor had been told many times, “Do the right thing.”
“I don’t know what the fuck that means,” he said with a shrug. People laughed. Something might be “right” to one person and not to another. How can you tell? Too often, it was an empty platitude at the Department of Justice. Well, you can tell if you are willing to take a risk. “If you are prepared to fight for it, then it’s probably the right thing,” he said. But the corollary was true, too: “If it’s the right thing, then you have to fight for it. If you are not willing to fight for it, then don’t give me that bullshit.”
The fighting man of Main Justice presented a gift to the Department of Justice. As he put it, “The department is dispossessing its history.” He wanted to remedy that. His voice choked, and his eyes watered.
“The department,” he said, “gives so much to us; we need to give something back.” He gave the department two giant photographs. “They cost me a fortune,” he assured the crowd.
One photo contained all the attendees for the fortieth anniversary party for the fraud section. The second depicted everyone who had come to the fiftieth anniversary. The department is about the people who staff it. The politicians come and go. The honor belongs to the people and the mission.
The night had been so emotional and had gone so fast. That weekend, Paul Pelletier cleared out his office.
The Department of Justice does not merely struggle to prosecute top bankers. The problems go beyond the financial crisis and beyond the financial sector. Even corporate prosecutions that do not involve powerful banks face profound problems. In April 2012 the New York Times ran a blockbuster story by star investigative reporter David Barstow. He had uncovered that Walmart’s Mexican operation had carried out a “campaign of bribery to win market dominance.” Walmart found through its own internal investigation at least $24 million in suspicious payments. The lead agent on the probe determined that American and Mexican laws had probably been broken. Then, the report went on to demonstrate, Walmart’s leaders, including then CEO H. Lee Scott Jr., kiboshed the investigation. Barstow won a Pulitzer for the stories the following spring.1
After the New York Times approached Walmart but before the story came out, the company reported itself to the Department of Justice for possible violations of the FCPA. The retail giant had known about the bribery allegations but had shown little inclination to reveal itself to the government until the Times forced the matter. The Feds initiated an investigation. The Walmart investigation generated a cornucopia for law firms. The retailer spent upward of $700 million on legal advice and compliance improvements.2
All that money was well spent. The Justice Department’s probe proceeded slowly. The government was frequently stymied. Many of the allegations involving Mexico were old. The statute of limitations had run out. The Mexican government barely cooperated, ignoring the Department of Justice’s official requests for assistance for years.
Walmart seemed to have had troubled operations in other countries as well. Justice Department officials investigated its activities in India, China, and Brazil. The department tried to put resources into the case. There were two prosecutors from the Eastern District of Virginia and three from Main Justice. But early on, prosecutors couldn’t get the FBI or the IRS engaged. The agencies did not prioritize the case.
Part of the Big Law playbook when corporations are under federal investigation is for them to appear as if they are taking the allegations seriously. Companies ease out culpable executives. Prosecutors tend to look favorably on such earnestness. After two years, Walmart eased out at least eight executives who had been involved in the suspicious activities or had been alerted to them. Their retirement packages, however, remained intact. The Department of Justice probe lasted years but slowed dramatically by 2015. In October of that year, the Wall Street Journal reported that the federal investigation found no serious violations.3 That Walmart made its changes and avoided any charges or even a deferred prosecution settlement suggested that the gentle farewells had been carried out with at least the tacit approval of the government. One of the biggest corporate scandals in years faded away to nothing.
Similar problems plagued the corporate investigations into Toyota (for the unintended acceleration problems with its cars) and General Motors (faulty ignition switches). Toyota did not cooperate fully with the Southern District’s investigation. As for GM, the Department of Justice could not identify any executives who had the full picture of the carmaker’s problems and responsibility for fixing them.
Even dedicating resources does not bring success. After the Deepwater Horizon platform exploded in 2010, killing eleven people and causing the largest oil spill off the US coast in history, Lanny Breuer gathered together a task force to investigate. BP paid $4 billion in criminal penalties and pleaded guilty. But by early 2016, the task force had come up almost entirely empty against individuals. It had started by charging low- and midlevel executives with a variety of crimes, but began withdrawing charges and dropping executives from its cases as courts ruled against it. The government ended up withdrawing manslaughter charges against two midlevel supervisors. Some of the cases were dismissed. Finally, the Justice Department lost three trials against executives.4
Even supposed triumphs against corporate executives often underwhelm. In late 2015, the Justice Department brought coal baron Don Blankenship, CEO of Massey Energy Company and a power in West Virginia, to trial for his role in creating unsafe conditions at the Upper Big Branch mine, the site of a terrible explosion that killed twenty-nine miners in 2010. The jury found Blankenship guilty, the first conviction of a top executive for a workplace safety violation.
But the success was tempered. Massey was not in the Fortune 500 and presented an easier target than, say, a Goldman Sachs or JPMorgan executive. More troublingly, the jury found Blankenship guilty only on one count of conspiracy, a misdemeanor for breaking federal safety rules, and exonerated him on two other felony counts.5 Even with a local jury made up of people supposedly sympathetic to dead miners, such cases don’t go smoothly. The judge sentenced Blankenship to one year in prison, the maximum allowed by law. People hailed the result, relieved that at least yet another CEO wasn’t getting off. But for a man who had been so cavalier about jeopardizing the lives of his employees, one year seems paltry.
• • •
Defenders of the Department of Justice maintain that these failed corporate investigations did not indicate a lack of will or skill. They highlighted, these people argue, the inherent difficulties with prosecuting corporate crime. Corporate responsibility is diffused; the top leadership of giant corporations make few day-to-day decisions and none without the advice of lawyers and accountants. They say that prosecutors didn’t make cases because there were not cases to make.
But then the Department of Justice started changing its corporate investigative practices and policies. In making these shifts, the department tacitly admitted that its past actions were indeed wanting. The age of deferred prosecution agreements gave way to what we have today: prosecutors and the SEC, responding to criticism from Judge Jed Rakoff, academics, the media, lawmakers, and activists, made companies admit wrongdoing and plead guilty.
The government now assigns corporate monitors to oversee its settlements more frequently. By early 2016, the 2008 crisis had resulted in nearly $190 billion in fines and settlements from forty-nine separate financial institutions.6 These new arrangements are no more satisfying than the previous period’s. The fines continued to hit the shareholders, not the wrongdoing executives. Prosecutors almost never named any individuals. Portions of the penalties often were tax deductible (since they were partially disgorging profits). All the big banks lined up to make mea culpas over mortgage securities misdeeds. For mortgage securities abuses, JPMorgan paid $13 billion, Bank of America paid $8.5 billion, and others paid giant sums. The big banks paid up for foreclosure abuses; for manipulating interest rates and foreign exchange rates; for trading with sanctioned countries; for money-laundering-monitoring failures; and for conflicts of interest in their research activities.7
But many of these settlements became less impressive once the particulars came out. The banks could earn credit for building affordable housing or helping mortgage holders, earning bonus dollars for each dollar actually spent. Perhaps worst of all, the department’s statements of fact that went along with these settlements were terse documents that contained little detail about who did what to whom and when. The banks wrote checks and in exchange won the ability to shield their executives from punishment and the specifics of their activities from the public eye.
The government celebrated its admissions of wrongdoing and guilty pleas, but they are little more than a semantic change. Prosecutors took extreme measures to minimize the regulatory consequences for a guilty plea. Regulators did not pull licenses. They did not ban them from government programs. The guilty pleas had only symbolic value. They lacked force just as much as the old settlements did.
The Eric Holder era at the Justice Department ended in April 2015. He rejoined Covington & Burling in July. The nation’s first African American attorney general had the third-longest tenure in history. Mythili Raman, the acting head of the criminal division, who had been in the role since Lanny Breuer left in early 2013, departed in the spring of 2014 to reunite with Breuer at Covington. James Cole, the deputy attorney general, left in early 2015 to join another top white-collar defense firm in Washington.
The regime of new attorney general Loretta Lynch moved to fix the flaws of Holder’s term. Few, if any, would admit as much publicly. Leslie Caldwell, who headed up the Enron Task Force, became the chief of the criminal division. She brought in her old friend and colleague from the task force, Andrew Weissmann, to be the chief of the fraud section. Weissmann had spent several years after Enron as a zealous advocate for his corporate clients at Jenner & Block, but he retained his reputation as a tough prosecutor.
As chief of the criminal division, Caldwell remained guarded both in public and private. But she told friends that she found the post-financial-crisis investigations puzzling. She thought it was a failure that the department did not prosecute Angelo Mozilo, the chief executive of Countrywide. The case had been given to the Sacramento office, with an assist from the Los Angeles office. According to Caldwell, the offices didn’t have the skill or experience to bring the case to a successful indictment.
For Lynch’s new deputy attorney general, the Obama administration chose Sally Yates, the US attorney general for the Northern District of Georgia. Confirmed in May 2015, Yates did not fit the model of early Obama administration clubby Beltway types. She was a career prosecutor, having worked for the Justice Department for twenty-six years. Yates had gone to the University of Georgia School of Law, not an elite institution. Four months later, she published the Yates memo. The memo was the first overhaul of the Department of Justice’s corporate prosecutorial policies of the Obama administration.
The Yates memo was seen for what it was: an implicit critique of the previous Holder administration and a tacit admission that it had not done enough to prosecute top executives. Yates created new policy: the department had to go after individuals again. The key element of a corporation’s cooperation, the memo stated, was to identify individuals who had done something wrong. Without naming the people responsible, a company could not get credit for cooperation and softer penalties.
Some critics welcomed the new policy but with caution. What individuals would corporations be required to finger? How would the Justice Department prevent a company from scapegoating some low-level schnook? In the SEC case on Abacus, the agency had been satisfied to go after Fabrice Tourre and no one else. Time and again, the government went after only one low-level employee, a “lone gunman theory” of corporate crime. Would the Yates memo change this practice? Would the department’s investigations go high enough, to the boardroom and the top corporate offices? Would prosecutors still be overly reliant on Big Law’s internal investigations of its clients?
The department even undermined these minor improvements. At the same time that it issued the Yates memo, Main Justice also set up a compliance office to vet corporate cooperation. The ostensible aim was to determine whether companies were cooperating or not and whether they were receiving due credit. The effect would be to add to the bureaucracy. The move added yet another layer of evaluation for investigations, making it harder to bring cases against either corporations or high-level individuals.8
The Yates memo suggested that the Justice Department’s policy had changed, but had it altered the way the department conducted business? The answer soon appeared to be no. In the first year of the Yates memo, the DOJ scored few obvious successes. When it brought a civil action against Goldman Sachs in 2016 for mortgage-related wrongdoing in the lead-up to the financial crisis, the Department of Justice named no individuals. The government charged individual executives from Volkswagen for having faked its emissions tests, but it did not appear likely to charge top officials at the German carmaker.
Despite its fanfare, the Yates memo lacked ambition. Implying a criticism of past practices is not the same as making one out loud. The Justice Department did not reckon publicly with its corporate white-collar prosecution problem. It had not conducted any serious analysis of whether it had lost crucial prosecutorial tools over the last several years or had devoted insufficient resources. It did not grapple with whether staff prosecutors have the incentive or skills to work on long cases against well-fortified defendants. There is no sign that the Justice Department thinks it should recruit different types of lawyers to bring cross-fertilization and a wider range of experience: older and more experienced lawyers; those with public interest law backgrounds rather than those from private practice; those from less prestigious institutions. The government has not grappled with how dependent it is on Big Law’s internal investigations for its own probes. The government gave no indication it understood it needed fewer insiders and more outsiders. The Justice Department published no reports about the issue. The department made no request from Congress for new statutory powers to prosecute white-collar criminals. The lack of public introspection doomed the policy change.
A broad coalition of corporate interests had led a fight against prosecutorial power in the post-Enron period. After Enron, Arthur Andersen, WorldCom, Adelphia, and Tyco, corporations, their lobbyists, and the white-collar defense bar revolted. They forced the Department of Justice to roll back the Thompson memo, depriving the government of tools and techniques to push corporate investigations. They won in courts, especially at the appellate level. They took advantage of the prosecutorial abuses and overreach. Over the decade, these interests changed the way the government enforces the corporate criminal code.
Now the same forces gathered again to fight the Obama administration’s initiatives. Modest as the corporate guilty pleas and the Yates memo were, the corporate lobby recognized a new danger: the government understood how inadequate its corporate investigations were. And so, in response to the reforms of the post-financial-crisis era, the same interests tried to roll out the same campaign from more than a decade earlier. Why shouldn’t the defense bar go back to the exact same playbook it had employed then? It had worked.
Former members of the Obama administration, now working for corporations, attacked the Yates memo, just as former Department of Justice officials had assailed the Thompson memo. In November 2015, two months after the memo was issued, two former high-level officials in Obama’s Justice Department went public with criticisms. Both had just moved to private practice. Mythili Raman, the former acting head of the criminal division and now a partner with Lanny Breuer at Covington & Burling, feigned hurt at what the Yates memo was saying about her tenure. “I was surprised, a little, that there was even an implicit acknowledgment that there weren’t sufficient prosecutions brought against individuals, which, in my view, wasn’t necessary to say,” she said. “You bring cases if you have the evidence, and if you don’t, you don’t. That’s about as plain as I can say it.”9
Yates’s direct predecessor, James Cole, attacked the new memo more forcefully. In a speech at a meeting of the American Bar Association, he revived the same argument levied at the Thompson memo: the Department of Justice was attacking the sacred attorney-client privilege. He went on to argue that with the Yates memo in effect, corporations will clam up to their lawyers. Executives won’t cooperate with investigations. The new Justice Department policy will backfire, he warned.
Yates denied that the department had any interest in violating attorney-client privilege, just the way that Larry Thompson had walked similar hallways at similar conferences making similar arguments. Cole responded to Yates with condescension: “With all due respect, I’m not sure she entirely understands.”10
The defense bar worked the government refs almost every week in the nation’s capital and in New York. Prosecutors gathered with white-collar defense attorneys at cocktail parties, conferences, dinners, and meetings where they heard about the mistakes they were making. In the real world, the public saw a pandemic of corporate misconduct and a lack of accountability. At these gatherings, however, white-collar defense lawyers of Washington insisted that their clients were the real victims. They had been bent to their knees beneath the weight of the government’s arbitrary, capricious, and harsh punishments.
Whether they have faux Louis XVI gold leaf moldings or bare beige walls suitable for thumbtacks, whether they serve cantaloupe and honeydew of the same pale color and tastelessness or acai smoothies with chia seeds, all Washington conference halls are the same. Lawyers, politicians, policy makers, and lobbyists gather to practice the genteel art of public influence. At the Securities Enforcement Forum in the fall of 2014, held in the capacious halls of the Four Seasons Hotel in the Georgetown district of Washington, DC, top regulators gathered with defense bar worthies. The marquee panel included Andrew Ceresney, the enforcement director of the Securities and Exchange Commission, and five of his predecessors. Four of those former SEC officials now represented corporations at prominent white-collar law firms: Robert Khuzami, President Obama’s first enforcement director, who now plied his trade at Kirkland & Ellis; Linda Chatman Thomsen, who served at the George W. Bush–era SEC and now worked for Davis Polk & Wardwell; William McLucas, the longest-serving agency enforcement director, who was now at WilmerHale; and George Canellos, who’d just left the Obama SEC to work for Milbank, Tweed, Hadley & McCloy. Even the legendary Stanley Sporkin sat at the end, leaning back in his chair with his legs spread before him, seemingly nodding off on occasion but clearly still attentive.11
The conference turned into a free-for-all as the defense attorneys hammered away at regulators about how unfair they had been to their clients, some of America’s largest companies. In a subsequent panel, Brad Karp, the chairman of Paul, Weiss, who had won the Citigroup case against Judge Rakoff, laid into the agency about how onerous the punishments have been. There is a “profound sense in defense circles,” he said, that there is a scrum of various regulators and enforcement bodies: the SEC, the Justice Department, state attorneys general, the New York State financial regulator, and so on. Karp said that these enforcers had become increasingly politicized and were trying to one-up one another. They “cannot be too tough,” “penalties cannot be too large,” and there was a “tremendous push toward increasing all of the sanctions,” he said, complaining that there was “no consistency other than that penalties and sanctions are much more draconian.”
The government representative on the panel, Scott Friestad, the number two enforcement officer at the SEC, was a target of Karp’s indignation. In response, Friestad took a shot at other government bodies, saying that he was proud that the SEC wasn’t as politicized as other offices and agencies. He noted the SEC didn’t do things such as hold news conferences when it issued subpoenas. That could be read as a dig at state officials and the Department of Justice, particularly Lanny Breuer and Preet Bharara, both famous for seeking podiums in front of the press. Then Friestad sympathized with Karp’s complaint. “Not to say you don’t have a valid point,” he said, adding, “It’s very tough for a company to navigate those waters.” In comments the next day, he had to do the classic Washington retreat, explaining further his concerns that too many regulators around the world were “piling onto” the banks.12
Some reformers hoped to expand prosecutorial power when it came to white-collar crime. They discussed extending statutes of limitations and expanding the criminal code. In health and public safety, prosecutors can charge responsible corporate officers criminally (with a misdemeanor). It does not matter if they were not aware of the problems. Some argued to expand that into other sectors, such as finance. Bank failures could cause job losses and economic devastation. Perhaps bankers who drove their institutions to disaster merited such punishment. None of these proposals made progress.
Companies recognized the threat. When a movement arose to respond to the country’s mass incarceration problem, corporations spotted an opportunity. They pressed their congressional friends to wring concessions out of the reformers. House Republicans attempted to raise the burden of proof for certain crimes committed by corporate executives.13 The right-wing Heritage Foundation penned a white paper on the need for such “mens rea” reform, referring to the legal term for having conscious intent.14 Instead of expanding the responsible corporate officer doctrine beyond health and safety violations, the new House language would roll back the ability to make such charges. The law did not pass, but the risk that the Department of Justice would lose more tools against corporate crime remained high.
With Donald Trump in office, corporations have an even friendlier Washington despite his populist rhetoric and pitch as the champion of the working class. He fired Sally Yates, the architect of the DOJ’s attempt to improve its prosecution of corporate crime, for a separate reason. She had determined the DOJ could not defend his immigration executive order effectively banning Muslims from entry to the United States. His appointees came from corporate boardrooms and Wall Street, especially Goldman Sachs. Meanwhile, Republicans moved to gut regulations, especially those reining in the banks, seeking to eviscerate the Consumer Financial Protection Bureau and roll back Dodd-Frank. Jefferson Beauregard “Jeff” Sessions III took over the DOJ, promising to pull back on its aggressive civil rights enforcement and go after voter “fraud,” a Republican obsession and vehicle for voter suppression. The incoming SEC chairman, the Sullivan & Cromwell partner Walter J. “Jay” Clayton, boasted Goldman Sachs as a loyal client and had few public views on securities enforcement, except that the government had gone too far in pushing the FCPA anti-bribery law, passed in the wake of Stanley Sporkin’s enforcement push in the 1970s. Any hope for tougher corporate enforcement appears laughably misplaced.
• • •
In January 2013, when Rob Khuzami left the SEC for the law firm of Kirkland & Ellis, the New York Times wrote a laudatory article about his tenure.15 Breuer congratulated him, writing, “Really nice article. You deserve it. I’m glad for you and proud of you.”
Khuzami wrote back, “Thx. Make sure the reporters call me when your article is being written.”
The articles about Breuer’s departure did not hit the same glowing notes. Breuer and his supporters believed he had overseen a significant upgrade in talent, recruiting a class of attorney that Main Justice hadn’t been able to secure in the past. He had commanded the first guilty pleas from banks in decades, overseen investigations into currency and interest rate fixing, guided major public corruption cases, and set up the BP Task Force in the wake of the Deepwater Horizon disaster, which supporters praised for having won a guilty plea and large fine from the company itself.16
He received little credit for any of those measures, however. In a maddening turn of events for him and his loyalists, Breuer left the Justice Department having become the face of the department’s inability to bring cases against Wall Street. That was unfair. The problem was much greater than one man. Yet despite his Washington skills, Breuer was ill-suited to take on such a profound financial and economic crisis. He brought professionalism and caution when the times required audacity and vision. The moment called for a Ulysses S. Grant, but with Lanny Breuer, the country had gotten a George B. McClellan.
Today Breuer works the corridors of power from his post as the vice chairman of Covington & Burling, after one of the longest tenures as criminal chief in department history. The Breu Crew largely went back into private practice, mostly at Covington, and thrived. Greg Andres went to Davis Polk. Denis McInerney returned to join him at the firm. Gary Grindler joined King & Spalding. The Southern District star prosecutors who had taken on high-profile insider trading cases all collected lavishly paid partnerships at the best law firms in New York.
Breuer may have stood out for blame, but few emerged from the post-financial-crisis era of enforcement with enhanced reputations. After returning to Covington, Eric Holder launched himself into political work, fighting for voting rights and against President Donald Trump’s anti-immigration push. But he also stood ready to take on corporate work, and signed on with Uber to investigate charges of endemic sexual harassment at the Silicon Valley ride-hailing upstart. In September 2013 James Comey, who had talked so bravely about not being chickenshits at the beginning of the century, took a job as Obama’s FBI head. His interventions during the 2016 presidential campaign soiled his hard-won reputation, perhaps permanently. In July of that year, he gave an unusual press conference chastising Hillary Clinton for her handling of her email scandal, while explaining why he wasn’t recommending criminal charges in the matter. Prosecutors were appalled, viewing it as a grandstanding spectacle. Good prosecutors do not explain their declinations publicly. To smear the subject of an investigation while passing on charges is regarded as unethical. But the department had been oversharing for years now. The Justice Department had, in less detailed fashion, started to comment publicly when it closed investigations, as it did with AIG and Goldman.
Then Comey reopened the Clinton email investigation eleven days before the election, after the FBI had found new emails—which were not even on her computer, but disgraced former Congressman Anthony Weiner’s, who was married to Huma Abedin, a Clinton aide. Comey alerted Congress before agents had reviewed the emails, violating long-standing FBI and Justice Department policy not to go public about investigations right before elections. The FBI closed the matter soon after as the email trove contained nothing new. But the damage to the Clinton campaign was done. (Comey’s actions, which helped Trump win the election, provided the pretext for the president to fire him in May 2017. The ouster came during the FBI’s investigation into possible Trump campaign collusion in Russian meddling in the election, leading to fears of a coverup and a constitutional crisis.)
Bad judgment, acts of prosecutorial abuse, fears of losing—all could be seen as products of the eroded investigative skills. A senior official goes rogue, as Comey did, because he doesn’t have enough faith in the customs of his institution. Abuses happen when a prosecutor doesn’t have a strong enough case but goes forward anyway. Senior officials take a pass on indictments because they are too inexperienced to judge the evidence. As the abilities of the FBI, SEC, and Justice Department corrode, they make blunders. The blunders make them more reluctant to pursue riskier paths such as prosecutions of powerful and well-defended individual corporate executives, which leads to more mistakes.
Those who fought hard against the large corporations incurred costs, not rewards. They often left with diminished status and did not alight on such prominent perches as Breuer’s. The people who broke with the prevailing culture, such as Paul Pelletier and James Kidney, were pains in the ass and made life difficult for their bosses. Often the people who do so—the whistle-blowers at companies and the prosecutors who take on the powerful—share a character flaw: they don’t play exactly by the unwritten rules, they lack diplomatic skills, and they don’t understand how to preserve their viability, either within the bureaucracy or for their next job. Their righteousness offends others. Most people act in their own self-interest. They do not. A reputation for toughness was not its own reward.
Justin Weddle, who had suffered public criticism from a judge in the KPMG case, struggled to find work in private practice. Stanley Okula, also a key prosecutor in the KPMG case, stayed at the Southern District—a lifer whom defense attorneys felt free to criticize because he had been assailed by judges. Shirah Neiman, the long-serving and unrelenting government lawyer, was pushed out of the Southern District of New York. Though she was in her seventies, she was not one to retire, so she started a consulting firm. After a long career, Jim Kidney left the SEC and in retirement grew steadily angrier about the agency’s shortcomings. Adam Safwat landed a job at the prestigious firm Weil, Gotshal & Manges. Paul Pelletier joined a firm, but he did not take easily to private practice and nursed a hope to return to government service. He never stopped referring to the Justice Department as “we.”
Those who took on the large financial institutions from other government roles also suffered. Sheila Bair, who had headed up the FDIC and challenged the Obama administration over its bank bailouts, could not land a prominent corporate or administration position. She became the president of Washington College in Maryland. Ben Lawsky, the former Southern District prosecutor who had risen to become the head New York State financial regulator and had miffed his fellow regulators and the banks with his aggression, did not take a job at a top law firm. One chairman of a major New York firm said the New York bar had blackballed him. Lawsky held out his own shingle as a consultant and attorney.
Corporate whistle-blowers had it even worse. Their lives were never the same. They faced divorce, financial ruin, and joblessness. They wondered whether it had been worth it. They wondered why they had been disbelieved so often by government investigators—when they had been interviewed at all.
Judge Jed Rakoff had a tough time as well. His rulings faced legal setbacks. In 2016 a panel of the Second Circuit Appeals Court threw out a verdict in a civil fraud trial that Rakoff had presided over. The Southern District had brought charges against Countrywide Home Loans, the mortgage bank, for deceptive mortgages it had sold to mortgage giants Fannie Mae and Freddie Mac. The government had also brought charges against one midlevel executive. The jury found the company, now owned by Bank of America, and the executive liable. In reversing the jury, the appellate panel criticized Rakoff’s jury instructions. It determined that the judge had erred in his definition of fraud. The panel wrote that since Countrywide had not intended to commit fraud at the time the contracts with Fannie and Freddie were written, the government had not met the standard of proof. Countrywide had intentionally breached its contracts, but that did not constitute fraud.17 Prosecutors at the Southern District and Rakoff found the decision ridiculous. The Southern District petitioned the panel to review it, a request the higher court rejected.
Rakoff remained undaunted. Now a senior judge, he had more prominence and pluck than ever. He sat as a visiting judge on the Ninth Circuit in California and happened to get a case on insider trading. Rakoff had long wanted insider trading law either resolved by the Supreme Court or clarified by Congress. The Second Circuit in New York had recently overturned some of Preet Bharara and the Southern District’s key insider trading convictions. Rakoff took the other side of the argument in his own ruling, setting up a dispute between appellate courts. Rakoff’s opinion was full of sly references to a sister circuit, as if he were a dispassionate judge sitting across the country on the other coast rather than a frustrated district court judge right on the home circuit’s turf. The Supreme Court picked up the case and resolved it in Rakoff’s favor, a triumph.
The higher courts had often been wrong on Rakoff, but the public embraced him. He branched out to write on other judicial topics. After Rakoff had written a New York Review of Books article criticizing his fellow judges about their lack of outcry at mass incarceration, a colleague of his, Judge Barrington Parker Jr. of the Second Circuit, complimented him and sent him a present: a blown-up 1906 photograph of a chain gang. Black prisoners in striped jumpsuits work cornfields and stare into the camera. On closer inspection, the prisoners turn out to not be men but boys, with some looking impossibly young. Their cheeks are still full of baby fat, their eyes wet and wide, and their prison suits are far too big for their bodies. The country has continued to put young black men behind bars at alarming rates. Judge Rakoff has cried out about the injustice of the system. He has played a role to change the way the country addresses corporate criminals. But today his United States remains unable to punish the powerful. They still have impunity.