By Andrew Longstreth
At a time when the federal government is facing fiscal
challenges, it is receiving record amounts of revenue from at
least one source: criminal fines and penalties paid by major
The latest contributor is the Swiss UBS AG bank, which on
Wednesday agreed to pay $500 million in criminal fines and
penalties to the U.S. government for its role in the growing
scandal over the rigging of global benchmark interest rates.
(UBS also agreed to pay the Commodity Futures Trade Commission
$700 million to resolve civil allegations.)
UBS joined a long list of companies that have shelled out
billions of dollars in criminal fines and penalties to the U.S.
government in 2012. In July, the British drugmaker
GlaxoSmithKline agreed to pay a $956 million criminal fine to
settle a healthcare fraud case. And in September, the
Taiwan-based AU Optronics Corp was fined $500 million for price
fixing in the market for liquid crystal display panels.
So where does all the money go?
Well, it depends. Penalties, which don't involve a
conviction, mostly go directly to the U.S. Treasury. On the
other hand, fines imposed on individuals and companies convicted
of federal crimes are mostly deposited into a pool called the
Crime Victims Fund.
The fund was established by the Victims of Crime Act of 1984
to fund state-run victim assistance and compensation programs.
They cater to victims of a wide range of crimes, including child
sexual abuse and domestic violence, but not the actual victims
of corporate fraud.
In the fund's most recent fiscal year, which ended on Sept.
30, it took in a record $2.7 billion, ending the year with a
total of more than $8 billion.
But while the fund is taking in record amounts, its spending
is not keeping pace because of limits set by law. In 2000,
Congress set caps on the amount the fund could spend each year
as a way to provide more stability in the future. While the cap
has been raised several times over the last 12 years, it has
stayed at $705 million a year for the last three fiscal years.
That cap will remain in place under an agreement between
Congress and President Barack Obama that keeps the government
running at current spending levels through March 27, 2013.
Steve Derene, executive director of the National Association
of VOCA Assistance Administrators, whose members administer
money from the federal fund, is hoping that Congress will raise
the cap. He said as a result of the limits, grants made by the
fund in 2012 were actually 30 percent less, in real dollars,
than 2000 grants.
"The fund itself is not running short," said Derene. "Our
problem has been getting money out of the fund for victims
While the fund is doing well, it is nevertheless losing out
on many major criminal penalties collected by the Justice
Department. When companies sign non-prosecution agreements or
deferred prosecution agreements, they often agree to pay a
penalty as opposed to a fine. Such penalties go directly to the
U.S. Treasury, not to the fund.
UBS, for example, agreed to pay $400 million as part of a
non-prosecution agreement. That money will go to the Treasury,
said Derene. Only a $100 million fine that UBS Securities Japan
Co, Ltd, agreed to pay as part of a guilty plea will go into the
Crime Victims Fund.
Derene said he's concerned that more and more money will not
make it into the fund as a result of non-prosecution and
deferred agreements in which companies pay penalties.
"They're the functional equivalent of a fine," said Derene.
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