Lanny Breuer made the formal announcement Wednesday that he is
stepping down as head of the Justice Department's criminal
division, after a week that he surely won't remember as his
favorite in public service. Last Tuesday, PBS's Frontline made
Breuer seem insincere and evasive about Justice's failure to
prosecute bankers involved in mortgage securitization. Then
yesterday, a pair of U.S. senators, Chuck Grassley (R-Iowa) and
Sherrod Brown (D-Ohio), sent a follow-up letter to Attorney
General Eric Holder, demanding information about the Justice
Department's settlements with big banks. In particular, the
letter quoted comments by both Holder and Breuer about receiving
advice from "experts" on the dire economic consequences of
indicting financial institutions. Brown and Grassley asked the
Justice Department to disclose the identity (and compensation)
of all outside experts who opined on prosecuting banks with more
than $1 billion in assets and to explain how it vetted the
experts to ensure that they "provided unconflicted and unbiased
advice to DOJ."
Based on a speech Breuer gave to the New York City Bar
Association last September, some of the experts who spoke with
the Justice Department about what would happen if global
corporations faced criminal charges were certainly not unbiased:
They were economists brought in by targets to dissuade the
department from indicting their clients. Let's be clear:
Listening to arguments from potential defendants is an entirely
appropriate exercise of prosecutorial discretion; as Breuer said
in his speech, responsible law enforcement demands that
prosecutors consider the consequences of their actions. But with
Grassley and Brown now pressing the Justice Department on who
advised Holder and Breuer to protect jobs and markets by
deferring prosecution of big banks, Justice critics could try to
turn Breuer's words against him and his office.
The senators' letter cites Breuer's remarks to Frontline,
which helpfully posted a transcript of its interview with the
assistant AG. "In any given case, I think I and prosecutors
around the country, being responsible, should speak to
regulators, should speak to experts, because if I bring a case
against institution A, and as a result of bringing that case
there's some huge economic effect, it affects the economy,"
Breuer told Frontline. "At the Department of Justice, we're
being aggressive, but we should in fact take into consideration
what the experts tell us. That doesn't mean we won't go forward,
but it has to be a factor."
Grassley and Brown also quoted Holder's remarks from the
Justice Department's press conference announcing the resolution
of interbank rate-rigging claims against UBS. "We reach out to
experts outside of the Justice Department to talk about what are
the consequences of actions that we might take, what would be
the impact of those actions if we wanted to make a particular
(prosecutorial) decision or determination with regard to a
particular institution," Holder said.
You can see why Grassley and Brown wanted to know more about
these experts, but I suspect there's less here than the Holder
quote suggests. I asked two knowledgeable critics of the Justice
Department's handling of too-big-to-fail banks whether they'd
previously heard anything about Justice relying on outside
opinions to guide indictment decisions. Neil Barofsky, the New
York University law professor who was inspector general of the
Trouble Asset Relief Program until 2011, and Jeffrey
Connaughton, the author and former chief of staff to former
senator Ted Kaufman (D-Del.), both said they hadn't, though both
applauded Grassley and Brown for pressing for information.
Breuer himself told my Reuters colleague Aruna Viswanatha on
Wednesday that he did not want to respond directly to the
senators' letter, but that when he has referred in the past to
consulting experts, he meant "regulators in the United States
and abroad whose entire job it is to figure out what the health
of a particular regulated industry is." Breuer told Viswanatha
that he did not mean to suggest that the Justice Department has
received advice from private consultants.
But even if Justice hasn't hired such experts, it has heard
from them, according to Breuer's New York City bar speech. "We
are frequently on the receiving end of presentations from
defense counsel, CEOs and economists who argue that the
collateral consequences of an indictment would be devastating,
just devastating, for their client," Breuer said. "In my
conference room over these past years, I've heard sober
predictions that a company or a bank might fail if we indict,
that innocent employees could lose their jobs, that entire
industries could be affected and that even global markets will
feel the effects. Sometimes, though let me stress not always,
these presentations are compelling."
Breuer's description of presentations by targets and their
expert economists almost makes you hope the Justice Department
was hearing counterarguments from experts not in the employ of
potential defendants. Perhaps the department's response to
Grassley and Brown will turn out to offer that reassurance.
The Justice Department didn't respond to my email requesting
comment, but a representative told Reuters Tuesday that it had
received the senators' letter and was reviewing it.
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