Inquiry which was why does it appear that the Justice Department failed to prosecute executives . So, lets begin. Why . Guest thanks so much for having me. I can later this conversation. So i think this is the flip side of mass incarceration in this country where we have a too. Justice system. One group of people disproportionately poor to support the people of color are punished too seriously, to punitively. And that was that what im writing about which is a class of people rich and powerful who seem to have impunity to commit crime. Im talking about executives at the highest levels of Corporate America, not just bankers, not just in the aftermath of the financial crisis. This is been a problem thats been building before the financial crisis. It persists today and it affects not just executives of the big banks but industrial companies, retailers, pharmaceutical companies, tech companies. This is a pervasive problem with bringing Corporate America to heal. Host in your book you talk about the fact that never really was a golden age of enforcement of the laws come what an Corporate Executives and corporations file extender to talk more about a silver age. And so try to forget how we got here. I noticed in your book you said the following, maybe you can address this. The aftermath of the 2008 call for aggressiveness. The people demand it. The politics were favorable pick the department of justice had chances to bring cases against companies and executives. Public trials would present the evidence. Juries would have decided if crimes have been committed that this fear of failure took gold when it did is tragic. Is that it . Is this all about a fear of failure . When you enter, tells about the title. I feel like have to ask. Guest here is a major part of this. Concern about losing hence the time of the book. The title of the book comes from jim comey, and viewers will know that that jim comey. He was far just recently as fbi director by donald trump before this 15 years ago he was u. S. Attorney in the Southern District of new york. And as you know the Southern District of new york is the premier office of the department of justice, now the prestigious office is also the main justice but then this was the place where the hottest shots went, the brightest stars in the prosecutorial, and he gathered them all together and he gave them a speech. He started off and he was focusing love to talk and he said how many of you have never lost a case . A bunch of dance shoes of the these guys are the best of the best of the best. Did go to the best law schools, best clerkships. They are the brightest and if you ask and they will attest to that. Theyre very proud of the record. Then he said the ambulance happening for you guys, the Chickenshit Club and the hands go back down. People are feeling a little sheepish. What does he mean by that . What used to go on to say . He says your job is not about winning. Your job is not about preserving an undefeated record. Your job is about doing justice. Justice requires ambitious cases. Raising your site so youre not taking off the foldable, the low hanging fruit but going up against the most powerful wrongdoers in society and not be worried you cant take them on and that you might, you might lose the case. Unfortunately, after that period of time which starts with a can of 5. , the silver age when the government prosecutes enron, talk you executives from income, tyco, those names. In he remembers those hur aftert theres a big backlash which i writing a book that interchanging the department of justice culture makes an fearful of trying these top executives. Host thats fascinating and im really glad that you mention james comey because is not the only familiar name that we see in this book who represent elevating courage over a career ambition. I think i see that a as a themen the book. Its wonderful that these prosecutors had a role model who was encouraging to take risks come to try to do justice and not just build the resume. But something did change. You mentioned during the enron era when the prosecution of enron occurred and i think it wound down about 2004. You talk about that. The book is filled with people, Robert Morgenthaler, ray croft and so on. We even see Robert Mueller think of another going in which you might bring up. It seems like theres these folks that you repair who were courageous, who stood up for justice but then something changed. I wonder whether elizabeth warren, her expression, comes into play. But what happened . We can find at any time in history courageous people. Is it something the people or is it the system. What change . Why those people not in those positions now . When did the change happen . Guest its a great question. It certainly is the case that some of it is actually the people, but i think the larger issue is that they are institutional incentives because if you think that largely the department of justice is filled with dedicated Public Servant or very intelligent who want to do good job. But there are, im glad you mentioned, that the are some people that i consider heroic. Imperfect but really trying to do a good job of bringing justice. One of the guys, a hero early on in the book is stanley and a largerthanlife character. He probably was the most important bureaucrat in the 1970s. He was director of enforcement through the 70s. He wasnt time he worked at the security and guest he wasnt the head of the sec but is probably regarded as the most important cop on the beat for companies throughout the 1970s. Hes a huge guy, big personality. And he had these loyalist young guys working for them, mostly guys, and terrify them. He would sit on a couch in a giant office and people had a table in his office, huge office and his young guys were working on Different Cases and he would sit on the couch and work on these cases, a brief period of time and then he would bring in the lawyers for people at the sec was of the city. He on the couch and his buttondown employees would present their arguments for why their clients were not guilty. He appeared to nod off on the couch and he would sink into the couch and he was a hideous looking couch with terrible array of discussing colors from the 1950s, and he would sink into the seat and it would appear to nod off and the lawyers had no idea what to do. They didnt understand, she we continue our presentation . Is his the asleep . Is a listening . They would continue the presentation in the kind of halting way. And he would wake up and season something that typically been listening the whole time and he had this brilliant ray of eviscerating their arguments. He was in their power and you control all conversations. So he was really a guy who put Corporate America on its heels to a variety of interesting techniques. He is one hero of the book. But, unfortunately, what i say is his innovation in some 30 years later, 40 years later souring and becoming kind of corrupted, and krups the way the sec and the doj to business today. Host talk about that innovation. The sec mission at tha the times solely to protect investors. He was then part of the sec where he was a career, a career employee. He was running, he had a job that was not a political appointment so he wasnt one of the commissioners. He didnt really have political power by the filters are within the organization the way you are describing by being quirky and brilliant and popular with his staff. You mention even though he was courageous there was innovation that got distorted later. Could you talk about what went wrong and what the unintended consequences was at this . Guest and his political protection in congress from both sides of the aisle, republicans and democrats, and so much so that when they were interviewing future sec, candidates to be sec chair, they would say going to keep him in office . So his he was a powerful even though he is not the head of the agency. He had a variety of innovations but two of them were one coming want to go after gatekeepers the way we think of investment banks, law firms and accounting firms. The ones that Companies Need to go public on the public markets. They have together books audited. They have to have legal opinions and investment banks. What he thought was if we go after those firms, then they will be on guard for fraudulent companies. We will use their leverage as the gatekeepers of this company to protect shareholders and the public from fraudulent companies. That was a Great Innovation. Hes kind of influence in that way by another hero of the book Robert Morgenthaler whose abuse attorney in the Southern District. Throughout the 60s and really kind of starts the whole idea that they both should go after accountants and lawyers and also that they should have sort of raise their sites in higher class of corporate whitecollar criminal. Host so whereas sporkin is in washington, d. C. , the security and Exchange Commission working a as a top lawyer in the Enforcement Division as folks may be where the sec only a Civil Enforcement authority. They cant create, they cant have criminal fines or put people in jupiter if you want to work on a criminal case the sec needs to reach out to the department of justice which also has a d. C. Office but you mentioned earlier in our conversation that one of the more prominent of the 93 offices is in the Southern District of new york, the most prominent and you mention Robert Morgenthaler was the head lawyer there. So they had to have a good working relationship if they wanted to bring them all cases. Guest and in a 60s and 70foot even more prominent than it is today because there are fewer offices around, in the country in the department of justice at the point that did these cases. So really when families want to do something criminal with whitecollar corporate crime, hes got to go to the Southern District. He comes in in the 70s but morgenthau has set this pattern and morgenthau, sporkin is at the sec in the 60s. So what they are doing, there are two kinds of enforcement. What theyre doing criminally is focusing on individuals. They dont prosecute companies. They dont think of prosecuting companies at all to the 60s and 70s. They emphasize going after the highest level individual executives they can. Host individual accountability for criminal wrongdoing. Guest exactly. They have the power to do this. There is a 1909 Supreme Court ruling that says it theres one employee in the course of his or her job who commits a crime, you can prosecute the company. But they dont do it. Its just not the practice. Reason is that they think of corporations as a piece of paper and they think that individuals commit crimes and they want to deter individuals so they want to prosecute individuals. As well see that changes over the next decade. It sort of changes because of an innovation that sporkin brings in the civil arena for the sec where he realizes that the acc is under resourced and can leverage the resources it has by making companies voluntarily come clean on various automatic things that theyre doing. The main thing that he is focused on is hes watching watergate and he is seeing how their allegations of slush funds going to campaign donations, and he realizes its a very technical out the vote on tax evasion kind of brilliant idea where he says these guys have these slush funds to make Illegal Campaign donations, discoveries, Major Companies like texaco. If we look at the books and records, we will not see the line item for secret slush fund. Bribes. And, therefore, what we can do is we can say you been misrepresenting your books and records to the public. So come clean now and then we will enter into a consent decree. You dont have to admit that youve done something wrong. Later they are not allowed to deny theyve done something wrong but they settle and they cleaned of books up. In the early part, this is the Great Innovation because companies are generally scared of Stanley Sporkin. They hate sporkin and did not want him on their case. They do come in and did you come clean. Then it becomes perverted over the course of the next 40 years. Host the innovation, that enforcement of the sec, Stanley Sporkin had figured out was we are under resourced just make i have a slight we are under resourced, we dont have access to what folks are really thinking. We rely on the company and their lawyers and say if you fess up and settle with us, then we get a win and maybe hopefully you will behave better and all will be better. Guest we will make the Companies Work for us, is his innovation. Make them start to examine their own behavior, put them on notice for a variety of things you put them on notice or activities that before that no one was saying was wrong, no one was scrutinizing, this is why they screamed bloody murder because all of a sudden they are being held to a new standard of behavior. But they do, doing a lot of bribery. Thats the kind of thing that you talk to the pleas, this is before bribery is technically illegal. So hes got to get them on this technicality of the books and records, then sporkin because of his intrepid enforcement i shares, brings about the foreign corrupt practices act in 1977 if im correct, and makes it illegal to bribe officials, foreign officials, Foreign Government officials. So this is a really Great Innovation. Sporkin is working with young prosecutors in the Southern District like another hero of my book, jed, who learns and admires sporkin and really emulates him and then becomes a defense lawyer and then later a judge, and he takes on the sec, the same as addition that sporkin had worked for when the judge sees the sec is having become degraded. Want to return to a restarted which is what went wrong and what changed. To some degree when i think much about i i think about it as kind of one of the reverse makeovers. Its like a before and after but the picture doesnt look as good at the end. Whats interesting is we have these examples of the high tide or the silver age. We have the 70s we just talked about but we also many people look back at the enron prosecution and say those were a success, copy it, other than the conviction of arthur anderson, the counting of from was overturned by the Supreme Court. There are many people have not looked at this as close as you have who think jeff who went to jail, a ceo, and kenneth lay who was chairman and later became ceo was also convicted, although he did die before he was sentenced. And many of us have read the book and seen the movie enron the smartest guys in the room. In terms of again the general public and folks who have to study disclose who we think thats another success story. We can also say i skipped a place in between, we have the silver era you talk about. We also have the thousand people who were prosecuted in connection with the savingsandloan debacle under george bush senior. Then we have under george bush junior we have what looks like a successful prosecution of the bad guys in enron. The folks are really waiting and waiting. We think the bankers did something wrong. There is kind of a list of folks and activities you mention which we can get to you, what happened. What i think is so fascinating about your book is a fault lines were there. Well before the Obama Administration takes over. In other words, what it seems like, this is what it want you to talk about, is that the culture and the knowledge and the practices of the department of justice have already been weakened. There had been a shift. So can you talk a bit about what caused the ship just to see the conversation a little bit more. Im wondering similar to what you talk about with Stanley Sporkin how much another innovation that occurred under Mary Jo White in 1994, the prosecution agreement changed things. What weekend the doj so that by the time president obama took over in 2009 it wasnt prepared to handle this crisis . Guest great question. Enron is i think a successful prosecution. So what do they do with enron . Bob mueller is head of the fbi and Larry Thompson is the Deputy Attorney general under ashcroft and Michael Chertoff who is the head of the Criminal Division of the department of justice form a task force. What they do is they pluck talented prosecutors from all over the country and essentially locked them in the room, at a fork which although although in some feeling like they literally are locked in a room, working 18 hours a day for years to look at one case. And by contrast, to skip ahead in the story of one of the things the Obama Administration doesnt do is create any kind of Operational Task force of prosecutors who was supposed to be looking at specific types of issues or banks and actually focusing on them solely. So theres no prosecutor in the wake of the financial crisis whose job it is solely to look at financial crisis cases. She is juggling insidertrading cases and some by the skin case, and then some financial crisis case. Its a really major problem. Thats one thing. They are focused. Theyre concentrating. They are dedicated to it and they have patience and they work for years and years. They are not brought to trial until 2006. The task forces from the beginning of 2002. 2002. It takes years to do this. These cases are extraordinarily complex. One thing to note about the cases is they never did any stupid stuff on email. Which is sort of the way that we may cases now. Prosecutors know theyre supposed to find the down email and leverage those to show whats going on in the mine, the criminal intent. But they didnt have that. They didnt have that kind of direct evidence. What they had to do is the oldfashioned way which is just what you prosecute a mob operation, which is that you get the soldiers to flip on the cobbles and the capos then flip. You have to do that in a corporate prosecution to and this is what jed used not to do in the 1970s and this is what they did in the early 2000s. It skills that the raleigh has been lost over the intervening 15 years. Why was a lost . Was lost because of an enormous corporate backlash against the perception that enron was overly aggressive and they were cowboys and it overcharged and primarily was focused around Arthur Andersen, the Auditing Firm that you alluded to just now. Host fascinating. So even though the enron prosecution you agree was successful because of the backlash against that success, there was a shift. I also want to mention that theres Something Else thats happening. You mention in 1994 when Mary Jo White was in the Southern District of new york. She was working with a fellow lawyer and her name was and came up with this idea that it might be a good idea to visit getting an entity, so like what Stanley Sporkin did to settle, and to work on again on the criminal side, to get into settle a case with whats called a deferred prosecution agreement. You kind of get a victory but you dont need to take the risk of going to trial. What was fascinating is that this took place, you can talk a bit about in 94, but Mary Jo White never entered into another one from the Southern District of new york. Her whole tenure there through a think 2002 but the other offices across, regional offices across the country found this delightful and useful tool. There again was backlash against that. Talk about that and what that did, what that did to your prosecutors guzzles what that did to the defense bar, how transformed the defense bar try to Mary Jo White who is succeeded by jim comey is a legend in the Southern District and shes working with a force of nature sharon nyman and they will get a bunch of major prosecutions. Keyword corporate prosecutions and maybe i would like but a lot of terrorism and my prosecutio prosecutions. Then they are looking at potential securities for some criminal allegations and they realize that the trail has gone a little cold and evidence is old and the allegations of wrongdoing were a long time ago. They realize well, why dont we take this innovation from the juvenile courts are long time ago where is a young person, 16 years old, committed a crime, what the judicial system could do, prosecute do is say were going to prosecute you that will put in a drawer. We are going to wait until your 18. You can keep a clean nose for two years we wiped the slate clean. But we have prosecuted you just so you know. So if you dont we get to bring those charges right back. We are not dropping the case. We are prosecuting you. So they reach this with prudential. Whats amazing to me about this and what truly emblematic and important in understanding about the department of justice is that theres very little policy thinking, very little care and planning figures into it. So this is just a kind of ad hoc settlement from some prosecutors. Theres lot of entrepreneurialism within the department of justice. Every u. S. Attorney likes to run his or her office and ignore washington. The attorney general doesnt have a lot of control over them. Each individual how secure it also is kind of entrepreneurial, and so the problem is then theres very little 30,000foot analysis of what kinds of policies are happening. So she invents the different prosecution agreement, settles with the company and they are settling for money. So no individual is being prosecuted. It is a settlement and if settlement for money in the most important thing is that the money is not coming from in executives pocketed its coming from the shareholders. The company, the piece of paper is paying for it, that any individual. So she doesnt like it but it does become a little bit popular. Not very popular around the country, and then the Arthur Andersen case comes the Arthur Andersen is the auditor for enron. They are the handmaiden at enron and it is a corrupt organization if theres one thing i can do n my book is to rehabilitate this prosecution because i think it was the right thing to do because i think it was a rotten organization. Many good people, many incidents of innocent people but through and through the system for in place to help companies commit accounting fraud. It wasnt just enron and Arthur Andersen helped but sunbeam, waste management, worldcom, many others. Very early on the Enron Task Force prosecutes of the firm Arthur Andersen. A win after other Arthur Andersen goes out of visitor tens of thousands of people sadly unfortunately are put on the street out of work, and something amazing happened, which is theres a pr victory where anderson manages to change the subject from accounting fraud to these innocent people being put out of work and it gets internalize at the department of justice and so they essentially decide without a policy, theres a policy in place, nobody ever says it explicitly but they essentially take the ability to prosecute companies, indict companies off the table. Because of the collateral consequences. Because of employees getting, losing their jobs and then later worries about Capital Markets disruption, financial crisis happening if you prosecute a bank. Host this is a fascinating shift because were kind of redefined success and failure. Part of what i hear you saying today and in this book is that fear of failure is not just whether you win a case. Here there is a fear of being a failure being perceived as being unfair, overly aggressive. They kind of internalize the pr stent. There are other things you just had a want to pick up on because this also is what, was another piece along the way that weakened the department of justice which is this emphasis on collateral consequences. Can you talk a bit about how that got embedded and the prosecution policy for the department of justice and have a shared overtime depending on who was second in line under the Deputy Attorney general . Guest yeah. So theres a member they come from that other than eric holder when hes the deputy. The deputy get to attach their name to the memo at the department of justice pixel eric holder is the deputy under host right now, the current Deputy Attorney general is rod rosenstein. Even though its the second line sometimes they have a big public profile when it comes to this prosecute drug memo. The name on. Continue with that. Guest so holder outlines and share nyman is with the author of this, after they do the Mary Jo White center down to make sure that washington doesnt screw up this memo and the come up with these principles for how to prosecute companies. And holder puts his name on it. The memo essentially says, this is how were going to look at things and you need to cooperate with our investigation if you want to get brownie points with us. This is what cooperation means. There are a variety of things. And one of them is you have to waive attorneyclient privilege so that we can go in and really examine what we want to examine when we conducting our investigation. And then host hold onto that. I think it cant just be dashed by like a book but one place i with you is on this. So were going to talk about the attorneyclient privilege in the moment. Tell us about collateral consequences. Guest so one of the things that they installed in this is its okay for prosecutors, in fact, prosecutors should think about the collateral consequences of their actions when youre taking on corporations. And by that they mean the harm that they could bring to the innocent employees. And also some kind of vague notions, its not articulate in the memo, about some kind of disruption in the capital market. But they dont really take it seriously. There are people who have attacked eric holder for the origins of this as if one, he didnt even write the memo, but two, the department of justice doesnt really put this into place until host andersen. What happens is the Deputy Attorney general under ashcroft, Larry Thompson was fascinating character, really interesting guy, is an africanamerican who becomes a goldwater voter, grows up in segregated missouri and it becomes the goldwater republican, rises to the ranks of republican politics and becomes the Deputy Attorney general under ashcroft and he is an old law and order guy. Larry thompson does not believe that there should be twotiered justice in america. He wants to treat corporate criminals as aggressively as street criminals. They kind of republican idea, republican attitude that a dont think exist anymore. Its kind of oldline law and order guy. Another person i really deeply admire. He updates the holder memo and its almost identical, but it does have a few additions and it talks about the collateral consequences looking at that. Talks about attorneyclient privilege. After andersen, the aggressive prosecution of andersen, then the big law, whitecollar defense bar incorporations attack andersen and the attack the thompson memo over attorneyclient privilege and the roll that back. The department of justice rosa back in a series of amended memos over the course of the next several years, and in doing so what happens is that they shift from a think about even indicting corporations to the gpas and the dbas takeoff. In the last 15 years weve had over 400 gpas in the first ten years of their existence of about 18. So nonprosecution agreements, various forms of settlements for money host no admission of guilt . Guest most of the time no admission of guilt. And then there is forms a kind of promises to behave better in the future which dont come which are not kept. We get to in a second, why that so inadequate. Host the public and what interesting is like any other tool, it can be an appropriate thank yous but in this case may be it was, the public perceives that its been over use and you can look at it from the defense side. He will claim this is a shakedown. They didnt have the goods on so what are we going to do . Ability terrible for stock price and shareholders, bad for morale to which is to some money at this a medical way. As a sort of the defense can take and maybe some of time it was true, maybe none of the timeless truth but theres that started from the public side they want to see trials because they think that this is just, that its not really, until you see both the corporation being held accountable if its done something wrong, and individuals inside of the firms going to jail if theyre guilty of something. They believe theres two system of justice. There we have this tool but theres is a big issue mentioned about relying on these dpas which is what happened to the defense bar. Historically, white shoe law firms were not experts come to experts in whitecollar crime. With the rise of the dba what happens if its kind of like evolution. A darwinian process of what happens at his law firms . Guest what my argument is is at the department of justice and big law are creating each other, and influencing each other and changing because its sort of like the old batman movie with Jack Nicholson where the robber played by Jack Nicholson kills bruce waynes parents and he becomes batman, then batman chases the robber into a bed of acid. Thats my very high literary reference for the evening. So what happens is we talked earlier about the 60s and 70s and a Robert Morgenthau and they are raising their sights on higher class of criminals. Big law firms realize this and they realized that now their clients, clients, their clients are Big Corporations and now their Big Corporation executives are in the sight of the federal government. They start to represent them very slowly over time prosecutors who have been doing these prosecutions go to big law. Law. What had happened earlier was prosecutors didnt really revolve out of the doj and go to big law firms, but if he did want to go do criminal defense work they would go to boutiques, not a big prestigious law firm, not what was then called the white shoe law firms. So slowly over time people like jet break off and so many other stars of the Southern District start to to big law and create these defense practices jed rakoff. Theres a movement to settle with corporations of the department of justice, and that generates much more bases for big law firms and big law firms realized how lucrative it is and how much better it is to enter into a settlement with the corporation because its not just a one off investigation of one individual, but a really sprawling kind of thing where they can do internal investigations. All oall of the sudden the busis of internal investigations creeps, comes up and becomes a giant extraordinarily lucrative aspects of big law. And today many law firms specialize in doing internal investigations of corporations. The dirty secret of american criminal Law Enforcement for corporations is that we have outsourced or privatize investigations. Law enforcement, to the corporations themselves. Its like Pablo Escobar running a cartel and in hiring his own lawyer to investigate whether he is a drug dealer. So its a big problem for american society, especially because now the prosecutors still go very commonly to become partners at these very firms. Host part of that even thens a bit of a revolving door story, although i guess the doors mostly going in one direction. How do you think that shapes the behavior of a young prosecutor . You know in your book that may be one of the ways to solve this problem, you can share that with us today, but it seems like what you are implying here is that, a young prosecutor spends a few years successively settles cases with big firms, gets that skill with Big Corporations and that is hired if youre lucky, becomes a partner in one of these large firms and can make several Million Dollars a year in this whitecollar criminal defense practice. What are some solutions to that particular problem . Guest before we get to the solution we should unpack that because its such a vital important part of the book. The argument against this, when prosecutors, when i present this to prosecutors they say no, no, no. We have every incentive to go after the individuals in the highest most powerful individuals we can get, because were going to get the glory and were going to get the career, you know, the career scalps and career making scalps, and thats what eric holder says come here this all the time. One of the real incentives, one of the actual incidence of staff prosecutor is facing. What it is, that person wants to produce and wants to produce quickly, and a prosecuting an individual takes an enormous amount of time when executives have huge defenses. They pay for the best defense lawyers they can. So youre going up against the best lawyers in the country. Its going to take years. If you lose at trial that youre going to have no feather in your cap. You have not built to resume. You havent presented anything. So theres enormous risk. They are not afraid. They just cant understand the risk reward scenario. The risks are very, very high. The rewards may be high but the risks end up being too high for each individual prosecutor to respond to these kind of incentives, too much to ask. So instead what are their incentives . Their incentives are to reduce all of these corporate settlements. What theyre doing is they are very complex and it think that good job because they are kind of reforming the culture and looking holistically at the company, and adding the company engage in all sorts of remedial activity so they can justify it. The fines go up and up and up so they think this is really going to cost them a lot of money and, therefore, its going to feel the pain. They can do them quickly because as you said earlier, the company has to come to the table to negotiate. They have no choice. Companies are not stupid enough to fight it is usually come the big companies. So you can do a series of dpas over the course of six or nine much really quickly knock them out and youre getting accomplishments to put on your resume. The most important thing is who are you sitting across the table from . You are sitting across the table from your bosses former boss, for every goalie. People been former prosecutors and chiefs of units at say the Southern District of new york, or main justice or the Eastern District of new york. Their portraits are on the wall in the hallways as you walk into your office. Your incentive is to dazzle them with how smart you are, appeared extremely tough as a negotiator, but then ultimately to be reasonable. You do not want to seem like a cowboy, reckless, overly aggressive, overly punitive, i am a jihad against the company. Because you want to be seen as someone who those people on the other side of the firm can envision as a future partner. And that is as you can imagine a deeply corrupting pernicious incentive i think for a young prosecutor. Host sure. What we have done now is we have really set the stage for what the department of justice was by the time president Obama Took Office in january of 2009. We did talk a little bit about where the prosecution policy was when eric holder came back and became the attorney general of the United States, this topic again of collateral consequences came up in part because in testimony before a Congressional Committee he was asked about this and mentioned that there were some concerns about the collateral consequences of prosecuting large firms. He was immediately attacked for enshrining the two dead shield doctrine and then he backed up with that and actually put out a video that they put up on the department of justice website saying no firm is too big to prosecute. Sally yates was then the Deputy Attorney general revise the memo and became a gates memo. There was a ship then, that added a factor about prosecution policy to talk about the need for individual accountability. So were shifting back. Not that this to be a dichotomy. You can have enterprise liability and individual accountability. Both of these things can happen. That was supposed to happen. What went wrong with this new policy to all individuals accountable . Why didnt it work . Guest well, thats a great question and youre absolutely right that i think the place for all these things, finding companies guilty all the settlements, corporate liability and individual liability i just think the emphasis has gone completely high water onto haywire and the need to get back in the bread and butter need to be individual accountable at the highest level. They were worried about the collateral consequences coming out of the financial crisis of prosecuting banks aggressively. They thought that there was, the Financial Markets were too fragile for i think that was a terrible mistake and mistreating because i think if you prosecute aggressively he would have restored faith in the market more quickly. But also more poorly, i think it you are really worried about that then you should have shifted into prosecuting individuals. As you should just rejected wholesale this notion will go after companies because the system is too fragile sewer going to focus on individuals. As i was saying it didnt create a task force. They dont doubt that the wrong incentives and so they dont focus on individuals. They dont really even look. One of the defenses from holder in lanny brewer and people in the air of the department of justice is do you really think that we would shy away from the prosecutions and preiraq will Say Something like we look at heart as we could are evidence of crime and we didnt see any . I just dont believe that whatever problems i dont think they look, and one cow somebody doesnt fit in the book but i wrote a new York Magazine piece about, the one banker who was prosecuted for the financial crisis is a walking robot of that argument because what he did was he was an executive at Credit Suisse who oversaw traders like about their portfolio. The value of the portfolio, the value of their mortgage portfolio. And believe me, no one in wall street thinks he was the only one that did that. Obviously that was a crime that was committed rampantly. So skipping forward to gates, the yates memo is incredibly important for variety of reasons. One is that it is a tacit admission that the holder regime, the lanny brewer regime made a mistake. And the Preet Bharara regime, that they did not focus on individuals. She is admitting that without actually saying it. So i think it was a good reform from her, but the system is still deeply problematic because of this outsourcing of investigations as i was talking to you about. Because the department of justice is so dependent on the internal investigation, conducted by law firms hired by companies that when they do focus on individuals they are going to get the schmo, the guys getting thrown under the bus instead of going up to the top. Host its interesting, one of the questions that comes up is when you site which is maybe there just werent cases to be brought, which you say you dont find credible and are many examples in the book that you wonder about. Again with outcome homage and some names not saying that these folks are guilty of anything but could of these folks have been pursued, some at Lehman Brothers due to the 105 transaction, perhaps others folks who settle civilly with the sec who were never prosecuted at all. But beside saying, one of the things that people say is that these things are just too complicated for juries to understand, which might be just another way of saying we are afraid to fail. As you remember one of the first cases brought after the financial crisis, grandma cases against individuals were the cases against the two Hedge Fund Traders at bear stearns and the government lost those cases. Ive always wondered what difference it would have made if they had won them. Guest i think it would make a big difference. That really put people on their heels and made them scared and nervous about the kind of evidence they have. How did we win the enron trial . This is what i start with the enron, because then you imagine anything more complicated than the enron fraud . Fayette offbalancesheet vehicles and encrypted ownerships. It was just internally complex and multiple business lines. But they won the case and i tried to walk through it carefully on the investigation and why they won the trials of lay and skilling is a menace to get authority line that the jury could understand if they said this is not a case about complex accounting is not a case about aggressive Business Practices that we are going to label illegal and mike madigan. This is about lies picus about truth and lies, black and white. They distilled their case down to the essentials and really understood that the jury was going to listen to a lot of complex evidence, but with a storyline that was clear, the prosecutor. My argument is this skill set has been lost. One of the reasons why its been lost which we havent talked about is they dont do trials anymore. The average u. S. Attorney does. 29 trials a year, one child every three years. That compares in the 70s to eight trials a year. They just have very little trials. Then you get to you, Flash Forward to Something Like bear stearns where Hedge Fund Managers were worried about the asked that the maybe misrepresenting the state of their fund and the assets and their prices to the public, and to their counterparties, and they were acquitted by a jury. But my view is that that shows the erosion of skill set, trial skill set, fsk skill set at the department of justice, not that they should of been come and this is evidence that window crimes committed. Host you also talk about something that happened with the Obama Administration, is you say instead of doling out punishment, the democrats engineered prevention measures to stave off similar future crises. And to be fair as we remember early 2009, we were trying to deal with the largest downturn since the great depression, has legislation to help shore up the economy work on the Affordable Care act, past doddfrank. All this was happening. Thats true, there was a lot happening but there wasnt a task force set up immediately. I wonder, what are your thoughts on whether if this is been a high priority there might have been a difference . Guest i think it wouldve a major difference. You see somebody like tim geithner was a treasury secretary saying we dont want an eye for an eye, this duration of this notion that we should have pitchforks and put people in prison. The Obama Administration was very technocratic and buttondown, and i think they saw these people is kind of people who have made mistakes but of the class, and they thought we need to reform the system overall, have systemic reform rather than focus on a few bad apples. What happens in that is that the system lacks legitimacy, the reforms lacks legitimacy, because people can see the lack of accountability and say that is unfair, that is unjust. People are getting away with crime. What the democrats didnt recognize, and i think the kind of technocratic democratic notion that, technocratic sort of elevation that the democrats have sort of fails to recognize is that you need to have individual accountability in order to persuade people that you care about punishing people when they do something wrong about fairness in the system, and that your reform cant be believed, they can be trusted without some punishment going handinhand. The oldline republican idea of law and order of taking out a few bad apples and not doing any systemic reform, no regulatory reform, as the adequate beauty. These things have to go handinhand. And my view is because we lack accountability, individual accountability, it undermined faith in obama. It cut the legs out of Hillary Clinton in her campaign. Donald trump was able to campaign on this, take advantage of this anger, rail against goldman sachs. I think with a more individual accountability we may well not have had donald trump as president. Host wow. So you see a line between failure to hold individuals accountable and his election. Ice can see what youre talking about turkey data on the populist anger with evidence that the government fashion without evidence that the government did something to the people in jail who helped caused this crisis, that he spoke to that the note its unlikely he will do anything about it. I would like use our last few minutes to have you tell me, what is your wish list . Weve got about two minutes, so if you could, what tools do we need at the federal or state level to make a difference . Guest a parse could a lot more money so you reduce the incentives, have them able live affluent lifestyles in new york and washington, d. C. , so they are not drawn to big law. And then diversity of hiring. Im not just talking about women and more people of color. Talking about geographic diversity. You want to draw from different law schools, not just the elite law schools and what professional diversity. So you draw for people who are sick a big law and never going back but no with the bodies are buried. They are 5 50 and want to do soe Public Service. Or people who are plaintiff lawyers or Consumer Protection lawyers. You what a much wider variety than these young hotshot who venture want to go defend corporations. I think that would be that would be important. The other thing is you have to change the culture to focus on the individual at the department of justice. If that means some more statutory power, i think those will probably be warded so deep a policy shop that is lobbying congress to get more powers for prosecutors but also means being more imaginative about the powers that they have. Host jesse, thank you so much that i cant believe were out of time. I want to keep talking to you about this. Wonderful. Thank you so much. Guest thank you. Cspan, where history unfold a daily. In 1979 cspan was created as a Public Service by americas cabletelevision companies and is brought today by your cable or satellite provider. The book i called the american genocide the United States and the california indian catastrophe, 1846 to 1873. The author, benjamin madley. Professor madley in your book you write that between 1846 and 1870, californias native american