Chicken shit club. After reading your book i can see that you also answered why does it appear that the Justice Department fails to prosecute executives so lets begin. Why . I cant wait to have this conversation. I think it is the flipside of mass incarceration in this country where we have two tiered justice systems, one group of people is proportionally for and punished to seriously and then weve got what im writing about which is a class of people rich and powerful who seem to have impunity in crime. Im talking about executives at the highest level of Corporate America not just bankers and not just in the aftermath of the financial crisis. This has been a problem that has been building before the financial crisis that existed today and affects not just executives of the big bank. In your book you talk about the fact it never really was the golden age when Corporate Executives violate that. You talk about the silver age and so trying to figure out how we got here i noticed you said the following the aftermath of 2008 called for aggressiveness. People demand it. The politics were favorable to the, public trials would have presented the evidence, juries would have decided if crimes were committed, the fear and failure took hold when it did so is that it for the title of your book the the Chickenshit Club come and talk about the title i feel like i have to ask. Guest fear is a major part of this and the title of the book that comes from jim comey and viewers will remember as the fbi director by donald trump but before this 15 years ago he was the u. S. Attorney in the Southern District of new york and it is the premier office of the department of justice now the prestigious office is also the main justice but this was the place the hot shots went, the greatest stars in the firm and he gathered them all together and gave them a speech and started off very folks he loves to talk and he said how many of you have never lost a case and a bunch of hands shoot up. The best law schools and clerkship they are the best and the brightest and if you ask them they will attest to that. So they are very proud of their record and then he said me and my buddies have a name for you guys, the Chickenshit Club and their hands go back downs. People are feeling a little sheepish. What does he mean by that . He says your job isnt about winning or preserving an undefeated record its about doing justice and justice requires ambitious cases and raising your site so youre not just picking off the formidable but going up against the most powerful wrongdoers in society and not being worried you might lose the case. Unfortunately, after that pure code of time that starts with a kind of high point when the government prosecute top executives from enron. After that there is a big backlash against a change in the department of justice culture and makes them fearful of trying these top executives. Guest im glad you mentioned james comey because he isnt the only name we see in this book with elevating courage over a Career Ambition and i see that as the theme of the book. Its wonderful that these classic shooters have a role model encouraging them to take risks and not just build their resume but something did change. You mentioned during this when the prosecution of enron occurred and it went down about 2004. The book is filled with people, some of the names Robert Morgenthau and so on and we even see Robert Muellers name but it seems there are these folks that you revere who stood up for justice but then something changed and i wonder if it was the discretion that comes into play. We can find at any time in history courageous people who isnt simply the people or the system that changed. Why are people not in those positions now and when did the change had been . It certainly is the case that some of it is that people. But i think a larger issue is institutional incentives because i think largely the department of justice is filled with dedicated Public Servants that are very intelligent and want to do a good job but there are and im glad you mentioned there are some people i considered heroic. Imperfect but really trying to do a good job of bringing justice. One of the guys that is a hero early in the book is the larger than life character who probably was the most important bureaucrat in the 1970s. He was the director of enforcement. Host lets just back up guest the director. And he wasnt the ahead that was probably regarded as the most important cop on the beat. Hes a huge guy with a Big Personality and used to terrify them and would sit on a couch in his joy and office. They would be working on Different Cases and he would sit on the couch and work on these cases three or four at a time and then bring in the lawyers for people they were they would sit on the couch and present their arguments for why their clients were not guilty and he appeared to nod off on theuch and it was a terrible couch with disgusting colors from the 1950s he would sink into the seats and appear to nod off and the lawyers had no idea what to do. Should we continue the presentation, is he asleep come is he listening. They would continue with the presentation and he would wake up and he had this brilliant way of anticipating their arguments that he was in their power and control over conversations. He put Corporate America on its heels through a variety of interesting techniques. Unfortunately his innovation ends up 30 or 40 years later becoming kind of corrupted and it corrupts the way they do business. Host the mission at that time was to protect investors and he was in the part where he was a career employee that had a job that was not one of the commissioners, he didnt have political power but though this power in the organization the way you are describing by being brilliant and popular with his staff. You mentione courageous they got deported later so can something you talk about what went wrong and what the unintended consequence was . Guest and the political protection and congress from both sides of the aisle, republicans and democrats and so much so that when they were interviewing candidates to be the chair they would say are you going to keep working in the office. He was that powerful even though he was not the head of the agency. He had a variety of innovations but two of them were he wanted 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 market. They have to have legal opinions and investments and what he thought was if we go after those firms then they will be on guard for fraudulent companies. We will lose their leverage. That was a Great Innovation. Hes kind of influenced by another one in the buck was the u. S. Attorney in the Southern District and really kind of starts the whole idea that they should go after accountants and lawyers and should raise their sights on a higher class of corporate whitecollar criminal. Host so, the Securities Exchange commission working as the top lawyer in the Enforcement Division and dealing of Civil Enforcement authority. They cant make criminal fines were for people in jail. If you want to work on a criminal case, the fcc to reach out to the department of justice. But you mentioned earlier in the conversation that one of the more prominent is in the Southern District of new york and you mentioned he was the head lawyer said they had to have a good working relationship guest and it was even more prominent than it is today because of fewer offices at that point so when he wants to do something criminal with whitecollar corporate crime hes got to go to the Southern District. He comes then in the 70s and morgenthau and the 1960s knows why so what youre they are doing, theres two kinds of enforcement and what they are doing is focusing on individuals. They dont prosecute companies or think about prosecuting companies at all in the 60s and 70s they emphasized going after the executives. They have the power to do this. There is a Supreme Court ruling that says if theres one employee in the course of his or her job that commits a crime you can prosecute the company, but they dont do it. Its not practice and the reason is they think of it as a piece of paper and they want to deter individuals. As people see that changes over the next decade because of an innovation in the civil arena where he realizes that they are under resourced and can leverage the resources by making companies voluntarily come clean on various things they are doing and the main thing hes focused on his watching watergate and seeing how the allegations of slush funds going to Campaign Donations and he realizes it is a very al capone technical brilliant idea where he says they have a slush fund to make illegal Campaign Donations in major companies. If we look at their books we are not going to see the line item for the secret slush funds and therefore what we can do is say its misrepresented to the public so come clean now and we will enter into a consent decree. You dont have to admit that youve done something wrong and later they are not allowed to deny that they clean their books up. In the early part, companies are genuinely scared. They dont want him on their case and they do come in and come clean over the course of the next 40 years. Host the innovation was the are under resourced, we dont have access to what folks are thinking so they rely on the company and lawyers to say if you settle with us then we get a win and the hope is that you will behave better. Guest we are going to make the companys work for us. Make them start to examine their own behavior and put them on notice for a variety of things but before that no one would say was wrong or was scrutinizing and this is why they kind of scream bloody murder because all of a sudden they are held to a new standard of behavior that they are giving a lot of bribery. This is before bribery is technically illegal so he has to get them on the technicality. They bring about the foreign corrupt practices act of 1957 and makes it illegal to bribe officials to. So this is a really Great Innovation and hes working with a young prosecutors in the Southern District like another hero of my book who learns and admires him and emulates him and then becomes a defense lawyer and later a judge and takes on the same institution that he worked for. Host i want to return to where we started which is what was wrong and whats changed. When i think about your book i think of it as a reverse makeover like a before and after like the picture doesnt look as good at the end. Whats interesting is we have these examples we just talked about but also many people look back at the enron prosecution and say those were a success with the caviar of other than the conviction of Arthur Andersen as many people that havent looked at it as closely as you have. Kenneth lay was the chairman and later became the ceo and was also convicted although he died before he was sentenced and many of us have read the book and have seen the movie so in terms of again the general public and whoever studies this closely thinks thats another Success Story and we can also say it we have have the soldier air out of you talk about and thousand people who were prosecuting the savings and loan debacle and then under george bush junior we have the successful prosecution of the bad guys. We think the bankers did something wrong and theres kind of a list of folks that what i think its a fascinating is the fault lines were there before the Obama Administration takes over in other words what it seems like and this is what i want you to talk about is the culture and knowledge and practice had already weekend. There was a shift. If you can talk about what caused this shift to feed into the conversation a little bit more im wondering how much another innovation that occurred in 1994 changed things. What weekend did so by the time president obama took over in 2009 it wasnt prepared to handle this crisis . Great question. Enron is a successful prosecution. The head of the fbi and the attorney general under ashcroft and the head of the Criminal Division of the department of justice form a task force and pluck the talented prosecutors from all over the country and essentially lock them in a room metaphorically although it ends up feeling like they are literally walked the room working 18 hours a day for years to look at one case, and by contrast one of the things the Obama Administration does not do is create an Operational Task force who are supposed to look at the specific types of issues and focus on them solely for there is no prosecutor in the wake of the financial crisis whose job it is to look at the financial crisis cases. Shes juggling Insider Trading cases and then some financial crisis case so it is a major problem. That is one thing. They are focused, they are concentrating, they are dedicated to it and they have patients and work for years and years. The task force was formed at the beginning of 2002 and it takes years. These cases are extraordinarily complex and one thing to note is they never did any stupid stuff on email which is sort of the way we make jesus now. Prosecutors know they are supposed to find dom emails and leverage goes to show what is going on in the mind of criminal intent but they didnt have that kind of direct evidence for what they had to do with the oldfashioned way which is you get them to click on the switch and you have to do that in a corporate prosecution, too. This is what they did in the early 2000 and its still fit in the intervening 15 years why was it lost . It was lost because of an enormous corporate backlash against the perception that enron was overly aggressive and primarily was focused around Arthur Andersen that you eluded to just now. Host so even though you agree that it was successful, because of the backlash against that there was a shift. I also want to mention Something Else was happening. You mentioned in 1994 Mary Jo White of the Southern District of new york was working with a fellow lawyer that came up with this idea that it might be a good idea to read this it getting an ntp to settle and work on the criminal side with the deferred prosecution agreement so theres a victory that you dont need to take the risk of going to trial. What is fascinating is it took place in 94 but never entered into another one and the whole tenure was the other officers found this to be a delightful and easy tool and again there was backlash so if you could talk about that and what that did to the prosecutors skills and the defense and how it transformed the defense bar. Guest the legend in the Southern District is working with a force of nature and they really do a bunch of major prosecutions. If you order prosecutions that say they are looking at Prudential Securities for criminal allegations they realize the trail has gone cold and the evidence into the allegations wrongdoing was a long time ago and they realized why dont we take this innovation from the juvenile courts where the person committed a crime but the judicial system could say we are going to put it in a tour and wait until you are 18 that we have prosecuted q. Just so you know. We are not dropping the case. So they reached this with prudential, and what is amazing to me and important to understand about the department of justice is theres little policy thinking into very little care and planning that goes into this, so this was an ad hoc settlement from some prosecutors. There is a lot of kind of entrepreneurialism in the department of justice. Every u. S. Attorney likes to run his or her office and the attorney general doesnt have a lot of control over them and each individual prosecutors kind of entrepreneurial. So the problem is theres a 30,000foot analysis of what kind of policies are happening so she invents the deferred prosecution agreement, settles with a company that is selling for money so no individual is being prosecuted. Its a settlement for money and the most important thing is that it is not coming from any executive pocketed this coming from the shareholders, so it is a piece of paper paying for it and not any individual. She didnt like it but it does become a little popular around the country and then the case comes. Arthur andersen is the auditor for enron and handmade to the fraud for the organization. If theres one thing i can do in my book it is to rehabilitate this prosecution because i think it was the right thing to do. I think it was a rotten organization. Many good people but through and through, the systems were in place to help companies commit accounting fraud and it wasnt just enron and Arthur Andersen helped put Waste Management and many others. So very early on the Enron Task Force prosecutors affirm and if they win in the trial, Arthur Andersen goes out of business, tens of thousands unfortunately are put out on the street out of work and something amazing happens which is there is 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 internalized in the department of justice so they essentially decide theres no policy in there is no policy in place, nobody says explicitly that they take the ability to prosecute companies off the table because of these collateral consequences, because of employees