The Dark Side of Deferred Prosecution Agreements: JP Morgan Chase
Deferred prosecution agreements have been called a “middle ground” approach, somewhere between criminal prosecution and – what? That’s the question: just what is the point of deferred prosecution agreements? To us they seem like just another way for fat-cat corporations to buy their way out of a finding of guilt.
Take the case of JP Morgan Chase, the recipient of a deferred prosecution agreement in January 2014 for its role in the Bernie Madoff scandal. JP Morgan served as the primary bank through which Madoff ran his Ponzi scheme, and turned a blind eye to years of very suspicious behavior. Without JP Morgan’s tacit – if not knowing – participation, Madoff could not have pulled off his criminal enterprise. Nevertheless, the government, simultaneously with announcing it was bringing criminal charges against JP Morgan for violating the Bank Secrecy Act, announced it had reached a deferred prosecution agreement with the bank. Under the terms of that agreement, the bank would pay $1.7 billion to the victims of Madoff’s fraud and the government, in turn, agreed that after two years it would dismiss all charges against the bank.
The total amount of losses from Mr. Madoff’s criminal enterprise have been set at $65 billion paper losses and cash losses of more than $17 billion. Victim compensation of $1.7 billion is certainly nothing to sneeze at, but it is still just a fraction of the losses Madoff’s victims incurred.
Even more to the point, the deferred prosecution deal the government cut with JP Morgan represents a level of leniency offered only to wealthy corporations, allowing them to escape criminal liability with their checkbooks. When offered in a situation where real people have died as a result of a corporation’s bad acts – the case with Massey Energy Co. – or where thousands have suffered crippling financial losses because of criminal misconduct – the case with JP Morgan’s role in the Madoff Ponzi scheme – non-prosecution and deferred prosecution agreements are a bad idea. They have very little to do with justice and almost everything to do with large amounts of cold hard cash, the ace up the sleeve of nearly every wealthy corporation.