Our federal Department of Justice (DOJ) excels at seizing the cash. In the past two years, often acting as another Department’s attorney, DOJ has prosecuted violators shaking at least $45 billion in fines and penalties out of companies – notably, JP Morgan ($13B), Bank of America ($9.5B), Anadarko ($5.2B), HSBC ($1.9B), Deutsche Bank ($1.9B), SAC Capital ($1.8B), Toyota ($1.2B), and miscellaneous drug makers ($1B).
In contrast, DOJ’s total budget outlays for fiscal 2013 were just $36.5 billion. As a cost center DOJ is a welcomed bluebird. The much smaller, but well known criminal asset forfeiture program is expected to harvest $1.4 billion during fiscal year 2015. DOJ’s fines from criminal litigation are recognized as revenues by the Treasury and are supposed to be spent on crime victims.
The future for DOJ’s revenue model looks bright. There are plenty of financial industry cases that the DOJ might take on or help others finish up. For example, the Consumer Fraud and Protection Branch has a record of fining credit card companies and it is suspected to be working on a case worth nearly $1 billion. Citibank’s Banamex affiliate appears headed for criminal court under allegations of fraud. Large fines and penalties await other financials for inappropriately influencing Libor settings.
The most recent candidate for DOJ’s treatments is high frequency trading. It will be interesting to watch the DOJ distinguish between the obvious but fair advantages of speed and intelligence as distinct from the advantages of speed and intelligence that are somehow criminal. If it does not involve insider information, DOJ may fail to make that case profitable.
On the EPA front, methane is the most recently bête noir that could prove highly lucrative. Coal mines and cattle emit methane, and owners of swampland may be fined for “swamp gas” bubbles – after all we wouldn’t want selective enforcement of the rules.
The government may be selling its GM ownership in the nick of time. GM has announced 7 million cars under a recall during 2014. Of those, 2.6 million are associated with faulty ignition switches, a defect with a history that looks susceptible to big fines. Other car makers are waiting for their chance in the defendant’s posture. Toyota has already received its fair share of abuse.
DOJ has established a strong track record of making corporate crime less profitable. We hope they are not gulled by other federal agencies into adopting lower standards such as ignoring the Brady rule or conspiring to commit “sue and settle” or getting a little help from NSA, or “parallel construction” to hide NSA’s help.
In any case, DOJ trawling for dollars appears to be the newest fundraiser in Washington.
Alan Daley is a retired businessman who writes for The American Consumer Institute Center for Citizen Research