HN Books @HNBooksMonth

> There is the perception that criminals are not being punished

The "perception" is that criminals with power, wealth, and connections aren't being punished, and that's because they aren't. After Enron our justice department lost whatever appetite it had for meaningful criminal prosecution of corporate execs, there's even a book about it:

https://www.amazon.com/Chickenshit-Club-Department-Prosecute...

People who get put away for white collar crimes are punished because they stole from someone wealthier or more powerful than them. Hardly anything is systematically being done about "white collar" crimes affecting ordinary disempowered people, which is why millions of workers in the U.S. experience wage theft each year.

⬐ paulpauper

plenty of recent post-Enron instances of high-profile and wealthy white collar criminals getting long sentences:

Scott W. Rothstein,Reed Slatkin,Bernie Madoff,Tom Petters,Allen Stanford,

⬐ jonwithoutanh

All of your examples are of people stealing from richer people via ponzi schemes, echoing his point that you only go to jail for white collar crime if you stole from the real upper class.

This book https://www.amazon.com/Chickenshit-Club-Department-Prosecute... has lots of proof.

⬐ pathseeker

That's not a good point of evidence. The laws in question are regarding government employees self-dealing by awarding contracts in exchange for employment/favors later.

>Why were no bankers put in prison after the financial crisis of 2008?

This question is enough to dismiss the entire book outright. The financial crisis of 2008 was caused by a systemic risk modelling failure. This led to banks relying too heavily on the stability of mortgages. Bad business decisions are not criminal, that's why the bankers weren't arrested.

Here are some other questions for you:

Why were no energy industry employees/CEOs put in prison after the 1973/1979 energy crises?

Why were no tech people arrested after the dot-com bust?

Entire industries have systemic failures that impact broad society. That is not evidence of a crime and implying so in a leading question to your book means pandering to a specific political view or just gullible people.

⬐ decebalus1

You're conflating issues here. Fraud is still criminal. Some made bad business decisions, some have committed fraud. Some have made money, some have lost. The ones which made bad business decisions lost money. That's not what the book is about.

> That's not a good point of evidence. The laws in question are regarding government employees self-dealing by awarding contracts in exchange for employment/favors later.

This happens all the time. It's called the 'Revolving door'. It's not that hard to prove, it's just that federal prosecutors don't bother instrumenting the cases, unless there is political gain from doing so. The laws in question I was replying to, were 'Federal laws', not specific to conflicts of interest, but even so..

I'm not advocating for the book, I read it and found it both interesting and representative of the recent enforcement efforts by the government which nobody can deny have been sub-par. Most of this is because of the broken incentive structures for prosecutors. Take for example the Equifax breach in which only two employees have been indicted and convicted of insider trading, with penalties totaling a whopping 160k. That's some vigorous enforcement right there.

Another examples of vigorous enforcement is what happened to the tobacco executives after lying to Congress. Or.. other people who also lied to Congress https://www.nbcnews.com/politics/congress/5-people-who-lied-...

So yeah.. vigorous.

It seems the Chickenshit club[0] has expanded to Europe.

[0] https://www.amazon.com/Chickenshit-Club-Department-Prosecute...

This is a worthwhile book that might help clear up some of your bewilderment at why corporate crime cases so often turn out so unsatisfactorily.

https://www.amazon.com/Chickenshit-Club-Department-Prosecute...

My personal TL;DR from a couple of years ago if you don't have the time to read the book:

- It's very hard for prosecutors to secure a criminal conviction even in the most blatant cases of wrongdoing.

- Prosecutors care too much about their win rate to risk trials.

- Prosecutors have fallen into a trap where they're so dependent on the policy of offering generous non-prosecution or deferred-prosecution agreements if the company comes forward and volunteers evidence, they've become incapable of actually executing on a complex criminal investigation anymore.

- There's intense political pressure to not punish shareholders for management's misdeeds.

⬐ caprese

I enjoyed that book, I felt it kind of just "ended" though. It had some interesting history and insights but then the pages just kind of ran out

⬐ Eliezer

Sometimes real life lacks a satisfying conclusion?

⬐ caprese

Sensationalized dramas generally dont make it to the presses that way

⬐ SkyBelow

One thing to add, the majority of the population supports this outcome (if you measure actions as more important than words).

⬐ chias

> There's intense political pressure to not punish shareholders for management's misdeeds

Rightly so, IMO. I invest almost exclusively in index funds, which means there's a good chance I'm a shareholder and don't even know it. I like to think that it wouldn't make sense for me to be held responsible.

⬐ scarejunba

You're not held responsible. The company is. You just made a bad investment through bad fortune. You get to sue the company for losing you money.

⬐ brianpgordon

The reason your index funds return so much is that you're buying a share of ownership in the company. That includes upside but it also includes downside. If there were no downside you'd be getting exactly money market-like returns.

⬐ mruts

The downside of equities is not being sued as a shareholder of a crooked company, it's the risk and long-term exposure you bear from your share of ownership and the future cash flow of the company.

⬐ JoeAltmaier

But the civil case seems so easy - failure to deliver the right stuff over most of a decade. Should be possible to bankrupt this company over contract fraud?

Matt,

I have really enjoyed your books and all your articles over the years, especially about banking, corruption, and the financial crisis. i am curious if you have read the book 'The Chickenship Club) [https://www.amazon.com/Chickenshit-Club-Department-Prosecute...] and your thoughts on it?

⬐ MattTaibbi

So I'm embarrassed to say that I haven't read that book, but I imagine I've read almost all of Jesse's articles from that time period, as we were both covering essentially the same story. Along with Gretchen Morgenson of the Times, Jesse was one of the first reporters to start asking the question of why no one from the crisis era went to jail. I gather from the title alone that he traversed a lot of the same area I did in "The Divide," which was significantly about the pusillanimous Justice Department not wanting to take on complex financial cases. Jesse is a great reporter so I will definitely check it out.

> It's amazing the effect a CEO locked in a cage for a few years like an animal has on the population of CEOs as a whole. Treat digital infrastructure like we treat real infrastructure. If people built bridges the way we build software infrastructure, rafts of executives would be rotting in prison.

Never going to happen. Especially in the current 'business friendly' administration. This [1] book does a great job at explaining why. I don't think we'll see a CEO behind bars for anything white-collar in our generation. Sadly. Judges and prosecutors are political animals too, you know.

[1] https://www.amazon.com/Chickenshit-Club-Department-Prosecute...

For those interested in learning about the United States government moving from prosecuting white-collar criminals to settling, the difference between the SEC and Justice Department misses the point.

The book The Chickenshit Club https://www.amazon.com/Chickenshit-Club-Department-Prosecute... by a Pulitzer Prize winning journalist tells a more thorough and comprehensive, though infuriating and tragic, story.

> Causing financial crisis wasn't illegal. Unethical but not a crime. Except for some cases of misselling products, banks playing against the customer etc.

The exception there swallows the rule. Prosecutors could have, and in previous financial crises did, prosecute top executives under the laws against, for example, wire fraud.

They didn't this time for reasons outlined in the excellent book: Chickenshit Club (https://www.amazon.com/Chickenshit-Club-Department-Prosecute...)

⬐ sytelus

I think the top review of this book summarizes it all pretty well:

With George W. Bush, Justice deteriorated under Secretary Alberto Gonzalez, who was forced to resign, and the SEC deteriorated under Christopher Cox, whose intent appeared to be to simply let it collapse from inactivity. Budgets were slashed and staffs reduced at the same time as demand for action increased. This is standard procedure for discrediting an institution. The stories of confusion, conflict, lack of direction, leadership or policy are all detailed here. The frustration of the prosecutors is palpable. In the current administration, you can see it real-time at Education, State, and the EPA for example.

The answer to the question is that everything changed. Prosecutors today are actually afraid to file suit, fearing they might lose and have black marks on their CVs. (James Comey famously called them chickenshits.) They have little or even no trial experience any more. Everything is a negotiated fine (never paid by the perpetrators). They have been battered by the collapse of Arthur Andersen, which put a lot of employees on the street, and has given us ridiculous arguments over “too big to fail” and markets that “self-regulate”. They no longer work for the “public good”. They work to get better jobs in big law firms. They want to take their faultless experience in government to make themselves millions from the other side. The revolving door makes this one huge club. This is so far removed from their predecessors as to be unrecognizable. And Eisinger makes this shockingly clear as he proceeds from decade to decade.

Considering people like Preet Bharara are now out, I'd say deterioration is only further accelerating.

Arthur Schlesinger Jr’s “The Cycles of American History”

“The Forth Turning” or “Generations” by Neil Howe and William Strauss. Although be warned although those books were well received at the time in like 1993 (including a pretty positive review by the N.Y. Times) they are little less ‘academic’ than Schlesinger’s.

Also the authors Samuel Lubell, R.G. Collingwood, and Frank L. Klinberg.

Regarding the concept of “willful blindness” that is currently experiencing a revival in academic legal circles and is forming the basis for an aggressive, take-no-prisoners approach to white-collar crime, look at “The Chickenshit Club” by Jesse Eisinger.

The Cycles of American History https://www.amazon.com/dp/0395957931/ref=cm_sw_r_cp_api_0ea9...

Generations: The History of America's Future, 1584 to 2069 https://www.amazon.com/dp/0688119123/ref=cm_sw_r_cp_api_kfa9...

The Chickenshit Club: Why the Justice Department Fails to Prosecute Executives https://www.amazon.com/dp/1501121367/ref=cm_sw_r_cp_api_aea9...

⬐ marnett

Thanks for all of these recommendations

Many reasonable people seem to believe that the backlash and horror inm response to the US government killing of Arthur Andersen and the subsequent job losses were what led to the later toothless reactions by the DoJ to subsequent corporate scandals:

http://www.npr.org/2017/07/11/536642560/is-the-justice-depar...

http://www.slate.com/articles/podcasts/slate_money/2017/07/t...

https://www.amazon.com/Chickenshit-Club-Justice-Department-C...

⬐ toomuchtodo

I mean this entirely seriously: perhaps its time we be less reasonable people.

it blows my mind that basically any financial crime committed by a big shop results in a fine (and more regulation/compliance) instead of jail time for the bad actors.

of course, if the crime is committed by a penny ante fraudster, then the DOJ is not afraid to put them in jail.

https://www.amazon.com/Chickenshit-Club-Justice-Department-C...

Yes, but even when the Dems were running DOJ, they did not go after corporate executives.

new book on this by Pro Publica reporter:

https://www.amazon.com/Chickenshit-Club-Justice-Department-C...