What to Say to Jack and Jim?

We were in an empty West Virginia courtroom last night with two young boys — let’s call them Jack and Jim — ages 10 and 8.

Time for homeschooling — Justice 101.

Let’s say Jack that you go into Jim’s candystore and steal a chocolate bar. Jim calls the police. The prosecutor charges Jack with theft. Jack will be charged and brought to trial in this courtroom. The prosecutor will sit at this table over here.

What’s this over here?

This is the witness stand. Te prosecutor will call Jim as a witness. Jim will testify that Jack stole the candy bar. Over in this box sit 12 of Jack’s fellow citizens. They will hear the evidence. Behind this bench over here sits the judge. The judge will determine what evidence gets to the jury.

After the jury hears the evidence, they will walk back into this room, close the door, and decide whether Jack is guilty or not. After reaching a verdict, the jurors will file back into the jury box and tell the judge of their decision. If the verdict is guilty, the judge will hand down his sentence.

Jack will go to jail. His reputation will be in tatters. His life destroyed. No more play group. No more swimming in the creek. No more candy bars. That was last night’s lesson.

This morning, we awake to a front-page Wall Street Journal article reporting that KPMG — one of the nation’s big four accounting firms — is facing criminal charges for the aggressive marketing of abusive tax shelters that cost the federal government $1.4 billion in lost revenue.

A November 2003 Senate report found that “KPMG devoted substantial resources to and obtained significant fees from ? potentially abusive and illegal tax shelters ? costing the U.S. Treasury billions.” According to the Journal, last year, the Internal Revenue Service told a federal court that KPMG “falsely asserts that it has never developed, sold or promoted a tax shelter” and that KPMG tried for years to delay or conceal evidence behind sometimes false claims of legal privilege. Here’s the first sentence from the article, written by Journal reporter John R. Wilke:

“Federal prosecutors have built a criminal case against KPMG LLP for obstruction of justice and the sale of abusive tax shelters, igniting a debate among top Justice Department officials over whether to seek an indictment — at the risk of killing one of the four remaining big accounting firms.”

KPMG issued a statement yesterday saying that it “takes full responsibility for the unlawful conduct by former KPMG partners” during the period under investigation by the Justice Department. KPMG said it has taken actions “to ensure that this type of conduct does not occur again,” including “firm-wide structural, cultural and governance reforms.”

In the wake of the criminal prosecution of Arthur Andersen, which drove the accounting firm out of business, federal prosecutors increasingly have shied away from criminally prosecuting big firms. Increasingly, federal prosecutors look to what impact a criminal prosecution will have on the firm.

First came the deferred prosecution agreement — that’s where prosecutors file an indictment on the condition that the company behave itself for a period of years, usually two. If things are in order after two years, the indictment is dropped. Slate wiped clean. No record of indictment. No conviction.

Then came the no prosecution agreement — prosecutors agree not to bring an indictment on the condition that the company change the way it does business. With the Supreme Court’s reversal of the Andersen conviction, combined with a number of high-profile white-collar crime not guilty verdicts, prosecutors find themselves on the defensive. As a result, increasingly, corporations are being deemed — too big to indict and convict.

And it appears that KPMG is now working out another in this series of corporate sweetheart deals with the Justice Department.

What to say to Jack and Jim about this?

Jack, if you are charged with stealing a candy bar from Jim’s candy store, go to the prosecutor and show him today’s Wall Street Journal. Tell the prosecutor to take into consideration the collateral consequences of the prosecution. Jack will be shunned by his peers. No more play group. No more swimming in the creek. No more candy bars. Please prosecutor please. Give me the same deal that you gave KPMG. No indictment.No conviction. I’ll be good. I’ll give back the candy bar. I’ll change my ways. Promise. Pretty please?

Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime Reporter, . Robert Weissman is editor of the Washington, D.C.-based Multinational Monitor, . Mokhiber and Weissman are co-authors of On the Rampage: Corporate Predators and the Destruction of Democracy (Monroe, Maine: Common Courage Press).

This article is posted at:

Leave a comment