The Justice Department basically stopped prosecuting high-level white-collar criminals, the ones in charge of the decisions that destroyed companies like Enron and led to the 2008 crash. Eisinger chronicles this as a failure of nerve—an unwillingness to lose, abetted by a corporate-friendly judiciary that interpreted criminal laws narrowly where white-collar crime was concerned, as well as by political pressure from the elected officials who received lots of lobbying and money from white-collar defenders (not for nothing, whose class, racial, and gender background they generally shared). Eisinger also points out that institutional capacity to go through full-fledged white-collar criminal trials has decayed—and the decreased interest and capacity feed each other. Instead, Justice relies on big-dollar settlements that don’t match the actual costs (or profits) of crimes, and is sympathetic to claims that greater penalties—like disqualifying criminal companies from getting government contracts—will put the companies out of business, hurting innocent employees. As Eisinger notes, Arthur Anderson didn’t go out of business for nothing—it survived indictment, but its higher-ups endorsed a huge amount of wrongdoing despite warnings from those below; probably it deserved to die, and its death neither prevented innocent employees from getting jobs elsewhere nor tanked the overall economy, as its defenders had predicted. Still, prosecutors started to believe the hype—that the economy was so fragile that criminal prosecutions of economic bad actors were unwarranted (not as worried about the incentives thereby created to cheat and cheat again). Eisinger tracks other factors—the SEC’s invention of self-examination as an enforcement tool, waiving penalties for appropriate self-reporting of violations; this was initially a pro-compliance tool, but it created huge new revenue streams for law firms doing the self-examination and turned into a get-out-of-jail-free card. Diversion of resources from white-collar crime to terrorism after 9/11 also hampered investigations.

Eisinger has a few recommendations, such as for prosecutors to be more willing to lose trials and swing for the bleachers. He also recommends greater age diversity—instead of a Justice Department job being a stepping-stone to a cushy firm partnership defending those you used to threaten to indict, becoming a prosecutor might be a capstone to a career. Drawing from class action/trial lawyers instead of top law school graduates might also help.

The dirt under the carpet

Any book that can definitively answer the question of why no executives have gone to jail for the Financial Crisis deserves our attention. And in this case a Pulitzer Prize. The Chickenshit Club is a fast moving, fly on the wall, disheartening look at the deterioration of the Justice Department and the Securities and Exchange Commission, written sympathetically, thoroughly, but mostly - engagingly. It is a book of superheroes.

There are 94 US Attorney offices around the country. They operate on their own, independent of the Justice Department, their dotted line overseers. They fight over cases, work (and fight) with the FBI and the SEC, or work around them, and seem to take their cues from the news. From the 60s to the 90s, they developed into the good guys, fighting the good fight and taking great pride in their accomplishments. They turned up clues, did forensic accounting, and turned (“flipped”) lower level criminals to get the executives. They were saving the country from itself. But the days of young aggressive lawyers nailing an Ivan Boesky or a Michael Milken are gone.

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.

What’s great about The Chickenshit Club is that Eisinger has created a huge cast of great characters. You see them giving news conferences or running from courtroom to courtroom, but these federal prosecutors are a different breed of human, and Eisinger profiles them in depth. They spend 16 hour days in crummy offices, scream and yell at each other, swear constantly, and have no fear of taking on the biggest and the wealthiest. Equal treatment under the law actually meant something to them, and they sought out prosecuting positions for the wide-ranging freedom and satisfaction they offered. There are several larger than life heroes here. The most notable is probably (Judge) Jed Rakoff, who began at the SEC and as a judge, had the temerity to refuse settlements between the government and the corporate criminals, because they were superficial, trivial, insufficient, and demonstrated no sense of justice whatsoever. As a result, settlements now avoid approval by the courts.

The final impression is that there is an absolute rainbow of crime constantly glowing over corporate America. Business is inventive, sneaky, and determined to take every underhanded shortcut it can, at the expense of its customers and shareholders. What The Chickenshit Club points out is that now more than ever, we need strong overseers, strong regulations, strong deterrents, and strong justice. Today, we have none of them, and they continue to decline from their low positions.

David Wineberg