A story spanning a decade has come to an unfortunate yet unsurprising end. Three former General Electric bankers—Dominick Carollo, Steven Goldberg, and Peter Grimm—had been convicted in 2012 for rigging auctions of municipal bonds, essentially stealing from projects intended to build public schools, hospitals, libraries, and nursing homes in virtually every US state. However, in November 2013, those convictions were reversed on a technicality: Because it took federal prosecutors so long to build the massive case, the statute of limitations ran out. The three men were released from prison the next day—just in time, as a defense attorney noted, to be home for Thanksgiving dinner.
These men were part of a decade-long scheme that bilked cities and towns of funds for public-works projects by paying kickbacks to brokers and manipulating bids. Between August 1999 and November 2006, Carollo, Goldberg, and Grimm participated in countless rigged bids via telephone. Like mafiosi, they used a secret language and code words to keep their underground business low-key. Prosecutors accumulated over 570,000 recorded phone conversations that directly linked the men to fraudulent activity. Evidence at trial established that they cost municipalities around the country millions of dollars.
This type of white-collar immorality is a major issue because cash-strapped municipalities could have used the stolen money to provide essential services. Matt Taibbi of Rolling Stone called this fraud the equivalent of robbing a church fund to pay for lap dances. Taibbi, however, is among a few reporters—including Paul Burton and Jonathan Hemmerdinger of the Bond Buyer—to consistently inform the public on these crimes and to point out the perhaps insurmountable obstacles faced by even an activist US Department of Justice in getting convictions. “It really is hard to put these guys away,” Taibbi wrote. “It’s even harder to keep them there.”
Meanwhile, as Janine Jackson reported for Fairness and Accuracy in Reporting’s Extra!, “While there have been substantive inquiries into the wrongdoing of investment banks and auditors, those calling for jail time are often dismissed as irrational, driven by ‘blood lust’ (Washington Post, 9/12/13), ‘anger’ (Chicago Tribune, 11/30/13) or ‘vengeance’ (Washington Post, 11/18/13).” Various media outlets have explained that, while bad business decisions are not crimes, knowingly selling fraudulent mortgages and other dubious financial products is punishable by jail time. People have pointed to multiple reasons for the lack of prosecutions, such as regulatory agencies stopping key functions and non-deterrent settlements from government watchdogs. Media outlets have also made the case that imprisonment and increased liability would be ineffective, and many press accounts appear to be arguing for the legality of CEO actions. As Jackson reported, “Many press accounts seem more intent on explaining why what CEOs did wasn’t a crime than on asking whether it should be.”
However, outlets acknowledging the human victims of Wall Street wrongdoing have been less dismissive of imprisonment. Calls for jail time can be seen as demands for equal treatment under law. For example, in February 2013, Matt Taibbi of Rolling Stone argued against the emerging distinction between “an arrestable class and an unarrestable class.”
Max Stendahl, “Former GE Execs Freed from Prison after Convictions Nixed,” Law360, November 27, 2013, http://www.law360.com/articles/492222/former-ge-execs-freed-from-prison-after-convictions-nixed.
Matt Taibbi, “Another Batch of Wall Street Villains Freed on Technicality,” Rolling Stone, December 4, 2013, http://www.rollingstone.com/politics/blogs/taibblog/another-batch-of-wall-street-villains-freed-on-technicality-20131204.
Janine Jackson, “Why Aren’t Big Bankers in Jail?” Extra! (Fairness and Accuracy in Reporting), January 1, 2014, http://fair.org/extra-online-articles/why-arent-big-bankers-in-jail.
Matt Taibbi, “Gangster Bankers: Too Big to Jail,” Rolling Stone, February 14, 2013, http://www.rollingstone.com/politics/news/gangster-bankers-too-big-to-jail-20130214.
Student Researchers: Markisha Barber (Frostburg State University), and Noah Tenney and Tania Sanchez (Sonoma State University)
Faculty Evaluators: Andy Duncan (Frostburg State University) and Peter Phillips (Sonoma State University)