U.S. Prosecution of Corporate Crime Varies
Widely by Location, Program and Agency

Figure 1. Percent of Federal Criminal Referrals
Prosecuted, FY 2010 - FY 2014

During the last five years, federal investigative agencies made 10,670 criminal referrals to U.S. Attorneys throughout the country, according to Justice Department records obtained from the Executive Office for U.S. Attorneys (EOUSA).

The number of referrals that went on to be prosecuted, however, was much smaller — 1,309 cases or, on average, only 262 a year. This means that for corporate referrals, only a small proportion (12.3%) of the matters recommended by the investigative agencies from FY 2010 to FY 2014 resulted in the filing of criminal charges in court.

Moreover, corporate referrals were prosecuted at a much lower rate than those aimed at individuals. For the nearly one million referrals aimed at individuals, 82.1 percent resulted in criminal charges being filed in federal court — a far cry from the mere 12.3 percent that resulted in criminal prosecutions for companies.

This meant that for incoming referrals, prosecution of individual defendants was, on average, nearly seven times more likely than it was for corporations (see Figure 1 and Table 1).

When the national effect of the Justice Department's almost total concentration on individual criminals is combined with the department's very high declination rate for corporations, the overall result is surprising.

But the combined effect of these two forces becomes even more startling when examined in many of the nation's separate judicial districts. Government records reveal notable and sometimes hard to explain variations in the corporate prosecution rates among the various U.S. Attorneys. In some offices, nearly half of corporate cases were taken to court; in other districts, all such cases were declined.

Figure 2. U.S. Attorney Offices Range Widely in Percent of Corporate Referrals Prosecuted

The report presented here is the second in a series on the criminal prosecution of corporations developed by Syracuse University's Transactional Records Access Clearinghouse (TRAC).

It is based on TRAC's analysis of hundreds of thousands of Justice Department records covering the five-year FY 2010 - 2014 period. TRAC's previous report from October 2015 focused on how — despite repeated Department claims to the contrary — the number of corporate prosecutions during the Obama Administration is very small and has been declining.

This report examines the process through other prisms — including the decisions made in each U.S. Attorney's office and the performance of the investigative agencies — and yields a number of new and unexpected insights.

Because these records — obtained from the Justice Department after TRAC's 17-year Freedom of Information struggle — have never previously been subject to an independent analysis, both the first and second reports document a broad overall range of problems in this enforcement area and the government's possibly flawed management of it.

Location, Location, Location

Many textbooks, government manuals and organizational charts indicate that the Attorney General of the United States directs the operations of the Justice Department. In several important ways, however, that observation is misleading. One dramatic example of this widespread public misunderstanding centers on the critical question of who is responsible for deciding whether or not a given individual or corporation will be formally charged with violating the law.

As just indicated, the manuals suggest that the control of the department largely rests with the Attorney General. But under well-established law and long-standing tradition, this core responsibility is in fact left to the semi-autonomous U.S. Attorneys, each serving as the senior federal enforcement official in one of the nation's 94 judicial districts. While nominally appointed by the President, U.S. Attorneys usually are chosen by senior political figures of the president's party who are located in the various districts.

One probable result, according to TRAC's analysis of the EOUSA data, are very prominent district-by-district variations in both the extent and nature of the corporate criminal referrals that were eventually brought to court. Aspects of these differences will be described in greater detail below.

As suggested above, while many different forces may be significant, the day-to-day authority of the U.S. Attorneys to reject or prosecute individual cases probably is one of the most important sources of variation. (These rarely-documented discretionary powers, of course, are exercised for all kinds of matters, and not just for those involving corporate crime.)

Here, in summary form, is information about the extent of the variations among the offices of all U.S. Attorneys in making this important decision. For example, TRAC's analysis found that the prosecutors in four of 90 states' districts brought almost half of corporate referrals (40 to 50%) to court. At the same time, however, there were eleven districts in which the prosecutors only sent about one in five corporate defendants (20%) to trial. In 14 districts, very few or none of these corporate referrals resulted in a prosecution (see Table 2).

(Because, as previously explained, the party in the White House tends to have a dominant voice when it comes to the appointment of all U.S. Attorneys, party affiliation is not thought to an be important factor when it comes to the varying prosecution rates in different regions during the life of a given administration.)

Among the ten districts with the highest proportion of incoming corporate referrals being sent to court were North Dakota (Fargo), Oklahoma West (Oklahoma City), Wyoming (Cheyenne) and Montana (Billings). This list might suggest that higher criminal prosecution rates were found in the districts with a relatively small number of corporate referrals.

But that conclusion would be simplistic. There are other districts with few corporate referrals, such as South Dakota, Oklahoma East (Muskogee) and Oklahoma North (Tulsa), that rarely prosecute those referrals they receive. And among the list of the ten districts with the highest prosecution rates were Louisiana East (New Orleans) and Florida South (Miami), both with a comparatively large number of referrals.

At the other end of the scale among the nation's ninety-plus judicial districts were four where every one of the incoming agency referrals went nowhere. On this particular list was Alabama Middle (Montgomery), Michigan West (Grand Rapids), Oklahoma North (Tulsa) and New York East (Brooklyn). See Table 2.

But in between these extremes were some obvious curiosities, most prominent among them New York South (Manhattan and White Plains), the home of Wall Street and the headquarters for many of the world's richest corporations. Some would describe it as the world capital of capitalism.

A long line of U.S. Attorneys in New York South have bragged about how this office and the prosecutors who work there are the cream of the crop when it comes to dealing with corporate crime. This may be so, but according to the Justice Department records from FY 2010 to FY 2014, this office was responsible for criminally prosecuting only 6.1 percent of its criminal referrals — or just 11 companies.

This relatively low prosecution rate means that, despite the top ranking place it has long claimed, New York South ranked only 71st among the 90 judicial districts. By this measure, way above New York South were Washington West (Seattle) with a 23.9 percent prosecution rate, California Central (Los Angeles) with 15.3 percent, Pennsylvania East (Philadelphia) with 11.9 percent and Michigan East (Detroit) with 9.6 percent of corporate criminal referrals being prosecuted.

Of course, the type and quality of criminal referrals coming into the offices of each U.S. Attorney can also be expected to vary. This is unquestionably a factor in the district-to-district variation observed. We next examine the work of the investigative agencies that refer corporate cases and also the types of offenses represented.

Who Investigates the Corporations?

In the five-year period covered in this report, a surprisingly large and diverse array of government agencies made criminal referrals to federal prosecutors involving alleged corporate misdeeds. From FY 2010 to FY 2014, government records show the referrals in question came from 146 different agencies. A total of 35 agencies — including the Nuclear Regulatory Commission, the Federal Trade Commission, the U.S. Army Corps of Engineers, Amtrak, and the Bureau of Mines — were recorded as making only a single referral.

The lion's share of the recommendations, however — more than four out of five of them — came from a relatively small number of departments and widely recognized federal investigative and independent agencies. The "top ten" are listed in Table 3, along with their number of criminal referrals.

The FBI tops the list with about one third of the national total of 10,670 corporate criminal referrals. Because it employs a comparatively large number of agents and frequently claims a high interest in corporate crime, this achievement is hardly surprising. For somewhat similar reasons, the placement of the IRS and the Postal Service in the top ten list also was expected.

Somewhat more surprising among the more active corporate enforcement agencies was the Department of Health and Human Services (HHS) and the Environmental Protection Agency (EPA). While each of these agencies account for a relatively small number of total referrals, in terms of those involving corporate crime their role is important. This is because, compared to other agencies in the top ten list, a much larger proportion of them are aimed at corporations rather than individuals. Here is an example: while only 2.7 percent of the FBI referrals involve corporations, the figures are 16.6 percent (one in six) at HHS and 33.9 percent (one out of every three) at the EPA.

Which Agencies Are Best at Getting Corporations Prosecuted?

But after the investigative agencies send their corporate referrals to the prosecutors, what happens? An examination of the Justice Department records indicates that during the last five years the ten agencies with the largest number of referrals ended up with very different success rates when measured by the proportion that ultimately resulted in a criminal prosecution.

Among the ten with the worst showing — well below the national average of 12.3 percent — were the Secret Service (3.2%), the Postal Service (5%), and the FBI (6.6%). See Table 4.

Despite sending a smaller volume of criminal referrals overall, the agencies with fewer referrals seemed to be more successful when it came to getting the prosecutors to act on their recommendations. For example, the Interior Department with only 229 referrals had a prosecution rate of 33.2 percent. Also comparatively successful were the Environmental Protection Agency (28.8%), Immigration and Customs Enforcement (18.5%) and Health and Human Services (13.2%).

Prosecution Rates and Types of Crimes

Because these agencies typically focus on different types of offense, part of the reason for the various success rates may also be a function of the specific language in the laws that the agencies are charged with enforcing. For example, many laws vary in terms of the types of evidence they require in order for the government to prove that a crime has taken place.

Table 5 shows the composition of corporate referrals that are criminally prosecuted in terms of broad offense types — white collar ("fraud") crimes, regulatory offenses, environmental crimes, and so forth.

While the single largest component of corporate referrals involves various white collar or fraud offenses, fewer of these — only 7.4 percent — end up being prosecuted. In contrast, one in three (32.2%) corporations referred for environmental crimes ends up being prosecuted (see Table 5).

Comparing Agency Performance Within Offense Categories

Of course, when an offense area is almost exclusively the province of one particular investigative agency, it is not possible to unravel whether the variation in agency performance is better explained by the agency's case preparation, differences in the relevant laws, or a combination of both.

And in general, because the Justice Department's widely different prosecutorial efforts around the country are driven by many factors, it is particularly challenging to pin down which of many possible forces best explains the distinct variations in the government's corporate enforcement activities.

It is useful, however, to compare investigative agency success rates within each offense category. Results of such a comparison are shown in Table 6.

Looking first at the FBI, there were six major offense types in which the FBI made at least 30 corporate referrals, a threshold selected in order to reasonably compare the prosecution rates within the various groups. The FBI ranked below average in four program areas, about average in one (government regulatory), and somewhat above average in another (narcotics/drugs). For the area in which the FBI makes most of its referrals — white collar crime offenses — the Bureau ranked distinctly below average, with charges being filed for only 4.3 percent of its corporate referrals as compared with 7.4 percent of all corporate white collar referrals.

In contrast, ICE had above average success rates in four out five offense categories that involved corporate criminal referrals.

Health and Human Services (HHS) was above average in all three offense categories when it came to that agency's corporate criminal prosecutions: for white collar, government regulatory offenses and drugs. Here is one distinct example: for corporate matters grouped under the "Government Regulatory" banner, 37.5 percent of the forty referrals originating from HHS resulted in actual criminal prosecutions.

But for the IRS — where only 5.5 percent of its 361 government regulatory referrals went forward — it was a very different story. And the IRS was above average in only one out of three corporate offense groups: white collar offenses.

While most of the EPA's efforts focused on environmental offenses, where its success rate of 28.8 percent was quite high, it still ranked lower than two other agencies: the U.S. Coast Guard and the Commerce Department[1]. And as shown in Table 6, the EPA's achievements were substantially below par for the much smaller number of corporate referrals of white collar crimes.

While these and other such comparisons raise many tantalizing questions, it is easy to over-generalize their implications. This is partly because the Justice Department's offense categories are very broad, and given the specialized type of cases handled by different agencies, the matters within the broad offense categories are not always comparable. As a result, some of the apparently uneven agency-by-agency performance may be the result of very different matters being placed under a single broad heading.

The Role of U.S. Attorneys Revisited

Added to this very complex mix is the fact that every case takes place in a particular federal district with its own U.S. Attorney who may set different priorities for the district when it comes to deciding the types of cases that the office will concentrate on.

Table 7 compares the corporate prosecution rates of U.S. Attorney offices within these same broad offense categories. For example, even within white collar offenses, there is wide variation from one district to the next in terms of the percentage of these specific referrals that resulted in the formal charging of a corporation with a criminal offense.

Even though Table 7 does not list districts with fewer than 30 corporate referrals within each of the displayed offense categories, it sometimes shows surprising geographic concentrations. For example, nearly half of the corporate referrals under the National Internal Security/Terrorism banner occurred in just two districts — New Jersey and Kentucky West (Louisville). Thus, the standards employed in those two offices alone appeared to have played an outsized role in the national picture for these kinds of cases.

Similarly, a third of all corporate referrals for criminal violations of government regulatory provisions occurred in just 8 out of the 90 federal districts that cover all 50 states. Here cases still fared very differently with all 77 referrals in D.C. being turned down. On the other hand, in nearby Virginia East (Alexandria) and Maryland, between one quarter to one third of this group of cases were prosecuted (see Table 7).

Conclusion

Partly because all Attorneys General are directly answerable to the presidents appointing them, but also because U.S. Attorneys are partially answerable to the political forces that influenced their appointments, law enforcement has never been a process guided only by the neutral professional judgments of well-trained and objective prosecutors and agents.

So the question may fairly be asked: given these political realities and the many curious and hard-to-explain enforcement differences disclosed in the data, are the prosecutors, the investigating agencies and the department dealing with corporate crime in an effective and fair way?

With this in mind, it is difficult to quarrel with the goal of improving public access to government records so that the American people can be better informed about the thousands of important decisions made each day by federal prosecutors, federal agencies, and occasionally the Attorneys General.

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