Criminalizing prosecutorial agency costs

It was about three years ago, while the Enron trial was ongoing, that Judge Lewis Kaplan first said he was “bothered” by government conduct pressuring KPMG into not paying individual defendants’ defense costs. Judge Kaplan later dismissed those charges on 6th amendment grounds, and the Second Circuit affirmed.  Then the Enron-related Nigerian Barge prosecution was overturned by the 5th Circuit.

Anyway, I noted at that time three years ago:

The press likes to make big scandals out of bunches of stories of corporate misconduct. I wonder if it will do the same for government misconduct in prosecuting these cases.

Well, it is getting even more interesting.  The news around now is the crash-and-burn of the Stevens prosecution, which as I've said has more than a passing resemblance to the Enron prosecution.  The WSJ Law Blog reports about the Stevens case:

competition with other U.S. attorney’s offices may have pushed the unit to act in an overly aggressive manner. Thomas C. Green, a Washington defense lawyer who recently won the acquittal of Anibal Vilá said: “I think what happens is that they get caught up in the competition and there’s no experienced voice of reason who says we cannot do this, we should not do this, we must not do this. These two cases could not have happened if the vetting process was in place and operating as it should.”

And now the dismissal of a backdating criminal prosecution because the defendant was not warned explicitly enough that the company lawyers interviewing the defendant didn’t represent him. Here’s the latest on that. Not quite prosecutorial misconduct, but Judge Kaplan recognized the real problem in this situation, and the underlying source of it.

Could it be that there are agency costs in corporate prosecutions just as there are in corporations? Should these agency costs be criminalized too? Well, if agency costs in the context of competitive markets call for criminal prosecutions, doesn't it follow that prosecutors, who are armed with the power of the government, need even stronger deterrence?  Just a thought.

Update:  Tom Kirkendall has a lot more.

Comments

[MDF]

It doesn't follow. Regardless of the merits of any of the cases of prosecutorial misconduct, this is 1L stuff -- increase the penalties for any kind of conduct and you will have an effect on the margins of legitimate conduct, and you have to weigh whether deterring the harm is greater than not having the legitimate activity. "Excessively" criminalizing agency misconduct may make agents overly cautious, to the detriment of shareholder returns. "Excessively" criminalizing prosecutorial misconduct may make prosecutors overly cautious when enforcing the law, to the detriment of not just shareholders but the entire legal system.