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Who Goes to Jail? Matt Taibbi on “The Divide: American Injustice in the Age of the Wealth Gap”

StoryJanuary 01, 2015
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In part two of our holiday special, we feature our April 2014 interview with Matt Taibbi about his book, “The Divide: American Injustice in the Age of the Wealth Gap.” The book asks why the vast majority of white-collar criminals have avoided prison since the financial crisis began, while an unequal justice system imprisons the poor and people of color on a mass scale. “It is much more grotesque to consider the non-enforcement of white-collar criminals when you do consider how incredibly aggressive law enforcement is with regard to everybody else,” Taibbi says.

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This is a rush transcript. Copy may not be in its final form.

AMY GOODMAN: This is Democracy Now!, democracynow.org, The War and Peace Report_. I’m Amy Goodman. In Apriltaibbi, journalist Matt Taibbi joined us on Democracy Now! to talk about his new book, The Divide: American Injustice in the Age of the Wealth Gap. The book asks why the vast majority of white-collar criminals have avoided prison since the financial crisis began, while an unequal justice system imprisons the poor and people of color on a mass scale. I interviewed Matt Taibbi with Democracy Now!’s Aaron Maté, and I began by asking Matt to talk about this divide.

MATT TAIBBI: This book grew out of my experience covering Wall Street. I’ve obviously been doing it since the crash in 2008. And over and over again, I would cover these very complex and often very socially destructive capers committed by white-collar criminals. And the punchline to all of the stories were basically the same: Nobody would get indicted; nobody went to jail. And after a while, I started to become interested specifically in that phenomenon. Why was there no enforcement of any of this? And around the time of the Occupy protest, I decided to write this book, and then I shifted my focus to try to learn a lot more for myself about who does go to jail in this country, because I thought you really can’t make this comparison accurately until you learn about both sides of the equation, because it’s actually much more grotesque to consider the non-enforcement of white-collar criminals when you do consider how incredibly aggressive law enforcement is with regard to everybody else.

AARON MATÉ: Now, you spent time with the—with the poor and vulnerable and people of color, who have been targeted by this system. There was one case of a man in New York, who lives in Bed-Stuy, standing outside of his home—

MATT TAIBBI: Right.

AARON MATÉ: —who was arrested. Can you take it from there?

MATT TAIBBI: Yeah, sure. I was actually in a—I was in a law office in Brooklyn, and I was actually waiting to speak to a lawyer about another case, when I met this 35-year-old African-American man, a bus driver. And I asked him what he was there for, and he told me that he had been arrested for, quote-unquote, “obstructing pedestrian traffic.” And I thought he was kidding. You know, I didn’t know what that meant. And I asked him to show me his summons, and he pulled out a little—little piece of pink paper, and there it was. It was written, you know, “obstructing pedestrian traffic,” which it turns out it meant that he was standing in front of his own house at 1:00 in the morning, and the police just didn’t like the way he looked and arrested him.

And this is part of the disorderly conduct statute here in New York, but this is one of these offenses that people get roped in for. It’s part of what a city councilman in another city called an “epidemic of false arrests,” basically these new stats-based police strategies. The whole idea is to rope in as many people as you can, see how many of them have guns or warrants, and then basically throw back the innocent ones. But the problem is they don’t throw back everybody. They end up sweeping up a lot of innocent people and charging them with really pointless crimes.

AARON MATÉ: There’s a very comic scene where then he goes to court, and he has a hard time convincing his public defender why he doesn’t want to pay a fine for standing in front of his home.

MATT TAIBBI: Yeah, and this is something that I encountered over and over and over again, is that people who were charged with these minor sort of harassing offenses, they—when the state discovers that the case against them is not very good, they start offering deals to the accused. And when people protest that “I’m not going to plead, because I didn’t do anything wrong,” they keep offering better and better and better deals. And no one can understand why they won’t plead guilty, because, in reality, most people do. They will end up taking—

AMY GOODMAN: Like all the bankers plead guilty.

MATT TAIBBI: Right, yeah, exactly. Of course, it’s completely the opposite situation on the other side of the coin. But in the case of Andrew, the guy who was arrested for obstructing pedestrian traffic, he literally could not convince his own lawyer that he was innocent. And it took a long, long time before they got the judge to ask the policeman on duty if there was actually anybody else on the street to obstruct. And it wasn’t until that moment that they dismissed the case, and it just took that long.

AMY GOODMAN: So let’s talk about the other side. And I want to go to Attorney General Eric Holder, his remarks before the Senate Judiciary Committee last May in which he suggests that some banks are just too big to jail.

ATTORNEY GENERAL ERIC HOLDER: I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to—to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy. And I think that is a function of the fact that some of these institutions have become too large. Again, I’m not talking about HSBC; this is just a more general comment. I think it has an inhibiting influence, impact, on our ability to bring resolutions that I think would be more appropriate.

AMY GOODMAN: That was Attorney General Eric Holder testifying before Congress. His remarks were widely criticized. This is Federal Judge Jed Rakoff speaking last November at the University of Pennsylvania Law School.

JUDGE JED RAKOFF: To a federal judge, who takes an oath to apply the law equally to rich and poor, this excuse, sometimes labeled the too-big-to-jail excuse, is, frankly, disturbing for what it says about the department’s apparent disregard for equality under the law.

AMY GOODMAN: That’s Federal Judge Jed Rakoff. Matt Taibbi, if you could respond? And then talk about the history of Eric Holder, where he came from.

MATT TAIBBI: Well, first of all, this idea that some companies are too big to jail, it makes some sense in the abstract. In a vacuum, of course it makes sense. If you have a company, a storied company that may have existed for a hundred, 150 years, that employs tens or maybe even 100,000 people, you may not want to criminally charge that company willy-nilly and wreck the company and cause lots of people to lose their jobs.

But there are two problems with that line of thinking if you use it over and over and over again. One is that there’s no reason you can’t proceed against individuals in those companies. It’s understandable to maybe not charge the company, but in the case of a company like HSBC, which admitted to laundering $850 million for a pair of Central and South American drug cartels, somebody has to go to jail in that case. If you’re going to put people in jail for having a joint in their pocket or for slinging dime bags on the corner in a city street, you cannot let people who laundered $800 million for the worst drug offenders in the world walk.

AMY GOODMAN: Wait, this can’t be a parenthetical. Explain what you’re talking about with HSBC.

MATT TAIBBI: So, HSBC, again, this is one of the world’s largest banks. It’s Europe’s largest bank. And a few years ago, they got caught, swept up for a variety of offenses, money-laundering offenses. But one of them involved admitting that they had laundered $850 million for a pair—for two drug cartels, one in Mexico and one in South America, and including the notorious Sinaloa drug cartel in Mexico that is suspected in thousands of murders.

And in that case, they paid a fine; they paid a $1.9 billion fine. And some of the executives had to defer their bonuses for a period of five years—not give them up, defer them. But there were no individual consequences for any of the executives. Nobody had to pull money out of their own pockets for permanently. And nobody did a single day in jail in that case.

And that, to me, was an incredibly striking case. I ran that very day to the courthouse here in New York, and I asked around to the public defenders, you know, “What’s the dumbest drug case you had today?” And I found somebody who had been thrown in Rikers for 47 days for having a joint in his pocket. So—

AMY GOODMAN: And that’s—is that even illegal?

MATT TAIBBI: No, in New York City, actually, it’s not illegal to carry a joint around in your pocket. It was decriminalized way back in the late '70s. But with part of the now past stop-and-frisk, what they do is they would stop you, and then they would search you and force you to empty your pockets. When you empty your pockets, now it's no longer concealed, and now it’s illegal again. So they had—in that year, they had 50,000 marijuana arrests, even though marijuana—having marijuana was technically decriminalized at the time.

So, my point was: Here’s somebody at the bottom, he’s a consumer of the illegal narcotics business, and he’s going to jail, and then you have these people who are at the very top of the illegal narcotics business, and they’re getting a complete walk. And that’s just totally unacceptable.

AARON MATÉ: But back to this doctrine that you can’t punish an entire company for the misdeeds of a few because you might hurt the economy, you might hurt shareholders, you know, some of which are pension holders and—pension funds and so forth, how do you get from hurting a—how do you equate hurting an entire company to just not jailing a couple of executives?

MATT TAIBBI: Well, that’s the whole point. They’ve conflated the two things. Originally—so, this—to answer the second part of your original question, “Where does this come from? Where does this doctrine come from?” way back in 1999, when Eric Holder was a deputy attorney general in the—in Clinton’s administration, he wrote a memo that has now come to be known as “the Holder Memo.” And in it, he outlined a number of things. Actually, it was originally considered a get-tough-on-corporate-crime memo, because it gave prosecutors a number of new tools with which they could go after corporate criminals. But at the bottom of it, there was this thing that he laid out called the “collateral consequences doctrine.” And what “collateral consequences” meant was that if you’re a prosecutor and you’re targeting one of these big corporate offenders and you’re worried that you may affect innocent victims, that shareholders or innocent executives may lose their jobs, you may consider other alternatives, other remedies besides criminal prosecutions—in other words, fines, nonprosecution agreements, deferred prosecution agreements. And again, at the time, it was a completely sensible thing to lay out. Of course it makes sense to not always destroy a company if you can avoid it. But what they’ve done is they’ve conflated that sometimes-sensible policy with a policy of not going after any individuals for any crimes. And that’s just totally unacceptable.

AARON MATÉ: Is it not the case that some of these cases are just too complex to explain to a jury?

MATT TAIBBI: Yes. And that—well, they are complex, and juries do have a difficult time with them, but they’re not impossible to explain to a jury. I mean, I attended a trial involving bid rigging in the municipal bond markets where they obtained convictions. Now, that case couldn’t have been more complicated. That was as hard as a case gets. And I actually watched some of the jurors fighting off sleep in the early days of the trial. That’s how difficult it was. And in that case, amusingly, one of the attorneys for the banks got up initially, and he tried to defend his client’s behavior by saying, you know, “When you call up a—if your washing machine breaks and you call the repairman and he tells you how much it costs, you just have to trust him what the price is because you don’t understand how to fix your washing machine, and we do.” In other words, this stuff is so complex, you just have to take our word for it that we didn’t commit a crime. And—but that excuse, I think that’s a weak excuse that prosecutors give out. It’s a cop-out for not taking on, you know, difficult cases. Rich or poor, black or white, if somebody has broken the law, you should want to go after wrongdoers no matter who they are, and the fact that it’s a difficult crime to prove should just be more of a challenge for you.

AMY GOODMAN: I want to turn to remarks by Lanny Breuer in 2012 about prosecuting large companies. At the time, he was the assistant attorney general. He spoke before the New York City Bar Association.

LANNY BREUER: I personally feel that it’s my duty to consider whether individual employees, with no responsibility for or knowledge of misconduct committed by others in the same company, are going to lose their livelihood if we indict the corporation. In large multinational companies, the jobs of tens of thousands of employees can literally be at stake. And in some cases, the health of an industry or the markets are a very real factor. Those are the kinds of considerations in white-collar cases that literally keep me up at night, and which must, must play a role in responsible enforcement.

AMY GOODMAN: That’s Lanny Breuer in 2012, who was like number two in the Justice Department.

MATT TAIBBI: He was the head of the Criminal Division, so he’s basically the top cop in America at the time.

AMY GOODMAN: He was at the Justice Department; of course, Eric Holder is the attorney general—both from the same company. Respond to what he said, and then talk about Covington & Burling.

MATT TAIBBI: Well, first of all, his—that whole thing about the innocent white-collar employees perhaps losing their livelihoods keeping him up at night, I want to know what his response is to, you know, the idea that maybe a single mother on welfare is going to lose her kids because she’s going to lose custody in an $800 welfare fraud case. You know, I saw so many of these cases that it was—that is was just overwhelming to me. Those are the kinds of things that would keep me up at night if I were the attorney general, thinking about the consequences that ordinary people feel—suffer when they are caught up in the criminal justice system.

People—for instance, again, going back to welfare fraud, your relatives can lose their Section 8 housing. So, you know, if you’re—again, if you’re on welfare and you get caught in a fraud case, that may just involve checking the wrong box or having somebody, one of your neighbors, say that you have a boyfriend living in your house, when you really don’t, your mother or your grandmother can lose their housing because of something like that. That would be the stuff that would keep me up at night. I mean, I wouldn’t be worried about millionaire and billionaire executives, you know, who are working at these banks, if I were Lanny Breuer. So that tells you a lot about the priorities of somebody like him.

AMY GOODMAN: And talk about Lanny Breuer, Eric Holder, where they come from, where they go back to.

MATT TAIBBI: So they both came from a law firm called Covington & Burling, which in the 2000s represented basically every single one of the too-big-to-fail banks. They were also involved in the setting up of the electronic mortgage registry, so they played an enormous role in the subprime mortgage crisis.

But here’s the key thing about the presence of these two people at the head of the attorney—of the Justice Department. Prosecutors, by and large—and I interviewed a lot of prosecutors for this book—they basically all have the same personality, the old-school prosecutors. They’re just—if you think of somebody like Eliot Spitzer, they’re all like bulldogs. They just want to get their—you know, get their target; by hook or crook, it doesn’t really matter. They have this ferocious aspect to their personalities. And it’s an admirable quality in a prosecutor. They’re all kind of the same, in a certain way. Cops are the same way. But in the 2000s, that kind of person started to be replaced in the regulatory system by a new kind of figure who tended to come from the corporate defense community. And their attitude was not, you know, get their target at all costs; it was more: “Let’s bring a bunch of people in a room and hammer out a solution where all the sides are going to end up walking out happy.” And that’s why we end up with settlements, like the $13 billion Chase settlement last year or the $1.9 billion HSBC settlement, instead of prosecutions.

AMY GOODMAN: Covington & Burling represented JPMorgan Chase.

MATT TAIBBI: They did, yeah, and a host of other banks that also were involved in nonprosecutions during this time. So, I mean, it’s—you have a whole bunch of people sort of at the top of the regulatory agencies, whether it’s Justice, the SEC, the CFTC, maybe the Enforcement Division of the SEC, who all came from these big banks or from law firms that represented these big banks. And it’s a very incestuous community. And just like you talked about with James Kidney, the SEC official who left, as a result of this kind of merry-go-round of people who all work for the same companies—and they’re going to go to government for a while, then they’re going to go back to the corporate defense community after they leave and make millions of dollars—they’re very, very reluctant to be aggressive against these companies, because it’s their—culturally, they’re the same people as their targets, whereas there isn’t that same simpatico with the very poor. And I think that’s a very—it’s an important distinction to make, and people don’t understand it.

AARON MATÉ: You also suggest that Holder and Breuer are perhaps overly concerned with their conviction rate—

MATT TAIBBI: Oh, yeah.

AARON MATÉ: —and that’s why they don’t go after these banks.

MATT TAIBBI: Again, that’s something I heard over and over again from people within the Justice Department, that once those two came in, the edict came down from above that we were only going to go after cases where we were absolutely sure we were going to win. Now, you can never guarantee a victory in any criminal case, and oftentimes the cases are difficult to prove or the evidence may not be 100 percent there, but the state has a moral obligation to proceed with investigations and, in many cases, criminal cases against people who are guilty. You know, the fact that it’s difficult shouldn’t be a limiting factor. And that’s why you saw—instead of cases against these big banks, you saw ridiculously large amounts of resources devoted to things like prosecuting Barry Bonds or Roger Clemens, you know, cases where there are like only a couple of pieces of evidence and it was hard to screw up. And yet, you know, they didn’t always succeed even in those cases. So, it was a terrible, terrible thing for the Justice Department during that period.

AMY GOODMAN: Matt Taibbi, author of The Divide: American Injustice in the Age of the Wealth Gap_. To watch the full interviewtaibbi, visit democracynow.org.

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