On May 22, Mythili Raman — the acting assistant attorney general for the Criminal Division of the Department of Justice (DOJ) — addressed ongoing criticism from members of Congress that large financial institutions have been deemed “Too Big to Jail” by DOJ. As discussed in a March 25, 2013, post on Subject to Inquiry, Attorney General Eric Holder testified before the Senate Judiciary Committee earlier this year that DOJ efforts to prosecute financial institutions had been inhibited by the potential that such prosecutions could “have a negative impact on the national economy, perhaps even the world economy.” Raman’s testimony before the Oversight and Investigations Subcommittee of the House Financial Services Committee marks the first time a DOJ official has gone before Congress to elaborate on how prosecutors evaluate this “systemic risk” consideration.
Raman largely defended current DOJ practices, arguing vigorously that collateral considerations such as systemic risk are essential for enforcement actions that are “targeted and effective and proportional.” Raman spent a large portion of her testimony distinguishing systemic risk from other “collateral consequences” — typically the effects on shareholders and employees — of corporate criminal prosecutions. She explained that concerns about systemic risk play a role in only a tiny fraction of cases. At several points during her testimony, Raman insisted that systemic risk considerations never precluded a corporate prosecution. Nor, in her view, had collateral consequences of any sort “prevented the Justice Department from aggressively pursuing investigations and seeking criminal penalties in cases involving large, complex financial institutions.” Nonetheless, she argued that consideration of systemic risk was essential to ensure that prosecutions did not result in “disproportionate harm” to the public. Raman also addressed members’ concerns that corporate institutions could reach settlements without actually admitting wrongdoing. Raman made it clear that unlike with the SEC’s “No Admit, No Deny” policy, DOJ’s Criminal Division requires companies to fully admit wrongdoing even under non-prosecution or deferred prosecution agreements.
Despite the recent criticism, Raman betrayed no indication that DOJ intends to back away from its current approach to corporate prosecutions of financial institutions. On the contrary, Raman offered an articulate defense of DOJ’s handling of corporate financial crimes. When considered in light of Holder’s remarks, Raman’s testimony suggests that DOJ remains committed to its position that corporate criminal prosecutions may not always be in the national interest. She told the subcommittee that DOJ is “deeply committed to holding wrongdoers — whether individuals or business entities — to account for their crimes.” Based on Raman’s testimony, it does not appear that DOJ’s methods for doing so are likely to change anytime soon.