Regulation by prosecution

By Ed Lasky

Barack Obama is on a permanent campaign to not only win reelection but also to transform America. A new tactic has come to my attention via our friends at Investors Business Daily.

An IBD op-ed by James Copland, "Government Regulation by Prosecution is Just Criminal Law on Steroids," looks at the expansion of criminal law to cover corporate actions. Even the threat of Big Brother/Big Bully using its vast resources to threaten businesses can force companies to accede to government demands -- regardless of their merits and costs. Particularly notable is the role of one key official on the Obama team who provided the framework for these types of threats:

An increasing percentage of American business managers are similarly distracted, since over the last 20 years, regulation by prosecution has emerged as a significant new form of government control over the marketplace. This practice threatens not only private-sector businesses but also individuals' rights and the rule of law.

In 1991, the U.S. Sentencing Commission issued guidelines that, in essence, gave corporations and other organizations "credit" for "cooperating" in criminal investigations. The next year, the government entered into its first "non-prosecution agreement" with Salomon Brothers, which paid a civil penalty to avoid criminal trial.

Modern-day regulation by prosecution dates to 1999, when attorney general Eric Holder - then a deputy attorney general in the Clinton Justice Department - issued a memorandum that formalized federal policy for determining whether a business has cooperated with a criminal investigation.

Federal pressure on corporations picked up after the dot-com stock-market bubble burst, and the 2002 conviction of Arthur Andersen, which precipitated the firm's collapse, signaled to companies that fighting overzealous prosecutors was futile.

Subsequently, nonprosecution and deferred-prosecution agreements (NPAs and DPAs) governing corporate behavior became far more commonplace...

Government lawyers have thus come to wield enormous power over business operations. Prosecutors have forced companies to reverse long-standing corporate policies, to sack management and directors, and to install prosecutor-appointed "business monitors" to oversee corporate activities.

The exercise of such prosecutorial power is disturbing.

The specter of the Feds coming after corporate executives and bending them to their will is an ever-present one in the Age of Obama. Given that Eric Holder has been a proponent of using this type of tactic to coerce businesses should we be surprised that this type of tool will be just one more method Barack Obama will use to bully businesses to follow his agenda?

This is a potent tool in the hands of those who oppose free enterprise. We have seen example of example of prosecutors gone wild (Eliot Spitzer's moves against American International Group's chief Hank Greenberg -- a political move that paved the way for his election as Governor -- may have been responsible for much of the carnage that hit the financial sector in 2008 by removing a leader who was very risk adverse); Scooter Libby's being pinned to the wall by the ever-zealous Patrick Fitzgerald in a disgraceful case of abuse of prosecutorial powers; the list goes on and on.

See also: Stopping Obama: A Republican Game Plan