Starkman: Why U.S. Chief Executives Are Above the Law

The writer is a Los Angeles freelancer and former Detroit News business reporter. This column first appeared on his blog,

By Eric Starkman

Reuters on Monday had a scoop that if I didn’t know better would have given me cause to rejoice. Citing two unnamed sources, the news service reported that junior prosecutors have recommended that Boeing face criminal charges for violating the sweetheart deferred prosecution deal the Department of Justice (DOJ) gave the airline manufacturer in 2021 after two of its 737 MAX planes crashed. Despite allegations that Boeing conspired to “defraud” the FAA about the safety of its 737 MAX aircraft, the DOJ hit the airplane manufacturer with a measly $2.5 billion fine and agreed not to pursue criminal charges, providing Boeing behaved itself for three years.

Put simply, Boeing got time off for good behavior without having to serve any time.  

Under the leadership of CEO Dave Calhoun, an accountant known for his ruthless cost cutting, Boeing continued doing business as usual. About a dozen whistleblowers have surfaced saying they were retaliated against for sounding the alarm about safety issues. In a securities lawsuit filed in May of last year and subsequently amended, lawyers laid out in painstaking detail allegations that Spirit AeroSystems, which was spun off from Boeing and builds the fuselages for the 737 MAX, had serious production and quality control issues, including “defects such as the routine presence of foreign object debris in Spirit products, missing fasteners, peeling paint, and poor skin quality.”

The lawsuit said Spirit’s quality failures “resulted in part from Spirit’s culture, which prioritized production numbers and short-term financial outcomes over product quality, and Spirit’s related failure to hire sufficient personnel to deliver quality products at the rates demanded by Spirit and its customers, including Boeing.” There’s no doubt that Boeing was fully aware of Spirit’s quality control issues because the company effectively had its supplier on double secret probation for several years because of Spirit’s shoddy workmanship but never made good on its threat to take its business elsewhere.

Boeing deteriorated considerably under Calhoun’s more than four years of leadership, for which he’s been showered with some $80 million in compensation. He was an influential board member for the previous ten years, and no doubt championed the cost cutting that’s proven detrimental to Boeing’s reputation and financial health.

The Lever

If Americans knew the backgrounds of the DOJ folks who will ultimately decide whether to charge Boeing with criminal wrongdoing, they’d readily understand why Boeing initially escaped criminal charges and appreciate that if the DOJ continues to avoid media scrutiny, Boeing might understandably get off with another wrist slap and Lord Calhoun of Lake Sunapee will continue living the good life at his gated homes in New Hampshire and South Carolina.  

At the most senior levels, the DOJ is headed by millionaire lawyers who previously defended some alleged egregiously wrongful corporate behavior, and no doubt will again be lucratively rewarded for their Sgt. Schultz non prosecutorial decisions when they return to private practice or cushy corporate general counsel jobs.

Here’s some alarming stats, as reported by American Prospect.

According to the U.S. Sentencing Commission, in 2023 DOJ prosecuted 113 corporations, up from 99 in 2022 and just 90 in 2021, which was the lowest number in a quarter-century. The 2023 figures are sharply lower than any year of George W. Bush’s business smooching administration, and lower than two of the four years of the Trump administration. The 113 prosecutions last year equal about 37 percent of the 304 prosecutions waged in 2000.

Tellingly, 76 percent of the corporations DOJ prosecuted in 2023 had 50 or fewer employees. Smaller companies can’t offer DOJ staffers seven figure corporate counsel jobs, and often can’t afford the white shoe law firms heavily staffed with DOJ alumni.

For once, I’m not alone in my outrage. American Prospect obtained a letter that four public accountability watchdog organizations sent to President Biden and Attorney General Merrick Garland in April protesting the DOJ’s dramatic decline of corporate prosecutions.

“The frequent revolving-door movement of prosecutors and staff between the DOJ and America’s largest corporate law firms—and the resulting relationships and worldviews that develop from defending big corporations against government enforcement—almost certainly have a negative impact on DOJ decision-making,” the letter said. “These individuals may not have nefarious motives, but there is a reason large corporations spend billions of dollars to keep the revolving door moving—because it works in tilting the scales in their direction. As Eric Schmidt, the former CEO of Google, once put it: People who ‘go into government, they are your emissaries… A rule of business is that if you could put your person in the company, they’re likely to buy from you. It’s the same principle.’”

Meet Lisa Monaco, who currently serves as deputy attorney general and is the second most powerful person in the executive branch. As reported by The Lever, Monaco represented Boeing when she worked at WestExec Advisors, a consulting firm co-founded by Biden’s Secretary of State Antony Blinken.

In January 2021 as she was being appointed to her current position, Monaco reported owning between $1,001 and $15,000 of Boeing stock. She reported the same in 2022, but no longer held Boeing stock in 2023.

Lisa Monaco/DOJ photo

According to the Revolving Door Project (RDP), Monaco was a partner in the white-collar corporate defense practice at O’Melveny & Myers, which RDP characterized as “a go-to law firm of the Trump family.” RDP said Monaco was paid nearly $1 million a year.  Monaco also once had her own consultancy, where she advised rideshare giant Lfyt in its promotion of California’s Prop 22, which allowed the company to avoid giving its drivers adequate employment and health care benefits. The proposed bill was opposed by both President Biden and Vice President Kamala Harris.

The DOJ’s third ranking official is Benjamin Mizer, who previously worked at the white shoe law firm Jones Day, where among his more illustrious cases was serving as lead attorney for Walmart in its defense of charges of facilitating the opioid epidemic among members of the Cherokee Nation in Oklahoma. As part of Walmart’s defense, the company demanded the tribe release detailed private data for every one of its citizens.

“Mizer’s resume is yet another example of a profile that has repeatedly failed to protect the American people from the most rapacious and amoral corporations,” the watchdog group’s letter said. “We lack confidence that Mizer should be trusted to advance the administration’s commitment to ensuring that the law applies to everyone, no matter how wealthy or connected.”

Nicole Argentieri/DOJ photo

Other key players at the center of the Boeing decision are Nicole Argentieri, the acting chief of the Justice Department’s criminal division; and Glenn Leon, chief of the Justice Department’s criminal fraud section. As reported by The Lever, both previously worked in the corporate world and have distinguished themselves for handing down agreements that are favorable to companies accused of misconduct.

In the year since Argentieri took charge, the agency has offered industry-friendly deferred prosecution agreements and non-prosecution agreements in virtually all the DOJ’s major corporate fraud cases. Argentieri, who brought mob bosses to justice when she worked as a U.S. Attorney in Brooklyn, told Bloomberg in January that more corporate guilty pleas would be forthcoming. I wouldn’t hold your breath.

So, what kind of cases does the DOJ like to pursue?

The DOJ for years pursued Mike Lynch, once hailed as Britain’s king of technology, who the Justice Department alleged bamboozled Hewlett Packard when he sold the once vaunted Silicon Valley company his software business for $11 billion. The deal didn’t pan out for HP, and a San Francisco jury earlier this month rejected the DOJ’s case, handing down not guilty verdicts on all counts.

Adding insult to injury, a judge threw out one of the DOJ’s critical counts against Lynch even before the case went to trial.

The DOJ mustered a conviction this week of tech entrepreneur Rishi Shah, who is in his late 30s, for allegedly exaggerating to customers and investors the number of physician offices with his company’s monitors displaying pharmaceutical advertisements. The DOJ wanted Shah to serve a 15-year prison sentence, but the presiding judge sentenced the entrepreneur to half that time.

Then there’s the DOJ’s case against Charlie Javice, a 31-year-old founder of a college financial aid company who allegedly outwitted the due diligence brains at JPMorgan Chase and exaggerated the number of her enterprise’s accounts when the bank purchased the business for $175 million. JPMorgan reportedly is on the hook for Javice’s legal fees, so if the DOJ loses its case against her Chase will have thrown good money after bad.

I’m sure Javice would agree and vigorously adhere to a deferred prosecution agreement, like the one the DOJ gave JPMorgan Chase for allegedly defrauding the precious metals and U.S. Treasuries markets.

National Review, June 19, 2024

The DOJ also has indicted Dr. Eithan Haim, the surgeon who sounded the alarm about Children’s Hospital in Houston doing a lucrative business performing sex change operations on minors. The DOJ alleged that Haim violated patient confidentiality when he leaked information about the procedures to an activist journalist. Haim’s whistleblowing resulted in Texas passing a law prohibiting sex change operations and procedures on children, deeming them child abuse.

Assuring children have access to sex change surgeries is one of the few areas where the DOJ’s senior leadership is clearly passionate.

Ben Mizer/DOJ photo

“As we seek to advance equality for LGBTQI+ Americans, the Department remains committed to bringing all resources to bear in that fight,” Acting Associate Attorney General Benjamin Mizer said in a recent news release. “Our efforts span the entire Department and include our pursuit of litigation to protect access to gender-affirming healthcare for transgender adults and minors, and our grants to organizations as well as state and local agencies working to prevent hate crimes and provide trauma-informed support to survivors. While progress is not always easy, we will not let up in our fight to ensure equal justice for everyone, regardless of what they look like, how they worship, or who they love.”

So what do the DOJ’s prosecutions of Lynch, Shah, Javice, and Haim have in common? All their alleged victims were powerful U.S. corporations.

When Lynch sold his company to HP, the company was still a tech powerhouse, and its CEO was widely respected Meg Whitman. Shah’s victims included Goldman Sachs and an investment firm founded by Illinois Gov. J.B. Pritzker. Javice allegedly deceived JPMorgan Chase. Haim disrupted a major profit center for Texas Children’s, a powerful Houston institution.

Perhaps the DOJ will depart from its usual practice and hold Boeing, Calhoun, and other senior executives criminally liable, but my guess is they aren’t all that worried.

For good reason.

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