Last month, I did a blog entry looking at data showing a big drop in efforts from the Federal Bureau of Investigation, Secret Service, and Internal Revenue Service in fighting white collar crime. The figures suggested a clear shift in US Government policy post-Enron to go easy on corporate shenanigans.
Now, the New York Times reports that the Justice Department has put off prosecuting more than 50 companies suspected of wrongdoing over the last three years. Instead of facing criminal charges, they are simply receive a cozy deferred prosecution agreement. And as the New York Times says, there are now questions whether the policy shift is helping companies, under investigation for the roles in the subprime mortgage debacle, get off with a slap over the knuckles.
The most dangerous part about these agreements is that they could encourage companies to push the boundaries a little further because they know they won't get in big trouble. Which creates a moral hazard, something I have talked about here.