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They're known for imposing fines that are minuscule relative to the amount of damage whoever they're investigating caused. For most deceptive operations large e

They're known for imposing fines that are minuscule relative to the amount of damage whoever they're investigating caused. For most deceptive operations large enough to land on the FTC's radar, whatever fines they might end up paying are considered a speeding ticket and cost of doing business. It's sad, really. They're also known for being massively understaffed relative to the amount of complaints they receive.

dylan604 7y ago
So what is the difference between CA, corporate banks, etc that are corporations that "shield" the employees from personally facing criminal action, and me running out to file an LLC/SCorp/etc to do illegal activities myself? Is it purely the size of their bank accounts?
- wahern 7y ago
  It's the size of an organization and the complexity of the enterprise. Large, sophisticated corporations effectively shield executives from personal criminal liability because decision making is more diffuse--or at least they have an easier time arguing that. If a prosecutor could establish that a Fortune 500 CEO had the same, unmoderated role in criminal activity as the CEO of a one man shell company, then he'd be just as easy to prosecute and undoubtedly would--that'd make the careers of the D.A. and the attorneys working the case. There aren't many (or any?) laws that criminalize scheming, amoral profiteers who effectively (but not literally) promote a culture of lawlessness. Even if you write them they'd be very hard to prosecute--Due Process protections are strong in the US and Anglosphere systems, at least if you have the money and wherewithal. A bigger problem is that executives and board members are financially shielded, often through corporate-bought personal liability insurance. Maybe things would get better if there were laws mandating clawbacks, with independent agents[1] tasked with drafting the contracts and enforcing clawbacks, and perhaps somehow preventing executives from insuring themselves, such as with mandatory right of recourse clauses (i.e. insurer can always recover their payouts from the insured, making them more like guarantors). This aspect of corporate law is really complex though because it touches on so many subject areas. And stuff like this has been tried--it's how we ended up with corporate-bought personal insurance policies, a response to a brief period where executives and board members found themselves financially exposed during the early years of professional shareholder lawsuits. [1] Even though technically this is supposed to be the responsibility of board members. But that's an even thornier problem.
  - dylan604 7y ago
    Essentially, you're saying plausible deniability? "I'm the CEO of 100s to 1000s of employees. I can't possibly know the complete details of what all of them are working on"? If you're a CEO like Steve Jobs or the Zuck, then I would never ever ever buy that argument.
    - wahern 7y ago
      Plausible deniability + army of lawyers + crapshoot of a jury trial = risk averse prosecutors. Lower-level employees who play a more direct role do often get pinched. For example, in the Libor scandal.[1] Prosecutors don't get dinged for being risk averse. And the same is true, to a lesser extent, for regulators. But attorneys who specialize in class action civil suits can't afford to be risk averse; they make payday by being aggressive and hunting out malfeasance, which is why business hates class actions. Corporate America has successfully systematically demonized "trial lawyers" the same way they demonized labor unions. Even the most anti-corporatist activists tend to assume trial lawyer lobbyists and labor unions are more corrupt than corporations, which is dubious to say the least. (As Jimmy Hoffa said circa 1959, "Twenty years ago the employers had all the hoodlums working for them as strikebreakers. Now we’ve got a few, and everybody's screaming." That doesn't excuse lawlessness, but it should effect how we allocate limited enforcement resources.) IMO, if we want to restore balance we need to make it easier for victims and shareholders to pursue civil remedies independently, and strip executives and board members of some of their financial protections. This way we realign financial incentives in a manner that, hopefully, maximizes disincentives for cheating (i.e. executives have to watch their back for trial lawyer "sharks"), without having to literally make a federal case out of everything. It will be costly, but corporate malfeasance is already costly, it's just that those costs are hidden--at least quantitatively hidden; qualitatively we all see it. Importantly, these costs won't need to be borne by tax payers[2] (i.e. growing ever-despised federal bureaucracy), which isn't sustainable politically. That's another reason why the SEC, FTC, and others don't pursue malfeasance more aggressively--their staffs are tiny and ill-equipped to perform investigations. It's why the SEC heavily relies on automated, heuristic algorithms for detecting financial fraud; and why reporting requirements are so invasive. We're relying on computers for lack of human resources, but computers are only good at detecting the simple schemes, the reporting costs are regressive, and prosecutions favor small fry--the type of people that taxpayers can more readily identify with, which makes prosecutions seem unfair and predatory. Corporate America pushes back so heavily on this stuff because for 40 years large corporations have slowly turned into accounting and financing firms, with manufacturing and services as side businesses. They basically specialize in aggressive accounting strategies, which makes them feel vulnerable. And because that's just how business is done these days, legislators and think tanks have internalized the notion that permitting more corporate and personal liability for harmful accounting and financing strategies will seriously harm the entire economy, at least as measured by GDP growth. And, to be honest, for a brief period it very well might, until corporate America shifts away from accounting gimmicks and more aggressively pursues other profit opportunities. [1] As an engineer I pitch myself to managers as someone who "gets things done". I'm an ask for forgiveness, not ask for permission kind of worker. And I assume many on HN are the same way, both in IT and other industries. So I don't doubt that executives often lack deep insight into the technicalities of various schemes. And in criminal law especially, personal knowledge of the technicalities is often a crucial element of liability. [2] Hopefully most costs will be principally borne by the wealthy. But to the extent they're borne by consumers through higher prices or less choice, they'd be largely hidden, which is a good thing, because consumers and taxpayers aren't very good at judging long-term tradeoffs. If we can agree democratically that corporate malfeasance needs to be aggressively addressed, then let's just use the best strategy--the one corporate interests have the least ability to capture and disassemble.
thaumasiotes 7y ago
What would be the amount of damage caused in this case?

dylan604 7y ago

So what is the difference between CA, corporate banks, etc that are corporations that "shield" the employees from personally facing criminal action, and me running out to file an LLC/SCorp/etc to do illegal activities myself? Is it purely the size of their bank accounts?

wahern 7y ago
It's the size of an organization and the complexity of the enterprise. Large, sophisticated corporations effectively shield executives from personal criminal liability because decision making is more diffuse--or at least they have an easier time arguing that. If a prosecutor could establish that a Fortune 500 CEO had the same, unmoderated role in criminal activity as the CEO of a one man shell company, then he'd be just as easy to prosecute and undoubtedly would--that'd make the careers of the D.A. and the attorneys working the case. There aren't many (or any?) laws that criminalize scheming, amoral profiteers who effectively (but not literally) promote a culture of lawlessness. Even if you write them they'd be very hard to prosecute--Due Process protections are strong in the US and Anglosphere systems, at least if you have the money and wherewithal. A bigger problem is that executives and board members are financially shielded, often through corporate-bought personal liability insurance. Maybe things would get better if there were laws mandating clawbacks, with independent agents[1] tasked with drafting the contracts and enforcing clawbacks, and perhaps somehow preventing executives from insuring themselves, such as with mandatory right of recourse clauses (i.e. insurer can always recover their payouts from the insured, making them more like guarantors). This aspect of corporate law is really complex though because it touches on so many subject areas. And stuff like this has been tried--it's how we ended up with corporate-bought personal insurance policies, a response to a brief period where executives and board members found themselves financially exposed during the early years of professional shareholder lawsuits. [1] Even though technically this is supposed to be the responsibility of board members. But that's an even thornier problem.
- dylan604 7y ago
  Essentially, you're saying plausible deniability? "I'm the CEO of 100s to 1000s of employees. I can't possibly know the complete details of what all of them are working on"? If you're a CEO like Steve Jobs or the Zuck, then I would never ever ever buy that argument.
  - wahern 7y ago
    Plausible deniability + army of lawyers + crapshoot of a jury trial = risk averse prosecutors. Lower-level employees who play a more direct role do often get pinched. For example, in the Libor scandal.[1] Prosecutors don't get dinged for being risk averse. And the same is true, to a lesser extent, for regulators. But attorneys who specialize in class action civil suits can't afford to be risk averse; they make payday by being aggressive and hunting out malfeasance, which is why business hates class actions. Corporate America has successfully systematically demonized "trial lawyers" the same way they demonized labor unions. Even the most anti-corporatist activists tend to assume trial lawyer lobbyists and labor unions are more corrupt than corporations, which is dubious to say the least. (As Jimmy Hoffa said circa 1959, "Twenty years ago the employers had all the hoodlums working for them as strikebreakers. Now we’ve got a few, and everybody's screaming." That doesn't excuse lawlessness, but it should effect how we allocate limited enforcement resources.) IMO, if we want to restore balance we need to make it easier for victims and shareholders to pursue civil remedies independently, and strip executives and board members of some of their financial protections. This way we realign financial incentives in a manner that, hopefully, maximizes disincentives for cheating (i.e. executives have to watch their back for trial lawyer "sharks"), without having to literally make a federal case out of everything. It will be costly, but corporate malfeasance is already costly, it's just that those costs are hidden--at least quantitatively hidden; qualitatively we all see it. Importantly, these costs won't need to be borne by tax payers[2] (i.e. growing ever-despised federal bureaucracy), which isn't sustainable politically. That's another reason why the SEC, FTC, and others don't pursue malfeasance more aggressively--their staffs are tiny and ill-equipped to perform investigations. It's why the SEC heavily relies on automated, heuristic algorithms for detecting financial fraud; and why reporting requirements are so invasive. We're relying on computers for lack of human resources, but computers are only good at detecting the simple schemes, the reporting costs are regressive, and prosecutions favor small fry--the type of people that taxpayers can more readily identify with, which makes prosecutions seem unfair and predatory. Corporate America pushes back so heavily on this stuff because for 40 years large corporations have slowly turned into accounting and financing firms, with manufacturing and services as side businesses. They basically specialize in aggressive accounting strategies, which makes them feel vulnerable. And because that's just how business is done these days, legislators and think tanks have internalized the notion that permitting more corporate and personal liability for harmful accounting and financing strategies will seriously harm the entire economy, at least as measured by GDP growth. And, to be honest, for a brief period it very well might, until corporate America shifts away from accounting gimmicks and more aggressively pursues other profit opportunities. [1] As an engineer I pitch myself to managers as someone who "gets things done". I'm an ask for forgiveness, not ask for permission kind of worker. And I assume many on HN are the same way, both in IT and other industries. So I don't doubt that executives often lack deep insight into the technicalities of various schemes. And in criminal law especially, personal knowledge of the technicalities is often a crucial element of liability. [2] Hopefully most costs will be principally borne by the wealthy. But to the extent they're borne by consumers through higher prices or less choice, they'd be largely hidden, which is a good thing, because consumers and taxpayers aren't very good at judging long-term tradeoffs. If we can agree democratically that corporate malfeasance needs to be aggressively addressed, then let's just use the best strategy--the one corporate interests have the least ability to capture and disassemble.

thaumasiotes 7y ago

What would be the amount of damage caused in this case?