Last Week in Deferred and Non-Prosecution Agreements: Arming China and Stealing Trillions from Municipalities

I’m so old I remember the time, four years ago, when Democrats hated Deferred Prosecution Agreements.

Back in the days when Chris Christie, former US Attorney, was challenging Jon Corzine, once and future bankster, to be governor of New Jersey, Democrats made hay of the significant numbers of DPAs Christie signed, mostly with a series of medical device companies busted for kickbacks. After it was revealed Christie had picked his former boss, John Ashcroft, to make $52 million monitoring one of those medical device companies, it became a convenient way to show the corporatist corruption of Christie.

There was even a bit of discussion, in early 2009, about whether DPAs made banks more likely to engage in fraud because they assumed they’d get a DPA rather than a prosecution. Those discussions largely centered on the two DPAs AIG got in the mid-00s for fraudulently hiding its risk, which nevertheless didn’t prevent AIG from taking on so much risk it blew up the entire financial system. One of the monitors of those DPAs–who arguably should have but didn’t see AIG’s ongoing fraud–was a guy by the name of James Cole. He’s now the Deputy Attorney General.

And as recently as 2010, NJ Congressman Bill Pascrell had this to say, in response to the publication of a GAO report showing some improvement but greater need for oversight over DPAs.

One cannot ignore the spike of 38 deferred prosecution agreements in 2007, up from a mere four agreements in 2003. That proves that what was supposed to be an option to be used in rare circumstances had become the norm at the Department of Justice.


It is imperative that the Congress reign in the unmitigated power that federal prosecutors hold to serve as judge, jury and sentencer in the deferred prosecution process.

And yet I have heard very little about the two DPAs signed last week–perhaps because big corporate impunity has become such a common occurrence in the post-crash era.

First, there’s the deal Pratt & Whitney and two subsidiaries signed for evading export restrictions to help China build an attack helicopter. Effectively Pratt & Whitney laundered their production of some development helicopters–plus the military grade engine control module software to go with them–through a Canadian subsidiary. And when they finally admitted they had deliberately avoided US export restrictions on military equipment, they lied to DOJ about doing so. While they have to pay a $75 million fine, some of the charges are being deferred. And no individual has been charged with helping China get a helicopter designed to attack tanks.

So DOJ’s punishment for a defense contractor to put Chinese civil contracts ahead of US national security is a big fine, deferred prosecution, but no jail time.

Even more troubling is the Non-Prosecution Agreement signed with Barclays over its manipulation of the LIBOR rate. Effectively, during the heady bubble days, Barclays colluded to lie about the interbank lending rate to maximize its own trades; as finance was crashing and Barclays itself had to pay higher rates for credit, it lied about that to imply the bank was healthier than it was. And while between DOJ, Commodity Futures Trading Commission, and Britain’s Financial Services Authority, Barclays will have to pay around $475 million in fines, and while CFTC imposed the kind of mandated fixes that DOJ normally would under a DPA, Barclays is basically scot-free for colluding to lie about a rate that affects people throughout the financial system.

Matt Taibbi explains why this is so important: because when the banks said the LIBOR rate was lower than it really was, a lot of investors got a smaller return on their LIBOR-tracked investments than they otherwise would have.

A sizable chunk of the world’s adjustable-rate investment vehicles are pegged to Libor, and here we have evidence that banks were tweaking the rate downward to massage their own derivatives positions. The consequences for this boggle the mind. For instance, almost every city and town in America has investment holdings tied to Libor. If banks were artificially lowering the rates to beef up their trading profiles, that means communities all over the world were cheated out of ungodly amounts of money.

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Parties for the Parrots!!

Remember those Republicans and Democrats who took Roche/Genentech’s script and inserted it, barely touched, into the Congressional Record?

It will surprise none of you that there were parties involved.

Rep. Bill Pascrell (D-NJ) was scheduled to attend a breakfast fundraiser at the Phoenix Park Hotel on May 7.  The event was hosted by lobbyists David Jones and former Senate Finance Committee staff director James Gould, who count Roche as clients.

Rep. Ted Poe (R-TX) held a fundraising breakfast at Bistro Bis on September 17. Lobbyist hosts included Darin Gardner and Anna Sagely, who lobby exclusively for Hoffman-La Roche,  as well as lobbyists Mat Lapinski, Chris Myrick, and Christine Pellerin, who have Roche on their client lists.

Darin Gardner and Christine Pellerin, legislative assistant to former Congressman Henry Bonilla (R-TX), also hosted Rep. Mike Conaway (R-TX) for breakfast at Bistro Bis, also in May of this year.

Finally, Rep. Kay Granger (R-TX) held a cocktails and cigars fundraiser for Women Impacting the Nation, a project of her leadership committee Common Sense Common Solutions, on September 21. More than two dozen lobbyists hosted the event, four of whom represent Roche:  Darin Gardner, Christine Pellerin, Anna Sageley and Mat Lapinkski–the same lobbyists responsible for the Conaway and Poe events.

The same post notes that Roche/Genentech has hosted parties for 26 members of Congress since their merger in March.

This Congressing thing sounds like great fun! You get invited to all sorts of swell parties, people shower you with money, and they even do your homework for you. A lark! So long as you don’t care about people suffering.