Senators Say Justice Dept. Didn’t Answer Their ‘Too Big to Jail’ Questions
By Mary Jacoby | March 3, 2013 9:43 pm

Two senators say the Justice Department was “aggressively evasive” in its response to a Jan. 29 letter they sent asking whether the department has designated some financial institutions “too big to jail.”

In a statement Friday, Sens. Charles Grassley (R-Iowa) and Sherrod Brown (D-Ohio) said the response “does not answer our questions.” They added: “We want to know how and why the Justice Department has determined that certain financial institutions are ‘too big to jail’ and that prosecuting those institutions would damage the financial system.”

The letter from Judith Appelbaum, the Principal Deputy Assistant Attorney General for legislative affairs, was addressed to Brown in his capacity as chairman of the Senate Banking subcommittee on financial institutions and consumer protection.

It said prosecutorial decisions are made in accordance with the United States Attorneys’ Manual, notably its Principles of Federal Prosecution and Principles of Federal Prosecution of Business Organizations. The latter were clarified in a 2006 memo by then-Deputy Attorney General Paul McNulty, known as the “McNulty memo.” A 2008 memo by then-Deputy Attorney General Mark Filip further clarified that prosecutors may not pressure corporations into waiving attorney-client privilege.

Appelbaum wrote that the manual instructs prosecutors to apply the same factors in their decision to charge a corporation as they would with an individual: “that the defendant’s conduct constituted a federal crime and that the admissible evidence is more likely than not sufficient to obtain and secure a conviction by jury.” While the manual encourages “vigorous enforcement against corporate wrongdoing,” it notes that non-prosecution and deferred prosecution agreements “occupy a middle ground” between declining to prosecute or going forward with an indictment that may have “collateral consequences” including harm to innocent employees or shareholders may result.

The Grassley-Brown letter asked the department to disclose “compensation contracts” for any outside experts it has consulted with regarding financial institutions with more than $1 billion in assets. Appelbaum wrote that the department properly consults with other executive branch regulatory agencies on “collateral consequences,” but that “neither those agencies nor the target companies receive any compensation from the department.” She did not say whether other outside consultants are contacted.

The Justice Department letter can be viewed here. The letter from Grassley and Brown can be viewed here.

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