Weekend Economists Piece for Peace April 3-5, 2015

[Demeter]

54. Some Atlanta Educators Just Learned A Cynical Lesson About Accountability In America

http://www.huffingtonpost.com/2015/04/03/atlanta-educator-cheating-scandal_n_7001214.html?utm_hp_ref=business&ir=Business

It isn't every day that people who abuse their positions of authority are held accountable for wrongdoing. Actually, to be statistically precise about it, it isn't any day that happens, really. But there is some good news on that front, for a change: This week, in an Atlanta courtroom, some malefactors finally got nailed...Yes, that's right, in the most recent scandal of its kind, a group of educators, including one principal and a number of school administrators, were caught altering the results of one of those daffy standardized tests that now subsume the lion's share of all pedagogical opportunities in America's public schools. Only this time, some are saying that this is a huge story and the biggest development in American education law since forever...And sweet fancy Moses, did they ever lay the wood to those folks they convicted! Per the AP: "Over objections from the defendants' attorneys, Superior Court Judge Jerry Baxter ordered all but one of those convicted immediately jailed while they await sentencing. They were led out of court in handcuffs."

They took them out in chains! That's hardcore. That's humiliating. That's a sight that will make other people think twice before committing similar crimes -- it's what real accountability looks like. Or at least that's what a horrifyingly unequal justice system looks like when it plays out right before our eyes. Last year The New Yorker took a close look at the teachers and administrators involved in this scandal and, well, read the story for yourself and decide whether these are people who should be shackled; or if, rather, society should apologize for creating the terrible circumstances into which they and their students were thrown: http://www.newyorker.com/magazine/2014/07/21/wrong-answer

So while an Atlanta judge somehow found the courage to lock these educators up even before they've been sentenced -- again, not a thing that happens to white-collar criminals (with an emphasis there on "white&quot -- the justice system typically has little appetite for such accountability. These educators stumbled into one of the few areas of American life where a willingness to lower the proverbial boom on a corrupt actor actually exists. Let me give you a blueprint for how this sort of thing would have gone down if the scofflaws were high-flying bankers. What if you had a situation where, say -- I don't know -- a big bank laundered money for drug cartels and aided and abetted the transfer of funds between rogue nations and terrorist organizations...This is an actual thing that an actual bank -- HSBC -- actually did. They broke the sort of laws that, had someone like you or I done the same, we would be lucky to avoid being flayed alive in the town square for it.

But when an organization like HSBC gets caught engaged in these sorts of crimes, what happens next is that the authorities tasked with meting out accountability invoke something called "collateral consequences." Collateral consequences is an idea that Attorney General Eric Holder laid out near the end of a famous memo that everyone initially thought was going to be a new, punitive guideline to disciplining bad banks. But "collateral consequences" encapsulates this notion that the state has much more important things to consider than "holding people accountable for their actions." From that memo:

In the corporate context, prosecutors may take into account the possibly substantial consequences to a corporation's employees, investors, pensioners, and customers, many of whom may, depending on the size and nature of the corporation and their role in its operations, have played no role in the criminal conduct, have been unaware of it, or have been unable to prevent it.

As a theoretical construct, this is fairly reasonable -- don't wreck the innocent on your way to punishing the guilty. But the way this precept has been applied has been much different. As Dealbook's Ben Protess and Jessica Silver-Greenberg reported, it's the principle that got HSBC largely off the hook: "State and federal authorities decided against indicting HSBC in a money-laundering case over concerns that criminal charges could jeopardize one of the world's largest banks and ultimately destabilize the global financial system." As punishment for directly aiding some of the world's most noteworthy sociopaths, HSBC was forced to pay $1.9 billion in restitution. That sounds like a big number! But bear in mind that this penalty amounted to "little more than half of the $3.5 billion in pre-tax profits the bank earned in the third quarter of 2012," and just a sliver of the $16.8 billion the bank netted in 2011. HSBC also earned a deferred prosecution deal (where you don't get prosecuted as long as you super-duper promise to stop laundering money for drug cartels and terrorists), and was made to apologize. "Our bad," said the bank's spokesperson, probably. As Reuters reported, former U.S. Treasury official and University of Notre Dame Law professor Jimmy Gurule said that this settlement made "a mockery of the criminal justice system," and recommended that HSBC be subject to the same sort of treatment as these Atlanta educators...