A serious threat to our national economy that no one seems to have noticed is the Justice Department’s new posture in corporate criminal prosecutions. The lesson of the Arthur Andersen prosecution back in 2002—which left the venerable accounting firm in ruins and 28,000 people jobless—is that a corporate criminal prosecution can be catastrophic. For corporate defendants in regulated industries, a conviction will trigger a loss of license and inability to continue doing business. The larger the corporate defendant, the deeper the impact on the economy at large.

Federal prosecutors, in the decade since Arthur Andersen’s downfall, have internalized the seriousness of a taking a corporation to trial. In the place of corporate criminal prosecutions, prosecutors have come to rely almost exclusively on deferred prosecution agreements (DPAs)—settlement agreements that allow corporate defendants to escape criminal prosecution, provided they pay a sizable penalty and undertake corporate governance reforms. While DPAs carry the same punitive, deterrent, and rehabilitative effect as a guilty plea, they allow prosecutors to carefully control collateral consequences that could put the domestic and global financial systems at risk.

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