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The feds say it's too expensive and difficult to nail down individuals for corporate wrongdoing. But the problem is, there's little deterrent value to these settlements when corporations simply write them off as the cost of doing business. In order to actually stop these practices, a fear-inspiring example is in order:
WASHINGTON — Pharmaceutical companies, military contractors, banks and other corporations are on track to pay as much as $8 billion this year to resolve charges of defrauding the government, analysts say — a record sum and more than twice the amount assessed last year by the Justice Department.
The surge in penalties is because of a number of factors, including the resolution of longstanding actions against drug makers and military contractors, as well as lawsuits brought against mortgage lenders after the financial crisis. But it also reflects a renewed emphasis on corporate fraud, as the Justice Department devotes more resources to the issue and demands higher penalties from companies.
[...] The ballooning settlements are for civil charges of fraud against the government, criminal charges often related to the same conduct and, in the case of health care companies, recovery of money for states for Medicaid fraud.
But while the collections are a boon to the government and taxpayers, they are resurrecting questions about the relative lack of charges against executives at the companies that are getting the stiffest penalties.
“A lot of people on the street, they’re wondering how a company can commit serious violations of securities laws and yet no individuals seem to be involved and no individual responsibility was assessed,” Senator Jack Reed, Democrat of Rhode Island and chairman of a subcommittee that oversees securities regulation, said at a recent hearing.
President Obama, lawmakers and government watchdog groups have called for holding more individuals responsible. The Justice Department has collected $8.6 billion over the last three years, more than in any similar period in history, but relatively few prosecutions of individuals have come from the biggest settlements.