Friday, February 06, 2009
February 6, 2009
The Honorable Eric Holder Department of Justice Robert F. Kennedy Building Tenth Street and Constitution Avenue, N.W. Washington, D.C. 20530 Re: Corporate Crime Data Base
Dear Attorney General Holder:
Congratulations on your appointment. We wish to offer our support to the Department of Justice (DoJ) in the coming years for the development of a key tool for addressing the menace of corporate crime: a corporate crime data-base.
The department’s development of a corporate crime database is long overdue. For example, it has now been nearly 30 years since the department has undertaken a comprehensive study of the extent and cost of corporate crime to the United States.(1) We have urged your predecessors to undertake the creation of an annual report since 1992.
We urge you to direct the department to undertake this important proposal as part of a comprehensive approach to corporate crime. Such a report would not only spell out the magnitude and nature of this complex and multi-faceted issue, but would also provide law enforcement officials with a comparative analysis of recent trends and the relative effectiveness of various sanctions as deterrents.
The FBI oversees the Uniform Crime Reporting (UCR) Program, which tracks certain categories of street crime from over 17,000 local and state law enforcement agencies. The UCR program’s annual reports constitute a useful barometer of trends in street crime.
An equivalent program should exist to collect and track information on various types of corporate crime and corporate law-breaking, including but not limited to antitrust and price-fixing, environmental crimes, financial crimes (including the various types of accounting fraud witnessed in recent years), overseas bribery, health care fraud, trade violations, labor and employment-related violations (discrimination and occupational injuries and death), consumer fraud and tax fraud.
Some of this information is already compiled by different state and federal agencies, including the DoJ itself, but the data are rarely aggregated so as to provide an overall assessment of the state of corporate crime. Other agencies and departments that currently do not compile this kind of information would be encouraged to do so if the DoJ signaled its importance. As the nation’s top law enforcement officer, we are asking you to provide the kind of leadership necessary for this coordination to occur.
The potential use of such information for deterrent measures also makes such an effort worthwhile. Information on individuals who commit criminal offenses is easily accessible to law enforcement agencies through the National Crime Information Center, which maintains a national database used by local, state and federal law enforcement officials to track criminals. Unfortunately, a similar database on corporations does not currently exist, although it could be used in a variety of ways – e.g. to enhance the kind of information necessary to screen out those corporations that do not meet the “responsible contractor” standards of the Federal Acquisition Regulations, and to help state and federal prosecutors identify recidivist violators and trends in corporate crime in specific industries. In addition, a publicly-available version of such information would be of tremendous use to socially-concerned investors, journalists, criminologists and other interested members of the public.
In February, 2006 we met with representatives from the Bureau of Justice Statistics, who agreed that, if given the resources to do so, such an effort would be possible. And, as the history of the UCR reports demonstrates, improvements in collection and presentation can be made with time. Groups including the Syracuse University-based Transactional Records Access Clearinghouse (TRAC), which analyzes federal government enforcement statistics, could be consulted on questions of methodology.
We believe that at a minimum, a corporate crime database (searchable by parent company and major subsidiaries) should include the following:
The database should include individual company data. This would include the number of civil, administrative and criminal enforcement actions brought against corporate defendants by government agencies involving a felony charge, misdemeanor or civil charge where potential fines may be $1,000 or more. The data should specify the agency bringing the charge, the charge, the name of the company charged (including ultimate parent company), and the outcome of the action if any, including plea agreements, consent decrees, findings of innocence, convictions and fines and other penalties.
This company-specific information should also be organized in a publicly-available, searchable database, just as the Federal Procurement Data Center provides a searchable, online database of federal contractors.
The database should compile agency enforcement data. The number, description and status of investigations initiated by federal agencies (including the FBI, but also EPA, SEC, IRS, OSHA, CPSC, etc.), as well as the number of cases referred to U.S. Attorneys for criminal prosecution should also be included.
Prosecution records should also be maintained. This would include the number of cases referred to U.S. attorneys for prosecution each year by the FBI or other federal and state agencies, as well as the status and ultimate disposition (i.e. how many of those referrals were prosecuted; how many of those prosecuted were found guilty; the magnitude and kind of penalties involved).
An estimate of the costs of corporate crime should be included in the annual report. In its 2001-2006 strategic plan, the department explained that “precise financial losses resulting from White Collar Crime (WCC) for consumers, government, and business are unknown since no systematic data collection exists.” Various estimates place the costs of corporate crime to the rest of society at hundreds of billions each year. A 1996 GAO study, for example, estimated that health care fraud alone ranges from 3 to 10 percent of all health care expenditures – i.e. as much as $100 billion each year. (Malcolm Sparrow of the Kennedy School of Government at Harvard estimates that the damage is much greater -- as high as 30 to 40 percent of total health care expenditures.) An effort should be made to determine not only the costs of crimes committed by individuals against businesses and investors (white collar crime), but also the costs that various types of corporate crime create for the rest of society.
An explanation of methodologies used should be included. Recognizing that efforts to collect and categorize this information are likely to improve with time, a clear explanation of the methodologies used and an index of all information categories should also be included.
An analysis of any new trends in corporate crime and an explanation of the relative effectiveness of different sanctions should also be included in each annual report.
The UCR measures certain forms of white-collar crime, but because corporate crime is multifaceted and complex, it does not always come to the attention of law enforcement officials. That is why we encourage you to collect this data in collaboration with other agencies responsible for enforcing related regulations.
We understand that the Criminal Justice Information Services Division has begun to develop a system to capture data from the federal agencies willing to participate in this kind of effort, and would like to see that effort expanded, with publicly-available online databases and an annual corporate crime report similar to the Crime in America report.
By focusing on statistics related to corporate (organizational) crime in addition to white-collar (individual) crime the DoJ will enhance public understanding of “crime in the suites,” improve the government’s ability to avoid contracting with criminal corporations and provide a deterrent effect by exposing corporate misdeeds. A relatively small amount of resources devoted to this task will go a long way toward promoting lawful corporate behavior.
We look forward to hearing from you about this important issue.
Ralph Nader, Center for the Study of Responsive Law
Jim Donahue, Essential Information
Charlie Cray, Center for Corporate Policy
cc: Representative John Conyers, Chairman, House Committee on the Judiciary Senator Patrick Leahy, Chairman, Senate Judiciary Committee
(1) See Marshall Clinard, Project Director, Illegal Corporate Behavior U.S. Department of Justice, Law Enforcement Assistance Administration, National Institute of Law Enforcement and Criminal Justice, October 1979.
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