You can say one thing for John Ashcroft: he’s not short on chutzpah.
In an op-ed in today’s New York Times, the former attorney general points out a thorny problem that the Justice Department may face as a result of the financial crisis: if there’s evidence that a company that has received significant amounts of bailout money committed fraud or other financial crimes, how do the Feds prosecute that company, while still protecting the health of the company on behalf of taxpayers?
The answer, according to Ashcroft: deferred prosecution agreements.
These deals, the former AG writes, offer “more appropriate methods of providing justice in the best interests of the public as well as a company’s employees and shareholders. They avoid the destructiveness of indictments and allow companies to remain in business while operating under the increased scrutiny of federally appointed monitors.”
But Ashcroft seems to willfully avoid one obvious point that badly undercuts his argument. And he skims over another key point that undercuts his ability to make that argument.
The company that played a more important role in triggering the financial collapse than perhaps any other single firm was AIG. But, as has been widely reported (sub. req.), in 2004 AIG itself entered into a deferred prosecution agreement with Ashcroft’s Justice Department, after the company had been charged with illegally helping a client, PNC Financial, to lower its tax bill. By the terms of the agreement, AIG escaped prosecution, but paid an $80 million fine and was required to provide high-level access to a government monitor.
Of course, we all know how things worked out for AIG. Despite the presence of the monitor, the firm collapsed last September — thanks to billions of dollars in losses from its Financial Products unit — taking much of the financial system with it. Several AIG execs are now being investigated for financial fraud. Meanwhile, Congress is seeking to have the information compiled by the monitor, James Cole of the firm Bryan Cave, released publicly, though the Justice Department and the SEC are dragging their feet.
So maybe deferred prosecution deals aren’t always so great.
But there’s another, perhaps more serious problem with the op-ed. To argue for the idea, Ashcroft cites the example of a deferred prosecution agreement that DOJ reached in 2007 with nation’s five largest manufacturers of prosthetic hips and knees, accused of giving kickbacks to orthopedic surgeons who used their products. In the spirit of disclosure, he notes in parentheses: “I was a paid monitor for one of these companies, Zimmer Holdings.”
But those pithy parentheses don’t begin to make clear that making such deals more prevalent, as Ashcroft desires, would represent a potential financial boon for the ex-AG, who now runs the Ashcroft Group, a law and lobbying firm — assuming he intends to remain active in the deferred prosecution agreement business.
Ashcroft also doesn’t mention that he’s drawn intense criticism for the Zimmer gig. That’s because the man who awarded it to him — then US Attorney Chris Christie, was a subordinate of Ashcroft’s at DOJ. Ashcroft was reportedly given the job — said to be worth between $28 and 52 million to the Ashcroft Group, at Zimmer’s expense — with no public notice and no outside bidding.
After initially refusing to answer questions bout the deal last year, Ashcroft eventually testified before Congress about it. During that hearing in March 2008, Rep. Linda Sanchez (D-CA) declared that the contract appeared to be “a backroom, sweetheart deal.”
The Washington Post last year added some additional details about the payments:
Ashcroft and about a half-dozen senior staff members of his firm are covered under a flat $750,000 monthly payment from Zimmer. Other top lawyers affiliated with Ashcroft’s consulting business are billing as much as $895 per hour under the agreement, while administrative support staff members are billing $50 to $150 per hour, Senate aides said.
Bills submitted by monitors for the other four companies involved in the settlement are less than half of what the Ashcroft group has charged, averaging a total of about $2 million each, the aides said.
And that’s not the only deferred prosecution agreement contract that’s drawn intense scrutiny. Christie, who’s currently running as a Republican for New Jersey governor, has had to fight off conflict of interest charges, after he gave Herbert Stern, a former federal judge, a $3 million no-bid contract to monitor the University of Medicine and Dentistry of New Jersey, then took $24,000 in campaign contributions from a law firm tied to Stern.
After having been slammed for the Christie deal, you’d hope that Ashcroft would think twice about publicly touting the benefits of such arrangements — especially without clearly disclosing that he could well benefit financially from their more widespread adoption. Guess not.
You’d also think the New York Times would want to give readers a bit more information about its writer’s financial stake in the issue he’s writing about. But then, we already know that the paper’s op-ed page doesn’t see disclosure as that big of a deal, so maybe it’s not surprising.