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The Nation's Pulse
The Criminalization of Business
A dramatic and unwarranted expansion of government power.
Under the radar, the Obama administration has exhibited a disturbing tendency to criminalize business. Recently the administration announced that it was opening a criminal investigation into the activities of Goldman Sachs in selling securities backed by subprime mortgage loans. Now comes word that the Food and Drug Administration is considering imposing criminal penalties against Johnson & Johnson’s McNeil Consumer Healthcare unit for a “pattern of non-compliance” with rules governing the manufacture of pharmaceutical products. This criminalization of business represents a dramatic expansion of government power that is unwarranted.
In the case of McNeil, the FDA’s action is prompted by a series of recalls of contaminated over-the-counter children’s medicines. While this is a potentially serious matter, FDA official Joshua Sharfstein recently acknowledged in congressional testimony that “the risk for any child in the United States was remote” and that “[s]o far, FDA has no cases with evidence that a product quality issue contributed to a significant adverse health outcome.” Moreover, Mr. Sharfstein’s testimony makes clear that the FDA was long aware of potential problems at McNeil’s facilities. As he acknowledged, “Before 2009, FDA investigators identified several problems with cGMP compliance at facilities run by McNeil.”
Nonetheless, only now has the FDA suggested that criminal penalties are warranted. Moreover, recent comments by FDA officials indicate that this latest action may be part of a wider program to make its regulatory program more “visible” by, among other things, “strengthening…criminal enforcement of FDA’s laws.”
The history of the government’s use of criminal laws to sanction corporate behavior is not a happy one. Government often uses the threat of criminal sanctions merely to harass corporations or for publicity purposes. For example, in the 1990s, the Department of Justice opened a criminal probe into the conduct of the tobacco industry with much fanfare. However, no one was ever prosecuted for any criminal violations. Rather, the criminal investigation appeared to be merely a means of harassing an industry that was unpopular.
In the few cases in which the government has pursued criminal prosecutions, the consequences have been profoundly negative. For example, the government’s pursuit of criminal charges against accounting firm Arthur Andersen led to the breakup of the company and the loss of thousands of jobs. As a result, the lives of numerous individuals who had nothing to do with any alleged wrongdoing were turned upside down. These consequences were particularly troubling given that the Supreme Court ultimately overturned the company’s criminal conviction, finding that the jury instructions given at trial suffered from a series of flaws.
This history demonstrates that government should exercise extreme caution before exercising its power to initiate criminal proceedings. This is particularly true in the current climate, where business is already struggling with economic uncertainty and new regulatory burdens imposed by the Obama administration. Adding another concern for business is the last thing we need right now.
Letter to the Editor View all comments (38) | Leave a comment
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Kitty| 6.16.10 @ 7:08AM
Wow! Glenn Beck had Yaron Brook, from the Ayn Rand Center, on his show yesterday discussing this very point and said that in 1975, Ayn Rand said this:
“One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary.”
Ned| 6.16.10 @ 10:40AM
Did you notice the small filler article earlier this week, about the record levels of cash and liquid assets currently on the books of American corporations?
Read Bram's comment about the 1930's and businesses laying low... sounds familiar, eh?
Kitty| 6.16.10 @ 11:03AM
I've been reading about that. Individuals seen to be doing the same thing. I don't know many employed people who are indulging in impulse items these days.
ENOUGH ROPE| 6.16.10 @ 1:07PM
Obama, The Smiling Cobra.
old white guy| 6.16.10 @ 2:15PM
the only control needed is the one you free people have . the second amendment.
Bram| 6.16.10 @ 8:13AM
This is a re-run. We saw all this in the 1930's. Business laid low and rode out the Depression until FDR finally died.
Harry the Horrible| 6.16.10 @ 8:41AM
And look at the cr@p FDR left us during his FOUR terms as president...
Lets hope that BHO only gets one term.
Alan Brooks| 6.16.10 @ 8:46AM
"Lets hope that BHO only gets one term."
Right, so the GOP can elect a Bush-type. Thanks ever so much; we really appreciate your foresight in running GOP candidates-- you are good shepherds and good stewards.
Bram| 6.16.10 @ 9:46AM
Conservatives were fed up with Republicans for running up a $161 Billion deficit before losing Congress in 2006. Now the Democrats are running a $1.6 Trillion deficit just to show what real irresponsibility looks like.
Alan Brooks| 6.16.10 @ 9:52AM
Then you are as pessimistic as I am.
Dan Hirsch| 6.16.10 @ 10:19AM
Alan!
Are you an unrepentant communist or a useful idiot? Tell us, we deserve to know!
Alan Brooks| 6.16.10 @ 12:00PM
A communist. I worked in Pol Pot's killing fields for four years, 1975- '79. I have the skulls to prove it. Write your mailing address below, and a skull will be sent to you.
Now you know.
old white guy| 6.16.10 @ 2:17PM
how about you brilliant voters elect an intelligent, honest conservative.
R Martin| 6.16.10 @ 8:38AM
Obama is anti business to his core, so the strong-arm tactics against capitalism are to be expected. But what is also in play is a very transparent effort by government to shift blame away from its own failings. The demonization of the financial services industry in general and Goldman Sachs in particular is but one example. That charge has been led by Barney Frank, Chris Dodd and their pals in Congress, most of whom should be subject to criminal investigations themselves.
JP| 6.16.10 @ 9:06AM
Actually, BHO is pro business. The President is pro Big Business of Crony Capitalism. Like most Progressives, he enjoys the fruits of capitalism. The President reminds me of Lennin in some ways. After Lennin siezed power he put in an order for 6 Mercedes roadsters. He said a man of his stature deserved 6 and 3 or even 1. So much for "Each according to his needs....". Our President since entering office has entering office. He has hosted several dinner parties that out do even JFK and Jackie in thier extravagence (his last outdoor dinner party featured specially cut glass butterflies that were hung from the party tents -each one cost over $1 thousand dollars. The WH catering service reported that the food alone cost nearly $1 million (and the chef was warned afterwards to keep off of Twitter). Yes, so much for populist solidarity.
The President has worked it all out. He conducts an insider game with Fortune 500 companies -that is, he cuts side deals, subsidies, and targeted tax breaks in order to get them on board his agenda. But in public, he continues the old Marxist schtick of class and economic warfare. Look at Wall St for the evidence. Since 2009, they've enjoyed record bonuses. Look GE, GM, BP,Merck, Anthem, for more evidence. All of these firms CEOs have in full view of thier shareholders and the cameras backed Obama's agenda.
But they way BP is now being treated should serve as a warning to other would-be Crony Capitalists. Being in bed with Obama is no guarentee of future success. He will think nothing of destroying the very firms that have partnered with him in the past, if it suits his political needs, that is. BP is Obama's life jacket. The destruction of BP as a private energy company, Obama believes will sate the growing populist anger against him. Or so he hopes.
Alan Brooks| 6.16.10 @ 9:54AM
"Actually, BHO is pro business. The President is pro Big Business of Crony Capitalism."
Whew, what a relief; we were starting to think BHO was a Commie.
Dan Hirsch| 6.16.10 @ 10:21AM
Alan!!!
Pick one:
Unrepentant communist, Useful idiot
Come on, man, we want to know!
Howard| 6.16.10 @ 11:49AM
What is Obama's philosophy? Is he just a Chicago style gangster politician, or something else? I know he has farmed out much to Pelosi, Obey, and Reid. Is that because of philosophical agreement? Or, lack of his own view? I don't know.
Alan Brooks| 6.16.10 @ 12:04PM
"Alan!!!
Pick one:
Unrepentant communist, Useful idiot
Come on, man, we want to know!"
Communist. I killed tens of thousands of the Polish intelligentsia, and buried them at Katyn.
old white guy| 6.16.10 @ 2:26PM
yes he is a commie. he is using those idiots to his own end. you have head the term, useful idiots.
DonDuke | 6.16.10 @ 9:36AM
I remember the first time I heard the libs rail about "unfair profits". It caused me to stop and examine this concept. I mean, except for monopolistic situations, "unfair profits" simply did not compute to me. Now after a number of years of hearing this and the concept behind it, it seems the American people have come to accept this idea. Frankly, this can be seen as nothing more than another step towards socializing the private enterprise of this country. I wonder who is going to be in charge of telling you, or me, how much we can earn. Isn't this assault to increase federal taxation and entitlements just another way of doing this?
Melvin| 6.16.10 @ 10:01AM
Something to think about. We buried the Soviets under massive amounts of debt from increasing the arms race to the point that they could no longer keep pace.
By doing so the Soviets could not keep up economically. The Soviet economy could not do two things at once create and maintain a modern military, and provide the basic infrastructure for it's people. Something had to give.
Obama is doing economic policies are something similar to a centralized economy but instead of directing massive amounts of debt to the military he is doing the reverse by spending massive amounts of borrowed debt to the government and socialized services which will have the same effect as when the Soviet Union collapsed.
My God people, this man and a complicit Legislative Branch is killing this Country.
Petronius| 6.16.10 @ 10:31AM
This government is the product of America's sandbox mentality. It will not change until more people believe in improving their estates by and for themselves rather than electing lowlife politicians to make their neighbors miserable by plundering incomes and hamstringing industry. But then economic literacy is a rarity in our polity.
Last week a shanty irish skank with a fat potfolio demanded that the assets of BP be siezed by the President. But the peasants didn't join the chorus.
They do know what drives up the price of a gallon of regular.
Howard| 6.16.10 @ 11:53AM
Am excellent book about the New Deal is "The Forgotten Man" by Amity Shlaes. It especially deals with the 1937-1939 period. That was when FDR was especially anti-business. A result was the so-called "Capital Strike". Business sat on its hands. No investment or new hiring. The unemployment rate jumped up to about 15%, after it had gone down to about 10%. It wasn't until WWII when FDR needed the "Arsenal of Democracy" did unemployment and business bashing go away.
Len| 6.16.10 @ 2:44PM
Too bad we don't have a government operating under the constraints of the US constitution.
Had we a government that actually observed the limits imposed on it, the congress would pass no regulatory or prohibitive laws.There are just a few little problems with the license the federal government has taken upon itself in "regulating" business.
1) Aug. 18th, the federal convention:
These propositions were referred to the Committee of detail which had prepared the Report and at the same time the following which were moved by Mr. Pinkney: in both cases unanimously. ......
..."To grant charters of incorporation" ....
This means business licensing and is the only thing that could allow the federal government to make laws for businesses.
2) Commerce was always spoken of as separate from industry and agriculture, thus the power to regulate commerce cannot be a power to regulate business. When considering this power it was spoken of as being used to aid industry and agriculture, not control them. Commerce merely means trade and navigation related to trade.
3) Regulate meant to keep regular and contained no implied understanding of prohibitive powers. As a matter of fact when one looks at Article 1, Section 9 we can see that the framers used prohibit and regulate concerning the slave trade.
4) Despite all the sophistry employed to misconstrue the commerce clause, this power was given to keep the states from being at odds with each other. For instance both Maryland and Virginia charged port fees to ships not registered in their states.
"Mr. ELSEWORTH. It is best as it stands. The power of regulating trade between the States will protect them agst. each other. Should this not be the case, the attempts of one to tax the produce of another passing through its hands, will force a direct exportation and defeat themselves."
The federal government was created to be a government for governments, not the people, unfortunately the US constitution was discarded a long time ago, and we are ruled by whatever the current passion is.
RCV| 6.17.10 @ 5:13PM
No, the Articles of Confederation were created to be a "government for governments." The Constitution created a federal government independent of the states, with its own powers and proscriptions.
zack | 6.16.10 @ 2:57PM
Obama and BP were bedfellows until it became politically inconvenient. Obama was helping to create cap and trade legislation that would benefit BP, and BP was paying him well with campaign donations to the Dems. However, just like the government looters in Atlas Shrugged - they will turn on each other like wild dogs when necessary.
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Pat| 6.16.10 @ 4:23PM
Using criminal law to promote politics is "been there, done that" within our American government. Enforce the law - or not - depending on the political winds. Get creative, interpret the law in new ways - or not. Back off on strict enforcement to avoid political embarrassment - or not.
During the FDR years, Thurman Arnold was a hotshot lawyer withn FDR's Brain Trust, happily prosecuting business under "antitrust" violations. What a hero he was - businessmen and their greed caused The Great Depression - the dirty crooks got what was coming to them - FDR, bold Thurman and his coat holders were the avengers, the Lone Ranger and heroes of the working class rolled into one.
But then FDR wanted to make war on Germany, he wanted American business to shift to war production and quickly, he didn't care how it was done, he didn't mind if large American corporations joined hands to create tanks and airplanes.
What was previously wrong became what was now right, almost overnight. But poor Thurman Arnold didn't get that memo, he continued doggedly prosecuting American business under "antitrust" - Thurman became a liability to FDR, a political embarrassment and obstacle to progress. But this farce ended well, as so often happens within American politics, Thurman was kicked upstairs, awarded a judgeship on the Federal Court of Appeals and a more pliable man took his place - needless to say, "antitrust" prosecutions would henceforth become as scarce as George Bush admirers among Harvard's faculty.
Not the law, not the Constitution, not common sense takes precedence over politics in these United States. And not a difference in kind when compared to the fascists, the socialists or the communists, different only in degree.
JeffT| 6.16.10 @ 7:18PM
This is exactly what the government did to the oil companies. Give them an impossible mandate, drill only in deep water, then when failure hits, blame the oil company. The problem is that CEOs are such pansies, they fold like cheap cameras.
Pat| 6.16.10 @ 7:45PM
JeffT, you're right of course, but the Feds have M-16's and M1A1 Abrams tanks in their favor, all the pansies have are aging, overweight corporate attorneys and their trusty Xerox machines to defend their interests. The prospect of keeping house for Big Tryone over the next 5 to 10 years before coming up for parole isn't a happy thought or a happy place to be. But the law is the law right, one impartial law for everyone right, well most of the time anyway, or maybe only sometimes depending on current politics - well, you know what I mean.
Yosemeti Sam| 6.17.10 @ 12:54AM
" ... The history of the government's use of criminal laws to sanction corporate behavior is not a happy one ...."
Whaaaa, whaaaa, whaaaa.
Well then - what are the courts for?
Step for step, move for move - challenge the
would-be usurpers of truth, justice and the American way!
Govt (SOP) versus any business - which is the greater evil?
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