“A Tiny Bank’s Surreal Trip Through a Fraud Prosecution” is a good reminder that you don’t want to be small if you’re in a government-regulated industry. If you can’t afford lobbyists to keep the government off your back and/or the legal fees to defend against a prosecution, you’re living on borrowed time.
3 thoughts on “Why you don’t want to be a small bank”
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It also helps to have a political godfather. If Abacus had been close to a major NY political figure (say for example “Reverend” Al Sharpton) it’s unimaginable that they would have gone after them in this way.
I’m beginning to wonder whether outright Middle Eastern style corruption is better. In some other country, Abacus would have just paid the necessary bribes and the case would have been dropped. Here they didn’t even have a way out (except for the fact that they got lucky in front of the jury – it could have easily gone the other way – more on this below). Once you are a target, it’s too late. The prosecutor will “lose face” if he backs down so he has to run the show to the bitter end, even if it becomes clear at some point that their case sucks.
Regarding luck, what usually happens is this – the prosecutor indicts you on 184 counts (this was the actual # for Abacus). Somewhere between indictment and trial the # of counts gets trimmed down to “only” 80 after your lawyers make a whole bunch of expensive motions (again the actual #). The jury is not told that each of the counts bears the same sentence and since they arise from the same acts any sentence will be concurrent and not consecutive. So if you are convicted on one count you will get 5 to 10 and if you are convicted on all counts you STILL get 5 to 10. The only way you get to go home is an acquittal on every single count. After the first vote, the jury is divided say 10 jurors for acquittal on all counts and 2 jurors for conviction. The weekend is approaching. One of the jurors has this bright idea for a “compromise” – lets convict on 1 or 2 counts (the ones where the prosecutions case seemed almost good enough) and acquit on the other 78 and we can all go home. And your goose is cooked.
Facing indictment and the threat of long prison sentences, eight Abacus loan department employees entered guilty pleas and agreed to cooperate with the district attorney’s investigation.
As Sandra Bland and others have found out, once you’re in the states cross hairs about the only way out is to plead guilty, and given a choice between a long jail sentance or freedom most people would rationally choose to plead guilty.
Sadly thanks to TV most Americans assume everyone gets a good lawyer without delay and only guilty people go to jail
Every time I think I have expended enough rage on 1) the megabanks and 2) the justice system, a story like this comes along. My first college roommate (and lifelong friend before that, I KNOW this man is honest) was ruined by a zealous federal prosecution in the first saving and loan crisis. It was a small bank that he and a few friends (not me) started, and most of them walked away. He paid every personal obligation from the bank deal but was forced into personal bankruptcy. I have never trusted the justice system since, and it always comes through, from Client Nine to Aaron Swartz.