Guns don’t kill. People kill. This is not so much a “truth” as a truism. The very rare freak accident aside, when one human being gets shot another human being is pulling the trigger. And when a human being uses a gun to commit a crime then it is the human being, not the gun, that is punished.
So what does that mean for Jamie Dimon?
At the time of writing Jamie Dimon is CEO of JP Morgan Chase & Co, one of the largest banks and, indeed, one of the largest public companies, in the world. He has held that post since 31 December 2005.
Mr Dimon is an interesting character and I shall have more to say about him later. For now it is sufficient to note that he was CEO when on 20 May 2015 JP Morgan Chase & Co along with three other banks pleaded guilty to a crime.
Four major banks pleaded guilty on Wednesday to trying to manipulate foreign exchange rates and, with two others, were fined nearly $6 billion in another settlement in a global probe into the $5 trillion-a-day market.
All but UBS pleaded guilty to conspiring to manipulate the price of U.S. dollars and euros exchanged in the FX spot market. UBS pleaded guilty to a different charge. Bank of America Corp (BAC.N) was fined but avoided a guilty plea over the actions of its traders in chatrooms.
Let’s stop and think about that.
Can a company commit a crime any more than a gun can kill?
A company is an abstract entity. It cannot actually do anything. People working for the company may commit crimes just as people may use guns to kill.
Companies don’t commit crimes. People commit crimes
Let’s think about this a bit more.
According to the Reuters report UK and US officials allege that the guilty banks used invitation only chat rooms and coded messages to coordinate their trades and cheat their customers. Stripped of gobbledygook this means human beings working for these banks conspired to cheat the banks’ customers. These human beings, not some abstract entity called a bank, were the actual perpetrators of the crime. There is an implicit acknowledgement of this in the Reuters report which states:
The investigations are far from over. Prosecutors could bring cases against individuals, using the banks’ cooperation pledged as part of their agreements.
That was eight months ago. So far no criminal cases have been brought and no one has gone to prison.
But why would anyone commit crimes on behalf of their employer?
It’s the pathological incentive system. If you’re part of a group that commits financial crimes on behalf of a giant company like JP Morgan Chase & Co or any other major financial institution:
- The chances of serious personal consequences are slight
- The rewards in the form of bonuses and pay increases amounting to millions of dollars are enormous
- The consequences of refusing to go along with the group can mean losing your job and being unable to find future employment. No one wants to hire a “troublemaker”.
In other words going along with the group is all upside and very little prospect of downside. Refusing to go along is all downside.
Get rich or join the ranks of the unemployed. Those are your choices.
Ambrose Bierce put it more succinctly over a hundred years ago:
CORPORATION, n. An ingenious device for obtaining individual profit without individual responsibility.
(Ambrose Bierce, The Devil’s Dictionary)
- If you’re going to do this sort of thing do it as part of a group with connections up the corporate ladder. If you act alone you’ll be called a “rogue trader” and cut loose. You’ll most likely end up in prison. In this case there’s safety in numbers
- It only works for financial crimes that benefit the bottom line of your employer and – preferably – fatten the CEO’s bonuses. Other crimes – eg murder or paedophilia – aren’t covered.
But here’s the bottom line. The only way to combat corporate crime is to ensure there are personal consequences for the human beings who perpetrate it. To put it in simple terms, toss the crooks into jail and throw away the key.
This is not as bizarre as it sounds. Former Enron CEO Jeffrey Skilling was sentenced to a lengthy prison term for his part in the company’s collapse. Enron Chairman Kenneth Lay died before starting his prison term. There is a precedent for jailing the CEO and chairman of a giant corporation.
So should Jamie Dimon now be sharing a cell with Bernie Madoff?
It is not reasonable to hold the CEO personally responsible for every crime his company’s employees commit. It is possible that Mr Dimon knew nothing about this particular scam though, given the scale of what amounts to a criminal conspiracy and the number of people involved, it is reasonable to ask whether this is likely.
But here’s what ought to happen. The individual human beings directly involved, those that participated in the “invitation only chat rooms” and exchanged coded messages need to be identified and investigated. If there seems a reasonable case against them they should be indicted. After that we see what happens. Perhaps they’ll cut a deal and implicate people further up the chain.
At any rate their conviction and imprisonment, if found guilty, may help deter future occurrences.
So the short answer is I don’t know whether Jamie Dimon should be sharing a cell with Bernie Madoff. What I do know is that it appears serious crimes were committed and somebody should be investigating to see who the perpetrators are. If that leads all the way up to the executive suite so be it.
It is disturbing that there seems to be no serious effort to identify and prosecute the culprits.
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