NYT Flubs Deferred Prosecution Reporting

In one paragraph it is suggested that a deferred prosecution agreement would have been the best way to deal with Arthur Andersen:

The agreements, government officials say, also avoid the type of companywide havoc seen most acutely in the case of Arthur Andersen, the accounting firm that was shuttered in 2002 after being indicted in the Enron scandal. The firm’s collapse threw 28,000 employees out of work.

What the NYT doesn’t mention is that Arthur Andersen should never have been prosecuted, but by the time their conviction was overturned the firm had collapsed. This was the definition of abusive prosecution, but during the rush to blame following the Enron scandal no one seemed to care. Basically, the DoJ thugs screwed up. According to the Supreme Court’s reversal:

The court found that the instructions were worded in such a way that Andersen could have been convicted without any proof that the firm knew it had broken the law or that there had been a link to any official proceeding that prohibited the destruction of documents. The opinion, written by Chief Justice William Rehnquist, was also highly skeptical of the government's concept of "corrupt persuasion"—persuading someone to engage in an act with an improper purpose even without knowing an act is unlawful.

So would have a deferred prosecution agreement been a better alternative? No, since AA didn’t do anything wrong in the first place.

The article then suggests that DPAs are get out of jail free cards.

Some lawyers suggest that companies may be willing to take more risks because they know that, if they are caught, the chances of getting a deferred prosecution are good. “Some companies may bear the risk” of legally questionable business practices if they believe they can cut a deal to defer their prosecution indefinitely, Mr. Khanna said.

The general theme of the article is that DPAs are corporate giveaways. Well they are, but not in the sense that the article puts it. DPAs give prosecutors a way to hand something back to their cronies and get credit for “wins” without winning anything. After all, why shut down a perfectly viable business when it’s so much better to extort it?

This is a classic Spitzer-tactic. Make accusations to back the accused into a corner, then cut a deal. The businesses involved can’t risk even a small chance of being shutdown, but that doesn’t matter to the prosecutors who won’t hesitate to claim victory regardless of the outcome. They get away with it because the prosecutors have no intention of following through with the expense of a trial, but the system is so stacked in their favor that they never have to.

Amazingly, the NY Times points out the Ashcroft scandal involving DPAs, but not the obvious conclusion: The biggest winners from DPAs are the prosecutors.

Non-Farm Payroll (NFP) Predictions for March

Consensus: -50k
ADP: 8k

Last: -63k

DailyFX on the number:

Now more than ever, the change in non-farm payrolls for the month of March will determine the outlook for the US dollar and US monetary policy. All but one of our leading indicators for non-farm payrolls point to another month of job losses, which means that a negative print alone will not be enough to drive the US dollar lower. The dollar has been rebounding in the days leading up to the non-farm payrolls report and interest rate expectations for the FOMC meeting at the end of this month are strongly skewed in favor of a 25bp versus 50bp cut. We have seen these expectations change on a dime in reaction to incoming economic data and given the fact that the non-farm payrolls report is the most market moving indicator for the US dollar, there is no question that a weak release could alter market expectations significantly.