Haugh on Financial Crisis Prosecutions

Todd Haugh has posted The Most Senior Wall Street Official: Evaluating the State of Financial Crisis Prosecutions on SSRN with the following abstract:

This September marks six years since the collapse of Lehman Brothers and the height of the financial crisis. Recently, a growing debate has emerged over the Justice Department’s failure to criminally prosecute Wall Street executives for their role in creating the crisis. One side of that debate contends the government has failed to bring to justice individual wrongdoers — primarily the heads of banks operating in the mortgage-backed securities market — instead preferencing enforcement decisions that target corporations, resulting in punishments that are “little more than window-dressing.” The other side argues that cases against individuals are precluded by the realities of the federal criminal justice system, and that “corporate headhunting” will only inhibit meaningful regulatory reform.

It is difficult, however, to evaluate these competing claims without proper context. This Article explores the recent conviction and sentencing of Wall Street executive Kareem Serageldin as a means of providing that context. Although Serageldin has been trumpeted as the “the most senior Wall Street official” to be sentenced for conduct committed during the financial crisis, and his conviction was framed as a victory in punishing those accountable for the financial collapse, a critical look at his case reveals he committed only a mundane white collar crime marginally related to the crisis. This disconnect creates a unique lens through which to understand and evaluate the current state of — and debate surrounding — financial crisis prosecutions. And it ultimately highlights the merits, and shortfalls, of each camp’s arguments. The Article concludes by offering something largely absent from the current debate: specific proposals for how we might go about prosecuting individuals so as to prevent the next crisis.