New York Mets owner Steven Cohen aims to continue his offseason spending spree by signing shortstop Carlos Correa to a long-term contract. Although negotiations are ongoing, the parties initially agreed on a 12-year, $315 million contract. Infamously, Correa was a member of the 2017 Houston Astros team that cheated its way to a World Series trophy, and Cohen was involved in one of the most notable insider-trading scandals in history. This lucrative potential contract left me with a nagging question: Why do cheaters prosper?
Both in baseball and the corporate world, it seems as if cheaters rarely get their just deserts. Whether it’s former Major League Baseball star and chronic doper Alex Rodriguez landing cushy television gigs, or Wells Fargo maintaining a stable stock price despite serially abusing consumers, those who break the rules seem to be doing well, even when they face some sanctions such as suspensions or fines.
The response to cheating in baseball can tell us much about how corporate crimes are handled.
While investigating the Astros cheating scandal, MLB Commissioner Rob Manfred had several options. He could punish individual players, with anything ranging from fines and suspensions to outright bans from the game. He could punish the team by levying a fine or taking away draft picks. He could go after leadership — using fines, suspensions or bans as sanctions. Finally, he could vacate the 2017 World Series title and seize from the Astros the spoils of its cheating.
Manfred ended up fining the Astros $5 million, suspending two managers and taking away four draft picks. But the Astros retained their World Series title, and no players were punished. Instead, players were given immunity for providing information.
These options and dilemmas are at the core of how we respond to corporate crime. Often, when a corporate crime occurs, prosecutors can charge individual employees or corporate leaders. Prosecutors can indict the corporation, or they can pursue a deferred-prosecution agreement, or DPA, and levy a fine against the corporation. Finally, in theory, prosecutors can pursue the “corporate death penalty” — judicially dissolving the company.
Corporate crimes can be hard to prove, so prosecutors tend to offer individuals immunity in exchange for their testimony. Prosecuting the corporation itself presents challenges: Corporations are legal fictions that can’t be incarcerated. And the corporate death penalty is unpopular because of collateral damage — employees and shareholders who did nothing wrong can lose their jobs or investments if a company is judicially dissolved. As a result, the default approach to corporate crime is DPAs and fines.
Manfred faced similar choices. Vacating the title — or, in the extreme, giving the Astros the “death penalty” and dissolving the franchise — would have harmed the fans and employees who had nothing to do with the scandal. Sanctioning individual players would have made it harder to find out the full extent of the cheating. And it was too difficult to prove the owner knew enough to hold ownership accountable with a suspension or ban.
In baseball and in business, the result is that cheaters prosper. Individuals go free, corporations survive and fines become a cost of doing business. The Astros won the World Series again last year, just a few years after the fine and draft pick penalty. The former general manager, Jeff Luhnow, though suspended and fired, now owns a soccer team. The other former manager, A.J. Hinch, also suspended and fired, currently manages another MLB team. Correa is on the cusp of landing a massive contract, and every Astros player got to keep his World Series ring. The cost of a tainted World Series trophy was a $5 million fine and four draft picks.
With penalties so lenient, cheaters are bound to come out ahead.
So, too, in the business world. Despite facing federal fines and being barred from trading for two years for his financial transgressions, hedge fund manager Cohen is still fabulously wealthy and now owns the Mets. Wells Fargo, despite committing widespread consumer abuse and paying billions in fines, marches on with little to no effect on its stock price. Hardly any financial institution faced accountability for the 2008 financial crisis, and most are alive and well today. The Sacklers are still rich from their ill-gotten gains related to Purdue Pharma’s opioid sales. In the corporate world, fines and DPAs are a manageable cost of business, leading to a commercial anomie that hurts us all.
If we really want accountability, we have to be willing to make hard trade-offs. We must be willing to pursue individual prosecutions, even if it makes fact-finding harder. And we must put the corporate death penalty on the table, even if collateral consequences are intimidating. Of course, the right approach will depend on the circumstances of each particular case. But, as a whole, it is clear that DPAs have not been enough.
Unless we get serious about accountability, cheaters will continue to prosper.
Max Willner-Giwerc is a student at the University of Chicago Law School and an avid baseball fan. He has been published in Northeastern University Political Review, E-International Relations and the Northeastern University Writing Journal.
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