What is the Department of Justice?

The Department of Justice (“DOJ”) is a Cabinet department in the United States government designed to enforce the law and defend the interests of the United States. The DOJ acts to ensure that laws passed by the legislative branch are properly upheld. Also, it works to deal with crimes at a federal level of government, often dealing with crimes involving multiple states, or acts of violence against the nation as a whole.

The DOJ is headed by the US attorney general, currently Eric Holder.  Holder is the chief law enforcement officer of the US and is appointed by the president as part of his or her Cabinet. Through its various agencies, the DOJ works to provide basic legal support to the president and the federal government. There are numerous offices and groups within the United States Department of Justice, including the Federal Bureau of Investigation, the Drug Enforcement Administration, the Bureau of Prisons, the US Federal Marshals, and the US Parole Commission. (http://www.justice.gov/)

There are also groups and committees within the United States Department of Justice devoted to dealing with specific areas of legal justice. These groups include the Office of Professional Responsibility, which investigates issues of misconduct by legal professionals; the Antitrust Division of the DOJ, which works to ensure fair trade among companies in the US; and the Office of the Solicitor General, which represents the United States in legal cases before the Supreme Court.

The Relationship between the DOJ & the SEC

Many people wonder what the function of the Department of Justice is and why it is not more involved in the recent cases of financial misconduct and  fraud. During the financial crisis, Americans were uncovering the fraud, corruption and misconduct of the financial system. The 2008 crisis has been very different than the Savings & Loans Crisis in the 80’s, because during the Savings & Loan crisis, hundreds of people were indicted and the financial instruments used to conduct fraud were not as opaque and misunderstood. Many believed the DOJ and the SEC should have stepped in sooner to arrest criminals and enforce regulations, respectively. According to Senator Chuck Grassly, “The Justice Department has brought no criminal cases against many of the major Wall Street banks or executives who are responsible for the financial crisis.” The DOJ could pursue more criminal cases but deals with a lot of political pressure from banks and bank-friendly politicians. ( http://blogs.wsj.com/law/2012/03/09/on-the-mortgage-meltdown-has-the-doj-done-enough-chuck-grassley-has-doubts/)

A common misconception about the DOJ and the SEC is that these two departments is that have the same powers and controls.  The Department of Justice is responsible for all criminal enforcement, and for civil enforcement of the anti-bribery provisions with respect to domestic concerns and foreign companies and nationals. The DOJ acts to ensure that laws passed by the legislative branch are properly upheld. The SEC is responsible for civil enforcement of the anti-bribery provisions with respect to issuers.

The SEC cannot commence a criminal case against someone who commits fraud.  Nothing the SEC does, alone, will result in prison time for financial criminals. The SEC brings civil enforcement actions, and can obtain injunctions, orders of disgorgement, and orders barring defendants from the securities industry. Essentially, what you really want to know is that the SEC cannot put anyone in prison.  Only the Department of Justice can file criminal charges. That said, often the DOJ’s criminal complaints track the civil complaints filed by the SEC.

Many people wonder why the Department of Justice does not always file criminal charges against scam artists exposed by SEC investigations.  One theory is that the Department of Justice has more work than it can handle; that there is more criminal conduct than they can possibly address.  Some financial fraud cases, therefore, die as a result of those decisions. In addition, the SEC has major gaps on the enforcement side.

Another consideration is the familiarity of the local U.S. Attorney’s Office with the federal securities laws.  Because of their proximity to Wall Street, the U.S. Attorney’s Office for the Southern District of New York is staffed with attorneys who know securities laws quite well.  The same is not true in other districts.  In a district that sees relatively few securities cases, therefore, the U.S. Attorney must consider the learning curve in making his decision about which cases he will prosecute.  Essentially, not every U.S. Attorney is willing to make that decision. Even with these considerations, there is unarguably more that both of these agencies can do to protect consumers, investors, and the financial markets.

What are Anti-Trust Laws?

One division within the DOJ is the Anti-Trust Division. The goal of antitrust laws is to protect economic freedom and opportunity by promoting free and fair competition in the marketplace. Competition in a free market benefits American consumers through lower prices, better quality and greater choice. Competition provides businesses the opportunity to compete on price and quality in an open market and on a level playing field.  Anti-trust laws also attempt to stop the formation of monopolies/oligopolies.  Unfortunately, we have not seen any anti-trust cases pursued against the Too Big to Fail Banks (Bank of America, J.P. Morgan Chase, Goldman Sachs, Citigroup, Morgan Stanley, Wells Fargo), which are anti-competitive in nature, and have effectively formed oligopolies that dominate the financial markets. (http://www.justice.gov/atr/)

Federal antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade, such as price-fixing conspiracies, corporate mergers likely to reduce the competitive vigor of particular markets, and predatory acts designed to achieve or maintain monopoly power.

Over the past year, the DOJ and the SEC have begun to address more cases against companies and their executives for fraud and anti-trust. As new regulations are adopted, we hope the SEC will enforce the rules with much more rigor and persistence, and that the DOJ will prosecute more white collar criminals.

By Elizabeth K. Friedrich

ekfriedrich@gmail.com and/or @ekfriedrich

Occupy The SEC, Member

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