Commerzbank, Eric Holder and too-big-to-jail
DENNIS Lerner, a former tax director at Commerzbank AG (CBK) in New York, isn't too big to jail. But the bank he once worked for may well be, along with the other executives there who made his crimes possible. Lerner, 60, pleaded guilty this week to public-corruption charges. Commerzbank hired him from the Internal Revenue Service in 2011 while he was an examiner responsible for negotiating a tax-fraud settlement with the bank, according to the criminal complaint that prosecutors filed in September. Commerzbank paid the IRS $210 million one day before offering Lerner the job, which he accepted immediately. The figure was 62 percent of the potential taxes due. Bank employees later told federal investigators it had been willing to pay much more money to settle the audit.
"We will not tolerate corrupt government employees and will prosecute and punish them to the full extent of the law," Preet Bharara, the U.S. attorney for the Southern District of New York, said in a March 12 news release. Notably, Bharara said nothing about prosecuting the people and companies that participate in corrupting them. Why hasn't the Justice Department charged Commerzbank or anyone else who worked there? That is a mystery, but perhaps only partly. U.S. Attorney General Eric Holder last week told the Senate Judiciary Committee, in essence, that some financial institutions are indeed too big to prosecute, because of the damage to the U.S. and world economy that might ensue.
Commerzbank is certainly big. The company had 636 billion euros ($839 billion) of assets on its Dec. 31 balance sheet, making it Germany's second-largest bank. The German government owns about 25 percent of the company, after bailing it out in 2009. We can imagine how upset some German political leaders would be if the Frankfurt-based lender were ever indicted in the U.S., jeopardizing its ability to survive.
Julie Bolcer, a U.S. Attorney's Office spokeswoman, declined to say if the Justice Department's investigation is continuing. Margarita Thiel, a Commerzbank spokeswoman, declined to comment. (The government's court papers refer to Commerzbank only as "Bank 1." Bloomberg News and other news organizations previously have identified the bank as Commerzbank.)
There are signs the investigation might be wrapping up. Lerner's plea deal doesn't require him to cooperate with government investigators, which suggests the feds aren't trying to use him to target bigger fish at the bank. Prosecutors said they would recommend only four to 10 months in prison, in line with federal sentencing guidelines. He also isn't required to admit to breaking the law while he was a Commerzbank official.
Of the original four counts against him, Lerner pleaded guilty to the two charges related to his conduct while he was an IRS employee. One was for violating conflictof-interest laws, the other for illegally disclosing IRS audit information. Prosecutors said they would drop the two counts stemming from his actions as Commerzbank's tax director.
If Lerner committed crimes, it stands to reason that others at Commerzbank did, too. Lerner didn't act alone. The notion that he's the only one who violated the law in this case seems beyond belief, based on the facts the government alleged.