When the dust settled on the 2008 financial crisis, not a single top Wall Street executive went to prison.
And for that, the Obama administration’s Justice Department took one lashing after another, from Congress, the press and a few maverick judges. The critics even coined a new phrase — that banks and their executives were “too big to jail” — and it reverberated through Wall Street and Washington, a taunting reminder of the ones who got away.
Over the past two years, the Justice Department, loath to be seen as treating the corporate world with kid gloves, began changing its approach. Two prosecutors with specialties in white-collar cases joined the administration and helped spearhead the push: Deputy Attorney General Sally Q. Yates, who created new guidelines for prosecuting corporate employees, and Leslie R. Caldwell, who took over the Justice Department’s criminal division.
The changes started with a few big banks pleading guilty and built to a flurry of activity this week, when Ms. Yates’s new guidelines appeared to bear fruit.
On Tuesday, the Justice Department announced the indictment of three former traders from some of the world’s biggest banks, accusing them of a conspiracy to manipulate prices in a currency market. The next day brought a guilty plea from Volkswagen as well as criminal charges against six Volkswagen executives for their roles in the emissions-cheating scandal, the first major test of Ms. Yates’s new policy. As soon as Friday, the auto parts maker Takata is expected to plead guilty over deadly airbags.
But whether these changes set a lasting precedent is not up to Ms. Yates or Ms. Caldwell. As expected, the officials announcing the white-collar cases are leaving the Justice Department, like the student whose popularity suddenly soared in the final week of school.
On Thursday, Ms. Caldwell announced that this was her final week. The Volkswagen case was one of her last acts.
Now, the Obama administration’s legacy falls into the hands of Jeff Sessions, President-elect Donald J. Trump’s pick for attorney general. Mr. Sessions, a Republican senator from Alabama, who faced a confirmation hearing this week, is expected to receive Senate approval.
In a recent interview, Ms. Yates said that she expected that the Justice Department’s focus on managers and executives would endure in the Trump administration.
“I don’t think that the concept of holding individuals accountable who actually committed crimes is a particularly controversial concept,” she said.
Indeed, when Mr. Sessions was a United States attorney in Alabama, he had a reputation as a tough-on-crime prosecutor.
And while Mr. Trump has promised far more business-friendly policies than the Obama administration, he also thrives on populist commentary. Even as Obama political appointees leave, many of the rank-and-file prosecutors who build these investigations are expected to stay.
Yet even if Mr. Sessions seizes the building momentum against corporate crime, there is reason to doubt that it can be sustained. Top bankers remain unscathed, even as their banks pay big fines. Experts on corporate crime also cautioned not to draw too many conclusions from the Justice Department’s recent aggressive streak. The Volkswagen case, they say, may present a rare opportunity for prosecutors to follow wrongdoing up the chain when a company breached a legal duty to report misconduct.
“In a normal case, a manager learns of a problem and has to interpret how serious it is and whether to report it,” said Jennifer H. Arlen, a New York University law professor who is founder and director of the program on corporate compliance and enforcement.
“What’s delicious about the Volkswagen case,” she said, is that prosecutors “have a situation where the managers completely knew the problem because they allegedly intentionally created it.”
In the financial crisis investigations, Justice Department officials argued that they always pursued individual wrongdoing aggressively, and that the failure to charge top bankers was not owed to a lack of will, but a lack of evidence.
Without such evidence — say, a damning email or a cooperating witness — prosecutors might find it too risky, or even unfair, to file criminal charges.
These officials point to the early years of the Obama administration, long before the Volkswagen case, when the criminal division under Lanny A. Breuer filed charges against BP employees linked to the 2010 Gulf of Mexico oil spill. They also note that Preet Bharara, the United States attorney in Manhattan, led a sweeping crackdown on insider trading.
Even so, Attorney General Eric H. Holder Jr. was blamed for being soft on corporate crime.
For much of his tenure, banks were paying billions of dollars for their misdeeds in the mortgage market and beyond, but the Justice Department mostly stopped short of extracting guilty pleas. In some cases, prosecutors cited fears that charging a big bank could cause collateral damage for the broader economy.
Ms. Caldwell, who spent nearly two decades as a federal prosecutor and led the Justice Department’s Enron task force, promised to apply a tough-on-crime approach to the corporate investigations.
In a questionnaire that she submitted in 2014 to lawmakers weighing her nomination, Ms. Caldwell declared that “No individual or corporation is above the law,” adding that “I will vigorously prosecute criminal wrongdoing whether it occurs in a boardroom, across a computer network, or on a street corner.”
Within weeks of Ms. Caldwell’s joining the criminal division, the Justice Department forced BNP Paribas, the giant French bank, to plead guilty to charges of transferring billions of dollars on behalf of Sudan and other countries blacklisted by the United States. Although much of the negotiating happened under Ms. Caldwell’s predecessors, among other prosecutors the case sent a signal that the criminal division now embraced guilty pleas for banks after decades of so-called deferred prosecution agreements.
Since then, Ms. Caldwell’s division, working with antitrust prosecutors, forced four big banks, including JPMorgan Chase and Citigroup, to plead guilty to charges of colluding in the currency markets. She also revoked a nonprosecution agreement that the Swiss bank UBS struck to resolve accusations of interest rate manipulation. In forcing UBS to plead guilty, Ms. Caldwell cited the bank’s pattern of recidivism, or, as she put it, “rap sheet” and its failure to “sufficiently mend its ways.”
As part of the manipulation case involving the London interbank offered rate, the global benchmark known as Libor, the criminal division under Ms. Caldwell also forced a British subsidiary of Deutsche Bank to accept a guilty plea.
In addition to the banks, the Justice Department has charged 15 people in connection with that scandal.
Foreign bribery cases, which are handled by the criminal division, have also yielded charges against individuals — about 100 people since the start of the Obama administration.
“Under her leadership as assistant attorney general, the criminal division energetically prosecuted a number of successful cases against perpetrators of financial fraud, foreign hacking, corruption and kleptocracy,” Attorney General Loretta E. Lynch said in a statement underscoring Ms. Caldwell’s focus on white-collar crime. “In these and in so many other ways, Leslie has played a crucial role in advancing the cause of justice, and she leaves behind a proud legacy of service.”
In a recent interview, Ms. Caldwell highlighted her division’s decision to increase the staffing of its foreign bribery unit by 50 percent. She also designed a foreign bribery “pilot program” that seeks to provide credit to companies that “voluntarily self-disclose” misconduct and fully cooperate with an investigation. And more broadly, Ms. Caldwell said she sought to clarify the Justice Department’s approach to resolving corporate investigations and accelerate the pace of these cases.
“We obviously don’t want to rush, but I’ve always had a view that there’s no reason why a white-collar case needs to take four years,” she said in the interview. “The more cases you bring quickly, and good cases, the quicker you can move on to the next case.”
As Ms. Caldwell was shifting the criminal division’s approach, the broader Justice Department was receiving new guidelines for prosecuting corporate employees. In September 2015, Ms. Yates issued a memo instructing prosecutors across the country to focus their investigations on employees from the get-go rather than at the end of a long corporate investigation.
The memo also explained that prosecutors should refuse to award companies any credit for cooperating without full disclosure of individual wrongdoing.
“We’re not looking at it as some faceless multinational corporation, but recognizing that companies can only act through flesh-and-blood people,” Ms. Yates said in the interview.
Much of Ms. Yates’s memo codified practices that were already in place in the criminal division and in United States attorney’s offices like Mr. Bharara’s and the one in Brooklyn, which are accustomed to white-collar prosecutions. But other offices were less consistent, and the new guidelines underscored the importance of focusing on individuals.
Because Justice Department memos do not have the force of law, incoming attorneys general can revoke them. But Ms. Yates said she expected this policy would persist during a Trump administration.
For his part, Mr. Sessions has also criticized the too-big-to-jail philosophy since joining the Senate.
“This is a dangerous philosophy,” he said in 2010 amid the investigations into the banks at the heart of the financial collapse. “Normally, I was taught, if they violated the law, you charge them. If they did not violate the law, you do not charge them.”