Steven Brill, the journalist who founded The American Lawyer and Court TV, has released his latest book Tailspin, which examines the past five decades to explain how America has dug itself into a rut where Congress can’t seem to agree on anything and corporate interests are protected over everyday people.
The reason the country has become so divided—both ideologically and socioeconomically—is that the principles that formed America’s core values have become “too much of a good thing,” Brill said in an interview.
“It wasn’t at all that someone sat around and said, ‘Okay, let’s pull these five strings, screw up the country and get rich,’” Brill told Bloomberg Law.
“We got too good at using the core values that make the country great. The First Amendment. Due process. Meritocracy. The technology advances that brought us automation and global trade,” said Brill.
Tailspin contains observations and anecdotes about how lawyers have contributed to what he depicted as America’s polarized and paralyzed state of affairs.
Executives Should Be Held to Account
Why have there been so many prosecutions of large corporations and so few convictions of top executives?
Brill proposed that CEOs have their compensation clawed back during the time of their employees’ misconduct. It could create a much-needed deterrent against corporate wrongdoing, he said.
“If you’re the CEO and your company gets fined for putting toxins in a lake or it gets fined for rigging the price of electricity in Europe, then why shouldn’t you pay a chunk of the fine?” Brill said. “You certainly shouldn’t get a bonus that year or whatever bonus you’re getting, something should be accounted for.”
Criminally prosecuting executives would serve as an even greater deterrent, he said.
“We’re very bad at that,” he said.
Brill pointed to the $264.4 million fine and penalty against JPMorgan for Foreign Corrupt Practices Act violations in China. The company hired relatives of Chinese officials to get investment deals business. But in the Justice Department announcement of the penalty, it made no reference to any executives who were responsible.
A JPMorgan spokesman told Bloomberg Law that the company “took action against the individuals involved.”
“We have also made improvements to our hiring procedures and reinforced the high standards of conduct expected of our people,” the spokesman said.
Close Relationship Between Prosecution, Defense
The collegial relationship between prosecutors and defense attorneys also protects executives, Brill said.
A hefty financial penalty against a corporation is easier for prosecutors to achieve, he said. Large fines prosecutors obtain make them marketable for employment prospects in private practice, Brill suggested.
“Rather than go through all the warfare and risk all the hurdles of overcoming reasonable doubt to put some banker in jail, it was much easier and more natural for the two sides to have long, even tough, negotiations over money and then come up with a deal that was a win for both: The defense lawyers protected the client from real accountability, while the prosecutors vindicated justice by winning billions for the taxpayers.”
Creating Moats for Big Business
Lawyers have helped create what Brill described as “moats” for their corporate clients, contributing to the growing divide between the haves and have-nots in America.
One of these moats, Brill wrote, is mandatory arbitration clauses in employment agreements.
He also pointed to how lawyers regularly use due process rights to keep a safe distance between their corporate clients, plaintiffs’ lawsuits and regulatory enforcement.
Sometimes It Pays to Break the Law
Some companies have profited by obstructing the law, Brill wrote.
The resulting penalty corporations pay is a tiny fraction of the profit they make.
Brill pointed to wool factory J.P. Stevens, which in the 1960s fought employee unionization. Some workers were fired after expressing pro-union sentiments, and filed lawsuits against the company.
Despite rulings that concluded J.P. Stevens broke the law, the cost of litigation and penalties was far less than what the cost of unionization would have been, Brill wrote.
“By , the profit-and-loss statement for Stevens’s obstruction, judged illegal in twenty-one cases, showed $1.3 million in back pay awards, plus approximately $3 million in legal fees—a total of $4.3 million invested to keep wages down for 34,000 workers for seventeen years. Just 25 cents per hour in union-won wage increases or fringe benefits would have cost the company $16 million in one year, or $277 million for those 17 years. The company had invested $4.3 million to obstruct the law and save $277 million. An excellent shareholder return.”
Those Trying to Bust the Moats
Brill interviewed lawyers who have tried to hold Wall Street and corporate America to account.
Among the interviewees:
• Judge Jed Rakoff, of the U.S. District Court for the Southern District of New York, who rejected a $285 million settlement between the SEC and Citigroup over charges of fraud for Citi’s sale of mortgage-backed securities and buying credit default swaps on the same securities. Under the deal, Citigroup was not required to admit guilt, which was the “S.E.C.'s longstanding policy—hallowed in history, but not by reason,” Rakoff said.
The U.S. Court of Appeals for the Second Circuit later overruled his rejection.
• Former Skadden Arps partner Dennis Kelleher, who lobbies on behalf of Better Markets, a non-profit that has pushed to make financial regulations, such as Dodd-Frank, as tough as possible.
Meritocracy has created force a greater division between the elite workforce and everyday American citizens.
Law firm managing partners who once hired only their country club pals began hiring women, minorities, and applicants with the best academic track records.
This shift in hiring criteria has created an even more “entrenched aristocracy,” Brill wrote in Tailspin.
In other words, it wasn’t just the wealthy—regardless of ability—who occupied the lawyer ranks at major law firms. It became the very smartest of the wealthy.
Brill relied on a Yale Law School graduation speech delivered by professor Daniel Markovits to illustrate the point:
“The elites have become so skilled and so hardworking that they are able to protect each other better than ever before,” he said.
Markovits noted that elite lawyers’ incomes have roughly tripled in the past century, which is more than ten times the rate of income growth experienced by the median American.
The American Lawyer
Brill’s publication The American Lawyer, which ranks law firms and publishes their financial figures, has contributed to this meritocracy.
Partners could see what their peers earned and switch jobs if they weren’t paid what they felt they deserved.
Brill doesn’t regret creating The American Lawyer, despite the resulting turmoil in the legal market.
“I take the self-serving position that any journalist takes: All things considered, it is right that good, accurate information about an important element of the marketplace is a good thing. If people react to it in the wrong way then it’s up to other people to figure out how you ameliorate that problem.”
He continued: “If you could put that back in the box, I don’t think it would do anybody any good. Because look at the way the firms were before all that. They were these clubby, unresponsive places that weren’t serving clients very well, they weren’t hiring very well.”
Tailspin hit bookstore shelves May 28.
To contact the reporter on this story: Casey Sullivan in New York at cSullivan@bloomberglaw.com