SAC Capital's agreement to plead guilty to insider trading and $1.2 billion fine may represent a sweeping victory for Preet Bharara, the United States attorney, and his team of prosecutors, and vindication for their multi-year investigation of one of the country's most successful hedge funds. But the decision to indict a company, and to spare, at least for now, its founder and billionaire manager, Steven A. Cohen, has already ignited criticism.
"A company can't commit a crime," said Edwin T. Burton, a professor of economics at the University of Virginia, who wrote a widely circulated blog post this summer that criticized the government's indictment. "They should only go after the people doing things wrong. There are innocent bystanders, a lot of them, who get hurt. Why is the villain the one who sweeps out the floor every night?"
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The Justice Department itself recognizes in its "Principles of Federal Prosecution of Business Organizations" that "corporate prosecutions can potentially harm blameless investors, employees, and others." The collapse of Arthur Andersen after it was indicted in 2002, reducing the number of large international accounting firms to just four, is widely cited as an example of the collateral damage that corporate prosecutions can have.