Column: What do Ken Starr, Bank of America and crimes without criminals have in common?


Way back in 1873, Congress investigated the financing of the transcontinental railroad, which involved the distribution of shares in the shadowy firm Credit Mobilier to members of the House, the vice president and others in the Grant administration. Its conclusion was that bribery had occurred, but it absolved the accused of actually taking any bribes.

Historians consider the Credit Mobilier scandal, which seemingly involved a crime but no criminals, to be a low point in American politics. But the tradition continues right up to today. Two cases to ponder:

--Baylor University ended its investigation of a string of sexual assaults by its football players by concluding that it “failed” to properly handle accusations up to and including rape, without specifying exactly who it was who “failed” and how. The university issued a 13-page “findings of fact” that lacks any details of the cases that led to the investigation and its outcome.


There are significant concerns about the tone and culture within Baylor’s football program.

— Baylor Board of Regents

The university removed Ken Starr--the same man who investigated Bill Clinton’s sexual behavior--as president over the “failure.” But Starr will remain a law professor at Baylor, and will “transition” to the role of chancellor. Since he’s been president and chancellor since 2013, it’s unclear what this transition amounts to. The question of whether it’s appropriate for a big-money commercial football program to be attached to a university at all apparently wasn’t addressed in Baylor’s investigation.

--Bank of America skated on an accusation of mortgage fraud, as a federal appeals court found that it was guilty merely of breaching a sales contract by selling the buyers toxic junk mortgages instead of the investment-grade loans it had promised. The appeals judges overturned a $1.3-billion penalty imposed by a federal judge. The $1-million penalty levied on mortgage executive Rebecca Mairone was also nullified.

The judges didn’t dispute that fraud had occurred somewhere along the line. They just concluded that if it occurred, it happened so long after the sales contract was signed that it didn’t matter. In other words, even if Bank of America sold fraudulent mortgages, it was technically innocent of fraud. This is about as close to Credit Mobilier’s there-was-bribery-but-no-one-was-bribed standard as one can get in the modern age.

This is how powerful people and institutions are protected when they’re accused of overseeing the victimization of others. We’ve documented repeatedly that the notion that guilt rests with corporations or universities, rather than with the human beings who direct their policies and make their decisions, is common in the prosecution of white-collar crime. But it’s also infecting other prosecutions, as we’ll see.


Let’s take a closer look at how the principle worked in these two cases.

Baylor launched its investigation of sexual misconduct by its athletes in August 2015, years after allegations of sexual assault were made against some of its football players and complaints surfaced about the indifference shown to the accusers by the school and its football coaches.

Two former players have been sentenced to jail for sexual assault. That includes defensive end Tevin Elliott, who was sentenced in January 2014 to 20 years for sexual assault. At least six women had reported Elliott to the university, which took no action despite a 2011 federal directive from the U.S. Department of Education requiring all universities to resolve such accusations fairly under Title IX of federal education law.

Despite the pile of evidence amassed by the law firm Pepper Hamilton, which Baylor hired to conduct its investigation, the university’s “findings of fact” are devoid of any hard information about what went on. To quote the sports website Deadspin: “It contains almost no facts; it has no names, no timelines, no dates, no specific examples; and it has no quotes from anyone who was interviewed or selections from emails or documents that were cited.”

The most glaring omissions involve an instance of “retaliation against a complainant for reporting sexual assault.” The report mentions this episode in passing but says nothing about who retaliated against whom, or why or how. For instance, was the retaliation physical or emotional? Was it implemented by football players, the athletic department or the president/chancellor?

Despite Baylor’s assertion that its “review was detailed, thorough and rigorous,” much of its report is couched in the buck-passing voice common to institutional PR. Baylor, it says, “failed to prioritize Title IX implementation..., failed to provide training and education to students,...failed to take sufficient action to identify, eliminate, prevent, and address a potential hostile environment...” etc., etc.

But of course Baylor, the university, isn’t in a position to “fail” to do anything. Failure is a human event. Yet no one made of flesh and blood is identified as the agent of such failure. Some person or persons made the decision to flout the Title IX mandate. Someone instituted a policy to ignore years of evidence that the football program had become a hive of sexual predators. Someone instituted a policy that the success on the field and at the cash register of the football team, which plays in a $266-million stadium, was more important than the safety of Baylor students who were preyed on by some members of that same team.

We can assume that the Baylor Board of Regents intends for blame to fall on Starr and Art Briles, the football coach, who has been “suspended with intent to terminate.” (The implication is that negotiations will have to establish how much money Briles must be paid under his contract to go away quietly.) But nowhere do the “findings of fact” say what Starr and Briles did, or “failed” to do, to merit their discipline. Starr will remain on Baylor’s payroll in an elevated position, and Athletic Director Ian McCaw, who oversaw the team, has been placed on probation.

Baylor’s investigation glides over the real problem: The money and fame that big-college football brings to a campus are hopelessly compromising. ESPN opined that the firing of Briles marks “a new era in college football,” but that’s a sick joke. The university states that “there are significant concerns about the tone and culture within Baylor’s football program as it relates to accountability for all forms of student athlete misconduct.” This is more responsibility-dodging diction. “Significant concerns “ where? Among students? The faculty? The Board of Regents? The world at large? And what’s Baylor going to do about it, since this behavior is part and parcel of a program that’s constructed as a profit-making, not an academic, enterprise.

If Baylor really were “horrified,” it would end its football program and fire everyone who allowed it to become the tail wagging the dog, including Starr. But it won’t, because football is money.

That brings us to the Bank of America. The government charged the bank with having defrauded Fannie Mae and Freddie Mac of billions of dollars by selling them thousands of mortgages that were based on deliberately sloppy and hasty underwriting, rather than the investment-grade mortgages that had been promised. The mortgages had been generated via a program supervised by Mairone and known as “Hustle,” which involved deliberately eviscerating underwriting standards in the interest of cranking out lots of loan volume.

The appeals judges overturned the verdict and the trial judge’s penalties by reasoning that it wouldn’t matter if the mortgages ultimately sold to Fannie and Freddie were toxic; what mattered was that the Bank of America executives who signed the original contract to sell the loans to Fannie and Freddie didn’t intend to sell them substandard loans. That occurred, if at all, later when the mortgage loans actually were made and then sold. (In fact, the contracting executives were at Countrywide Financial, which BofA bought in 2007, warts and all.)

The appeals judges didn’t challenge the government’s assertion that the mortgage sales to Fannie and Freddie were the product of fraud. They even quoted the government’s closing argument at trial: “First, the Hustle loans were bad. Second, the defendants knew the Hustle loans were bad. And third, the defendants passed the Hustle loans off as good loans anyway to cheat Fannie and Freddie out of money.”

But they found that this didn’t matter, because the people who concocted the allegedly fraudulent loans weren’t the same people who signed the original sales contract with Fannie and Freddie.

This is reasoning destined to create a whole new category of crime without criminals. The decision “not only imperils lenders, who are at risk of being defrauded by borrowers,” Dan S. Schechter, who teaches commercial finance and bankruptcy at Loyola Law School, told me. “It also puts the federal government at risk, since it paradoxically insulates potential fraudsters from liability.

“If a fraudster has cleverly entered into a master agreement with a federal agency, and if the wrongdoer later knowingly delivers substandard goods (such as counterfeit parts for military jets), the fraudster can now point to the existence of the original agreement”--and it’s hard to prove fraudulent intent at the time of the execution of the original agreement.

Any such contract involves a continuing relationship between buyer and seller, and the nature of the product being sold can change at any time, whether inadvertently or deliberately (as allegedly happened in this case). If fraudsters can be absolved because their actions weren’t anticipated in the past, it opens the “specter” of a whole new species of fraud, Schechter believes. He thinks the appeals court ruling is destined to be reviewed by the Supreme Court for that reason.

The real infection needing to be stamped out is the notion that crimes can be committed impersonally, so that no living, breathing individual needs to go to jail to pay a fine. That’s not how the world works, and it’s time that courts, prosecutors and university boards came to grip with reality. Today, 173 years after the Credit Mobilier scandal cast a permanent shadow over American culture, that dime still hasn’t dropped.

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