Samsung Settlement Doesnt Do Enough

Opinion: Prosecuting all the individuals involved in corporate crimes would lead to more group responsibility.

Repeat after me: Companies dont commit crimes, people do. And people who commit crimes in the workplace should be prosecuted and jailed just like the thugs who commit crimes on the street.

If the U.S. Department of Justice is really serious about fighting white-collar crime, it will exercise its option to bring individual charges against seven Samsung employees who masterminded—if you can call it that—the price-fixing scheme that is costing the company a $300 million fine.

Seems that between 1999 and 2002, Samsung was conspiring with other chip manufacturers to fix prices of DRAM (dynamic RAM) chips. So far, the government has collected nearly $650 million in fines. The investigation is continuing.

At the time, many noticed that, though the PC industry was in the tank, memory prices kept rising. The industry blamed supply and demand. The always astute Michael Dell, however, blamed a cartel formed by the chip makers.

He was right: Samsung, the third member of that cartel to pay a fine, and two other companies, one South Korean and the other German, have paid nearly $350 million between them.

Sadly, many of the individuals involved probably didnt realize that what they were doing was wrong, or they were low enough on the corporate food chain that they had little choice but to go along or quit.

Given that the "victims" of this swindle were the Dells, Compaqs, HPs, and Apples of the world, companies that would just pass the higher prices along, it probably didnt seem to the price fixers that what they were doing was such a terrible thing. Sure, the PC companies could afford to pay a bit more for memory, right?

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Maybe they could, but in the end the money was taken from the pockets of businesses and individuals, who ended up paying more for their computers than they should have had to. And without the U.S. Department of Justice, no one would have been any the wiser.

Read more here about Samsungs hefty settlement over allegations of DRAM price fixing.

In reaching a settlement with Samsung, the Department of Justice "carved out" the seven individuals from the settlement, with the option to press charges against them later. These people should be made an example and it shouldnt stop with them.

Prosecutors need to start casting a wider net for corporate criminals, grabbing people who had little to gain from their activities and who might have blown a whistle on the scheme had there been a downside for them personally.

Why? Because even paying the second-largest antitrust fine in U.S. history isnt much to a global giant like Samsung, the worlds largest manufacturer of memory chips. But the prospect of many more than seven Samsung employees going to jail would send a chill not only through Samsung but through many other companies as well.

If employees had a realistic likelihood of being held individually responsible for what their companies did, corporate crime might take a nosedive.

The prospect of doing the perp walk on TV and facing a judge would scare the bejeezus out of most employees, who wouldnt have Samsung attorneys to defend their actions. And this shouldnt just happen to Korean electronics companies, either.

Can you imagine how Microsoft might have behaved differently if hundreds of the companys managers had faced the prospect of jail time as the result of anti-competitive activities?

What does the Larry Ellison settlement say about the handling of insider trading cases? Click here to read columnist Chris Nolans commentary.

I know what the defense would be in these cases: "We were only following orders," or, perhaps, "We didnt know what we were doing was illegal." Both of those are fine excuses, but they shouldnt rise to the level of a defense.

To be lenient, wed allow most employees to testify against their bosses, enter guilty pleas and pay lawyer bills forever, as they try to get on with their ruined lives as convicted felons.

The ringleaders wed send to the big house, and let them stay for a while as examples to other "business leaders" who dont know illegality until the subpoenas arrive.

This is not me being heartless and cruel, though I admit it might come off that way. Its just that the only way to stop corporate crime is to hold the individuals who commit the crimes responsible for their actions, not the shareholders who ultimately pay the fines.

While it might be difficult to get the most senior executives of these companies in our legal snare, it wouldnt take too many jail sentences before middle managers would just start refusing orders that might result in prosecution. It would become easier for companies to follow the law than to risk breaking it.

Think of what holding people responsible might do, not just in antitrust cases but also for workplace safety or environmental protection, for example.

Employees would have to start paying attention to what they were doing and would force higher-ups to sign on the dotted line for questionable orders.

The Samsung case is yet another example of how, while endlessly extolling the virtues of "healthy competition," many executives will do anything possible, legal or not, to wipe out competition. If they cant stop the competitors themselves, they will try to cut deals under which all the "competitors" win—and all the customers lose.

That isnt to say that everyone in business is immoral. That would include you and me, and I am quite sure I havent anything illegal today. And I dont think you have, either.

Most businesspeople are honest and expect the same from the people they work with and for. But it only takes a few bad people to turn a company over to the dark side. The threat of "missing your numbers" or, worse, of others making theirs at your expense, can cause shortcuts to be taken. Shortcuts that should, but too often dont, land the responsible parties in front of a judge.

Extracting big fines from companies looks good in the newspaper, but holding more executives responsible for these crimes—and putting them in jail—would do more to stop them.

Contributing editor David Coursey has spent two decades writing about hardware, software and communications for business customers. He can be reached at david_coursey@ziffdavis.com.

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