Let's say your neighbor, who earns $56,000 per year, gets caught printing out fake credit cards in his basement using the names of everyone on the block. He got arrested, prosecuted and ultimately fined $420 then set loose back on the streets.

In a nutshell that's what just happened with Wells Fargo. The Consumer Financial Protection Bureau announced last week that bank employees created 2 million dummy credit card and bank accounts in the names of its customers. The blame was placed on an incentive structure that heavily pressured low-level personnel to bring in new business, and ultimately more than 5,300 people were fired.

Wells Fargo as an institution was fined a record breaking $185 million, which brings us back to the story of the neighbor. Although it sounds high, the fine represents approximately 3% of one quarter's earnings for the bank. It's the equivalent of fining someone who earns the median income about $420 for a vast conspiracy of credit card fraud.

All of which leaves many Americans with the same question they've been asking since the financial crisis of 2008: why is nobody going to jail?

After all, despite a handful of prosecutions since the Great Recession, in the case of Wells Fargo, it could not seem more cut-and-dried: bank employees opened up millions of fraudulent accounts and credit cards. If someone did this from his apartment, it would be a felony, but somehow doing it from a branch manager's office makes it a matter for human resources?

The answer is that banks are big, complicated creatures, and bankers rarely go to jail is because it's incredibly hard to prove precisely who did anything wrong.

It's a matter of diffuse responsibility said James Cox, a professor at the Duke University Fuqua School of Business.

"These people are pretty darn good at what they say on the phone and what they say in emails, so that it doesn't come back to haunt them," he said. "My reading between the lines in all of these cases is that the government doesn't believe that it can put together enough knowledge by particular people about the violations that are being committed."

"It's very difficult to establish, and the bigger the organization the more people who touch a transaction," he added. "So you might have a collective knowledge, but it's not enough individual knowledge for the government to launch a prosecution." 

The difference between fining an institution and jailing an individual is the government's burden of proof. While it may be known what the bank did, before its CEO can go to jail, prosecutors must prove beyond a reasonable doubt that he specifically participated in a crime.

In the case of massive banks that's often incredibly difficult. Decisions pass through so many hands that it's easy for one person to claim ignorance of what was happening until it was too late, and prosecutors almost never can find the smoking gun that says, "O.K., let's do it."

In fact, overt decisions rarely even happen at all. Most financial crimes happen incrementally, through individual deals cut here and there until they eventually stack up to billion-dollar malfeasance. Crime by inches is no less criminal, but far harder to prosecute in a system that looks for the one, provable act of criminality. In the language of the law this is called "actus reus" and "mens rea," the criminal act and the criminal mind.

Proving that collectively a thousand-person bank caused something illegal to happen is easy. Pinning the act and intent on one person is much harder.

And it's not likely to get any easier.

"Deterrence is a great idea," said Sumit Agarwal, an expert on banking reform. "We know deterrence works. We have the whole criminal justice system that says you can have severe penalties for committing certain crimes, but we have not shown that we will prosecute. We had a financial crisis that was worth $5 trillion and there was not a single prosecution."

Agarwal is a professor of business at Georgetown University, as well as a former federal regulator and a Vice President with Bank of America. He is an evangelist for the idea that criminal penalties should be an important part of any financial reform, but is pessimistic that they can realistically happen.

Prosecutors and regulators, such as the Securities and Exchange Commission, will pursue cases only if they have a good faith belief that they can win (a tenant of legal ethics). Often they don't think they can prove their case.

"They should have said, 'We don't want $185 million, we want this woman [Carrie Tolstedt] to go to jail,'" Agarwal said of the Wells Fargo fine. "That would send a different signal."

Tolstedt, the executive in charge of relevant section of Wells Fargo, is reportedly scheduled to leave the bank with $124.6 million in stocks and options.

"The reason they don't do that is that it's a very tough nut to crack," Agarwal said. "How do you prove that she's responsible? That is a very tough nut to crack because it will be in the courts for years, so what they do is they take the second best which is to make them pay. But the payment is so small."

It's less about hiding accountability than spreading it, with hundreds of individuals all making decisions that contribute to wrongdoing none actually being the "but for" cause and all claiming plausible deniability.

Take, for example, hiding funds. If one banker knows about an IRS debt, another knows about the client's funds, a third requests that it get transferred and a fourth puts it in the Cayman Islands, collectively perhaps an illegal tax shelter has been created. Individually, however, no one has broken the law. (Necessarily, at least; there are many hypotheticals we can create even around this bare-bones scenario.) Each contributed one necessary, but not sufficient, element of a crime.

It's also how executives at Wells Fargo can claim ignorance of the fact that five percent of their accounts were fraudulent.

"I think," Cox said, "quite frankly a lot of individuals high up in the organization had to know what was going on. Wells Fargo had to notice that the number of accounts were going up, and somebody had to be paying attention to the fact that some customers were complaining about certain things.

"The evidence is here that the compliance department on this issue was missing in action."

Criminal law is about targeted blame. A prosecutor must prove beyond a reasonable doubt what each, named defendant did and the criminal intent behind those actions. In a large institution, however, that chain can be broken and parsed so much that it's next to impossible to prove anyone's participation in the overall fraud.

And that's why the bankers never seem to go to jail and why they're unlikely to this time either.

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