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The Forgotten Victims

When the Justice Department goes easy on Wall Street, battered women pay the price.

Ever since Wall Street bankers cratered the global economy in 2009, federal prosecutors have barely been able to keep up with the unprecedented scale of corporate wrongdoing. Last year, in a series of high-profile settlements, Citicorp, JPMorgan Chase, Barclays, and the Royal Bank of Scotland agreed to pay more than $2.5 billion in criminal fines for manipulating the exchange rates on foreign currencies. Credit Suisse forked over $1.1 billion for helping its wealthy clients evade taxes. And the Justice Department ripped up an earlier settlement with UBS and fined the Swiss bank more than $200 million for rigging interest rates.

As critics have pointed out, such penalties are little more than chump change for Wall Street, especially compared to the enormous profits that big banks have raked in from their criminal activities. But even if the punishment doesn’t fit the crime, the record-setting fines levied by the Justice Department are still flooding federal coffers with billions of new dollars. Which raises the question: Where is all the money going?

The answer, it turns out, is the Crime Victims Fund, a little-known pool of money created during the law-and-order push of the 1980s to assist victims of crime, much of it violent. All criminal fines paid by individuals or corporations are deposited directly into the fund, which in turn flows to states to support individual victims and the organizations that assist them: battered women’s shelters, counseling centers for abused children, families who lost their primary breadwinners to murder, victims left permanently disabled by violent assaults. America’s biggest corporate criminals, in short, are paying to help the victims of other criminals. Thanks to a wave of big-dollar settlements with banks and pharmaceutical companies, the Crime Victims Fund ballooned from approximately $3 billion at the end of 2009 to almost $12 billion by the end of 2014.

The problem is, the fund only receives money from criminal fines. And in most cases, the Justice Department has been letting big banks and other corporate criminals off the hook with civil settlements and deferred prosecution agreements. Those settlements, instead of going into the Crime Victims Fund, mostly get handed over to the Treasury to reduce the deficit. Of the $23 billion in fines the Justice Department collected last year, in fact, only $2.6 billion made its way into the Crime Victims Fund. That means the feds aren’t just letting banks and top executives off easy for defrauding customers—they’re shortchanging victims of murder, sexual assault, and child abuse.

“No one of any importance has spent time in jail for the massive fraud that the Justice Department outlines in horrifying detail in deferred prosecution agreements,” says Bart Naylor, a financial policy advocate for the nonprofit consumer rights group Public Citizen. “Not only does this invite more crooks into this risk-free racket, it deprives crime victims of any relief.”

When the Crime Victims Fund was established in 1984 as part of the Victims of Crime Act, few lawmakers in Washington resisted the chance to help sympathetic crime victims. A task force appointed by President Ronald Reagan heard from crime survivors who suffered from deep psychological trauma and crippling medical bills. Disabled assault victims lost their means of support. Others had trouble getting time off from work to testify against their tormentors, or struggled to return to everyday life, plunging them into financial distress. Even navigating assistance programs required experienced help. The main sponsors of the victims fund were Strom Thurmond, the archconservative senator, and Peter Rodino, the liberal congressman.

“In an era of Reaganism and budget constraints, it was an extremely bipartisan initiative,” says Steve Derene, executive director of the national association of state agencies that administer the fund.

Unfortunately, the way Congress set up the fund effectively makes much of the money off-limits to crime victims. As criminal prosecutions have increased in recent years, the fund has grown to record levels. Because deposits into the fund can vary wildly from year to year based on criminal settlements, Congress caps the amount the fund can disperse on an annual basis, leaving money for leaner times. The cap was initially set at $500 million. As the fund has expanded, Congress has gradually raised the cap—up to $745 million in 2014, then to $2.4 billion in 2015. But that still leaves a huge unspent sum that service organizations desperately need to support crime victims. “There’s $9 billion sitting there with a specific purpose in mind,” says Meg Garvin, executive director of the National Crime Victim Law Institute. “Meanwhile, victim services can’t pay their rent.”

That huge reserve of cash, however, has turned out to be too big a temptation for Congress to resist. Last year, for the first time, lawmakers raided the fund, taking $1.5 billion from crime victims to help pay for their own spending measures. And the looting has continued. This year, Congress plans to divert $379 million from the fund to support programs designed to curb violence against women—a worthy cause, but one that is supposed to receive its own funding. Other proposals would transfer 5 percent of grants from the fund to tribal governments, or commandeer a portion of the money to support a Republican move to rein in the Justice Department. “A lot of programs that represent different areas would like to get their slice of the fund,” Derene says.

There is another solution. If the Justice Department actually did its job and prosecuted corporate wrongdoers to the full extent of the law, there would be more than enough money in the fund to aid crime victims. What’s more, Congress could help victims of Wall Street’s own fraud by doing away with the ineffective “consumer relief programs” that the Justice Department inserts into civil settlements. Those programs often end up helping the banks more than the customers they cheated, allowing them to profit even further by selling off the homes of their victims. If money from consumer relief programs went into the Crime Victims Fund, it would be overseen by social service professionals who know how to help victims, rather than by federal prosecutors looking to make headlines.

But such reforms are unlikely to happen without a push by victim advocates. For now, lawmakers appear more interested in robbing the Crime Victims Fund than in helping victims of robbery. “This is a social problem,” says Garvin. “You have a huge swath of communities suffering from victimization. We made the decision decades ago to support those communities. Now we’re abandoning them.”