Ameriquest Settlement and Corporate Moral Behaviour

Sorry for the delay in posting a new piece of commentary.I have been swamped.
On the recent events that has stuck in my mind was the recent settlement by Ameriquest for a wide number of mortgage fraud offenses. (Changing rates, adding points and in general screwing the sub-prime market)

Here's some observations from the The Checkout - a consumer blog at the Washington Post

The settlement ends a two-year investigation by all 50 state attorneys general, banking regulators and local prosecutors into allegations that Ameriquest deceived consumers to sell mortgages, using high-presure sales tactics to meet employee sales quotas. In addition to paying $295 million in consumer redress and $30 million in legal fees, the company has agreed to change some of its business practices and accept outside monitors who will observe the company...

Ameriquest did not admit any wrongdoing in agreeing to the settlement; but issued a statement saying "we regret those occasions when our associates have not met this ideal to our customers' expectations... This agreement is good for consumers and fair to the company. It provides a framework for new lending policies that improve and enhance our ability to serve our customers and are a model for the industry."

One of things that immediately comes to mind is that any time you are writing a $325,000,000 check, you will want to do everything possible to avoid that. Despite the silly protests of "no wrongdoing" it's clear that Ameriquest knew they would lose at trial. Why? Because the last time I looked even a 1/3 of that money (roughly 100 million) would be quite a bit of legal defense. You settle now to prevent an even more devestating judgement at trial (undoubtedly in the billions of dollars). Why do corporations that have inflicted damage on hundreds of thousands of people insist when settling, "they admit no wrong doing?"

First of it's a purely legalistic defense so their lawyers think they can mitigate damage at trial. At every one of the civil trials for Ameriquest (from people who Ameriquest robbed from), they can mention that they admitted no wrongdoing in the hopes it will mitigate the cupability of the company. Why do corporations often do this?

Let's remember one of the roles the corporation serves for the individual who are employees. The corporation serves to lessen the moral responsibility for each employee. Each employee is then able to commit acts that they would never think of doing as a private person. This transfer of moral authority to a corporation is fairly obvious to anyone that thinks about it and is supported by the Milgram experiment which show how people can defer to authority even when it conflicts with their conscience. The transfer of moral responsibility from employee to the the corporation is yet another clear example.

Employees of Ameriquest lied, stole and robbed people of thousands of dollars - an action which they would not take in the context of say robbing a bank but were able to easily do in the context of sub prime loan.

I have seen people argue somewhat childishly "that corporations are composed of people." Yes they are comprised of people but their moral behaviour in groups is entirely different than their individual behaviour.