User blog comment:Abranon/Why didn't lucius malfoy get arrested at the end of the Chamber of Secrets?/@comment-4643582-20120403174449

The two word answer as to why this did not happen is "Human Nature." More specifically:

1) Due to the prejudice against house elfs, Dobby's testimony would likely not have been considered credible. This is speculation,but I would also magine that there is a similar law prohibiliting house-elves from testifying agasint their masters - probably called "house-elf privilege" in analogy to "attorney-client privilege" and "clergy-penitent privilege." (All the information Dobby had came about as a result of his service as a house-elf and the fact he no longer was one does not matter.)

2) All the information Harry had against Lucius would have been considered "heresay" evidence and would not have been admitted in either English or US courts (and therefore, likely, would also be barred by magical courts.)

3) The governors would likely not have been willing to testify since it would reflect negatively on them that they allowed themselves to be extorted into suspending Dumbledore. As seen in many other cases in the real world, they also may have kept quiet to avoid damaging Hogwart's reputation.

4) Most importatnly, given the corruption rampant in the Ministry, any accusations such a rich, prominent, pure-blood family would heave been quickly covered up.