Why havent the financial executives been prosecuted? | The Compost Bin

K

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3 Jan ’14 - 9:34 am

asks US district judge, good question imo

As the five-year statute of limitations approaches for the wrongdoing that bequeathed us the Great Recession, the question of why no high-level executives have been prosecuted becomes more urgent.

You won't find a better, more incisive discussion of the question than the one by U.S. District Judge Jed Rakoff of New York in the current issue of the New York Review of Books.

Rakoff, 70, is the right person to raise the issue. He's a former federal prosecutor in Manhattan, where he handled business and securities fraud. A Clinton appointee, he's been on the bench for more than 17 years.

It's unsurprising to find Rakoff emerging as a critic of the government's hands-off treatment of Wall Street and banking big shots in the aftermath of the financial crisis: He's never shown much patience for the settlements in which the Department of Justice and the Securities and Exchange Commission allow corporations and executives to wriggle out of cases by paying nominal penalties and promising not to be bad in the future. These are known as "consent decrees."

In 2009, he tossed a $33-million SEC settlement of a white-collar case with Bank of America, calling it "a contrivance designed to provide the S.E.C. with the facade of enforcement and the management of the Bank with a quick resolution of an embarrassing inquiry." The parties later agreed to a higher fine and stricter terms. And in 2011 he rejected a $285-million consent decree Citigroup entered with the SEC. That rejection is still being pondered by a federal appeals court.

In his new essay, Rakoff takes particular aim at the government's habit of prosecuting corporations, but not their executives -- a trend we railed against earlier this year.

http://www.latimes.c.....z2pLW0tZKo

groinkick

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3 Jan ’14 - 12:52 pm

Not enough people like this in positions of power.

K

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4 Jan ’14 - 9:07 am

true, hopefully a change is coming

WASHINGTON (AP) Republican Sen. Rand Paul says he is filing suit against the Obama administration over the data-collection policies of the National Security Agency. On his website, he's urging Americans to join the lawsuit, in his words, "to stop Barack Obama's NSA from snooping on the American people."

In an interview Friday night on the Fox News show "Hannity," the Kentucky Republican tells host Eric Bolling he believes everyone in the U.S. with a cellphone would be eligible to join the suit as a class action.

Paul says that people who want to join the suit are telling the government that it can't have access to emails and phone records without permission or without a specific warrant.

Paul says the lead lawyer in the suit is Virginia's former attorney general, Ken Cuccinelli.

http://bigstory.ap.o.....a-policies

nedcmk1

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14 Jan ’14 - 12:55 pm

Prosecuting high level executives becomes a tricky situation due to previous government actions. Can the government in one election cycle implore an organization to engage in a series of actions, and in the next election cycle prosecute them for it?

Also the implications on government officials would be massive. I am "familiar" with someone who was very high profile in 2008-2009. Someone who deserved just punishment, but at the same time was fairly backed into a corner. The public outcry was basically for execution, and congress wanted a trial. When the emails and documents were released several things became clear. First, he had continued dialogue with several high powered Senators and Congresmen telling them that the amount of sub prime loans were ridiculous and that there would be major liquidity issues in the very near future. He was ignored, and hushed by the very people who publicly called for his prosecution, while privately trying to settle quietly.

Also through his communications they uncovered that he had made his BoD aware that the leverage would sink the company. BoD does not care, wants a high risk portfolio to maintain returns and basically says deal with it.

Well how do you deal with that? You securitize and sell it. Who does that for you? Investment banks. Who purchases the risk, or underwrites the insurance policy against it? Companies that are in some way subsidized by the federal government.

It was a nice little tango. Lenders made a killing selling mortgages, everyone could buy a home, there was a huge wealth effect for constituents (resulting in reelections), banks made a fortune playing the odds against the risk/with the risk/securitizing the risk, and the government bankrolled it when the market was at capacity. It was great, and everyone was a winner until the music stopped.

The other scenario is tricky as well. Take Jamie Dimon for example. He gets asked to purchase a troubled bank by one treasury secretary, and the next treasury secretary cries for prosecution because he made money on the deal? They could go ahead and prosecute, but they would have a hard time getting future cooperation from executives.

I think a more minor issue - but an issue none the less - is government officials who are not really clear about the details of what they are talking about. While they make some great sound bytes that seem logical to common sense, many times they are under-informed concerning the intricacies of the problem.

This doesnt mean blame should not be laid on the executives. It should to an extent as these issues occurred under their tenure, but there is also blame with the Boards of Directors and Government as well.

In cases where prosecution is clearly applicable, how can the government prosecute someone for a crime they aided and abetted?

nedcmk1

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14 Jan ’14 - 1:01 pm

On a somewhat related note it is fantastic to see the aggressive prosecution of market participants who have been partaking in insider trading.

Raj Rajaratman

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The apparent offensive on SAC with the recent trials including Martoma's current trial have actually begun to restore some confidence for me.

The prosecutors have been doing a great job the last few years tracking these guys down, and putting solid cases up against them. Probably a result of their failure to pursue Madoff in spite of a mountain of complaints and evidence.

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14 Jan ’14 - 1:26 pm

Quote:

Quote from nedcmk1 on January 14, 2014, 12:55