Couldn’t they have found someone who wasn’t a key figure in one of the most notorious scandals to hit the SEC in the past two decades? And couldn’t they have found someone who isn’t a perfect symbol of the revolving-door culture under which regulators go soft on suspected Wall Street criminals, knowing they have million-dollar jobs waiting for them at hotshot defense firms as long as they play nice with the banks while still in office?
The Securities and Exchange Commission said on Friday that it was making a major change in how it settles some securities fraud cases, telling companies that they will no longer be allowed to neither admit nor deny the commission’s civil charges when, at the same time, they admit to or have been convicted of criminal violations.
The change will also apply to cases where a company enters an agreement with criminal authorities to defer prosecution or to not prosecute as part of a settlement.
Robert Khuzami, the director of enforcement at the S.E.C., said the agency would continue to use the “neither admit nor deny” settlement process when it alone reaches a deal with a company in a case of civil securities law violations. Those types of cases make up a large majority of its settlements.
Although the SEC is touting this as a major change, it will still leave a certain amount of discretion to its employees, who just might allow personal considerations to affect their decisions.
Under the new policy, a civil settlement will cite the admission of conduct or conviction in the corresponding criminal case, Mr. Khuzami said. But the S.E.C.’s enforcement staff will have discretion whether to use relevant facts from the criminal case in its own court documents for the civil case.
Earlier this year, Project on Government Oversight (POGO) reported on the ethics challenges of what it called Â “revolving regulators”Â and the S.E.C. One of their findings:
One recent empirical study uncovered several significant and systematic biases in the SEC’s enforcement patterns and found indirect evidence to support the contention that “post-agency employment at higher salaries may operate as a quid pro quo in return for favorable regulatory treatment.”
Did a clever SEC bait Goldman Sachs into compounding its legal problems with the “Kiss of Death” message? Sam Antar at White Collar Fraud thinks so. By releasing the news on Friday the SEC may have suckered Goldman into a hasty press release which may now be used against them.
He also says Richard Simpson, the SEC lead counsel against Goldman, is a relentless and legendary “pit bull.” Antar should know. He is a convicted felon and former CFO of Crazy Eddie who now has a consulting business teaching about corporate crime. Simpson was the lead counsel in Crazy Eddie securities fraud prosecution. Sam Antar barely avoided going to prison, Eddie didn’t.
In any company, especially a company that is the size of Goldman Sachs, there are always some employees who bend the rules or break the law and end up getting a company in legal trouble. By circling the wagons around Fabrice Tourre, Goldman Sachs raised the ante from a single employee issue involving a certain corporate transaction to a corporate wide issue involving the entire company. A very dumb move!
The public relations people and attorneys representing Goldman Sachs will get rich as they suck the company dry with fees and lead them down the river. That’s what happened to the Antar clan at Crazy Eddie as Richard Simpson rightfully “deep-sixed” them too.
He ends his post with
My research on Goldman Sachs is a freebie for securities regulators and the public in order to help me get into heaven, though I doubt that I will ever get there anyway. I personally believe that some people at Goldman Sachs may end up joining me in hell.
In my opinion, Goldman is going down. They have no friends left or even allies. They backstab anything within range, including clients. So why should anyone lift a finger for them. The number of lawsuits and prosecutions will be huge.
We need a Richard Whitney moment. He was head of NYSE in the 1930’s and convicted of embezzlement. When they put him on the train from Grand Central Station to Sing Sing prison, thousands came to watch.
His brother and family made good the difference, about a million dollars, which was a huge amount at the time. Apparently they possessed some concern about ethics and morality however quaint a concept that might seem to the amoral thugs infesting investment banks today. May they get to ponder that as they do their coming perp walks.
The report by the SEC’s inspector general says SEC examiners concluded four times between 1997 and 2004 that Mr. Stanford’s businesses were fraudulent, but each time decided not to go further. It singles out the former head of the SEC’s enforcement office in Fort Worth, Texas, accusing him of repeatedly quashing Stanford probes and then trying to represent Mr. Stanford as a lawyer in private practice.
The SEC was asleep about Madoff too. But saying that may be too charitable. Twice is not coincidence. It’s deliberate, seems to me.
If this happened in another country, we’d just assume the regulatory agency was a joke and corrupt, right?
They say it only applies in Texas but, oopsie, the announcement went out on all their statements nationwide.
A recent SEC proclamation does the same for money market accounts.
Restricting demand deposits in a way that makes it unclear when people will have access to their funds – especially since they need daily access to their checking account or money fund – makes them more likely to withdraw funds before everyone else does. Where would you rather have your funds: at an institution with withdrawal restrictions or at one without limitations on access to your funds? In essence, the Citi and SEC proclamations make the affected institutions more vulnerable, not less.
The SEC says this is being done to protect consumers against bank runs. I say it’s more likely to increase the possibility of them happening.
I’d say banks and the government are getting twitchy about the stability of the system.