The SEC Attempts To Paper Over Its 'Rakoff Problem': Rolling Out The Big Guns--Press Releases!!

OS spent Saturday late morning doing the weekly grocery-pharmacy-dry cleaner-liquor store shopping run with the sainted Mrs. OS. Jet lag began to catch up to him, rather delayed after attendance at a fabulous Westminster Choir College concert last night. More about that another time, if the spirit moves. However, if any of OS's readership are in Mississippi, Alabama, Georgia, eastern Tennessee, or West Virginia these next few days, it's worth the drive to hear these young people--a completely inspirational evening of music.

In the parking lot, the humorous moment of the morning: A car, owned by a Tea Party member, with the window display announcing 'You can't cure stupid, but you can vote it out of office.'

It did provide a grin, and food for thought as OS shopped for groceries.

At the next election, this country desperately needs to elect grown-ups, people who will demand (and make happen) certain basic truths take hold, such as Judge Rakoff is insisting upon: Banks who defraud investors, customers and the country at large, walking away with $700 million, cannot be asked to settle for pennies on the dollar with no admission of wrongdoing. The defrauded never are compensated, and the truth is never known. The government becomes complicit with the criminals, and essentially charges 'protection tax' to keep the whole corrupt game in play. It's a recipe for tragedy, sooner or later.


Mish, Heaven bless 'im, continues to track the Rakoff v. Citigroup and it ally, the SEC, who has decided to issue press releases to douse the fires of public disdain.

He points out that the last person prosecuted and jailed for securities fraud by the SEC was (drumroll please...) Martha Stewart.

Really.

While essentially ignoring billions of dollars in repeated fraud allegations against Citigroup, the SEC brought full weight down on Martha Stewart over (drum roll please) ... $45,673.

Martha Stewart went to prison and was fined $30,000. Since then, no one has gone to prison or even been criminally indicted in $trillions of dollars of fraud in the global financial crisis. And unless someone does admit criminal action, the SEC reserves the right to do more whitewashing without seeking admission of guilt.

OS continues to follow and harp on this and the MF Global scandal, because they strike at the heart of this country's ability to function. If the Martha Stewarts and those more humble go to jail, and firms like Citigroup and individuals like Corzine go free after surrendering their pocket change, we will one day reach a tipping point, where the citizenry decides to either simply sit on its hands and refuse to participate in a fixed game--which may already be occurring--or it (more ominously) blows up, or some combination of the two in sequence.

Neither option is desirable, each leads to poverty, despair, decline. It is not the kind of world we wish for our children and theirs. Unlike some more nihilistic souls, OS spends his energies begging that these things not happen.

One thing that struck OS on his vacation in England was that much of the peaceful and prosperous way of life he witnessed there, and enjoys here, is due to a robust system of banking. Currency gets exchanged, card transactions complete within seconds, goods get imported and exported and onto the shelves while fresh, and at reasonable cost. Cash and credit, borrowed and paid back, lubricates the intricate machine. If the banking system is crippled, everyone loses, the farmer, the merchant, the employer, the employee, the school, the church, the charity, on it goes. It's happening already, in ways great and small.

The Citigroups and the Corzines, the SEC, the Fed, and all the lawyers and politicians will end up blowing the system to bits. It will never operate perfectly, but it doesn't need to in order to work wonderfully well. It needs to operate in a culture that assumes honest dealing underpins the system.

You can't cure stupid, and you can't rid the world of all the Corzines--but you can vote for grown-ups, and insist they insist on governance where virtue is rewarded and crime punished. 

It's not that much to ask of them. If they do that one thing, a lot of the other problems will sort themselves.


 

The Crooks And The Cops Lock Arms: The SEC Plans To Appeal Judge Krakoff's Ruling In The Citigroup Case

Time was, when the crooks, in this case Citigroup (who ripped off everyone in sight, including every taxpayer in the US for generations), got caught and lost their case in court, they appealed their conviction/loss, proclaiming that they were the real victims, etc. etc., and that theft isn't theft because it was done with computers by white people in suits, not black people holding up liquor stores with guns--you know, real criminals, the kind you put in jail, to keep white folk like us safe on the way to the country club...

Them daze iz over, ya'll. Merry Christmas!

OS's readers may remember a couple of earlier posts, here and here, in which he recounts how one federal Judge Rakoff had decided he had had enough, and that he would not rubber-stamp one more sweetheart deal between the SEC Enforcement Division and the banks they were supposed to be, well, enforcing the rules on. His intent, obviously, was for the SEC to go back, and extract real penalties from Citigroup for having blatantly ripped the world off for some 700 million dollars, and come back to him.

To quote John Belushi: 'But NOOOOOOOOOOOOOOoooooo......'


The SE frigging C plan to lock arms with the crooks, and appeal the judge's ruling!!!

They have no intention of (a) ceasing to make sweetheart deals with crooks, and (b) exposing the inner workings of the machine that makes these sweetheart deals by actually litigating them, because that would open them up to adversarial process, which includes (drumroll please) Discovery!

So, instead of spending their energies enforcing the law, they'll spend their energies arguing that they shouldn't have to enforce the law, even though that's what they were instituted to do, and are paid to do, and (by innocent souls like OS) expected to do.

This is Alice Through The Looking Glass, pure and simple.

It is maddening, but no longer surprising to read of it. We're at the point where the cops don't even need to pretend to uphold the law.

By the way, if anyone thinks those MF Global clients, including all those farmers who didn't even know they were MR Global clients, have a prayer of getting their money back, this should disabuse them.

The cops now protect the crooks--it's the Chicago Way--the world of Al Capone, Eric Holder, Tim Geithner...

Judge Rakoff Tells The SEC and Citigroup He's Had Enough, Refuses To Approve One More Slap On the Wrist

As OS noted last month, the judge seems to have located his huevos.

Today's new's comes as confirmation that, indeed, he has.


From the New York Times, this evening:

Taking a broad swipe at the Securities and Exchange Commission’s practice of allowing companies to settle cases without admitting that they had done anything wrong, a federal judge on Monday rejected a $285 million settlement between Citigroup and the agency. 

The judge, Jed S. Rakoff of United States District Court in Manhattan, said that he could not determine whether the agency’s settlement with Citigroup was “fair, reasonable, adequate and in the public interest,” as required by law, because the agency had claimed, but had not proved, that Citigroup committed fraud. 

As it has in recent cases involving Bank of America, JPMorgan Chase, UBS and others, the agency proposed to settle the case by levying a fine on Citigroup and allowing it to neither admit nor deny the agency’s findings. Such settlements require approval by a federal judge. 

While other judges are not obligated to follow Judge Rakoff’s opinion, the 15-page ruling could severely undermine the agency’s enforcement efforts if it eventually blocks the agency from settling cases in which the defendant does not admit the charges. 

The agency contends that it must settle most of the cases it brings because it does not have the money or the staff to battle deep-pocketed Wall Street firms in court. Wall Street firms will rarely admit wrongdoing, the agency says, because that can be used against them in investor lawsuits.

'Well, Duh!' to quote Snookie.  Beside, the lawyers at the SEC, who sheltered Bernie Madoff all those years, were too busy with their online porn to actually check to see if Citigroup were engaging in massive fraud. That would resemble...well...work! Besides, if you want a job at Citigroup or J.P. Morgan after your exhausting five years at the SEC, you best not piss those bankers off by actually doing your job.

In his decision, Judge Rakoff called Citigroup “a recidivist,” or repeat offender, for having previously settled other fraud cases with the agency where it neither admitted nor denied the allegations but agreed never to violate the law in the future.


Citigroup and other repeat offenders can agree to those terms, the judge said, because they know that the commission has not monitored compliance, failing to bring contempt charges for repeat violations in at least 10 years.

Ten years, at least ten years. No attempt to monitor compliance of known fraud artists. Billions lost, businesses and neighborhoods in ruins. Words fail.

It's time for the lawsuits and indictments, ya'll. Somebody needs to go to jail, or we need to apologize to Bernie Madoff and let him go home to Ruth and get back into business. Why the hell not? Either we prosecute massive frauds or we don't. At least, let's be honest and admit that we don't, if we don't intend to.

Here's hoping his ruling stands, and that he doesn't waken one morning with the decapitated head of a horse on the foot of his bed, left as a friendly warning about what happens to uppity judges.