Thursday, November 10, 2011

Of limp "enforcement"

Really, this is just all too much.

Too big to fail is now too big to flail. If this is the new normal in corporate oversight, there is no abnormal.

Guambat says, bring out the cat-o-9-tails and put the whip to some humans here. At the very least, how about applying the "3 strikes and you're out" rule, assiduously applied to small potatoes, to the Big Spuds in Cow Town?

All these "settlements" settle nothing.

Promises Made, and Remade, by Firms in S.E.C. Fraud Cases
When Citigroup agreed last month to pay $285 million to settle civil charges that it had defrauded customers during the housing bubble, the Securities and Exchange Commission wrested a typical pledge from the company: Citigroup would never violate one of the main antifraud provisions of the nation’s securities laws.

It also was not the first time the firm was making that promise.

Citigroup’s main brokerage subsidiary, its predecessors or its parent company agreed not to violate the very same antifraud statute in July 2010. And in May 2006. Also as far as back as March 2005 and April 2000.

Citigroup is far from the only such repeat offender — in the eyes of the S.E.C. — on Wall Street. Nearly all of the biggest financial companies, Goldman Sachs, Morgan Stanley, JPMorgan Chase and Bank of America among them, have settled fraud cases by promising the S.E.C. that they would never again violate an antifraud law, only to do it again in another case a few years later.

A New York Times analysis of enforcement actions during the last 15 years found at least 51 cases in which 19 Wall Street firms had broken antifraud laws they had agreed never to breach.

On Wednesday, Judge Jed S. Rakoff of the Federal District Court in Manhattan, an S.E.C. critic, is scheduled to review the Citigroup settlement. Judge Rakoff has asked the agency what it does to ensure companies do not repeat the same offense, and whether it has ever brought contempt charges for chronic violators.

The S.E.C. said in a court filing Monday that it had not brought any contempt charges against large financial firms in the last 10 years.
Guambat has never run the numbers, but he's pretty sure, by the wet finger in the wind test, that he's quite squarely in the 99% crowd. And he's a bit pissed off, too. He's certainly not eased by the rest of that story:
prior violations are plentiful. For example, Bank of America’s securities unit has agreed four times since 2005 not to violate a major antifraud statute, and another four times not to violate a separate law. Merrill Lynch, which Bank of America acquired in 2008, has separately agreed not to violate the same two statutes seven times since 1999.

Of the 19 companies that the Times found to be repeat offenders over the last 15 years, 16 declined to comment. They read like a Wall Street who’s who: American International Group, Ameriprise, Bank of America, Bear Stearns, Columbia Management, Deutsche Asset Management, Credit Suisse, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley, Putnam Investments, Raymond James, RBC Dain Rauscher, UBS and Wells Fargo/Wachovia. Two others, Franklin Advisers and Massachusetts Financial, said that their two settlements were made simultaneously and therefore one incident did not violate a previous cease-and-desist order.

But some experts view many settlements as essentially meaningless, particularly since they usually do not require a company to admit to the accusations leveled by the S.E.C. Nearly every settlement allows a company to “neither admit nor deny” the accusations — even when the company has admitted to the same charges in a related case brought by the Justice Department — so that they are less vulnerable to investor lawsuits.

In 2005, Bank of America was one of several companies singled out for allowing professional traders to buy or sell a mutual fund at the previous day’s closing price, when it was clear the next day that the overall market or particular stocks were going to move either up or down sharply, guaranteeing a big short-term gain or avoiding a significant loss.

In its settlement, Bank of America neither admitted nor denied the conduct, but agreed to pay a $125 million fine and to put $250 million into a fund to repay investors. The company also agreed never to violate the major antifraud statutes.

Two years later, in 2007, Bank of America was accused by the S.E.C. of fraud by using its supposedly independent research analysts to bolster its investment banking activities from 1999 to 2001. In the settlement, Bank of America without admitting or denying its guilt, paid a $16 million fine and promised, once again, not to violate the law.

But two years later, in 2009, the S.E.C. again accused Bank of America of defrauding investors, saying that in 2007-8, the bank sold $4.5 billion of highly risky auction-rate securities by promising buyers that they were as safe as money market funds. They weren’t, and this time Bank of America agreed to be “permanently enjoined” from violating the same section of the law it had previously agreed not to break.

In fact, the company had already violated that promise, according to the S.E.C when it was accused last year of rigging bids in the municipal securities market from 1998 through 2002. To settle the charges, Bank of America paid no penalty, but refunded investors $25 million in profits plus $11 million in interest. And, the bank promised again never to violate the same law.

The S.E.C. allowed the bank to settle without admitting or denying the charges, even though Bank of America had simultaneously settled a case with the Justice Department’s antitrust division admitting the very same conduct.

Companies routinely argue that while they may be settling multiple violations of the same law, the facts of each case are different — and therefore not exactly a repeat offense.
Guambat calls enough BS on this stuff.

These are serious offenses, by orders of magnitude much more serious than the offenses of "common" criminals who pay with much more jail time and other deprivations of liberty than any of the banks or other financial institutions have ever paid.

Guambat joins with those in the OWS crowd who say, we will accept the holding of the Supreme Court that corporations are persons too, with all the liberties accorded real people, when one of them is strung up.

Hang 'em high.

Otherwise, as Barry points out, "
moving our money is an effective step towards reclaiming America."

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