Tuesday, May 21, 2013

Your daily dose of rage-making capitalism

By Carl 

Inside this rather boring if frightening story about the problems at hedge fund SAC Capital, lies this sentence (bolded):

A legal deadline looms for prosecutors to bring a criminal case against Mr. Cohen related to charges against Mathew Martoma, a former SAC portfolio manager accused of illegally trading in the shares of two drug companies, Elan and Wyeth. The Martoma case is the first time that Mr. Cohen was linked to questionable trades, which occurred in late July 2008. Under the five-year statute of limitations for insider trading crimes, the government must charge Mr. Cohen by July.

Yet the eliciting of Mr. Cohen's grand jury testimony is not entirely bad news for the hedge fund manager, at least as it relates to his criminal exposure, legal experts say. A grand jury subpoena seeking Mr. Cohen's testimony suggests that the government is pursuing a case against SAC, but not Mr. Cohen himself. It is highly unusual for prosecutors to issue a grand jury subpoena to the target of an investigation, indicating that they want to interview Mr. Cohen broadly about his fund's activities.

But bringing criminal charges against SAC would also be an unusual move by the government. Over the last decade, the Justice Department has moved away from indicting companies after the 2002 indictment of Arthur Andersen was widely seen as having put the accounting giant out of business.

Excuse me?

To refresh your memory, the CPA firm of Arthur Andersen voluntarily surrendered its license to practice in the United States after multiple felony convictions in connection with its audits of Enron. Yes, the Supreme Court of the United States later vacated the convictions, but not on the facts: documents relevant to the Enron investigation by the Justice Department were shredded. The case was thrown out for bad jury instructions. The facts were never at issue.

So an auditing firm, charged with making sure its client abided by what is known as GAAP (generally accepted accounting principles) lies to people who are relying on their opinion that the firm is operating above board, but then destroys any proof otherwise? They deserved to be put out of business. Enron's bankruptcy revealed not only the massive greed of conservative "capitalists" and the overwhelming hubris of people who treated customers, clients and shareholders like ants under a magnifying glass, and warned Andersen (or rather should have) there were irregularities big enough to clog a pipeline, and yet did nothing to stop them.

And if Enron didn't warn Andersen, they certainly could have dug a bit deeper than they did. Obviously, there was something they were trying to hide in shredding documents, if it was only how badly they were hoodwinked. Nonetheless, they were in deep and deserved to be shut down.

So if you're wondering why the banksters were never put on trial after the subprime mortgage scandal, there's your answer: our government is too scared to upset an apple cart or two.

(Cross-posted to Simply Left Behind.)

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  • Oh, Carl! You are so caught up in your post-Magna Carta thinking. When do you think it is? The year 1216?!

    There are laws for the power elite and then there are laws for the rest of us. The next thing you'll be asking for habeas corpus!

    By Anonymous Frank Moraes, at 1:07 AM  

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