I have been blogging for months about the SEC’s practice of letting Wall Street companies pay fines for committing fraudulent acts.
Finally, Jed Rakoff, a U.S. District Court judge rejected a $285 million settlement between Citigroup and the SEC. Citigroup was accused of mortgage fraud – in this case, a $1 billion CDO that cost investors $700 million.
The SEC claims it does not have the staff or resources to prove Citigroup committed fraud in a prolonged court battle because Citigroup has deep pockets and a lot of attorneys.
I have two problems with this position. Apparently big Wall Street companies can commit fraud and get away with it because they employ a lot of high powered attorneys. Second, companies don’t commit fraud, the executives who run the companies commit fraud.
These executives make millions from fraudulent acts and IF they are caught their companies pay fines to regulatory agencies that do not want to take them on in lengthy court battles.
What a crock. The SEC claims a company committed fraud, but does not prove its claim. The company pays a fine, that is small percentage of its profits, without admitting it did anything wrong – after all investors only lost 70% of their money in a short time period. I guess the SEC protects investors from bad guys if they have limited resources to pay attorneys.
Something stinks here. When something smells this bad I believe politicians are involved. Dig a little deeper and I bet the SEC’s position is a result of pressure that is exerted by politicians to protect the executives who run Wall Street companies. These companies bought protection by spending more than $300 million per year on lobbyists.
You can trust Wall Street when executives start going to jail.