Is That It for Financial Crisis Cases?
Is That It for Financial Crisis Cases?
Last week turned out to be a good one for Goldman Sachs. The Justice Department closed a criminal investigation of the firm and its chief executive, Lloyd C. Blankfein, and the firm disclosed that the Securities and Exchange Commission had decided not to pursue a civil fraud case related to a subprime mortgage deal.
When the story of the financial crisis is finally written, this may turn out to be the denouement of the government’s investigations of Wall Street for potential wrongdoing that contributed to the financial crisis in 2008.
Investment banks like Goldman load their disclosure documents with plenty of generic disclaimers that can support a defense that no one sought to mislead buyers. It may not be so much a matter of weak laws as the requirement to show beyond a reasonable doubt that a defendant had the intent to commit a crime, a significant barrier to successfully prosecuting any fraud case.
And proving a perjury case is even more difficult because it must be shown that the defendant intentionally lied, not just that the testimony was incomplete or inaccurate. Whether Goldman’s position was “massive” or not looks to be a matter of degree, making it almost impossible to prove perjury.
The S.E.C.’s decision was a bit more surprising because the enforcement division told Goldman in February that it planned to recommend civil charges against the firm related to its sale of a $1.3 billion mortgage-backed security. Goldman had already settled allegations in 2010 about how it structured a collateralized debt obligation known as Abacus, so even if the S.E.C. had pursued another case, it was unlikely to contain any major new revelations about systemic misconduct.
It does not look as if any other criminal cases against other banks are likely to emerge from the financial crisis now that four years have gone by. The Justice Department has already passed on cases against executives from firms like Countrywide Financialand the American International Group, and nothing else seems to be drawing the attention of prosecutors at this point.
New laws would not make it any more likely that senior executives could be pursued unless they included liability as a “responsible corporate officer” for the conduct of underlings without having to prove an executive’s knowledge or recklessness.
Wall Street would be sure to put up quite a fight if expansive criminal prohibitions were introduced that made it easier to prosecute senior managers for the violations of lower-level employees. The pushback in Congress against the Dodd-Frank Act’s regulation of the financial sector shows that there may not be much appetite for additional government involvement in the financial sector.
What happened to the legal concept that you can not write your self a disclaimer against criminal activity?
I have a patient sign an informed concent that crap could happen, doesn’t get me off the hook if I did not do what an “reasonable person” would have expected or done.
I got to get me one of those bank disclaimers for my office. Damn!
Also, what happen to the concept of responsibility as a professional? They call themselves professional.
We have a two pathsway legal system to go along with our 2 pathway economic system. If you are on one, you are sure to never, ever intersect with the other, though one runs on top of the other.
Maybe we need to look into the future so that we can know where all the prosecutors at the Justice Dept. and the compliance officials at Treasury and the SEC live out the balance of their professional careers. How many attorneys currently employed protecting the financial industry got their early training at one of the government related agencies that are supposed to keep the foxes at bay? The small government adherents will likely never cut back on those training programs as they are critical to the banking industry.
My faith in people has sure taken a beating.not to mention my pocketbook!