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Expounding on To Big To Fail, SEC Policy, DOJ prosecution action

Linda posted here on To Big To Fail and made suggestions as to how to fix it. I want to just add some more background information to the discussion.
Via Bob Swern at Daily Kos who linked to a post by Pam Martens at Wall Street on Parade comes a bit of transcript from the confirmation hearing for Mary Jo White for the SEC. 
Senator Brown: When you were U.S. Attorney, my understanding is you consulted Bob Rubin and Larry Summers when considering whether to bring charges against financial firms. Is that correct?

White: I actually consulted the Deputy Attorney General who had Mr. Summers call me back. I was asking a factual question.

Senator Brown: Did they reject the argument that institutions could not be prosecuted to the fullest extent of the law?

White: I’d like to answer that yes or no but I can’t. Essentially, I was seeking information based on an argument that had been made by the lawyers for the institution that I ultimately indicted, as to whether an indictment of that institution would result in great damage to either the Japanese economy or the world economy. And the answer I got back is that I should proceed to make my own decision; which I took to mean that it would likely not have that impact.
Pam then notes:
There actually is an official policy but its finer points have certainly not been expanded upon by either Attorney General Holder or SEC nominee Mary Jo White. The policy is called Title 9, Chapter 9-28.000: Principles of Federal Prosecution of Business Organizations.* The policy thoroughly advocates the prosecution of corporations — especially when there is a serial history of fraud as in the case of Wall Street.
She quotes from the policy:
“…Virtually every conviction of a corporation, like virtually every conviction of an individual, will have an impact on innocent third parties, and the mere existence of such an effect is not sufficient to preclude prosecution of the corporation.”
Just saying.
*The link for the actual policy is in Pam’s article.

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Matt Taibbi’s Rolling Stone article posted today about Mary Jo White is devastating — APPENDED*

I hadn’t read Taibbi’s reporting about a jaw-dropping series of events in 2004-05 involving White until just now, when I read his article posted today on the Rolling Stone website, summarizing them.  Call me naive–which is what I’m calling myself–but the article really shocked me.   

I wonder who recommended White to Obama. White surely isn’t in his “in” crowd, and I’ll go out on a limb here and venture that Obama was unaware of the events Taibbi discusses. The idea, I believe, was to pick someone from outside the SEC and from outside Washington–someone with serious major law enforcement cred who also knows the ins and outs of securities law and securities practices–whose nomination would send a signal that enforcement of finance laws would be a priority in Obama’s second term.  

I’m certainly no expert in any of the possibly relevant criminal laws, but I do know that the major federal criminal conspiracy law has a 10-year statute of limitations.  The time period, I believe, would include any illegal obstruction of justice, which, if there was any, would have occurred, I guess, in 2004 and 2005.  

From Taibbi’s article, the extent of White’s involvement is unclear, but, assuming the accuracy of the facts the article states, she did play a role.  The most culpable of the players seem to me to be the people involved within the SEC; there is a whiff of subtle bribery involving jobs with the law firm, but it appears that the subject was broached by the SEC lawyers rather than by the firm.  But I don’t see how this won’t be a high-publicity issue during her confirmation hearing if the mainstream media picks it up. The Republican senators won’t question her about it, but at least one Dem probably will. At least I hope so. This is really different than just the usual revolving door situation. This concerns facts about a specific case, and it’s seriously damaging, in my opinion.  

*I want to append this post to add the following exchange this morning in the Comments thread, between reader Peter and me:

PETER:  Is this the same caring, compassionate, liberal, open-minded Matt Taibbi who wrote Andrew Breitbart: Death of a Deuche, threw coffee in the face of someone who had criticized one of his columns, and wrote 52 Funny Things about the Death of the Pope?
Beverly, lie down with dogs, you wake up with fleas. Can’t you find a decent human being to quote?

ME:  Peter, the only reason I wrote this post at all is that earlier yesterday, before I read Taibbi’s article but after I read David Sirota’s in Salon, I wrote one saying that I don’t buy into the criticism of White claiming that, because in recent years she has represented large financial institutions and executives of those institutions, including some involved in the events that crashed the economy and would have brought down the banking system had the federal government not intervened with TARP.  That post is [here].

I don’t read Rolling Stone regularly.  I’m on ReaderSupportedNews’s email listserve, and through them get headlines and links to some of what Taibbi writes, but I rarely click the link and read the article.  I’m not familiar with his comments about Breitbart after his death, or about the pope.  (Or about much of anything else about his writings.) What matters to me in the Taibbi article about White is the reporting on what happened in the John Mack case and what happened to Gary Aguirre.  It is Taiibi’s reports on the Aguirre matter, and the quotes from Aguirre, that caused me to write this post.  It is that alone that makes me very uncomfortable.  

But I’m glad my post said, “From Taibbi’s article, the extent of White’s involvement is unclear, but, assuming the accuracy of the facts the article states, she did play a role.” That is, I’m glad I made clear that the article doesn’t give enough information to know the extent of White’s involvement–the role she actually played.  And I’m glad I made clear that I’m assuming that the facts stated in the article, as far as they go, are accurate, but that I realize that that they may not be.

In my first post, I added a postscript saying that White would have to recuse herself from any matters concerning the past, in which she gained knowledge of specific facts–possible misconduct–through her representation of the bank or executive at issue. That’s a concern, too, I think.  I would much prefer a securities-law professor in that post.  
She may turn out to be a good choice.  She certainly knows how to use the investigative powers of the federal government to gain the information needed to be an effective SEC head.

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Lanny Breuer and Mary Jo White. Or Is It, Lanny Breuer versus Mary Jo White? Or is it neither?*

BREUER: “If you look at what we and the U.S. attorney community did, I think you have to take a step back. Over the last couple of years, we have convicted Raj Rajaratnam, one of the largest hedge fund leaders. Now, you’ll say that’s an insider trading case, but it’s clearly going after Wall Street.”*

Oh, we get it.  It’s a semantics game.  Anyone connected with the finance industry will do as a prosecution target, as long as he wasn’t a top executive at a mega bank, a mega investment bank, or a mega mortgage company.  He works on Wall Street!  We went after Wall Street!

What’s next? A claim that they prosecuted the head of the asphalt company that repaved Wall Street, for tax evasion or something?

BREUER: “First of all, I think that the financial crisis is multifaceted. But even within that, all we can do is look hard at this multifaceted, multipronged problem. And what we’ve had is a multipronged, multifaceted response.”*

Actually, there seems to be a major facet missing in their approach.  Which was the point of the expose.

All that said, I just think there’s something more that was going on there than just Lanny Breuer’s and Eric Holder’s desire to return to Covington & Burling after their Justice Dept. stints.  For one thing, most top white collar crime defense attorneys began their careers as federal prosecutors and made their names in high-profile cases.  They know how to defend in white collar criminal cases, precisely because they successfully prosecuted some complicated ones.  So prosecuting big-name Wall Street execs would not have hampered their option to return to big-law criminal defense work.  

For this reason, I think the criticism of Obama’s selection of Mary Jo White as SEC head is off-base; she was known as an extremely aggressive head of the Manhattan U.S. Attorney’s Office, and do think Obama’s decision to nominate her is intended to indicate a toughness toward the finance industry.  Yes, she’s been representing finance industry companies and execs in criminal-law matters, but because of that, she now knows all the more how the inside game is played.  And the better she is at the SEC job, the more desirable, not the less desirable, she’ll be to the big Wall Street law firms.  It’s counterintuitive, and of course exactly the opposite of people who work in regulatory agencies such as the EPA leaving to become lobbyists.  But what matters in this situation, less, ideology than actual knowledge

This is not to minimize the potential and maybe real conflicts of interest that result from the passage back through the revolving door to high-level law enforcement and regulatory positions after time spent on the other side of that door.  But I think that’s because of friendships–personal relations–rather than a surely-unrealistic fear of having trouble returning to Big Law, for really big bucks, when the time comes to pass back through the revolving door once again. 
Ultimately, I just don’t think Holder and Breuer were the ones deciding to not even investigate the big boys.  I think that was more likely a policy decision made elsewhere in the administration.  I don’t think Geithner picked up the phone and called Holder or Breuer. Nor, if he did play a role in these decisions, do I think he even thought he was doing anything other than protecting the economy. Same for Obama, if my hunch is right that Geithner had some influence on these decisions, via Obama.
But I guess there’s no way for us to know the inside story. At this point, anyway. And I do agree with the New York Times today in an article by Ben Protess and Benjamin Weiser that Obama seems to be trying to signal a new day.

* From The New York Times would rather cover a Breuer chair than cover Lanny Breuer, by lambert, at Corrente. H/T, reader rjs.

*POSTSCRIPT:  The New York Times article notes specifically that White “defended some of Wall Street’s biggest names, including Kenneth D. Lewis, a former chief of Bank of America,” and that “[a]s the head of litigation at Debevoise & Plimpton, she also represented JPMorgan Chase and the board of Morgan Stanley.”  So she’ll have to recuse herself from matters that touch upon issues related to the cases she worked on for those execs and banks or that rely in any respect on information she gained through those representations.

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