“Why Isn’t Wall Street in Jail?: Financial crooks brought down the world’s economy — but the feds are doing more to protect them than to prosecute them” wrote Matt Taibbi in the February 16, 2011 issue of the Rolling Stone. It increasingly looks like NO ONE is going to jail. Jail is for the little people, Matt.
Several cases are in the news this week, but I’ll start out with a New York City example of justice.
ANDREW STEIN “FORGETS” TO PAY TAXES ON $1 MILLION OF INCOME
Andrew Stein is a former Manhattan Borough President (a position I ran for unsuccessfully in 2005). From the New York Times:
Former City Council Leader Avoids Prison for Tax Evasion
By C. J. HUGHES
Published: March 15, 2011
Andrew J. Stein, a former president of the City Council and a fixture in New York politics for a quarter-century, was sentenced on Tuesday to three years’ probation for tax evasion, dodging a prison sentence after delivering an emotional plea for leniency.
As part of that sentence, which was handed down in Federal District Court in Manhattan, Mr. Stein, 66, will have to perform 500 hours of community service for not paying taxes on $1 million in income in 2008, a misdemeanor punishable by up to a year in prison.
But the magistrate judge, Ronald L. Ellis, was swayed in part by 14 letters from journalists, entertainment figures and lawyers, including Geraldo Rivera, the movie director Doug Liman and the First Amendment lawyer Floyd Abrams.
Oh, a letter from Geraldo Rivera! No jail time for you!
Last May, Mr. Stein was arrested with Kenneth I. Starr, a financial adviser, as part of an investigation into a $30 million Ponzi scheme that Mr. Starr was accused of running. On March 2, Mr. Starr was sentenced to seven-and-a-half years in prison for fraud and money laundering.
According to the criminal complaint then, Mr. Stein had used $1.6 million in laundered funds from Mr. Starr’s scheme to pay his bills and rent a large home in Bridgehampton, N.Y. He later lied about those funds to the Internal Revenue Service.
Stein is reported to have choked up before the judge, saying that not paying his taxes was “a terrible, terrible mistake.” C’mon, folks! Who doesn’t make mistakes?
From the New York Post:
Injustice for Andy Stein
Posted: March 16, 2011
Stein’s political background undoubtedly helped him carve out the quite lucrative career he’s had since leaving public service in 1994.
Yet a softie judge still gives him a sweetheart sentencing deal.
As if the average person would get off so easy after ripping off the federal government for millions.
Too bad, but the judge erred on this one. Big time.
LEHMAN BROTHERS: I LOST EVERYTHING, THE CEO MADE OFF WITH $500 MILLION, AND NO ONE GOES TO JAIL
I lost a lot of money on Lehman Brothers. My broker (Morgan Stanley/Smith Barney) told me to buy it. The rating agency gave it a top rating. The financial reports looked very good, even as the company was effectively bankrupt. I could have done all the due diligence in the world, but I still wouldn’t have found the bad numbers that were intentionally hidden from me.
Lehman’s CEO, Richard Fuld, hid that he was making over $500 million. He recently put some assets in his wife’s name and surely hid other assets, but he needn’t have bothered. No worries for you!
From the New York Times’ Dealbook:
March 15, 2011, 2:33 pm Legal/Regulatory | White Collar Watch
In Lehman’s Demise, a Dwindling Chance of Charges
By PETER J. HENNING
Instead, The Wall Street Journal reports that the S.E.C. is “increasingly doubtful” that securities fraud charges could be proven against any Lehman executives for accounting fraud or false statements to investors during the final months of the firm’s existence. Can it be that the largest bankruptcy ever will simply pass into history with no one held accountable for the losses inflicted on investors and the market?
Sure! Why not? No one goes to jail!
The S.E.C.’s investigations of Lehman and the mortgage companies appear to be on similar timelines, but may reach very different conclusions. No Wells notices for Lehman executives have come to light at this point, unlike those related to Fannie and Freddie, so if the accounting for the Repo 105 transactions passes muster, even just barely, then it is much less likely any civil or criminal charges will be filed against Lehman executives.
The perception that Wall Street has pulled a fast one on the American public will only grow if no one from one of the major financial firms is charged.
Just write that check off to Barack H. Obama 2012, Mr. Fuld.
From Zero Hedge:
The “Repo 105” Scam: How Lehman Fooled Everyone (Including Allegedly Dick Fuld) And How Other Banks Are Likely Doing This Right Now
Submitted by Tyler Durden on 03/11/2010 18:53 -0400
And here is the Fed punchline, as it once again implicates Tim Geithner:
And even though the Fed should have been fully aware of any shadow transaction be they “matched book” repos or the “105 variety, nobody had any clue. Just who the hell was regulating banks???
Stunningly, nobody at the SEC was aware of Lehman’s Repo 105 program. And guess what: NEITHER DID DICK FULD. This is unbelievable – the criminality reaches to the very top, yet the very top denies all knowledge.
Evidence, however, suggests that Fuld is blatantly lying:…
on Thu, 03/11/2010 – 22:51
Please do not use the term “auditors” to describe Ernst & Young. There must be a better word. How about co-conspirators?
on Thu, 03/11/2010 – 20:13
Gotta say I’m not suprised by the findings (depressed, yes, shocked, no). My difficulty comes when I realize that none of this is “criminal” in America any longer. White collar looting is just part of the game like bribes in Mexico. Stealing from my f-cking pocket to put it in theirs is now ok. That’s just part of the fabric of our country now. Hmmm, makes you question justice and the like when crime is committed in broad daylight, everybody sees it, but authority is on the same side as the criminals…acckkk, that’s dark.
on Thu, 03/11/2010 – 20:28
I wanna see somebody go to jail. It would make me feel better. Bernie Madoff was a joke. Someone in a substantial position please.
Madoff went to jail because the money ran out and he turned himself in. The toothless SEC was warned many times about Madoff, but ignored each warning.
Here’s a good article from Tycoon Report:
Why Aren’t These Wall Street Crooks In Jail?
Sunday, February 27, 2011 | Ed Pawelec
Remember how the whole mess started in sub-prime mortgages, a large chuck of which were originated at Countrywide Financial (now owned by Bank of America) under the leadership of Angelo Mozilo. (…) From 2001-2006, Mozilo is estimated to have received total compensation of $470 million. That includes $140 million in stock he sold prior to Countrywide’s demise.
For not disclosing the full extent of the risks a declining housing market posed to Countrywide’s portfolio, and for selling the stock while clearly in possession on material non-public information, Mozilo paid $67.5 million in fines, and the criminal investigation has been recently dropped. Not only is that a paltry sum for a man purportedly worth as much as $600 million, but $45 million of that is being paid by Bank of America as part of its obligations in the takeover of Countrywide.
It simply makes your head spin.
Yes, it does. Angelo had plenty of friends–such as Barney Frank and Chris Dodd.
Cassano, former head of AIG Financial Products, is the man “credited” with the collapse of the insurance giant.
For the eight year period from 2000-2008, Cassano earned roughly $315 million, including a $35 million bonus received after the collapse of the insurance giant and the $182 billion tax payer funded bailout. Despite clear evidence that he sought to conceal the massive problems in his division, no criminal charges have been filed.
Fuld headed Lehman Brothers from 1994 until its collapse in 2008, and received total compensation in excess of $500 million, although he claims it was only $310 million. Under Fuld, Lehman engaged in some serious financial chicanery using what is known as “Repo 105”.
As yet, no charges or penalties have been levied against Fuld.
NO ONE GOES TO JAIL AT FREDDIE MAC AND FANNIE MAE, EVEN IF YOUR NAME REALLY IS MUDD
From Wall Street Pit:
Ex-Fannie Mae CEO Gets Wells Notice – Where Does This Go?
By Bruce Krasting Mar 12, 2011, 6:40 PM
Daniel Mudd, the former CEO of Fannie Mae (FNMA) got a Wells notice from the SEC on Friday. I have been waiting years for this to happen. There is a good reason this action is so late in coming. This case could open the door for culpability of the Federal Government in the collapse of the US mortgage agencies.
The Wells notice is a very significant ratchet up of this story. Prosecution is not assured, but a big investigation is certain.
I have always believed that Mudd is dirty. He had ample foreknowledge that the wheels were coming off at Fannie (and the entire mortgage market). If he argues that he did not, he will just look dumb. When he spoke to Bloomberg he was reading from a script prepared by big-shot lawyers.
I hope the SEC pushes this hard. I hope there is a trial. If there is, I am betting that Mudd takes a walk. His reporting/disclosure was approved by Lockhart. That legal conclusion (should it come) would be very damaging to the government. It opens the door for a ton of lawsuits.
From the New York Times’ Dealbook:
March 15, 2011, 10:00 pm Legal/Regulatory
Freddie Mac’s Former Chief May Face S.E.C. Action
By BEN PROTESS and AZAM AHMED
The former chief executive of Freddie Mac may face a civil action as the government ramps up an investigation of disclosure practices at the mortgage finance giant and its sister company, Fannie Mae, people briefed on the investigation said.
The executive, Richard F. Syron, a former president of the American Stock Exchange and now an adjunct professor and trustee at Boston College, has received a so-called Wells notice from the Securities and Exchange Commission, an indication the agency is considering an enforcement action against him.
They’ll all walk. I’m reading that the charges Mudd is responding to are civil, not criminal.
Not a single person is held accountable for Fannie Mae and Freddie Mac?
“INSIDE JOB” ON OSCAR NIGHT TOLD THE WORLD THAT NO ONE GOES TO JAIL
Inside Job: Best Documentary Oscar Winner Notes Nobody Has Served Jail Time For Financial Meltdown
by Colby Hall | 10:38 pm, February 27th, 2011
As of this evening, Charles Ferguson is no longer just a documentary filmmaker, he is now a Academy Award winning documentary filmmaker for his film Inside Job. The film focused on the connections between the government and financial institutions that led to insane levels of profit-taking which endangered the global economy. Mr. Ferguson will also be known for creating perhaps the most entertaining and contentious moment during a thus far lackluster Academy Awards when he pointedly noted that no one has gone to jail for the financial misconduct.
No one goes to jail for white collar crime. No one (come on, Matt Taibbi) blames our president, Barack Obama. No one blames Eric Holder at the Department of Justice. Tim Geithner gets promoted to Treasury Secretary, and incredibly, he’s still there.
The only people who suffer are my children.