Investors seeking redress from third parties accused of aiding companies to defraud shareholders suffered a blow on Wednesday when the Bush administration came down against the plaintiffs' bar and in favour of companies in a landmark case heading to the Supreme Court.This is quite a complicated issue but any company that helped another defraud the public should be held to account if it can be proved in a court of law. This decision makes Wall Street that much closer to Las Vegas.
The development is also a blow for Enron investors who have sued the defunct energy company's bankers - including Merrill Lynch, Barclays and Credit Suisse – for allegedly helping Enron executives carry out the accounting fraud that eventually destroyed the company.
It is an awkward development for Securities and Exchange Commission chairman Christopher Cox, who had urged the US solicitor general to side with investors in the case, known as Stoneridge vs. Scientific Atlanta.
Wednesday, August 15, 2007
Bush Administration Sides With Companies Over Investors
Is there anyone who still thinks the Bush administration cares at all about regular people?
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3 comments:
It's always about the wealthy elite and Corporate America, instead of the struggling working class and the poor.
There's a reason that a bipartisan group of 16 former SEC chairmen, commissioners, and officials, joined by 11 of the Nation's leading legal and financial academics, filed an friend of the court brief in Stoneridge Investment Partners v. Scientific-Atlantic.
Because the case isn't really about protecting investors - it's about enriching the Trial Lawyers.
Stoneridge is a huge - massive - case for one of the principal funders of the Left, America's Trial Lawyers.
Famed trial lawyer Bill Lerach's firm stands to make an estimated $700 million on the immediate cases - Stoneridge and Enron - and hundreds of millions more from the open season a Supreme Court decision favoring them would call on virtually every company that does business with publicly listed corporations in the US.
It's called "Scheme Liability," but the real scheme here is to open up the American economy to incessant financial raids by Trial Lawyers Inc.,
If the case goes the way Trial Lawyers, Inc. wants it to, you can be sure that in the years ahead they will find ever more inventive ways link any company that has done business with an alleged securities violator to the violation -- or argue that the company was "reckless" in not knowing that a securities violation had taken place in its customer or supplier. And since the stakes are so high in securities cases that the cases never go to trial, a decision that goes their way will be a license to extortion.
That's why, as important as Stoneridge is, the Trial Lawyers and the political Left don't intend to lose even if the court ruling goes against them
They have been waging a game of high intensity political hardball.
They tried to intimidate the SEC - and succeeded in getting the SEC to write a brief supporting the Trial Lawyer's view of the case.
But their attempt to intimidate the Solicitor General into supporting the SEC's brief didn't work.
So now they are trying to say it was illegitimate for the President and other members of the Administration to weigh in on the case.
That's highly misleading – presidents have done even more in the past. President Dwight D. Eisenhower, for example, helped draft the government's brief in Brown v. Board of Education.
The Left claims Stoneridge is about protecting investors - as if giving hundreds of millions to trial lawyers is, somehow, a plus for investors.
And the Left doesn't mention that the SEC already has full police powers, making the trial lawyers's plan for "scheme liability" wholly unnecessary to protect investors.
Unable, most likely, to intimidate the administration and the solicitor general, and worried that the SCOTUS ruling might not got their way, the left's political goal is to isolate the administration and set the case up in the media and the public's mind as "big business v. investors" – rather than what it is, Trial Lawyers, Inc. against the American economy.
They will scream about it in the blogosphere and Congress for the next year, try to hang it around the neck of the GOP in the 2008 election.
If they succeed and if the Ds win the next election, chances are you'll see legislation in the next Congress to write "scheme liability" into law – a law that would further enrich trial lawyers, a stalwart member of the Democratic coalition – at the expense of the American economy.
There are two really good posts on Stoneridge at ProfessorBainbridge.com today, including:
Lehn on the Impact of Post-Enron Enforcement
Writes Bainbridge: Lehn's paper strikes me as supporting the position I and others have taken in the Stoneridge case before the SCOTUS (our brief was discussed in a post earlier today). If public enforcement is working this well, there is no need to expand the scope of private enforcement (and, indeed, a risk of over-deterrence).
Also, see Bainbridge's other post today on Stoneridge. Here's the LINK.
I agree this case is very complicated but to just say that the trial lawyers are whats wrong is naive. Enron bilked their employees and investors out of billions and there is some evidence that others knew of this wrongdoing. The head of the SEC (a Republican) wants the US to side with the investors. To me this about the constant assault by the Bush administration on anyone that doesn't contribute to their causes.
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