“Justice Anthony M. Kennedy, writing for the majority, said stockholders had no knowledge of the actions of the two vendors and thus cannot show those companies’ actions influenced investors “except in an indirect chain that we find too remote for liability.” “

This is just plain ridiculous. The principal information stockholders get on which to base all decisions about a company is in the SEC filings. The vendors took deliberate action to participate in the falsification of those filings i.e. fraud. I don’t get what is “indirect” about this chain.

Welcome to the world of result-driven jurisprudence.

From the New York Times article on Oct 9 2007:

I’ve highlighted the pertinent bit.

The difference between aiding and abetting and a primary violation is crucial to the outcome of the case, Stoneridge Investment Partners v. Scientific-Atlanta Inc., No. 06-43, and was the subject of intense debate during the argument. The reason was that in a 1994 case, Central Bank of Denver v. First Interstate Bank, the Supreme Court ruled there was no “aiding and abetting” liability under the securities laws. Congress responded by giving the S.E.C. the authority to bring such suits, while withholding the same authority from private litigation.

The evil lay with Congress, not the Supreme Court. Congress specifically legislated that private parties could not litigate.

Cheerio

Slumlord

Perhaps Professor Epstein, too, is a shill of the plutocracy?

Surely reasonable people can disagree on this case. I find it distressing that this doesn’t seem clear to you, and that you feel the need or at least the desire to shower those who do disagree with a stream of Vyshinskyesque rhetoric. There are more things under heaven and earth, etc.

Law – especially civil law – does not exist to punish wickedness wherever it may be. It exists to establish predictable consequences for actions.

Was what Motorola and Scientific-Atlanta did wicked? Perhaps. Should they be liable for it? Um, I think it depends on the law. Do you know the law in the matter? I am not a lawyer and I don’t, so I have no opinion on it. However, I find the likes of Bainbridge quite credible:

Stephen Bainbridge, William D. Warren Professor of Law at the University of California at Los Angeles, who has written extensively about Stoneridge, said the case exemplifies European perceptions of capricious litigation risk when doing business in the United States.
“[The defendants] allegedly knew this was essentially a straw man transaction for accounting considerations, but they never lied to the investors and that is what the securities laws are designed to address,” Bainbridge said.
“It’s the kind of case that conveys the notion our law casts a very broad net and you face significant liability risks [in the United States] that are not present elsewhere,” he said. “Companies find they can raise capital from investors who will purchase their securities even in jurisdictions that seemingly offer fewer protections. Maybe the investors are making a big mistake, but the fact is investors are buying those securities, so the question is: Have we gone overboard here in the U.S.?”

And if you really think that executives at the likes of Mot and SA go around openly scoffing at the law or boasting, like H.R. Haldeman, of dancing through it like a minefield, you know a lot more about the corporate culture of American finance than about the actual productive sector. I realize that the latter is small and getting smaller, and perhaps it can just be ignored. But…

Too bad there aren’t any more states where you could practice law just by passing the bar exam (assuming, of course, that you did want to practice law, but if nothing else being able to write your own demand letters and other nastygrams has certain advantages).

I wanted to go back to your comment some time ago about Jett. I’m sorry if it wasn’t clear, but I thought he was treated badly too. I’m no expert in SEC sanctions, but a books and records violation is ridiculous. I assume you’d have to be a firm principal for that to apply, and he wasn’t. The system made the errors, not him. It isn’t clear to me still whether he knowingly gamed the system or not (but if he understood the profits were phony, you would think he’d recognize the gig had to be up someday). But regardless, the firm did not lose money, merely stupidly paid him too much in bonuses. Since when is that a crime?

My beef was quite different, however: there is no scenario under which Jett can be a bad guy and his boss, Cerullo, be blameless, yet that is precisely where things came out. Jett made no effort to hide his actions. Everything was in full view, but management decided to play along with the fiction that there were zillions of arbitrage profits to be found in govvies. Appalling.