Category Archives: Legal

Bill Black: Obama and Holder Choose Banksters Over Whistleblowers

Yves here. At this point, the Obama administration’s fealty to banksters is a “dog bites man” story. Nevertheless, it’s useful to catalogue particular incidents to show how consistent its behavior is. The latest case study is its shoddy treatment of whistleblowers.

Read more...

Joe Firestone: The Lawless Society

Yves here. This post lays bare the depth of corruption in the US. We addressed the problem of what Joe Firestone calls “the lawless society” and presented some initial thoughts about the necessity of pressuring political parties rather than working within them in our Skunk Party Manifesto. A key section:

Corruption is the biggest single problem. Until we tackle that, frontally, it will be impossible to get any good solutions or even viable interim measures to the long and growing list of problems we face. Conduct that would have been seen as reprehensible 40 years ago, like foreclosing on people who were current on their mortgages, or selling drugs even when the company knows they increase heart heart attack and stroke risk enough to be fatal for a meaningful percentage of patients, barely stirs a raised eyebrow today.

As Frederick Douglass said:

Find out just what any people will quietly submit to and you have found out the exact measure of injustice and wrong which will be imposed upon them, and these will continue till they are resisted with either words or blows, or both. The limits of tyrants are prescribed by the endurance of those whom they oppress.

It has become fashionable to talk of outrage fatigue, but political and economic abusers have used that to press for more advantage. And events of recent weeks suggest that even a downtrodden and disenfranchised public is capable of rousing itself and acting when they have finally been pushed too far. Escalating violence by police and the utter indifference of local authorities to it has produced not just a backlash, but sustained protests. Similarly, while the publication of the CIA torture reports is unlikely to lead to real reform of the CIA, it has embarrassed our foreign collaborators and has confirmed the worst of what US critics and skeptics overseas believe. Even if the report produces little change in the US, it has ended any pretense that the US has moral authority in the world at large.

Read more...

Bill Black: Second Circuit Decision Effectively Legalizes Insider Trading

Yves here. Bill Black is so ripshit about a Second Circuit court of appeals decision that effectively legalizes insider trading that he doesn’t unpack the workings until later his his important post. Let’s turn to Reuters (hat tip EM) for an overview:

A U.S. appeals court dealt federal prosecutors a blow in their crackdown on insider trading on Wall Street on Wednesday, overturning the convictions of two former hedge fund managers charged with making illegal trades in technology stocks.

The 2nd U.S. Circuit Court of Appeals in New York said prosecutors presented insufficient evidence to convict Todd Newman, a former portfolio manager at Diamondback Capital Management, and Anthony Chiasson, co-founder of Level Global Investors.

The court held that defendants can only be convicted of insider trading if the person trading on confidential information knew the original tipper disclosed it in exchange for a personal benefit.

What does this mean in practical terms? The court has just provided a very-easy-to-satisfy roadmap for engaging in insider trading legally.

Read more...

Suit on Animator Wage Suppression Shows Another Face of How Capital Squeezes Labor

Mark Ames reports on the latest revelations in a major anti-trust case against Silicon Valley giants including Disney, Sony, Dreamworks, Lucasfilm, and Pixar. For tech titans, enough is apparently never enough.

The earlier chapters of this sorry saga exposed a long-standing scheme by which major tech companies including Apple, Google, Adobe, Intuit, Intel, Lucasfilm and Pixar colluded to suppress wages of an alleged one million workers. The collusion was agreed at the CEO level of all the participants and memorialized through written agreements.

A related private suit was filed last September by animator against nine movie industry heavyweights including Walt Disney Animation, Dreamworks Animation, Sony Pictures, LucasFilm and Pixar. It alleged similar conduct to the bigger Silicon Valley wage-suppression suit. Among other things, the companies not just compared pay levels but agreed to fix them, and also signed agreements not to recruit from each other.

An amended complaint in the animator suit added two studios to the complaint and far more important, exposed that the wage-fixing scheme was far longer standing that previously thought. K

Read more...

Jeffrey Sachs Channeled His Inner Bill Black – and Obama and Holder Ignored Him Too

Yves here. This post by Bill Black serves to illustrate the difficulties of effecting change. As much as Black in particular has been a forceful and articulate advocate for tougher bank regulation and prosecution of executives, arguments like his get at most polite lip service from the enforcers. Recall that Black is far from alone. Others who’ve called for a more tough-minded approach include Charles Ferguson of Inside Job, Eliot Spitzer, Neil Barofsky, Joe Stiglitz and Simon Johnson.

We are seeing more and more of the elite willing call for more aggressive measures to combat bank misconduct.

Read more...

Bill Black: Why the New York Fed Isn’t Trustworthy

Yves here. Readers may recall that we criticized the New York Times’ reporting on an important story on a criminal investigation underway involving both Goldman and New York Fed employees. A Goldman employee who had worked at the New York Fed and his boss were fired because the ex-Fed staffer allegedly had obtained confidential bank supervisory information. A New York Fed employee was also fired immediately after the Goldman terminations. The piece was composed as if the intent was to be as uninformative as possible and still meet the Grey Lady’s writing standards. Readers were left in the dark as to where the two Goldman employees fit in the organization and what the sensitive information was.

Bill Black dug through later news reports, did some additional sleuthing, and based on is experience as a regulator, concluded that there is no way the Goldman employee, Rohit Bansal, didn’t recognize that he was misusing confidential bank supervisory information. That matters because whether or not breach is criminal hinges on whether he “willfully” broke the law.

Read more...

Obama Pretends to Put Immigration Reform in Play

I’m reluctant to write about immigration reform, given that when the topic of illegal aliens comes up in posts on labor policy, too often there’s an upsurge of xenophobic, even racist, comments and a dearth of thoughtful discussion. So let this introduction serve as a warning: I’d like to use this piece to serve as a point of departure for discussing what a good immigration reform policy would look like, so we can have benchmarks for measuring what comes out of Obama’s promise that he would move immigration reform reform forward in an address Thursday evening.

But bear in mind that Obama’s speech and proposal for immigration reform is almost all public relations to cover up an action that is hard to swallow: making a bad situation worse by suspending deportations for illegal immigrants. Of course, cynics might argue that we’ve had flagrant non-enforcement of the law as far as elite bankers were concerned; why not extend that privilege to the other end of the food chain?

Obama’s pretext is that this action is a forcing device to get the Republicans to pass a “responsible” immigration reform bill. But the real political calculus is all too obvious.

Read more...

Private Equity Firms Start ‘Fessing Up to Cheating

The Wall Street Journal describes how some private equity firms are attempting to clean up their act by admitting to dubious practices in revised regulatory filings with the SEC.

There’s a wee problem with this approach. Securities law is not like the Catholic Church, where confession and a promise not to sin again buys you redemption.

Read more...

Exposing More Super Secret Private Equity Limited Partnership Agreements

Private equity fund managers keep insisting that private equity limited partnership agreements need to remain confidential or their businesses will suffer irreparable harm. We’ve already shown that claim to be ludicrous.

We published a dozen of these supposedly sacrosanct documents at the end of May. They had been accidentally made public by the Pennsylvania Treasury, but no one seemed to have noticed. They included funds of major industry players such as KKR, TPG, and Cerberus. Yet miraculously, they sky has not fallen in on their businesses as a result of the release of this information. We have obtained ten more limited partnership agreements from a source authorized to receive them who is not bound by a confidentiality agreement. These include limited partnership agreements from Blackstone, Oak Hill, and New Mountain, as well as smaller players. You can see all these limited partnership agreements here.

Read more...

Bill Black and Marshall Auerback Discuss Why Economists and Regulators Don’t Use “Fraud”

Yves here. Bill Black discusses his favorite topic, fraud, with Marshall Auerback of the Institute of New Economic Thinking. Some of this talk is familiar terrain for those who know Black’s work, such as Black’s well-argued criticism of the failure of financial regulators to make criminal referrals for misconduct in the runup to the financial crisis. Even so, many readers are likely to find new information here, such as the number of FBI agents assigned to handle white collar fraud, and how some regulators during the savings & loan crisis defied Congressional pressure to go easy on failing and defrauded banks, and the career costs they paid.

Read more...

State Street, Governor Elect Rauner Both Implicated in Pay-to-Play Scandals

The more rocks you turn over in public pension land, the more creepy crawlies you find. No wonder private equity has such a secrecy fetish. The most obvious, and most offensive to the public, are so-called pay-to-play scandals, in which public officials who are in a position to influence how funds are invested, take campaign funding from individuals or firms who are currently managing government funds or in short order get a mandate.

Read more...

AIG Bailout Trial Revelation: Morgan Stanley Told Geithner it Would File for Bankruptcy the Weekend it Became a Bank

I’m still hugely behind on the AIG bailout trial, and hope to show a ton more progress in the next week. I’m posting the transcript for days three the trial; you can find the first two days here and other key documents here.

The first week was consumed with the testimony of the painfully uncooperative Scott Alvarez, the general counsel of the Board of Governors, who Matt Stoller argued needs to be fired, and the cagier-seeming general counsel of the New York Fed, Tom Baxter. Unlike Alvarez, Baxter at least in text seemed to be far more forthcoming than Alvarez and more strategic in where he dug in his heels. But the revelations about the Morgan Stanley rescue alone are juicy. The main actors have sold a carefully concocted story for years.

Read more...

Matt Taibbi and Alayne Fleischmann Discuss JP Morgan Mortgage Fraud, Eric Holder CoverUp on Democracy Now

Even though many readers have already read Matt Taibbi’s new article on how Attorney General Eric Holder acceded to Jamie Dimon’s efforts to squelch a criminal prosecution of JP Morgan’s securitization of toxic mortgages, I thought it would be useful to present the Democracy Now discussion of the story, particularly since the whistleblower, Alayne Fleischmann, discusses the case in her own words. Amy Goodman also asks Tabbi late in the broadcast about his departure from First Look.

Read more...

Taibbi: Ex-JP Morgan Lawyer With Smoking Gun on Mortgage Fraud Stymied by Holder Cover-Up

Matt Taibbi has pulled the curtain back on an offensive and obvious bit of Obama administration bank cronyism that disappeared too quickly from public attention. Earlier this year, JP Morgan settlement negotiations over mortgage misconduct had broken down over price. When word got out that the Department of Justice had a criminal suit that it was ready to file, Jamie Dimon called the DoJ and went to Washington to negotiate a deal. Let us turn the mike over to Georgetown law professor Adam Levitin who wrote at the time:

Read more...