Another Loophole for Corporate Fraud

flavio — Thu, 17 Jan 2008 17:10:56 +0000

Suppose that I’m the get-away driver for a bank robbery. I didn’t actually steal the money, but I certainly helped facilitate the theft. I would be categorized as an accomplice to the crime and subject to criminal prosecution. Furthermore, upon my conviction, the bank would be expected to try to recover the stolen monies (from the actual bank robbers and myself). This makes sense right? I enabled the theft and as such the bank has a right to try to recover its money from all those involved.

So why doesn’t this logic apply to corporate fraud?

Yesterday, the Supreme Court severely limited the ability of investors to sue businesses that helped hide the fact that corporate entities were cooking the books. The Court said that unless stockholders can show that they relied on the deceptive advice from these enablers to make their investment decision, they are up shit’s creek. So basically, a bank could help hide the fact that a company is really going bankrupt and profit from the investment into that company, without the fear of lawsuit; so long as they didn’t recommend that anyone buy that stock.

Now, I know that my bank robbery example isn’t the best metaphor, but there are some similarities. One company helped another hide its financial problems and, because of this court ruling, they cannot be sued by investors seeking to recover the money that was swindled from them. It’s like trying to say that the get-away driver shouldn’t be held accountable for the bank robbery.

The conservative majority on the court reasoned that the SEC and other government bodies should have the responsibility to pursue these enablers, rather than private litigants. Sure this logic makes sense in an ideal world; but in reality, the SEC has done next to nothing to fight against corporate fraud and its supporting actors. Thus, screwed-over investors have no recourse left but to go after these enablers in civil court. If a bank could prove that I was the get-away driver in a robbery but the cops didn’t care and wouldn’t prosecute me, you can be sure that they would drag me into civil court to recover their money (and would win.)

In this Supreme Court case, the SEC originally supported the plaintiff’s position that investors should be able to sue these enablers, but they were overruled by King George and his flunky for a Treasury Secretary, Paulson. They echoed the conservative mantra that lawsuits such as this destroy the economy and thus reinforce the notion that economics outweigh justice.

Since when is our Supreme Court supposed to weigh a case on the economic implications its potential verdict could produce? Have we forgotten that the courts are supposed to be a house of justice? Aren’t they supposed to leave economics to the economists?

What’s the moral of the story? You can help hide the bleak financial predicament of a publicly traded company, so long as you don’t tell people to invest in it. Lie, cheat, and steal and you’ll do alright in today’s America.

We All Lost: Reflection on the Immigration Debate

flavio — Fri, 29 Jun 2007 15:27:06 +0000

The immigration bill is dead and we now face a continuation of the status quo for at least another two years. It’s unrealistic to think that we might see comprehensive immigration reform in this country until after the next presidential and congressional elections; and even then, reform is only possible if one party secures significant dominance over the other. There doesn’t appear to be much room for compromise on this issue. It’s too early to predict who will win, but if current trends continue and the blatantly racist attitudes of our brethren go unabated, we will all lose.

Like many of my friends on the left, I thought that the bill being debated didn’t go far enough and was unacceptable on many grounds. The proposed guest worker program, which in fact would have increased the exploitation of the undocumented, would have been disastrous for all working people. Furthermore, provisions that make it harder to achieve family reunification are antithetical to what are supposed to be America’s guiding principles. So I’m glad that we had representatives that stood up for our values and voiced our opposition to certain elements of the plan. I’m glad that this bill was defeated because it was unworkable in its present form.

However, I also think that we all lost on this one. This bill was not defeated because Americans were upset about the inability for families to be reunified. It was not defeated because we were disgusted by the guest worker program. It was defeated because millions of Americans are scared that this country is being overrun by immigrants, specifically Latinos.

It wasn’t just the crazies on the extreme right who came out in large numbers against this bill; far too many middle-of-the-road Americans voiced their disgust at the idea that they have to share there towns with more than a handful of immigrants. They were incensed that they would have to share their suburbs and Wal-Marts with those who speak Spanish. There were a multitude of reasons given to explain why they opposed this immigration bill (perceived increase in crime, complaints about amnesty, worries about job loss/competition, etc.); but ultimately, these reasons for opposition were underscored by racist sentiments and an insecurity about “being outnumbered.”

We all lost because it is clear that racism and discrimination won. We all lost because the majority of Americans have forgotten that we are all human and we are all part of the same family. We have forgotten that how we treat each other is a reflection upon who we are.

The Activist » flavio

Another Loophole for Corporate Fraud

We All Lost: Reflection on the Immigration Debate