Why Isn’t Wall Street in Jail?
Matt Taibbi asks this interesting question in the current issue of Rolling Stone, and answers…
Financial crooks brought down the world’s economy – but the feds are doing more to protect them than to prosecute them.
And after describing the chummy atmosphere of an all-day conference attended by “1,500 or so of the country’s leading lawyers who represent Wall Street, as well as some of the government’s top cops from both the SEC and the Justice Department,” where the best and brightest of the million-dollar lawyers who represent Wall Street were Assistant U.S. Attorneys or “prosecutors” for the SEC only yesterday, before they started collecting their deferred bribes, Taibbi gets right down to the nitty-gritty…
But the real fireworks came when Khuzami, the SEC’s director of enforcement, talked about a new “cooperation initiative” the agency had recently unveiled, in which executives are being offered incentives to report fraud they have witnessed or committed. From now on, Khuzami said, when corporate lawyers like the ones he was addressing want to know if their Wall Street clients are going to be charged by the Justice Department before deciding whether to come forward, all they have to do is ask the SEC.
“We are going to try to get those individuals answers,” Khuzami announced, as to “whether or not there is criminal interest in the case – so that defense counsel can have as much information as possible in deciding whether or not to choose to sign up their client.”
Aguirre, listening in the crowd, couldn’t believe Khuzami’s brazenness. The SEC’s enforcement director was saying, in essence, that firms like Goldman Sachs and AIG and Lehman Brothers will henceforth be able to get the SEC to act as a middleman between them and the Justice Department, negotiating fines as a way out of jail time. Khuzami was basically outlining a four-step system for banks and their executives to buy their way out of prison. “First, the SEC and Wall Street player make an agreement on a fine that the player will pay to the SEC,” Aguirre says. “Then the Justice Department commits itself to pass, so that the player knows he’s ‘safe.’ Third, the player pays the SEC – and fourth, the player gets a pass from the Justice Department.”
So the “incentives” which the SEC offers cooperating Wall Street insiders include immunity from prosecution by the Justice Department, but they can wait until the SEC tips them off that prosecution is imminent, before they come forward.
This is a reward for whistle-blowing that only gets paid when the DOJ has already made its case, and the “cooperating witness” is useless, but he or she gets a free pass anyway.
And that isn’t speculation from some left-wing conspiracy theorist in a tin-foil hat.
It’s right out of the mouth of Robert Khuzami, the Director of Enforcement for the United States Securities and Exchange Commission.