Hey, just like BofA!

Another settlement, another DK from a judge:

“A federal judge refused to approve the Securities and Exchange Commission’s $75 million settlement with Citigroup Inc. over the bank’s disclosure of subprime-mortgage problems, saying she is “baffled” by the proposed pact.

The move by U.S. District Judge Ellen Segal Huvelle represents another challenge for the SEC as it tries to punish financial institutions blamed for the financial crisis.

The judge, striking a frustrated tone, fired several questions at the SEC, among them why it pursued only two individuals in the case and why Citigroup shareholders should have to pay for the alleged sins of bank executives.”

My issue with the proposed Citi settlement was that it is a) too small; and 2) too limited in executives covered. There were many more people involved in Citi’s $40 billion misstatements than the two execs cited here.

Oh, and U.S. District Judge Ellen Segal Huvelle seems to have the same fundamental misunderstanding about punishing shareholders that Judge Jed S. Rakoff of Federal District Court in the Bank of America case did. Shareholders in corrupt companies are supposed to be punished . . .

>

Previously:
Punishing Shareholders? Nonsense (August 3rd, 2010)

Source:
Judge Won’t Approve Citi-SEC Pact
KARA SCANNELL
WSJ, AUGUST 17, 2010
http://online.wsj.com/article/SB10001424052748704868604575433833841630548.html

Category: Credit, Legal

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

29 Responses to “Judge DKs Citi-SEC Settlement”

  1. What she really means is that agency costs prevented shareholders from effectively being able to exercise much oversight in what the managers of the enterprise did. Which is more or less true with all publicly-traded corporations these days. But how do you punish the managers w/out punishing the shareholders? Forget the fines on the corporation and put the managers in jail. If Citi were a Madoff-style $40 billion dollar fraud, that’s exactly what would happen.

    But a $75 million corporate fine for the $40 billion dollar fraud of two individuals, and no jail time? That just makes agency costs even more expensive. It’s part of why retail investors need to look extremely hard before they leap into stock ownership in this day and age.

  2. Julia Chestnut says:

    I agree with Curmudgeon – and the Judge. There was an old, efficient-markets hypothesis idea that the fine would punish shareholders and therefore make them punish the company. Only they no longer have the ability to do that – management, the actual malefactors, are completely entrenched.

    So aside from any signalling to the market that the losers who are looting the company are pariahs, what is the purpose of fining a company? Retribution and repayment. $75 million on a $40 billion fraud? It just adds insult to injury.

    When you call something a fraud, by definition the shareholders did not choose the action, and punishment of them is misplaced. The crumbs from the fraud dribbled down to their table, but they should be punished instead of the active defrauders? Something is seriously wrong here. The SEC is a toothless old lion. I’m glad that the Judiciary still has some sense of outrage.

  3. Petey Wheatstraw says:

    “Shareholders in corrupt companies are supposed to be punished . . .”

    Corrected and expanded: Shareholders in corrupt corporations are supposed to be punished, while officers and management and insiders hide behind the corporate shield with their skimmed and laundered gains.

    We live in a corporatocracy. Corruption without consequence is inherent.

  4. droubal says:

    Finally, a judge that gets it.
    Shareholders have no control over these companies. It is the banksters, that run these companies, that should be fined. All the scum at the big six should be looking through bars for what they have done.

    I hope future cases begin to focus on the real miscreants. That will be a sign that real reform may actually occur someday.

  5. b_thunder says:

    Big Picture readers with “legal” background:

    Does the SEC/Goldman settlement need to be approved by a judge?

    If so, what are the chances for a “3 in a row” decisions against the original terms of the settlements? (BA,C, GS)

  6. ACS says:

    The de jure owners of the big corporations are the pension and mutual find managers, the de facto owners are the management. Any real solution must involve both.

  7. Petey Wheatstraw says:

    ACS:

    True. But, any real solution should also force the return of ill-gotten gains, plus a substantial penalty (fines AND jail time) for those instrumental (by evidence or proximity/association, who knew or should have known, by omission or commission) in advancing the underlying fraud.

    Unless the guilty have a net loss imposed on them (in this case, the loss of money and freedom), there is no reason or incentive to discontinue the looting.

  8. b_thunder:

    Yes, the judge has to approve it. But there’s no widow and orphan shareholders in the Goldman case, just smelly financiers that got burned playing with fire.

  9. destor23 says:

    This is a rare case where I disagree with Barry. Shareholders can’t discipline wayward managers without hurting themselves. I think we’re expecting too much from them.

  10. Good point, B… “Shareholders in corrupt companies are supposed to be punished . . .” Now, what about those higher up in the capital structure?

  11. ACS says:

    Petey, I agree. Punishment of individuals is vital and that is what has been outrageously lacking in the response so far. My prior comment was about longer term solutions.

  12. FrancoisT says:

    (Groan!) “Shareholders in corrupt companies are supposed to be punished ”

    Not again?
    Barry, with the extraordinarily limited rights shareholders have in this country, the excessive deference to wealth prosecutors and the whole judicial system have, and the numerous accounting shenanigans permitted, you really want to push this meme again?

    GRRRR!!

    It bears repeating: Until there are criminal prosecutions for those who decide to commit fraud behind the corporate shield, corporate behavior just won’t change! It’s that simple.

    This BULLSHIT about punishing shareholders without going after the executives has been the perfect excuse for corporate executives to convert judicial punishment into a mere cost of doing business, at no personal cost to them while shareholders are the only ones getting shafted.

    I’ll go further: if corporate behavior isn’t modified by real punishment, a great deal more corporations will have to engage in fraud to stay competitive: Tell me where shareholders will go then? And what about the whole economic system?

  13. MorticiaA says:

    FrancoisT @ 11:54 am makes valid points and I don’t disagree.

    That said, however, I checked the top holders of Citi common shares and found the following owners (behind Uncle Sam, of course):
    Gov’t of Singapore
    State Street
    Vanguard
    Blackrock
    Paulson & Co.
    Fidelity.

    Am I really supposed to consider these holders “victims?” If anyone can pressure management into doin’ the right thing it’s these people, but they have apparently not been weilding their power. At all.

  14. obsvr-1 says:

    If everyone agrees that a penalty is to influence behavior – then the penalty has to be applied to those whose behavior needs to be modified. By not applying the penalty, either monetary or incarceration, then we are stuck with a cycle of unethical behavior. Just like the wallstreet bailout perpetuates privatized gains and socialized losses, penalizing anyone other than the bad actors perpetuates bad acting.

    Its a joke to penalize the shareholders as if somehow they were complicit through their investment in supporting unethical companies or executives. I guess I would go along with this line of thinking if there was some way of a priori knowing who these companies are (e.g. I accept any penalty if DrugCartel-inc is fined). I have read a lot of annual reports and disclosure documents and have yet to find the clause that discusses the unethical nature of the company or executives.

  15. Natacuy says:

    Flip the question: Should shareholders in corrupt companies be rewarded? What kind of financial system does that reinforce?

  16. mbelardes says:

    I think what these judges are trying to get at is eliminating the ability for executives to do whatever they want and then pass the costs off to the shareholder.

    The Executives, Officers, and Board Members responsible for these blowups are staunch supporters of the “punish shareholders” argument.

    You talk about Citi/BofA as if their shareholders own the shares knowing they banks were corrupt and should therefore be punished for the actions of Execs, Officers and Board Members. Is that really reasonable?

    Corporate law is a mess of this problem. Shareholders have limited rights and if they want to sue to fix things, they are literally suing themselves. Perhaps we need better corporate laws before just punishing shareholders as if that will cure the problem.

  17. TDL says:

    Some commentators have already alluded to or explicitly stated that large shareholders (i.e. mutual funds, pension funds, & other institutional players) are the largest shareholders. At what point does the SEC, federal & state prosecutors step up to the plate and begin going after these large shareholders for not fulfilling their fiduciary obligations (I am specifically referring to m.f.s & pension funds.) It is beyond obvious (in my view at least) that many current and past corporate chieftains should have their bonuses clawed back, should be fined, and should be prosecuted criminally. Fraud is fraud, the enablers & the perpetrators should both be punished.

    Regards,
    TDL

  18. Mysticdog says:

    The shareholders are like the angels in heaven. The mere act of owning stock elevates one to an untouchable status, where the only allowable outcome is more and more wealth pouring into your ivory hands. Anything that could alter this arrangement is by definition an unjustifiable evil, for it is only through their wisdom that The Invisible Hand can further perfect our world.

    Shareholders have made tons of money turning a blind eye towards the malfeasance of corporate America. Giving them something (anything) to think about regarding the long term implications of their actions and responsibilities beyond pushing “buy” and “sell” on their keyboards could only be a good thing for everyone.

    Longterm, anyway. Which is of course why it will never happen.

  19. Mysticdog says:

    Perhaps we need better corporate laws before just punishing shareholders as if that will cure the problem.

    That would be great, but there is absolutely no incentive anywhere in the system for anyone to pressure lawmakers to do that. Everything is designed to absolve personal responsibility, and no one playing the game wants to change that. I don’t know of anyone who takes a quarterly statement at face value, and most business reporting is done with a wink and a nod. For instance, every shareholder knows golden parachutes for failing executives are bullshit, but even that very obvious bit of corruption has gone unchallenged for decades now. They could vote with their feet anytime they wanted too, but they would rather keep gambling that the most corrupt companies and CEO’s will still kick up their stock values in the weeks and months they might own those stocks.

  20. TakBak04 says:

    @FrancoisT and FrancoisT Says: Says:

    I am a shareholder in a highly regarded Value Mutual Fund pushed by a 401-K Manager that was heavly weighted in the “top banks.” We had been forced to go with the MFM who recommended it because of a job change where we had to move our 401-K to one that the New Company preferred. The fund had an excellent rating and long term stable management. Probably some savvy folks who read BR’s site were invested in it. It crashed…and I lost about $10,000. I won’t get that money back and the Mutual Fund Manager eventually lost his job when clients pulled out of the fund because of the steep loses. I imagine many other MFM’s lost jobs because their clients also pulled out. Why this fund didn’t see what was coming and rebalance has always been the question that’s nagged at me. They stayed with the same Banks as the crashed and burned which meant that Institutions and Pension funds who were invested in this Mutual Fund took their hit, too. Thousands of people and other burned by this. Should we be blamed for just making a “stupid” investment? It was not our only investment — we were balanced ….but it was a big hit to our overall portfolio..

    And, if one looks at my loss multiplied and then my tax dollars being used to bail out the banks that were in this MF…you can see that the losses to “investors” and “taxpayers” who weren’t involved with the banks and their products have been devastating as it all plays out. Yet, who has gone to jail at the top? The Mutual Fund is still out there and still being recommended by top financial sites. It’s still underwater from just before the crash. It ‘s still invested in the same Banks (those who survived) CITI, BOA,GS. A sucker is born every minute, I guess.

  21. TakBak04 says:

    Correction: “I was a shareholder in that Mutual Fund.” I got out of it.

  22. FrancoisT says:

    “Should we be blamed for just making a “stupid” investment?”

    Absolutely not! 401Ks have been gradually set up as a guaranteed annuity for the financial industry. The individual investor has no real power except to say Yes, I invest or No I don’t.

    “Yet, who has gone to jail at the top?”

    Excellent question that Andy Xie addressed a while ago. Of course, no one in the US elite would listen to him:

    Why protest the bailout? In previous financial crises, big shots who contributed to bubbles went to jail; Americans expect heads on pikes after a financial crisis. Jailing even a few crooks is extremely important because it resets the system with a new psychology. For example, after the junk bond bubble burst in the 1980s, junk bond king Michael Milken and top executives at many bankrupt savings and loans went to jail. And after the IT bubble burst in 2000, jail terms were ordered for top guys at Enron, Tyco and even some Wall Street analysts.

    The bubble that just burst was bigger than any in the past, yet none of the big shots went to jail. Instead, the president has dined with them and begged them to support his financial reforms. Americans see this as a farce. And if the Obama administration is unwilling to change, voters will choose someone else.

    In addressing the financial crisis, Obama’s team continued a Bush administration policy aimed at protecting the status quo. Obama didn’t have to, but the government needed a financial system to protect the economy. [FT: This is highly debatable, to say the least!] It could have let the system go down before nationalizing it, leaving a clean sheet for a new system without the flaws that led to the bubble. Instead, the Obama administration created an enemy to its own financial reforms by bailing out the existing system wholesale. No one could expect the same people who benefited from the system’s flaws to support abolishing them.

    And that is why we’re still stuck economic and socially, and shall be until a modicum of basic trust and fairness is reestablished.

    With DC being the clusterfuck it is now, I’m not holding my breath. BTW, as another example of how dangerous the actual political paralysis and lack of courage in Washington is putting this country on a economic downward path: China and the EU are literally eating our lunch in sustainable energy. Check those numbers:

    http://www.greentechmedia.com/articles/read/awea-announces-dismal-numbers-for-1h-2010

  23. mbelardes says:

    I should reiterate. You cannot “punish” the shareholder. Are you talking fining a company or “piercing the corporate veil” (as the lawyers call it).

    Some of you are talking about fining a corporation (cents off a share isn’t a punishment). Some of you are talking about going after mutual funds that own large stakes in companies. There is a HUGE difference.

    What exactly is your end goal or point? If the Executives, Officers, and Board Members are all skimming money out of the Shareholder’s pocket to the tune of millions and in the end they get the Golden Parachute anyway and the Shareholders get caught holding the empty bag, what good does it do for America if you start punishing the Shareholders?

    I want everyone in this board to tell me who manages the largest fund held in your retirment plan and what actions they took or did not take regarding the largest position in their fund to ensure good corporate governance and corporate social responsibility. Can’t do that? That is because we are in the world of the passive shareholder. And even the mutual funds out there aren’t talking about active management of the positions they take.

    The financial system is not adequately set up to encourage the “activist shareholder” that you seem to want to hold accountable. All of Corporate law is geared towards excusing the Shareholder from personal liability and limiting their “punishment” to the loss of the full value of the stock held. This is now almost irrelevant as hedging strategies and the ability to just sell the stock allows shareholders to avoid the downside or at the very least share the downside with market participants.

    So punish the shareholders all you want but the Executives, Officers, and Board Members have all the power and create all the problems and then they walk away with their millions and leave the Shareholders to suffer the consequences.

    As Bob Rubin how he felt about this case! Ask Dick Fuld what he thinks about punishing Shareholders! Ask John Thain what his first reaction was!

    You are playing exactly into the hands of the culprits.

  24. bruerr says:

    But the noose is slowly tightening. The FCIC has undercovered documented illegal behavior, while a newly revitalized SEC opens more cases.

    Doubt in this “settlement” offer (if you can call it that), coming behind the GS and MER/BOA settlements doubts. That leaves 2 of 3 judges questioning the vitality and sobriety of the SEC.

    I would add concern that the SEC held down potentially a lot of evidence that it gathered in the GS/Abacus settlement. The SEC was in a better position to show a pattern of ABACUS-alike deception, and should have filed two or three similar complaints against GS, to give their “civil” claim more severity and show the nation what GS was really up to. @ Pattern misconduct. Pattern of misguiding targeted clients – Fraud in the Inducement.

    I have expressed concern the SEC had your man on a tether, and he did his best to make it seem “tough enough.” But it is my impression he could have swung a mightier bat, in the enforcer or clean-up role, by filing a series of cases against GS, to inflict much more substantial settlement and call for a ban of some sort.

    The baseball bat is not a nod to violence as much as it is a nod to how the financial industry in N.Y. likes to compare itself to athletics, wherein “the players” in high finance have some type of self aggrandized “heavy hitter” fantasy to go along with notions of their athletic prowess.

    Executives in these large brokerage houses like to compare themselves to athletes. Well, lets look at the ban and fines USC (Trojans) got for bad behavior of a few athletes: Two year postseason ban. Loss of 30 schlarships. Leave it to the offending party to file the appeal, after the ban is imposed. That is the correct way to serve out deterrent.

    [[[

    NCAA delivers postseason football ban …The rulings are a sharp repudiation of the Trojans’ decade of stunning football success under Carroll, .

    You might want to send a memo to Robert Khuzami.]]]

    Prosecuting pattern behavior is a type of action more dignified for the SEC to do, than for the SEC to dump it off on the private sector (and imply they can take up individual civil action with GS if they want – while knowing some private institutions will not do that because of GS connections in government). …Knowing also GS got some backing from Federal agencies and have plenty of money left over from that to cause a smaller, private company to suffer more anguish.

    (Thanks for “protecting investors” SEC.)

    This action by the Court should cause anyone who is watching how the SEC performs, more concern, not just at financial industry abuse, but as the pattern is now manifesting, how soft the SEC is on offensive behavior. The NCAA does more with less money and resources. When it makes a decision to penalize an institution, that institution hurts, not just for one quarter, but for several years, and sometimes is stripped of even championship titles. This happens in other “athletic” sports as well.

    The SEC (after 20 years or more you would think they could figure this out on their own) would be more persuasive and respected, if it was handing out ban-actions, recommendations for criminal prosecution and censure with its settlements.

    For all their efforts, and being understaffed, they should be hitting these top most offenders with more serious “settlement” offers that truly penalize. (GS represented by USC in this example. Top teams get hit the hardest, because more is expected of them and their “history and traditions” boast of and call for much higher standards to begin with.)

    Sometimes the shepherd breaks a lambs leg, because they stray too far and too often, thus endangering the herd; all assets associated. It may seem severe, but it makes their job a bit easier in the long run, and being understaffed as they so often complain … it is essential. Ask the shephard who is understaffed. They have to do it.

    The SEC should be breaking legs, livelihoods or something. Setting down harsh and very uncomfortable penalties. A ban is such a penalty. Recommendation for criminal prosecution and psychological evaluation is another. To discern potentiality of white collar criminal compulsive tendencies. Give the rest something to think about. Cause the reputation of the SEC to improve. Enforcers in the public sector have no qualm about imposing stiff sentences on the lower and middle class to prove a point that they are NOT being soft on crime. Likewise the NCAA sets the bar high up for all to see. They are NOT soft on member institutional negligence and omission, nor on industry-wide offenses.

    What exactly has the SEC acting so squeamishly?

    Barry, I saw your comments on the other thread about serious punishments coming. You sometimes come across as a think tank scholar, acting like all the public wants, is to see are petty purp walks. I hear this language tossed around carelessly quite often on financial news networks and written about carelessly as if to demoralize the public for being held to a different standard in financial fraud and such burdensome matters.

    I note you often like to make wagers when boasting of the SEC’s effectiveness. Care to make a wager on if the SEC can actually repair its image and do some substantial good for a change?

    Lets us the example of the NCAA as our measuring stick. They do not take as long to hand down their verdicts or condemnations. They do far more with less and (for all the privilege) do not complain about it.

    And one last thing: It is the bank financed lobby and think tank agencies such as Rountable, and Peterson who put these fake compensation committee experts out in the public to wax eloquent about how esteemed are these so called executives in high finance. So why not you and I start advocating they get treated like athletes when they fuck up their sport.

  25. ACS says:

    Are fund managers legally required to vote their shares for the benefit of the fund’s shareholders?

  26. bruerr says:

    From an earlier thread

    …….“But the noose is slowly tightening. The FCIC has undercovered documented illegal behavior, while a newly revitalized SEC opens more cases.

    Doubt in this “settlement” offer is coming behind the GS and MER/BOA settlements doubts. That leaves 2 of 3 judges questioning the vitality and sobriety of the SEC.

    I would add concern the SEC held down potentially a lot of evidence that it gathered in the GS/Abacus settlement. The SEC was in a better position to show a pattern of ABACUS-alike deception, and should have filed two or three similar complaints against GS, listing different parties involved, to give their “civil” claim more severity and show the nation what GS was really up to. @ Pattern misconduct. Pattern of misguiding targeted clients – Fraud in the Inducement.

    I have expressed concern the SEC had its enforcer on a tether, and Robert Khuzami did his best to make it seem “tough enough.” But it is my impression he could have swung a mightier bat, in the clean-up role, by filing a series of cases against GS, to inflict much more substantial settlement and call for a ban of some sort.

    The baseball bat is a nod to how the financial industry in N.Y. likes to compare itself to athletics, wherein “the players” in high finance have some type of self aggrandized “heavy hitter” fantasy to go along with notions of athletic prowess.

    Executives in these large brokerage houses like to compare themselves to athletes. Well, lets look at the ban and fines USC (Trojans) got for bad behavior of a few athletes: Two year postseason ban. Loss of 30 schlarships. Leave it to the offending party to file the appeal, after the ban is imposed. That is the correct way to serve out deterrent.

    NCAA delivers postseason football ban:

    …. …The rulings are a sharp repudiation of the Trojans’ decade of stunning football success under Carroll, .

    Prosecuting pattern behavior is a type of action more dignified for the SEC to do, than for the SEC to dump it off on the private sector (and imply they can take up individual civil action with GS if they want – while knowing some private institutions will not do that because of GS connections in government). …Knowing also GS got some backing from Federal agencies and have plenty of money left over from that to cause a smaller, private company to suffer more anguish.

    (Thanks for “protecting investors” SEC.)

    This action by the Court should cause anyone who is watching how the SEC performs, more concern, not just at financial industry abuse, but as the pattern is now manifesting, how soft the SEC is on offensive behavior. The NCAA does more with less money and resources. When it makes a decision to penalize an institution, that institution hurts, not just for one quarter, but for several years, and sometimes is stripped of even championship titles. This happens in other “athletic” sports as well.

    The SEC (after 20 years or more you would think they could figure this out on their own) would be more persuasive and respected, if it was handing out ban-actions, recommendations for criminal prosecution and censure with its settlements.

    For all their efforts, and being understaffed, they should be hitting these top most offenders with more serious “settlement” offers that truly penalize. (GS represented by USC in this example. Top teams get hit the hardest, because more is expected of them and their “history and traditions” boast of and call for much higher standards to begin with.)

    Sometimes the shepherd breaks a lambs leg, because they stray too far and too often, thus endangering the herd; all assets associated. It may seem severe, but it makes their job a bit easier in the long run, and being understaffed as they so often complain … it is essential. Ask the shephard who is understaffed. They have to do it.

    The SEC should be breaking legs, livelihoods or something. Setting down harsh and very uncomfortable penalties. A ban is such a penalty. Recommendation for criminal prosecution and psychological evaluation is another. To discern potentiality of white collar criminal compulsive tendencies. Give the rest something to think about. Cause the reputation of the SEC to improve. Enforcers in the public sector have no qualm about imposing stiff sentences on the lower and middle class to prove a point that they are NOT being soft on crime. Likewise the NCAA sets the bar high up for all to see. They are NOT soft on member institutional negligence and omission, nor on industry-wide offenses.

    What exactly has the SEC acting so squeamishly?

    Barry, I saw your comments on the other thread about serious punishments coming. You sometimes come across as a think tank scholar, acting like all the public wants, is to see are petty purp walks. I hear this language tossed around carelessly quite often on financial news networks and written about carelessly as if to demoralize the public for being held to a different standard in financial fraud and such burdensome matters.

    I note you often like to make wagers when boasting of the SEC’s effectiveness. Care to make a wager on if the SEC can actually repair its image and do some substantial good for a change?

    Lets us the example of the NCAA as our measuring stick. They do not take as long to hand down their verdicts or condemnations. They do far more with less and (for all the privilege) do not complain about it.

    And one last thing: It is the bank financed lobby and think tank agencies such as Rountable, and Peterson who put these fake compensation committee experts out in the public to wax eloquent about how esteemed are these so called executives in high finance. So why not you and I start advocating they get treated like athletes when they fuck up their sport.

  27. philipat says:

    @Petey Wheatstraw

    “Corrected and expanded: Shareholders in corrupt corporations are supposed to be punished, while officers and management and insiders hide behind the corporate shield with their skimmed and laundered gains.

    We live in a corporatocracy. Corruption without consequence is inherent.”

    My thoughts entirely. The shareholders are supposed to be punished, but this is not the entire picture:

    1. The BOD and particularly the Chairman are supposed to represent the interests of the Shareholders. They don’t, the system is broken.

    2.The BR statement also assumes, I would hope, that shareholders are punished equally with the reponsible executives and applicable oversight structure. This doesn’t happen, the system is broken as with the rest of Government as it facilitates everything for the Corporatocracy, not “We the people” it is supposed to represent.

    Bottom line: The system is broken.

  28. TakBak04 says:

    @philipat says in reply to @ Petey Wheatstraw:

    BOTTOM LINE—THE SYSTEM IS BROKEN

    My thoughts entirely. The shareholders are supposed to be punished, but this is not the entire picture:

    1. The BOD and particularly the Chairman are supposed to represent the interests of the Shareholders. They don’t, the system is broken.

    2.The BR statement also assumes, I would hope, that shareholders are punished equally with the reponsible executives and applicable oversight structure. This doesn’t happen, the system is broken as with the rest of Government as it facilitates everything for the Corporatocracy, not “We the people” it is supposed to represent.

    Bottom line: The system is broken.

    ———

    SO…what do we all do now? That’s the question that runs around and around with each new revelation.

  29. obsvr-1 says:

    I know, maybe they should try to ENFORCE the laws and punish the bad actors … why spend all the time and money creating the accounting standards, the securities laws, regulation and corporate law if we are not going to enforce them. Another interesting note is to find the speck of “Enforcement for Financial Crimes” on the US Budget poster http://www.wallstats.com/deathandtaxes/
    Perhaps doubling or tripling down on the size of the enforcement resources would be a good start.

    Sarbanes/Oaxley has created a tremendous drain on small and large business alike — billions of dollars spent to structure corporate accounting and reporting processes and reorganization to comply with the law. If the SEC and DOJ are not going to enforce these laws and prosecute the offenders then we have inflicted a lot of economic friction for no reason. Jeff Skilling should have a bunch of visitors to engage with from this last round of corporate malfeasance and fraudulent actions. Heaven knows that ultimately Ken Lay will.