Federal judges are “throwing the book” at Wall Street fat cats who commit financial fraud, according to a September 8th article in Bloomberg.com by Cary O’Reilly and Linda Sandler entitled “Judges Punish Wall Street as Regulators Just Talk About
Reform.” Based on their rulings and comments, a growing number of federal judges are outraged with the culture of corruption on Wall Street that has brought our financial system to its knees, and disgusted with the apparent reluctance of regulators and Wall Street to institute meaningful reforms to prevent future disasters. With that in mind, and finding little in common with the defendants before them (most U.S. judges make less than a junior lawyer at a large law firm), these judges are taking matters into their own hands, issuing rulings that really send a message to those who might engage in similar misconduct.
Consider the following examples in the article:
- U.S. District Court Judge Shira Scheindlin recently rejected the First Amendment Free Speech defense that rating firms like Moody’s, Standard & Poors and Fitch have successfully hidden behind for years, and allowed a class action based on fraudulent AAA ratings of toxic debt to proceed to trial.
- U.S. District Court Judge Denny Chin sentenced Bernard Madoff to the maximum 150 years in prison, longer than the CEOs of Enron and WorldCom who were convicted of fraud, and referred to his crimes as “extraordinarily evil.”
- U.S. District Court Judge Richard Sullivan sent Madoff’s chief financial officer, who plead guilty and cooperated with prosecutors, to jail as a flight risk despite prosecutors’ request for bail, commenting that the proposed bail was “completely dwarfed by the amount of restitution and forfeiture in this case.”
- U.S. District Court Judge Jed Rakoff sentenced Monster Worldwide, Inc.’s chief financial officer to two years in jail for improperly accounting for backdated stock options, which earned him $14.5 million, rejecting his attorney’s proposal for no prison time for a “technical” crime that the judge regarded as “appalling.”
- Last month, Judge Rakoff refused to approve $33 million settlement (that the SEC recommended) between Bank of America and the SEC to resolve findings that Bank of America failed to disclose that it had agreed to $3.6 billion in bonuses and incentives for Merrill Lynch employees in connection with that business combination, rejecting the explanation that executives had relied on attorney’s advice in not disclosing this information to the investing public, and asking whether the attorney’s should be held legally responsible.
- U.S. District Court Judge Jack Weinstein, after a jury found a Credit Suisse broker guilty of securities fraud, in considering what sentence to impose, instructed lawyers on both sides to put the defendant’s acts in the context of “how pernicious and pervasive was the culture of corruption” on Wall Street that “brought our financial system to its knees.”
- U.S. District Court Judge Gerald Lynch recently urged Congress to legislatively repeal a U.S. Supreme Court decision that prohibits aggrieved investors from recovering from secondary participants, such as lawyers and accountants, who aided and abetted a primary violator’s securities fraud. The judge had recently been forced to dismiss an investors’ lawsuit seeking to recover from a lawyer for bankrupt Refco, Inc. for his alleged role in “cooking the books” to conceal hundreds of millions of dollars of debt. Judge Lynch commented: “It is perhaps dismaying that participants in a fraudulent scheme who may even have committed criminal acts are not answerable in damages to the victims of the fraud.”
According to James Cox, a professor of law at Duke University, “If we’re serious about protecting investors and consumers, we have to understand it’s individuals not entities who commit violations and should be hung out to dry.”
J. Boyd Page, a senior partner of Page Perry in Atlanta said, “While we applaud these tough sentences, the apparent reluctance of Wall Street and regulators to make equally tough and effective regulatory reforms underscores the need for an aggressive bar of private attorneys to represent the interests of the victims of financial fraud.”
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys are actively involved in counseling institutional and individual investors regarding their investment problems. For further information, please contact us.