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Second Circuit Rules on case against the SEC.
Dean Lawrence Velvel – “In my judgment, the opinion opens the door to wholesale abuse of regulatory powers whenever an agency wishes not to exercise power given it by Congress, regardless of how terrible the agency’s inaction may be. Now more than ever, Congress must act to correct the grievous injustice, since the courts won’t. I think that Congress should also denounce this opinion as a terrible deformation of congressional intent. It permits regulatory bodies to eviscerate Congress’ purposes at their discretion. Congress never intended discretion of that magnitude. (Did it intend, for instance, for the FBI to have the discretion not to investigate murders?). You will note that the court gives no specific reasons whatever as to why the plaintiffs allegedly fell short in showing that the SEC lacked justification for failing to act against Madoff (yet the court expressed “antipathy” for the SEC’s conduct). It is plain that the court could give no reasons justifying the failure (because there were none), and that it simply blinked when it came to holding a major governmental body liable for horrific misconduct — and thereby, as indicated, vitiated Congress’ purposes and opened the door to a wholesale screwing of citizens by agencies. As said, Congress should both denounce this and act against it.”
Click here for a copy of the opinion.
Click here for the amicus brief filed by [...]
A trustee in the liquidation of Bernard L. Madoff Investment Securities LLC was in Denver on Tuesday to discuss the $17.5 billion fraud case with local lawyers. About 250 people or entities with Colorado addresses were account holders in Madoff’s Ponzi scheme, said trustee Irving Picard, who was in town with his chief counsel, David Sheehan. Picard and Sheehan are lawyers with BakerHostetler, which has played an important role during the past four years in the Madoff investigation, and spoke with the firm’s Denver branch. Slightly more than half of the 250 with Colorado addresses had “net loser” accounts, meaning they lost money in their investments. More in the Denver Post [...]
Bernard Madoff’s investors can’t sue the U.S. Securities and Exchange Commission for failing to uncover his massive Ponzi scheme, a federal appeals court ruled. The regulator’s “regrettable inaction” is shielded by law, the New York-based appeals panel said today, upholding a lower-court decision to dismiss suits in which investors accused the SEC of negligence. The three-judge panel ruled that the “discretionary function” exception to a law permitting people to sue the U.S. government applies in cases filed by Madoff victims. “Despite our sympathy for plaintiffs’ predicament (and our antipathy for the SEC’s conduct), Congress’s intent to shield regulatory agencies’ discretionary use of specific investigative powers” defeats the investors’ claims, the court said. Read Bloomberg report [...]
A federal judge grilled lawyers for Citigroup Inc and shareholders on Monday over a proposed $590 million settlement of an investor lawsuit over its exposure to toxic mortgage assets, asking if the accord was fair given none of the bank executives named as defendants would contribute money to it.
U.S. District Judge Sidney Stein in Manhattan said that Citigroup’s current shareholders have been left to pay for the settlement under the current terms of the agreement. He said he was concerned about the impact on future bank conduct, citing the lack of any planned payments by individual defendants including former Chief Executive Charles Prince. “Should the plaintiffs not also be concerned with deterrence as an issue in the settlement?” Stein asked.
More on Reuters [...]
Wall Street has a new top watchdog, but it isn’t clear whether she will be in the room as her agency makes key decisions about whether to pursue some of the financial sector’s biggest stars. Mary Jo White, a former federal prosecutor who has spent the last decade as a lawyer defending banks, was confirmed by the U.S. Senate on Monday as the new head of the Securities and Exchange Commission. White pledged not to participate in SEC decisions for one year in matters involving former clients, which include Bank of America, JPMorgan Chase and Morgan Stanley. She also vowed not to return to the New York law firm Debevoise & Plimpton. More in the Huffington Post [...]
The Senate on Monday confirmed Mary Jo White as head of the Securities and Exchange Commission, dismissing concerns about her close ties to the Wall Street banks she will now oversee. Ms. White, a former federal prosecutor who spent the last decade defending JPMorgan Chase and other big banks, secured Senate approval by unanimous consent. Ms. White is expected to join the agency in the coming days, replacing Elisse B. Walter, who has led the S.E.C. since the departure of Mary L. Schapiro in December. Her arrival at the post comes at a time of transition for the S.E.C. and the public markets it regulates. The agency is under pressure from Congress to complete new rules for Wall Street and take aim at financial fraud. It also most confront the growing world of high-frequency trading, a business that continues to confound the agency, and money market funds, which the S.E.C. is seeking to rein in. Read New York Times report [...]
A friend of the president gets invited to great parties, the chance to hobnob with Hollywood celebrities and sometimes, if the friend gets in trouble, he can pull out a “Get out of jail free” card. There’s little else to explain how Jon S. Corzine, the former Democratic governor of New Jersey, appears to pay no price for “negligent conduct” that cost clients at the Wall Street firm MF Global Holdings nearly $2.1 billion. This comes from new findings by Louis Freeh, the former head of the FBI, who investigated the role of Mr. Corzine in the collapse of the financial firm. Read more in the Washington Times [...]
A court-appointed trustee is paying $506 million to victims of Bernard Madoff’s Ponzi scheme in the latest attempt to repair some of the financial devastation caused by the massive fraud. The partial reimbursements announced Monday are being sent to 1,103 Madoff account holders. That means the average check will be for about $459,000. The highest amount being doled out is about $116 million. It is the third round of payments to Madoff’s victims. Irving H. Picard, the court-appointed trustee overseeing the reimbursement effort, estimated about $5.4 billion has now been sent out to Madoff’s former accountholders. That’s about 58 percent of the $9.3 billion that Picard says he has been able to recover for the Madoff victims through legal settlements and court rulings. More in The Advocate [...]
On Thursday, Louis Freeh, one of the two bankruptcy trustees for MF Global and a former head of the FBI, released a report that for the first time squarely places the blame of the demise of the commodities trading firm on one person. Back in March 2010, MF Global’s board of directors created the position of global head of capital and liquidity risk, a response to an earlier trading blunder that had cost the firm more than $100 million. The position was created the same month CEO Jon Corzine, the former Senator and head of Goldman Sachs (GS), was hired to run the firm. So basically Corzine’s first assignment from the board was to hire this person. The job of the global head of capital and liquidity was to be the ultimate guard of MF’s cash, alerting the board if there was any chance the firm would run out. Basically, the buck was supposed to stop there on whether MF had enough bucks. As anyone familiar with the MF Global story will tell you, this person clearly failed, horribly. See CNNMoney report [...]
Even while accusing Jon S. Corzine and other former MF Global executives of “negligent conduct” that may have fueled the brokerage firm’s collapse, a bankruptcy trustee has agreed to postpone a lawsuit against them. Instead, Mr. Corzine’s lawyers will enter mediation next week with the trustee, Louis J. Freeh, according to people briefed on the talks who were not authorized to speak publicly. The development is an encouraging sign for Mr. Corzine, a former senator and New Jersey governor who underwent a humbling ouster when MF Global collapsed in October 2011. Lawyers for Mr. Corzine are also in negotiations with another MF Global trustee and some of the firm’s investors who filed a separate suit against him in 2011, the people briefed on the talks said. More in the New York Times [...]
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