The Free Press, Mankato, MN

November 6, 2013

Our View: Get serious on financial crimes

Why it matters: The threat of jail time should get white collar criminals and their enablers to think twice


The Mankato Free Press

---- — The U.S. Department of Justice has taken a serious and significant step to finally treat financial crimes in the same aggressive way it would treat drug cartels, environmental abusers and anti-trust cases.

The prosecution of SAC Capital Advisors by the U.S. Attorney in Manhattan recently brought about the first guilty plea by a large Wall Street firm in more than a decade. It’s a fact that probably stuns most Americans —that only one Wall Street firm has faced the music after nearly a decade of financial crimes that have devastated average investors, citizens and small businesses on Main Street.

The investigation and prosecution took nearly a decade and spanned Republican and Democratic administrations. SAC Capital pleaded guilty to five counts of insider trading in the original indictment and agreed to pay a fine of $1.2 billion. Eight of its former traders also have been charged with securities fraud.

Experts say the case may mark the beginning of a more aggressive approach to firms violating securities laws who once may have been considered “too big to jail.”

U.S. Attorney for Manhattan Preet Bharara in announcing the settlement said that “No institution should rest easy in the belief that it is too big to jail.” He called the fine “steep but fair,” and “commensurate with the breadth and duration of the charged criminal conduct,” according to a report in The New York Times.

Investor and SAC Capital owner Steven A. Cohen has personally escaped criminal prosecution so far, but officials say the U.S. Attorney’s office continues to look at trading records and seeks help from informants for possible criminal prosecution of Cohen. The plea agreement specifically states that no individual has immunity from further prosecution.

Not since the prosecution of junk bond promoter Michael Milken and Drexel Burnham Lambert more 20 years ago have Wall Street firms been held accountable for their misdeeds. Many have paid fines to the SEC over the years with the caveat of not admitting guilt.

Even that appears to be changing. The SEC filed a separate civil case against SAC that says Cohen looked the other way on misconduct of those who worked with him and is seeking to bar Cohen from ever being allowed to manage money that is not his own, according to the Times report.

Experts told the Times the criminal prosecutions like that of SAC are rare and suggest the Justice Department is no longer worried about economic consequences that occurred when Enron’s accounting firm Arthur Anderson was indicted and eventually shutdown, causing 28,000 jobs to be lost.

Prosecutor Bharara is also reportedly considering criminal charges against JPMorgan Chase for possible involvement in the Bernard Madoff fraud case. The SEC apparently now is also pushing for violators of securities laws to admit wrongdoing, changing a past practice of allowing corporations to play dumb, according to the Times report.

Bharara also seems to be leading the charge, all for the good. In a September talk, he seemed to suggest corporate responsibility was as important as personal responsibility. “I think we should be entering a serious era of institutional accountability, not just personal responsibility.”

The SAC case represented a more serious approach to financial crime fighting when it began nearly a decade ago. Prosecutors and investigators began using techniques like wire-tapping and pressuring others to be informants, according to the Times report. Those tactics were typically used in drug or organized crime cases.

Now, it’s all too clear, financial crimes are organized and carry as much damage as drug, environmental and anti-trust cases.

It’s high time we got serious about these crimes again. Congress should support these efforts and make sure prosecutors have all the tools to make sure no one believes they are too big to jail.