We've written about this before (here and here), the tale of the judge who "bitch-slapped the SEC" (Taibbi's formulation) for wrist-slapping Citibank (mine) in exchange for forgiveness for crimes no one would specify, or would have to admit to.
Matt Taibbi takes a second look at Judge Rakoff's ruling and finds several notable aspects. The most important is Rakoff's criticism, not just of the SEC, but of the whole system by which the SEC operates (my emphases):
By accepting hundred-million-dollar fines without a full public venting of the facts, the SEC is leveling seemingly significant punishments without telling the public what the defendant is being punished for. This has essentially created a parallel or secret criminal justice system, in which both crime and punishment are adjudicated behind closed doors.For years. That's forever in DC precedent-setting terms.
This system allows for ugly consequences in both directions. Imagine if normal criminal defendants were treated this way. Say a prosecutor and street criminal come into a judge’s chamber and explain they’ve cooked up a deal, that the criminal doesn’t have to admit to anything or plead to any crime, but has to spend 18 months in house arrest nonetheless.
What sane judge would sign off on a deal like that without knowing exactly what the facts are? Did the criminal shoot up a nightclub and paralyze someone, or did he just sell a dimebag on the street? Is 18 months a tough sentence or a slap on the wrist? And how is it legally possible for someone to deserve an 18-month sentence without being guilty of anything?
Such deals are logical and legal absurdities, but judges have been signing off on settlements like this with Wall Street defendants for years.
Much of Taibbi's piece revolves around how revolutionary (my word) this ruling is and how generally it applies.
First, the ruling rejects the idea that a company can be punished if no crime has been proved or alleged; thus, no judge can bless such a non-transparent deal. This could indeed echo forward — remember, Judge Rakoff isn't offering advice; his ruling itself adds to precedent.
Second, he admonishes the SEC for not considering the public interest primarily. Taibbi:
This issue of whether or not the SEC must consider the public interest in granting these cozy settlements gets to the heart of what OWS is all about. The SEC in this case incredibly argued – out loud, on paper – that it could make regulatory decisions without considering the public interest. ... Translating loosely: “When we decide to let thieving megabank off with just a promise to never do it again, we don’t have to consider whether or not this is in the public interest.”Taibbi says that "these crappy settlements have evolved into a kind of cheap payoff system" in which small fines are paid.
Quoting Judge Rakoff's opinion directly (again, my emphasis):
As for common experience, a consent judgment that does not involve any admissions and that results in only very modest penalties is just as frequently viewed, particularly in the business community, as a cost of doing business imposed by having to maintain a working relationship with a regulatory agency, rather than as any indication of where the real truth lies. This, indeed, is Citigroup's position in this very case.What neither mentions is the other payoff, in which the loyal SEC types get their own reward — that sweet job on Thank You Street with Wall Street paying the freight. That's also the "cost of doing business" — where the "business" is institutional bribes that let you skate the Rule of Law.
The crime itself, financial in nature, finances its forgiveness. Or as Hamlet said:
The wicked prize itself buys out the lawGroucho's reply: "Clip me off a piece of that."
GP
