The Times' Quintuple Standard

http://www.futureofcapitalism.com/2012/08/the-times-quintuple-standard

In an editorial, the New York Times faults Paul Ryan and Mitt Romney for meeting, with no reporters allowed, with Sheldon Adelson, the CEO of Las Vegas Sands. The Times refers to "the issues swirling about Mr. Adelson's business practices," as well as a fine imposed by Chinese regulators on the company for violating foreign exchange rules. The editorial faults Mr. Ryan and Mr. Romney for "allowing Mr. Adelson to have such an outsize role in their race," as if it is within their control how Mr. Adelson or his wife choose to spend their money.

Let's compare how the Times editorialists treat the Ryan-Romney-Adelson relationship— example number one—with how they have treated some other relationships between businessmen and politicians.

Example number two: Robert Wolf of UBS. Mr. Wolf, chairman and CEO of UBS Americas, reportedly raised at least $500,000 for Mr. Obama in 2008 and will do so again this cycle. He plays golf and basketball with the president, also with no reporters allowed, has been a guest at White House state dinners, and, as the Wall Street Journal put it, "frequently attended White House meetings about the worsening financial crisis and contributed to discussions of the administration's subsequent plans for recovery."

Here is UBS's record, according to a recent Times column that did not mention the Wolf-Obama connection (Wolf recently announced he was leaving UBS):

UBS obtained a deferred prosecution agreement in 2009 for conspiring to defraud the United States of tax revenue by creating more than 17,000 secret Swiss accounts for United States taxpayers who failed to declare income and committed tax fraud. UBS bankers trolled for wealthy clients susceptible to tax evasion schemes at professional tennis matches, polo tournaments and celebrity events. One UBS banker smuggled diamonds in a toothpaste tube to accommodate a client. In return for the deferred prosecution agreement, UBS agreed to pay $780 million in fines and penalties and disclose the identities of many of its United States clients. At the same time it settled Securities and Exchange Commission charges that it acted as an unregistered broker-dealer and investment adviser to American clients and paid a $200 million fine. In October 2010 the government dropped the charges, saying UBS had fully complied with its obligations under the agreement.

In May 2011, UBS admitted that its employees had repeatedly conspired to rig bids in the municipal bond derivatives market over a five-year period, defrauding more than 100 municipalities and nonprofit organizations, and agreed to pay $160 million in fines and restitution. An S.E.C. official called UBS's conduct "a 'how to' primer for bid-rigging and securities fraud." UBS landed a nonprosecution agreement for that behavior, and the Justice Department lauded the bank's "remedial efforts" to curb anticompetitive practices.

In what the S.E.C. called at the time the largest settlement in its history, in 2008 UBS agreed to reimburse clients $22.7 billion to resolve charges that it defrauded customers who purchased auction-rate securities, which were sold by UBS as ultrasafe cash equivalents even though top UBS executives knew the market for the securities was collapsing. Seven of UBS's top executives were said to have dumped their own holdings, totaling $21 million, even as they told the bank's brokers to "mobilize the troops" and unload the securities on unsuspecting clients. As Andrew M. Cuomo, who was New York's attorney general then, put it: "While thousands of UBS customers received no warning about the auction-rate securities market's serious distress, David Shulman — one of the company's top executives — used insider information to take the money and run." Besides reimbursing clients and settling with the S.E.C., UBS paid a $150 million fine to settle consumer and securities fraud charges filed by New York and other states. It again escaped prosecution.

There's more — including UBS's prominent role and big losses in the mortgage-backed securities debacle that helped bring on the financial crisis. The federal agency overseeing Fannie Mae and Freddie Mac sued UBS for securities law violations, accusing it of "materially false statements and omissions." The agency is seeking $1 billion in damages. (UBS has denied the charges and the case is pending.)

There's been not a peep out of the Times editorial page faulting the president for meeting with Mr. Wolf.

Example number three: Jeffrey Immelt, CEO of GE. Not only has Mr. Immelt been a frequent White House guest, Mr. Obama appointed him to head a presidential council on jobs and competitiveness. Yet GE has been charged with civil fraud by the SEC twice, and also settled a case involving the same Foreign Corrupt Practices Act under which the Times reporters and the Obama administration are now apparently trying to ensnare Mr. Adelson. Again, not a peep from the Times editorial page suggesting that it is in any way inappropriate for President Obama to meet with Mr. Immelt, let alone to appoint him to chair a presidential advisory group.

Example number four: George Soros. Jonathan Tobin mentioned this one in a post at Commentary this morning, writing, "The only real difference between the two is that Soros backs left-wing politicians and causes while Adelson has dedicated his financial resources to supporting Israel and conservatives." Well, one other difference is that Mr. Soros's conviction on an insider trading charge was in France, a free country, and involved having to repay $2.9 million, while Mr. Adelson's company's fine was less ($1.6 million, according to the Times), and was in China, an unfree country. When Barack Obama meets with Mr. Soros, there's not a complaint about it from the Times editorial writers.

Example number five: Goldman Sachs. This one shows how the Times not only holds Mr. Romney and Mr. Ryan to a different standard than Mr. Obama; it holds itself to the Obama standard, not to the Romney-Ryan standard. Goldman Sachs has been under all kinds of regulatory scrutiny. Goldman paid $550 million to settle one SEC case and $60 million to settle with the Massachusetts state attorney general. Yet when the Times decided to sell its stake in the Red Sox, the Times hired Goldman Sachs to find a buyer. And the Times is full of advertising from Goldman, UBS, and GE.

It's interesting to wonder why the Times applies different standards to these cases. Is it because Mr. Romney and Mr. Ryan are Republicans while Mr. Obama is a Democrat? Or is it because Mr. Adelson is pro-Israel while Mr. Immelt and Mr. Wolf are not as outspoken or as philanthropic on Israel?

And remember, aside from the China-imposed penalty, all the issues relating to Las Vegas Sands are just "issues swirling," (because the Times keeps writing about them) not anything the company has settled or been convicted of or admitted. The Times, which has campaigned for due process including trials for the accused terrorists at Guantanamo, now wants to make Mr. Adelson into a pariah on the basis of merely swirling investigations rather than any due process. They should be cheering the guy on for running a successful business that pays taxes and creates jobs, not vilifying him. As for his decision to spend money on politics, one could praise him for spending the money to benefit the country rather than on personal consumption, like on owning another fancy apartment or house full of art and furniture in some place that he only lives in for a week or two a year.

But for me the larger point relates not only to the bias of the Times, which is an old story, but to the nature of modern regulation. America now has so many laws and regulations that it's essentially impossible to know what they all are, let alone to obey them all. So even a business led by an honest and well intentioned executive, if it reaches any size at all, is almost destined to run afoul of the regulations at some point. The effect is to either tar all large businesses as lawbreakers, or to blur the line between the ones that are doing their best to follow the law and those who are genuine bad actors. This system of rules creates lots of fees for lawyers and jobs in "compliance departments" for former regulators, but the utility of it for consumers, investors, or fair competition in business is questionable.

by Ira Stoll  |  Aug 17, 2012 at 3:44 pm Related Topics:  Banking, China, General Electric, George Soros, Politics, President Obama, Press, Regulation, SEC receive the latest by email: subscribe to the free futureofcapitalism.com mailing list