SEC Misfeasance

Reader comment on: Citigroup and the SEC

Submitted by J.Johnson (United States), Aug 17, 2010 19:12

And to misfeasance lets add malfeasance and nonfeasance, a perfect trifecta and almost identical to what they pulled off in their slap-on-the-wrist of Bank of America for its illegalities in the acquisition of Merrill Lynch. In that one, Judge Jed Rakoff finally allowed B of A shareholders to cough up over a hundred million dollars to the SEC, a travesty considering the harm the SEC said the shareholders had already suffered at the hands of B of A management. These actions by the SEC are true Catch 22s because, irrespective of whether shareholders actually do suffer the losses alleged by the agency, the shareholders certainly are penalized by the SEC fines, especially when they are substantially increased by judges.

The real travesty here is obvious, namely, the SEC's aversion to punishing the corporate officers and employees who actually commit illegalities, or, if they are punished, to make the fines so trivial as to be a meaningless cost-of-doing-business to executives making multimillion dollar salaries + bonuses. With only a very few notable exceptions, such as Bernie Ebbers at WorldCom and a few bigwigs at Enron, the SEC and the DOJ seldom bring personal civil charges and almost never bring personal criminal charges in corporate cases, irrespective of the clear identity of the responsible parties and their culpability in the illicit activities.

Given the revolving door between the SEC and the corporate world, a cynic might wonder if more than just independent judgement is at work here and believe instead that at least some SEC enforcers are very hesitant to offend any future employers. Levying big fines that are eventually paid by the victims of the crimes being punished is oh-so-much easier and noncontroversial than imposing meaningful fines, with maybe a little jail time thrown in, on guilty executives who will then serve as exemplars to their fellow executives of the perils of going off the rails.

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