Man Without Qualities

Wednesday, July 30, 2003

Enron Game Called On Account of Reality IV: Learning To Take Life Easy

An interesting e-mail draws my attention to a blog posting by Charles Dodgson that includes this comment on my prior posts on the recent settlements between J. P. Morgan Chase and Citigroup and government regulators:

To most people, the $300 million payment would be a sign that the banks knew they were in hot water, and the lack of a formal guilty plea would be a technicality. To this guy, it's the reverse; the banks have, for some strange reason, agreed to pay $300 million to regulators who "have nothing, nothing at all, and know it" (his boldface), and their failure to extract a guilty plea is positive proof. Note particularly the rhetorical pirouette in which "the banks neither admitted nor denied any wrongdoing" somehow becomes a protest of innocence.

The e-mail I received also includes a copy of a message sent by the e-mailing reader to Charles regarding the above excerpt:

I'm not sure I understand. I haven't been following this matter nearly as much as you obviously have been, but aren't defendants presumed to be innocent unless they are convicted (or, I guess, found civilly liable) or admit they did wrong?

Maybe I'm letting my personal experiences get in the way of my understanding. I was once threatened with suit by the SEC without merit, and I know from that personal experience that defendants often pay to make a case go away even when they didn't do anything wrong - especially where the plaintiff is some powerful government regulator and they want to cut off bad publicity. Does this settlement look like one of those? What do you make of Columbia Professor Chaffee's quotes in the Times regarding the $300 million?

In my case, the SEC said I had traded on "inside information." I can assure you there was no inside information, but I had to settle (and pay!) without admitting or denying any wrong, because the SEC action would have been a disaster for my business. I had to "disgorge" my profits. Didn't Citibank make more than $100 Million off Enron? My lawyer - who works at a very good NY law firm - assured me that people do what I did all the time in these settlements and there is no "taint" because everyone knows that people have to settle with the SEC rather than spend their lives in humiliating and expensive litigation. Was he wrong? Should I sue my lawyer?

Well, gentle reader! Relax!

Presumption of innocence? Pshaw! Picky, picky, picky! Charles tells us that a "formal" guilty plea is a mere technicality!

Government lawyers admit that they couldn't find a mere preponderance of the evidence showing "intent to defraud?" Heck, what's that deficiency compared to having a settlement agreement with no admission of wrongdoing in it as a sign that the banks knew they were in hot water?

And if a prosecutor says something bad about you? Well, the prosecutor is a very busy man - he wouldn't say those things if they weren't true!

Anyway, who takes seriously that standard settlement agreement language "this agreement shall not be construed as an admission of any wrong or violation?" That language is a lawyer's in-joke! A settlement agreement is an admission of wrongdoing if you pay - just ask Charles.

A company wanting to terminate bad publicity and enforcement actions - regardless of their merit? Puleeze! Charles tells us that the banks entered into these settlements for some strange reason which most companies couldn't possibly understand. And that should be enough of an explanation for the likes of you! Why every defendant knows that to pay to make a meritless case go away (including every technology company in Silicon Valley that ever paid Mr. Lerach a settlement to get rid of a meritless class action of the type Congress had to eventually amend the securities laws to bar) is actually an admission of the charges.

Some Columbia securities law professor pointing out that new securities legislation makes the settlement a "no brainer" for the banks on economics grounds alone? Don't get so excited!

Fines imposed are much less than apparent profits from the alleged violations? Manana!

See, learn to take life easy. Sue that top New York lawyer of yours. Get another one to file the papers tomorrow. Don't you know? Litigating is fun! People who pay to make it stop are just big, uptight sillies who are admitting the charges against them, anyway!

Just ask Charles!

If you can find his rabbit hole.

Comments: Post a Comment