Will the ruling highlighted in my initial post this morning, “Judge Jed Rakoff Indicts the Wall Street-SEC Incest”, ultimately pit one arm of Uncle Sam against another, or to coin a phrase, pit Uncle Sam vs. Aunt Samantha? How so? Would Bank of America CEO Ken Lewis under oath put former Secretary of Treasury Hank Paulson and Fed Chair Ben Bernanke on the hot seat and implicate them as the driving forces behind the BofA takeover of Merrill?
If Lewis plays that card under oath, Judge Jed Rakoff may be put in a position to adjudicate on the culpability of Paulson and Bernanke in this financial fiasco vs. the judgment of the SEC in imposing the $33 million fine against BofA.
You know that every party involved in this mess, with the exception of BofA shareholders, is cringing at the prospect of this case going to trial.
Bloomberg aptly describes the precarious nature of the predicament facing these parties in writing, Bank of America Ruling Leaves SEC with Few Options:
Now the SEC is in a jam, said Peter Henning, a former SEC attorney who teaches law at Wayne State University in Detroit. Regulators could dismiss a case in which the bank is accused of breaking the law. They could try the case and risk that the bank has strong defenses. Or they could file a new lawsuit against individual executives or lawyers after saying earlier that they lacked sufficient evidence to do so.
“In a sense, the SEC has painted itself into a corner,” Henning said in an interview.
Human nature dictates that individuals backed into a corner will often resort to desperate measures. How desperate is the SEC to save face rather than upholding its mission to protect investors? Bloomberg offers more grist:
“The parties’ submissions, when carefully read, leave the distinct impression that the proposed consent judgment was a contrivance designed to provide the SEC with the façade of enforcement and the management of the bank with a quick resolution of an embarrassing inquiry,” Rakoff wrote.
Rakoff rejected the bank’s arguments yesterday, saying he still doesn’t know why executives or their lawyers weren’t sued. He said a trial in the case, which neither side wants, would start on Feb. 1.
“The judge’s not-so-implicit message is that he wants people named and he wants those people to pay the penalties,” Anthony Sabino, a business-law professor at St. John’s University in New York, said in an interview. “The bottom line is that there have been very pertinent and important questions asked and the answers have not been very forthcoming.”
Could this scenario play out that Mary Schapiro as Aunt Samantha is compelled to make a case which implicates Hank Paulson and Ben Bernanke as Uncle Sam for improperly compelling a bank executive, Ken Lewis, to violate shareholder rights?
The twists and turns on this stretch of our economic landscape are getting ever more interesting.
LD
Related Sense on Cents Commentary:
Did Big Ben Bernanke and Heavy Hank Paulson Break the Law in Buying Ken Lewis’ Silence? (April 28, 2009)
This entry was posted
on Tuesday, September 15th, 2009 at 12:44 PM and is filed under Bank of America, General, Merrill LYnch.
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