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Judge Rakoff Orders FINRA Documents to Remain Sealed

Posted by Larry Doyle on February 17, 2010 9:26 AM |

Nobody ever said it was going to be easy.

The pursuit of truth, transparency, and ultimate integrity in our financial regulatory system can only be equated to a 15 round heavyweight fight. Yesterday, the  sting of opposing blows landed hard upon our face as Judge Jed Rakoff ordered FINRA documents relating to the very formation of this Wall Street self-regulatory organization to remain sealed.

Recall that the request to unseal these documents was made by attorneys representing Dow Jones, Bloomberg, and The New York Times. From the blogosphere, Sense on Cents also wrote to Judge Rakoff requesting that he order these documents to be unsealed.  The information embodied in the documents addresses an allegation made by attorneys representing a plaintiff, Standard Investment Chartered, in a lawsuit filed against FINRA. The crux of that lawsuit is that then FINRA head (and current SEC Chair) Mary Schapiro and her fellow FINRA executives lied verbally during roadshows and in writing via the proxy statement issued for the merger of the NASD and NYSE Regulation to form FINRA.

How big was Ms. Schapiro’s lie? Upon request of Judge Rakoff during a December hearing on the actual case (Standard Investment Chartered v. FINRA), plaintiffs’ attorneys stated the lie totaled a misappropriation of funds ranging between $175 -$350 million (approximate). FINRA’s attorneys contested that statement but rather than agreeing to the document being unsealed so the truth could be exposed, the defense attorneys have waged a fierce battle to keep the document sealed.

Yesterday the defense attorneys won this round, but the fight continues.

Why did Rakoff rule in this manner? As the brief addresses, Rakoff did not believe he was in a position to overturn a ruling by the Second Circuit Court of Appeals which upheld an initial ruling to keep the document sealed. Rakoff explicitly stated during a January hearing that he likely would have ruled differently than the then presiding, but since deceased, Judge Kram who ordered the document sealed. He hints at those feelings again in his ruling released yesterday. That said, Rakoff offers the legalese known as ‘vertical precedent’ as his reasoning for not ordering the documents unsealed.

Will this order be appealed by the news organizations? Perhaps.

Will this order cause Sense on Cents to stop writing about FINRA? Are you kidding me?

Do you think attorneys for Standard Investment Chartered would knowingly and openly lie in a court proceeding about information they have read in a FINRA dcument? What might be the ramifications for their careers if, in fact, they did knowingly lie and misrepresent this information? Game, set, match, career over, most likely.

What happened to the career of Ms. Schapiro after the successful completion of the merger to create FINRA? Welcome to Washington and your new position as SEC Chair.

Do you think America would like a peek at that document? I know I would. That said, we may never see the document. That does not mean that the case of Standard Investment Chartered v. FINRA can not proceed to trial and that America may not eventually learn that its SEC Chair is a liar as plaintiffs’ attorney Richard Greenfield alleged on my radio show last October 19th, Attorney Richard Greenfield Brands Mary Schapiro and FINRA Execs as “Liars.”

Nobody said it was going to be easy. That is just fine.

The best things in life, including the pursuit of real truth, transparency, and integrity in our financial regulatory system, are worth fighting for.

I’m still punching.

Hell, I’m not even winded.


For the overachievers in the audience, please click on the image below to access the 5-page order released yesterday by Judge Rakoff.

  • disenchanted

    This is pathetic. Does this Judge realize
    that he is creating a precedent? I am araid to
    see what this decision will do with the
    Board Meeting issues. I think we should form
    our own Tea Party and refuse to open our
    books and records also. What’s good for the
    goose is good for the gander.

  • John Wallace

    How much did FINRA and Mary, in what ways, pay the Judge ?

    Proof that the U.S. financial system is a total shame lie and sham. Totally rigged for the elite and insiders. Trust no US financial entity or anyone working for them. Judicial branch bought and paid for like the executive & Congress.

    • LD

      To both disenchanted and John,

      The major ruling in this case is actually due the end of this month. What is that ruling? The judge will rule whether the case should and will proceed to trial or not. If he rules not to have this case proceed to trial, then a grave disservice and injustice will have occurred.

      I was not optimistic about this ruling after hearing the judge in his courtroom in January. He did mention that he would have ruled differently initially but he could not overrule a higher court which upheld the ruling on appeal. In my speaking with a highly respected attorney, he confirmed that no judge could or would try to overrule a higher court.

      All this said, I have every reason to be optimistic that this case will go to trial.

      Thanks for your interest and support.

  • Bill

    Vertical precedent is also known as the
    law of the case. Judge Rakoff obviously
    thought himself constrained by the prior
    2d Circuit ruling on the issue. There’s
    obviously the route of an appeal, and it
    would appropriately be the 2d Circuit to
    reverse the matter. A district judge
    cannot just go willy nilly ignoring the
    dictates of a higher court.

    It’s odd that the documents were
    ordered sealed originally, but then none of us knows
    what is actually in them, nor other
    pertinent facts of the litigation, or
    at least I don’t.

    I liked the judge’s allustion to Hilda
    and Rumpole.

  • disenchanted

    Bill- you sound like an attorney. I realize
    that even in law there is a pecking order,
    but truth and ethics should override that.
    If you had nothing to hide, would you allow
    someone to drag you into court and smear
    your name publically, or would you produce
    the documents needed to clear the issue?

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