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“We’re Not Prosecuting the Bad Guys”

Posted by Larry Doyle on November 9, 2010 7:44 AM |

Who needs major print media which will not aggressively report on stories deserving real exposure when we have Sense on Cents to spread the faith while pursuing truth, transparency, and integrity? Regular readers hopefully appreciate that I do not easily engage in hyperbole but I am compelled to highlight the virtues of my blog this morning based on a comment left here last evening at 11:58pm.

A reader by the name of Nancy shed light on her less than satisfying Finra arbitration process. In the body of her comment, Nancy alludes to a retiring CFTC administrative Judge George Painter’s very serious allegations of misconduct by a fellow CFTC administrative Judge Bruce Levine. How serious is Painter’s allegation? As Nancy highlighted,

As George H. Painter was preparing to retire recently as one of two administrative law judges presiding over investor complaints at the Commodity Futures Trading Commission, he issued an extraordinary request:

Please don’t assign my pending cases to the other judge. In a notice recently released by the CFTC, Painter said Judge Bruce Levine, his longtime colleague, had a secret agreement with a former Republican chairwoman of the agency to stand in the way of investors filing complaints with the agency.

While almost spilling my coffee, I thought this must have been a charge issued long ago and far away. If it were a recent charge then surely it would have been widely covered by a host of major outlets. If not that, could Nancy have simply received erroneous information? I was sufficiently intrigued to see what I might unearth. Soon thereafter I once again learned why I give little credibility to major financial media in our nation. This ‘grenade’ was launched a mere two weeks ago. While some readers may have already seen this story on some selected blogs, the only major news outlet to provide any respectable degree of coverage to this bombshell is the Los Angeles Times. I commend them. Let’s navigate.

The LA Times’ Michael Hiltzik highlighted this blockbuster allegation in writing, Retiring CFTC Judge’s Allegations Should Concern Small Investors,

Cards on the table: When George H. Painter says the game is rigged against the small investor in Washington, I have reason to take him at his word.

Even when his word comes wrapped up like a bombshell.

Painter, 83, detonated that bombshell recently in the course of announcing his retirement as an administrative law judge for the Commodity Futures Trading Commission, effective in January. In a public notice, he accused his lone colleague on the CFTC bench, Bruce Levine, of having made a vow nearly 20 years ago never to rule in a complainant’s — that is, an investor’s — favor.

“A review of his rulings,” Painter stated, “will confirm that he has fulfilled his vow.”

He asked the CFTC, which regulates the commodity futures markets, to bring in a new judge instead of transferring his pending cases to Levine. The two judges rule on allegations of fraud or other misdeeds brought by investors against futures brokers and traders.

Strong words, but not entirely out of character for Painter. And they’ve stirred up a fairly ugly cloud of dust, involving claims and counterclaims about Painter’s physical and mental health, traded between his wife and other members of his family in a Maryland court. Whether the court case would have reached the newspapers if not for Painter’s attention-grabbing resignation is hard to say. But it’s now being used to dismiss his attack on Levine as the words of someone who’s not all there.

I first encountered Judge Painter nearly three decades ago, when he issued a number of stern rulings involving a Newport Beach investment operator I had been writing about.

The investment firm, Monex International, had been hawking illegal futures contracts, he ruled. In one case, he found that Monex had ignored a customer’s repeated pleas to cash out her deteriorating stake, and awarded her $20,000 in reparations.

When I reached Painter again last week, he didn’t seemed to have changed much. “It’s gone to hell,” he said, referring to the standing of the investor at the CFTC. “But it’s always been that way, hasn’t it? We’re not prosecuting the bad guys.” For the record: He sounded perfectly lucid.

Why did Painter wait so long to expose this ‘rigging of the process?’ What do other judges in the system have to say? What about investors who had their cases heard by Levine? Can those cases be reopened? Is this allegation by Painter nothing more than another twist in the incestuous relationship between Wall Street, Washington, and the financial regulators charged with protecting investors?

Why should we be surprised when investors leave our markets never to return. When investors and their capital are not properly protected, our markets, our economy, and our nation suffer. That statement is no hyperbole but is the harsh reality of the nation in which we live today….and it encompasses a wealth of ‘sense on cents.’

Navigate accordingly!!

Larry Doyle

Please subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

I have no affiliation or business interest with any entity referenced in this commentary. As President of Greenwich Investment Management, an SEC regulated privately held registered investment adviser, I am merely a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Luke

    How many other Judge Levines are there in the system? The fact is the arbitration process has always disadvantaged small investors. You are right, investors need to be exceptionally careful in engaging brokers and financial planners because the system offers little protection both before and after the fact.

  • Bruce

    Who is going to properly investigate these charges? Who is going to speak to Wendy Gramm?

    So many questions….So few answers…

    What happened to our country?

  • TLP

    Can you say kangaroo court?

  • Mary Beatty

    Thank you for doing this story! It is my question too. Why isn’t anyone covering this. The story gets even weirder…did you know that Painters wife of 8 years is a CFTC LAWYER and she claims that he is depressed, drinks too much (the WSJ did small bit about this…why??) and has alzheimers. She is accused of overmedicating him prior to the altzhimer test and wants to be made his legal guardian. Painter’s son came to the east coast, got him out of the althimers center and Painter got a lawyer to file for a divorce and is headed out west with his son. Thank goodness. John Grisham could not do better than this!

  • Soul

    Thank you for highlighting. That is very Fu(£€< up, to put it mildly.

    Unfortunately, much of it is heresay. Has anybody done a review of the judge's case results versus typical case outcomes? I realize that Mark Twain has his quote about lies, damn lies, and statistics – yet I would think that if these allegations are indeed true then there would be a disparity in the comparison numbers. What's that you say, it's difficult to publicly obtain final arbitration results and numbers? Exactly.

    I too am confused as to how capital can work in our society amidst this uncertainty.

    Anyway, thanks for your insight.

  • Tex

    Need to sue individuals personally under damages.

    Arbitration is broken

  • Ned

    Free Market Capitalism vs. Market Corruption

    By Ned W. Downing 10/19/10

    The term “free market capitalism” invokes a knee jerk most negative reaction from many Americans today. They see Enron, AIG, the Bernie Madoff scandal, the current real estate debacle, and the stock market crash – all negatively affecting them. Linking the cause to “free market capitalism” is easy. It always seems that the beneficiaries of the biggest market problems are its biggest institutions. Witness the billions of dollars of American taxpayer dollars funneled clandestinely through AIG to Goldman Sachs and other “too big to fail” companies including foreign banks in response to the market collapse in 2008.

    I can’t say that I blame Americans for distrusting our markets. But the culprit is not free market capitalism. In truth the brand of free market capitalism practiced in the United States starting with Alexander Hamilton and the First Federal Congress allowed the American comparative advantage to propel the United States to over 200 years of prosperity. The system works. People corrupt it.

    Our Founding Fathers gave us the best system of government ever devised and then challenged future generations to keep it. Our constitutional government derives all its power from the people of the United States. Anything not enumerated is left to the States. Founding Fathers from John Adams to George Washington preached the need for eternal vigilance from citizens in order to prevent the corruption of the system.

    Thoughtful Americans are disgusted by the lack of vigilance practiced by their elected representatives and many legislators are about to lose their jobs as a consequence of our mostly effective constitutional system of government. But we need vigilance practiced by all Americans in order to regain our American competitive edge.

    Witness now on Oct 18th the exposure of one of the most egregious causes of dislike of free market capitalism, the unveiling of the alleged 15-year corruption of one of two CFTC Administrative Law Court Federal Judges regulating our country’s futures markets. Retiring Judge George H. Painter accused his fellow Administrative Law Court Judge Bruce Levine of taking his job there as a result of agreeing to never to make a ruling against a member firm (i.e. Goldman Sachs, J P Morgan, etc). A review of his cases over that 15-year time period confirms Judge Painter’s allegations. No wonder the little guy always seems to lose in the commodities market.

    Now three days later the Wall Street Journal, p. C7, produces a suspicious article, “Case Sheds Light on Judge” that attempts to characterize Judge Painter as mentally ill, an alcoholic and suffering with dementia – all denied by his children. I say a suspicious article because the WSJ reporter, Sarah N. Lynch, never once mentions Judge Painter’s accusations against Judge Levine. It seems incredible to me that any story this meaningful to our capital market system would be swept under the rug, soviet style, with the apparent complicity of the Wall Street Journal.

    I call on all readers to vigilantly alert their elected representatives to investigate this fiasco and begin a restoration of the elements that once gave this country a great comparative advantage among the nations of the world.

    Ned W. Downing
    5260 South Landings Drive #1104
    Ft Myers, FL 33919
    Author of The Revolutionary Beginning of the American Stock Market, published in September by The Museum of American Finance in New York City.

    • Daniel Carey

      I’m interested in contacting Ned about his work on Transatlantic Paper.

      • Ned

        What did you want to know about Transatlantic Paper? My thesis is published in The Origins of Value, Oxford Press, 2005. ps 271-298

  • Mandy

    According to legal records, Judge George Painter has been ruled competent in every sense by medical experts (other than the ones his ex-wife to be chose and influenced). In my book there should be a lot of medical malpractice and character assassination in future legal works. Judge George Painter is a great man who is “making a difference.”

    • LD

      Mandy,

      Thanks for sharing this insight. Now the question begs, who will look into his extremely serious allegation.

      Anybody, anybody….??

      Perhaps Judge Painter himself may like to expound further.

      Does anybody have a connection with the judge and might we entice him to shed further light on this topic here at Sense on Cents?

  • Mandy

    Judge George Painter just found out today that his home in Chevy Chase where he has lived for 50 plus or minus years has been liquidated and is in the hands of a trustee. Judge Painter, who has dealt with many, many people very honestly, has not received the same treatment from his ex-wife of 7 years. Judge Painter was never allowed back into his home without the threat of being locked up in an alzheimer’s unit. He had to get new identification made, new driver’s licence, new social security card, had to obtain his military records again, as he was never allowed to return to get anything from his home after his sweet wife convinced the doctors he needed to be locked up. However, signed medical records were never produced in court and all court records mentionin Judge Painter’s mental problems have been sealed.
    This whole thing makes Bernie Madoff’s case seem simple. Judge George Painter is an 84 year old man who has actually been wanting to retire for several years. His sweet wife of 7 years had other ideas for his final years of life. I’m sure she had this in mind 7 years ago when she moved in with the Judge because she was destitute with her child after she had filed bankruptcy – then she convinced the Judge that they should get married. She had been is former law clerk before her previous marriage, and anything she knows about law she probably learned from the good Judge. It is very hard for me to think a person like is sweet wife is getting praise from the CFTC. If our country is run by people like her, there’s no hope for anybody.

    I only hope that there can be some type of investigation into this matter, but the CFTC doesn’t seem at all interested nor does anybody else. We might as well be living in Nazi Germany unless there is some interest in this type of treatment of a very hard working man.

    I thank God for Judge Painter’s son, and is nieces and nephews who rescued him from this horrible fate planned by his sweet wife of 7 years.

    • LD

      Mandy,

      You seem to be close to this situation. Is there anybody within the judge’s circle of friends who can comment specifically on his serious allegations made against Judge Levine?

      • Mandy

        All anybody has to do is look at Judge Levine’s records and make their own Judgement. Then look at Judge Painter’s records and see the difference. Judge Painter doesn’t have to prove his words. His words are all on record and can be googled by anybody.

        • LD

          Mandy,

          I am not questioning either of the judge’s records but it is not likely that the media or other investigators will take the time or make the effort to dig. I was merely inquiring that if somebody was able to shed a few specifics here it may add more fuel to the fire.

    • Jeff

      I would like to say for the record that nothing is as simple as it is written. Judge Painter is my uncle(my father’s eldest living brother). I have deep admiration and respect for the man regarding his tenure on the bench. He is well known in the financial world as being fair to the little guy. Without going into great detail, he most assuredly wished to retire years ago but, was waiting for a more favorable administration to replace him with someone similar to his beliefs. Unfortunately, it appears that even the current administration which I’m certain that many had high hopes for (not me) is riddled with the same people that were heavily involved in keeping derivatives deregulated. (LOOK IT UP!) I greatly appreciate the kind comments about my uncle George but, you must remember that no one is perfect and he would always say that there are 2 sides to every story.

      • Marty

        By the end (and by “end” I mean the last decade) of his tenure, Painter spent very little time in the office and other CFTC employees had to occasionally silence his alarm clock at about 1:30 (since Painter had already left for the day). His intellectual energy was spent (smoking, heart problems and heavy drinking had done its work). He could snarl and bark but whatever powers he had to reason and explain were gone. He lacked the energy to do his own research or to meaningfully edit the work of his clerks (who lived in fear of his moods and reactions to real and imagined episodes of disloyalty).

        By the last decade of his time on the bench, Painter had also long lost the ability to conduct fair hearings. So, once the claimant or DOE had presented his/her/its case (or simply conducted direct examination), Painter normally wanted to just get the hearing over with. This meant that Painter often improperly limited the ability of respondents and their lawyers to present the other sides of cases. While the Commission did its best to paper over his intemperance (see, e.g., United States of America before the Commodity Futures Trading Corporation/Chenli Chu v. Peregrine Financial Group and James Francis Kelly) (” The transcript of the June 3 hearing reveals that the ALJ was unusually acrimonious and
        intemperate.”), Painter was a joke long before he fired the parting shot. Lawyers feared his temper while his senility was the subject of countless jokes in Miami, Chicago, New York and DC.

        I have one question. If Painter was such a stand-up guy, why did he wait until his retirement to try and scuttle a fellow ALJ’s career.

        • LD

          Marty,

          Thanks for writing and sharing these sentiments. While I do not think that America has much interest in the inner politics and turmoil of the judges chambers, I think America has REAL interest in the charges put forth by Judge Painter.

          I have yet to see any sort of real meaningful defense put forth negating the charges on a point by point basis.

          I am not categorically and blindly accepting the allegations put forth by Painter as gospel. I do not know him nor the court, but given the strength and forcefulness of the charges, I think we deserve either a meaningful investigation of his allegations or a meaningful and specific defense. To date, we have seen neither. Nor do I think we will…and that is regrettable.

          I am happy to provide my blog if you can or care to provide meaningful transparency on the topic.

  • Mandy

    If I knew of anyone who could shed more light I would welcome any type of investigation into this matter. Somehow we have lost our ability to complain about anything and greed has taken over. Not a good day here.

    • Seroun

      I just sent several links about this situation and statements from Judge painter to 60 Minutes. I will let you know if they respond. I also wrote to my Senator and Congressman.

  • Mandy

    Do you think any of the media is concerned with truth or is it just the ratings and how much money the story brings in? I think this is true for the whole world. Tabloid stories sell much better than dull truth.

  • CFTC

    The Washington Post recently reported, A Tough Slog Toward Justice for Investors

    Gensler declined to be interviewed for this article.

    Among The Post’s findings:

    l Painter is not alone in criticizing Levine’s work. CFTC commissioners have repeatedly overruled Levine’s decisions, accusing the judge of abusing his discretion.

    The CFTC was so concerned about the fairness of its proceedings that it issued a policy statement in January reminding the judges that, under commission rules, they should not let an overly literal application of procedural standards get in the way of justice.

    l At least partly because of a loss of faith in the process, private lawyers say, hardly any investors are turning to the CFTC for relief. As of Nov. 8, there were nine investor complaints pending before an administrative law judge.

    “Nobody wants to use it,” said Kansas lawyer Barry D. Estell. “It’s not fair.”

    l Justice can be slow. In October, the CFTC issued a 14-page opinion in an appeal that dated from 2003.

    l Painter’s conduct, too, has been called into question. The CFTC found that Painter “was unusually acrimonious and intemperate” in 2008 when he ejected a defense lawyer from a case. “That’s one I don’t remember,” Painter said in an interview.

    l Although the CFTC has the option of trying its own enforcement cases before the two judges based in its Washington headquarters – supposedly the authorities in this area of law – it almost never does so. Instead, it sends its lawyers to litigate charges in federal courts around the country. Currently, no enforcement cases are pending before a CFTC administrative law judge.

    CFTC enforcers have avoided the in-house forum partly because they did not want to take their chances with Levine, said a former commission official who spoke on the condition of anonymity to avoid straining relations with people at the agency.

    “The Enforcement Division chooses the venue that is best for each particular case,” a CFTC spokesman said by e-mail.

    Unlike administrative judges, federal courts have the power to freeze assets while cases are pending.

    l As for investors, even when they win, they can lose. Once investors obtain CFTC judgments, they are left to their own devices to enforce them through the courts. That can be a challenge if the firms have folded or if the brokers would sooner forfeit their professional licenses than pay the debt. In some cases, even as the commission awarded damages, it warned investors that they might be unable to collect.

    In many instances, investors have won judgments but, as far as the agency knows, never recouped the money. A CFTC database lists more than 1,000 individuals or firms in almost 1,200 cases who have apparently failed to pay reparations.

    The unpaid judgments total $40.3 million, though that includes double-counting where parties are jointly liable for the same damages.

  • Ned

    The COMEX could declare force majure in the gold and silver futures markets within 30 days because of the CFTC’s lack of regulatory oversight in those markets.The effect could be devastating to the American capital markets.
    Yet vast new markets(OTC derivitives) under the new Frank-Dodd financial regulatory bill are just now being put under the regulatory supervision the same Gensler led corrupt CFTC Administration. How stupid do they think we are.
    The Main Stream media should be all over this. It’s bigger than Watergate. At least it will be if the COMEX defaults which is very possible within 30 days.

  • Seroun

    There is nothing wrong with George Painter. He is a man of utmost integrity and we are lucky to have him. Anyone in disagreement definitely has the same problem with lucidity as the Wall Street Journal

  • Marty

    If you want to see Levine at his best, check out his intial decision in In re Wright, [2003-2004 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 29,412 (CFTC Feb. 25, 2003). Dealing with a number of throny issues of law and fact (including issues of jurisdiction), he found some charges to have been proved, dismissed others and fined the primary malefactor $500,000 (and, in more than 200 pages, exlained, explained and explained). Nearly eight years later, the CFTC affirmed Levine’s decision.
    United States of America before Commodity Futures Trading Corporation in re Roger J. Wright et al






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