Retiring SEC Lawyer Indicts Schapiro, Khuzami et al as Being ‘In Bed with Wall Street’
Posted by Larry Doyle on April 8, 2014 1:51 PM |
In what might only qualify as turning one’s weapon on those formerly running a defense unit, a retiring attorney in the SEC’s Enforcement Division just left the commission and went out with “guns a-blazing.”
I welcome immediately inducting this attorney, James Kidney, into the Sense on Cents Hall of Fame. Let’s navigate as Bloomberg reports:
A trial attorney from the Securities and Exchange Commission said his bosses were too “tentative and fearful” to bring many Wall Street leaders to heel after the 2008 credit crisis, echoing the regulator’s outside critics.
James Kidney, who joined the SEC in 1986 and retired this month, offered the critique in a speech at his goodbye party. His remarks hit home with many in the crowd of SEC lawyers and alumni thanks to a part of his resume not publicly known: He had campaigned internally to bring charges against more executives in the agency’s 2010 case against Goldman Sachs Group Inc.
The SEC has become “an agency that polices the broken windows on the street level and rarely goes to the penthouse floors,” Kidney said, according to a copy of his remarks obtained by Bloomberg News. “On the rare occasions when enforcement does go to the penthouse, good manners are paramount. Tough enforcement, risky enforcement, is subject to extensive negotiation and weakening.”
Kidney said his superiors were more focused on getting high-paying jobs after their government service than on bringing difficult cases. The agency’s penalties, Kidney said, have become “at most a tollbooth on the bankster turnpike.”
Can you say revolving door and meter maids? That’s right. In the process, a sense of fairness and decency within the system has been obliterated.
His speech bemoaned the lack of SEC enforcers who “believe in afflicting the comfortable and powerful.”
The SEC has taken a beating from critics including lawmakers, judges and advocacy groups who say the agency has been too easy on the banks that helped fuel the 2008 crisis by peddling mortgage-backed securities of questionable value to unwary investors. No senior executive at a major financial firm has gone to jail and the SEC has brought civil charges against only a handful.
In his speech, Kidney also hit the agency for using misleading statistics to showcase its enforcement efforts. The SEC should focus on the quality of its actions, rather than try to file as many as possible just to tout its record to lawmakers and the media, he said.
“It is a cancer,” Kidney said of the agency’s use of numbers. “It should be changed.”
Kidney said in the interview that he will always be an SEC loyalist and was trying to offer constructive criticism that could help the agency. He said he wasn’t singling out any specific cases or officials in his comments.
I will. Let’s start with Mary Schapiro and Robert Khuzami.
In his retirement speech, Kidney noted that he had been “involved in a high-profile case or two” and said he had gotten a message from above not to take too many risks.
“I have had bosses, and bosses of my bosses, whose names we all know, who made little secret that they were here to punch their ticket,” Kidney said. “They mouthed serious regard for the mission of the commission, but their actions were tentative and fearful in many instances.”
Tentative and fearful? Sounds like a pack of bed wetters. Let’s make no mistake, in the midst of such tentative and fearful enforcement, frauds were perpetuated and accountability went missing.
How does this happen? Those running the commission were asleep, incompetent, and/or corrupted.
Thank you, Mr. Kidney.
As for everybody else, let’s continue the fight as we navigate accordingly.
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