Our real undoing

[Mondo]

This is type of stuff that will bring down America... not the red herrings of welfare queens, Obamacare, national debt, or the war on Christmas. We're talking $billions. Sorry for the long read but we can't understand real problems in 3 sentence sound bites.

 

Another Batch of Wall Street Villains Freed on Technicality

By Matt Taibbi

POSTED: December 4, 5:10 PM ET

 

I love covering trials, which is one reason I've been a little sad since switching over to the Wall Street beat: Few of the bad guys in this world ever even get interviewed by the authorities, much less indicted, so trials are comically rare.

But we did have one last year, a big one, and though it was boring and jargon-laden enough on the surface that at least one juror fought sleep in its opening days, I thought it was fascinating. In a story about the Justice Department's Spring 2012 prosecution of a wide-raging municipal bond bid-rigging case, I called it the "first trial of the modern American mafia":

"Of course, you won't hear about the recent financial corruption case, United States of America v. Carollo, Goldberg and Grimm, called anything like that . . . But this just completed trial in downtown New York . . . allowed federal prosecutors to make public for the first time the astonishing inner workings of the reigning American crime syndicate, which now operates not out of Little Italy and Las Vegas, but out of Wall Street."

Dominick Carollo, Steven Goldberg and Peter Grimm were mid-level players who worked for GE Capital. They were involved in a wide-ranging scheme (one that also involved most of America's biggest banks, from Chase to BOA to Wachovia) to skim billions of dollars from America's cities and towns by rigging the auctions banks set up to help towns earn the highest returns on the management of municipal bond issues.

The case was over 10 years in the making and involved offenses that took place long before the 2008 crash. All three defendants were convicted in May 2012, with Goldberg ultimately getting four years and the other two getting three.

Now, they're all free. A New York federal judge last week ordered their convictions overturned in a quiet Thanksgiving-week transaction.

The GE Muni-riggers will now join such luminaries as the Gen Re defendants (executives from an insurance company who were convicted in 2008 of helping AIG conduct a fraudulent accounting transaction) and the KPMG defendants (executives of the U.S. arm of the Dutch accounting giant who were convicted in the 2000s of selling illegal tax shelters) in the ranks of Wall Street line-crossers who improbably made it all the way to guilty verdicts in criminal cases, only to be freed on technicalities later on.

As one antitrust lawyer I know put it: "Apparently, the government can't seem to get criminal trials involving financial executives (as opposed to, well, drug dealers) right. Go figure."

In this case, the defendants were shielded by the sheer complexity of the case. It would appear that the state took so long sorting through the mountains of recorded conversations and interviews to find the massive but well-camouflaged crime – these men, along with others like them in other banks, were using code words to rig the auction process so that banks and finance companies could collude and bid lower for city and town money management business – that the statute of limitations ran out on their own individual actions. When that happened, the Feds then switched up and charged them with different crimes related to what they claimed was an ongoing conspiracy, using continuing interest payments to establish the "ongoing" part of the indictment.

According to the lawyers for the three men, this allowed the government to unfairly bypass the statute of limitations. The lawyers for two of the men gave statements that recalled the heartwarming courthouse-steps speeches given by attorneys for genuine innocents, freed from prison after years of suffering by DNA results.

"We feel gratified by the Second Circuit's order, which allowed Steve Goldberg to be freed in time for Thanksgiving with his family," said David Frederick, Goldberg's attorney.

There are two important reasons why Wall Street defendants tend to slink out of convictions more easily than, say, drug dealers or burglars. Both reasons showed loudly in this case.

One is obvious. The Wall Street types have better lawyers. They don't miss anything and they all have gigantic balls (or are paid to have them, anyway). In this case, who knows, the court might even have been technically right in its decision. But it needed to be led there by lawyers with the skill to pull it off.

The argument in this case was relatively straightforward, as the government itself admitted it missed the deadline to charge the defendants based upon their own actions. But in the KPMG case, for instance, the court had to be convinced that an official Department of Justice policy for securing cooperation from corporate targets – one originally dreamed up by Eric Holder in the Clinton years, incidentally – was inherently violative of defendants' rights to counsel. That was a long bomb of a legal argument and in that case the KPMG lawyers hit the court right in the hands.

So unlike street-crime cases – where prosecutors screw up all the time but overworked defense counsel rarely have the time or the resources to call them on their mistakes – in these finance-sector cases, no error ever goes unnoticed.

It's one of the reasons prosecutors don't like to bring these cases at all. You make one misstep, and the whole case goes away – in this case, 10 years of work by God knows how many lawyers and investigators goes down the drain, with the snap of a finger. Imagine the last time you lost a paper thanks to a computer error, multiply that feeling by about 10 billion, and you might get close to grasping the horror of the DOJ prosecutors in this case this week.

The other reason these cases get overturned so much is equally obvious. These scandals are crazily complex. It's not just juries that have a hard time sorting them out. In many cases the crimes are so subtle, and the standard of proof to even call the crimes crimes is so high, that it takes years and years for investigators to build cases.

You can send a guy away for life on a murder charge based on a speck of blood and an old lady who saw a piece of a license number on a car screeching away from the scene. But you need to build a massive rhetorical case from scratch just to indict someone for being part of a nationwide bid-rigging conspiracy.

The crimes take place in a world unknown to ordinary people, so it is not unlike trying to explain a crime committed by aliens on another planet. In fact, the crime, in many cases, is not one that has even been seen in American courtroom before.

Judges need to be convinced they're not wasting their time. Juries need to be walked by the hand down a very deep rabbit-hole of inscrutable paper transactions and then literally trained on the fly to recognize evidence – these trials are often more like seminars than court cases.

So bringing these cases takes forever. This one took forever. And in the end, for these three anyway, it was all for nothing.

The Carollo, Goldberg and Grimm case was important on a number of levels. Many years from now, we will look back on this story that began as far back as the late Nineties and recognize in it an early, smaller-scale preview of the major global manipulation/collusion scandals that have already rocked the planet and will likely continue to do so in the years to come.

After all, the most dangerous possible consequence of the extreme concentration of financial power that has taken place in the last few decades has always been the possibility that these giants might figure out ways to work together, to game the costs of things for the rest of us. That's what took place in this case, as these defendants (and many big banks which have already settled with the state for similar actions) were caught colluding to skim from the investment returns owed to all of us local taxpayers.

Something similar also took place in the Libor case, and in the global currency exchange scandal now blowing up, and in numerous other manipulation cases (involving everything from metals to chocolate) already coming down the pipeline.

All of these cases will share the same features. The defendants, if there will be any, will have the best lawyers money can buy. And if they're charged at all, it will be for the most complex crimes imaginable, offenses so convoluted that it will take years to make cases.

This carries serious risks for anyone trying for justice, and we've just seen what those risks are. It's hard to put these guys away. It's even harder to keep them there.

[slngsht]

yup, between big corporations, big unions, big government... the only guys not at the table are ordinary citizens. It's awesome.

[JohnK]

yup, between big corporations, big unions, big government... the only guys not at the table are ordinary citizens. It's awesome.

 

Ah, but all citizens are ordinary and equal under the law - but some are more ordinary than others (paraphrasing A. Huxley)

[JohnK]

I've heard answers to all this on NPR in comments by the different folk there, and at heart, they stem from the fact that we have capitalism as our economic system. Capitalism has some awful properties that ordinary citizens exploit (after all, capitalism is all about exploiting the other guy so you can get ahead at his expense), and the killer is that we don't have anything to preplace it with. All economic systems have the ability to be subverted by ordinary citizens. ( I'm pretty certain that the TEA party will be shown to have caused much harm to the country when the historians sort it all out and they will tell you that they're ordinary citizens, self-righteous ones to boot.)

Again, it comes down to "We the people..." and the people just don't have it together enough to handle things - education is one point, and another is being able to reason objectively.

I don't see that there's anything to pin it on but us.

[slngsht]

I'm pretty certain that the TEA party will be shown to have caused much harm to the country when the historians sort it all out and they will tell you that they're ordinary citizens, self-righteous ones to boot.

 

I'm certain of this too... only because the field is dominated by liberals. I used to listen to NPR almost exclusively, and read other sources- used to think they have a very balanced blend - but there is a definite bias in their reporting too... mostly by omission of opposite views.

 

You're correct - every system of government has its problems.

 

The real choices are not republicans vs democrats. In my view both are out of control - both are big government (and big business/big union)- both put too much power in the hands of the federal government - both are corrupt.

 

Some of this is the inevitable cycle of rise and fall of societies.

 

Today we are like the fat kid in a room full of twinkies and unlimited video games. anyone can tell the solution is to take away the twinkies and replace the game console with exercise equipment, but the kid ("we the people") just don't have the will power.

 

The solutions are actually fairly simple to start:

 

institute term limits for congress

 

reassert the powers states have under the constitution (as an example, good luck getting congress to pass term limits for its own members - best chance of this happening is through state ratification)

 

undo all the harm that's been done to the senate. that's a critical part of check and balance of federal power, and it has been reduced to a miniature version of the house. We need to go back to state legislatures picking their senators. Senate was supposed to be comprised of people held accountable to state legislatures - to make sure other parts of the federal government don't just keep taking power.

 

Enforce mandatory waiting periods on voting on bills after their text is ready to be voted on. No more "you gotta pass it to see what's in it".

 

To me the surest sign that the Tea Party is not the problem is the debate it has created within the republican party.

 

It's abundantly obvious that recently democrats are one solid voting block, towing the party line. While there is chaos on the republican side, and that's costing them effective "opposition", I see this chaos as part of the examination process of where things are heading. Clearly if people don't want the Tea Party candidates, they'll all get voted out in '14.

[speedwagon]

If you vote you vote for the wrong people. It has always amazed me that not one of Enron's management died of an unnatural cause in lieu of how many employes and investors lost all. We have the best government that money can buy.

[Mondo]

Campaign finance reform is needed. Corporations are now "people" too. The money needed to run is outrageous... you'll never get a "regular" person to sell their soul for donations required.

[DeanG]

If you vote you vote for the wrong people. It has always amazed me that not one of Enron's management died of an unnatural cause in lieu of how many employes and investors lost all. We have the best government that money can buy.

+1

I always wonder why nobody hunted these people down and took vengeance.

[bigdog]

Here is an interesting link. Man we are such sheep aren't we.

[/url]http://www.apfn.org/apfn/reserve2.htm

We should have listened to Thomas Jefferson.

[JohnK]

Study history to learn what people who made rules were influenced by. Build big systems with other folk to learn how good and sensible ideas produce consequences that no one could have predicted (or intended). Become a Biologist so you can observe how poplulations of animals behave over time (which will eventually get you to the point of saying, "Hey! people do the same damn thing!") Like it or not, it's all in our hands and if we don't teach ourselves and learn how to face the realities, and if we think that someone else is going to fix things for us then we're no better than the typical 17-year-old who thinks that the one or two things he/she knows explains it all and winds up being able to do nothing better than develop an attitude.

[bigdog]

Study history to learn what people who made rules were influenced by. Build big systems with other folk to learn how good and sensible ideas produce consequences that no one could have predicted (or intended). Become a Biologist so you can observe how poplulations of animals behave over time (which will eventually get you to the point of saying, "Hey! people do the same damn thing!") Like it or not, it's all in our hands and if we don't teach ourselves and learn how to face the realities, and if we think that someone else is going to fix things for us then we're no better than the typical 17-year-old who thinks that the one or two things he/she knows explains it all and winds up being able to do nothing better than develop an attitude.

 

true.

But with the big private banks controlling the public money to the point they and not the government make all the decisions does not bode well for the folks. Even if said folks become aware and decide to do something about it, I fear it would be to late, As who would fund such a revolt? The people that run the corporations that make the goods (weapons & ammo) are already making big money. Why would they essentially revolt against them selves. In addition our sense of what freedom really is has been changing due to the influence of the big apparatus. We seem to be rather comfortable with allowing the government & the corrupt cronies that control it to administrate our lives almost completely. While I'm absolutely NOT against capitalism, we need to (somehow) get back to a constitutional government.

[JohnK]

true.

(1) But with the big private banks controlling the public money to the point they and not the government make all the decisions does not bode well for the folks. (1)

 

Even if said folks become aware and decide to do something about it, I fear it would be to late, As who would fund such a revolt? The people that run the corporations that make the goods (weapons & ammo) are already making big money. Why would they essentially revolt against them selves. (2)

 

In addition our sense of what freedom really is has been changing due to the influence of the big apparatus. We seem to be rather comfortable with allowing the government & the corrupt cronies that control it to administrate our lives almost completely.(3)

 

While I'm absolutely NOT against capitalism, we need to (somehow) get back to a

constitutional government.(4)

 

(1) We (the government) want the banks to do well because when they're profitable they a) hire people b) provide capital for industry and c) provide a good return to their investors (which I feel safe in assuming includes both you and me.) So when these guys come to Congress and lobby (explain their situation to) the lawmakers to ensure that there aren't difficulties created which stand in the way of them being successful, lawmakers at least listen carefully. Since any large bank can pay for a large and talented staff, they can give the lawmakers well crafted descriptions and justifications of what they want – much better than any lawmaker's staff can put together. And of course the lawmakers want their constituents employed and the companies in their districts to do well, it seems a no-brainer that they should give the banks what they need to be successful. And if the bankers make a lot of money, hey, that's what Capitalism is all about right? (And what no one mentions is that Capitalism has as its fundamental principle ripping off the next guy better than the next guy can rip him off – it's called exploitation and it's what our economy is based on. Hardly the basis for a fair and equitable society, not to mention an informed populace.)

 

(2) Years ago I realized that the same scene has been playing out over and over in different countries in South America: the citizens in a country would rise up against terrible rulers and at ghastly costs, throw them out - and in time other terrible rulers would come into power or new kindly rulers would decide to use their circumstances to enhance their own situation at the citizens' expense. It's not enough to get rid of a bad situation, you have to REPLACE it with something that prevents such from recurring. And no one's figured out how to do that.

 

(3) As Walt Kelly said in Pogo years ago, “We have met the enemy and it is us.”

 

(4) Capitalism has some really, really bad properties and no one's figured out how to get rid of them (- without promoting blood in the streets like we're seeing in lots of other places today.) It doesn't help that Economics isn't a science so it can't give us a foundation to work from - so we're a ship without a rudder until someone figures out something that works AND can actually be put in place. A good article in Scientific American (Mirsky?) described how the founding fathers were trying to come up with a balance between freedom and laws, that they knew that such a balance was dynamic (needed continuous examination and modification) and that the Liberal Democracy that they crafted was an EXPERIMENT – no civilization had ever attempted such a thing before. So I take anyone who rants about “the government” not doing its job in providing what they think it's supposed to is so out to lunch about the facts as to be considered the 17-year-old I described.

Edited December 29, 2013 by JohnK

[Manshoon11]

it seems a no-brainer that they should give the banks what they need to be successful.

 

And the answer is to give government MORE power? More power in which the cronies can purchase? :banghead:

 

 

 

And if the bankers make a lot of money, hey, that's what Capitalism is all about right?

Purchasing politicians as part of a business model is NOT capitalism. :banghead:

 

 

 

(And what no one mentions is that Capitalism has as its fundamental principle ripping off the next guy better than the next guy can rip him off – it's called exploitation and it's what our economy is based on

Our economy is based off of using government to gain an advantage. A free market would be one in which no law could be passed to gain advantage.

 

 

 

Hardly the basis for a fair and equitable society, not to mention an informed populace.)

 

What is fair and equitable? We are all born with different abilities. We don't have the right to success, only the right to pursue it to the best of our abilities.

 

Is it fair and equitable that General Electric pays no income taxes? Is it fair that they sit on Obama's job council? Is it fair for any company to pay less % of taxes than any other?

 

All of those that scream about the evils of capitalism ALWAYS highlight the big corporations using government to corner the market. You are arguing against yourself. You want more government, but prove why you need less in the same effort.

 

 

 

 

It [Economics] doesn't help that Economics isn't a science so it can't give us a foundation to work from - so we're a ship without a rudder until someone figures out something that works AND can actually be put in place.

 

 

You must be joking and/or have never studied economics. Within every economic school lies a foundation "to work from". Keynesian economics is the main school in which our politicians get their beliefs from. This means that our current rudder is mostly Keynesian.

 

I am firmly in the Austrian camp. Personal responsibility should be our rudder. The problem for my camp is that it is impossible to go from this corrupt system to a true free market..... without the corrupt system first imploding. Is it easier for an alcoholic to consume "just one more" beverage, or go to rehab?

 

These super banks could not exist in a free market. They need favors, a positive regulatory climate and bailouts to survive.

[bigdog]

I would say that while I would love to return to a more constitutional based government, I don't think we nor the politicians can change the system even if we/they wanted too.

 

We collectively have ventured to the middle of a tunnel only to discover a fast train approaching. In to deep to run away, Yet not far enough in to get to the exit.

 

Back in the days of the American revolution. We and most other countries that wanted a reboot could do so because of the isolation of communication, transportation of that bygone era. We grew our own crops & livestock. These days, Everything is instantaneous & heavily interconnected, no place on earth is more than 3/4's a day apart. We no longer have the ability to be self sufficient, Especially given the large population. We are locked into the grid and are not likely to be easily taken off it.