The End of the Spitzer Saga

From Salon:

"Put this within the larger context that Spitzer saw prostitutes while actively seeking their imprisonment, and that Emperors was only attending to his requests, and the whole mess strikes me as a distortion of justice and a sickening waste of resources."

Also, a poignant description of Mr. Spitzer's prosecution efforts.

The Filip Memorandum: Does It Go Far Enough?

With the McNulty memo finally dead, law.com asks if the new guidelines have gone far enough. Nope:

Beyond its treatment of privilege waivers, the other changes announced by
the Filip Memo are somewhat of a mixed bag. The memo clearly strengthens the
prohibition on prosecutors' consideration of a corporation's decision to
indemnify its employees. But other new protections it announces appear largely
illusory.For example, although the Filip Memo provides that prosecutors can no
longer consider a company's retention or discipline of culpable employees as a
factor affecting cooperation credit, it allows the government to continue to
consider retention or discipline as a factor affecting remediation. Since, under
the Filip Memo, both cooperation and remediation are factors affecting the
charging decision, it is unclear whether there is any significance to this
change. Similarly, although the Filip Memo generally prohibits the
government from considering whether a company entered into a joint defense
agreement, it also indicates that if a joint defense agreement prevents a
company from disclosing relevant facts, the failure to disclose will weigh
against the corporation receiving cooperation credit. Accordingly, companies
will either continue to be penalized for entering into joint defense agreements
or attempt to negotiate one-sided agreements that permit full disclosure by the
company while providing little protection to the individual employees who join
the agreement.

White Collar Justice

We have blogged previously about this case and the misconduct of the DOJ. With this decision, the DoJ revised it's standards and the odious Thompson Memo. The WSJ Op/Ed has this to say:

Congratulations to Lewis D. Kaplan, the federal judge whose withering critique of prosecutorial abuse in the KPMG tax-shelter case was vindicated yesterday by the Second Circuit Court of Appeals.

In fact, you can double that applause, because yesterday the Justice Department went further and once again rewrote its white-collar prosecution guidelines to accommodate Judge Kaplan's demolition. Whether Justice anticipated its legal defeat before the surrender is less important than the fact that it has now restored a measure of due process fairness to corporate defendants and their employees.

"...this does not mean that the Sentencing Guidelines for white-collar crimes should be a black stain on common sense."

For these two brothers common sense prevailed:

Two brothers facing 30 years to life under federal sentencing guidelines for their roles in a securities fraud scheme received five-year sentences Thursday.

In departing downward from the minimum recommended sentence by 25 years, Eastern District of New York Judge Frederic Block issued a 21-page opinion -- the longest sentencing memorandum of the senior judge's career -- highly critical of the guidelines' "fetish with absolute arithmetic."

"[W]e now have an advisory guidelines regime where, as reflected by this case, any officer or director of virtually any public corporation who has committed securities fraud will be confronted with a guidelines calculation either calling for or approaching lifetime imprisonment," Block wrote in People v. Parris, 05-CR-636.

WSJ Blasts AGs

Just like our post yesterday, the WSJ rails against the sleaze AGs we have in place. Nothing new here, but still worth a read:

Take one part ego, one part ambition and one part lawyer, mix it with an office that has few restraints on power, and you'll end up with the worst sort of state attorney general. Take Dan Greear, and you'll have a man at the front of a nascent electoral movement to change the formula.

...

His quest has become a case study in the opportunities, and pitfalls, of an upstart reformer challenging an incumbent attorney general who, like New York's
Eliot Spitzer, has cemented his position through populism and political patronage.
...
Mr. McGraw, in more than 14 years as West Virginia's attorney general, has been a pioneer in the practice of filing questionable lawsuits against big companies, secretly doling out the legal work to outside trial lawyer friends who reap millions in fees. Those lawyers then turn around and donate heavily to Mr. McGraw's re-election.

What is it with State AGs?

I recognize many of the names on this list of AGs from wiki, all of them for saying or doing something the average man would be too embarrassed to do. They are as out of touch as academics. Take (please) AG Blumenthal of Connecticut. Yesterday’s NY Post quoted a released statement saying, "We are holding the credit-rating agencies accountable for a secret Wall Street tax on Main Street." The gist of his complaint is that municipal bonds aren’t rated as high as corporate debt.

What puts this bureaucrat in a position to second guess the ratings experts? Nothing. But it’s a lot easier to bully around rating agencies than shore up a balance sheet. It’s classic Spitzer: Make the corporations the bad guys and himself the good guy. No matter what the outcome is, claim victory. Move on to the next shakedown.

While Spitzer the AG is no more, his tactics live on in the other wannabes. The grandstanding, the bullying, and the shameless pandering is all part of the job description. There is nothing noble about a public servant in the AG role. They all seem to be using it as a role to burnish their populist cred and move onto the next gig. So what is the solution? Recognizing that AGs are just like any other politician, but with too much power, is a good first step. The unfortunate catch-22 of AGs: The only people who would want the position aren’t the kind of people you would want to be in that position. The lap dog press doesn’t go any deeper into the AG phenomenon than cutesy grammar articles about Attorneys General. Disgraceful.

Trading Thought Crimes - Never Trust the Discretion of a Prosecutor

It should be obvious by now: The kind of people who become prosecutors are not the kind of people who can be trusted to use their discretion. One of the few sensible business reporters, John Carney, explains why going after rumor spreaders, even if they are right, is a waste of time:

We think that this would be a terrible misuse of prosecutorial power. In
the first place, there's precious little evidence that the supposed market
manipulation even occurred. Instead of evidence there's just pure speculation.
"Where there's smoke, there's fire," might be a nice soundbite but its not
evidence. Before we unleash the hounds of war on rumor mongers, shouldn't we
require more than this?

What's more, the costs of such investigations would likely be worse
than the alleged wrong-doing. In order to catch wrong-doers, prosecutors would
have to subpoena the private emails, instant messages and testimony of lots of
people who did no wrong at all. Each of the investigated would face huge legal
bills and know that their lives could be ruined by a prosecutor or a judge who
misreads a bad intention into an innocent email.