Another Batch of Wall Street Villains Freed on Technicality

By Matt Taibbi
POSTED: December 4, 5:10 PM ET



General Electric's corporate headquarters.
STAN HONDA/AFP/Getty Images

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.
http://www.rollingstone.com/politics/blo...y-20131204

financial crime is similar to corporate tax dodging these days.

The Establishment doesn't really treat it as crime, but rather as an understandable dimension of shrewd business practise. After all, the people being fleeced are largely the sheep of the world anyway (did someone say "taxpayers"?) and what else are they for but to be fiercely sheared? It's in the order of things and therefore, in their own benefit in the long run.

Ah, but wait. Our wonderful legislators in Blighty, have come up with a solution to naughty bankers.

In the future, senior banking Capo's will have to write a "health check" about their soldiers stating whether they are "suitable" to keep their status as "wise men".

That sorts it.

Back to fiddling the expenses and getting measured for Saville Row suits (plus the required off-the-peg Marks & Sparks suit for Friday surgery)...

Quote:Bankers face 'annual health check' under reforms

Banks will have to submit employees to "annual health check" under new staff approval rules in Banking Reform Bill amendments


Andrew Tyrie MP, chairman of the Treasury Select Committee, has led opposition to the Banking Reform Bill Photo: Micha Theiner/City AM/Rex



By Harry Wilson, Banking Editor

11:30PM GMT 09 Dec 2013

Banks will be required to give regulators an annual health check on all their senior staff to confirm they are suitable to keep their "authorised" status in the UK.

The new rule came in an amendment to the Government's Banking Reform Bill and will force every bank to conduct senior staff reviews "at least once a year" and to tell the authorities if there are "any grounds" to withdraw their license to operate.

The annual check-ups are one of a series of amendments tabled by the Government to ensure the Bill gets through Parliament after several peers threatened last month to disrupt its passage in the House of Lords.

In a series of amendments tabled at the weekend, the Government confirmed it would review proprietary trading by banks and set up an independent panel to conduct a study.

The Government also offered the extraordinary concession of handing the final say on the composition of the independent review panel to the chairman of the Treasury Select Committee, a role currently filled by Andrew Tyrie MP, who led much of the opposition to the Bill.

Mr Tyrie, along with former Chancellor Lord Lawson and Justin Welby, the Archbishop of Canterbury, pushed George Osborne to alter the legislation to take in many of the recommendations of the final report of the Parliamentary Commission on Banking Standards (PCBS), which the Chancellor himself set up.
The PCBS had been chaired by Mr Tyrie and among its recommendations called for an overhaul of the approval system for senior bankers, tougher rules on proprietary trading, as well a tightening of the incoming ring-fencing rules to give regulators the power to break up banks that fail to comply with them.
Under the amended Bill, the Britain's top banking regulator, the Prudential Regulation Authority, will be called upon to conduct an immediate 12-month review into the risks to the "safety and soundness" of financial groups resulting from proprietary trading, whereby banks seek to profit from trading using their own money.
"These are some very significant concessions and are likely to satisfy those who had been calling for the Bill to be amended," said one political source.
The change to the approval regime envisaged by the annual reviews has been seen as particularly important in the light of the Co-op Bank scandal and the revelations about the private life and lack of professional qualifications of the troubled lender's former chairman, the Reverend Paul Flowers.
Rev Flowers was approved to first sit on the board and then take the chairmanship of one of the country's larger banks despite his professional experience amounting to working in a junior role at a bank more than 40 years ago.
The Government also tabled its own amendment to the Bill to include a specific provision for anti-money laundering compliance that will in future mean that senior bankers, as well as other staff, could be held personally to account for any breaches of the rules.
This amendment comes in the wake of revelations about serious breaches of money-laundering regulations at HSBC, which paid a $1.9bn fine in the US 12 months ago over accusations it had helped move money for drug gangs and terrorists.

Yep. That will work. Everything ticketyboo. Move along.