Sunday, May 2, 2010

Enron On The Hudson: The Justice Dept. Piles On (part 4 of a series)

And now, finally, The Squid will face off against the Justice

Earlier this week, the DOJ announced that it is investigating
Goldman's ill-fated Abacus deal for possible criminal violations.
Under most circumstances, this is routine once the SEC serves
a target with a "Wells" notice - referrals for possible criminal
violations are virtually automatic as a result.

Yet the Justice Department has been strangely silent during
all the commotion surrounding The Squid and its blatant,
multifaceted history of wrongdoing. Attorney General
Eric Holder seems far more interested in prosecuting
the violations of "civil rights" of terrorists and illegal
immigrants than going after the gangsters of Wall and Broad.

But all that changed Tuesday when Rep. John Conyers (D-MI),
Chairman of the House Judiciary Committee, sent Holder a
letter, co-signed by all 40 members of the Committee,
demanding that he open a criminal investigation of
Goldman Sachs in light of the SEC civil charges.

Translation: if you don't jump on this now, expect to find
yourself before the Committee, on the hot seat under the
hot lights, explaining why.

And Holder would have a lot of explaining to do.

Thus far, he has been far more interested in going after
former Bush Administration officials for their lack
of solicitude in the treatment of terrorists and illegal
immigrants than in prosecuting complex financial
crimes in his own back yard. With few exceptions, he
has totally ignored the financial equivalent of the
Taliban and Al-Qaeda operating openly on Wall Street.

That may be about to change. The public has now caught on,
and they are beginning to "connect the dots" between actions
taken by Wall Street and job losses, outsourcing and job
exportation, the collapse of pensions and 401(K) accounts,
the collapse of the housing market, and the complete lack
of credit for the "real" productive economy.

But in point of fact it may be too late. Financial
deregulation has put the law enforcement community
hopelessly behind the curve when it comes to prosecuting
crimes based on extremely complex financial instruments
and exotic, computer-driven trading schemes.

We have arrived at the point where the only people who
understand the nature of the wrongdoing, the schemes used,
and the technology behind it all are the criminals themselves.

And that, in my opinion, constitutes an existential threat
that no free society can tolerate. As Baron Rothschild said
two hundred years ago: "Allow me to control a nation's
money and I care not who makes its laws, nor what those
laws are".

Replace Rothschild with "Goldman Sachs" and you have a
succinct, twenty-word explanation for our current

And will indicting Goldman criminally change anything?
Not likely. Now, instead of being forced to answer questions
in the "Show Trials" of Congressional hearings, they can now
dummy up as smooth, Armani-clad Wall Street lawyers
ritually intone "my client takes the Fifth" on every question.

The same will happen with the SEC case.

The best course, in my opinion? Hard as it may be, drop
any thought of immediately prosecuting the "top dogs"
at Goldman or Goldman itself.

Instead, roll out a vast, multi-count indictment against
a slew of lower-level players, most notably the "Fabulous
Fab" Tourre and his immediate superior, Jonathan Egol.
And, the lead charge should be " deprivation of honest
services"; that by committing criminal acts, they
fraudulently deprived both Goldman and their clients of
their "honest services".

The usual defense, of course, to an "honest services" rap
is that they committed all of these acts with the full
knowledge of and at the direction of their superiors.

And that's what we want to establish. The deal should be,
"Roll over on Blankfein and the others before the Senate
Committee and at the SEC trial and these charges will be
either substantially reduced or dropped altogether. It's
up to you".

And my guess is that we'll see a horde of lower-level
Goldmanites rolling over on their betters like
snowballs headed down the hill.

Unlike The Mob, who for all their wrong doing were
men of honor, who took care of the families of
"standup guys", these lower-level folks know exactly
who they work for at Goldman: Harvard-educated slimeballs
and sleazebags who would rat out their grandmothers to
escape one day of jail time.

It may happen, folks - seeing Lloyd and the gang exchange
pinstripes for jail stripes would bring bring joy to all
America. But it's going to take a lot of work to get there.

It will take civil prosecutions, lawsuits, some judicious
criminal indictments of low-level players, and constant,
ongoing investigations in Congress to make this happen.

But the public is now demanding this. And we won't let up
until we get it.

Congress, Administration, are you listening?

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