Our Whistleblowers and Activists Give Us Reason to Hope
Pam Martens and Russ Martens report in Wall Street on Parade:
Over the past week Rasmussen polls have captured the epic disgust of voters in the direction America is heading. Only31 percent of likely voters believe the country is heading in the right direction;67 percent of voters are angry at the current policies of the federal government; and just 24 percent trust the federal government to do the right thing most or nearly all the time.
The smooth functioning of the U.S. economy is based on citizens having confidence in the country’s leaders. Over two-thirds of the U.S. economy stems from consumer spending. When consumers lack confidence, they scale back spending. When businesses lack confidence, they lay off workers or stop hiring. When new home buyers lack confidence, they postpone signing a contract. Last Friday, Bloomberg News reportedthat the CEO of Signet Jewelers Ltd., Mark Light, was blaming a slowdown in diamond wedding ring sales on “a presidential campaign season that has scared couples into closing their checkbooks.”
No Federal agency has done more to drain investor and consumer confidence than the crony Securities and Exchange Commission. Public revulsion of the SEC has now reached such epic proportions that a whistleblower, Eric Ben-Artzi, has turned down his half of a $16.5 million whistleblower award from the SEC for alerting the agency that his former employer, Deutsche Bank, had been inflating the value of its credit derivatives to avoid taking losses. The SEC imposed a $55 million fine on the bank but took no further actions against the employees who were responsible for misspricing the derivatives and hiding the losses.
In an OpEd in the Financial Times earlier this month, Ben-Artzi explained his digust with how the SEC went about its enforcement in the case as follows:
“…top executives retired with multimillion-dollar bonuses based on the misrepresentation of the bank’s balance sheet. It is therefore especially disappointing that in 2015, after a lengthy investigation helped by multiple whistleblowers, the SEC imposed a fine on Deutsche’s shareholders instead of the managers responsible.”
Ben-Artzi saw a link to this lapdog enforcement action and the revolving door between the SEC and Deutsche Bank, writing:
“So why did the SEC not go after Deutsche’s executives? The most obvious concern is that Deutsche’s top lawyers ‘revolved’ in and out of the SEC before, during and after the illegal activity at the bank. Robert Rice, the chief lawyer in charge of the internal investigation at Deutsche in 2011, became the SEC’s chief counsel in 2013. Robert Khuzami, Deutsche’s top lawyer in North America, became head of the SEC’s enforcement division after the financial crisis. Their boss, Richard Walker, the bank’s longtime general counsel (he left the bank this year) was once head of enforcement at the SEC…
“This took place on the watch of Mary Jo White, the current chair of the SEC, whose relationship with Mr. Khuzami and Mr. Rice dates back 20 years. She bears ultimate responsibility for the Deutsche fine.”
If Ben-Artzi were the first to charge the SEC with cronyism getting in the way of justice at the SEC, his charges might be taken less seriously. But his assessment comes on the heels of a long line of charges from the quintessential SEC whistleblower – its own inside attorneys.
In 2014, The American Lawyer published excerpts from 2,000 pages of documents it had obtained from the SEC under a Freedom of Information Act (FOIA) request. The documents showed that . . .