IP: wall st email destruction; $ 10 Mil collectively to avoid going to jail, much bigger costs; not a bad deal

[Dave Farber <dave () farber net>]

------ Forwarded Message
From: 
Date: Sat, 03 Aug 2002 07:42:33 -0400
To: dave () farber net
Subject: wall st email destruction; $ 10 Mil collectively to avoid going to
jail, much bigger costs; not a bad deal

Dave, if you post to IP, please do not post my name or email routing info...
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Let's follow the money in this case. Merrill Lynch is fined $ 100 Million
for being caught with compromising email. So, SEC proposes to fine 6 firms
COLLECTIVELY $ 10 Million for violating outstanding regulations not to
destroy email records for a set period.

In criminal and civil procedure generally, evidence of document destruction
can lead jury or judge/factfinder to conclude that party destroying
evidence had reason to do so - and thus to a presumption of guilt
(criminal) or wrongdoing meriting judgement in favor of the party alleging
wrongful document destruction.(civil)

Waiting with great anticipation for Justice Dept to initiate criminal
investigation of all parties who have destroyed/failed to keep evidentiary
records. Such indictments would demonstrate Bush administration was serious
about upholding the <existing, applicable> law! Dont have to wait to
enforce newly signed corporate corruption bill; just apply applicable laws
already on the books which covered actions during period involved; past 2-3
years.

Looking forward to the vigor of arbitrators (securities firms account
agreements in last 10 yrs required customers to waive right to trial,
forcing arbitration) in pending arbitration proceedings. Juries and other
fact finders may wish to use such record of failure to abide by stated SEC
regulations to find 'per se' that the parties had prejudicial evidence of
wrongdoing deleted - as, otherwise, why wouldn't they have kept such
records?

What a return on investment of lawyers fees. $ 10 Million civil fine
COLLECTIVELY - to 'settle' such critical matter - which can then help
frustrate justice being done. How much will the lawyers' 'success fee' in
addition to their astronomical hourly fees likely to be, any guesses?

Bet Bill Gates would have gladly paid $ 10 Million, or even $ 100 Million
to not have to face some prejudicial email that was presented in the MS
anti-trust trial.

This exposes the farcial nature of SEC and other Government civil fines in
settlements of potential criminal matters.

They are ineffective in achieving their intended purpose, because:

1) economic damage by the wrong committed is usually many magnitudes larger
than the agreed to fine and

<aside> Do the numbers on the civil settlements in last few years for deals
wall street firms sold in the 1980's with conflict riddled, overpriced real
estate partnership deals to unwary investors. The firms succeded in paying
pennies on the dollars of commissions, and insider fees paid by the
investors upfront; not to mention the economic losses suffered on the loss
in value of shares ultimately

Same for many other high visibility PR announcements such as:  "X agency
today agreed to the largest civil fine in its history"
What is not said is:  'X Agency today settled with happy defendant company
which received a 1000% Return on Investment on its wrongfully gained
profits"

Also not said in those press releases: "By breaking the law in such a
blatant and stupid way that even X agency had to act, and was able to catch
the crooks, just shows how stupid or incompetent they were as they failed
to timely destroy relevant potentially incriminating documents, or emails."
......</aside>

2) absent jail time served, they are hardly likely to deter future conduct
as usually even the fine is not personally paid by impacted officers; but
is paid by the corporation (talk about a perk!)

Thats why the proposed SEC fine of $ 10 Million, collectively is another
example of egregious conduct by SEC.
Is there any question that this proposed settlement is not in the public
interest?

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