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The SEC And Rattner

June 2, 2010 in Rattner, White Collar World by Solomon Wisenberg | No comments

Have things really changed at the SEC? Michael Barbaro reports here, in today’s NYTimes, that the SEC and mega-wealthy financier Steven L. Rattner are at loggerheads over whether Rattner should be barred from working in the securities industry for up to three years. This obviously means that civil settlement talks between Rattner and the SEC have been in the works for some time. Rattner is said to have ”fiercely resisted” the proposed bar.

According to Barbaro, the SEC and New York AG Andrew Cuomo ”have suggested that Mr. Rattner improperly paid off a political operative to win lucrative business from the New York state pension fund — in one case, by arranging to help distribute a low-budget film for the brother of a pension fund official.”  Rattner’s former company, Quadrangle Group, settled with the SEC in April, characterizing Rattner’s conduct as “inappropriate, wrong, and unethical.”

I posted on that settlement here, noting that:

“Rattner is under investigation by the SEC and the New York Attorney General’s Office as part of the New York State Common Retirement Fund ‘pay to play’ scandal, in which certain money-management firms allegedly paid kickbacks to middlemen in order to gain Retirement Fund business.”

According to the SEC’s press release at the time of the Quadrangle Group settlement:

“The SEC alleges that Quadrangle Group LLC and Quadrangle GP Investors II, L.P. secured a $100 million investment from the New York State Common Retirement Fund. The investment came only after a then-executive at Quadrangle arranged for an affiliate to distribute the DVD of a low-budget film that former New York State Deputy Comptroller David Loglisci and his brothers had produced.

The SEC further alleges that the Quadrangle executive also agreed to pay more than $1 million in purported ‘finder’ fees to Henry Morris, the top political advisor and chief fundraiser for former New York State Comptroller Alan Hevesi. The SEC previously charged Morris and Loglisci for orchestrating the fraudulent scheme that extracted kickbacks from investment management firms seeking to manage the assets of the Retirement Fund.”

If SEC enforcement types really believe all of this stuff, but decide to cave in on a three-year bar for Rattner, then they have no guts and nothing has changed. And if they don’t believe all of this stuff, then they have no business smearing Rattner in press releases.

Rattner has an impressive resume–onetime NYTimes reporter, monster Democratic fund-raiser, former Obama Administration car czar, Michael Bloomberg intimate, Manhattan socialite, and all-around beautiful person. By most accounts he is a nice guy and a super-competent Wall Street money man. Does the SEC have what it takes to go after him?

By the way, the conduct that Rattner is alleged to have engaged in would typically generate a DOJ investigation in virtually any federal district in which it occurred.  But that apparently did not happen here. And I had not realized, until reading it in Barbaro’s story, that Cuomo has granted immunity to Rattner, which ”has complicated Mr. Cuomo’s case against Mr. Rattner.” You don’t say!

This brings up some interesting questions. Is there a federal criminal investigation of Rattner? If not, why not? (It may just be that Cuomo got his hands first on the the NY State Pension “pay to play” probe.) If Rattner has an immunity deal with Cuomo, how broad is it and how will it effect any current or future federal investigation, assuming that such an investigation would survive DOJ’s Petite Policy? Why was Rattner given immunity? Did Cuomo really need his testimony that badly?

Look, I don’t wish an SEC or FBI investigation on anybody. But the conduct Rattner allegedly engaged in is garden variety fodder for the feds. If you or I or anybody else engaged in such conduct, a file would be opened at a minimum. Prosecutorial discretion is one thing. Favoritism is another. The rich, famous, and politically connected should not be singled out for special abuse or special favors.

But I digress. Let’s get back to the SEC. We are just talking about a civil settlement here. If the SEC really believes its press releases, this one should be a no-brainer.

Connecticut Housing Market Collapses: $5 Million Mansion Goes For 10 Bucks!

June 18, 2009 in Accounting Fraud, Sentencing, White Collar World by Solomon Wisenberg | No comments

Well, not exactly. Former Cendant Corp. CEO Walter Forbes is doing 12 years in Allenwood for accounting fraud. His sentence included a $3.275 billion restitution order. The federal government moved, post-sentencing, to liquidate Forbes’ assets in order to satisfy the restitution order. The feds wanted Forbes’ $5 million house, claiming that it was purchased with ill-gotten gains. Now Forbes’ wife Caren has filed for divorce seeking equitable division of the couple’s property. But the mansion is currently held in Caren’s name only, having been sold to her by Walter for a mere $10. Our government is not amused. Nora Dannehy, Acting U.S. Attorney for the District of Connecticut, has taken the highly unusual step of moving to intervene in the Bridgeport Superior Court divorce action. According to Dannehy’s motion: “This court should not allow the Forbes family to undermine the government’s work to enforce the restitution order under the guise of a simple, uncontested, family court matter.” The Connecticut Post story by Daniel Tepfer is here.

ABA White Collar Conference: Relearning Old Lessons

March 6, 2009 in White Collar World by Solomon Wisenberg | No comments

Two of yesterday’s panels at the ABA Annual White Collar Crime Conference were excellent. The panel on the year’s major cases, all of which resulted in convictions, reminded the audience of some time-tested truths. Most or all of the convicted defendants had talked to somebody–the grand jury, corporate internal investigators, or the SEC–prior to indictment. There was general agreement among the attorneys on the panel that the talking had been a major mistake. The decisions to talk had been made for the most part by previous counsel on the cases at issue. 

Ted Wells, who represented Scooter Libby, was, true to form, an outstanding panelist.  Wells stressed that Libby faced a choice, when deciding whether to testify before the grand jury, between increasing his criminal exposure and losing his job. This is a choice sometimes faced by politicians and public servants who are witnesses, subjects, and targets. It is a choice also faced by corporate executives who are asked to participate in internal investigations or testify at the SEC. The ultimate question that all of these people should ask themselves, at every stage of the game, is: “What do I prefer–to lose my job or my liberty?”

Wells reminded the audience that even the sharpest clients and attorneys often cannot comprehend the full scope of a criminal investigation. Thus there is no way to be prepared for every question. Libby, before he hired Wells, testified in front of the grand jury, apparently not realizing that Patrick Fitzgerald’s mandate was much broader than the question of who leaked Valerie Plame’s name to Robert D. Novak.

The ethics panel focused on ethical quandaries associated with corporate internal investigations. As usual, Earl Silbert called, correctly, for transparency by audit counsel in dealing with corporate employees who are potential interviewees. Specifically, if audit counsel anticipates that the corporation’s attorney-client privilege will be waived, and that interview results will be turned over to the government, these facts should be made clear to the interview subjects. Professor Ellen Podgor, of the White Collar Crime Prof Blog, and the other panelists also made excellent contributions. Ellen is also posting on the conference.

The securities enforcement session was largely forgettable. Again, no mention whatsoever of the dismissal of all criminal charges in the David Stockman case.

Live!!! From The ABA White Collar Crime Conference

March 5, 2009 in White Collar World by Solomon Wisenberg | No comments

We come to you live from the 23rd Annual ABA White Collar Crime Conference at the Westin St. Francis in San Francisco. The festivities began last night with an afternoon nuts and bolts session for beginners and an evening of dinners and receptions. The level of excitement among participants was stratospheric at the hotel, as everyone eagerly anticipated another scintillating opening speech by conference organizer Raymond Banoun. It was all everyone was talking about. Really.

In past years, Banoun’s speeches were so powerful that droves of conference-goers emptied the room. Ray promised to tone down his speech this year, and, having just sat through it, I can report that he definitely kept his promise. Oddly, however, people still emptied the room.

There is absolutely no truth to the rumour that Ray laces his coffee with LSD 30 minutes before the speech begins. Valium, maybe. LSD, never.

I am now sitting through a panel discussion of last year’s allegedly major trials–at least one of which took place in 2007 and all of which resulted in convictions.

Banoun also writes an annual essay, printed in the conference materials book, highlighting the past year’s white collar world highlights. Somehow he forgot to include the government’s decision to drop all criminal charges in the alleged $900 million David Stockman securities fraud case. I guess it wasn’t important enough.