US Financial Justice 2010: No Cost, No Admission of Guilt

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Anthony Mozilo, the former CEO of Countrywide Financial , just got tagged by the SEC with “the biggest financial penalty ever against a public company’s senior executive”. This follows the settlement earlier this summer with Goldman Sachs in which the SEC also claims the largest fine ever – $550 million. It appears the SEC is back in the tough Financial Cop business after an 8 year hiatus and missing the Mortgage Bubble, Madoff and Sanford Ponzi schemes, and the current Foreclosure Fiascos.Nobody messes with the SEC these days.

Well maybe the verdict on the New Tougher SEC and Financial Justice should be Not Exactly if not out-and-out Paper Tiger.

The problems  with the SEC actions are “no cost” and “no admission of guilt”. First lets look at the Goldman Sachs action from this past summer. Goldman Sachs had to admit “marketing materials for the 2007 deal at the center of the case contained “incomplete information” “.  Thats it – no other admission of guilt . And most importantly the SEC agreed not to pursue several other cases against Goldman.  As for the largest fine in SEC history, Business Week points out the Street was expecting a fine of over $1billion and the markets reacted by adding $3B to Goldman’s stock value on the announcement of the settlement. But the key was that no fiduciary trust breaches were cited and further actions by the SEC  on what many had regared as lsam dunk casesagainst a key financial player and beneficiary in the Banking Crisis. So Business Week predicted that  shareholders and other 3rd parties wracked with losses will have a bigger burden of proof of negligence by the banks in ongoing 2007-2009 Banking Crisis cases.

If Goldman dodged a bullet, Anthony Mozilo got off Scott Free.

Yahoo Finance describes the sweeteners in the “biggest fine” for an American CEO.  First, Anthony Mozilo settled with the SEC with no admission of  guilt – making pending litigation  against him much harder to prove.  And as for the $ 67.5 million biggest fine ever – again Anthony Mozilo  and his two cohorts walk away scott-free. An agreement with BAC-Bank of America Corporation when CountryWide was acquired means combined with CountryWide’s previous escrow fund all the fines are covered by BAC and former CountryWide shareholders. Here is the case the SEC had against Anthony Mozilo:

Regulators portrayed Countrywide’s massive size in court documents as the result of the three executives’ single-minded pursuit of market dominance, even if it meant taking disastrous risks.

“The credit losses experienced by Countrywide in 2007 not only were foreseeable by the proposed defendants, they were in fact foreseen at least as early as September 2004,” the SEC said in its filing.

The SEC accused the men of misleading shareholders about the quality of the loans on Countrywide’s books. The civil complaint also accused Mozilo of acting on his inside knowledge of the company’s precarious state when he sold shares between November 2006 and October 2007 ahead of its collapse, reaping more than $139 million.

Under the settlement, the three men did not admit wrongdoing.

It is truly a sad disparity in Justice when the Madoff of Mortgage Fraud walks away with a no cost, no legal liability sanctions from the SEC. Is the Obama administration tossing in the towel on finding guilt for Financial Recklessness that culminated in the worst recession and continuing financial trauma for the US in 70 years? Is this the same no prosecutions against the Bush Administration for its action and coverups surrounding the Iraq War and TARP dealings? Is President Obama trying to match South Africa’s President Joseph Mandela – a Truth and Reconciliation Commision with no prosecustions for previous wrongdoing by Afrikaners and other white South? And is Obama getting Less than Half-Truths and No Reconciliation Whatsover from the Financial Community and the Republican Party?
Or is it more Sinister
Are both parties, Republicans and Democrats, so compromised and so complicit in Financial Lobbying and Congressional gift misdeeds that Justice has to stumble blindly through a pit field of coverups and turning-a-blind eye. Consider the evidence and decide for your self – is Financial Justice in the USA doubly blindfolded?

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