Opinion

Stories I’d like to see

Lying to the SEC, A-Rod’s contract, and everybody gets hacked

Steven Brill
Feb 5, 2013 12:47 UTC

1.      Suppose a college applicant did this?

Here’s a story that seems so bizarre that it might be good material for a Tom Wolfe re-do of The Bonfire of the Vanities rather than worth the time of a serious non-fiction reporter – except that it’s apparently true. According to this New York Times report last month, Egan-Jones, an “upstart credit ratings firm,” has been:

barred for 18 months from issuing certain government-recognized ratings after the firm made misstatements on an application with the government. The S.E.C. said the firm had exaggerated its record when it applied for a government designation in July 2008. The firm said then that it had performed 150 ratings of asset-backed securities and 50 ratings of governments, when it actually had performed none at that time, according to the agency…. Under the terms of the penalty, Egan-Jones is barred [for 18 months] from rating asset-backed and government securities issuers as a so-called nationally recognized statistical rating organization….For other categories of ratings, Egan-Jones will still have the government designation.

Huh? “Exaggerated” its record? A firm applying for the SEC seal of approval as a provider of honest securities ratings seems to have completely fabricated its resume, saying it had done 200 ratings when it had done zero. And the SEC puts them in the penalty box for just 18 months for some ratings and lets them keep right on providing other ratings?

There must be more to this story. Maybe the fabrications on the application were an accident, or the work of a prankster who snuck into the Egan-Jones offices and took over a keyboard. Or maybe the SEC announcement of the “settlement” was a prank. If not, can the SEC explain what an applicant would have to do to be barred permanently from winning a designation? And why did it take five years for the SEC to deal with this?

2. Is A-Rod’s contract as hollow as his bat?

The recent round of charges that faded Yankee star Alex Rodriguez may be implicated in another scandal involving performance enhancing drugs (PEDs) has generated press speculation that the Yankees will use the charges as a way of freeing them from A-Rod and the $114 million left to pay over the next five years on his contract. But according to this ESPN story, “Rodriguez might be in little danger of having his contract voided, even if the charges turn out to be true. There is no precedent to successfully void a contract in baseball over PEDs.”

Oil spill muckraking, SEC excuses, and Gingrich’s taxes

Steven Brill
Dec 20, 2011 14:16 UTC

1. The Muck Around the BP-Halliburton Oil Spill Legal Fights

Earlier this month, BP filed papers in federal court alleging that Halliburton – which built the ill-fated Deepwater Horizon offshore well for BP – had destroyed test results showing it had used unstable cement to secure the well. The 310-page filing, filled with lurid accusations of negligence and cover-ups, is one of many such documents now sitting in publicly-available court records charging all kinds of misconduct by everyone involved in the oil spill disaster. For example, there’s also Halliburton’s suit against BP, filed in September, accusing BP of fraud and of hiding information that could have prevented the spill. A tour through all of this multi-million dollar lawyer name-calling is  bound to be fun reading, as would a highlights reel from the ton of documents produced in the dozens of suits filed by plaintiffs lawyers against both companies. It’s time that someone plow through all the mudslinging and tell us which charges, if any, seem real and what they tell us about letting either of these companies continue to operate in the Gulf or anywhere else.

2. Post-Crash Prosecutions: Excuses or Reality?

I tend to be skeptical of any government agency that cites funding shortages as an excuse for poor performance. So, as I keep reading all of those stories quoting the SEC saying that one reason the agency hasn’t been able to be tougher on those accused of violations related to the financial crash is because of budget constraints, my radar flares – especially since a quick check that any reporter could do before simply taking down those quotes reveals that the SEC’s $1.26 billion budget for the just-ended fiscal year is nearly three times its budget nine years ago. Can’t we see some reporting that details whether these supposed constraints on enforcement are real and, if so, why, given the flood of extra funding?

We also keep reading about the difficulty of proving criminal intent as the excuse for there not having been any prosecutions of major Wall Street bosses, which is the responsibility of the Justice Department, not the SEC. But I haven’t seen anything yet that actually explains why it’s harder to prosecute these securities fraud cases than others. Can’t someone zero in on those issues by talking to experienced prosecutors and defense lawyers and pinning down, with specifics, whether or why that’s true – or whether what’s more at work is some kind of failure of will, or nerve? How good a lawyer and leader is Lanny Breuer, the head of the Justice Department’s criminal division? And is it he or the local U.S. Attorneys who are making these decisions not to pull the trigger?

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