Tags: Eisinger | enforcement | law | jail

Propublica's Eisinger: 1 Guy Went to Jail for Financial Crisis

By    |   Wednesday, 07 May 2014 07:46 AM

On April 30, The New York Times Magazine published an article titled "Why Only One Top Banker Went to Jail for the Financial Crisis," by Jesse Eisinger, who writes regularly for The Times and Propublica, and on May 3 Eisinger appeared on C-SPAN's Washington Journal to discuss the article with host Pedro Echevarria.

This writer has admired Eisinger as one of the best and most prolific investigative reporters in the mainstream media.

Eisinger realizes that the incarceration of Kareem Serageldin, an unknown Egyptian national who oversaw complex securities at Credit Suisse and pleaded guilty to misrepresenting their value, only reinforces the impression that the law enforcement function utterly failed in the 2008 episode of the ongoing financial crisis. He could have said that Serageldin shouldn't really count, because he pleaded guilty. In a sense, he was a volunteer; perhaps he had a guilty conscience. As a result, he is doing 30 months in a facility in central Pennsylvania in a room with 70 bunks.

The author pronounced himself "stunned" by this enforcement failure in light of what he considers a reputation the United States has earned as a country that locks up a lot of people, so he set out to find the reasons.

He found the financial instruments, such as collateralized debt obligations and credit default swaps, at issue are complex and difficult for juries to understand, but he also learned that during a decade or so in the overlap of the Bush, Clinton, Bush and Obama administrations, enforcers had lost, or believed they had lost, some of the tools and tactics they could have used.

More convincing was Eisinger's observation that a revolving door operates between the enforcement agencies and the high-powered law firms that represent white-collar defendants, where government lawyers repair once they have made their reputations, perhaps by prosecuting some insider trading cases, which are easier to do in a volume sufficient for resume enhancement that can support salaries 10 times what they made in government.

For Eisinger, the fact that the job of the prosecutor is difficult is not excuse for failure to do the work it takes to move up the chain of authority, "turning" witnesses along the way. This writer would note the virtual absence of whistleblowers in the field of financial crime and the notorious failure on the part of Securities and Exchange Commission (SEC) staffers to act on the Bernie Madoff case when it was gift wrapped for them. Eisinger is especially contemptuous of the SEC, which he says is so incompetent that defense lawyers don't fear taking the agency to court. The SEC has only civil enforcement authority, but Eisinger faults it for not making enough criminal referrals to the Department of Justice.

Eisinger's prescription is to recruit prosecutors who are fearless because they are unconcerned about the effect their actions might have on their ability to earn in the private sector. While he called Rudy Giuliani a "grandstanding egomaniac," he found him and former New York Attorney General Eliot Spitzer flawed but fearless. He quipped that what we needed was Grants, but we got McClellans.

His wish for the hapless SEC is that Chairman Mary Jo White can restore the skills the agency needs to be an effective law enforcer, but he doubts she will do this in light of her years spent as a "white-collar defense attorney." It would be interesting to know how he would weigh the fact that White's husband, a former SEC division chief, is practicing securities law today with a leading firm.

Based on a small sample size, White appears to be lining up on the side of the industry in the numerous policy disputes spawned by the Dodd-Frank Act.

(Archived video can be found here. The New York Times Magazine article can be found here.)

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Robert-Feinberg
On April 30, The New York Times Magazine published an article titled "Why Only One Top Banker Went to Jail for the Financial Crisis," by Jesse Eisinger, who writes regularly for The Times and Propublica, and on May 3 Eisinger appeared on C-SPAN's Washington Journal to discuss the article.
Eisinger, enforcement, law, jail
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2014-46-07
Wednesday, 07 May 2014 07:46 AM
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