Forgive an obsession about insider trading abuse, but when Bernie Sanders succeeds with wholesale attacks on the rich, Hillary Clinton at least pretends to go along, and the ultimate insider, Donald Trump, is for the little guy, someone should defend hedge-funders.
Admit it: Who does not get secret pleasure from the travails of the rich, especially those who do not perform heavy lifting?
Do Carl Icahn or Peter Lynch or Ronald Perelman and their multi-billions touch your heart? Do they evoke sympathy living opulently in their San Moritz lodges and Caribbean mansions?
Americans tell Gallup someone who grosses $150,000 or more per year is “rich.” Globally, the top one percent only earns $50,000 or more per year. So maybe even you and I are rich in much of the world; but not here in the U.S.
The real rich can ignore us with our pitiful savings and few trades. We average folks return the favor by applauding the war against the real rich.
It is not so much Ponzi schemes crooks like Bernie Madoff and R. Allen Sanford.
As the Inspector General of the Securities and Exchange Commission reported, the SEC top agency officials do not target complicated criminal cases but look for “quick hits” against celebrity rich “Wall Street cases” that will rally us against those we actually envy.
Celebrity is essential. Who even knows who Lynch is?
But everyone recognized Martha Stewart when prosecutors railroaded her into prison.
They bragged to the media she was guilty of “insider trading” but the judge threw that out so prosecutors could only convince the jury she was guilty of the nebulous charge of “conspiracy” without an underlying crime. She ended up in prison anyway.
More recently it was Phil Mickelson’s turn. He may have been America’s best loved golfer, but he was rich and famous — guaranteeing headlines for showboats like U.S. Attorney Preet Bharara and his SEC enablers.
Besides, when a “goody two shoes” is revealed as greedy, it makes everyone feel superior.
Mickelson was caught in a trap set for famed Las Vegas sports gambler William "Billy" Walters in an alleged illicit $40 million trade. Using its favorite tool of promising easy treatment for some to get others, the SEC pressured lower levels to give up the big ones.
Bharara used these to pressure CEO of giant Dean Foods Thomas Davis to say he leaked inside information to Walters, who had urged Mickelson to trade in Dean stock.
The SEC alleged that Mickelson “received gains from trades based on material nonpublic information” over which “he had no legitimate claim” as a “consequence of security law violations.” Therefore, it would not be “just, equitable or conscionable” for him to retain any gains which had totaled $931,000.
Prosecutors had no evidence that Mickelson knew there was anything improper about Davis’ advice to buy his stock. There certainly was no evidence that he knew Davis had anything to gain for his tip.
He had no intent to defraud.
So Mickelson was not charged criminally or civilly but was named a “relief defendant” even though that is supposed to require committing an unlawful act. Threats of further prosecution forced Mickelson to pay up anyway, basically for being rich and famous.
Since taking office in 2009, Bharara has charged 107 people for insider trading. Less than two years after the 2nd U.S. Circuit Court of Appeals slapped him down for prosecuting two hedge fund managers and forced him to drop charges against another 12 defendants, including some who previously had pleaded guilty, Bharara has now again charged another 11 people for insider trading in 2016.
Not surprisingly he is rumored to be aiming at the governor of New York and would be considered the leading candidate if he did.
SEC Chairman Mary Jo White is even more aggressive, bringing a record 807 enforcement cases in 2015 alone and forcing $4.2 in settlements against rich traders, which has earned a great degree of favorable publicity that will undoubtedly result in generous offers from every firm and university when she retires.
The enforcers charge insider trading even after the courts had admonished Bharara for prosecuting without proof of intent to defraud as required by the Supreme Court.
One of the judges noted that the district judge who supported Bharara seemed to appear on many of his insider cases and asked whether courthouse rules were violated in the selections.
The only proof prosecutors require is an actual gain which by itself is perfectly legal, indeed why anyone trades in the first place. Everyone trades on information and who does not want it to be based on knowledge? That is why the courts keep trying to minimize its use in prosecutions.
Unfortunately, picking on the rich is good politics and good business and that creates bad law.
Donald Devine is senior scholar at the Fund for American Studies, the author of "America’s Way Back: Reclaiming Freedom, Tradition and Constitution," and was Ronald Reagan’s director of the U.S. Office of Personnel Management during his first term. For more of his reports, Go Here Now.
© 2022 Newsmax. All rights reserved.