Senator Warren Accuses the SEC of Poor Enforcement

U.S. Senator Elizabeth Warren has issued a report in which she claims that the U.S. Securities and Exchange Commission and the U.S. Department of Justice have been doing a poor job on enforcement when it comes to going after companies and individuals for corporate crimes.

In Rigged Justice: How Weak Enforcement Lets Corporate Offenders off Easy, Warren takes a closer look at what she describes as the 20 worst federal enforcement failures of 2015. The Senator noted that that when federal agencies caught large companies in illegal acts, they failed to take substantial action against them. Instead, companies were fined for sums that in some cases could be written off as tax deductions.

Some of the 2015 cases that Warren Mentions:
• Standard & Poor’s consented to pay $1.375B to the DOJ, DC, and 19 states to resolve charges that it bilked investors by putting out inflated ratings misrepresenting the actual risks involved in collateral debt obligations and residential mortgage-backed securities. Warren Points out that the amount the credit rater paid is less than one-sixth of the fine the government and states had sought against it, and at S & P did not have to admit wrongdoing. No individuals were prosecuted in this case.

Citigroup (C), Barclays (BARC), JPMorgan Chase (JPM), Royal Bank of Scotland (RBS), and UBS AG (UBS) paid the DOJ $5.6B to resolve claims that their traders colluded together to rig exchange rates. As a result, the firms made billions of dollars while investors and clients suffered. While admissions of guilt were sought, no individuals were prosecuted. Also, the SEC gave the banks waivers so they wouldn’t have to deal with collateral damages from pleading guilty.

Deutsche Bank (DB) subsidiary DB Group Limited consented to pay just $77M to the DOJ over London Interbank Offered Rate rigging charges even though 29 employees were purportedly in the misconduct, none of whom were prosecuted. The SEC gave the bank a waiver so it could still avail of the privileges given to banks that hadn’t broken any laws.

• Two Citigroup affiliates paid just close to $180M to resolve SEC allegations of fraud related high-risk leveraged bonds that were sold to investors leading up to the 2008 financial crisis. The purported misconduct cost investors $2B. The firm did not have to admit wrongdoing.

• Deutsche Bank resolved an SEC case over $1.5B of derivatives losses for $55M. The firm did not have to admit wrongdoing and no individuals were held accountable.

JPMorgan (JPM) consented to pay the SEC and the Commodity Futures Trading Commission more than $300M over conflicts of interest related to the way that the firm managed customers’ accounts. The monetary fine, said Bloomberg Business, was the equivalent of over 1% of the company’s yearly operating profits. The SEC also gave JP Morgan a waiver so it could continue to have its privileges.

It is important that you have a securities law firm representing you and your interests if you want to maximize your chances for recovery. If you are an investor that has sustained losses from securities fraud, contact the SSEK Partners Group today.

Rigged Justice: 2016; How Weak Enforcement Lets Corporate Offenders Off Easy