Judge takes a stand against a corporate cover-up

[Saguaro]

When U.S. District Judge Jed Rakoff recently threw out a $33 million settlement between the Securities and Exchange Commission and the Bank of America, it was a watershed moment. A relatively unknown judge called out a couple of heavyweights — an unrepentant titan of the financial industry and a representative of the nation's regulatory authority.
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In a scathing ruling, Judge Rakoff voided an attempted cover-up — a cynical agreement between the SEC and the "too big to fail" Bank of America, stating that this settlement "does not comport with the most elementary notions of justice and morality."

The proposal in question read as follows: "The management of Bank of America — having allegedly hidden from its shareholders as much as $5.8 billion of their money … given as bonuses to the executives of Merrill Lynch, who had run that company nearly into bankruptcy — would now settle the legal consequences of their lying by paying the SEC $33 million more of their shareholders' money." Nowhere were the guilty and irresponsible executives mentioned by name.

Would shareholders and investors have approved the merger if they had known of undisclosed billions of Merrill's losses and the end-of-the-year bonuses? Should violated victims of an egregious cover-up have to "pay an additional penalty for their own victimization?"

Yanking away a veil of secrecy, the judge accused Bank of America and the SEC of concocting a scheme to absolve themselves of future responsibility. "The SEC gets to claim that it is exposing wrongdoing on the part of Bank of America in a high-profile merger. The bank's management can claim that they have been coerced into an onerous settlement by overzealous regulators." Rejecting the proposed settlement, the judge ordered the two parties to prepare for a possible trial.

Will they eventually argue their case in court, exposing the long-standing practice of corporate cover-up and the cozy relationship between insiders and regulators? Probably not.

Yet, a courageous act by Judge Rakoff did profoundly invigorate our lives with a sense of hope and satisfaction that a grievous wrong can be set right, reassuring us that it is possible for one ordinary person to make a difference. None of us will know what pressure the judge encountered from concerned friends, the financial industry, or political operatives.

Nevertheless, his act shows that a selfless decision to make a difference can be like a pebble tossed into a lake, rippling and spreading, effecting changes beyond our knowledge.

http://www.tennessean.com/article/20...0334/1001/NEWS