Dimitri Lascaris: Department of Justice under George Bush secured convictions of major figures from the business community in complex financial frauds and Obama and Holder have not done so following the worst epidemic of financial fraud in the modern era
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore. And this is the first edition of what will be regular reports from Dimitri Lascaris, who now joins us from London, Ontario.
Dimitri’s a partner with the Canadian law firm Siskinds, where he heads up the firm’s securities class action group. He was named by the Canadian Lawyer Magazine as one of the 25 most influential lawyers in Canada. He’s currently prosecuting numerous securities class actions, and he’s worked for a major Wall Street law firm. He now joins us from London, Ontario.
Thanks for joining us again, Dimitri.
DIMITRI LASCARIS, SECURITIES CLASS ACTIONS LAWYER, SISKINDS LLP: Good to be back, Paul.
JAY: So what’s caught your attention this week?
LASCARIS: I think those who practice in my area were, I think, transfixed by the departure of Lenny Breuer, who headed the Criminal Division of the Department of Justice in the United States. And his departure followed what many of us regarded as a pretty riveting report by Frontline about the failure of the Department of Justice to prosecute high-ranking officials from Wall Street in connection with the financial crisis. And I think what he had to say in the interview (and he really was the focus of the documentary’s attention), whether or not it precipitated his departure, it unquestionably was revealing about what has gone on or not gone on at the Department of Justice over the last four or five years.
And essentially what he did, he didn’t deny, you know, that there has been a paucity of prosecutions of high-ranking officials on Wall Street. He essentially acknowledged that. His explanation was one that wouldn’t have enlightened a first-year law student. He simply kept repeating over and over again that in order to secure a conviction for white-collar crime, one has to prove beyond a reasonable doubt the element of every offense.
Well, you know, that was true when the Department of Justice successfully prosecuted Jeffrey Skilling, who was the CEO of Enron, in a complex financial fraud. That was true when the Department of Justice successfully prosecuted Bernard Ebbers, who was the CEO of WorldCom, again, in connection with a complex financial fraud.
And Mr.Â Breuer failedâ€”I think, miserablyâ€”to explain what has changed since the Department of Justice under, amazingly, George Bush secured convictions of, you know, major figures from the business community in complex financial frauds and has not done so following what is arguably the worst epidemic of financial fraud in the modern era, namely the few years leading up to the financial crisis in 2008, 2009.
JAY: Well, the argument that he gave in the film was that, you know, when he did try to justify all this, was that if you prosecuted these people, the CEOs or whatever of some of these big banks, it might cause instability in the financial system, and that these banks are so big, essentially they’re too big to prosecute. What do you make of that argument?
LASCARIS: I have an even more dim view of that argument than The New York Times, which described it as “a dark day for the rule of law.”
This was, of course, a view that he defended in connection with the announcement that HSBC, the largest bank in the United Kingdom, had settled a series of very serious allegations for $1.9Â billion. That may sound like a lot of money, but considering the severity of what it did or was alleged to have done, which is to facilitate money laundering by drug cartels, to knowingly do business with a bank that was supportive of al-Qaedaâ€”and these are things which the establishment in the United States, you know, basically regards as impardonable offenses. And Mr. Breuer said, well, if we prosecute criminally an organization of this size and stature, it’s going to constitute a threat to the financial system.
What actually constitutes a threat to the financial system and to the global economy as a whole is the relative impunity with which these increasingly large banks are conducting business. And I think, and many in the practice area believe, that that was basically an invitation to persons who work for these organizations to engage in even more egregious conduct than they have up until now. They’ve effectively been told by the top-ranking official in the criminal division of the Justice Department that they will not be prosecuted because of the size of the institution. That is very dangerous, and we’re all going to pay for it eventually if that approach is not altered dramatically in the near future.
JAY: But in spite of the sort of outrage of The New York Times and such, isn’t there some truth to what he says, that so much of this banking system is a quote-unquote confidence game (and I mean that in all meanings of the word), and that if you shake that confidence game, you don’t know where that might unravel to?
LASCARIS: Well, you know, I think you have to look at it as a question of putting up with the lesser of two evils. There’s no question that if you shut down an institution like HSBC, which can be done, there are going to be significantly negative consequences in the short term.
But one has to ask, if you allow it to act with impunity, and other institutions of that size and stature to act with impunity, will we actually end up worse off than if we simply shut it down? And I think that the financial crisis demonstrates that we would be worse off. Basically, the entire global financial system almost came to a halt. Major financial institutions across the globe were teetering on the brink of collapseâ€”many didâ€”precisely because there was a relative atmosphere of impunity on Wall Street. We’re going to end up in the long term paying for this to a far greater extent than if we simply brought the activities of HSBC to an end altogether.
JAY: And is not the other part of this problem is that these big financial institutions, one, they have this threatâ€”we’re too big; you come after us, your whole financial system’s going to get paralyzed again. But isn’t there another part to it as well, which is these financial institutions have so much political power, they have so much purchasing power of political representatives, thatthe clout they have makes them anâ€”almost unregulatable (I’m not sure that’s a word, but anyway) and unprosecutable, because they just have too much influence? And you can say they should be controlled, but I guess what I’m getting at: is there any reality, realistic possibility of that, unlessâ€”that’s what I’m gettingâ€”within this system as we know it?
LASCARIS: Not within the current system. I think that that’s precisely the problem. I mean, it’s very instructive to look at who Mr.Â Breuer is and who his boss, Eric Holder, is and how and when they came to occupy the positions that they occupy.
Both of them were partners at one of the most prestigious Wall Street and Washington law firms, Covington & Burling, for a number of years. Mr.Â Breuer in particular was the cochairman of the firm’s white-collar defense practice. And I think it’s fair to assume that somebody who occupies that position and is paid very handsomely for it, as undoubtedly he was, is not going to be philosophically inclined to vigorously pursue financial fraud wherever he may find it. And he was appointed to the position, as was Eric Holder, at a moment when I think Wall Street was very concerned about potential criminal prosecutions.
The public was with good reason completely irate about the bailout of these financial institutions who had engaged in this conduct. I think that the Obama administration having had its campaign largely financed by Wall Street quite deliberatelyâ€”you know, and I’m speculating to a degree here, but I think this is a very logical inference, given the administration’s dependence upon Wall Street for the financing of its own campaign, quite deliberately put in place in these two important positionsâ€”attorney general and the head of the Criminal Divisionâ€”two individuals whose lives had been largely built, professional lives had been largely built by defending the very sorts of people who they were now being called upon to prosecute.
And until you separate, you know, campaign finance from big business and from Wall Street, until you separate the regulatory community from the regulated and you shut down the revolving door, then the problem is not going to get solved. And, you know, one of the things that has to be done, in my view, is you simply have to prohibit people who work in the regulatory community from going off and accepting plum positions with the very companies that they were called upon to regulate.
If you’re going to do that, however, you have to understand that you’re going to have to compensate these people better; otherwise, you’re not going to attract top talent. And I think this is part of, you know, big business’s agenda. They basically try to starve the government of revenue so that it’s not able to pay, you know, important civil servants the types of salaries that you need to pay in order to attract the best people, and therefore the civil service ends up being both corrupt and outmatched by the private sector when it comes to law enforcement.
So there are really some very fundamental changes that have to take place in terms of campaign finance, in terms of the revolving door between the regulatory community and the private sector before we’re going to have any hope of solving these problems. And nobody, you know, in the political upper echelons of politics in the United States or Canada, or Western Europe, for that matter, seem determined to implement any of these reforms.
JAY: Well, ’cause they’re all getting their campaigns financed the same way the Obama administration has. The congressmen and the members of various parliaments around the world are all getting financed the same way.
LASCARIS: Precisely. And the United States is simply an extreme example of a phenomenon that we’re witnessing throughout the Western world to an increasing degree.
JAY: Alright. Well, thanks very much for joining us, Dimitri.
LASCARIS: Thank you, Paul.
JAY: And thank you for joining us on The Real News Network.
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