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Multiple fraud violations[1][2]? It's interesting how Martha Stewart was put in prison for insider trading, but the financial industry's Culture of Fraud lead t

by Klinky 9y ago

Multiple fraud violations[1][2]? It's interesting how Martha Stewart was put in prison for insider trading, but the financial industry's Culture of Fraud lead to practically no one going to prison. There really needs to be a way to hold top executives accountable for the culture they've created, such as at Well Fargo where millions of fraudulent accounts were opened due to the intense pressure created by executive growth targets. This is similar to financial firms bundling shitty loans, paying off a ratings agency to call it gold while knowing full well it's full of shit, and then passing those loans off golden investment opportunities. Yet the people who get caught are those at the bottom. If you create a culture that encourages bad things(fraud) and do not have checks and balances in place to catch bad behavior(fraud), then you should be held accountable. Typically the executives state they had "no knowledge of what was going on" in the company/department they were supposed to be running and were paid handsomely to do. 1. http://www.nytimes.com/2011/11/08/business/in-sec-fraud-cases-banks-make-and-break-promises.html http://www.nytimes.com/2011/11/08/business/in-sec-fraud-case... 2. https://www.sec.gov/spotlight/enf-actions-fc.shtml https://www.sec.gov/spotlight/enf-actions-fc.shtml

pjc50 9y ago
Fargo perhaps not the best example - they weren't punished because the company as a whole lost money, the targets had effectively set up the frontline employees to defraud both the company and the customers.
- FireBeyond 9y ago
  So if you don't make a profit from a crime, you shouldn't be punished for that crime? That's like saying if I attempt to steal something from a store, security stops me, retrieves the item, then I shouldn't be punished because I didn't get anything from my crime, in fact it cost me money, in gas, going to the store to steal from it... The "they were defrauding us too" is a weaselly argument - it can be argued that when you are an executive, you represent the company, and directing people to do something, can they really be said to be deceiving/defrauding you by _doing as you directed_?
  - pjc50 9y ago
    My mistake, they actually got fined too https://www.nytimes.com/2016/09/09/business/dealbook/wells-fargo-fined-for-years-of-harm-to-customers.html https://www.nytimes.com/2016/09/09/business/dealbook/wells-f...
- Klinky 9y ago
  Not true, executives pushed their high-pressure upselling scheme downstream without properly following up on if the goals of the program were realistic or viable. They fired or punished employees calling into the ethics line. Their high-pressure policies created this culture of fraud, and they looked the other way. So long as the money kept rolling in, they didn't care how it was getting done.
rayiner 9y ago
The incidents you point to were rightfully prosecuted as civil fraud. Fraud can be either civil or criminal. Criminal fraud is something like taking investments from the general public and just blowing the money on cocaine. Lying to sophosticated counterparties in a business transaction is classic civil fraud.
- Klinky 9y ago
  Did Madoff blow all the money of his ponzi scheme on cocaine? Is that why he's behind bars? I don't think it's as clear cut to just say that purposefully deceitful fraud that collapsed the world economy is simply a civil matter.
  - rayiner 9y ago
    Yes, basically. He took in money and gave people forged trade reports showing how much their investments had made. It’s the difference between a car salesman lying about the “180-point inspection” they put their used cars through and simply delivering you a set of tires instead of the car you paid for. The aggregate impact of such conduct on the world economy is irrelevant to criminal prosecution of individuals. It’s antithetical to criminal law to punish people more harshly because unrelated other people happened to engage in the same wrongdoing.
    - Klinky 9y ago
      ..and how is that different than selling people AAA rated investments, knowing the investments were failing, while bundling them further, so they could be fraudulently re-rated as AAA again? They knew these investment vehicles were failing and a sham, but continued to misrepresent their stability to investors. To use a car analogy, it's similar to VW cheating on emissions testing. They knew they could not keep up, so they just lied instead. Guess what? People from VW are actually getting arrested and likely going to prison. As far as the impact of their actions on the world economy, there could be a lot to be said about firms colluding with each other to hide and obfuscate the problems they were creating from their fraudulent activity, so that they could continue to enrich themselves. All of these firms failures at accountability being completely isolated events is simply not true. Madoff isn't behind bars because he blew the money on cocaine. He's behind bars due to: securities fraud, wire fraud, mail fraud, money laundering, making false statements, perjury, theft from an employee benefit plan, and making false filings with the SEC.
coredog64 9y ago
Martha Stewart was convicted of lying to federal investigators, not insider trading.
- Klinky 9y ago
  You're correct, although Stewart actually had to face a jury trial, unlike practically everyone with major involvement in the financial crisis.

by Klinky 9y ago

pjc50 9y ago

Fargo perhaps not the best example - they weren't punished because the company as a whole lost money, the targets had effectively set up the frontline employees to defraud both the company and the customers.

FireBeyond 9y ago
So if you don't make a profit from a crime, you shouldn't be punished for that crime? That's like saying if I attempt to steal something from a store, security stops me, retrieves the item, then I shouldn't be punished because I didn't get anything from my crime, in fact it cost me money, in gas, going to the store to steal from it... The "they were defrauding us too" is a weaselly argument - it can be argued that when you are an executive, you represent the company, and directing people to do something, can they really be said to be deceiving/defrauding you by _doing as you directed_?
- pjc50 9y ago
  My mistake, they actually got fined too https://www.nytimes.com/2016/09/09/business/dealbook/wells-fargo-fined-for-years-of-harm-to-customers.html https://www.nytimes.com/2016/09/09/business/dealbook/wells-f...
Klinky 9y ago
Not true, executives pushed their high-pressure upselling scheme downstream without properly following up on if the goals of the program were realistic or viable. They fired or punished employees calling into the ethics line. Their high-pressure policies created this culture of fraud, and they looked the other way. So long as the money kept rolling in, they didn't care how it was getting done.

rayiner 9y ago

The incidents you point to were rightfully prosecuted as civil fraud. Fraud can be either civil or criminal. Criminal fraud is something like taking investments from the general public and just blowing the money on cocaine. Lying to sophosticated counterparties in a business transaction is classic civil fraud.

Klinky 9y ago
Did Madoff blow all the money of his ponzi scheme on cocaine? Is that why he's behind bars? I don't think it's as clear cut to just say that purposefully deceitful fraud that collapsed the world economy is simply a civil matter.
- rayiner 9y ago
  Yes, basically. He took in money and gave people forged trade reports showing how much their investments had made. It’s the difference between a car salesman lying about the “180-point inspection” they put their used cars through and simply delivering you a set of tires instead of the car you paid for. The aggregate impact of such conduct on the world economy is irrelevant to criminal prosecution of individuals. It’s antithetical to criminal law to punish people more harshly because unrelated other people happened to engage in the same wrongdoing.
  - Klinky 9y ago
    ..and how is that different than selling people AAA rated investments, knowing the investments were failing, while bundling them further, so they could be fraudulently re-rated as AAA again? They knew these investment vehicles were failing and a sham, but continued to misrepresent their stability to investors. To use a car analogy, it's similar to VW cheating on emissions testing. They knew they could not keep up, so they just lied instead. Guess what? People from VW are actually getting arrested and likely going to prison. As far as the impact of their actions on the world economy, there could be a lot to be said about firms colluding with each other to hide and obfuscate the problems they were creating from their fraudulent activity, so that they could continue to enrich themselves. All of these firms failures at accountability being completely isolated events is simply not true. Madoff isn't behind bars because he blew the money on cocaine. He's behind bars due to: securities fraud, wire fraud, mail fraud, money laundering, making false statements, perjury, theft from an employee benefit plan, and making false filings with the SEC.

coredog64 9y ago

Martha Stewart was convicted of lying to federal investigators, not insider trading.

Klinky 9y ago
You're correct, although Stewart actually had to face a jury trial, unlike practically everyone with major involvement in the financial crisis.