The Revolt of the Judges

There is still some semblance of law in the United States, as evidenced by these two recent cases of Judges asserting the supremacy of Law, against the criminality of the Obama administration.

Federal Judge Rejects the White House’s “Limitless” View of Its Authority To Withhold Presidential Communications from the Public

The Federation of American Scientists reported on Thursday, December 19th, that federal district Judge Ellen Huvelle in D.C. had “ordered the Obama Administration to release a copy of an unclassified presidential directive, saying that the attempt to withhold it represented an improper exercise of ‘secret law.'” The phrase “secret law” refers to the forbidden practice by which the government secretly makes up rules and then punishes those who have unknowingly violated them, or by which known public law on any number of topics is contravened by the secret rules.

Judge Huvelle’s ruling came in a Freedom of Information Act case brought by the Center for Effective Government, seeking Presidential Policy Directive (PPD) 6, “a widely-publicized, non-classified Presidential Policy Directive on issues of foreign aid and development that has been distributed broadly within the Executive Branch and used by recipient agencies to guide decision-making,” according the decision. “Even though issued as a directive, the PPD-6 carries the force of law as policy guidance to be implemented by recipient agencies, and it is the functional equivalent of an Executive Order.”

Judge Huvelle wrote, “The government appears to adopt the cavalier attitude that the President should be permitted to convey orders throughout the Executive Branch without public oversight — to engage in what is in effect governance by ‘secret law.'” Further, “In the government’s view, it can shield from disclosure under FOIA any presidential communication, even those — like the PPD-6 — that carry the force of law, simply because the communication originated with the President. … The Court rejects the government’s limitless approach. …”

Federal Judge Denounces Non-Prosecution of Bankster Fraud

LaRouche PAC reported several days ago on a New York Times interview of federal Judge Jed Rakoff (S.D.N.Y.) on his forthcoming New York Review of Books article on the non-prosecution of any figure involved in the 2008 financial crisis. The latter article has now become available, and we outline some of the salient points made by Rakoff, a judge who has denounced powder-puff settlements reached by the SEC with Bank of America and Citigroup. Rakoff is a former federal prosecutor who specialized in financial fraud.

Although, as a sitting judge, he explicitly and repeatedly states he has “no opinion” about the guilt of anybody, he introduces the article by contrasting the non-prosecutions with earlier times: the junk bond bubble and Michael Milken, the savings & loan crisis and the Keating 5, and Enron and Worldcom prosecutions of CEOs Jeffrey Skilling and Bernie Ebbers. He asks why.

He states the possibility that no fraud was committed, just outlandish epic stupidity. He responds, “But the shared opinion of those government entities asked to examine the financial crisis overall is not that no fraud was committed. Quite the contrary. … in the aftermath of the financial crisis, the prevailing view of many government officials (as well as others) was that the crisis was in material respects the product of intentional fraud.” Rakoff says that the DOJ has been less explicit than the Commission of Inquiry and various other agencies, but he’s seen nothing to indicate a disagreement in the DOJ that it was fraud. He then dissects the DOJ’s rationales for not prosecuting high-level officials for this fraud:

  • They have argued that proving intent — crucial in criminal prosecutions — is very difficult. However, he points out that the banks, themselves, were filing a flood of “suspicious activity reports” but never questioned the AAA ratings their securities were given. “This of course, is known in the law as ‘willful blindness’ or ‘conscious disregard.’ It is a well-established basis on which federal prosecutors have asked juries to infer intent” in other cases at least as complicated as these.
  • They — specifically including former Asst. AG Criminal Division Lanny Breuer — have argued that because the institutions which purchased the mortgage-backed securities were sophisticated investors, it might be difficult to prove “reliance,” i.e., that the victims relied on the false representations made by the banksters. This argument “totally misstates the law,” which does not require such a reliance in prosecution of criminal securities fraud: “The law … says that society is harmed when a seller purposely lies about a material fact, even if the immediate purchaser does not rely on that particular fact, because such misrepresentations create problems for the market as a whole.”
  • They argue that such prosecutions could harm the economy. Rakoff takes particular exception to this, as it creates different treatment for rich and poor, a violation of equality under the law which federal lawyers and judges are sworn to uphold. “But if we are talking about prosecuting individuals, the excuse becomes irrelevant; for no one that I know of has ever contended that a big financial institution would collapse if one or more of its high-level executives were prosecuted…”

So what’s the real reason for the dearth of prosecution of high-level bank executives? Rakoff speculates on the three leading reasons for non-prosecution:

  • Prosecutors have other priorities. Resources are limited. For example, the post-9/11 shift of FBI investigations out of white-collar crime; agencies such as the SEC have focussed on other kinds of fraud, e.g., Ponzi schemes and insider trading; and DOJ prosecutors have focussed on other kinds of cases ready to go to trial, rather than on these complex investigations.
  • The government’s own involvement in the underlying circumstances that led to the financial crisis starting with the repeal of the Glass-Steagall Act, “thus allowing certain banks that had previously viewed mortgages as a source of interest income to become instead deeply involved in securitizing pools of mortgages in order to obtain the much greater profits available from trading,” and subsequent government facilitation and encouragement of the mortgage-backed securities trade.
  • The general shift over the past 30 years, from focus on prosecuting high-level individuals to prosecuting companies, rationalized as attempts to transform “corporate cultures” to prevent future crimes through “deferred prosecution agreements.” Instead of investigation, indictment, and prosecution, the present course of action is to meet with corporate lawyers, let them investigate the problem, and accept the dubious claims down the line that the errors are being corrected. “I suggest,” Rakoff says, “that the future deterrent value of successfully prosecuting individuals far outweighs the prophylactic benefits of imposing internal compliance measures that are often little more than window dressing.”

He concludes, again refusing to state that the financial crisis was the product of fraud, “But if it was — … the failure of the government to bring to justice those responsible for such colossal fraud bespeaks weaknesses in our prosecutorial system that need to be addressed.”

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