When the SEC raises charges against a firm and the firm agrees to settle the matter for a certain amount of money, most of the time they pay the fine with NO ADMISSION OF ANY WRONG DOING. As I mentioned in my previous post to this blog, Bank of America agreed to a settlement with the SEC for $33 million dollars, and they did so with NO ADMISSION OF ANY WRONG DOING. The reason I am raising my voice (in the blog/texting manner of capitalization) is this is particularly irritating to me. I realize that asking the recipients of these actions to “man up” and admit wrong doing is akin to asking a coward to act with conspicuous gallantry, and about as likely to occur, but can’t the SEC force the issue a little? Like multiply the fine if they want to play that game? I guess not. Just the fact that the SEC is gathering the intestinal fortitude to charge these companies is a deviation from their modus operandi of promethian proportions. Our regulating agencies have let us down to such a degree over the last decade or so that this is looked at as an act of resolve. How pathetic.
Even more egregious than the B of A settlement is this. I pause here for dramatic effect…
General Electric settled a case with the SEC for $50 million for “Misleading the Public” by committing accounting violations. NO ADMISSION OF ANY WRONG DOING was made, and the SEC has agreed not to name the executives involved. I will put this piece of information into storage so that any time a GE executive announces he or she is leaving to go elsewhere I can point out that he or she might be among the executives whose honesty is in doubt and who are of dubious character. Since we are not going to find out who is responsible all must be assumed to fall into these categories untl proven otherwise.
The alleged accounting violations ranged widely.
Inappropriate application of accounting rules to certain short term loans the company received, allowing it to book $200million in additional profits
Improper accounting for sales of commercial aircraft spare parts, boosting earnings by $585million
Reporting sales of trains (they make locomotives) that hadn’t occurred yet accelerating $370million in revenue
GE said it corrected its financial statements and spent $200million in legal and accounting expenses to fix the problems raised by the SEC
So $50mil fines, $200mil to accountants and lawyers and $1,155,000,000 in additional profits. That’ll teach them a lesson. Oh yeah, nothing like being spanked with a $905million dollar profit for teaching these bad boys to track the straight and narrow. This is the business equivalent of getting a ticket for driving on the wrong side of the road and causing an accident, and getting a summons that entitles you to a Ferrari. Hello… SEC… you getting this? Of course not.
This has a personal effect on me, I put client and firm money into GE debt instruments last november. A significant amount in fact by my standards. I did this based on information that now turns out to be not just erroneous but fraudulent. And because I am not a lame SEC apparachik I am calling it fraudulent, I am not accepting the NO ADMISSION OF ANY WRONG DOING nonsense.
If the markets are to be considered truly free and fair (I can hear you laughing so knock it off) we cannot accept this NO ADMISSION OF ANY WRONG DOING bulls***. It’s an insult to us as citizens and as market participants and it is propping up a bunch of liars and scoundrels. It’s outrageous, it’s a robbery in broad daylight, and it’s wrong. Plain and simple wrong. Tonight like every night these executives will walk out of their offices and get in their cars and go home, while there are increasing numbers of hard working Americans of high moral character without jobs, cars or homes. They should be perp walked to a 5 by 9 at the gray bar hotel, or at the very least they should be shamed by the public revelation of their dishonesty, and their dishonor. The SEC, our representatives in this disgrace, by allowing this to go unpunished in a meaningful way shares that dishonor.
