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babylonsister Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-07-09 01:18 PM
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How to Shake Down the Banks
Edited on Sat Mar-07-09 01:21 PM by babylonsister /

How to Shake Down the Banks

by Matt Miller

From prison, Bill Lerach, Americas premier class-action lawyer, has a roadmap to get all that bonus money back from the Wall Streeters who got us into this mess.

Like every fuming American, I want Wall Street bankers to be forced to disgorge the zillions they made while tanking the economynot to mention the billions more theyve paid themselves while on the taxpayers teat. But how?


What just came back was a letter from Lerach, passed on to me by a mutual friend, with a legal roadmap for Team Obama to follow:

Dear Mr. Miller:

I dont usually respond to blog material about me but wanted to make an exception in your case. Your wife Jody is not wrong.

In fact, there is a way for the federal government to go after the obscenely excessive bonuses paid to the Wall Street pigs. One legal problem to be surmounted is that the federal government itself has no statutory authority to sue to recover excessive compensation paid officers of public companies. Such claims are exclusively the province of state lawhere, the corporate haven of Delaware, where all the big banks are incorporated. But, in order to sue under state corporate law for waste of corporate assets or breach of fiduciary duty, you must be a common shareholder at the time of the wrong and at the time of the suit. Unfortunately, the federal government is a preferred shareholder in the banks and thus does not have standing to sue and, either way, many of the worst bonuses (i.e., paid to the ousted CEOs of Merrill Lynch {ONeal} and Citi {Prince}) were paid before the government became a shareholder.

The solution to this dilemma is this. There are several entities of the federal government that one way or another own common stocksand likely the common stock of the banks in question. The Pension Benefit Guaranty Corp. comes to mind. There are others. They will have standing to sue. They should join forces with four or five other large, prestigious, activist public pension fundsthe City of New York and California Public Employees Retirement System (CalPERS) are examplesand bring a shareholders derivative suit against the grossly negligent boards of directors that permitted the wasteful bonuses to be paid as well as the defalcating executives who got them. Corporate law recognizes claims for breach of fiduciary duty, gross negligence, waste of corporate assets, or abuse of control to recover excessive compensation. Any recovery would flow back to the corporate entitybut since these are now taxpayer-supported entities, the recovery would benefit the taxpayers, i.e., help banks pay back TARP money sooner! These boards are covered by directors' and officers' liability insurance that could pay or help pay for any recovery. Best of all, the US Justice Department could represent the federal agency involved in the case or appear as amicus curiae if necessaryin any event, lending its considerable weight (and prestige) to the claims.

Because corporate law is designed to screw shareholders and protect corporate insiders and because Delaware is the most protective of havens with a long-demonstrated hostility to shareholders rights, any such suit would, of course, be difficult and have to overcome numerous procedural and substantive hurdles. But, just because it is hard doesnt mean it should not be attempted. The mere bringing of the suitespecially against the directorswould have a beneficial deterrent effect on all directors going forward.

Were I free and still able to practice law, I could propose this strategy to President Obamawho, as a Harvard Law School graduate, would get it. And, I would have prosecuted the case on a contingent fee basis, i.e., no cost to the government; the fee, if any, to come out of a recoveryno recovery, no fee. Unfortunately, to do so one would have to find a way to get the proposal past the Wall Street alumni and sycophants who serve our new president and are creating the current save-the-banks strategy.

So, I appreciate the sentiments expressed by you and your wife, but, unfortunately, I am disabled from doing what I would like to do and what should be done.

Best wishes,
William Lerach

OK, Martin Luther Kings Letter from Birmingham Jail it aint. But at this moment I think even Dr. King would agree the Lerach solution could strike a blow for justice.

Bill Maher had it right when he said, There are a million lawyers in the United Statesdoesnt one of them know how to put a banker in jail? Maybe not, but at least Ive found one jailed lawyer with a promising way to make bad bankers pay. If Eric Holder does his duty and takes it from here, before long well hear a phrase that will be music to the ears of an aggrieved and angry nation: Mr. Prince, Mr. Lerach will see you for your deposition now.

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Peace Patriot Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-07-09 05:20 PM
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