International Herald Tribune Editorial - Holding accomplices liable
International Herald Tribune Editorial - Holding accomplices liable
Copyright by The International Herald Tribune
Published: May 14, 2007
It took a host of banks, lawyers and accountants to hide Enron's problems from investors. So a federal appeals court sent precisely the wrong message when it prevented a class-action lawsuit against three of Enron's banks - Merrill Lynch, Credit Suisse and Barclays - from moving forward, saying that the banks "only aided and abetted that fraud by engaging in transactions to make it more plausible."
Considering the shattered lives strewn across the United States in Enron's wake, that's a lot for the word "only" to excuse.
The legal team behind the $40 billion shareholder suit has asked the Supreme Court to review its case on the grounds that securities laws prohibit anyone, either directly or indirectly, from employing "any device, scheme or artifice to defraud." Thus, they argued, Enron's professional enablers - be they accountants, lawyers or bankers - can be held liable if they knowingly worked to deceive its investors.
The appeals court ruling should not be the last word. The Supreme Court has accepted a similar case on scheme liability and will hear arguments this fall. We hope that the justices also will accept the Enron case and decide them together.
Either way, the Securities and Exchange Commission should ask the solicitor-general to file a brief in support of the Enron shareholders' arguments. A fair reading of the law suggests that they should win. And holding outside professionals fully accountable for their actions may help prevent the next financial scandal. While it is extremely difficult to deter desperate executives from illegal cover-ups, professionals with many clients would think twice if they knew they, too, could be held liable.
Copyright by The International Herald Tribune
Published: May 14, 2007
It took a host of banks, lawyers and accountants to hide Enron's problems from investors. So a federal appeals court sent precisely the wrong message when it prevented a class-action lawsuit against three of Enron's banks - Merrill Lynch, Credit Suisse and Barclays - from moving forward, saying that the banks "only aided and abetted that fraud by engaging in transactions to make it more plausible."
Considering the shattered lives strewn across the United States in Enron's wake, that's a lot for the word "only" to excuse.
The legal team behind the $40 billion shareholder suit has asked the Supreme Court to review its case on the grounds that securities laws prohibit anyone, either directly or indirectly, from employing "any device, scheme or artifice to defraud." Thus, they argued, Enron's professional enablers - be they accountants, lawyers or bankers - can be held liable if they knowingly worked to deceive its investors.
The appeals court ruling should not be the last word. The Supreme Court has accepted a similar case on scheme liability and will hear arguments this fall. We hope that the justices also will accept the Enron case and decide them together.
Either way, the Securities and Exchange Commission should ask the solicitor-general to file a brief in support of the Enron shareholders' arguments. A fair reading of the law suggests that they should win. And holding outside professionals fully accountable for their actions may help prevent the next financial scandal. While it is extremely difficult to deter desperate executives from illegal cover-ups, professionals with many clients would think twice if they knew they, too, could be held liable.
posted by Carlos T Mock @ 6:15 PM
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