Defrauded Enron shareholders recently lost again, this time as victims of federal judges who seem intent on helping Wall Street crooks rather than Wall Street victims. With their case before the U.S. Supreme Court, the Enron shareholders lost yet again when the SEC and Bush Administration, who had indicated they would intervene, missed a deadline. Now, three former SEC Commissioners are asking the Supreme Court to allow them to intervene to help.
In 2001, the total value of Enron shares plummeted from over $80 billion to almost zero. Enron officials and its auditors were indicted, several persons were convicted and some are now serving jail terms. The auditing firm of Arthur Anderson was forced to close. The scandal then turned to several Wall Street firms which are claimed ot have played a large role in assisting Enron to falsify its books.
Several individuals and firms were accused – and four former Merrill Lynch Brokers were convicted of by a jury – for arranging loans to appear as sales in order for Enron to book the loans as profits. Yet, just as the Enron shareholders’ claims against Merrill Lynch were headed for trial, business-friendly appointed appellate judges dismissed the case.
The judges’ decision stated that the federal securities law simply does not allow investors to recover from Wall Street firms that assist companies to defraud them. (Changes by Congress in the last decade forbid securities class actions to be filed under any other law.) The Enron shareholders then appealed to the Supreme Court to try to reinstate their case.
Because this is the same law the SEC must use to regulate Wall Street participants, one would think the “Wall Street police” would object to being hamstring by this outcome. However, the politically appointed SEC commissioners now take the side of Wall Street firms rather than the investors it is designed to protect. In fact, the SEC did nothing on the Enron case until embarrassed by the press into stating it would intervene on behalf of the investors.
The SEC says it submitted documents to the Office of the U.S. Solicitor General, which speaks for the Bush administration before the Supreme Court. However, the Solicitor General’s office says it did not accept the SEC’s position and instead allowed the deadline to pass for filing legal briefs in the case. That decision came after both President Bush and Treasury Secretary Henry Paulson said that if the Enron shareholders were allowed to win this would put U.S. companies at a disadvantage to foreign rivals and expose businesses to liability for fraud.
Shocked by the situation, a bipartisan group of former SEC leaders, including former SEC Chairmen William H. Donaldson (R) and Arthur Levitt (D), and former SEC Commissioner Harvey J. Goldschmid (D), have now asked the Supreme Court for permission to submit their own post-deadline brief on behalf of the Enron shareholders calling this a “critical” case.
“Holding liable wrongdoers who actively engage in fraudulent contact that lacks a legitimate business purpose does not hinder, but rather enhances, the integrity of our markets and our economy,” wrote their lawyers, New York University law professor Arthur R. Miller and former SEC lawyer Meyer Eisenberg. “We believe that the integrity of our markets is their strength.”
Federal Prosecutors in the Bush Administration also seek to put the Enron shareholders’ lead attorney in jail and recently indicted his former firm and law partners.
Shepherd Smith and Edwards is a securities law firm which represents investors nationwide in claims against investment firms. If they fail in their appeal, we plan to represent many of the Enron shareholders in individual claims against Merrill Lynch and others. To learn whether we can assist you in a claim contact us to arrange a free confidential consultation with one of our attorneys.