A recent New York Times article reports that according to new data, federal officials are prosecuting far fewer cases involving fraudulent stock scams than they did in 2000 before the Bush Administration came into office. According to financial and legal experts, less strict enforcement polices, Securities and Exchange Commission staff cutbacks, and a greater focus on fighting terrorism have led to the federal government’s laxer policing efforts when it comes to pursuing securities fraud cases.
The new information, based on Justice Department information and put together by a Syracuse University research group, says that there haven’t been so few securities fraud prosecutions in a year since 1991. Also:
• During the first 11 months of the 2008 fiscal year, there were 133 securities fraud prosecutions-compare this to 2002 when there were 513 prosecutions, spurred by the WorldCom and Enron scandals, and 2000 when there were 437 prosecutions for this same time period.
• SEC investigations led to 9 Justice Department prosecutions in 2007, which is a significant drop in case numbers from the 69 SEC-related prosecutions in 2000.
The SEC has also come under more fire recently for its failure to predict and stop the current economic and Wall Street crises from happening. The recent indictment of Bernard Madoff over his $50 billion investor scam has raised even more questions over how well (or poorly) of a job the SEC has been doing that Madoff’s scheme was able to go on for so long.
Another agency that has also seen a drop in the number of white collar crime cases it has brought is the Federal Bureau of Investigation-due, in large part, to its shift in concentration toward fighting terrorism.
While federal officials are disputing the conclusions being drawn from the new data and maintain that they are as committed as always to prosecuting any person or entity engaged in securities fraud, Shepherd Smith Edwards & Kantas LTD LLP Founder and Stockbroker Fraud Attorney Bill Shepherd had this to say: “It is no surprise to me that “securities cops” have been turning a blind eye. In fact, this is an egg or chicken situation: When the police sit in diners eating donuts, criminals run amuck!”
Related Web Resources:
Federal Cases of Stock Fraud Drop Sharply, New York TImes, December 25, 2008
Obama Names Three to Top Economic Posts, New York Times, December 19, 2008
SEC Said to Examine More Ponzi Schemes After Madoff, Bloomberg, January 2, 2009