Bush Shafts Enron Victims

From Truthout:

Wall Street's investment banks just got another one step closer to making defrauding investors an accepted line of business. And Enron's employees who lost their pensions and the small investors who got fleeced in the Enron frauds just got shafted again - this time at the urging of President George W. Bush.

Wall Street's most powerful investment banks and their friends in high places lobbied the U.S. Solicitor General Paul Clement to reject the recommendation of the Securities and Exchange Commission that the Justice Department support defrauded investors in their appeal to the Supreme Court.

The case before the Supreme Court is called Stoneridge v. Scientific-Atlanta, but the Court decision will directly impact the millions of victims of Enron's collapse - and say much about the honesty of U.S. markets.

Briefs in support of the defrauded investors were filed by dozens of state attorneys general, by the Council of Institutional Investors and some of the nation's largest pension funds whose investments are at risk if Wall Street banks can concoct fraudulent schemes with impunity. Yet, in an unprecedented failure to meet his responsibilities to the public, Solicitor General Clement, who represents the United States before the Court, decided to punt.

Clement is not exactly a neutral party. He's a star of the right-wing bar. He clerked for Laurence Silberman and Antonin Scalia, among the most partisan and reactionary judges of our time. He served as an aide to Sen. John Ashcroft. He is an activist in the right-wing Federalist Society that seeks a return to 19th century jurisprudence.

What is the Stoneridge v. Scientific-Atlanta case?

Stoneridge brought a securities fraud class action on behalf of purchasers of Charter Communications Inc stock. The claim was that Charter engaged in a scheme involving sham transactions designed to inflate Charter's cash flow by $17 million in one quarter in order to meet the expectations of Wall Street analysts.
The alleged scheme was to pay equipment vendors additional moneys in exchange for the vendors returning the moneys to Charter in the form of advertising fees. The vendors named in the case were Scientific-Atlanta, Inc. and Motorola, Inc.

The vendors' position was that they could not be held liable because they were alleged to be only aiding and abetting. The 8th Circuit agreed, holding that one who does not make a fraudulent misstatement or omission, and does not directly engage in manipulative securities practices cannot be guilty of anything more than aiding and abetting - and thus cannot be held liable under Securities and Exchange Act Section 10(b) or SEC Rule 10b-5.