Saturday, July 4, 2009

A good day for the courts

By Don Klein

Two major court actions occurred on the same day and uniquely both were the right calls. It is almost enough to reestablish the faith we once had in the American judicial system before it was nearly fatally damaged in the muffed O.J. Simpson murder case.

The uplifting two cases were unrelated but the results of both were deserved and correct. The first was the Bernie Madoff sentencing in New York federal court. There was speculation that with all his money and influence there was a chance that the disgraced Wall Street bilker would get off with a slap on the wrist and a few years imprisonment.

Not so this time. Madoff’s 150 year term would be tantamount to life behind bars if he was born last year, let alone 71 years ago. He will die in prison and it seems no one will mourn his passing. His sons have disassociated themselves from him for months, his brother is nowhere to be seen and his wife said he is not the man she knew during their more than 50 gilded years of nuptial togetherness.

No one stood up to say a good word about Madoff when the judge invited comments before sentencing. You could almost feel sorry for the poor bloke – with not a friend in the world to speak up for him – if he were not such a scoundrel. Even his lawyer begged Federal District Judge Denny Chin for a 12 year sentence.

It is estimated by authorities that $170 billion passed through Madoff’s hands during his reign as a money manipulator. Much of that amount went into payoffs, a necessary ingredient of a Ponzi scheme. In other words he paid old investors with the cash that came in from new clients. The authorities reportedly have traced between $1 and $2 billion of the loot. However some $13 billion has been identified as "lost" money. No one knows what happened to it.
The only remaining question is where is the $13 billion? Did Madoff make off with it? It is still unaccounted for. Madoff’s personal assets do not calculate for any portion of the missing loot.

So where is the money? Some of Madoff’s victims claim the money is hidden in secret offshore accounts. What good will that do Madoff while sitting in prison for the rest of his life? The hope is that federal investigators will solve the riddle of the missing booty given more time working the books. It could take about a year or two. But that is only possible if you believe the feds are that smart. I am not sure they are. So they may never solve the mystery.

The other quirky aspect to the case is the battle that is now forming between the various victims all vying to get a piece of the confiscated Madoff assets. It seems a small proportion of the victims are showing their own special brand of greed in trying to get as much of the confiscated funds as they can for themselves even at the expense of other Madoff victims. These people are certainly victims, but they act like jackals fighting over the spoils of a kill. They got burned looking for a special market advantage in the first place and now are determined to muscle others to the side while they grab theirs.

Many of the other victims are just pathetic sufferers. They range from the hardworking little guys who scraped and saved to put away a nest egg for their later years to giant charities and universities who should have known better. Madoff’s clients were a cross-section of Americana.

The remaining questions are where were was the Securities and Exchange Commission, which was supposed to protect investors from such frauds? They were not just asleep at the switch, they apparently weren’t even on the job. They were warned several times that the Madoff figures didn’t make sense, but did nothing.

The SEC’s failure in this case plus the stock market crash has permanently damaged the image of the stock market in the eyes of many. It will take generations before the market will regain the trust of most of its middle class investors. Some will hide their money in fire-proof vaults instead of going to Wall Street in the future.

Speaking of fire brings us to the second happy achievement of the day. The Supreme Court ruled in favor of the New Haven firefighters who claimed to be victims of reverse discrimination. They passed the test for promotion but was denied the step-up because no blacks passed the test and the city feared this would bring a suit from the black firefighters charging discrimination. Instead the city decided to discriminate against those who passed the test, who happened to be white.

The disturbing aspect of the court’s 5-4 ruling was the vote breakdown with the four conservative justices in favor of the plaintiffs and the four liberals against and the swing justice, Anthony Kennedy voting with the conservatives. To me it was a simple case of justice, yet to the liberals it became an ideological contest.

I thought the inscription on the facade over the entrance to the Supreme Court building, "Equal Justice Under Law" meant strict impartiality and no other ingredient.

Justice was on the side of the firemen who passed the test and the liberals should uphold that value. I believe if the case was reversed and the only candidates to pass the test were blacks and they were not appointed for the same reasons the whites were not, the court liberals would have found that ripe for overturning.

On the whole the courts did the ideal of American justice proud this past week and we should all be happy. It doesn’t happen that often.

1 comment:

Charlie said...

The Civil Rights Act is actually ambiguous on this issue. The law provides that, even though there was no basis for a finding of discrimination in the promotional practices, the negative effect on a disadvantaged group -- in this case, the black firefighters -- would be enough to support the city's decision to throw out the test. Apparently the liberal Justices put their focus on that part of the law. The Civil Rights Act could stand some revision to bring it up to today's social realities.