Quick notes on white-collar crime

Phil Bennett, subject of yesterday's entry, didn't have a good day in court.

He received a sentence of 16 years. The judge, Naomi Buchwald, seems to have started from a baseline of 20 and then asked herself whether there were any reasons for leniency, bargaining herself down by a fifth of the whole.

Here's a link.

Intriguingly, and despite all the attention Samuel Israel's flight has received in recent days and weeks, Buchwald denied the prosecution's request that Bennett be incarcerated immediately. He's expected to turn himself in on September 4th.

Jeffrey Skilling, former chief executive of Enron, is still in prison. That sentence may sound to some like the evocation of an old Saturday Night Live routine. Generalissimo Franco is, after all, still dead.

But the Skilling thing is worth mentioning because, a week ago, admirers of his were confident that a break, and perhaps even freedom for JS was imminent.

Okay, "admirers" is an excessive word in this context. But Larry Ribstein and those to whom he refers there do believe that Skilling is the victim of prosecutorial misconduct and would like to see him walk. They haven't persuaded me. At any rate, their hopes of an imminent rescue by the fifth circuit are still just ... hopes.

Mel Weiss. A month ago, Mel Weiss, once one of the most prominent class-action attorneys in the US, was sentenced to 30 months in prison for kickbacks, i.e. undisclosed payments to class representatives in class action lawsuits that his firm handled.

He broke the rules and has been punished. Risks you take, etc. But ... what is the evidence such kickbacks do harm? and to whom? to his clients? to the system as a whole? The whole question deserves some serious inquiry.

Unfortunately, its a holiday and in providing you with this three-item list, I've done as much serious stuff as I plan to do today. But I'm open, as always, for comments. Agree, dissent from, or just bloviate about any of the above.

Bennett to be sentenced

Today is the scheduled date for the sentencing hearing for Philip ("Refco") Bennett.

Here are the basics beneath the decision the sentencing judge must make.

Mr. Bennett has pleaded guilty to securities fraud, wire fraud, bank fraud, money laundering, and making false filings with the SEC. If his case is disposed of in a manner similar to that of other recent analogous cases (especially the Bayou hedge fund matter) then Bennett faces twenty or more years in prison. Assuming that he survives that (he is 60 years old) he'll be deported to the UK after his emergence again into the light of day.

He has argued for leniency on a variety of theories. In any of these battles-of-the-sentencing memos, there is of course a lot of selective picking through 'similar' cases. The defendant's counsel say, "Look! Joe Schmoe was ever worse that our client, and he received a mere five years." The prosecution responds, "Joe Schmoe wasn't as central to the conspiracy there as the defendant is to this one."

The defense replies to that, the prosecution replies to the reply, and the judge probably has his clerks read it all and provide him with a one-page summary.

If we conscientiously read through all these memoranda, though, we get the impression of eavesdropping on a debate among pre-Copernican astronomers about how many epicycles are needed to explain the motions of Jupiter.

I suspect the one-page summary from Judge Buchwald's clerks runs something like this:

Defendant claims that he has co-operated with the civil plaintiffs in the litigation that arose from the melt-down of Refco, which has helped them locate assets they need to make themselves whole. The prosecution responds that his co-operation hasn't been all it could have been. Defense says that if you don't give him leniency, you'll discourage defendants in the future from similarly co-operating, harming the plaintiffs in such situations. Prosecution replies that, fortunately, cases on this scale aren't common enough to make that a very powerful consideration.

We'll see how it plays out today.

Not A Conspiracy Theory

Indeed, I don't plan in this post to offer a "theory" of any sort, not even the most tentative of hypotheses.

What I will do, though, is confess that a certain fact pattern creeps me out. And that if I weren't the level-headed fellow that I am, I would probably spin a conspiracy theory around it. It would be something of a novelty too, because this particular pattern has so far escaped the net of most such theorists.

Which brings us at last to the point: Cerberus is everywhere. I don't mean the multi-headed hellhound. http://www.steliart.com/hercules_capture_of_cerberus.htm

I mean the global-investment company associated with former vice president Dan Quayle. Could it be that Quayle wasn't as dumb as we thought in the days when he couldn't moderate a spelling bee properly?

Cerberus is everywhere, just behind the headlines. Refco, once a very prominent commodities futures trading concern, melted down in 2005. The bankruptcy court auctioned off its assets, and Cerberus was in the thick of that.

http://users2.wsj.com/lmda/do/checkLogin?mg=evo-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB113176036686295540.html%3Fmod%3Drss_whats_news_us_business

The Austrian bank, Bawag -- that country's fourth largest -- runs into trouble (due to its own entanglement with Refco), and Cerberus steps in to pick up the pieces.
http://www.reuters.com/article/idUSL1475757320061214

The logging and paper industries are going through a period of consolidation. Cerberus is in the thick of that.

Finally, only because accumulating more examples would be too easy: Daimler is looking to unload its American operation, Chrysler. It looks for buyers and guess who surfaces? Yes, the hell hound.

http://money.cnn.com/news/newsfeeds/articles/newstex/AFX-0013-14981488.htm

So Cerberus is a large successful company, and Quayle has found himself a job. What is there especially that bothers me? Well ... chiefly that Cerberus seems to be always just behind the headlines, and also that it seems to be always just behind the headlines. It has managed to intrude itself into innumerable high-profile goings on, while staying remarkably low profile itself.

That just makes me go hmmmm.