Let’s talk about jail time for culprits of AIG fiasco

[girl gone mad]

FROMA HARROP, http://www.chron.com/disp/story.mpl/editorial/outlook/6320003.html">HOUSTON CHRONICLE

Anyone who has watched Law & Order over the years, as I have, knows that the ending must feel right. The circumstances of the crime may be complex and the legal issues muddy, but in the end, most viewers are left feeling that some justice has been served.

The great American audience sees no justice in paying $165 million in bonuses to the AIG executives whose reckless conduct led to a $170 billion (so far) bailout of their company. There may be far more expensive outrages in the AIG story, but the bonuses hit the public’s already aggravated injustice nerve. Reducing them would not do.

What truly rankles is the argument that AIG, now 80 percent owned by the taxpayer, has no choice but to cough up the money: The sacrosanct contract requires the bonus payments. Also, not paying them might prompt the “talent” to depart, leaving less experienced hands to fix the mess.

No Law and Order would end like that. Fortunately, other plots are available.

Brush aside the congressional theatrics about taxing the bonuses to their eyeballs. Let’s talk jail time.

William Black, a law professor at the University of Missouri-Kansas City, envisions a federal investigation into AIG’s past accounting, securities disclosures and executive-pay program. Black was the litigation director of the Federal Home Loan Bank Board and helped bag the “Keating Five” lawmakers during the savings-and-loan scandal in the late 1980s and early 1990s.

As the bottom was falling out of its derivatives trading, AIG was reporting healthy profits, he told me. That’s not allowed. Meanwhile, the company created a short-term bonus system for its top execs. The massive prior bonuses should be clawed back, he said, “and we do that by establishing that there is accounting fraud and by putting in intelligent, vigorous investigators.”

Speaking of which, Goldman Sachs said that it had no material exposure to AIG, but we now learn that it has received $13 billion in AIG bailout money. “That’s a felony to make a false disclosure,” Black adds.

The solution is to split AIG’s financial products unit off of the conventional insurance business and let it file for bankruptcy. Then we’ll see what sort of payback is truly due the financiers who gambled on the housing market. “The contract they (Goldman and others) made was that if you don’t pay us because you’re insolvent, we’re simply a general creditor and we get only pennies on the dollar” in a bankruptcy, Black notes. “How come that contract isn’t sacrosanct?”

http://www.chron.com/disp/story.mpl/editorial/outlook/6320003.html">More...

[FreakinDJ]

1. It was "De-Criminalized = Deregulated" by GOP/Reaganomics

They took away the laws - they didn't break the laws

I think the guy is blowing smoke

[depakid]

4. Not blowing smoke at all

Mail fraud, wire fraud, ecurities fraud, making false statements to federal officials (among others statutes) are broad federal crimes that prosecutors routinely use in cases where other, more specific laws may not apply.

[FreakinDJ]

5. I wish they did break the law and could be tried

but from every thing i read so far the overwhelming consensus is the law were decriminalized by deregulation.

But YES I do agree the financials should be broken off, and liquidated through Bankruptcy court. If the books were cooked or improprieties are found then by all means see to it they spend the rest of their life in prison

[depakid]

6. Like I said- there are dozens of general statutes out there covering their behavior

that could be (and are used) in all sorts of contexts. That the specific underlying acts make (or may not) have been legal doesn't insulate one from other forms of culpability.

[rzemanfl]

2. Talking about stuff is good. I started talking about having sex

with Ursula Andress back when I saw "Dr. No" in the the theater. I heard she celebrated her seventy something-th birthday last week, so I guess that talk is over. Talking about prosecuting these jokers has about the same odds of success as my eighth grade fantasy had.

[terisan]

3. I think William Black is making sense and I suspect it is possible that the bailout strategy

was developed over time and that many politicians were involved. (I actually hope this is not true).