Law Students

Be The Driver, Not The Gunman.

By Dr. Bombay

Enron. Just saying the name sends a chill down the spine. In the minds of investors everywhere, it is the very distillation of corporate malfeasance.

On the back of a collapse that cost millions of people billions of dollars, it turns out that ?The Smartest Guys in the Room? were nothing more that a collection of Lucchese clad confidence men, swilling bourbon at company box at Enron Field, and cooking up ponzi schemes that would make a Jersey loan shark blush.

While the annals of corporate malfeasance are certainly chock full of comparable scumbags (who here remembers Drexel Burnham?), the Enron boys are certainly at the top of the list. Rest assured good citizens, that while the wheels of justice turn slowly, they will eventually punish the guilty, those who profited from this thievery will be brought to heal, and the damaged made whole. Or not.

The Supreme Court recently declined to hear argument in a case brought by the Regents of the University of California against Merrill Lynch, Credit Suisse, and Barclay?s for their role in helping Enron unload their stock in the years preceding its collapse.

That decision mirrors a recent finding in StoneRidge Investment Partners v. Scientific-Atlanta which determined that lawyers, accountants, and other outside consultants could not be implicated in stock losses unless they were directly involved. In rejecting this theory of ?scheme liability,? the Court is signaling that the same trick that the Feds use to prosecute mobsters doesn?t apply to private actions going after corporate crooks.

What this means is that those who aided and abetted Enron (Merrill Lynch, et al. hereinafter ?the Get-Away Drivers?) have no liability to shareholders for their role in helping Enron (hereinafter ?the Gunman?) commit the crime. I think I?ll keep my money in my mattress from now on.

Full post as published by Fight The Hypo on January 28, 2008 (boomark / email).