Do the piggies always get off scott free?

As the debt-ceiling deadline looms and it appears the GOP power base of fat cats will slide by yet again without paying their fair share, I am reminded of a 2008 column I published on this theme:


Do the Piggies Always Escape Scott-Free?
By Jim Castagnera
As Uncle Sam printed billions of new dollars to bail out AIG, the failing financial giant’s top hogs gobbled up more than $400,000 on a junket, according to news reports. While that much money might be enough for many of us to retire somewhere shy of our 80th birthdays, it’s only a drop in the trough for these folks. Golden parachutes in the nine-figure range enable these piggy-pirates to enjoy soft landings, leaving shareholders --- including our pension funds --- and we taxpayers and our children (and, no doubt, grandchildren) to cover the losses caused by their greed and incompetence.
And Obama wonders why some of us here in depressed Pennsylvania may fondle our guns with a certain wistful affection.
Do these porcine gluttons ever have to pay for their sins? The answer is “yes, sometimes they do.” For example, several former AIG and affiliated execs were convicted in a federal court in Connecticut of securities fraud and mail fraud in May. In this case, according to the federal district judge, “The defendants were convicted of crimes associated with a loss portfolio transfer reinsurance transaction between Gen Re and AIG. Four of the defendants-Ferguson, Garand, Graham, and Monrad-are former Gen Re executives; the remaining defendant, Milton, is a former AIG executive. Count One charged all five of the defendants with participating in a conspiracy to commit securities fraud, to make and cause to be made false and misleading statements in reports filed with the SEC, to falsify and cause to be falsified the books and records of a public company, and to commit mail fraud, in violation of 18 U.S.C. § 371.” In other words, they lied to the SEC and the public to make their firms’ assets look more valuable than they actually were.
According to Reuters, last month “In a sentencing memorandum…, prosecutors argued that sentences for the five defendants should be stiffer than the range of 168 months to 210 months calculated in a pre-sentence report. The government also said losses to AIG investors could be estimated at more than $400 million -- with the government's expert calculating fraud-related losses as much as $1.4 billion -- a factor that should enhance the defendants' sentences.” The memorandum is still under consideration, so far as I can tell. Here’s hoping the judge sees things the government’s way.
In addition to such criminal cases, we can anticipate plenty of litigation on the civil side, too, in the wake of the financial pigpen’s collapse. Here’s one example, from the June 13, 2007, edition of Market Watch [http://www.marketwatch.com]:
“American International Group Inc. (AIG) Wednesday sued its ousted Chairman Maurice R. ‘Hank’ Greenberg and ex-Chief Financial Officer Howard I. Smith for more than $1 billion in damages stemming from accounting troubles on their watch.”
Another class action suit, called In re American International Group Securities Litigation was described a federal judge in Manhattan this way last July:
“This litigation was commenced more than three-and-a-half years ago when putative class actions were filed in this Court on October 15, 2004. The putative class actions alleged that AIG and certain of its officers and directors violated the securities laws by failing to disclose AIG's participation in bid-rigging and contingent commission schemes (alleged in a complaint by the New York Attorney General against Marsh & McLennan Companies, Inc.). The proposed class period in these actions was October 28, 1999 through October 13, 2004. On February 8, 2005, this Court consolidated the cases and appointed Ohio Funds as lead plaintiff. On April 19, 2005, lead plaintiff filed a Consolidated Amended Class Action Complaint, which included allegations pertaining to the same bid-rigging and contingent commission schemes, as well as newly-disclosed allegations of accounting improprieties involving defendant General Reinsurance Corp.”
Plaintiffs include public employee and teachers’ retirement funds and the like. Defendants again include good ‘ol Hank Greenberg.
If all this seems too much to take in, you’re not alone. I plan to follow these lawsuits for you into the future. For now, suffice to say that, when I was still practicing law in Philly, I knew lawyers who made their livings chasing down such pilfering piggies on behalf of we hapless shareholders and would-be retirees. The Enron crimes of the last decade resulted in similar suits, which recovered quite a bit of what had been stolen by Enron’s criminal execs. CEO Kenneth Lay escaped prison by dying.
Someone less charitable than me might wish the same for some of the hogs who have benefited personally from the shenanigans that led up to our present predicament.