Protecting Their Assets

(Via CJR)

Here's a great example of government in action, courtesy of Bloomberg's Jonathan Weil:

Crime didn’t pay for Joseph Collins, a former corporate lawyer who received a seven-year prison sentence in January for securities fraud. It just has cost him a lot less money than it should have.

Collins, a former partner at the law firm Mayer Brown LLP, was the chief outside counsel for Refco Inc. when the futures- trading firm collapsed in October 2005, two months after its initial public offering. He was convicted last July on five felony counts for helping Refco executives fleece the company’s investors and lenders of $2.4 billion. Yet Collins, 60, hasn’t been forced to pay compensation to anyone who lost money when Refco went bust.

That’s mainly because Congress has made sure only the government has the right to bring civil court claims against defendants for aiding and abetting securities fraud. Private litigants are barred from doing so under federal law. That means outside investors typically have no means to seek redress in such cases, unless prosecutors or regulators choose to pursue restitution for them. As for the Collins case, the government has proved worthless in that respect.

That translates into the government pre-empting investors rights to sue those who mismanaged their investment bad enough to go to prison.

Because the S.E.C. is going to exact civil penalties. And so they did:

[Collins'] deal [with the S.E.C.] included no monetary penalties. His only punishment was a court order barring him from violating the securities laws’ anti-fraud provisions in the future. He also was allowed to settle the suit without admitting or denying the SEC’s allegations, an absurd formality considering he’s already been found guilty of a crime.

Read the whole article. Makes you rethink the whole "equal under the law" thing.

Owch.