Is It A Shakedown When The Gov't Does It? SEC Much Less Likely To Prosecute You If You're A Big Campaign Funder
from the nice-business-here.-wouldn't-want-to-see-an-sec-investigation-happen-to-it dept
In the past, we've highlighted some questionable activities by the SEC, which is supposed to be stopping financial fraud, but often seems to be both arbitrary and capricious in its activities. However, reporter David Sirota is highlighting how the SEC is much less likely to prosecute a company if that company happens to be a big political contributor, because, well, duh. This is based on some recent research by Maria Correira at the London Business School on Political Connections and SEC Enforcement, which found that there's a pretty clear correlation.If, as the saying goes, justice is blind, the data would show little correlation between firms' political expenditures and their likelihood of being prosecuted. Instead, Correira found that "politically connected firms are on average less likely to be involved in an SEC enforcement action and face lower penalties if they are prosecuted by the SEC." Specifically, Correira discovered that firms that increased their PAC contributions by $1 million over five years ended up halving their probability of being prosecuted.Yes, correlation is not automatically causation, yada yada, but that doesn't mean there isn't a causal relationship here. I guess it's possible one could argue that a company that increases its PAC contributions is somehow less likely to be also engaged in financial shenanigans, but I'm not sure anyone would actually buy that.
There are some other bits of data that don't speak particularly kindly to the motives of SEC folks, such as that old revolving door:
Data from the Project on Government Oversight has documented that since 2001, more than 400 former SEC officials filed disclosure forms documenting their plans to represent firms before the SEC. Correira's report shows that this revolving door also influences financial prosecutions, as companies that employ lobbyists who once worked for the SEC "experience a larger reduction in the probability of enforcement and in penalties than those that do not."Of course, it might not be entirely the SEC's fault. As Correira suggests, the SEC may be responding to basic incentives itself, in noting that investigations and prosecutions of politically "friendly" firms may create "political consequences for itself and its budget." Sirota more or less got a former SEC official to admit that this all goes into the thought process:
In an interview with IBTimes, former SEC counsel Scott Kimpel acknowledged that the agency does have to weigh how to best maximize its limited resources.As Sirota again notes at the end of his article, this issue is not just for the SEC, but for other federal agencies as well, including the DOJ, which more or less admitted that it wouldn't prosecute Wall Street firms connected to the 2008 financial mess, because it might have "a negative impact on the national economy."
"At the end of the day, the SEC only has about 1,000 enforcement officials, so they can't possibly go after every single case of wrongdoing," he said.
It's not clear how you directly solve this issue, but it certainly does seem like a very real problem. Between the revolving door and the power of campaign contributions, it's been quite clear for a long time that the government is not the people's representatives any more (if they ever were).
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Filed Under: campaign finance, funding, investigations, maria correira, politics, prosecutions, sec
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Forgetting Something
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Re: Forgetting Something
i asked this online, and was *told* (insert grain of salt here) that -of course!- the fines/etc will be tax deductable...
as the saying goes: i hate it when we lose, but i hate it even more when we win, and we still lose...
the game is rigged...
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Justice is Blind....
Justice's Eyes are indeed wide open and eventually will come for us all. Justice delivered by other Humans is not blind, it see's well, but is most often blurred by ignorance and stupidity.
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Re: Justice is Blind....
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This drives me nuts. As if leaving them intact hasn't hurt our economy?
Look at the last 5 years. Unemployment and underemployment drags onward, climbing slowly higher. They say we're in a "recovery," but all the shuttered stores along Main Street and empty storefronts at the local mall tell a different story.
A pernicious debt bubble began to pop, and instead of letting it happen and working to clear out bad debt so we could reset and get back to normal, the government has doubled down on it, stepping in when it was only halfway finished with the full might of the Federal Reserve behind moronic efforts to reinflate it! And we've all seen the results with our own eyes. The stock market is rallying, but ordinary Americans are getting ground down by the millions.
The systemic problems remain in place exactly as they have been, and only when we stop propping them up and allow nature to take its course will we get back to real propserity. If we continue on this path... well, just look at Japan over the last couple decades. They had the same problems in the 90s that we had in 2008, and we've responded the same way they did. Do we really want to end up with their economy?
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Mind you I don't support policy bailing out bad actors. But once you cross that line I have no qualms about the gov acting like any other investor would and using its shareholder abilities to direct things...
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But that's the result that we ended up with anyway.
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The "revolving door" can be a problem, but the alternative is the same people staying in government their entire lives without any experience in the private sector. That comes with its own problems.
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I think you misspelled "is a problem."
"That comes with its own problems."
The main one I can think of is that it's more difficult to bribe them that way. What are the others?
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I have no desire to work in the government, but if I did, I'd sure hope I could do a job that I know something about - i.e. one that I can contribute to. And then if I subsequently decide to leave that job, I'd also hope that I would be allowed to go back doing what I know.
As bad as the revolving door is, I don't know if having an FCC full of people who know nothing about the telecom industry would be any better.
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There are issues there to be sure, but it's not nearly as thorny as is portrayed by those who strongly desire the revolving door to persist (namely, the corporations). I think that a substantial cooling-off period -- say 10 years -- would go far. But, really, my preferred answer would be "yes, if you work for a regulatory agency, you may not subsequently take a job for any of the companies you used to regulate."
"As bad as the revolving door is, I don't know if having an FCC full of people who know nothing about the telecom industry would be any better."
That's a false choice. It's completely possible to know how the telecom industry works without having been an employee of it. Lots of people manage that.
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Not a shakedown
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Justice is Blind
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