They do quite a bit of surveillance at most casinos. Frankly, those paid to watch the games of chance do a better job than those paid to watch our stock markets. Take this recent case.
Blackjack Players Go Bust And Get Busted
On September 20, 2008, five blackjack players and the dealer at a blackjack table at the Mohegan Sun Casino in Uncasville, Connecticut were under in-house surveillance that allegedly caught them cheating. The six suspects were arrested and initially charged with committing a sixth-degree larceny on September 20, 2008. However, sometimes things are not what they seem. All charges against four of the players were dropped.
As with most games of chance, you place your bet, you take your chances. Alas, Lady Luck did not smile upon two of the six blackjack suspects. In October 2008, Rory Shaffer, the 28-year-old blackjack dealer, and 21-year-old Samuel M. Pierce, one of the five arrested players, were charged in Connecticut's Norwich Superior Court with first degree larceny, cheating while gambling, and conspiracy to commit first degree larceny. Allegedly, Pierce and Shaffer engaged in a scheme to steal $16,000 from a casino whereby Pierce was allowed to keep chips that he bet on losing hands. Notwithstanding the charges, Shaffer and Pierce are presumed innocent until and unless proven guilty in a court of law.
Wall Street's High Standards and Principles
In 2007, Pierce apparently started a Wall Street career when he became an Associated Person, which is typically an unregistered Wall Street employee who is generally excluded from dealing with the investing public other than in a clerical or administrative capacity. From July 24, 2008, through January 19, 2009, Pierce was an Associated Person with FINRA member firm Citigroup Global Markets, Inc.
The Financial Industry Regulatory Authority (FINRA) is one of the many cops that are supposed to patrol Wall Street. Neither a federal nor state governmental agency, FINRA is what is referred to as a self-regulatory organization (SRO). The concept of an SRO is that a working partnership between the regulator and the regulated should prove invaluable and a potent means to combat Wall Street fraud. In theory, an SRO is an intriguing idea - after all, who knows more about the shenanigans in a given industry than the folks in that industry? Ah, but there is always that old hang-up: in theory things should work; in reality, well, not always. See this for some context:
FINRA's Dubious Madoff Report http://www.brokeandbroker.com/index.php?a=blog&id=250; and
FINRA Strikes Out http://www.forbes.com/2009/08/21/singer-regulation-commentary-intelligent-investing-finra.html
Having missed out on timely nailing some of the great fraudsters in recent Wall Street history, FINRA now seems to be trying to make up for lost time, and, perhaps, trying to manufacture some feel-good publicity. When Pierce allegedly got nabbed at the Mohegan Sun Casino, FINRA had this rule (from its predecessor the National Association of Securities Dealers or "NASD") that stated:
NASD Conduct Rule 2110: Standards of Commercial Honor and Principles of Trade:
A member, in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade.
Too often, prosecutors or regulators haul out some rubbery, pliable, stretchy bit of prohibitions and restrictions that they claim covers a whole host of sins, real or imagined. We lawyers have a term for that type of regulation; we call it an Elastic Clause. It's not a term of endearment. Rule 2110 is just such an example. I mean, seriously -- what the hell are "high standards of commercial honor" and "just and equitable principles of trade" when it comes to something as tawdry as Wall Street?
The House of Cards Collapses
Not prepared to tolerate a dastardly, hardcore card-shark in its midst, FINRA pursued Pierce for violating Rule 2110. Pursuant to a FINRA Letter of Acceptance, Waiver and Consent ("AWC") (AWC #2008015405101, March 9, 2010) Pierce offered to settle the regulatory case against him, without admitting or denying the findings. Notably, only the alleged blackjack scheme is referenced by FINRA; there is not a single reference to any alleged criminal charge, plea, or final disposition as providing the basis for jurisdiction. Frankly, that's what caught my eye about this case. FINRA was going after this kid not based upon any criminal conviction (there is none) but simply because he allegedly rigged a blackjack game.
I'm not suggesting that Pierce should be permitted to remain in the industry or that he is (or isn't) a reputable character. The facts are what they are and you are welcome to draw your own inferences and conclusions. Moreover, in FINRA's defense, this is a matter that Pierce agreed to settle with a bar. Consequently, FINRA agreed to the imposition of a Bar upon Pierce from association with any member in any capacity. Pierce is not presently associated with any FINRA firm and has no other disciplinary history beyond the matter at issue.
Pierce's attorney, David T. Grudberg, of Jacobs, Grudberg, Belt, Dow & Katz, P.C. of New Haven, Ct. advised me that Pierce was presently participating in Connecticut's pretrial program for accelerated rehabilitation ("AR"). AR gives certain first-time offenders probation for up to two years, during which time the criminal prosecution is suspended. If the defendant satisfactorily completes the probationary period he may then apply to the court for dismissal of the charges against him.
For a detailed analysis of AR, visit this link http://www.jacobslaw.com/CM/CriminalDefensePractice/PretrialDiversionPrograms.asp
As matters presently stand, Pierce has not admitted to any criminal conduct and the State has not proven any criminal conduct. Accordingly, Pierce continues to be entitled to the presumption of innocence. Further, all charges against Pierce will likely be dismissed if he complies with the terms of the AR. As a matter of law, in two years, his arrest and the charges against him may well be rendered non-events.
Bill Singer's Comment: In taking its bows for Pierce, FINRA might ask us to imagine all the damage that this unregistered 21-year-old alleged card cheat could have done to the unsuspecting investing public. Unfortunately for FINRA's what-if scenario, Pierce wasn't registered and probably wasn't dealing directly with investors. Oh well, minor detail.
Compare this case with FINRA's rather tepid responses to the misdeeds of Bernie Madoff and Sir Allen Stanford. FINRA certainly nipped those major frauds in the bud - okay, maybe not in the bud, maybe whatever a bud becomes after a decade or so and far too many defrauded investors have lost millions of dollars.
- Is FINRA presently preparing to bar all those fine, upstanding Wall Street execs who bid against the very products that they sold to the public -- you know, keeping in mind all that high fallutin' stuff about commercial honor and equitable principles of trade?
- What about all those former SEC employees who were terminated for viewing pornography during the workday? If any of those folks apply for work on Wall Street, will FINRA move to bar them?
- If former Governor Spitzer, or former Senator Edwards, or former Representative Fosella, or sitting Governor Sanford, or sitting Senator Ensign, or sitting Senator Vitter apply for jobs on Wall Street, have their past extramarital actions run afoul of FINRA's high standards of commercial honor and just and equitable principles of trade?
- And just what is FINRA's ethical interpretation about sitting Attorney General Blumenthal's misstatement about his Vietnam service?
- Essentially, Pierce is barred for having allegedly cheated while placing a legal bet on a legal card game at a legal casino. How about all those Wall Streeters who place illegal bets in their offices in violation of state and federal anti-gambling laws? What am I talking about? How about all those industry folks who illegally gamble on the office NCAA March Madness or NFL Super Bowl pools? Does that fall under FINRA's arch concern about honor and and equity?
As you may have inferred, some of this is all too sanctimonious for me. The last thing that Wall Street now needs are more hypocritical double-standards.
Of course, there is that other interesting question: How much FINRA staff time was diverted and how many regulatory dollars were spent going after young card-shark Pierce -- and what about the more serious securities fraudsters who continue to savage the investing public while such a dubious regulatory effort proceeds?
I don't know about you, but I'm sleeping much better at night knowing that Wall Street is being swept clean of allegedly crooked casino gamblers. If only we could get those who police the nation's casinos to teach those who police Wall Street's how better to surveil and regulate their own turf.