The Smartest Guy in the Room
If New York was mother to many of the evildoers in the financial disaster that sent the economy into a tailspin, it's also home to an avenging angel for the millions of ordinary Americans who lost billions of dollars in the meltdown.
The guy with the wings and the sword also wears robes: He's federal Judge Jed Rakoff. The shock waves from Rakoff's scathing denunciation last month of a proposed settlement between the Securities and Exchange Commission and the Bank of America are still rippling through Wall Street and Washington.
Bank of America CEO Ken Lewis is on his way out, and New York Attorney General Andrew Cuomo is pressing an investigation into the deal in which the bank purchased ailing Merrill Lynch last December without telling its shareholders that executives of the tottering brokerage were paid $3.6 billion in bonuses shortly before the takeover was announced. A congressional panel is also probing the deal.
The common-sense wisdom of Rakoff's ruling resonated with a public infuriated with billion-dollar bonuses and bailouts. The SEC signed off on an agreement in which the bank agreed to pay $33 million (in shareholder money) for concealing the bonus payments from the shareholders. In effect, the victims were being punished, a topsy-turvy outcome fairly typical of the SEC's handling of wrongdoing by large corporations in cases like these.
"Oscar Wilde once famously said that a cynic is someone 'who knows the price of everything and the value of nothing,'" Rakoff wrote.
The proposed consent judgment in this case suggests a rather cynical relationship between the parties: the S.E.C. gets to claim that it is exposing wrongdoing on the part of the Bank of America in a high-profile merger; the Bank's management gets to claim that they have been coerced into an onerous settlement by overzealous regulators. And all this is done at the expense, not only of the shareholders, but also of the truth.
Rakoff's ruling may well mark the dawn of a new era in corporate accountability, since the judge has pressed for the names of the bank executives responsible for hiding the bonus payments.
"I think Judge Rakoff resented the degree to which a government agency was seeking to pull the wool over his eyes, and just blandly stating it was his duty to rubber-stamp their settlement," said Columbia Law School professor John Coffee, who teaches a seminar on white-collar crime at Columbia with Rakoff.
The federal jurist who overturned the Wall Street applecart is a 66-year-old workaholic who neither smokes nor drinks, according to friends and colleagues. In keeping with that New York theme, Rakoff enjoys Broadway show tunes and once dreamed of becoming a lyricist. The judge and his wife of 35 years, Ann, have three daughters. The couple enjoys ballroom dancing.
He admires the writing of Kafka and Arthur Miller, and is himself admired for legal opinions filled with sharp writing and laced with wit. His legal hero is Benjamin Cardozo, the Supreme Court justice from New York whose lofty reputation rests partly on his writing skill.
Lawyers who know Rakoff mention three qualities that mark his style as a jurist: intelligence, independence and a thoroughness that can turn the resolution of an apparently routine legal question into a day-long hearing.
"He is one of the best federal judges that I have ever seen," said criminal defense lawyer Gerald Shargel, "because he's the smartest guy in the room, he's painstakingly fair, and he never kowtows to the government."
Last summer, Rakoff imposed a 20-year-sentence on Shargel's client, Marc Dreier. (Dreier, a prominent Manhattan lawyer, financed a Gilded Age lifestyle for himself by selling fake promissory notes to hedge funds and other investors. He stole about $400 million before he was caught impersonating a lawyer for a Canadian retirement fund he hoped to loot.) Given the temper of the times, and the irritability of the public, Shargel found himself treated like a winner by other lawyers after the sentence was announced.
Bernard Madoff had gotten 150 years for his $50 billion fraud and the government had urged Judge Rakoff to send Dreier to prison for 145 years, apparently calculating that the shady barrister was only slightly less evil that the Prince of Financial Darkness himself. But Rakoff refused, "Mr. Dreier's crimes, despicable though they may be, pale in comparison to Mr. Madoff's," he said.
"What I said to the lawyers who contacted me was that we've come to a very strange place if I'm getting congratulated for 'winning' a 20-year sentence for a 59-year-old white collar offender," Shargel recalled.
Since he was named to the federal bench by President Clinton in 1995, Rakoff has built a judicial resume that includes overturning the federal death penalty (reversed on appeal), thumbing his judicial nose at federal sentencing guidelines and forcing the Pentagon to reveal the names and nationalities of hundreds of detainees held at Guantánamo Bay.
Some of Rakoff's more interesting opinions have come in cases that are less than earth-shattering. In 2005, for example, New York City put the kibosh on a block party in Chelsea because the organizer planned to let artists spray graffiti on mock-ups of subway cars. Mayor Michael Bloomberg argued that such activity would encourage vandals to deface real subway cars with graffiti.
Judge Rakoff disagreed.
"By the same token, presumably, a street performance of 'Hamlet' would be tantamount to encouraging revenge murder," Rakoff wrote. "As for a street performance of 'Oedipus Rex,' don't even think about it."
"He has an extremely droll sense of humor. One might almost call it puckish," said Ron Kuby, the lawyer (and HuffPost blogger) who represented the party-thrower.
Rakoff's strong suit is securities law. He was born in Philadelphia and, after graduating from Swarthmore in 1964, attended Oxford and Harvard Law School. According to friends and colleagues, he arrived in New York City in 1970 with a dual dream: He would work as a lawyer by day and by night write the book for a musical that would take Broadway by storm.
Despite Rakoff's love of lyrics, the law won out. He soon joined the prestigious U.S. Attorney's office in Manhattan, where he worked as a prosecutor for seven years, including two as chief of the securities fraud unit. That paved the way for a career in private practice that made him one of the top securities lawyers in the U.S. (He has written a number of books and more than 100 articles).
"He was a great, great securities litigator. He's forgotten more about securities law than some of the top lawyers in the country have ever known," said Anthony Sabino, a professor of law and business at St. John's University. "His knowledge of securities law is such that if he asks you a question, you'd better have the answer. The SEC and the Bank of America didn't have the answers, and that's why they're in the pickle that they're in."
The bank and the government agency are scheduled to go to trial in Judge Rakoff's courtroom in March. Not surprisingly, given Rakoff's harsh criticism of the $33 million deal, both sides have opted for a jury trial.
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< The common-sense wisdom of Rakoff's ruling resonated with a public infuriated with billion-dollar bonuses and bailouts. >
Just how tin-eared can Mr. Obama be, to not hear the cries and despairs of the "let 'em eat cake" rabble, nor to not see the billions of dollars of bailouts with NO OVERSIGHT, NO top-to-bottom AUDITS, NO going after off-shore tax-dodgers, much less, heavens forbid, prosecutions for financial fraud?
whose side is he on?
Men with a backbone and ethics are what we need today, and needed in this last election...
I have no doubt the banks will exercise to the full their right to be judged by a jury of their peers.
Ya know, I would think the American people and the Press, if they really tried, could find many Judge Radkoffs. Though first they have to throw out virtually all of Congress, many members of the Administration, three or four Supreme Court Justices, most of the Pentagon--- that should leave about 600 to 700 job openings. Of course, the MEDIA would need to first do some serious house cleaning, and the PUBLIC would have to do some serious wising-up. Still, I think job applications should start now!
Most of us would agree with your view, Robert.
The middle class has allowed itself to become Wall Street's PATSY.
A funny parallel, if you may...
Years ago we entertained the thought of ROBOTS taking over the earth...
We missed it. Scratch out ROBOTS, PENCIL IN BANKS and CORPORATIONS.
~ Judge Radkoff (a hero for today) ~
...and let's recognize one basis for a true democracy: One man, one vote.
NO to "Corporate Personhood"! NO to "Corrupt Governance"!
YES to publicly funded elections
K-Street WILL ultimately reduce America to ruins.
This is a good article, but there's something that gets my goat. In about paragraph 7 when discussing the judge, this author says that the judge neither smokes nor drinks. And that is relevant how?
Surely he meant "we've come to a very sane place" where evil and the willingness to cause great harm others, to cause great harm to society as a whole is treated as the “violent" act that it truly is.
I've lost my life's savings now three times at least, twice during the Bush administration. I am now too old to have the time to re-earn what has been lost. And I am only one of 10's of millions of Americans whose life's labor has been stolen.
There must be a profound message sent by our government and our justice system that this kind of theft of billions of dollars will be treated as if it were, in fact, the theft of billions of dollars and destruction of millions of business large and small and ruination for millions of working Americans.
That is an horrendous crime.
We need more like him.
wow...another one of those liberal "activist" judges, eh???.....perfect to replace thomas, or better yet, scalia....a judge for WE, THE PEOPLE.....
The problem is that his nomination would die in Congress. Since "money is the mother's milk of politics", J. Unruh), Neither Reps or Dems would want him on the bench
There has been so little good news and hope in the past two years. Finally, a story about a government official actually doing his job and looking out for the people. why do you have to ruin it with constant negativity?
Sarcasm?
One of the largest banks in the world and SEC are choosing a jury trial in the current climate of proletarian justice?
Have we just found the corporate "Bogeyman" we've always been looking for?
Hey, people have been screaming all along that any person off the street could be a good bank president. Now we will get to see how well 12 jurors understand the case.
The corporate shell protects wrong doers from the consequences of their actions. The original corporations (in the early days of the U.S.) had their charters yanked if they misbehaved. Now corporations and their wrong-doers are above the law. Fines are nothing to them.
Amen sister. The problem is that the states once controlled corporate charters. Now, the states are too weak and corrupt to do that.
Finally someone versed in securities overseeing the accountability of financial institutions. No longer can they claim that we don't understand what they are doing and get a pass. There should be many more judges like this. And the financial "wizards" should be afraid, very afraid.
For some reason the SEC has been given the dubious distinction of being an enforcement agency when in reality they just appease Wall Street with slaps on the wrist. BOA better settle before going to court. They will get slaughtered as sentiment is not good for the banks and Wall street.
SEC = fox guarding proverbial hen house.
That depends upon the venue. If the case is heard in upstate New York, BOA and the SEC may be supported; same is true for Manhattan. Some corporations that deal with jury selection are going to make a ton of money. I assume that this will also be paid for by BOA shareholders.
Unfortunately, you are right. And when B of A gets killed, us taxpayers will be the ones that pay for it.
What a breath of fresh air.
Nobody intimidates Judge Rakoff and it's good to know that at least one Federal Judge has the go nads to do what's right. Of course, it helps when you sit in this particular district.
Think of the possibilities.
Wonder who he is supporting as candidates for Governor and Senators from New York.
He is a clear and honest thinker. That means he probably isn't supporting any of the candidates.
How many Bankers and Judges does it take to change a light bulb?
One of each.
Defendant "A" changes the bulb. While Justice "B" tells the shareholders its cost them $33M.
Thank you judge Rakoff, he should definitely be in the Supreme Court in the next vacancy.
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