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PAUL JAY: Welcome to The Real News Network. I'm Paul Jay in Baltimore. And this is the
first edition of what will be regular reports from Dimitri Lascaris, who now joins us from
London, Ontario.
Dimitri's a partner with the Canadian law firm Siskinds, where he heads up the firm's
securities class action group. He was named by the Canadian Lawyer Magazine as one of
the 25 most influential lawyers in Canada. He's currently prosecuting numerous securities
class actions, and he's worked for a major Wall Street law firm. He now joins us from
London, Ontario.
Thanks for joining us again, Dimitri.
DIMITRI LASCARIS: Good to be back, Paul.
JAY: So what's caught your attention this week?
LASCARIS: I think those who practice in my area were, I think, transfixed by the departure
of Lenny Breuer, who headed the Criminal Division of the Department of Justice in the United
States. And his departure followed what many of us regarded as a pretty riveting report
by Frontline about the failure of the Department of Justice to prosecute high-ranking officials
from Wall Street in connection with the financial crisis. And I think what he had to say in
the interview (and he really was the focus of the documentary's attention), whether or
not it precipitated his departure, it unquestionably was revealing about what has gone on or not
gone on at the Department of Justice over the last four or five years.
And essentially what he did, he didn't deny, you know, that there has been a paucity of
prosecutions of high-ranking officials on Wall Street. He essentially acknowledged that.
His explanation was one that wouldn't have enlightened a first-year law student. He simply
kept repeating over and over again that in order to secure a conviction for white-collar
crime, one has to prove beyond a reasonable doubt the element of every offense.
Well, you know, that was true when the Department of Justice successfully prosecuted Jeffrey
Skilling, who was the CEO of Enron, in a complex financial fraud. That was true when the Department
of Justice successfully prosecuted Bernard Ebbers, who was the CEO of WorldCom, again,
in connection with a complex financial fraud.
And Mr. Breuer failed--I think, miserably--to explain what has changed since the Department
of Justice under, amazingly, George Bush secured convictions of, you know, major figures from
the business community in complex financial frauds and has not done so following what
is arguably the worst epidemic of financial fraud in the modern era, namely the few years
leading up to the financial crisis in 2008, 2009.
JAY: Well, the argument that he gave in the film was that, you know, when he did try to
justify all this, was that if you prosecuted these people, the CEOs or whatever of some
of these big banks, it might cause instability in the financial system, and that these banks
are so big, essentially they're too big to prosecute. What do you make of that argument?
LASCARIS: I have an even more dim view of that argument than The New York Times, which
described it as "a dark day for the rule of law."
This was, of course, a view that he defended in connection with the announcement that HSBC,
the largest bank in the United Kingdom, had settled a series of very serious allegations
for $1.9 billion. That may sound like a lot of money, but considering the severity
of what it did or was alleged to have done, which is to facilitate money laundering by
drug cartels, to knowingly do business with a bank that was supportive of al-Qaeda--and
these are things which the establishment in the United States, you know, basically regards
as impardonable offenses. And Mr. Breuer said, well, if we prosecute criminally an organization
of this size and stature, it's going to constitute a threat to the financial system.
What actually constitutes a threat to the financial system and to the global economy
as a whole is the relative impunity with which these increasingly large banks are conducting
business. And I think, and many in the practice area believe, that that was basically an invitation
to persons who work for these organizations to engage in even more egregious conduct than
they have up until now. They've effectively been told by the top-ranking official in the
criminal division of the Justice Department that they will not be prosecuted because of
the size of the institution. That is very dangerous, and we're all going to pay for
it eventually if that approach is not altered dramatically in the near future.
JAY: But in spite of the sort of outrage of The New York Times and such, isn't there some
truth to what he says, that so much of this banking system is a quote-unquote confidence
game (and I mean that in all meanings of the word), and that if you shake that confidence
game, you don't know where that might unravel to?
LASCARIS: Well, you know, I think you have to look at it as a question of putting up
with the lesser of two evils. There's no question that if you shut down an institution like
HSBC, which can be done, there are going to be significantly negative consequences in
the short term.
But one has to ask, if you allow it to act with impunity, and other institutions of that
size and stature to act with impunity, will we actually end up worse off than if we simply
shut it down? And I think that the financial crisis demonstrates that we would be worse
off. Basically, the entire global financial system almost came to a halt. Major financial
institutions across the globe were teetering on the brink of collapse--many did--precisely
because there was a relative atmosphere of impunity on Wall Street. We're going to end
up in the long term paying for this to a far greater extent than if we simply brought the
activities of HSBC to an end altogether.
JAY: And is not the other part of this problem is that these big financial institutions,
one, they have this threat--we're too big; you come after us, your whole financial system's
going to get paralyzed again. But isn't there another part to it as well, which is these
financial institutions have so much political power, they have so much purchasing power
of political representatives, thatthe clout they have makes them an--almost unregulatable
(I'm not sure that's a word, but anyway) and unprosecutable, because they just have too
much influence? And you can say they should be controlled, but I guess what I'm getting
at: is there any reality, realistic possibility of that, unless--that's what I'm getting--within
this system as we know it?
LASCARIS: Not within the current system. I think that that's precisely the problem. I
mean, it's very instructive to look at who Mr. Breuer is and who his boss, Eric
Holder, is and how and when they came to occupy the positions that they occupy.
Both of them were partners at one of the most prestigious Wall Street and Washington law
firms, Covington & Burling, for a number of years. Mr. Breuer in particular was the
cochairman of the firm's white-collar defense practice. And I think it's fair to assume
that somebody who occupies that position and is paid very handsomely for it, as undoubtedly
he was, is not going to be philosophically inclined to vigorously pursue financial fraud
wherever he may find it. And he was appointed to the position, as was Eric Holder, at a
moment when I think Wall Street was very concerned about potential criminal prosecutions.
The public was with good reason completely irate about the bailout of these financial
institutions who had engaged in this conduct. I think that the Obama administration having
had its campaign largely financed by Wall Street quite deliberately--you know, and I'm
speculating to a degree here, but I think this is a very logical inference, given the
administration's dependence upon Wall Street for the financing of its own campaign, quite
deliberately put in place in these two important positions--attorney general and the head of
the Criminal Division--two individuals whose lives had been largely built, professional
lives had been largely built by defending the very sorts of people who they were now
being called upon to prosecute.
And until you separate, you know, campaign finance from big business and from Wall Street,
until you separate the regulatory community from the regulated and you shut down the revolving
door, then the problem is not going to get solved. And, you know, one of the things that
has to be done, in my view, is you simply have to prohibit people who work in the regulatory
community from going off and accepting plum positions with the very companies that they
were called upon to regulate.
If you're going to do that, however, you have to understand that you're going to have to
compensate these people better; otherwise, you're not going to attract top talent. And
I think this is part of, you know, big business's agenda. They basically try to starve the government
of revenue so that it's not able to pay, you know, important civil servants the types of
salaries that you need to pay in order to attract the best people, and therefore the
civil service ends up being both corrupt and outmatched by the private sector when it comes
to law enforcement.
So there are really some very fundamental changes that have to take place in terms of
campaign finance, in terms of the revolving door between the regulatory community and
the private sector before we're going to have any hope of solving these problems. And nobody,
you know, in the political upper echelons of politics in the United States or Canada,
or Western Europe, for that matter, seem determined to implement any of these reforms.
JAY: Well, 'cause they're all getting their campaigns financed the same way the Obama
administration has. The congressmen and the members of various parliaments around the
world are all getting financed the same way.
LASCARIS: Precisely. And the United States is simply an extreme example of a phenomenon
that we're witnessing throughout the Western world to an increasing degree.
JAY: Alright. Well, thanks very much for joining us, Dimitri.
LASCARIS: Thank you, Paul.
JAY: And thank you for joining us on The Real News Network.