Monday, October 1, 2012

ECOA 2012 conference

Sent: 10/1/2012 2:35:10 P.M. Central Daylight Time
Subj: Another year on: Entity level versus officer/employee individual liability

To ECOA 2012 conference speakers (c/o of Keith Darcy):

Prior to the 2011 Ethics & Compliance Officer conference, I sent about 19 different emails to scheduled conference speakers trying to raise the relevance of entity level liability versus officer/employee liability regarding their respective speaking topics. You may find those emails here. (This followed similar efforts I made in connection with the 2010 and 2009 conferences.)

Gretchen Morgenson was a keynote speaker at the 2011 conference. In her book Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon and in other venues, Ms. Morgenson has been very outspoken about the paucity of individual liability for the likes of Jim Johnson, Franklin Raines, Angelo Mozilo and others, whose "outsized ambition, greed and corruption led to economic armageddon." See this email I sent to Ms. Morgenson relative to her keynote presentation.

I have this ongoing project to investigate the views and information that multiple interested parties have concerning the subject of entity level liability versus officer and employee individual liability as a means to deter corporate wrongdoing.

Earlier this year, I focused on Federal Sentencing Guidelines for Organizations Sec. 8B2.1(b)(6), which deals with "appropriate incentives" and "appropriate disciplinary measures" to enforce an organization's compliance and ethics program.  In April I sent to Dr. Harned at the Ethics Resource Center this email. about Sec. 8B2.1(b)(6). I made inquiries to state attorneys general, the Department of Justice, the Conference of State Bank Supervisors, the American Association of Residential Mortgage Regulators, and the Mortgage Bankers Association, concerning Sec. 8B2.1(b)(6) and how it it related to, and might be affected by, the $25 billion settlement that was made by Ally Financial, JPMorgan Chase, Wells Fargo, Citigroup, and Bank of America regarding the alleged mortgage-servicing and home-foreclosure abuses stemming from the so-called "robo-signing" practices. The inquiries were, in part, prompted by a HUD report about the pressures that were put on bank foreclosure workers (as reported in this Wall Street Journal article). I was unable to learn anything from the parties I contacted that would lead me to believe that "appropriate disciplinary measures" will be taken against individual officers and employees as contemplated by Sec. 8B2.1(b)(6). See this entry in my blog for further information about this.

In July, the LIBOR scandal, which may be the biggest financial scandal ever, broke. (Ms. Morgenson has turned her attention to this. See this article.) Tens or hundreds of billions of dollars of lawsuits are being filed by plaintiffs lawyers to impose entity level liability and get huge sums out of the hides of innocent shareholders, many of whom obtained no benefit from the LIBOR wrongdoing. Barclays has paid significant fines to the Commodities Futures Trading Commission and the United States Department of Justice. The chairman of Barclays resigned, as did the CEO of Barclays.

The ECOA's 2012 conference begins tomorrow. I cannot tell from the agenda whether any speaker will discuss the subject of entity level liability versus officer and employee individual liability as a means to deter corporate wrongdoing, including whether and to what extent "appropriate disciplinary measures" are being taken by enforce their compliance and ethics programs as contemplated by FSGO Sec. 8B2.1(b)(6) and whether entity level liability actions and settlements divert away from or impede such "appropriate disciplinary measures" being imposed.

I hope these matters get discussed formally or informally at the 2012 ECOA conference this week.

Rob Shattuck

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