Tuesday, April 2, 2013

BEQ authors re deterrence in Citigroup of BofA cases

From: RDShatt@aol.com
To:
Sent: 4/2/2013 4:41:32 P.M. Central Daylight Time
Subj: Update to BEQ authors re deterrence in Citigroup and Bank of America cases
Dear Professors,
I wish to provide you with an update to my November 4, 2012 email to you, in which I solicited citations of academic articles on the subject of the relative effectiveness of entity liability, versus individual officer and employee liability, for purposes of deterring corporate wrongdoing. The reason for my request was to be able to provide the articles to the Court as part of my amicus curiae objection in this Bank of America Securities Litigation pending in the Southern District of New York.
Since then, my objection has been extended to a similar class action lawsuit involving Citigroup, also pending in the Southern District of New York (link Citigroup Securities Litigation).
I wish to report that there may be forthcoming some judicial consideration of this deterrence issue in these cases.
In particular, in the Citigroup case, former United States District Court Judge Layn R. Phillips submitted to the Court this Declaration Regarding Approval Of Settlement. I sent an email to Mr. Phillips inquiring of him whether the parties made argument to him about whether the lawsuit had a deterrence value. Mr. Phillips replied that I should serve my email on the parties to give them an opportunity to comment, and then Mr. Phillips would respond. For further information about this, go here.
I do not know where academic research and publication currently stand related to this deterrence question. If Federal judges can be persuaded to think about the subject, I hope Business Ethics Quarterly and its contributors will take up the issue (if that is not already being done)
Thank you very much.
Sincerely,
Rob Shattuck

From: RDShatt@aol.com
To:
Sent: 11/4/2012 6:10:05 A.M. Central Standard Time
Subj: Fwd: To BEQ authors: re Citigroup mortgage fraud settlement
Dear Professors,
Following on from the below email to you in October 2011, I propose to file this amicus curiae objection in the settlement hearing that will be held in due course for the recently announced $2.4 billion settlement that Bank of America has agreed to regarding the Merrill Lynch acquisition that Bank of America made in 2008.
A main question raised in the objection is the effectiveness of entity liability, on the one hand, and individual officer and employee liability, on the other hand, for deterring corporate wrongdoing. The draft objection currently say, "It is further noted that there seems to be a lack of academic interest and a paucity of academic research."
I would very much appreciate any aid you can give me in making to the Court citations of academic articles on the subject that you think the Court should consider.
Please help me out if you can.
Thank you.
Sincerely,
Rob Shattuck

From: RDShatt@aol.com
To:
CC: francesco.guerrera@wsj.com, michael.siconolfi@wsj.com, ethicsconcern@citi.com
Sent: 10/28/2011 8:19:20 A.M. Central Standard Time
Subj: To BEQ authors: re Citigroup mortgage fraud settlement
Dear Professors,
This October 20 Wall Street Journal article on the Citigroup mortgage fraud settlement for $285 million against Citigroup also reports that the SEC has negligence civil charges against a Citigroup employee that it is pursuing. The lawyer for the Citigroup employee is quoted as saying, "He was not responsible for any alleged wrongdoing, he did not control or trade the position, did not prepare the disclosures and did not select the assets," and, "We will vigorously defend this lawsuit."
Here are some arguably compelling questions for business ethicists:
1. If there is wrongdoing for which Citigroup is called on to pay $285 million, shouldn't officers and employees who are responsible for the wrongdoing be held liable to some extent?
2. If responsible officers and employees are not held liable to some extent, is that not a signal to all officers and employees, "Go ahead, put your thinking caps on, and come up with your next idea for making the company money, don't worry too much about whether it is ethical or not, ideally the company will make some good money from it and be able to pay you additional compensation for the year, and no one will be the wiser, of, if your idea does come a cropper and a liability has to be paid, it will come out of the hides of the stockholders and not you, so again don't worry"?
3. If there is wrongdoing by Citigroup, are there legitimate reasons why responsible officers and employees should not be held personally liable?
4. Is it possible that the legal system works so badly that there is fact no wrongdoing but a $285 million payment still gets extracted from Citigroup? If so, and there is no wrongdoing, can that have any adverse effect on attitudes and efforts related to Citigroup and its officers and employees being more ethical?
5. Will a meaningful determination be in fact made of wrongdoing, or not, in this matter, which will provide guidance to other officers and employees of Citigroup and of other banks and corporations, relative to future decisions and actions of such officers and employees?
Rob Shattuck

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