Matthew T. Bodie is a Hofstra law professor who is guest blogging over at the Conglomerate blog and, in this post, wonders why fellow law professors such as Stephen Bainbridge and Larry Ribstein are critical of New York attorney general Eliot Spitzer. After extolling the merits of the Lord of Regulation’s crackdown on the mutual fund and investment banking industries, Mr. Bodie then observes:

All of these accomplishments took creative application of the laws, as well as the settlement process, to bring systemic changes to entire industries. . . Now, apparently it makes one a naif to believe that Spitzer has improved things. But really, what is so controversial about what he has done? Who was in favor of the gross conflicts of interests at play in analysts’ recommendations, so luridly displayed in emails? Who thought the rigged bidding in the mutual fund industry was a practice to be encouraged? Really, where’s the problem?

Mr. Bodie’s question is commonly asked regarding the use of the state power to prosecute or regulate through civil litigation the unpopular and greedy businessperson of the moment. “Why shouldn’t (insert the name of any Enron defendant, Arthur Andersen, Martha Stewart, Frank Quattrone, Hank Greenberg, etc) be prosecuted or sued,” the argument goes. “They probably did something illegal. So what if the state has to cut some corners in pursuing them. That’s a small price to pay for protecting us from these evil people, isn’t it?”

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As anticipated by this earlier post, U.S. District Judge Nancy Atlas declared a mistrial earlier today on the remaining 12 criminal counts against former Duke Energy trader, Timothy Kramer. Two days ago, the jury acquitted Kramer on seven counts and his co-defendant, former Duke Energy trader Todd Reid, on all counts. Earlier posts on the case are here.
This case establishes once again that it’s far easier in most white collar criminal cases involving the prosecution of agency costs to bludgeon a plea bargain out of the defendants than to obtain a conviction through a fair trial.

The New York Times’ Joseph Nocera has written a couple of real doozy op-eds recently, one extolling the “lofty standards” of New York AG Eliot Spitzer and another one defending the virtues of the Sarbanes-Oxley Act, the latter of which contained a quote or two from UCLA law professor and well-known corporate law blogger, Stephen Bainbridge.
In this Tech Central Station op-ed, Professor Bainbridge dissects Nocera’s argument in favor of SOX and exposes the legislation for what it is — a knee-jerk legislative reaction to a brief spike in corporate accounting scandals that arose after the bursting of the late 1990’s stock market bubble. As Bainbridge lucidly points out, SOX neither makes such scandals less likely to occur nor improves the functioning of public-equity financing markets.
Advantage Bainbridge.

This earlier post noted that Lea Fastow — a former mid-level Enron executive and wife of demonized former Enron CFO Andrew Fastow — was prosecuted more harshly than normal for tax fraud because of her relationship to Fastow and endured longer and harsher punishment because of it. Earlier posts on the Lea Fastow case are here.
The Chronicle’s Mary Flood reports here that Mr. Fastow apparently agrees with me. He has sworn that neither Mrs. Fastow nor he were involved in tax fraud at all. Of course, as Peter Henning points out, Mr. Fastow’s sworn statements raise all sorts of interesting questions.
One of the most interesting questions is for the Enron Task Force — despite his guilty plea to various crimes under a plea bargain, does Mr. Fastow truly believe that he committed crimes at Enron? It would be a good idea for the Task Force prosecutors to pin Fastow down on that little detail before he takes the stand in the upcoming trial of former key Enron executives Ken Lay, Jeff Skilling and Richard Causey.