In 2007 Angelo Mazzerello paid himself tens of millions in bonuses as Countrywide Mortgage was committing fraud, described by the SEC as at “Unprecedented Levels.” Yet through 2014 no executive has been charged with a criminal crime under Sarbanes-Oxley. According to the SEC, it regulates about 12,000 public companies. If Sarbanes-Oxley costs each company approximately $2.5 million for fortune 1,000 companies and much higher for the smaller companies that have to report items they normally would not track.
So the approximate annual cost of complying with Sarbanes-Oxley is $27 billion. The total penalties paid by Bank of America because of Angelo Mazzarella is almost $23 billion. Yet, President Barack Obama claims that no one violated any criminal laws under Sarbanes-Oxley or any other law on the books in the US. However, the Supreme Court is hearing a case where a Mr. Yates, a fisherman destroyed evidence concerning 72 undersized fish on his boat in 2007, the same year the SEC claims Angelo Mazzarella committed civil fraud, and he has been sent to jail in 2011 under Sarbanes-Oxley violation. Of course, Mr. Mazzarella paid a fine of $60 million and ruined hundreds of thousands, if not millions, of lives but the Department of Justice under any law or regulation including Sarbanes-Oxley could not find any criminal conduct. So, 72 fish offense is a crime under Sarbanes-Oxley, but ripping off millions of Americans and almost single handedly taking down the economy is not criminal.
Where is the justice? Where is the common decency in this finding? I hope the Supreme Court does the right thing and finds the Department of Justice over reached when it did this. Now, the cynic in me, says that the Justice Department receives a third of the penalties it imposes on banks so about $8 billion went to government agencies by imposing those fees whereas the fisherman’s penalties were probably a few tens of thousands. So, what incentive was there for the government to make a monetary deal with Mr. Yates, none. But with Bank America, a shakedown could yield $23 billion to the government and $8 billion to the Department of Justice and SEC, big incentive. But, is that right? If executives can misbehave and stick it to their shareholders for their bad behavior then we have not created any deterrent for committing what I think were crimes. But, let the little people even come close, and we throw the book at them. Now, what I hate to see is that the US government has created a two tier system: if you are wealthy enough to pay big fines which can help pay the government, such as what happened to protect Mr. Mazzarella, you can buy a get out of jail free card, if not, you go to jail as what happened to Mr. Yates.
The message of this outcome is so harmful to our country we need to do something very different. I only hope we have the foresight and integrity as a country to do so.
Sources:
http://www.sox-online.com/costs.html
