Judge Stephen Reinhardt's Footnote Five
On Vacation: Reading, Not Writing

"Chasing Small Fry, S.E.C. Let Madoff Get Away"

The modern American prosecutorial novella has a simple theme.  Federal prosecutors ignore rich and powerful people like Bernie Madoff.  Instead, they prosecute small targets.  This June, 2009 New York Times article is typical:

Three months ago, in a courtroom in Bridgeport, Conn., a 72-year-old former Morgan Stanley broker named Richard A. Kwak was cleared of any involvement in a small-time stock manipulation scheme.

The S.E.C. retried Mr. Wilson in 2008. He was cleared. Finally, in March 2009, the S.E.C. retried Mr. Kwak, with the same result. The jury took less than four hours to exonerate him.

I bring all this up because this Monday, Bernard L. Madoff, a contender for the title of greatest financial criminal in history, will be sentenced for the Ponzi scheme he ran for years. Mr. Madoff ruined lives, destroyed philanthropies and cost his investors billions of dollars — yet the S.E.C. was nowhere to be found, despite the repeated entreaties of a whistle-blower, Harry Markopolos.

The Department of Justice is no different from the SEC.  For example, in United States v. Aleynikov, the following occurred: Goldman Sachs called the FBI at 3 a.m. to report that Sergey Aleynikov had stolen Goldman's proprietary software.  This software, Goldman reported, could be used to "unfairly manipulate markets." 

Instead of indicting Goldman Sachs for unfairly manipulating markets, within 48 hours of the call to the FBI, Aleynikov was arrested and in jail.  How does that make any sense?  

If someone came to you saying, "He stole my murder weapon," wouldn't you be more concerned with the murder than the theft?  If Goldman said that a former employee had stolen its market-manipulating software...Should you really be worried about the employee?

It makes total sence, once you realize that line federal prosecutors are much more concerned with getting cozy jobs in the private sector than they are with seeking justice.  Goldman Sachs can send a lot of work to a former AUSA.  

Folks like Aleynikov pay the price.  An innocent man's freedom is just the price the public must pay so that AUSAs may do business with the likes of Goldman Sachs.

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