Perdido 03

Perdido 03

Sunday, February 15, 2015

Albany Strikes Back Against US Attorney Preet Bharara

Legislators are whining about US Attorney Preet Bharara's grandstanding tactics as federal prosecutor, particularly his penchant for press conferences and media interviews, but only two had the guts to go public with their criticism:

More than a dozen state legislators, legislative officials and other insiders interviewed by the Daily News give credit to Preet Bharara for targeting Albany wrongdoing but are fuming over what they say is the powerful prosecutor’s publicity seeking, tarring of the entire Legislature, and wading into governance issues far beyond the scope of his office.

“You want to target corruption? God bless you,” said state Sen. Diane Savino (D-S.I.). “That’s what you’re supposed to do. But the fact there’s some corruption in the Legislature does not mean we all are corrupt. And the rest of us don’t appreciate the comparison.”

 Assemblyman Nick Perry (D-Brooklyn) is one of many who agreed. “It’s totally unfair — not just to us, but to our families — to sort of cast a wide net of mud and dirt across the whole spectrum of elected officials that serve New York,” Perry said.

Savino, the IDC traitor, is coming off calling City Council Speaker Mark-Viverito an "idiot," so she's having a helluva media week herself.

But back to criticism of Bharara:

Is he grandstanding?


Does he make it all about himself?


Does he enjoy taunting the criminals up in Albany?


Is all this worrisome?


“He’s nothing but a politician with a badge,” said one Assembly Democrat. “He should be doing everything he can to root out corruption, but he should not be threatening and grandstanding, telling the world to ‘stay tuned’ and tarring everybody with a criminal brush. It’s inappropriate.”

To me, the most damaging criticism of Bharara is not the grandstanding or taunting (though I think that criticism is fair and accurate) but his failure to take on any of the systemic corruption on Wall Street.

As Michael Fiorillo has pointed out again and again in comments here at Perdido Street School blog, Bharara's only targets on Wall Street have been insider traders and Bernie Madoff - not one of the criminals who nearly crashed the economy in 2008 with their misdeeds, enriching themselves in the process, was indicted by either US Attorney Preet Bharara or the Attorney General at the time, one Andrew M. Cuomo.

Matt Taibbi had similar criticism of Bharara years ago in his seminal piece "Why Isn't Wall Street In Jail?" which aims at the close relationships between the "top cops" on Wall Street and the targets they're supposed to be policing:

Criminal justice, as it pertains to the Goldmans and Morgan Stanleys of the world, is not adversarial combat, with cops and crooks duking it out in interrogation rooms and courthouses. Instead, it's a cocktail party between friends and colleagues who from month to month and year to year are constantly switching sides and trading hats. At the Hilton conference, regulators and banker-lawyers rubbed elbows during a series of speeches and panel discussions, away from the rabble. "They were chummier in that environment," says Aguirre, who plunked down $2,200 to attend the conference.

Aguirre saw a lot of familiar faces at the conference, for a simple reason: Many of the SEC regulators he had worked with during his failed attempt to investigate John Mack had made a million-dollar pass through the Revolving Door, going to work for the very same firms they used to police. Aguirre didn't see Paul Berger, an associate director of enforcement who had rebuffed his attempts to interview Mack — maybe because Berger was tied up at his lucrative new job at Debevoise & Plimpton, the same law firm that Morgan Stanley employed to intervene in the Mack case. But he did see Mary Jo White, the former U.S. attorney, who was still at Debevoise & Plimpton. He also saw Linda Thomsen, the former SEC director of enforcement who had been so helpful to White. Thomsen had gone on to represent Wall Street as a partner at the prestigious firm of Davis Polk & Wardwell.

Two of the government's top cops were there as well: Preet Bharara, the U.S. attorney for the Southern District of New York, and Robert Khuzami, the SEC's current director of enforcement. Bharara had been recommended for his post by Chuck Schumer, Wall Street's favorite senator. And both he and Khuzami had served with Mary Jo White at the U.S. attorney's office, before Mary Jo went on to become a partner at Debevoise. What's more, when Khuzami had served as general counsel for Deutsche Bank, he had been hired by none other than Dick Walker, who had been enforcement director at the SEC when it slow-rolled the pivotal fraud case against Rite Aid.
"It wasn't just one rotation of the revolving door," says Aguirre. "It just kept spinning. Every single person had rotated in and out of government and private service."

The Revolving Door isn't just a footnote in financial law enforcement; over the past decade, more than a dozen high-ranking SEC officials have gone on to lucrative jobs at Wall Street banks or white-shoe law firms, where partnerships are worth millions. That makes SEC officials like Paul Berger and Linda Thomsen the equivalent of college basketball stars waiting for their first NBA contract. Are you really going to give up a shot at the Knicks or the Lakers just to find out whether a Wall Street big shot like John Mack was guilty of insider trading? "You take one of these jobs," says Turner, the former chief accountant for the SEC, "and you're fit for life."

Fit — and happy. The banter between the speakers at the New York conference says everything you need to know about the level of chumminess and mutual admiration that exists between these supposed adversaries of the justice system. At one point in the conference, Mary Jo White introduced Bharara, her old pal from the U.S. attorney's office.

"I want to first say how pleased I am to be here," Bharara responded. Then, addressing White, he added, "You've spawned all of us. It's almost 11 years ago to the day that Mary Jo White called me and asked me if I would become an assistant U.S. attorney. So thank you, Dr. Frankenstein."

Next, addressing the crowd of high-priced lawyers from Wall Street, Bharara made an interesting joke. "I also want to take a moment to applaud the entire staff of the SEC for the really amazing things they have done over the past year," he said. "They've done a real service to the country, to the financial community, and not to mention a lot of your law practices."

Haw! The line drew snickers from the conference of millionaire lawyers. But the real fireworks came when Khuzami, the SEC's director of enforcement, talked about a new "cooperation initiative" the agency had recently unveiled, in which executives are being offered incentives to report fraud they have witnessed or committed. From now on, Khuzami said, when corporate lawyers like the ones he was addressing want to know if their Wall Street clients are going to be charged by the Justice Department before deciding whether to come forward, all they have to do is ask the SEC.

"We are going to try to get those individuals answers," Khuzami announced, as to "whether or not there is criminal interest in the case — so that defense counsel can have as much information as possible in deciding whether or not to choose to sign up their client."

Aguirre, listening in the crowd, couldn't believe Khuzami's brazenness. The SEC's enforcement director was saying, in essence, that firms like Goldman Sachs and AIG and Lehman Brothers will henceforth be able to get the SEC to act as a middleman between them and the Justice Department, negotiating fines as a way out of jail time. Khuzami was basically outlining a four-step system for banks and their executives to buy their way out of prison. "First, the SEC and Wall Street player make an agreement on a fine that the player will pay to the SEC," Aguirre says. "Then the Justice Department commits itself to pass, so that the player knows he's 'safe.' Third, the player pays the SEC — and fourth, the player gets a pass from the Justice Department."

When I ask a former federal prosecutor about the propriety of a sitting SEC director of enforcement talking out loud about helping corporate defendants "get answers" regarding the status of their criminal cases, he initially doesn't believe it. Then I send him a transcript of the comment. "I am very, very surprised by Khuzami's statement, which does seem to me to be contrary to past practice — and not a good thing," the former prosecutor says.

I'm happy to tout Bharara's work on the blog when he's giving Cuomo headaches and heart attacks, when he's holding pressers the day after big Cuomo announcements to steal Cuomo's press coverage, and I certainly am hoping that Barara takes out the last two of the "Three Men In A Room" he mocked at an NYU law speech a few weeks ago (Skelos and Cuomo.)

But I am under no impression that Bharara is actually looking to clean up the systemic corruption in New York, for if he were, he'd been carting the criminals at Goldman Sachs and JP Morgan Chase out in handcuffs the same way he's carting out the criminals in Albany.

Bharara is undoubtedly running for political office, despite his terse responses to the question of his political future ("No."), and as a former Chuck Schumer aide, Bharara is also undoubtedly as political as anybody else in the system.

The last few prosecutors we've had run for political office in this state (Cuomo, Spitzer and Giuliani) have all been holy terrors as politicians, problematic in their own ways.

I'm not looking forward to finding out just what kind of politician Preet Bharara is going to be if and when he announces a run for something in the future.

But I think we will find that out.

Given his smarts, his ego, his political wiliness, and his ability to garner splashy headlines, I have little doubt that he'll be successful at getting elected.

And I'm sure all those Wall Street folks Bharara and his fellow "top cops" at the SEC and the DOJ refuse to prosecute will be just as happy to have a guy like him governor as they are at having their pal Sheriff Andy in office.

To them it's all the same just so long as whomever is in power leaves them pretty much alone.


  1. This sort of thing happens all the time in government. When you cannot dispute the truthfulness of what is being said, distract with overstated attacks on style ('grandstanding', etc) and then impugn the motives ('angling for higher office', etc) of the prosecutor. This sort of transparent and orchestrated counterattack/misdirection serves only to make me doubly suspicious of the corruption in Albany. Don't fall for it.

    1. Did you read the long excerpt from the Taibbi piece wherein the top cops, including Bharara, explain to the Wall Street criminal lawyers how they can use "Get Out Of Jail" cards for their clients?

      That kind of chumminess with the Wall Street criminal class is a problem, no?

    2. Not in the case of Albany political corruption. I see that as an (attempted) misdirection/distraction. The more the messenger is blamed the more I focus on the message.
      Rather than look to Taibbi I look to Jose Conseco. He was blamed smeared and attacked repeatedly as a nutjob, egoist, bankrupt, meathead. To the point that susceptible folks were misdirected away from his accusation that many baseball players were taking steroids. He was correct in his message and the misdirectors themselves have been shamed.

    3. You think the corruption in Albany is a bigger problem than the corruption in the financial system?

      The corruption in Albany is penny ante stuff, at best.

      Silver stole $4 million.

      How much have the banksters gotten away with, even since 2008, after they nearly collapsed the economy?

      The games played with CDO's, swaps, mortgage fraud and LIBOR fixing alone add up to tens of billions.

      Sure, Albany corruption is a problem.

      But if anything's a distraction, it's Bharara making believe like that's the biggest corruption problem in the system.

      It's not - not even close.

      Make no mistake, it's not a mistake that Preet's not interested in systemic fraud on Wall Street.

      Going after that would preclude him going anywhere in politics later.

    4. Oh, there are many issues more concerning than corruption in Albany. But it is nevertheless concerning and I am grateful Bharara is addressing it.
      Former Speaker Silver is not, by most measures, small fry in the world of New York State political corruption.That is notwithstanding other issues which may or may not be swirled about.
      One lesson I drum into my students is to note that just because one thing is wrong does not mean another cannot be wrong too. I find they are easily distracted away from issues at hand by ad hominem , etc.

    5. I'm glad the feds are aiming at Albany too - would be even happier if Preet turned his attention to Goldman, HSBC, JP Morgan Chase, et al.

      But he won't, and I've already laid out the reasons why.

      And because he won't, all the arrests in Albany won't matter much in the long run.

      The political system is as corrupt as it is because the financial system is so rigged and corrupt.

  2. Funny, Savino states "We're not all corrupt". Interesting view from Albany. Can't teachers say the same thing? Hey, "We're not all predators!"

    1. Loved the "idiot" comment about the City Council Speaker the other day.

      Nothing like a substantive pushback against criticism that you're full of shit on an issue than calling the critic an "idiot."

  3. Why would any lawyer become an assemblyman for just $125,000 a year when they can make much more money in private practice.

    Answer: Albany is all about corruption and absolute contempt for democracy.

  4. If you are paying close attention, you will notice who gets hit on and then the why will fall into place. Spitzer, Weiner, Silver. Not saying that Weiner didn't behave like a total fool, but these guys are little minnows in the big sea. Yeah, they took out Madoff but he was not part of the larger banking system, just an independent guy screwing a finite number of people. Look at Martha Stewart, had to set an example with a woman who had the chutzpah to make it big.

    1. Yes, I agree - insider trading cases like Stewart's, Ponzi schemes like Madoff's, they don't get at the real corruption in the system.