The Bush administration rejected a Securities and Exchange Commission recommendation in a key Supreme Court case and did not support shareholders suing Wall Street banks for damages over Enron's collapse.Get that? The Justice Department ignored the SEC on this. The Bush Justice Department seems to have an incredibly firm view of its priorities these days, doesn't it?
The Justice Department's solicitor general, who represents the administration in Supreme Court cases, did not file a friend-of-the-court brief by Monday's deadline. The SEC recently asked Solicitor General Paul Clement to file in support of the Enron shareholders.
The move puts the Bush administration at odds with the federal agency that oversees securities markets as well as with dozens of states and several consumer and investor advocates.
Dan Newman, a spokesman for Enron plaintiffs' law firm Lerach Coughlin, called the administration's stance "an unprecedented example of politics trumping the rule of law, a crass slap in the face to (SEC Chairman Christopher) Cox and the Enron victims from the hyperpolitical Bush Justice Department."The politicization of the Justice Department has not been limited to the hirings and firings of U.S. attorneys. It also manifests itself in more subtle ways such as in this case, where substantive legal considerations like the SEC's recommendation that Justice back the shareholders are allowed to twist in the wind instead...
The case, pitting cable TV company Charter Communications Inc. against a shareholder that accused it of securities fraud, raises an issue known as scheme liability: Whether shareholders also can collect damages from investment banks, attorneys and accountants believed to have aided fraud by their corporate clients.
The high court's ruling in the case could determine whether the Enron plaintiffs' $40 billion lawsuit against the investment banks - stalled by a federal appeals court ruling in March - can proceed. The shareholders contend in the suit that Merrill Lynch & Co., Barclays PLC and Credit Suisse Group should be held equally liable as Enron Corp. as participants in the fallen energy company's massive accounting fraud.
In recent weeks, unions, state regulators and plaintiffs' attorneys pressed the SEC to intervene in the case on the side of the Enron shareholders. The agency did so on a 3-2 vote of its commissioners, as Cox, a former Republican congressman appointed by Bush, sided with the two Democrats.
Some observers had viewed the SEC's stance as a key test of the agency's leanings on questions of investor protection under Cox.