Bush is at odds with regulators
In a lawsuit that harks back to the Enron Corp. scandal, the Bush administration is at odds with the Securities and Exchange Commission as well as with state attorneys general and consumer and investor advocates.
President Bush personally weighed in with his views before the administration decided not to support investors whose securities fraud case is now before the Supreme Court.
The SEC had voted 3 to 2 to ask Solicitor General Paul Clement to support shareholders in the pending court case. After being told of Bush’s perspective, Clement, who represents the government’s views in cases before the high court, did not file a brief in the case by Monday, which was the deadline to intervene on behalf of the investor plaintiffs. The government can intervene in the next 30 days on behalf of the defendant.
The case pits St. Louis-based cable TV company Charter Communications Inc. against a shareholder that accused it of securities fraud.
The issue is whether shareholders can collect damages from investment banks, attorneys and accountants believed to have aided fraud committed by their corporate clients.
The high court’s ruling in the case could determine whether the Enron plaintiffs’ separate $40-billion lawsuit against investment banks -- stalled by a federal appeals court ruling in March -- can proceed.
Thirty state attorneys general sided with investors.
“Our system of monitoring and eliminating securities fraud would be severely undermined” if the parties who could have pulled the plug on Enron “get to walk away,” the state attorneys general wrote.
The president’s message to the solicitor general was that it was important to reduce “unnecessary lawsuits” and that federal securities regulators were the ones in the best position to sue, said Al Hubbard, Bush’s chief economic advisor and director of the National Economic Council.
A White House official conveyed Bush’s perspective to Clement.
“We think the SEC is the right entity to bring those lawsuits and make sure investors are protected,” Hubbard said in describing the president’s views. “We are in a society that is overly litigious and it’s very harmful to society, very harmful to investors.”
Former Enron shareholders contend in the suit that Merrill Lynch & Co., Barclays and Credit Suisse Group, as alleged participants in Enron’s massive accounting fraud, should be held equally liable as the fallen energy company.
