The SEC’s revolving door

Larry Ribstein —  2 August 2011

I discussed last year the peculiarities of the SEC’s complaint against Goldman arising out of the infamous Abacus transaction. One peculiarity is how John Paulson, whose undisclosed role in structuring the transaction led to the charges against Goldman, has escaped blame.

Today Andrew Ross Sorkin sheds some light on why that might be:  a senior SEC lawyer involved in the case, Adam Glass, had previously worked for Paulson in connection with this transaction.

As Sorkin notes:

[Glass’s] role once again raises questions about the revolving door between Washington and Wall Street at a time when public distrust about the agency and its lack of enforcement action against the culprits of the crisis is running high.

He quotes Jack Coffee: “[I]t is a case that will raise further questions about the S.E.C.”

For more on the revolving door problem at the SEC, see my post yesterday on the FCPA.

Given this, and Madoff, and the SEC’s failure to get its regulatory act together, isn’t it about time somebody started raising some really basic questions about the SEC?  If it’s really true that the financial markets need a cop, it would seem some attention should be paid to whether we have the right cop.

Larry Ribstein


Professor of Law, University of Illinois College of Law

3 responses to The SEC’s revolving door


    Ribstein is the ever ready bunny—he never stops putting out bs driven by his incentive caused bias.

    Any one who has real experience dealing with sophisticated corporate fraud and mendacity will tell you that ‘You need to set a thief to catch a thief.” Several times in my career I have tackled fraud in a industry or part of industry new to me. The learning curve is very steep, for the frauds are so subtle that until the moment they are sprung you have no idea what happened. Every trick is used. For example, accountants routinely destroy all their papers. A big board of director trick is straw votes. People vote in a poll and then people leave or false records are created. Amazing stuff.

    The level of mendacity in American business is beyond stunning. It was just announced today that Kraft is going to split itself in two. The lies being told about that, so that a few investment bankers and officers can make $$$, has the eyes rolling on CNBC. I expect that the “thiefs” are the executives who have “change of control” provisions in their employment contracts (why doesn’t Ribstein ever write about the cartel that gives greedy CEO’s enough market power to get an written employment K?) which were re-written so that this blessed looting of the shareholders would come to pass. Who knows, but the entire deal sticks

    northfork investor 2 August 2011 at 11:21 am

    You’re the law prof, but as a fairly astute amateur I believe the revolving door angle is irrelevant to why Paulson wasn’t charged for the Abacus transaction.

    Like from my standpoint, Paulson didn’t violate any securities or other laws although I suspect something could have been drummed up (aiding and abetting, conspiracy to defraud, defrauding the market etc. etc. etc.).

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