Lehman Bros. execs should be taken to court
even if damages, convictions aren’t assured

Suppose you’re the theater commander of a U.S. Army counterinsurgency campaign in a backward Mideast country, with 15 generals and colonels assigned to various provinces.

It comes to your attention the troops of Province V, under Col. Dempster, have conducted no major offensive operations, only five minor ones, and engaged the enemy another 20 times when ambushed, each time ending in retreat, in the year since Dempster assumed command.

By contrast, in Province IV the past year, Gen. Davis’ troops conducted three major offensives, 32 minor ones and engaged when ambushed more than 50 times, most ending in the attackers being killed or captured. The story in Province VI is similar, with Gen. Smith’s troops doing five major and 25 minor offensives, with 60 other engagements, most ending successfully.

How long would it take you to replace Col. Dempster?

We bring this up in the wake of last Friday’s Securities and Exchange Commission news dump* announcing that prosecutions are unlikely in the matter of Lehman Brothers’ financial chicanery and the fraudulent accounting practices — to which the Ernst & Young accounting firm was an accomplice — that cost investors billions, brought down the company and played a big part in the 2007-2008 financial meltdown that has cost taxpayers trillions and left more than 17 million unemployed.

And the reason? Holding high-profile, incredibly rich Wall Street crooks accountable for their crimes is hard work. The SEC might not win.

CHICAGO (Reuters) – A government probe into the fall of Lehman Brothers Holdings Inc has hit so many snags that enforcement officials fear they may never be able to bring civil or criminal charges against company executives, the Wall Street Journal reported on Saturday.

According to the paper, Securities and Exchange Commission officials have begun to doubt they can prove that Lehman broke U.S. laws by moving nearly $50 billion in assets off its balance sheet to make it appear that the securities firm had lowered its debt burden.

Quoting people familiar with the situation, the Journal said SEC officials are also worried they might not win any lawsuit against former Lehman Chief Executive Richard Fuld Jr accusing him of improperly accounting for the value of a large real estate portfolio acquired with the takeover of Archstone-Smith Trust, or to hide losses to investors related to that deal.

If the SEC decides not to file charges against Lehman, the securities firm could escape criminal prosecution because the Justice Department often takes its lead from the SEC, the newspaper said.

A key principle behind outlawing certain behavior is to deter that behavior as much as possible and punish those who engage in the bad behavior anyway. Prosecutions shouldn’t be undertaken lightly or capriciously, but neither should they be reserved for slam-dunk cases.

In fact, there’s a case to be made that in some circumstances, when you know damned well someone has lied, cheated and stolen from others on a vast scale, you go ahead and prosecute even if conviction prospects look bleak. You do it to sweat the bastards, and to send a message to others that even if they can beat the rap in court, they will have to fight tooth and nail to stay out of prison.

And, in the process of being tried, the crooks’ reputations will be forever tarnished by the dirty dealings you can prove.

But if you shrink from even trying to prosecute them, you relieve other crooks of any worry about being held accountable for their crimes. Like appeasing a tyrant, you’re literally asking them to commit future aggressions.

And that they will do.

Some person or persons at the SEC should pull up their big-boy britches and give going after the Lehman Brothers crooks their best shot. Attorney General Eric Holder, for a great big change, should get off his dead butt and actually prosecute Wall Street criminals for their crimes — even if doing so makes other Wall Street banksters hate President Obama more than they already do.

And make no mistake, Wall Street banksters, along with most of corporate America, already hate Obama with an abiding passion.

In the following video, MSNBC’s Dylan Ratigan and former New York prosecutor and ex-Gov. Eliot Spitzer discuss what Lehman Brothers CEO Fuld and other executives did that warrants prosecution. It’s 10 minutes long, but worth every minute of your time.

For an excellent rundown of Lehman Brothers’ reckless mortgage business, shady accounting, crooked business moves and ultimate demise, see this New York Times piece. (Be sure to click “read more” for the full story.).

* “News dump” refers to the practice of government agencies and others releasing late on Friday information likely to prove unflattering or inconvenient for the issuing organization or person. News media, like other businesses, tend to transition to weekend mode late on Fridays, so the information might be overlooked or under reported.