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Thursday, May 24, 2007

The Absent Minded Professor

Columbia law Professor John Coffee seems to be unfamiliar with the classic movie, “The Absent Minded Professor” despite appearing to be the real world embodiment. To wit: on Wednesday, the Financial Time’s Patti Waldmeir wrote an article making the case that the SEC needs to combat frivolous investor lawsuits. In particular, comments from Prof. Coffee caught my eye:

“[Coffee] says current law wrongly immunizes secondary participants in fraud – such as banks and accountants. The SEC used to believe that guilt should be spread to all those who actively helped perpetrate a fraud – and it will shortly have a chance to prove whether it has changed that position.” (Financial Times May 23, 2007)

In a previous blog post, I showed that Prof. Coffee has made clear that he advocates preventing class action securities lawsuits and arbitration claims from arguing violations of SEC Rule 10b-5. He thinks the SEC should be the sole user of the so-called “Securities Fraud Rule.” This is a catch-22 for investors.

On the one hand Prof. Coffee’s tying the hands of investors by preventing the use of Rule 10b-5, and then on the other he’s admitting the SEC may not have the appetite to seek retribution against fraudsters like Enron’s bankers. Who’s looking out for the little guy then?

Further Prof. Coffee’s legal career includes helping lawfirm giant Vinson & Elkins evade punishment after they allegedly assisted former Enron CFO Andy Fastow hide illegal personal profits from offshore partnerships in order to deceive shareholders. Apparently banks and accountants who enable fraud: bad…law firms that enable fraud: good.

Absent minded indeed!!


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