FOIA-Obtained Emails Reveal Merrill Lynch Rep. Requested Meeting With Cox
Santa Monica, CA — Consumer advocates appealed a partial response to a Freedom of Information Act (FOIA) request today and demanded full disclosure of lobbying by Enron bankers of the Securities and Exchange Commission (SEC) and Chairman Christopher Cox.
The Foundation for Taxpayer and Consumer Rights (FTCR) submitted a FOIA in January for information detailing efforts by Enron banker Merrill Lynch (and client of Chairman Cox's former law firm) to pressure the SEC into intervening against investor interests in a lawsuit to determine whether the banks will be held responsible for defrauding Enron shareholders.
Documents obtained included an email request for a meeting with Chairman Cox from K Street lobbyist, and Merrill representative, K&L Gates and an email indicating General Counsel Cartwright was recused from the case. Conspicuously absent were the response to the meeting request, any information concerning whether Cox considered recusing himself, and nearly all identification (including names) of SEC correspondents with Merrill Lynch. Both Cox and Cartwright worked for Merrill Lynch law firm Latham & Watkins prior to joining the SEC, the conflict that presumably led to Cartwright's recusal.
The SEC filed a friend of the court brief in the case supporting Enron victims in the past, but has not yet taken the same position at the U.S. Supreme Court in the face of the banks' lobbying campaign, said FTCR. Cox told Congress yesterday the Commission would vote on the case shortly.
"The Commission is veering away from investor protection to succoring Enron conspirators, even to the point of reversing its own positions. Chairman Cox must justify his failure to even consider recusing himself from the case to the Enron shareholders and employees who lost everything," said consumer advocate Carmen Balber with FTCR.
Cox was appointed Chair of the SEC in 2005 amid allegations that his deregulatory agenda as a private attorney and Congressman would prevent him from being an investor advocate. He has since moved to weaken some post-Enron corporate reforms, including a sudden, behind-the-scenes rule change in December that allows identical executive compensation packages to be disclosed differently. The SEC has intervened against investors in another case before the U.S. Supreme Court — Tellabs v Makor — to limit corporate accountability for securities fraud.
"The SEC must not let attorneys, banks and accountants off the hook for actively orchestrating securities fraud simply because they didn't pick up the phone and lie to shareholders themselves. Americans investors expect protection from the SEC, not lenience for Enron conspirators and one of Cox's former firm's clients," said Balber. "Will the SEC turn its back on its responsibility to shareholders to shield the banks that enabled one of the greatest corporate frauds in American history?"
The SEC has not weighed in on a second securities fraud case at the U.S. Supreme Court — Charter Communications, Inc. Securities Litigation — that raises the same issue as Enron. Charter could determine by proxy whether the Enron banks will be let off the hook for actively orchestrating securities fraud because they did not pick up the phone and lie to shareholders themselves. The FOIA also requests documents revealing lobbying by the Enron banks concerning Charter.
As a Congressman, Cox sponsored the Private Securities Litigation Reform Act, which made it harder for investors to sue and recover losses due to fraud. His confirmation to the commission was marred by questions about his involvement in an investor scam that cost retirees and other small investors over $130 million during his tenure at Latham and Watkins.
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FTCR is California's leading public interest watchdog. For more information, visit us on the web at www.ConsumerWatchdog.org.