The Fight for Investor Rights is Also Our Fight

January 28, 2008

The Supreme Court has just refused to hear a case that let major banks complicit in the Enron fraud off the hook from paying damages to investors hurt by the scandal. As a story in The Washington Post said:

The ruling is a staggering setback to the movement to expand investor rights. Often, financial experts say, business partners and corporate advisers are the only deep pockets left to tap after a scandal-ridden company has succumbed to bankruptcy.

If this was not enough, only a few days earlier the court ruled that third parties can’t be held liable for damages in cases where they aided schemes to commit fraud. The case, known as Stoneridge Investment Partners v Scientific-Atlanta, is also bad news for working families. Why? It’s simple. Think about the mortgage crisis, for example. Mortgage brokers and investment banks built a system in which they generated huge fee revenues and then passed off risk to investors. These risky mortgages were packaged by Wall Street bankers to sell to investors like our public pension funds. Now that there’s a mortgage crisis, our retirement funds could be hit by losses that would make Enron look pennyante. Meanwhile, the parties responsible have less to fear now because, just like the banks involved in the Enron scandal, they may be immune from litigation. In the end, the failed CEOs who led these companies walk about with hundreds of millions of dollars as working people are left holding the bag. This is why the fight for investor rights is also our fights because, ultimately, it’s things like our mortgages and our retirement that are on the line.