Too Big to Jail?

When a covey of executives from Goldman Sachs appeared before the Senate Permanent Investigations Subcommittee in Washington, they first stood up and swore to tell the “Truth, etc., etc.” When the committee’s 650-page report was released, it seemed pretty clear that they did not tell any part of the truth let alone the whole truth. Already under attack by the S.E.C., Goldman is now facing charges from multiple sources.

We are all tired to death of grandstanding members of the Congress and their “Gotcha” hearings. Senator Carl Levin, Chairman of the Permanent Investigations Subcommittee, does not fall into that classification. Levin has a law degree from Harvard and experience as Michigan’s Special Assistant Attorney General. He doesn’t do “Gotcha.”

That said, the appearance of the Goldman Sachs “Carpetland” crew, including CEO Lloyd Blankfein, in front of Levin’s committee pretty much turned into just such an outing. The Senator turned over the results of their investigation to the Justice Department suggesting that they review as to bringing perjury charges. While we claim no legal insight, what Blankfein and his associates said under oath and what they said in internal documents obtained by the Committee are vastly different.

The Justice Department has taken no action. We would assume they are building a case. After all, they are putting baseball legend Roger Clemens on trial for exactly the same offense –lying to the Congress while under oath– with seemingly little more than the word of Clemens’ one time trainer. While lying to the Congress under any circumstances is a bad thing, whether or not a sports figure shot up some performance enhancing drugs is not quite in the same class as involvement in triggering the derailment of our economy.

Meanwhile New York's newly minted state Attorney General, Eric Schneiderman, is charging ahead with an investigation into the role played by several major investment banks –including Goldman Sachs– in triggering the financial collapse. And Manhattan District Attorney Cyrus Vance, Jr. has issued subpoenas to Goldman for records relating to the 2008 crisis.

The New York based prosecutors have a unique tool, the 1921 Martin Act, a state law aimed at curbing financial fraud. Schneiderman and Vance could use the Martin Act along with information gleaned from an S.E.C. and two federal investigations to help build cases against the individuals who created worthless financial instruments and conned buyers into paying top dollar for them.

Many Wall Street lawyers seem to believe that nothing much but some slap-on-the-wrist fines will come of this. They are sure nobody will go to jail or even end up with “Felon” attached to their name. That would be a tragedy; it would do nothing to deter a repeat of the reckless behavior that ran us off the cliff.

After all, if we are going after sports heroes for lying about behavior that resulted in fooling their fans, how can we justify not holding those accountable who appear to have thrown us into a recession that has wracked our nation to its core. What’s good enough for Roger Clemens is good enough for Lloyd Blankfein and the others who appeared before Senator Levin’s committee. We deserve their day in court.