-Caveat Lector-
Begin forwarded message:
From: [EMAIL PROTECTED]
Date: August 16, 2007 3:58:12 AM PDT
To: [EMAIL PROTECTED]
Cc: [EMAIL PROTECTED], [EMAIL PROTECTED], [EMAIL PROTECTED]
Subject: Bush DoJ Intervenes in Supreme Court, Takes Side of Con
Artists against Victims
Bush may gut lawsuits against Enron
Filing backs companies, not shareholders, in unrelated case
By DAVID IVANOVICH
Houston Chronicle, Aug 15 2007
http://www.chron.com/disp/story.mpl/business/5058117.html
WASHINGTON — Weighing in on a case before the Supreme Court that
could have broad ramifications for lawsuits stemming from Enron's
collapse, the Bush administration threw its support behind
companies under attack from investors.
But shareholders who sued the banks that helped finance Enron's
dealings were heartened by the Justice Department's seeming
acceptance of at least some of their arguments.
The Supreme Court has agreed to hear a securities fraud case
brought by investors, led by Stoneridge Investment Partners,
against Scientific-Atlanta and Motorola, which make digital boxes
for cable TV subscribers.
Stoneridge had invested in cable TV operator Charter
Communications, which Stoneridge claims, asked Scientific-Atlanta
and Motorola to engage in "wash" transactions to artificially meet
a target for operating cash flow. Besides suing Charter and its
managers, the investors went after Charter's now defunct accounting
firm Arthur Andersen, as well as Scientific-Atlanta and Motorola.
At issue is whether secondary players like the digital box makers
can be held liable for their allegedly "deceptive conduct," even if
investors weren't really basing their decisions on those actions
but on an alleged "misstatement" by Charter.
The issue has divided official Washington, with lawmakers, business
groups and former and current Securities and Exchange Commission
members jumping into the fray.
On Wednesday, the Justice Department's solicitor general, Paul
Clement, filed a brief supporting the digital box makers, arguing a
Supreme Court decision favoring Stoneridge Investments would
"constitute a sweeping expansion" of the right to sue.
"Such a rule would expose accountants and lawyers who advise
issuers of securities ... to potentially billions of dollars in
liability when those issuers make misrepresentations to <i.e.,
DEFRAUD> the market," the solicitor general argued.
The Supreme Court, of course, can reject the solicitor general's
argument when reaching its decision in the case. But the solicitor
general has often been referred to as the "10th justice," noted
Peter Henning, a law professor at Wayne State University. "It
matters. The views of the solicitor general are very important to
the court."
The administration's position in the case was a blow to a group of
Enron shareholders who are hoping to force Enron's one-time bankers
Merrill Lynch & Co., Credit Suisse First Boston and Barclays to
help recoup some of their losses.
"It's a sad day for us," said Charles Prestwood of Conroe, a former
plant operator for Enron who estimates he lost $1.3 million when
the company failed.
The shareholders had faced a defeat at the 5th U.S. Circuit Court
of Appeals, which sided with Enron's bankers and ruled that class-
action lawsuits can pursue only primary players.
The Enron shareholders led by the University of California Regents
have been trying to get the Supreme Court to hear their case, but
all action was put on hold pending the outcome of Stoneridge's case
against the digital box companies.
While ultimately siding with the companies, the solicitor general
did contend that the appeals court had defined too narrowly exactly
what constitutes deceptive conduct under securities law, an
argument the Enron shareholders hope could bolster their case.
But Ken Connor, chairman of the Washington-based Center for a Just
Society, which has been supporting the Enron shareholders lawsuit,
said the solicitor general gave a "tip of the hat" to some of the
Enron shareholders' arguments, only to "emasculate" them with other
reasoning later.
"What they gave on the one had they later took away, which in my
judgment is a disingenuous approach," Connor said.
Dan Newman, a spokesman for Lerach Coughlin, the firm representing
the University of California Regents, called the solicitor
general's filing "a complicated brief that deserves thorough
examination."
Most people have been assuming that the high court's decision in
the Stoneridge vs. Scientific-Atlanta case would decide the fate of
the Enron case. But if the justices were to accept some of the
arguments the solicitor general has made, "it's a possibility it
could mean different things for the two cases," Newman said.
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