The federal and state lawsuits against S&P are well and good, but no people are on the hook in these cases. What kind of deterrence is that?
By Michael Hiltzik
February 9, 2013, 6:55 a.m.
You may have heard last week about a couple of big lawsuits brought by federal and state governments, alleging that the credit rating agency Standard & Poor’s concocted a fraudulent scheme that contributed to trillions of dollars in investment losses and the cratering of pretty much the entire world financial system.
Those are serious charges, and the federal government’s demand for $5 billion in penalties isn’t peanuts. Yet there’s something bloodless about the lawsuits, for the simple reason that they don’t point the finger at any particular person who was responsible for these dastardly doings.
McGraw was chairman, chief executive and president of McGraw-Hill, S&P’s parent company, in the period at issue, 2004 to 2007. (He’s still in place today.) Did he profit from S&P’s wrongdoing? Let’s assume so: he not only owns 10 million company shares but received $44.5 million in compensation over those years, according to corporate disclosures. Did he know or care about what was happening at S&P? One would hope so because it was by far the most profitable domain in his empire, contributing an average of more than 70% of McGraw-Hill’s operating profit.
Harold McGraw’s largest business unit engaged in an “egregious” fraud that “goes to the very heart” of the financial crisis, Atty. Gen. Eric H. Holder Jr. said. But prosecutors have made no effort to hold him, or anyone else, directly responsible for what was done at S&P.
These new lawsuits replay the only story uglier than the financial meltdown itself, which is the government’s pathetic record at prosecuting the crimes that produced it.
For companies can’t do things like manipulate numbers on spreadsheets, lie about their “independent” judgment, and fire employees who try to rectify such errors. Only people can.
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